UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 4, 2012
KBS STRATEGIC OPPORTUNITY REIT, INC.
(Exact name of registrant specified in its charter)
Maryland | 000-54382 | 26-3842535 |
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (IRS Employer Identification No.) |
620 Newport Center Drive, Suite 1300
Newport Beach, California 92660
(Address of principal executive offices)
Registrant’s telephone number, including area code: (949) 417-6500
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
£ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
£ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
£ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
£ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
On December 4, 2012, KBS Strategic Opportunity REIT, Inc. (the “Company”), through an indirect wholly owned subsidiary, acquired an office building containing 400,101 rentable square feet located on approximately 1.9 acres of land in Houston, Texas (the “1800 West Loop Building”). The Company hereby amends the Form 8-K dated November 20, 2012 to provide the required financial information related to its acquisition of 1800 West Loop Building.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(a) | Financial Statements of Real Estate Acquired | |
1800 West Loop Building | ||
(b) | Pro Forma Financial Information | |
KBS Strategic Opportunity REIT, Inc. | ||
F-6 | ||
F-8 | ||
F-10 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
KBS STRATEGIC OPPORTUNITY REIT, INC. | ||||||
Dated: January 17, 2013 | BY: | /s/ David E. Snyder | ||||
David E. Snyder | ||||||
Chief Financial Officer | ||||||
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
KBS Strategic Opportunity REIT, Inc.
We have audited the accompanying statement of revenues over certain operating expenses of the 1800 West Loop Building for the year ended December 31, 2011. This statement is the responsibility of the 1800 West Loop Building’s management. Our responsibility is to express an opinion on the statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues over certain operating expenses is free of material misstatement. We were not engaged to perform an audit of the 1800 West Loop Building’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the 1800 West Loop Building’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of revenues over certain operating expenses, assessing the accounting principles used and significant estimates made by management, and evaluating the overall presentation of the statement of revenues over certain operating expenses. We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues over certain operating expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, as described in Note 2, and is not intended to be a complete presentation of the 1800 West Loop Building’s revenues and expenses.
In our opinion, the statement of revenues over certain operating expenses referred to above presents fairly, in all material respects, the revenues and certain operating expenses described in Note 2 of the 1800 West Loop Building for the year ended December 31, 2011, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Irvine, California
January 17, 2013
F-1
1800 WEST LOOP BUILDING
STATEMENTS OF REVENUES OVER CERTAIN OPERATING EXPENSES
(in thousands)
Nine Months Ended September 30, 2012 | Year Ended December 31, 2011 | |||||||
(unaudited) | ||||||||
Revenues: | ||||||||
Rental income | $ | 5,276 | $ | 7,188 | ||||
Tenant reimbursements and other revenue | 397 | 900 | ||||||
Parking revenue | 239 | 382 | ||||||
Total revenues | 5,912 | 8,470 | ||||||
Expenses: | ||||||||
Real estate taxes and insurance | 1,139 | 1,493 | ||||||
Repairs and maintenance | 551 | 668 | ||||||
Utilities | 489 | 668 | ||||||
General and administrative | 437 | 590 | ||||||
Cleaning | 290 | 375 | ||||||
Security | 222 | 290 | ||||||
Total expenses | 3,128 | 4,084 | ||||||
Revenues over certain operating expenses | $ | 2,784 | $ | 4,386 |
See accompanying notes.
F-2
1800 WEST LOOP BUILDING
NOTES TO STATEMENTS OF REVENUES OVER CERTAIN OPERATING EXPENSES
For the Year Ended December 31, 2011
and the Nine Months Ended September 30, 2012 (unaudited)
1. | DESCRIPTION OF REAL ESTATE PROPERTY |
On December 4, 2012, KBS Strategic Opportunity REIT, Inc. (“KBS SOR”), through an indirect wholly owned subsidiary, acquired an office building containing 400,101 rentable square feet located on approximately 1.9 acres of land in Houston, Texas (the “1800 West Loop Building”) from 1800 West Loop Houston LTD (the “Seller”). The seller is not affiliated with KBS SOR or KBS Capital Advisors LLC, KBS SOR’s external advisor. The contractual purchase price of the 1800 West Loop Building was $68.5 million plus closing costs.
KBS SOR is a Maryland corporation formed to invest in and manage a diverse portfolio of real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments.
2. | BASIS OF PRESENTATION |
The accompanying statements of revenues over certain operating expenses have been prepared to comply with the rules and regulations of the Securities and Exchange Commission (“SEC”).
