KBS Real Estate Investment Trust III, Inc. - BROCHURE
This is neither an offer to sell nor a solicitation of an offer to buy shares of KBS Real Estate Investment Trust III, Inc. (“KBS REIT III”); offering is only made by prospectus www.kbsreits.com. This information must be preceded or accompanied by a prospectus in order to understand fully all of the implications and risks of the offering. Neither the Attorney General of the State of New York nor any other state regulators have passed on or endorsed the merits of this offering. Any representation to the contrary is unlawful. .
A copy of the KBS REIT III prospectus has been made available to you as an Adobe PDF file. Click on the document link to the right to view prospectus and supplements.
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Shares of KBS REIT III are not suitable for all investors. Investing in KBS REIT III includes significant risks. These risks include, but are not limited to:
- the possibility of losing your entire investment;
- no guarantees regarding future performance;
- upon sale or distribution of assets you may receive less than your initial investment;
- fluctuation of the value of the assets owned by KBS REIT III;
- lack of a public market for shares of KBS REIT III;
- limited liquidity;
- limited transferability;
- reliance on KBS Capital Advisors LLC, KBS REIT III’s advisor, to select, manage and dispose of assets;
- payment of significant fees; and
- various economic factors that may include changes in interest rates, laws, operating expenses, insurance costs and tenant turnover.
KBS REIT III commenced investment operations on June 24, 2011 in connection with its first investment and has a limited operating history. KBS REIT III is dependent on KBS Capital Advisors, its advisor, to identify suitable investments and to manage its investments.
All of KBS REIT III’s executive officers, its affiliated directors and other key real estate and debt finance professionals are also officers, affiliated directors, managers, key professionals and/or holders of a direct or indirect controlling interest in KBS REIT III’s advisor, its dealer manager and/or other KBS-affiliated entities. As a result, KBS REIT III’s executive officers, its affiliated directors, some of its key real estate and debt finance professionals, KBS REIT III’s advisor and its affiliates face conflicts of interest, including significant conflicts created by KBS REIT III’s advisor’s and its affiliates’ compensation arrangements with KBS REIT III and other KBS-sponsored programs and KBS-advised investors and conflicts in allocating time among KBS REIT III and these other programs and investors. Furthermore, these individuals may become employees of another KBS-sponsored program in an internalization transaction or, if KBS REIT III’s internalizes its advisor, may not become KBS REIT III’s employees as a result of their relationship with other KBS-sponsored programs. These conflicts could result in action or inaction that is not in the best interests of KBS REIT III’s stockholders.
Because investment opportunities that are suitable for KBS REIT III may also be suitable for other KBS-sponsored programs or KBS-advised investors, KBS REIT III’s advisor and its affiliates face conflicts of interest relating to the purchase of properties and other investments and such conflicts may not be resolved in KBS REIT III’s favor, meaning that KBS REIT III could invest in less attractive assets, which could reduce the investment return to KBS REIT III’s stockholders.
If KBS REIT III does not raise significant proceeds in its public offerings, it may not be able to acquire as diverse a portfolio of real estate investments as it otherwise would, which may cause the value of an investment in KBS REIT III to vary more widely with the performance of specific assets and cause KBS REIT III’s general and administrative expenses to constitute a greater percentage of its revenue. Raising fewer proceeds, therefore, could increase the risk that KBS REIT III’s stockholders will lose money in their investment.
KBS REIT III’s advisor and its affiliates receive fees in connection with transactions involving the purchase or origination and management of its investments. These fees are based on the cost of the investment, and not based on the quality of the investment or the quality of the services rendered to KBS REIT III. This may influence KBS REIT III’s advisor to recommend riskier transactions to KBS REIT III and increases its stockholders’ risk of loss. In addition, KBS REIT III has paid and will pay substantial fees to and expenses of its advisor, its affiliates and participating broker-dealers, which payments increase the risk that KBS REIT III’s stockholders will not earn a profit on their investment. KBS REIT III may also pay significant fees during its listing/liquidation stage. Although most of the fees payable during the listing/liquidation stage are contingent on KBS REIT III’s stockholders first enjoying agreed-upon investment returns, the investment return thresholds may be reduced subject to approval by the conflicts committee and to other limitations in KBS REIT III’s charter.
KBS REIT III’s charter permits it to pay distributions from any source, including offering proceeds or borrowings (which may constitute a return of capital), and the charter does not limit the amount of funds it may use from any source to pay such distributions. As of June 30, 2014, KBS REIT III had used a combination of cash flow from operating activities, proceeds from debt financing and proceeds from an advance from its advisor to fund distributions. During KBS REIT III’s offering stage and from time to time during its operational stage, KBS REIT III expects to use proceeds from third party financings to fund at least a portion of distributions in anticipation of cash flow to be received in later periods. KBS REIT III may also fund such distributions from the sale of assets or from the maturity, payoff or settlement of debt investments. If KBS REIT III pays distributions from sources other than cash flow from operating activities, it will have less funds available for investment in properties and other assets, the overall return to its stockholders may be reduced and subsequent investors will experience dilution.
KBS REIT III’s policies do not limit it from incurring debt until its total liabilities would exceed 75% of the cost of its tangible assets (before deducting depreciation or other non-cash reserves), and KBS REIT III may exceed this limit with the approval of the conflicts committee of the board of directors. To the extent financing in excess of this limit is available on attractive terms, KBS REIT III’s conflicts committee may approve debt such that its total liabilities would exceed this limit. High debt levels could limit the amount of cash KBS REIT III has available to distribute and could result in a decline in the value of an investment in KBS REIT III.
