v2.4.1.9
Document and Entity Information Document
3 Months Ended
Mar. 31, 2015
May 11, 2015
Document and Entity Information [Abstract]    
Entity Registrant Name KBS Real Estate Investment Trust, Inc.  
Entity Central Index Key 0001330622  
Current Fiscal Year End Date --12-31  
Entity Filer Category Non-accelerated Filer  
Document Type 10-Q  
Document Period End Date Mar. 31, 2015  
Document Fiscal Year Focus 2015  
Document Fiscal Period Focus Q1  
Amendment Flag false  
Entity Common Stock, Shares Outstanding   187,385,260dei_EntityCommonStockSharesOutstanding
v2.4.1.9
CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2015
Dec. 31, 2014
Real estate held for investment:    
Land $ 271,566us-gaap_Land $ 271,566us-gaap_Land
Buildings and improvements 873,237us-gaap_InvestmentBuildingAndBuildingImprovements 867,156us-gaap_InvestmentBuildingAndBuildingImprovements
Tenant origination and absorption costs 87,181kbsreiti_TenantOriginationAndAbsorptionCostsGross 88,350kbsreiti_TenantOriginationAndAbsorptionCostsGross
Total real estate held for investment, at cost and net of impairment charges 1,231,984us-gaap_RealEstateInvestmentPropertyAtCost 1,227,072us-gaap_RealEstateInvestmentPropertyAtCost
Less accumulated depreciation and amortization (199,352)us-gaap_RealEstateInvestmentPropertyAccumulatedDepreciation (187,461)us-gaap_RealEstateInvestmentPropertyAccumulatedDepreciation
Total real estate held for investment, net 1,032,632us-gaap_RealEstateInvestmentPropertyNet 1,039,611us-gaap_RealEstateInvestmentPropertyNet
Real estate held for sale, net 0us-gaap_RealEstateHeldforsale 78,900us-gaap_RealEstateHeldforsale
Foreclosed real estate held for sale 0kbsreiti_ForeclosedRealEstateHeldForSale 12,045kbsreiti_ForeclosedRealEstateHeldForSale
Total real estate, net 1,032,632kbsreiti_TotalRealEstate 1,130,556kbsreiti_TotalRealEstate
Real estate loans receivable, net 29,135us-gaap_MortgageLoansOnRealEstateCommercialAndConsumerNet [1] 28,922us-gaap_MortgageLoansOnRealEstateCommercialAndConsumerNet [1]
Total real estate and real estate-related investments, net 1,061,767kbsreiti_RealEstateAndRealEstateRelatedInvestmentsNet 1,159,478kbsreiti_RealEstateAndRealEstateRelatedInvestmentsNet
Cash and cash equivalents 141,855us-gaap_CashAndCashEquivalentsAtCarryingValue 58,675us-gaap_CashAndCashEquivalentsAtCarryingValue
Restricted cash 55,419us-gaap_RestrictedCashAndCashEquivalents 62,755us-gaap_RestrictedCashAndCashEquivalents
Rents and other receivables, net 41,208us-gaap_AccountsReceivableNet 39,462us-gaap_AccountsReceivableNet
Above-market leases, net 21,912kbsreiti_AboveMarketLeasesNet 22,767kbsreiti_AboveMarketLeasesNet
Assets related to real estate held for sale 0us-gaap_AssetsOfDisposalGroupIncludingDiscontinuedOperation 6,918us-gaap_AssetsOfDisposalGroupIncludingDiscontinuedOperation
Deferred financing costs, prepaid expenses and other assets, net 29,154kbsreiti_DeferredFinancingCostsPrepaidExpensesAndOtherAssets 26,112kbsreiti_DeferredFinancingCostsPrepaidExpensesAndOtherAssets
Total assets 1,351,315us-gaap_Assets 1,376,167us-gaap_Assets
Notes payable:    
Notes payable 639,346kbsreiti_NotesPayableExcludingNotesPayableForRealEstateHeldForSale 641,523kbsreiti_NotesPayableExcludingNotesPayableForRealEstateHeldForSale
Notes payable related to real estate held for sale 0us-gaap_LiabilitiesOfDisposalGroupIncludingDiscontinuedOperation 16,575us-gaap_LiabilitiesOfDisposalGroupIncludingDiscontinuedOperation
Total notes payable 639,346us-gaap_NotesPayable 658,098us-gaap_NotesPayable
Accounts payable and accrued liabilities 23,059us-gaap_AccountsPayableAndAccruedLiabilitiesCurrentAndNoncurrent 22,579us-gaap_AccountsPayableAndAccruedLiabilitiesCurrentAndNoncurrent
Due to affiliates 696us-gaap_DueToRelatedPartiesCurrentAndNoncurrent 444us-gaap_DueToRelatedPartiesCurrentAndNoncurrent
Distributions payable 0us-gaap_DividendsPayableCurrentAndNoncurrent 4,699us-gaap_DividendsPayableCurrentAndNoncurrent
Below-market leases, net 38,217us-gaap_OffMarketLeaseUnfavorable 40,854us-gaap_OffMarketLeaseUnfavorable
Liabilities related to real estate held for sale 0kbsreiti_LiabilitiesRelatedToRealEstateHeldForSale 308kbsreiti_LiabilitiesRelatedToRealEstateHeldForSale
Other liabilities 34,883us-gaap_OtherLiabilities 36,412us-gaap_OtherLiabilities
Total liabilities 736,201us-gaap_Liabilities 763,394us-gaap_Liabilities
Commitments and contingencies (Note 13)      
Redeemable common stock 8,442us-gaap_TemporaryEquityCarryingAmountAttributableToParent 10,000us-gaap_TemporaryEquityCarryingAmountAttributableToParent
Stockholders’ equity    
Preferred stock, $.01 par value; 10,000,000 shares authorized, no shares issued and outstanding 0us-gaap_PreferredStockValue 0us-gaap_PreferredStockValue
Common stock, $.01 par value; 1,000,000,000 shares authorized, 187,500,775 and 187,845,515 shares issued and outstanding as of March 31, 2015 and December 31, 2014, respectively 1,875us-gaap_CommonStockValue 1,879us-gaap_CommonStockValue
Additional paid-in capital 1,662,487us-gaap_AdditionalPaidInCapital 1,662,483us-gaap_AdditionalPaidInCapital
Cumulative distributions and net losses (1,057,690)us-gaap_AccumulatedDistributionsInExcessOfNetIncome (1,061,589)us-gaap_AccumulatedDistributionsInExcessOfNetIncome
Total stockholders’ equity 606,672us-gaap_StockholdersEquity 602,773us-gaap_StockholdersEquity
Total liabilities and stockholders' equity $ 1,351,315us-gaap_LiabilitiesAndStockholdersEquity $ 1,376,167us-gaap_LiabilitiesAndStockholdersEquity
[1] Book value represents outstanding principal balance, adjusted for unamortized acquisition discounts, origination fees and direct origination and acquisition costs. Loan balances are presented gross of any asset-specific reserves.
v2.4.1.9
CONSOLIDATED BALANCE SHEETS (Parenthetical) (Unaudited) (USD $)
Mar. 31, 2015
Dec. 31, 2014
Statement of Financial Position [Abstract]    
Preferred stock, par value $ 0.01us-gaap_PreferredStockParOrStatedValuePerShare $ 0.01us-gaap_PreferredStockParOrStatedValuePerShare
Preferred stock, shares authorized 10,000,000us-gaap_PreferredStockSharesAuthorized 10,000,000us-gaap_PreferredStockSharesAuthorized
Preferred stock, shares issued 0us-gaap_PreferredStockSharesIssued 0us-gaap_PreferredStockSharesIssued
Preferred stock, shares outstanding 0us-gaap_PreferredStockSharesOutstanding 0us-gaap_PreferredStockSharesOutstanding
Common stock, par value $ 0.01us-gaap_CommonStockParOrStatedValuePerShare $ 0.01us-gaap_CommonStockParOrStatedValuePerShare
Common stock, shares authorized 1,000,000,000us-gaap_CommonStockSharesAuthorized 1,000,000,000us-gaap_CommonStockSharesAuthorized
Common stock, shares issued 187,500,775us-gaap_CommonStockSharesIssued 187,845,515us-gaap_CommonStockSharesIssued
Common stock, shares outstanding 187,500,775us-gaap_CommonStockSharesOutstanding 187,845,515us-gaap_CommonStockSharesOutstanding
v2.4.1.9
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Revenues:    
Rental income $ 35,365us-gaap_OperatingLeasesIncomeStatementLeaseRevenue $ 39,143us-gaap_OperatingLeasesIncomeStatementLeaseRevenue
Tenant reimbursements 12,554us-gaap_TenantReimbursements 13,058us-gaap_TenantReimbursements
Interest income from real estate loans receivable 726us-gaap_InterestAndFeeIncomeLoansCommercialRealEstate 801us-gaap_InterestAndFeeIncomeLoansCommercialRealEstate
Parking revenues and other operating income 932us-gaap_OtherRealEstateRevenue 1,004us-gaap_OtherRealEstateRevenue
Total revenues 49,577us-gaap_Revenues 54,006us-gaap_Revenues
Expenses:    
Operating, maintenance, and management 21,989us-gaap_CostOfRealEstateRevenue 21,400us-gaap_CostOfRealEstateRevenue
Real estate taxes, property-related taxes, and insurance 6,781us-gaap_RealEstateTaxesAndInsurance 7,440us-gaap_RealEstateTaxesAndInsurance
Asset management fees to affiliate 2,420us-gaap_AssetManagementCosts 2,499us-gaap_AssetManagementCosts
General and administrative expenses 2,220us-gaap_GeneralAndAdministrativeExpense 3,644us-gaap_GeneralAndAdministrativeExpense
Depreciation and amortization 15,605us-gaap_DepreciationDepletionAndAmortization 17,923us-gaap_DepreciationDepletionAndAmortization
Interest expense 8,733us-gaap_InterestExpense 13,545us-gaap_InterestExpense
Impairment charge on real estate held for investment 0us-gaap_ImpairmentOfRealEstate 1,257us-gaap_ImpairmentOfRealEstate
Total expenses 57,748us-gaap_CostsAndExpenses 67,708us-gaap_CostsAndExpenses
Other income    
Gain on sales of real estate securities (includes $3.8 million of unrealized gains reclassified from accumulated other comprehensive income during the three months ended March 31, 2014) 0kbsreiti_GainOnSaleOfRealEstateSecurities 3,748kbsreiti_GainOnSaleOfRealEstateSecurities
Gain on sales of real estate, net 13,967kbsreiti_GainLossOnSaleOfRealEstate 0kbsreiti_GainLossOnSaleOfRealEstate
Gain on sales of foreclosed real estate held for sale 2,509kbsreiti_GainLossOnSaleOfForeclosedRealEstateHeldForSale 0kbsreiti_GainLossOnSaleOfForeclosedRealEstateHeldForSale
Gain from extinguishment of debt 0us-gaap_GainsLossesOnExtinguishmentOfDebt 1,815us-gaap_GainsLossesOnExtinguishmentOfDebt
Other interest income 116us-gaap_InvestmentIncomeInterest 168us-gaap_InvestmentIncomeInterest
Other income 0us-gaap_OtherNonoperatingIncomeExpense 304us-gaap_OtherNonoperatingIncomeExpense
Total other income 16,592us-gaap_OtherIncome 6,035us-gaap_OtherIncome
Income (loss) from continuing operations 8,421us-gaap_IncomeLossFromContinuingOperationsIncludingPortionAttributableToNoncontrollingInterest (7,667)us-gaap_IncomeLossFromContinuingOperationsIncludingPortionAttributableToNoncontrollingInterest
Discontinued operations:    
Gain on sales of real estate, net 124us-gaap_DiscontinuedOperationGainLossOnDisposalOfDiscontinuedOperationNetOfTax 2,916us-gaap_DiscontinuedOperationGainLossOnDisposalOfDiscontinuedOperationNetOfTax
Income from discontinued operations 44us-gaap_DiscontinuedOperationIncomeLossFromDiscontinuedOperationDuringPhaseOutPeriodNetOfTax 236us-gaap_DiscontinuedOperationIncomeLossFromDiscontinuedOperationDuringPhaseOutPeriodNetOfTax
Total income from discontinued operations 168us-gaap_IncomeLossFromDiscontinuedOperationsNetOfTax 3,152us-gaap_IncomeLossFromDiscontinuedOperationsNetOfTax
Net income (loss) $ 8,589us-gaap_ProfitLoss $ (4,515)us-gaap_ProfitLoss
Basic and diluted income (loss) per common share:    
Continuing operations (per share) $ 0.05us-gaap_IncomeLossFromContinuingOperationsPerBasicAndDilutedShare $ (0.04)us-gaap_IncomeLossFromContinuingOperationsPerBasicAndDilutedShare
Discontinued operations (per share) $ 0.00us-gaap_IncomeLossFromDiscontinuedOperationsNetOfTaxPerBasicAndDilutedShare $ 0.02us-gaap_IncomeLossFromDiscontinuedOperationsNetOfTaxPerBasicAndDilutedShare
Net income (loss) per common share $ 0.05us-gaap_EarningsPerShareBasicAndDiluted $ (0.02)us-gaap_EarningsPerShareBasicAndDiluted
Weighted-average number of common shares outstanding, basic and diluted 187,718,362us-gaap_WeightedAverageNumberOfShareOutstandingBasicAndDiluted 189,481,669us-gaap_WeightedAverageNumberOfShareOutstandingBasicAndDiluted
v2.4.1.9
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Parenthetical) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Income Statement [Abstract]  
Unrealized gains on real estate securities reclassified from accumulated other comprehensive income $ 3.8us-gaap_AvailableforsaleSecuritiesGrossRealizedGainLossExcludingOtherThanTemporaryImpairments
v2.4.1.9
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Statement of Comprehensive Income [Abstract]    
Net income (loss) $ 8,589us-gaap_ProfitLoss $ (4,515)us-gaap_ProfitLoss
Other comprehensive (loss) income    
Reclassification of realized gain on real estate securities 0us-gaap_OtherComprehensiveIncomeLossReclassificationAdjustmentFromAOCIForSaleOfSecuritiesNetOfTax (3,783)us-gaap_OtherComprehensiveIncomeLossReclassificationAdjustmentFromAOCIForSaleOfSecuritiesNetOfTax
Unrealized change in market value of real estate securities 0us-gaap_OtherComprehensiveIncomeUnrealizedHoldingGainLossOnSecuritiesArisingDuringPeriodNetOfTax (136)us-gaap_OtherComprehensiveIncomeUnrealizedHoldingGainLossOnSecuritiesArisingDuringPeriodNetOfTax
Total other comprehensive (loss) income 0us-gaap_OtherComprehensiveIncomeLossNetOfTax (3,919)us-gaap_OtherComprehensiveIncomeLossNetOfTax
Total comprehensive income (loss) $ 8,589us-gaap_ComprehensiveIncomeNetOfTaxIncludingPortionAttributableToNoncontrollingInterest $ (8,434)us-gaap_ComprehensiveIncomeNetOfTaxIncludingPortionAttributableToNoncontrollingInterest
v2.4.1.9
CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Cumulative Distributions and Net Income (Loss) [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Balance, value at Jan. 26, 2006          
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Redemptions of common stock, shares   (11,934,805)us-gaap_StockRedeemedOrCalledDuringPeriodShares
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_CommonStockMember
     
