Pacific Oak Strategic Opportunity REIT, Inc. - FORM 8-K - EX-99.3 - PRO FORMA INTERIM CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2018 (UNAUDITED) - August 10, 2018

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EX-99.2 - CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2018 (UNAUDITED) - Pacific Oak Strategic Opportunity REIT, Inc.kbssorex992.htm
EX-99.1 - INTERIM CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2018 (UNAUDITED) - Pacific Oak Strategic Opportunity REIT, Inc.kbssorex991.htm
8-K - FORM 8-K - Pacific Oak Strategic Opportunity REIT, Inc.kbssor8k.htm

Exhibit 99.3




KBS SOR (BVI) HOLDINGS, LTD.


PRO FORMA INTERIM CONSOLIDATED FINANCIAL STATEMENTS


AS OF JUNE 30, 2018


UNAUDITED




INDEX


 
Page
 
 
Board of Directors' Explanations for Pro Forma Interim Consolidated Financial Statements
2
 
 
Pro Forma Consolidated Statements of Operations
3-5
 
 
Pro Forma Consolidated Statements of Comprehensive Income
6
 
 
Notes to Pro Forma Interim Consolidated Financial Statements
7




- - - - - - - - - - -


KBS SOR (BVI) HOLDINGS LTD.
BOARD OF DIRECTORS' EXPLANATIONS FOR PRO FORMA INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 
 
 


A.    GENERAL

Presented below are pro forma interim consolidated financial statements for the six and three months periods ended June 30, 2017 and for the year ended December 31, 2017 (together the "Pro Forma Periods"), in accordance with Regulation 38B of the Israeli Securities Regulations (Periodic and Immediate Reports), 1970 (the "Pro Forma Statements").

The Pro Forma Consolidated Statements of Operations and Pro Forma Consolidated Statements of Comprehensive Income have been prepared to give effect to the disposition of the Singapore Portfolio on November 8, 2017, as if such disposition occurred on January 1, 2017. The Pro Forma Statements have been prepared under certain assumptions, which are set forth in Note 2b to the Pro Forma Statements. It is clarified that the Pro Forma Statements do not reflect the actual results of the Company; rather, they have been prepared in order to provide additional information, based on different assumptions.

On November 8, 2017, the Company through 11 wholly owned subsidiaries, sold 11 of its properties (the "Singapore Portfolio") to various subsidiaries of Keppel-KBS US REIT, a newly formed Singapore real estate investment trust that was listed on the Singapore Stock Exchange (the "Singapore Transaction"). The Singapore Portfolio consists of the following properties: 1800 West Loop, Westech 360 (part of the Austin Suburban Portfolio), Great Hills Plaza (part of the Austin Suburban Portfolio), Westmoor Center, Iron Point Business Park, the Plaza Buildings, Bellevue Technology Center, Northridge Center I and II, West Loop I and II, Powers Ferry Landing, and Maitland Promenade II. The sale price of the Singapore Portfolio was $804 million, before closing credits. In addition to the selling of the properties in the Singapore Portfolio, the Company paid off existing mortgages of the properties which their outstanding principal balance as of the transaction date was approximately $401.7 million.

In connection with the sale, the Company received $321.6 million in cash, after deducting transaction costs, and $52.5 million of Keppel-KBS US REIT units (comprising of 53,713,600 units or approximately 9.5% of Keppel-KBS US REIT) in lieu of cash. The Company accounts for its holding of Keppel-KBS US REIT units as financial assets at fair value through profit or loss. The underwriters exercised an over-allotment option, and on December 15, 2017, purchased 15,714,100 of the Keppel-KBS US REIT units from the Company at $0.88 per unit. As of June 30, 2018 and December 31, 2017, the Company owned 43,999,500 units of Keppel-KBS US REIT, representing a 7.0% ownership interest.


August 9, 2018
 
/s/ Peter McMillan III
 
/s/ Keith David Hall
Date of approval of the pro forma financial statements
 
McMillan III, Peter
Chairman of Board of Directors
 
Hall, Keith David
Chief Executive Officer

- 2 -
KBS SOR (BVI) HOLDINGS LTD.

PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 


 
Six months ended June 30, 2017
 
As previously reported
 
Pro Forma
Adjustments
 
Pro Forma Total
 
U.S. dollars in thousands
 
 
 
 
 
 
Revenues and other income:
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
60,312

 
$
(31,662
)
 
$
28,650

Tenant reimbursements
12,094

 
(8,269
)
 
3,825

Interest income from debt investments
760

 
—

 
760

Other operating income
2,540

 
(1,891
)
 
649

Total revenues and other income
75,706

 
(41,822
)
 
33,884

 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
Operating, maintenance, and management fees
(22,207
)
 
11,239

 
(10,968
)
Real estate taxes and insurance
(10,152
)
 
5,803

 
(4,349
)
Total expenses
(32,359
)
 
17,042

 
(15,317
)
 
 
 
 
 
 
Gross profit
43,347

 
(24,780
)
 
18,567

 
 
 
 
 
 