The 1800 West Loop Building is not a legal entity and the accompanying statements of revenues over certain operating expenses are not representative of the actual operations for the periods presented, as certain revenues and expenses have been excluded that may not be comparable to the revenues and expenses the Company expects to incur in the future operations of the 1800 West Loop Building. Excluded items include interest, depreciation and amortization, and general and administrative costs not directly comparable to the future operations of the 1800 West Loop Building.
The accompanying unaudited statement of revenues over certain operating expenses has been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 8-K and Article 3-14 of Regulation S-X. Accordingly, the unaudited statement of revenues over certain operating expenses does not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the statement of revenues over certain operating expenses for the unaudited interim period presented includes all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such period. Operating results for the nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.
An audited statement of revenues over certain operating expenses is being presented for the most recent fiscal year available instead of the three most recent years based on the following factors: (i) the 1800 West Loop Building was acquired from an unaffiliated party and (ii) based on due diligence of the 1800 West Loop Building by KBS SOR, management is not aware of any material factors relating to the 1800 West Loop Building that would cause this financial information not to be indicative of future operating results.
Square footage, acreage, occupancy and other measures used to describe real estate included in these notes to the statements of revenues over certain operating expenses are presented on an unaudited basis.
3. | SIGNIFICANT ACCOUNTING POLICIES |
Rental Revenues
Minimum rent, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, is recognized on a straight-line basis over the term of the related lease and amounts expected to be received in later years are recorded as deferred rent. The adjustment to record deferred rent increased rental revenue by $0.1 million and $0.3 million for the year ended December 31, 2011 and the nine months ended September 30, 2012 (unaudited), respectively.
F-3
1800 WEST LOOP
NOTES TO STATEMENTS OF REVENUES OVER CERTAIN OPERATING EXPENSES (CONTINUED)
For the Year Ended December 31, 2011
and the Nine Months Ended September 30, 2012 (unaudited)
Use of Estimates
The preparation of financial statements, as described in Note 2 and in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.
4. | DESCRIPTION OF LEASING ARRANGEMENTS |
As of December 31, 2011, the 1800 West Loop Building was 76% leased by 38 tenants. For the year ended December 31, 2011, the 1800 West Loop Building earned approximately 24% of its rental income from a tenant in the marketing industry and a tenant in the professional services industry.
The tenant in the marketing industry occupies 39,596 rentable square feet, or approximately 10% of the total rentable square feet. Its lease expires on October 31, 2018, with one five-year extension option. For the year ended December 31, 2011, the 1800 West Loop Building earned 14% of its rental income from this tenant.
The tenant in the professional services industry occupied 41,630 rentable square feet, or approximately 10% of the total rentable square feet. Its lease expired on December 5, 2012. For the year ended December 31, 2011, the 1800 West Loop Building earned 10% of its rental income from this tenant.
No other tenant leases represented more than 10% of rental income for the year ended December 31, 2011.
5. | FUTURE MINIMUM RENTAL COMMITMENTS |
As of December 31, 2011, the future minimum rental receipts due under non-cancelable operating leases for the years ending December 31 were as follows (in thousands):
2012 | $ | 6,762 | |
2013 | 6,714 | ||
2014 | 6,898 | ||
2015 | 6,676 | ||
2016 | 6,170 | ||
Thereafter | 16,272 | ||
$ | 49,492 |
6. | COMMITMENTS AND CONTINGENCIES |
Tenant Lease Termination Options
Certain tenants have lease termination options built into their leases, which are subject to termination fees. In the event that a tenant does exercise its option to terminate its lease early and the terminated space is not subsequently leased out, the total amount of future minimum rent received by the 1800 West Loop Building will be reduced. For the year ended December 31, 2011, the 1800 West Loop Building recognized $0.5 million of tenant lease termination income and is included in tenant reimbursements and other revenue on the accompanying statements of revenues over certain operating expenses.
Environmental
The 1800 West Loop Building is subject to various environmental laws of federal, state and local governments. Compliance with existing environmental laws is not expected to have a material adverse effect on the 1800 West Loop Building’s financial condition and results of operations as of December 31, 2011.
7. | SUBSEQUENT EVENTS |
KBS SOR evaluates subsequent events up until the date the statements of revenues over certain operating expenses are issued. The accompanying statements of revenues over certain operating expenses were issued on January 17, 2013.
F-4
KBS STRATEGIC OPPORTUNITY REIT, INC.