Redemptions of common stock, value   $ (87,000)us-gaap_StockRedeemedOrCalledDuringPeriodValue
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_CommonStockMember
     
Balance, value at Mar. 31, 2015   1,875us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_CommonStockMember
    0us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_AccumulatedOtherComprehensiveIncomeMember
Balance, shares at Mar. 31, 2015   187,500,775us-gaap_CommonStockSharesOutstanding
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_CommonStockMember
     
Balance, value at Dec. 31, 2013 645,893us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest 1,896us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_CommonStockMember
1,670,356us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_AdditionalPaidInCapitalMember
(1,030,911)us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_AccumulatedDistributionsInExcessOfNetIncomeMember
4,552us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_AccumulatedOtherComprehensiveIncomeMember
Balance, shares at Dec. 31, 2013   189,616,701us-gaap_CommonStockSharesOutstanding
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_CommonStockMember
     
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income (loss) (21,266)us-gaap_ProfitLoss     (21,266)us-gaap_ProfitLoss
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_AccumulatedDistributionsInExcessOfNetIncomeMember
 
Other comprehensive income (4,552)us-gaap_OtherComprehensiveIncomeLossNetOfTax       (4,552)us-gaap_OtherComprehensiveIncomeLossNetOfTax
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_AccumulatedOtherComprehensiveIncomeMember
Redemptions of common stock, shares   (1,771,186)us-gaap_StockRedeemedOrCalledDuringPeriodShares
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_CommonStockMember
     
Redemptions of common stock, value (7,890)us-gaap_StockRedeemedOrCalledDuringPeriodValue (17)us-gaap_StockRedeemedOrCalledDuringPeriodValue
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_CommonStockMember
(7,873)us-gaap_StockRedeemedOrCalledDuringPeriodValue
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_AdditionalPaidInCapitalMember
   
Distributions declared (9,412)us-gaap_DividendsCommonStock     (9,412)us-gaap_DividendsCommonStock
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_AccumulatedDistributionsInExcessOfNetIncomeMember
 
Balance, value at Dec. 31, 2014 602,773us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest 1,879us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_CommonStockMember
1,662,483us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_AdditionalPaidInCapitalMember
(1,061,589)us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_AccumulatedDistributionsInExcessOfNetIncomeMember
0us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_AccumulatedOtherComprehensiveIncomeMember
Balance, shares at Dec. 31, 2014 187,845,515us-gaap_CommonStockSharesOutstanding 187,845,515us-gaap_CommonStockSharesOutstanding
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_CommonStockMember
     
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income (loss) 8,589us-gaap_ProfitLoss     8,589us-gaap_ProfitLoss
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_AccumulatedDistributionsInExcessOfNetIncomeMember
 
Other comprehensive income 0us-gaap_OtherComprehensiveIncomeLossNetOfTax        
Redemptions of common stock, shares   (344,740)us-gaap_StockRedeemedOrCalledDuringPeriodShares
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_CommonStockMember
     
Redemptions of common stock, value (1,558)us-gaap_StockRedeemedOrCalledDuringPeriodValue (4)us-gaap_StockRedeemedOrCalledDuringPeriodValue
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_CommonStockMember
(1,554)us-gaap_StockRedeemedOrCalledDuringPeriodValue
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_AdditionalPaidInCapitalMember
   
Transfers from redeemable common stock 1,558kbsreiti_AdjustmentsToAdditionalPaidInCapitalTransfersFromRedeemableCommonStock   1,558kbsreiti_AdjustmentsToAdditionalPaidInCapitalTransfersFromRedeemableCommonStock
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_AdditionalPaidInCapitalMember
   
Distributions declared (4,690)us-gaap_DividendsCommonStock     (4,690)us-gaap_DividendsCommonStock
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_AccumulatedDistributionsInExcessOfNetIncomeMember
 
Balance, value at Mar. 31, 2015 $ 606,672us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest $ 1,875us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_CommonStockMember
$ 1,662,487us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_AdditionalPaidInCapitalMember
$ (1,057,690)us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_AccumulatedDistributionsInExcessOfNetIncomeMember
$ 0us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_AccumulatedOtherComprehensiveIncomeMember
Balance, shares at Mar. 31, 2015 187,500,775us-gaap_CommonStockSharesOutstanding 187,500,775us-gaap_CommonStockSharesOutstanding
/ us-gaap_StatementEquityComponentsAxis
= us-gaap_CommonStockMember
     