Fair value adjustment of investment properties, net
(14,131
)
 
1,005

 
(13,126
)
Equity in income of unconsolidated joint ventures
2,092

 
—

 
2,092

Asset management fees to affiliate
(5,603
)
 
2,534

 
(3,069
)
General and administrative expenses
(1,341
)
 
30

 
(1,311
)
 
 
 
 
 
 
Operating profit
24,364

 
(21,211
)
 
3,153

 
 
 
 
 
 
Finance income
170

 
(7
)
 
163

Finance income from financial assets at fair value through profit or loss
3,207

 
—

 
3,207

Finance expenses
(19,709
)
 
6,187

 
(13,522
)
Foreign currency transaction adjustments, net
(7,097
)
 
—

 
(7,097
)
 
 
 
 
 
 
Net income (loss)
$
935

 
$
(15,031
)
 
$
(14,096
)
 
 
 
 
 
 
Net income (loss) attributable to owner
$
960

 
$
(15,031
)
 
$
(14,071
)
Net loss attributable to non-controlling interests
(25
)
 
—

 
(25
)
 
 
 
 
 
 
Net income (loss)
$
935

 
$
(15,031
)
 
$
(14,096
)

August 9, 2018
 
/s/ Jeffrey Waldvogel
 
/s/ Peter McMillan III
 
/s/ Keith David Hall
Date of approval of the pro forma financial statements
 
Waldvogel, Jeffrey
Chief Financial Officer
 
McMillan, Peter III
Chairman of Board of Directors
 
Hall, Keith David
Chief Executive Officer

- 3 -
KBS SOR (BVI) HOLDINGS LTD.

PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 

 
Three months ended June 30, 2017
 
As previously reported
 
Pro Forma
Adjustments
 
Pro Forma Total
 
U.S. dollars in thousands
 
 
 
 
 
 
Revenues and other income:
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
30,560

 
$
(15,767
)
 
$
14,793

Tenant reimbursements
6,457

 
(4,415
)
 
2,042

Interest income from debt investments
600

 
—

 
600

Other operating income
987

 
(936
)
 
51

Total revenues and other income
38,604

 
(21,118
)
 
17,486

 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
Operating, maintenance, and management fees
(11,299
)
 
5,585

 
(5,714
)
Real estate taxes and insurance
(5,415
)
 
3,111

 
(2,304
)
Total expenses
(16,714
)
 
8,696

 
(8,018
)
 
 
 
 
 
 
Gross profit
21,890

 
(12,422
)
 
9,468

 
 
 
 
 
 
Fair value adjustment of investment properties, net
(11,410
)
 
564

 
(10,846
)
Equity in income of unconsolidated joint ventures
398

 
—

 
398

Asset management fees to affiliate
(2,855
)
 
1,279

 
(1,576
)
General and administrative expenses
(426
)
 
15

 
(411
)
 
 
 
 
 
 
Operating profit (loss)
7,597

 
(10,564
)
 
(2,967
)
 
 
 
 
 
 
Finance income
154

 
(5
)
 
149

Finance income from financial assets at fair value through profit or loss
1,338

 
—

 
1,338

Finance expenses
(10,323
)
 
3,298

 
(7,025
)
Foreign currency transaction adjustments, net
(2,426
)
 
—

 
(2,426
)
 
 
 
 
 
 
Net loss
$
(3,660
)
 
$
(7,271
)
 
$
(10,931
)
 
 
 
 
 
 
Net loss attributable to owner
$
(3,441
)
 
$
(7,271
)
 
$
(10,712
)
Net loss attributable to non-controlling interests
(219
)
 
—

 
(219
)
 
 
 
 
 
 
Net loss
$
(3,660
)
 
$
(7,271
)
 
$
(10,931
)


- 4 -
KBS SOR (BVI) HOLDINGS LTD.

PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 


 
Year ended December 31, 2017
 
As previously reported
 
Pro Forma
Adjustments
 
Pro Forma Total
 
U.S. dollars in thousands
 
 
 
 
 
 
Revenues and other income:
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
108,113

 
$
(54,612
)
 
$
53,501

Tenant reimbursements
21,710

 
(13,601
)
 
8,109

Interest income from debt investments
1,782

 
—

 
1,782

Other operating income
4,001

 
(3,197
)
 
804

Total revenues and other income
135,606

 
(71,410
)
 
64,196

 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
Operating, maintenance, and management fees
(42,611
)
 
21,178

 
(21,433
)
Real estate taxes and insurance
(17,404
)
 
9,460

 
(7,944
)
Total expenses
(60,015
)
 
30,638

 
(29,377
)
 
 
 
 
 
 
Gross profit
75,591

 
(40,772
)
 
34,819

 
 
 
 
 
 
Fair value adjustment of investment properties, net
4,755

 
22,179

 
26,934

Loss on deconsolidation
(667
)
 
—

 
(667
)
Loss on extinguishment of debt
(478
)
 
478

 
—

Equity in income of unconsolidated joint ventures
24,130

 
—

 
24,130

Asset management fees to affiliate
(10,686
)
 
