KBS Real Estate Investment Trust III Inc.
10/18/2024 | Press release | Distributed by Public on 10/18/2024 15:06
Financial Obligation Form 8 K
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
Amended and Restated Portfolio Loan Facility and Amendment of Advisory Agreement
On November 3, 2021, certain of KBS Real Estate Investment Trust III, Inc.'s ("KBS REIT III") indirect wholly owned subsidiaries (the "Portfolio Loan Borrowers"), entered into a loan agreement with Bank of America, N.A., as administrative agent (the "Agent"); BofA Securities, Inc., Wells Fargo Securities, LLC and Capital One, National Association as joint lead arrangers and joint book runners; Wells Fargo Bank, N.A., as syndication agent; and each of the financial institutions signatory thereto as lenders (as subsequently modified and amended, the "Amended and Restated Portfolio Loan Facility"). The current lenders under the Amended and Restated Portfolio Loan Facility are Bank of America, N.A.; Wells Fargo Bank, National Association; U.S. Bank, National Association; Capital One, National Association; PNC Bank, National Association; Regions Bank; and Zions Bankcorporation, N.A., DBA California Bank & Trust (together, the "Portfolio Loan Lenders"). The Amended and Restated Portfolio Loan Facility is secured by 60 South Sixth, Preston Commons, Sterling Plaza, Towers at Emeryville, Ten Almaden and Town Center (the "Properties").
On October 11, 2024, KBS REIT III, through the Portfolio Loan Borrowers, entered into a sixth loan modification and extension agreement with the Agent and the Portfolio Loan Lenders (the "Sixth Extension Agreement"). Pursuant to the Sixth Extension Agreement, the maturity date of the facility was extended to November 20, 2024. The Sixth Extension Agreement requires KBS REIT III to satisfy certain conditions, some of which conditions are not in the sole control of KBS REIT III, including KBS REIT III taking identified actions relating to its portfolio. The failure of KBS REIT III to satisfy certain of these conditions will result in an immediate event of default under the loan documents. KBS REIT III will amend this Current Report on Form 8-K to provide updates on the maturity of the facility.
The aggregate outstanding principal balance of the Amended and Restated Portfolio Loan Facility was approximately $601.3 million as of October 11, 2024.
The Sixth Extension Agreement waived certain milestones initially included in the fourth and fifth extension agreements(1), including the requirement for KBS REIT III to raise not less than $100,000,000 in new equity, debt or a combination of both.
Under the Sixth Extension Agreement, the Agent and the Portfolio Loan Lenders waived the requirement for the Properties to satisfy the minimum required ongoing debt service coverage ratio through the then current maturity date under the loan documents and waived the requirement for KBS REIT Properties III LLC, an indirect wholly owned subsidiary of KBS REIT III, as guarantor, to satisfy a net worth covenant through the then current maturity date under the loan documents.
Pursuant to the Sixth Extension Agreement, the Portfolio Loan Borrowers also agreed (a) to pay the Portfolio Loan Lenders a non-refundable fee in the amount of $250,000, and (b) to pay the Agent certain costs and expenses incurred by the Agent in connection with the Sixth Extension Agreement. In addition, pursuant to the Sixth Extension Agreement, the Portfolio Loan Lenders agreed to modify the timing of the payment of the exit fee in the amount of $1.0 million due to the Portfolio Loan Lenders to the earliest to occur of the maturity date, the occurrence of certain triggering events under the loan documents and the repayment of the loan in full.
On February 12, 2024, KBS REIT III engaged Moelis & Company LLC, a global investment bank with expertise in real estate, capital raising and restructuring, to assist KBS REIT III in developing, evaluating and pursuing the initiatives to restructure its outstanding debt obligations. KBS REIT III will continue to work to meet all of the conditions in the Sixth Extension Agreement, though there can be no assurance as to the certainty or timing of KBS REIT III's plans.
Also, as required by the Sixth Extension Agreement, on October 11, 2024, KBS REIT III and KBS Capital Advisors LLC, KBS REIT III's external advisor (the "Advisor"), entered into an amendment to the advisory agreement between the parties to reduce and defer until December 1, 2025 certain transaction-based compensation in an amount of approximately $0.5 million that may be payable to the Advisor.
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(1)On February 6, 2024 and July 15, 2024, KBS REIT III, through the Portfolio Loan Borrowers, entered into the fourth and fifth loan modification and extension agreements, respectively, with the Agent and the Portfolio Loan Lenders. See KBS REIT III's Current Reports on Form 8-K filed with the Securities and Exchange Commission on February 12, 2024 and July 18, 2024 for a description of the material terms of these agreements.
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