v2.4.1.9
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Cash Flows from Operating Activities:    
Net income (loss) $ 8,589us-gaap_ProfitLoss $ (4,515)us-gaap_ProfitLoss
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Depreciation and amortization 15,605us-gaap_DepreciationDepletionAndAmortization 17,923us-gaap_DepreciationDepletionAndAmortization
Impairment charge on real estate 0us-gaap_ImpairmentOfRealEstate 1,257us-gaap_ImpairmentOfRealEstate
Noncash interest income on real estate-related investments (240)kbsreiti_NoncashInterestIncomeOnRealEstateRelatedInvestments (248)kbsreiti_NoncashInterestIncomeOnRealEstateRelatedInvestments
Deferred rent (495)us-gaap_RecognitionOfDeferredRevenue (574)us-gaap_RecognitionOfDeferredRevenue
Bad debt expense 334us-gaap_ProvisionForDoubtfulAccounts 482us-gaap_ProvisionForDoubtfulAccounts
Amortization of deferred financing costs 476us-gaap_AmortizationOfFinancingCosts 377us-gaap_AmortizationOfFinancingCosts
Deferred interest 0kbsreiti_DeferredInterestPayable 480kbsreiti_DeferredInterestPayable
Amortization of above- and below-market leases, net (1,790)us-gaap_AmortizationOfAboveAndBelowMarketLeases (2,094)us-gaap_AmortizationOfAboveAndBelowMarketLeases
Gain on sales of foreclosed real estate held for sale (2,509)kbsreiti_GainLossOnSaleOfForeclosedRealEstateHeldForSale 0kbsreiti_GainLossOnSaleOfForeclosedRealEstateHeldForSale
Gain on sales of real estate, net (14,191)kbsreiti_GainLossonDisposalofDiscontinuedandContinuedOperationNetofTax (2,916)kbsreiti_GainLossonDisposalofDiscontinuedandContinuedOperationNetofTax
Gain on sales of real estate securities 0kbsreiti_GainOnSaleOfRealEstateSecurities (3,748)kbsreiti_GainOnSaleOfRealEstateSecurities
Gain on extinguishment of debt 0us-gaap_GainsLossesOnExtinguishmentOfDebt (1,815)us-gaap_GainsLossesOnExtinguishmentOfDebt
Amortization of discounts and premiums on notes payable, net 511us-gaap_AmortizationOfDebtDiscountPremium 639us-gaap_AmortizationOfDebtDiscountPremium
Changes in operating assets and liabilities:    
Restricted cash for operational expenditures 2,949us-gaap_IncreaseDecreaseInRestrictedCashForOperatingActivities 814us-gaap_IncreaseDecreaseInRestrictedCashForOperatingActivities
Rents and other receivables (1,880)us-gaap_IncreaseDecreaseInAccountsReceivable (2,877)us-gaap_IncreaseDecreaseInAccountsReceivable
Prepaid expenses and other assets (3,615)us-gaap_IncreaseDecreaseInPrepaidDeferredExpenseAndOtherAssets (3,188)us-gaap_IncreaseDecreaseInPrepaidDeferredExpenseAndOtherAssets
Accounts payable and accrued liabilities 3,894us-gaap_IncreaseDecreaseInAccountsPayableAndAccruedLiabilities 1,834us-gaap_IncreaseDecreaseInAccountsPayableAndAccruedLiabilities
Due to affiliates 651us-gaap_IncreaseDecreaseInDueToRelatedParties 0us-gaap_IncreaseDecreaseInDueToRelatedParties
Other liabilities (1,480)us-gaap_IncreaseDecreaseInOtherOperatingLiabilities (834)us-gaap_IncreaseDecreaseInOtherOperatingLiabilities
Net cash provided by operating activities 6,809us-gaap_NetCashProvidedByUsedInOperatingActivities 997us-gaap_NetCashProvidedByUsedInOperatingActivities
Cash Flows from Investing Activities:    
Improvements to real estate (11,903)us-gaap_PaymentsForCapitalImprovements (5,025)us-gaap_PaymentsForCapitalImprovements
Proceeds from sales of real estate, net 99,915us-gaap_ProceedsFromSaleOfRealEstate 47,324us-gaap_ProceedsFromSaleOfRealEstate
Proceeds from sales of foreclosed real estate held for sale 14,155us-gaap_ProceedsFromSaleOfForeclosedAssets 0us-gaap_ProceedsFromSaleOfForeclosedAssets
Principal repayments on real estate loans receivable 27us-gaap_ProceedsFromCollectionOfLoansReceivable 20us-gaap_ProceedsFromCollectionOfLoansReceivable
Proceeds from sale of real estate securities 0us-gaap_ProceedsFromSaleAndMaturityOfAvailableForSaleSecurities 6,588us-gaap_ProceedsFromSaleAndMaturityOfAvailableForSaleSecurities
Net change in restricted cash for capital expenditures 4,111us-gaap_IncreaseDecreaseInRestrictedCash (175)us-gaap_IncreaseDecreaseInRestrictedCash
Net cash provided by investing activities 106,305us-gaap_NetCashProvidedByUsedInInvestingActivities 48,732us-gaap_NetCashProvidedByUsedInInvestingActivities
Cash Flows from Financing Activities:    
Proceeds from notes payable 0us-gaap_ProceedsFromNotesPayable 2,500us-gaap_ProceedsFromNotesPayable
Principal payments on notes payable (19,263)us-gaap_RepaymentsOfNotesPayable (104,747)us-gaap_RepaymentsOfNotesPayable
Net change in restricted cash for debt service obligations 276kbsreiti_RestrictedCashForDebtServiceObligations (346)kbsreiti_RestrictedCashForDebtServiceObligations
Payments of deferred financing costs 0us-gaap_PaymentsOfFinancingCosts (727)us-gaap_PaymentsOfFinancingCosts
Payments to redeem common stock (1,558)us-gaap_PaymentsForRepurchaseOfCommonStock (1,628)us-gaap_PaymentsForRepurchaseOfCommonStock
Distributions paid to common stockholders (9,389)us-gaap_PaymentsOfDividendsCommonStock 0us-gaap_PaymentsOfDividendsCommonStock
Net cash used in financing activities (29,934)us-gaap_NetCashProvidedByUsedInFinancingActivities (104,948)us-gaap_NetCashProvidedByUsedInFinancingActivities
Net increase (decrease) in cash and cash equivalents 83,180us-gaap_CashAndCashEquivalentsPeriodIncreaseDecrease (55,219)us-gaap_CashAndCashEquivalentsPeriodIncreaseDecrease
Cash and cash equivalents, beginning of period 58,675us-gaap_CashAndCashEquivalentsAtCarryingValue 211,391us-gaap_CashAndCashEquivalentsAtCarryingValue
Cash and cash equivalents, end of period $ 141,855us-gaap_CashAndCashEquivalentsAtCarryingValue $ 156,172us-gaap_CashAndCashEquivalentsAtCarryingValue
v2.4.1.9
ORGANIZATION
3 Months Ended
Mar. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
ORGANIZATION
ORGANIZATION
KBS Real Estate Investment Trust, Inc. (the “Company”) was formed on June 13, 2005 as a Maryland corporation and has elected to be taxed as a real estate investment trust (“REIT”). Substantially all of the Company’s assets are held by, and the Company conducts substantially all of its operations through, KBS Limited Partnership, a Delaware limited partnership (the “Operating Partnership”), and its subsidiaries. The Company is the sole general partner of and directly owns a 99% partnership interest in the Operating Partnership. The Company’s wholly owned subsidiary, KBS REIT Holdings LLC, a Delaware limited liability company (“KBS REIT Holdings”), owns the remaining 1% partnership interest in the Operating Partnership and is its sole limited partner.
The Company owns a diverse portfolio of real estate and real estate-related investments. As of March 31, 2015, the Company owned or, with respect to a limited number of properties, held a leasehold interest in, 397 real estate properties, including the GKK Properties (defined below). In addition, as of March 31, 2015, the Company owned four real estate loans receivable and a participation interest with respect to a real estate joint venture.
On September 1, 2011, the Company, through indirect wholly owned subsidiaries (collectively, “KBS”), entered into a Collateral Transfer and Settlement Agreement (the “Settlement Agreement”) with, among other parties, GKK Stars Acquisition LLC (“GKK Stars”), the wholly owned subsidiary of Gramercy Property Trust, Inc. (“Gramercy”) that indirectly owned the Gramercy real estate portfolio, to effect the orderly transfer of certain assets and liabilities of the Gramercy real estate portfolio to KBS in satisfaction of certain debt obligations under a mezzanine loan owed by wholly owned subsidiaries of Gramercy to KBS (the “GKK Mezzanine Loan”). The Settlement Agreement resulted in the transfer of the equity interests in certain subsidiaries of Gramercy (the “Equity Interests”) that indirectly owned or, with respect to a limited number of properties, held a leasehold interest in, 867 properties (the “GKK Properties”), consisting of 576 bank branch properties and 291 office buildings, operations centers and other properties. As of December 15, 2011, GKK Stars had transferred all of the Equity Interests to the Company, giving the Company title to or, with respect to a limited number of GKK Properties, a leasehold interest in, 867 GKK Properties as of that date.
Subject to certain restrictions and limitations, the business of the Company is managed by KBS Capital Advisors LLC (the “Advisor”), an affiliate of the Company, pursuant to an advisory agreement with the Company (as amended, the “Advisory Agreement”) in effect through November 8, 2015. The Advisory Agreement may be renewed for an unlimited number of one-year periods upon the mutual consent of the Advisor and the Company. Either party may terminate the Advisory Agreement upon 60 days written notice. The Advisor owns 20,000 shares of the Company’s common stock.
Upon commencing its initial public offering (the “Offering”), the Company retained KBS Capital Markets Group LLC (the “Dealer Manager”), an affiliate of the Advisor, to serve as the dealer manager of the Offering pursuant to a dealer manager agreement dated January 27, 2006 (the “Dealer Manager Agreement”). The Company ceased offering shares of common stock in its primary offering on May 30, 2008. The Company terminated its dividend reinvestment plan effective April 10, 2012.