4,422

 
(6,264
)
General and administrative expenses
(2,852
)
 
45

 
(2,807
)
 
 
 
 
 
 
Operating profit
89,793

 
(13,648
)
 
76,145

 
 
 
 
 
 
Finance income
1,021

 
(12
)
 
1,009

Finance income from financial assets at fair value through profit or loss
12,640

 
—

 
12,640

Finance expenses
(37,149
)
 
11,285

 
(25,864
)
Foreign currency transaction adjustments, net
(15,298
)
 
—

 
(15,298
)
 
 
 
 
 
 
Net income
$
51,007

 
$
(2,375
)
 
$
48,632

 
 
 
 
 
 
Net income attributable to owner
$
48,317

 
$
(2,375
)
 
$
45,942

Net income attributable to non-controlling interests
2,690

 
—

 
2,690

 
 
 
 
 
 
Net income
$
51,007

 
$
(2,375
)
 
$
48,632




- 5 -
KBS SOR (BVI) HOLDINGS LTD.

PRO FORMA CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
 
 


 
Six months ended June 30, 2017
 
As previously reported
 
Pro Forma
Adjustments
 
Pro Forma Total
 
U.S. dollars in thousands
 
 
 
 
 
 
Net income (loss)
$
935

 
$
(15,031
)
 
$
(14,096
)
 
 
 
 
 
 
Total comprehensive income (loss)
935

 
(15,031
)
 
(14,096
)
 
 
 
 
 
 
Total comprehensive income (loss) attributable to owner
$
960

 
$
(15,031
)
 
$
(14,071
)
Total comprehensive loss attributable to non-controlling interests
(25
)
 
—

 
(25
)
 
 
 
 
 
 
Total comprehensive income (loss)
$
935

 
$
(15,031
)
 
$
(14,096
)
 
Three months ended June 30, 2017
 
As previously reported
 
Pro Forma
Adjustments
 
Pro Forma Total
 
U.S. dollars in thousands
 
 
 
 
 
 
Net loss
$
(3,660
)
 
$
(7,271
)
 
$
(10,931
)
 
 
 
 
 
 
Total comprehensive loss
(3,660
)
 
(7,271
)
 
(10,931
)
 
 
 
 
 
 
Total comprehensive loss attributable to owner
$
(3,441
)
 
$
(7,271
)
 
$
(10,712
)
Total comprehensive loss attributable to non-controlling interests
(219
)
 
—

 
(219
)
 
 
 
 
 
 
Total comprehensive loss
$
(3,660
)
 
$
(7,271
)
 
$
(10,931
)

 
Year ended December 31, 2017
 
As previously reported
 
Pro Forma
Adjustments
 
Pro Forma Total
 
U.S. dollars in thousands
 
 
 
 
 
 
Net income
$
51,007

 
$
(2,375
)
 
$
48,632

 
 
 
 
 
 
Total comprehensive income
51,007

 
(2,375
)
 
48,632

 
 
 
 
 
 
Total comprehensive income attributable to owner
$
48,317

 
$
(2,375
)
 
$
45,942

Total comprehensive income attributable to non-controlling interests
2,690

 
—

 
2,690

 
 
 
 
 
 
Total comprehensive income
$
51,007

 
$
(2,375
)
 
$
48,632



The accompanying notes are an integral part of the pro forma interim consolidated financial statements.

- 6 -
KBS SOR (BVI) HOLDINGS LTD.

NOTES TO PRO FORMA INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 
 
 

NOTE 1:
GENERAL

The pro forma interim consolidated financial statements are prepared in accordance with Regulation 38B of the Securities Regulations (Periodic and Immediate Reports), 1970 (the "Pro Forma Statements").


NOTE 2:
PRO FORMA ASSUMPTIONS

a.
General

The Pro Forma Interim Consolidated Statements of Operations and Pro Forma Consolidated Statements of Comprehensive Income have been prepared to give effect to the disposition of the Singapore Portfolio, as if such disposition occurred on January 1, 2017. The Pro Forma Statements have been prepared under certain assumptions, which are set forth below. It is clarified that the Pro Forma Statements do not reflect the actual results of the Company; rather, they have been prepared in order to provide additional information, based on different assumptions.
Since the Singapore transaction occurred in November 2017, the statements of operations and the statements of comprehensive income for the six and three months period ended June 30, 2018 are not presented as they do not differ from the consolidated statements of operations for the six and three months periods ended June 30, 2018.

b.
Principal assumptions used in preparing the Pro Forma Statements

The Pro Forma Statements have been prepared under the following assumptions:
1.
The Singapore Transaction occurred on January 1, 2017 for the Pro Forma Consolidated Statements of Operations and Pro Forma Consolidated Statements of Comprehensive Income.
2.
A reversal has been made for the historical operations of the Singapore Portfolio as reflected in the Company's historical statements of operations and statements of comprehensive income for the six and three months periods ended June 30, 2017 and for the year ended December 31, 2017.




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Pacific Oak Strategic Opportunity REIT, Inc. Reports