SUMMARY OF UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following pro forma information should be read in conjunction with the consolidated balance sheets of KBS Strategic Opportunity REIT, Inc. (“KBS SOR”) as of December 31, 2011 and September 30, 2012, the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2011 and for the three and nine months ended September 30, 2012, and the notes thereto. The consolidated financial statements of KBS SOR as of and for the year ended December 31, 2011 and the consolidated financial statements as of and for the three and nine months ended September 30, 2012 have been included in KBS SOR’s prior filings with the SEC. In addition, this pro forma information should be read in conjunction with the statements of revenues over certain operating expenses and the notes thereto of the Bellevue Technology Center, which have been filed with the SEC on September 26, 2012 and the statements of revenues over certain operating expenses and the notes thereto of the 1800 West Loop Building, which are included herein.
The unaudited pro forma balance sheet as of September 30, 2012 has been prepared to give effect to the acquisition of 1800 West Loop Building as if the acquisition occurred on September 30, 2012.
The unaudited pro forma statements of operations for the nine months ended September 30, 2012 and for the year ended December 31, 2011 have been prepared to give effect to the acquisitions of (i) the Bellevue Technology Center and (ii) the 1800 West Loop Building as if these acquisitions occurred on January 1, 2011.
These unaudited pro forma financial statements are prepared for informational purposes only and are not necessarily indicative of future results or of actual results that would have been achieved had the acquisitions of the Bellevue Technology Center and the 1800 West Loop Building been consummated as of January 1, 2011. In addition, the pro forma balance sheet includes pro forma preliminary estimates of the fair value of the assets and liabilities acquired in connection with the acquisition. These preliminary estimates may be adjusted in the future upon finalization of the purchase accounting.
F-5
KBS STRATEGIC OPPORTUNITY REIT, INC.
UNAUDITED PRO FORMA BALANCE SHEET
As of September 30, 2012
(in thousands, except share and per share amounts)
KBS Strategic Opportunity REIT Historical (a) | Pro Forma Adjustments | Pro Forma Total | |||||||||||
1800 West Loop Building (b) | |||||||||||||
Assets | |||||||||||||
Real estate, net | $ | 199,738 | $ | 67,652 | (c) | $ | 267,390 | ||||||
Real estate loan receivable, net | 71,034 | — | 71,034 | ||||||||||
Real estate securities ($0 pledged under repurchase agreements) | 24,213 | — | 24,213 | ||||||||||
Total real estate and real estate-related investments, net | 294,985 | 67,652 | (c) | 362,637 | |||||||||
Cash and cash equivalents | 66,185 | (66,185 | ) | — | |||||||||
Investment in unconsolidated joint venture | 7,926 | — | 7,926 | ||||||||||
Rents and other receivables, net | 1,971 | — | 1,971 | ||||||||||
Above-market leases, net | 2,960 | — | 2,960 | ||||||||||
Prepaid expenses and other assets | 4,092 | — | 4,092 | ||||||||||
Total assets | $ | 378,119 | $ | 1,467 | $ | 379,586 | |||||||
Liabilities and stockholders’ equity | |||||||||||||
Notes payable and repurchase agreements: | |||||||||||||
Notes payable | $ | 31,576 | $ | — | $ | 31,576 | |||||||
Repurchase agreements on real estate securities | — | — | — | ||||||||||
Total notes payable and repurchase agreements | 31,576 | — | 31,576 | ||||||||||
Accounts payable and accrued liabilities | 5,247 | — | 5,247 | ||||||||||
Due to affiliates | 4 | — | 4 | ||||||||||
Below-market leases, net | 262 | 592 | (c) | 854 | |||||||||
Security deposits and other liabilities | 1,290 | — | 1,290 | ||||||||||
Total liabilities | 38,379 | 592 | 38,971 | ||||||||||
Commitments and contingencies | |||||||||||||
Redeemable common stock | 13,293 | — | 13,293 | ||||||||||
Equity | |||||||||||||
KBS Strategic Opportunity REIT, Inc. stockholders’ equity | |||||||||||||
Preferred stock, $.01 par value; 10,000,000 shares authorized, no shares issued and outstanding | — | — | — | ||||||||||
Common stock, $.01 par value; 1,000,000,000 shares authorized, 40,845,175 shares issued and outstanding, 41,006,916 pro forma shares | 408 | 1 | (d) | 409 | |||||||||
Additional paid-in capital | 347,118 | 874 | (d) | 347,992 | |||||||||
Cumulative distributions and net losses | (35,844 | ) | — | (35,844 | ) | ||||||||
Accumulated other comprehensive gain | 232 | — | 232 | ||||||||||
Total KBS Strategic Opportunity REIT, Inc. stockholders’ equity | 311,914 | 875 | 312,789 | ||||||||||
Noncontrolling interests | 14,533 | — | 14,533 | ||||||||||
Total equity | 326,447 | 875 | 327,322 | ||||||||||
Total liabilities and stockholders’ equity | $ | 378,119 | $ | 1,467 | $ | 379,586 |
F-6
KBS STRATEGIC OPPORTUNITY REIT, INC.