The Company sold 171,109,494 shares of common stock in its primary offering for gross offering proceeds of $1.7 billion. The Company sold 28,306,086 shares of common stock under its dividend reinvestment plan for gross offering proceeds of $233.7 million. As of March 31, 2015, the Company had redeemed 11,934,805 of the shares sold in the Offering for $87.0 million.
Asset Management Services Agreement Related to the GKK Properties
On December 19, 2013, the Company, through an indirect wholly owned subsidiary (“KBS Acquisition Sub”), entered into an amended and restated asset management services agreement (the “Amended Services Agreement”) with GKK Realty Advisors LLC (the “Property Manager”), an affiliate of Gramercy, with respect to the GKK Properties. The effective date of the Amended Services Agreement was December 1, 2013. Pursuant to the Amended Services Agreement, the Property Manager agreed to provide, among other services: standard asset management services, assistance related to dispositions, accounting services and budgeting and business plans for the GKK Properties (the “Services”). The Property Manager is not affiliated with the Company or KBS Acquisition Sub. As compensation for the Services, the Company agreed to pay the Property Manager: (i) an annual fee of $7.5 million plus all GKK Property-related expenses incurred by the Property Manager, (ii) subject to certain terms and conditions in the Amended Services Agreement, a profit participation interest based on a percentage (ranging from 10% to 30%) of the amount by which the gross fair market value or gross sales price of certain identified portfolios of GKK Properties exceeds the sum of (a) an agreed-upon baseline value for such GKK Property portfolios plus (b) new capital expended to increase the value of GKK Properties within the portfolios and expenditures made to pay for tenant improvements and leasing commissions related to these GKK Properties as of the measurement date, and (iii) a monthly construction oversight fee equal to a percentage of construction costs for certain construction projects at the GKK Properties overseen by the Property Manager.
The Amended Services Agreement will terminate on December 31, 2016, with a one-year extension option at the Company’s option, subject to certain terms and conditions contained in the Amended Services Agreement. The Amended Services Agreement supersedes and replaces all prior agreements related to the Services among the Company and its affiliates and the Property Manager and its affiliates.
v2.4.1.9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3 Months Ended
Mar. 31, 2015
Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 2014. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2014 included in the Company’s Annual Report on Form 10-K filed with the SEC.
Principles of Consolidation and Basis of Presentation
The accompanying unaudited consolidated financial statements and condensed notes thereto have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods. Operating results for the three months ended March 31, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.
The consolidated financial statements include the accounts of the Company, KBS REIT Holdings, the Operating Partnership and their direct and indirect wholly owned subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements and condensed notes thereto in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.
Reclassifications
Certain amounts in the Company’s prior period consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of prior periods. During the three months ended March 31, 2015, the Company sold four properties (of which two were GKK Properties), two of which were held for sale as of December 31, 2014. As a result, certain assets and liabilities were reclassified to held for sale on the consolidated balance sheets for all periods presented. Operating results of properties that were classified as held for sale in financial statements prior to January 1, 2014 will remain in discontinued operations on the Company’s consolidated statements of operations. Operating results of properties that were disposed of or classified as held for sale in the ordinary course of business subsequent to January 1, 2014 that had not been classified as held for sale in financial statements issued for the reporting periods prior to January 1, 2014 are included in continuing operations on the Company’s consolidated statements of operations.
Per Share Data
Basic net income (loss) per share of common stock is calculated by dividing net income (loss) by the weighted-average number of shares of common stock issued and outstanding during such period. Diluted net income (loss) per share of common stock equals basic net income (loss) per share of common stock as there were no potentially dilutive securities outstanding during the three months ended March 31, 2015 and 2014, respectively.
Distributions declared per share of common stock were $0.025 for the three months ended March 31, 2015. On March 6, 2015, the Company’s board of directors declared a distribution in the amount of $0.025 per share of common stock to stockholders of record as of the close of business on March 20, 2015. No distributions were declared during the three months ended March 31, 2014.
Segments
The Company’s segments are based on the Company’s method of internal reporting, which classifies its operations by investment type: (i) real estate, (ii) real estate-related and (iii) commercial properties primarily leased to financial institutions received under the Settlement Agreement, the GKK Properties. For financial data by segment, see Note 12, “Segment Information.”
Recently Issued Accounting Standards Update
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU No. 2014-09”).  ASU No. 2014-09 requires an entity to recognize the revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.  ASU No. 2014-09 supersedes the revenue requirements in Revenue Recognition (Topic 605) and most industry-specific guidance throughout the Industry Topics of the Codification.  ASU No. 2014-09 does not apply to lease contracts within the scope of Leases (Topic 840). ASU No. 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and is to be applied retrospectively, with early application not permitted.  The Company is still evaluating the impact of adopting ASU No. 2014-09 on its financial statements, but does not expect the adoption of ASU No. 2014-09 to have a material impact on its financial statements. 
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU No. 2014-15”). The amendments in ASU No. 2014-15 require management to evaluate, for each annual and interim reporting period, whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or are available to be issued when applicable) and, if so, provide related disclosures. ASU No. 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The Company does not expect the adoption of ASU No. 2014-15 to have a significant impact on its financial statements.
In January 2015, the FASB issued ASU No. 2015-01, Income Statement - Extraordinary and Unusual Items (Subtopic 225-20), Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items (“ASU No. 2015-01”). The amendments in ASU No. 2015-01 eliminate from GAAP the concept of extraordinary items. Although the amendments will eliminate the requirements in Subtopic 225-20 for reporting entities to consider whether an underlying event or transaction is extraordinary, the presentation and disclosure guidance for items that are unusual in nature or occur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring. ASU No. 2015-01 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company does not expect the adoption of ASU No. 2015-01 to have a significant impact on its financial statements.
In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs (“ASU No. 2015-03”).  The amendments in ASU No. 2015-03 require debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. ASU No. 2015-03 is limited to the presentation of debt issuance costs and does not affect the recognition and measurement of debt issuance costs.  ASU No. 2015-03 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015 and is to be applied retrospectively.  Early adoption is permitted for financial statements that have not been previously issued.  The adoption of ASU No. 2015-03 would change the presentation of debt issuance costs as the Company presents debt issuance costs as deferred financing costs, prepaid expenses and other assets, net on the accompanying consolidated balance sheets.
v2.4.1.9
REAL ESTATE HELD FOR INVESTMENT
3 Months Ended
Mar. 31, 2015
Real Estate Held for Investment [Abstract]  
REAL ESTATE HELD FOR INVESTMENT
REAL ESTATE HELD FOR INVESTMENT
As of March 31, 2015, the Company’s portfolio of real estate held for investment, including the GKK Properties, was composed of approximately 9.7 million rentable square feet and was 79% occupied. These properties are located in 31 states and include office properties, industrial properties and bank branch properties. Included in the Company’s portfolio of real estate held for investment was 6.3 million rentable square feet related to the GKK Properties held for investment, which were 80% occupied as of March 31, 2015.
The following table summarizes the Company’s investments in real estate as of March 31, 2015 and December 31, 2014 (in thousands):
 