KBS REIT III depends on tenants for the revenue generated by its real estate investments and, accordingly, the revenue generated by its real estate investments is dependent upon the success and economic viability of its tenants. Revenues from KBS REIT III’s properties could decrease due to a reduction in occupancy (caused by factors including, but not limited to, tenant defaults, tenant insolvency, early termination of tenant leases and non-renewal of existing tenant leases) and/or lower rental rates, making it more difficult for KBS REIT III to meet its debt service obligations and limiting its ability to pay distributions to its stockholders.
KBS REIT III’s real estate investments and any future investments may be affected by unfavorable real estate market and general economic conditions, which could decrease the value of those assets and reduce the investment return to its stockholders. Revenues from KBS REIT III’s real estate properties and the properties and other assets directly securing its loan investments could decrease. Such events would make it more difficult for the borrowers under KBS REIT III’s loan investments to meet their payment obligations to KBS REIT III and could in turn make it more difficult for KBS REIT III’s to meet its debt service obligations and limit its ability to pay distributions to its stockholders.
If KBS REIT III its unable to locate investments with attractive yields while it is investing the proceeds of its public offerings, KBS REIT III’s distributions and the long-term returns of its investors may be lower than they otherwise would.
KBS REIT III cannot predict with any certainty how much, if any, of its dividend reinvestment plan proceeds will be available for general corporate purposes including, but not limited to: the repurchase of shares under its share redemption program; capital expenditures, tenant improvement costs and leasing costs related to its real estate properties; reserves required by any financings of its real estate investments; funding obligations under its real estate loan receivable; the acquisition or origination of real estate investments, which include payment of acquisition or origination fees to its advisor; and the repayment of debt. If such funds are not available from KBS REIT III’s dividend reinvestment plan offering, then it may have to use a greater proportion of its cash flow from operating activities to meet these cash requirements, which would reduce cash available for distributions and could limit its ability to redeem shares under its share redemption program.
Disruptions in the financial markets and uncertain economic conditions could adversely affect KBS REIT III’s ability to implement its business strategy and generate returns to stockholders.
KBS REIT III’s charter does not require it to liquidate its assets and dissolve by a specified date, nor does KBS REIT III’s charter require its directors to list its shares for trading by a specified date. No public market currently exists for KBS REIT III’s shares of common stock, and it currently have no plans to list its shares on a national securities exchange. Until KBS REIT III’s shares are listed, if ever, its stockholders may not sell their shares unless the buyer meets the applicable suitability and minimum purchase standards. Any sale must comply with applicable state and federal securities laws. In addition, KBS REIT III’s charter prohibits the ownership of more than 9.8% of its stock, unless exempted by its board of directors, which may inhibit large investors from purchasing its shares. KBS REIT III’s shares cannot be readily sold and, if KBS REIT III’s stockholders are able to sell their shares, they would likely have to sell them at a substantial discount from their public offering price.
KBS REIT III’s current primary offering price of $10.39 per share may not be indicative of the price at which its shares would trade if they were listed on an exchange or actively traded. This updated offering price of shares of common stock to be sold in KBS REIT III’s ongoing primary initial public offering was determined by adding certain offering costs to the estimated value of its assets less the estimated value of its liabilities, divided by the number of shares outstanding, all as of March 31, 2014. As such, the offering price of KBS REIT III’s shares is not a statement of KBS REIT III’s estimated net asset value per share, as the offering price takes into consideration the projected costs and expenses associated with raising capital in its ongoing initial public offering. These costs include selling commissions, dealer manager fees and certain other offering costs. The estimated net asset value per share was determined for the sole purpose of updating the offering prices in KBS REIT III’s primary initial public offering and in its dividend reinvestment plan offering. Moreover, the valuation methodologies used to establish the net asset value component of KBS REIT III’s updated offering prices are based upon a number of estimates and assumptions that may not be accurate or complete. KBS REIT III’s board of directors may adjust the offering price of the primary offering shares or dividend reinvestment plan shares during the course of its ongoing initial public offering. For information related to the determination of KBS REIT III’s updated offering prices, see supplement no. 3 dated May 6, 2014 to the prospectus.
KBS REIT III expects to use debt in connection with its investments, which increases the risk of loss associated with these investments. The use of debt could hinder the REIT’s ability to pay distributions to its stockholders or could decrease the value of its stockholders’ investment in the REIT if income related to a real estate property owned by the REIT, or the value of a property securing a debt owned or originated by the REIT, declines.
KBS REIT III may make adjustments to its target portfolio based on real estate market conditions and investment opportunities and it may change its targeted investments and investment guidelines at any time without the consent of its stockholders.
KBS REIT III intends to qualify as a real estate investment trust (REIT) beginning with the taxable year ended December 31, 2011. Should KBS REIT III not qualify as a REIT, it may be subject to adverse tax consequences. Please refer to the prospectus for more detailed information regarding these consequences.
An investment in the shares of KBS REIT III is suitable only for persons who have adequate financial means, including minimum net worth and/or annual gross income levels as outlined in the KBS REIT III prospectus. The minimum suitability standards are more stringent for investors in certain states, as described in the prospectus.
An investment in shares of KBS REIT III is complex. Investors should read and understand the prospectus, which contains additional important information.