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
As of September 30, 2012
(a) | Historical financial information derived from KBS SOR’s Quarterly Report on Form 10-Q as of September 30, 2012. |
(b) | Represents the acquisition of the 1800 West Loop Building. The purchase price (net of closing credits) of the 1800 West Loop Building was $67.1 million. This amount was funded from cash available from proceeds, net of offering costs, from KBS SOR’s initial public offering through the acquisition date. |
(c) | KBS SOR determined the cost of tangible assets, identifiable intangibles and assumed liabilities (consisting of below-market leases and tenant origination and absorption costs) acquired in the business combination based on their estimated fair values. The purchase accounting for these acquisitions is preliminary and subject to change. |
(d) | Represents additional proceeds, net of offering costs, from KBS SOR’s initial public offering necessary to fund the acquisition of the 1800 West Loop Building as of the pro forma date of September 30, 2012. |
F-7
KBS STRATEGIC OPPORTUNITY REIT, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2012
(in thousands, except share and per share amounts)
KBS Strategic Opportunity REIT Historical (a) | Pro Forma Adjustments | ||||||||||||||||
Bellevue Technology Center | 1800 West Loop | Pro Forma Total | |||||||||||||||
Revenues: | |||||||||||||||||
Rental income | $ | 9,334 | $ | 2,455 | (b) (c) | $ | 5,540 | (b) | $ | 17,329 | |||||||
Tenant reimbursements | 1,051 | 737 | (d) | 195 | (d) | 1,983 | |||||||||||
Interest income from real estate loans receivable | 231 | — | — | 231 | |||||||||||||
Interest income from real estate securities | 855 | — | — | 855 | |||||||||||||
Other operating income | 107 | 70 | (e) | 441 | (e) | 618 | |||||||||||
Total revenues | 11,578 | 3,262 | 6,176 | 21,016 | |||||||||||||
Expenses: | |||||||||||||||||
Operating, maintenance, and management | 5,481 | 1,217 | (f) | 1,989 | (f) | 8,687 | |||||||||||
Real estate taxes and insurance | 1,742 | 422 | (g) | 1,139 | (g) | 3,303 | |||||||||||
Asset management fees to affiliate | 1,099 | 343 | (h) | 384 | (h) | 1,826 | |||||||||||
Real estate acquisition fee and expenses | 388 | (238 | ) | — | 150 | ||||||||||||
Real estate acquisition fee and expenses to affiliate | 1,040 | (789 | ) | — | 251 | ||||||||||||
Costs related to foreclosure of loans receivable | — | — | — | — | |||||||||||||
General and administrative expenses | 2,445 | — | — | 2,445 | |||||||||||||
Depreciation and amortization | 6,350 | 1,156 | (i) | 1,792 | (i) | 9,298 | |||||||||||
Interest expense | 1,918 | — | — | 1,918 | |||||||||||||
Total expenses | 20,463 | 2,111 | 5,304 | 27,878 | |||||||||||||
Other income: | |||||||||||||||||
Other interest income | 63 | — | — | 63 | |||||||||||||
Gain from extinguishment of debt | 581 | — | — | 581 | |||||||||||||
Income from unconsolidated joint venture | 116 | — | — | 116 | |||||||||||||
Gain on early payoff of real estate loan receivable | 359 | — | — | 359 | |||||||||||||
Total other income | 1,119 | — | — | 1,119 | |||||||||||||
(Loss) income from continuing operations | (7,766 | ) | 1,151 | 872 | (5,743 | ) | |||||||||||
Discontinued operations: | |||||||||||||||||
Gain on sale of real estate, net | 593 | — | — | 593 | |||||||||||||
Total income from discontinued operations | 593 | — | — | 593 | |||||||||||||
Net (loss) income | (7,173 | ) | 1,151 | 872 | (5,150 | ) | |||||||||||
Net loss attributable to noncontrolling interests | 182 | — | — | 182 | |||||||||||||
Net (loss) income attributable to common stockholders | $ | (6,991 | ) | $ | 1,151 | $ | 872 | $ | (4,968 | ) | |||||||
Basic and diluted income (loss) per common share: | |||||||||||||||||
Continuing operations | (0.26 | ) | (0.13 | ) | |||||||||||||
Discontinued operations | 0.02 | 0.01 | |||||||||||||||
Net loss per common share | $ | (0.24 | ) | $ | (0.12 | ) | |||||||||||
Weighted-average number of common shares outstanding, basic and diluted | 29,732,658 | 41,006,916 |
F-8
KBS STRATEGIC OPPORTUNITY REIT, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2012
(a) | Historical financial information derived from KBS SOR’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2012. |