 
Land
 
Buildings and
Improvements
 
Tenant 
Origination and
Absorption Costs
 
Total Real Estate
Held for 
Investment
As of March 31, 2015:
 
 
 
 
 
 
 
 
Office
 
$
68,178

 
$
404,910

 
$
1,661

 
$
474,749

Industrial
 
16,787

 
82,486

 
2,244

 
101,517

GKK Properties
 
186,601

 
385,841

 
83,276

 
655,718

Real estate held for investment, at cost and net of impairment charges
 
271,566

 
873,237

 
87,181

 
1,231,984

Accumulated depreciation/amortization
 

 
(160,670
)
 
(38,682
)
 
(199,352
)
Real estate held for investment, net
 
$
271,566

 
$
712,567

 
$
48,499

 
$
1,032,632

As of December 31, 2014:
 
 
 
 
 
 
 
 
Office
 
$
68,178

 
$
401,083

 
$
1,825

 
$
471,086

Industrial
 
16,787

 
80,565

 
3,137

 
100,489

GKK Properties
 
186,601

 
385,508

 
83,388

 
655,497

Real estate held for investment, at cost and net of impairment charges
 
271,566

 
867,156

 
88,350

 
1,227,072

Accumulated depreciation/amortization
 

 
(150,434
)
 
(37,027
)
 
(187,461
)
Real estate held for investment, net
 
$
271,566

 
$
716,722

 
$
51,323

 
$
1,039,611


Operating Leases
The Company’s real estate assets are leased to tenants under operating leases for which the terms and expirations vary. As of March 31, 2015, the Company’s leases, including the GKK Properties held for investment and excluding options to extend, had remaining terms of up to 11.9 years with a weighted-average remaining term of 4.9 years. As of March 31, 2015, leases related to the GKK Properties, excluding options to extend, had remaining terms of up to 11.9 years with a weighted-average remaining term of 5.0 years. Some of the Company’s leases have provisions to extend the term of the leases, options for early termination for all or a part of the leased premises after paying a specified penalty, rights of first refusal to purchase the property at competitive market rates, and other terms and conditions as negotiated. Additionally, the Company assumed several leases related to the GKK Properties which contain shedding rights provisions. As of March 31, 2015, these shedding rights totaled approximately 0.3 million square feet and can be exercised at various dates during the remainder of 2015 through 2016. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires a security deposit from the tenant in the form of a cash deposit and/or a letter of credit. The amount required as a security deposit varies depending upon the terms of the respective lease and the creditworthiness of the tenant, but generally is not a significant amount. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in other liabilities in the accompanying consolidated balance sheets and totaled $2.9 million and $3.0 million as of March 31, 2015 and December 31, 2014, respectively.
During the three months ended March 31, 2015 and 2014, the Company recognized deferred rent from tenants of $0.5 million and $0.6 million, respectively. These excess amounts for the three months ended March 31, 2015 and 2014 were net of $0.4 million and $0.4 million of lease incentive amortization, respectively. As of March 31, 2015 and December 31, 2014, the cumulative deferred rent balance was $30.4 million and $29.3 million, respectively, and is included in rents and other receivables on the accompanying balance sheets. The cumulative deferred rent balance included $6.0 million and $5.7 million of unamortized lease incentives as of March 31, 2015 and December 31, 2014, respectively. The Company records property operating expense reimbursements due from tenants for common area maintenance, real estate taxes and other recoverable costs in the period the related expenses are incurred.
The future minimum rental income from the Company’s properties under non-cancelable operating leases, including leases subject to shedding rights and excluding options to extend, as of March 31, 2015 for the years ending December 31 is as follows (in thousands):
April 1, 2015 through December 31, 2015
$
90,848

2016
119,917

2017
110,491

2018
97,651

2019
82,967

Thereafter
208,183

 
$
710,057


As of March 31, 2015, the Company’s highest tenant industry concentration (greater than 10% of annualized base rent) was as follows:
Industry
 
Number of
Tenants
 
Annualized
Base Rent
(1)
(in thousands)
 
Percentage of
Annualized Base Rent
Finance
 
69
 
$
61,552

 
49.3
%
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of March 31, 2015, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease's inception through the balance of the lease term.
As of March 31, 2015, no other tenant industries accounted for more than 10% of the Company’s annualized base rent. The Company currently has approximately 360 tenants over a diverse range of industries and geographical regions. As of March 31, 2015 and December 31, 2014, the Company had a bad debt expense reserve of $1.4 million and $1.1 million, respectively. The Company’s bad debt expense reserve as of March 31, 2015 and December 31, 2014 included $1.1 million and $0.9 million related to the GKK Properties, respectively. During the three months ended March 31, 2015 and 2014, the Company recorded bad debt expense related to its tenant receivables of $0.4 million and $0.4 million, respectively.
As of March 31, 2015, the Company had a concentration of credit risk related to leases with the following tenant that represented more than 10% of the Company’s annualized base rent:
 
 
 
 
 
 
 
 
Annualized Base Rent Statistics
 
 
Tenant
 
Property
 
Tenant
Industry
 
Rentable Square Feet
 
% of
Portfolio Rentable Square Feet
 
Annualized Base Rent (1)
(in thousands)
 
% of Portfolio Annualized Base Rent
 
Annualized Base Rent per Square Foot
 
Lease Expirations
Bank of America, N.A.
 
