KBS Real Estate Investment Trust III Inc.

11/26/2024 | Press release | Distributed by Public on 11/26/2024 11:34

Material Event Form 8 K

ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
Amended and Restated Portfolio Loan Facility
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 "Portfolio Loan 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").
As previously disclosed, on October 11, 2024, KBS REIT III, through the Portfolio Loan Borrowers, entered into a sixth loan modification and extension agreement with the Portfolio Loan Agent and the Portfolio Loan Lenders (the "Sixth Extension Agreement").(1)Pursuant to the terms of the Sixth Extension Agreement, the maturity date of the facility was automatically extended to January 23, 2025. Additionally, on November 22, 2024, KBS REIT III, through the Portfolio Loan Borrowers, entered into a seventh loan modification agreement with the Portfolio Loan Agent and the Portfolio Loan Lenders (the "Seventh Extension Agreement"). The Seventh Extension Agreement requires that on or prior to December 19, 2024 (or such later date as the Portfolio Loan Agent may approve), the Portfolio Loan Borrowers and KBS REIT Properties III LLC, KBS REIT III's indirect wholly owned subsidiary ("REIT Properties III"), as guarantor, enter into a customary mandate letter with the Portfolio Loan Agent under which the Portfolio Loan Agent will agree to pursue credit approval (subject to further diligence review and credit approvals by all Portfolio Loan Lenders, and final documentation satisfactory to all parties in their respective sole and absolute discretion) for a restructuring of the Amended and Restated Portfolio Loan Facility on the terms and conditions to be set forth in a term sheet attached to such mandate letter. The failure to meet this requirement constitutes an immediate default under the loan documents.
As of November 22, 2024, the aggregate outstanding principal balance of the Amended and Restated Portfolio Loan Facility was approximately $460.9 million, which reflects a pay down on November 15, 2024 of $140.4 million from the net proceeds from the sale of Preston Commons (see below). The Amended and Restated Portfolio Loan Facility was secured by 60 South Sixth, Sterling Plaza, Towers at Emeryville, Ten Almaden and Town Center (the "Properties").
Under the Seventh Extension Agreement, the Portfolio Loan 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 REIT Properties III, as guarantor, to satisfy a net worth covenant through the then current maturity date under the loan documents.
Pursuant to the Seventh Extension Agreement, the Portfolio Loan Borrowers also agreed to pay the Portfolio Loan Agent certain costs and expenses incurred by the Portfolio Loan Agent in connection with the Seventh Extension Agreement. KBS REIT III continues to work with Moelis & Company LLC, a global investment bank, to consider various strategic initiatives.
Management Fee and Disposition Fee Subordination Agreement
On November 22, 2024, KBS REIT III's external advisor, KBS Capital Advisors LLC (the "Advisor"), entered into a Management Fee and Disposition Fee Subordination Agreement (the "Subordination Agreement") in favor of U.S. Bank National Association (the "Credit Facility Agent") as agent for the lenders under the credit facility that was entered on July 30, 2021 (as subsequently modified and amended, the "Credit Facility") among REIT Properties III, the Credit Facility Agent and the lenders party thereto (the "Credit Facility Lenders"). The current Credit Facility Lenders are U.S. Bank National Association and Bank of America, N.A.
_____________________
(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 Portfolio Loan 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, July 18, 2024 and October 18, 2024 for a description of the material terms of these agreements and the Sixth Extension Agreement.
1
Pursuant to the Subordination Agreement, the Advisor agreed that payment of certain asset management fees and disposition fees owed by KBS REIT III to the Advisor pursuant to the advisory agreement (as amended, the "Advisory Agreement") will be subordinate to the obligations of REIT Properties III to the Credit Facility Lenders under the Credit Agreement (such obligations, the "Senior Debt"). Specifically, payment of asset management fees to the Advisor associated with five of KBS REIT III's real estate properties is subordinated to the Senior Debt until the Senior Debt is paid in full, provided that KBS REIT III may pay the Advisor 90% of the asset management fees associated with these five properties so long as an "Event of Default" under the Credit Facility is not in existence or would not result from such payment. For the avoidance of doubt, the remaining 10% of the asset management fees associated with these properties is subordinated and deferred until the Senior Debt is paid in full. With respect to disposition fees associated with the sale of these five properties, the Advisor agreed that the disposition fees will be reduced to not more than 0.65% of the contract sales price of each property and that payment of such disposition fees to the Advisor is subordinated to the Senior Debt until the Senior Debt is paid in full. Such deferred disposition fees will be set aside and deposited to an interest bearing account under the control of the Credit Facility Agent.