(b) | Represents base rental income (not reflected in the historical statement of operations of KBS SOR), including amortization of above-market lease assets and below-market lease liabilities, for the nine months ended September 30, 2012. Base rent is recognized on a straight-line basis beginning on the pro forma acquisition date of January 1, 2011. Above-market lease assets and below-market lease liabilities are amortized over the remaining non-cancelable terms of the respective lease, including any below-market renewal periods. |
(c) | The seller of the Bellevue Technology Center entered into an agreement to lease 67,378 rentable square feet as of the date of acquisition. The pro forma adjustment assumes the same lease was entered into on the pro forma acquisition date of January 1, 2011. |
(d) | Represents operating cost reimbursements from tenants (not reflected in the historical statement of operations of KBS SOR) for the nine months ended September 30, 2012, based on historical operations of the previous owners. |
(e) | Represents other operating income from tenants (not reflected in the historical statement of operations of KBS SOR) for the nine months ended September 30, 2012, based on historical operations of the previous owners. |
(f) | Represents operating expenses (not reflected in the historical statement of operations of KBS SOR) for the nine months ended September 30, 2012, based on historical operations of the previous owners. |
(g) | Represents real estate taxes and insurance expense (not reflected in the historical statement of operations of KBS SOR) for the nine months ended September 30, 2012 based on historical operations of the previous owners. |
(h) | Represents asset management fees (not reflected in the historical statement of operations of KBS SOR) for the nine months ended September 30, 2012 that would have been due to affiliates of KBS SOR had the asset been acquired on January 1, 2011. With respect to investments in real property, the asset management fee is a monthly fee paid to KBS SOR’s advisor equal to one-twelfth of 0.75% of the amount paid to acquire the investment. This amount includes any portion of the investment that was debt financed and is inclusive of acquisition expenses related thereto, but excludes acquisition fees payable to KBS SOR’s advisor. |
(i) | Represents depreciation and amortization expense (not reflected in the historical statement of operations of KBS SOR) for the nine months ended September 30, 2012. Depreciation expense on the purchase price of buildings is recognized using the straight-line method and a 39-year life. Depreciation expense on the purchase price of tenant improvements is recognized using the straight-line method over the shorter of the life of the lease or the expected useful life. Amortization expense on lease intangible costs is recognized using the straight-line method over the life of the lease, including any below-market renewal periods. |
F-9
KBS STRATEGIC OPPORTUNITY REIT, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Year Ended December 31, 2011
(in thousands, except share and per share amounts)
KBS Strategic Opportunity REIT Historical (a) | Pro Forma Adjustments | ||||||||||||||||
Bellevue Technology Center | 1800 West Loop | Pro Forma Total | |||||||||||||||
Revenues: | |||||||||||||||||
Rental income | $ | 3,595 | $ | 4,545 | (b) (c) | $ | 7,286 | (b) | $ | 15,426 | |||||||
Tenant reimbursements | 276 | 1,358 | (d) | 272 | (d) | 1,906 | |||||||||||
Interest income from real estate loans receivable | 311 | — | — | 311 | |||||||||||||
Interest income from real estate securities | 53 | — | — | 53 | |||||||||||||
Other operating income | 43 | 127 | (e) | 1,010 | (e) | 1,180 | |||||||||||
Total revenues | 4,278 | 6,030 | 8,568 | 18,876 | |||||||||||||
Expenses: | |||||||||||||||||
Operating, maintenance, and management | 2,957 | 2,247 | (f) | 2,591 | (f) | 7,795 | |||||||||||
Real estate taxes and insurance | 888 | 719 | (g) | 1,493 | (g) | 3,100 | |||||||||||
Asset management fees to affiliate | 328 | 592 | (h) | 512 | (h) | 1,432 | |||||||||||
Real estate acquisition fee and expenses | 1,139 | — | — | 1,139 | |||||||||||||
Real estate acquisition fee and expenses to affiliate | 460 | — | — | 460 | |||||||||||||
Costs related to foreclosure of loans receivable | 901 | — | — | 901 | |||||||||||||
General and administrative expenses | 2,005 | — | — | 2,005 | |||||||||||||
Depreciation and amortization | 3,203 | 2,359 | (i) | 1,852 | (i) | 7,414 | |||||||||||
Interest expense | 313 | — | — | 313 | |||||||||||||
Total expenses | 12,194 | 5,917 | 6,448 | 24,559 | |||||||||||||