Various
 
Finance
 
3,085,003
 
31.7
%
 
$
27,406

 
22.0
%
 
$
8.88

 
(2) 
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of March 31, 2015, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.
(2) As of March 31, 2015, lease expiration dates ranged from the remainder of 2015 through 2026 with a weighted-average remaining term of 5.0 years. Additionally, as of March 31, 2015, certain of Bank of America’s leases contained shedding right provisions. These shedding rights totaled approximately 0.3 million square feet and can be exercised at various dates during the remainder of 2015 through 2016.
Bank of America Corporation is the guarantor of various leases that its subsidiary, Bank of America, N.A., has with the Company. The condensed consolidated financial information of Bank of America Corporation has been included herein because of the significant credit concentration the Company has with this guarantor. Bank of America Corporation currently files its financial statements in reports filed with the SEC, and the following unaudited summary financial data regarding Bank of America Corporation is taken from its previously filed public reports. For more detailed financial information regarding Bank of America Corporation, please refer to its financial statements, which are publicly available with the SEC at http:// www.sec.gov.
 
Three Months Ended March 31,
 
2015
 
2014
Consolidated Statements of Income (in millions)
 
 
 
Total revenue, net of interest expense
$
21,202

 
$
22,566

Income before income taxes
4,742

 
(681
)
Net income (loss)
3,357

 
(276
)
 
 
 
 
 
As of
 
March 31, 2015
 
December 31, 2014
Consolidated Balance Sheets (in millions)
 
 
 
Total assets
$
2,143,545

 
$
2,104,534

Total liabilities
1,893,357

 
1,861,063

Total stockholders’ equity
250,188

 
243,471


No other tenant represented more than 10% of the Company’s annualized base rent.
Geographic Concentration Risk
As of March 31, 2015, the Company’s net investments in real estate in North Carolina represented 12.0% of the Company’s total assets.  As a result, the geographic concentration of the Company’s portfolio makes it particularly susceptible to adverse economic developments in North Carolina’s real estate market. Any adverse economic or real estate developments in this market, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for office or bank branch space resulting from the local business climate, could adversely affect the Company’s operating results.
v2.4.1.9
TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES
3 Months Ended
Mar. 31, 2015
Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities [Abstract]  
TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES
TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES
As of March 31, 2015 and December 31, 2014, the Company’s tenant origination and absorption costs, above-market lease assets, and below-market lease liabilities (excluding fully amortized assets and liabilities and accumulated amortization) were as follows (in thousands):
 
Tenant Origination and
Absorption Costs
 
Above-Market
Lease Assets
 
Below-Market
Lease Liabilities
 
March 31, 2015
 
December 31, 2014
 
March 31, 2015
 
December 31, 2014
 
March 31, 2015
 
December 31, 2014
Cost, net of impairments
$
87,181

 
$
88,350

 
$
34,329

 
$
34,329

 
$
(75,946
)
 
$
(76,128
)
Accumulated amortization
(38,682
)
 
(37,027
)
 
(12,417
)
 
(11,562
)
 
37,729

 
35,274

Net Amount
$
48,499

 
$
51,323

 
$
21,912

 
$
22,767

 
$
(38,217
)
 
$
(40,854
)

Increases (decreases) in net income as a result of amortization of the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities for the three months ended March 31, 2015 and 2014 were as follows (in thousands):
 
Tenant Origination  and
Absorption Costs
 
Above-Market
Lease Assets
 
Below-Market
Lease Liabilities
 
For the Three Months Ended March 31,
 
For the Three Months Ended March 31,
 
For the Three Months Ended March 31,
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Amortization
$
(2,824
)
 
$
(3,834
)
 
$
(855
)
 
$
(1,008
)
 
$
2,645

 
$
3,021

v2.4.1.9
REAL ESTATE LOANS RECEIVABLE
3 Months Ended
Mar. 31, 2015
Receivables [Abstract]  
REAL ESTATE LOANS RECEIVABLE
REAL ESTATE LOANS RECEIVABLE
As of March 31, 2015 and December 31, 2014, the Company, through indirect wholly owned subsidiaries, had invested in or originated real estate loans receivable as follows (dollars in thousands):
Loan Name
Location of Related Property or Collateral
 
Date
Acquired/
Originated
 
Property
Type
 
Loan
Type
 
Outstanding
Principal
Balance as of March 31, 2015(1)
 
Book Value
as of
March 31,
 2015 (2)
 
Book Value
as of
December 31,
2014 (2)
 
Contractual
Interest
Rate (3)
 
Annualized
Effective
Interest
Rate (3)
 
Maturity
Date
Sandmar Mezzanine Loan
Southeast U.S. (4)
 
01/09/2007
 
Retail
 
Mezzanine
 
$
5,150

 
$
5,172

 
$
5,181

 
5.4%
 
%
 
01/01/2017
Lawrence Village Plaza Loan Origination
New Castle, Pennsylvania
 
08/06/2007
 
Retail
 
Mortgage
 
6,915

 
6,915

 
6,920

 
8.0%
 
8.1
%
 
09/01/2015
San Diego Office Portfolio B-Note
San Diego, California (5)
 
10/26/2007
 
Office
 
B-Note
 
20,000

 
17,645

 
17,450

 
5.8%
 
11.2
%
 
10/11/2017
4929 Wilshire B-Note
Los Angeles, California
 
11/19/2007
 
Office
 
B-Note
 
3,873

 
3,397

 
3,365

 
6.1%
 
12.4
%
 
07/11/2017
 
 
 
 
 
 
 
 
$
35,938

 
$
33,129

 
$
32,916

 
 
 
 
 
 
Reserve for Loan Losses (6)
 
 
 
 
 
 
 

 
(3,994
)
 
(3,994
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
35,938

 
$
29,135

 
$
28,922

 
 
 
 
 
 
_____________________
(1) Outstanding principal balance as of March 31, 2015 represents original principal balance outstanding under the loan, increased for any subsequent fundings and reduced for any principal paydowns.
(2) Book value represents outstanding principal balance, adjusted for unamortized acquisition discounts, origination fees and direct origination and acquisition costs. Loan balances are presented gross of any asset-specific reserves.
(3) Contractual interest rate is the stated interest rate on the face of the loan. Annualized effective interest rate is calculated as the actual interest income recognized in 2015, using the interest method, annualized and divided by the average amortized cost basis of the investment during 2015. The contractual interest rates and annualized effective interest rates presented are as of March 31, 2015.
(4) The Company had recorded an asset-specific loan loss reserve against this investment as of March 31, 2015. See “—Reserve for Loan Losses.”
(5) The borrower under this note is a wholly owned subsidiary of the Irvine Company. Donald Bren, who is the brother of Peter Bren (one of the Company’s executive officers and sponsors), is the chairman of the Irvine Company. During the three months ended March 31, 2015, the Company recognized $0.5 million of interest income related to its investment in this loan.
(6) See “—Reserve for Loan Losses.”
As of March 31, 2015 and December 31, 2014, interest receivable from real estate loans receivable was $0.1 million and $0.1 million, respectively, and is included in rents and other receivables.
The following summarizes the activity related to real estate loans receivable for the three months ended March 31, 2015 (in thousands):
Real estate loans receivable, net - December 31, 2014
$
28,922

Principal repayments received on real estate loans receivable
(27
)
Accretion of discounts on purchased real estate loans receivable
248

Amortization of origination fees and costs on purchased and originated real estate loans receivable
(8
)
Real estate loans receivable, net - March 31, 2015
$
29,135


For the three months ended March 31, 2015 and 2014, interest income from real estate loans receivable consisted of the following (in thousands):
 
Three Months Ended March 31,
 
2015
 
2014
Contractual interest income
$
486

 
$
553

Interest accretion
248

 
257

Amortization of origination fees and costs
(8
)
 
