Thursday, June 29, 2017

KBS Ditches BDs

The DI Wire reports that KBS is closing its flatlined non-traded REIT, KBS Growth & Income REIT, Inc., effective June 30, 2017.  This REIT raised $5.4 million since its inception in April 2016.  This is a horrible capital raise effort even in a tough DOL dominated market.  I am not optimistic about the REIT's plan to continue to raise capital through an on-line private offering.  KBS Growth & Income is returning to investors the difference between the price investors paid for their shares and the pending NAV price per share, which is the offering load, unless there is some aggressive valuation math.  This is a positive move by the REIT, but at $5.4 million of total capital, KBS should just return all investor money and start fresh.

Commenting in hindsight is easy, but looking back, KBS really should have listed or sold the $1.8 billion in equity KBS REIT II outright in 2014 rather than liquidating the portfolio asset by asset.  KBS REIT still owns eleven properties four years after it began to sell its portfolio.  It had an estimated NAV of $5.49 per share as of December 31, 2016, so the REIT still has a long way to full liquidation.  An outright sale would have allowed for a potential large capital reinvestment.  Periodic distributions, even if they eventually total more than the initial $10.00 per share, are harder to reinvest, especially when spread out over more than four years.

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