Other income: | |||||||||||||||||
Other interest income | 117 | — | — | 117 | |||||||||||||
Gain from extinguishment of debt | — | — | — | — | |||||||||||||
Income from unconsolidated joint venture | — | — | — | — | |||||||||||||
Gain on early payoff of real estate loan receivable | — | — | — | — | |||||||||||||
Total other income | 117 | — | — | 117 | |||||||||||||
(Loss) income from continuing operations | (7,799 | ) | 113 | 2,120 | (5,566 | ) | |||||||||||
Discontinued operations: | |||||||||||||||||
Gain on sale of real estate, net | — | — | — | — | |||||||||||||
Total income from discontinued operations | — | — | — | — | |||||||||||||
Net (loss) income | (7,799 | ) | 113 | 2,120 | (5,566 | ) | |||||||||||
Net loss attributable to noncontrolling interests | 218 | — | — | 218 | |||||||||||||
Net (loss) income attributable to common stockholders | $ | (7,581 | ) | $ | 113 | $ | 2,120 | $ | (5,348 | ) | |||||||
Basic and diluted loss per common share: | |||||||||||||||||
Continuing operations | (0.66 | ) | (0.18 | ) | |||||||||||||
Discontinued operations | — | — | |||||||||||||||
Net loss per common share | $ | (0.66 | ) | $ | (0.18 | ) | |||||||||||
Weighted-average number of common shares outstanding, basic and diluted | 11,432,823 | 29,873,250 |
F-10
KBS STRATEGIC OPPORTUNITY REIT, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Year Ended December 31, 2011
(a) | Historical financial information derived from KBS SOR’s Annual Report on Form 10-K for the year ended December 31, 2011. |
(b) | Represents base rental income (not reflected in the historical statement of operations of KBS SOR), including amortization of above-market lease assets and below-market lease liabilities, for the year ended December 31, 2011. Base rent is recognized on a straight-line basis beginning on the pro forma acquisition date of January 1, 2011. Above-market lease assets and below-market lease liabilities are amortized over the remaining non-cancelable terms of the respective lease, including any below-market renewal periods. |
(c) | The seller of the Bellevue Technology Center entered into an agreement to lease 67,378 rentable square feet as of the date of acquisition. The pro forma adjustment assumes the same lease was entered into on the pro forma acquisition date of January 1, 2011. |
(d) | Represents operating cost reimbursements from tenants (not reflected in the historical statement of operations of KBS SOR) for the year ended December 31, 2011, based on historical operations of the previous owners. |
(e) | Represents other operating income from tenants (not reflected in the historical statement of operations of KBS SOR) for the year ended December 31, 2011, based on historical operations of the previous owners. |
(f) | Represents operating expenses (not reflected in the historical statement of operations of KBS SOR) for the year ended December 31, 2011, based on historical operations of the previous owners. |
(g) | Represents real estate taxes and insurance expense incurred (not reflected in the historical statement of operations of KBS SOR) for the year ended December 31, 2011 based on historical operations of the previous owners. |
(h) | Represents asset management fees (not reflected in the historical statement of operations of KBS SOR) for the year ended December 31, 2011 that would have been due to affiliates of KBS SOR had the asset been acquired on January 1, 2011. With respect to investments in real property, the asset management fee is a monthly fee equal to one-twelfth of 0.75% of the amount paid to acquire the investment. This amount includes any portion of the investment that was debt financed and is inclusive of acquisition expenses related thereto, but excludes acquisition fees payable to KBS SOR’s advisor. |
(i) | Represents depreciation and amortization expense (not reflected in the historical statement of operations of KBS SOR) for the year ended December 31, 2011. Depreciation expense on the purchase price of buildings is recognized using the straight-line method and a 39-year life. Depreciation expense on the purchase price of tenant improvements is recognized using the straight-line method over the shorter of the life of the lease or the expected useful life. Amortization expense on lease intangible costs is recognized using the straight-line method over the life of the lease, including any below-market renewal periods. |
F-11