(9
)
Interest income from real estate loans receivable
$
726

 
$
801


The Company generally recognizes income on impaired loans on either a cash basis, where interest income is only recorded when received in cash, or on a cost-recovery basis, where all cash receipts are applied against the carrying value of the loan. The Company will resume the accrual of interest if it determines the collection of interest according to the contractual terms of the loan is probable. The Company considers the collectibility of the loan’s principal balance in determining whether to recognize income on impaired loans on a cash basis or a cost-recovery basis. Beginning in July 2014, interest income received on the Sandmar Mezzanine Loan was recorded on a cost-recovery basis. During the three months ended March 31, 2014, the Company recognized $0.1 million of interest income related to the Sandmar Mezzanine Loan, which has an asset-specific reserve. The Company did not recognize any interest income related to the Sandmar Mezzanine Loan during the three months ended March 31, 2015.
Reserve for Loan Losses
As of March 31, 2015, the total reserve for loan losses consisted of $4.0 million of asset-specific reserves related to the Sandmar Mezzanine Loan, which had an amortized cost basis of $5.2 million.
The Company did not record a provision for loan loss reserves during the three months ended March 31, 2015 or 2014. As of March 31, 2015, the borrower under the Sandmar Mezzanine Loan was delinquent and the Company will recognize income on this loan on a cost-recovery basis.
v2.4.1.9
REAL ESTATE HELD FOR SALE AND DISCONTINUED OPERATIONS
3 Months Ended
Mar. 31, 2015
Discontinued Operations and Disposal Groups [Abstract]  
REAL ESTATE HELD FOR SALE AND DISCONTINUED OPERATIONS
REAL ESTATE HELD FOR SALE AND DISCONTINUED OPERATIONS
In accordance with ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU No. 2014-08”), operating results of properties that are classified as held for sale in the ordinary course of business on or subsequent to January 1, 2014 would generally be included in continuing operations on the Company’s consolidated statements of operations. Operating results of properties that were classified as held for sale in financial statements issued for the reporting periods prior to January 1, 2014 will remain in discontinued operations on the Company’s consolidated statement of operations. Prior to the adoption of ASU No. 2014-08, the operations of properties held for sale or to be disposed of and the aggregate net gains recognized upon their disposition were presented as discontinued operations in the accompanying consolidated statements of operations for all periods presented. During the year ended December 31, 2014, the Company disposed of 16 properties (of which 11 were GKK Properties), transferred a portfolio of five GKK Properties to the lender in satisfaction of the debt and other obligations due under the BOA Windsor Mortgage Portfolio, terminated its leasehold interest in three GKK Properties and transferred two GKK Properties to the lenders in connection with foreclosure proceedings. During the three months ended March 31, 2015, the Company disposed of four properties (of which two were GKK Properties). As of March 31, 2015, the Company did not own any properties that were classified as held for sale.
The following summary presents the major components of assets and liabilities related to real estate held for sale as of March 31, 2015 and December 31, 2014 (in thousands):
 
March 31, 2015
 
December 31, 2014
Assets related to real estate held for sale
 
 
 
Total real estate, at cost and net of impairment charges
$

 
$
84,847

Accumulated depreciation and amortization

 
(5,947
)
Real estate held for sale, net

 
78,900

Other assets

 
6,918

Total assets related to real estate held for sale
$

 
$
85,818

Liabilities related to real estate held for sale
 
 
 
Notes payable

 
16,575

Other liabilities

 
308

Total liabilities related to real estate held for sale
$

 
$
16,883


During the three months ended March 31, 2015, the Company sold two historical real estate properties and one GKK Property, which properties were not classified as held for sale in financial statements issued for the reporting periods prior to January 1, 2014. During the year ended December 31, 2014, the Company sold four historical real estate properties and two GKK Properties, disposed of a portfolio of five properties in connection with a deed-in-lieu of foreclosure, and transferred two GKK Properties to the lenders in connection with foreclosure proceedings, which properties were not classified as held for sale in financial statements issued for the reporting periods prior to January 1, 2014. In accordance with ASU No. 2014-08, the operations of these properties are included in continuing operations on the Company’s consolidated statements of operations. The following table summarizes certain revenues and expenses related to all of these properties, which were included in continuing operations (in thousands):
 
 
Three Months Ended March 31,
 
 
2015
 
2014
Revenues
 
 
 
 
Rental income
 
$
2,196

 
$
5,379

Tenant reimbursements and other operating income
 
668

 
1,057

Total Revenues
 
2,864

 
6,436

Expenses
 
 
 
 
Operating, maintenance, and management
 
1,125

 
1,377

Real estate taxes and insurance
 
260

 
831

Asset management fees to affiliate
 
98

 
195

General and administrative expenses
 

 
7

Depreciation and amortization
 
220

 
2,394

Interest expense
 
194

 
2,493

Impairment of real estate
 

 
1,257

Total expenses
 
1,897

 
8,554


Discontinued Operations
The following table summarizes operating income from discontinued operations for the three months ended March 31, 2015 and 2014 (in thousands):
 
Three Months Ended March 31,
 
2015
 
2014
Total revenues and other income
$
33

 
$
692

Total expenses
(11
)
 
456

Income from discontinued operations before gain on sales of real estate, net and impairment charge
44

 
236

Gain on sales of real estate, net
124

 
2,916

Income from discontinued operations
$
168

 
$
3,152

v2.4.1.9
FORECLOSED REAL ESTATE HELD FOR SALE
3 Months Ended
Mar. 31, 2015
Foreclosed Real Estate Held for Sale [Abstract]  
FORECLOSED REAL ESTATE HELD FOR SALE
FORECLOSED REAL ESTATE HELD FOR SALE
In 2006 and 2007, the Company originally made three debt investments (collectively, the “Tribeca Loans”) related to the conversion of an eight-story loft building into a 10-story condominium building with 62 units (the “Tribeca Building”) located at 415 Greenwich Street in New York, New York. On February 19, 2010, the borrowers under the Tribeca Loans defaulted and the Company foreclosed on the Tribeca Building by exercising its right to accept 100% of the ownership interest of the borrowers. The Company acquired the remaining unsold condominium units of the Tribeca Building (the residential, retail and parking space condominium units transferred to the Company are, collectively, the “Units” and, individually, each is a “Unit”) and assumed the project liabilities. The Company recorded the Tribeca Building at fair value using a discounted cash flow valuation model based on the net realizable value (expected sales price less estimated costs to sell the unsold Units) of the real estate.
As of December 31, 2014, the Company’s investment in the Tribeca Building consisted of two Units with a carrying value of $12.0 million and is presented as foreclosed real estate held for sale on the consolidated balance sheet.  During the three months ended March 31, 2015, the Company sold the remaining two Units and recognized a gain on sale of $2.5 million (which gain on sale has been reduced by disposition fees to the Advisor of $0.2 million related to these two Units) and recorded expenses of $0.2 million related to foreclosed real estate held for sale. During the three months ended March 31, 2014, the Company did not sell any Units of the Tribeca Building and recorded expenses of $0.3 million related to foreclosed real estate held for sale.
v2.4.1.9
NOTES PAYABLE
3 Months Ended
Mar. 31, 2015
Notes Payable [Abstract]  
NOTES PAYABLE
NOTES PAYABLE
As of March 31, 2015 and December 31, 2014, the Company’s notes payable, including notes payable related to real estate held for sale, consisted of the following (dollars in thousands):
Loan Type
 
Book Value as of
March 31, 2015
 
Book Value as of
December 31, 2014
 
Contractual
Interest Rates as of
March 31, 2015 (1)
 
Weighted-Average
Interest Rates as of
March 31, 2015 (1)
 
Weighted-Average
Remaining Term
in Years (2)
Fixed Rate
 
 
 
 
 
 
 
 
 
 
Mortgage loans
 
$
62,200

 
$
62,200

 
5.9%
 
5.9%
 
1.5
GKK Properties mortgage loans
 
379,035

 
381,179

 
5.3% - 6.8%
 
5.9%
 
3.7
 
 
441,235

 
443,379

 
 
 
 
 
 
Variable Rate
 
 
 
 
 
 
 
 
 
 
Mortgage loans
 
164,131

 
181,249

 
One-month LIBOR + 1.80%
 
2.0%
 
0.8
GKK Properties mortgage loans
 
40,000

 
40,000

 
One-month LIBOR + 3.00%
 
3.2%
 
2.2
 
 
204,131

 
221,249

 
 
 
 
 
 
Total notes payable principal outstanding
 
645,366

 
664,628

 
 
 
 
 
 
Discount on notes payable, net (3)
 
(6,020
)
 
(6,530
)
 
 
 
 
 
 
Total notes payable, net  
 
$
639,346

 
$
658,098

 
 
 
 
 
 
_____________________
(1) Contractual interest rates as of March 31, 2015 represent the range of interest rates in effect under these loans as of March 31, 2015. Weighted-average interest rates as of March 31, 2015 are calculated as the actual interest rates in effect under these loans as of March 31, 2015 (consisting of the contractual interest rates), using interest rate indices as of March 31, 2015, where applicable.
(2) Weighted-average remaining term in years represents the initial maturity dates or the maturity dates as extended as of March 31, 2015; subject to certain conditions, the maturity dates of certain loans may be further extended.
(3) Represents the unamortized discounts and premiums on notes payable due to the above- and below-market interest rates when the loans were assumed. The discounts and premiums are amortized over the remaining life of the respective loan.
As of March 31, 2015 and December 31, 2014, the Company’s deferred financing costs were $1.6 million and $1.9 million, respectively, net of amortization. During the three months ended March 31, 2015 and 2014, the Company incurred interest expense, net of discontinued operations, of $8.7 million and $13.5 million, respectively. Included in interest expense was: (i) the amortization of deferred financing costs of $0.5 million and $0.3 million for the three months ended March 31, 2015 and 2014, respectively, and (ii) the amortization of discounts and premiums on notes payable, which increased interest expense by $0.5 million and $0.6 million for the three months ended March 31, 2015 and 2014, respectively. As of March 31, 2015 and December 31, 2014, $2.6 million and $1.9 million of interest was payable, respectively.
The following is a schedule of maturities, including principal amortization payments, for all notes payable outstanding as of March 31, 2015 (in thousands):
April 1, 2015 through December 31, 2015
$
13,346

2016
304,640

2017
159,175

2018
8,651

2019
126,044

Thereafter
33,510

 
$
645,366

The following summarizes the activity related to notes payable for the three months ended March 31, 2015 (in thousands):
Total notes payable, net  - December 31, 2014
$
658,098

Principal repayments
(19,263
)
Amortization of discounts and premiums on notes payable, net
511

Total notes payable, net  - March 31, 2015
$
639,346


Debt Covenants
The documents evidencing the Company’s outstanding debt obligations typically require that specified loan-to-value and debt service coverage ratios be maintained with respect to the financed properties. A breach of the financial covenants in these documents may result in the lender imposing additional restrictions on the Company’s operations, such as restrictions on the Company’s ability to incur additional debt, or may allow the lender to impose “cash traps” with respect to cash flow from the property securing the loan. In addition, such a breach may constitute an event of default and the lender could require the Company to repay the debt immediately. If the Company fails to make such repayment in a timely manner, the lender may be entitled to take possession of any property securing the loan. Except as described below, as of March 31, 2015, the Company was in compliance with these debt covenants.
BBD2 Loan
As of March 31, 2015, the borrower under the BBD2 Loan was out of debt service coverage compliance. As a result of such non-compliance, the loan servicer will impose a “cash trap,” which restricts distributions to the Company to the budgeted property operating expenses.
v2.4.1.9
FAIR VALUE DISCLOSURES
3 Months Ended
Mar. 31, 2015
Fair Value Disclosures [Abstract]  
FAIR VALUE DISCLOSURES
FAIR VALUE DISCLOSURES
Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other financial instruments and balances at fair value on a non-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:
Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;
Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and
Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.
The fair value for certain financial instruments is derived using a combination of market quotes, pricing models and other valuation techniques that involve significant management judgment. The price transparency of financial instruments is a key determinant of the degree of judgment involved in determining the fair value of the Company’s financial instruments. Financial instruments for which actively quoted prices or pricing parameters are available and for which markets contain orderly transactions will generally have a higher degree of price transparency than financial instruments for which markets are inactive or consist of non-orderly trades. The Company evaluates several factors when determining if a market is inactive or when market transactions are not orderly. The following is a summary of the methods and assumptions used by management in estimating the fair value of each class of assets and liabilities for which it is practicable to estimate the fair value:
Cash and cash equivalents, restricted cash, rent and other receivables, and accounts payable and accrued liabilities: These balances approximate their fair values due to the short maturities of these items.
Real estate loans receivable: These instruments are presented in the accompanying consolidated balance sheets at their amortized cost net of recorded loan loss reserves and not at fair value. The fair values of real estate loans receivable were estimated using an internal valuation model that considered the expected cash flows for the loans, underlying collateral values (for collateral-dependent loans) and estimated yield requirements of institutional investors for loans with similar characteristics, including remaining loan term, loan-to-value, type of collateral and other credit enhancements. The Company classifies these inputs as Level 3 inputs.
Notes payable: The fair values of the Company’s notes payable are estimated using a discounted cash flow analysis based on management’s estimates of current market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio, type of collateral and other credit enhancements. Additionally, when determining the fair value of a liability in circumstances in which a quoted price in an active market for an identical liability is not available, the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach. The Company classifies these inputs as Level 3 inputs.
The following were the face values, carrying amounts and fair values of the Company’s real estate loans receivable and notes payable as of March 31, 2015 and December 31, 2014, which carrying amounts generally do not approximate the fair values (in thousands):
 
March 31, 2015
 
December 31, 2014
 
Face Value    
 
Carrying
Amount      
 
Fair Value    
 
Face Value    
 
Carrying
Amount      
 
Fair Value    
Financial assets:
 
 
 
 
 
 
 
 
 
 
 
Real estate loans receivable (1)
$
35,938

 
$
29,135

 
$
26,314

 
$
35,966

 
$
28,922

 
$
25,818

Financial liabilities:
 
 
 
 
 
 
 
 
 
 
 
Notes payable
$
645,366

 
$
639,346

 
$
669,642

 
$
664,628

 
$
658,098

 
$
688,374

_____________________
(1) Carrying amount of real estate loans receivable includes loan loss reserves.
Disclosure of the fair values of financial instruments is based on pertinent information available to the Company as of the period end and requires a significant amount of judgment. The actual value of these investments could be materially different from the Company’s estimate of value.
v2.4.1.9
RELATED PARTY TRANSACTIONS
3 Months Ended
Mar. 31, 2015
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS
The Company has entered into an Advisory Agreement with the Advisor, which entitles the Advisor to specified fees for the management and disposition of investments, among other services, as well as to reimbursement for certain costs incurred by the Advisor in providing services to the Company. In addition, the Advisor is entitled to certain other fees, including an incentive fee upon achieving certain performance goals, as detailed in the Advisory Agreement. The Company has also entered into a fee reimbursement agreement (the “AIP Reimbursement Agreement”) with the Dealer Manager pursuant to which the Company agreed to reimburse the Dealer Manager for certain fees and expenses it incurs for administering the Company’s participation in the DTCC Alternative Investment Product Platform with respect to certain accounts of the Company’s investors serviced through the platform. The Advisor also serves, and the Dealer Manager also serves or served, as the advisor and dealer manager, respectively, for KBS Real Estate Investment Trust II, Inc., KBS Real Estate Investment Trust III, Inc., KBS Strategic Opportunity REIT, Inc., KBS Legacy Partners Apartment REIT, Inc. and KBS Strategic Opportunity REIT II, Inc. and anticipate that they will serve as the advisor and dealer manager, respectively, to KBS Growth & Income REIT, Inc.
On January 6, 2014, the Company, together with KBS Real Estate Investment Trust II, Inc., KBS Real Estate Investment Trust III, Inc., KBS Strategic Opportunity REIT, Inc., KBS Legacy Partners Apartment REIT, Inc., KBS Strategic Opportunity REIT II, Inc., the Dealer Manager, the Advisor and other KBS-affiliated entities, entered into an errors and omissions and directors and officers liability insurance program where the lower tiers of such insurance coverage are shared. The cost of these lower tiers is allocated by the Advisor and its insurance broker among each of the various entities covered by the program, and is billed directly to each entity. The allocation of these shared coverage costs is proportionate to the pricing by the insurance marketplace for the first tiers of directors and officers liability coverage purchased individually by each REIT. The Advisor’s and the Dealer Manager’s portion of the shared lower tiers’ cost is proportionate to the respective entities’ prior cost for the errors and omissions insurance.
During the three months ended March 31, 2015 and 2014, no other business transactions occurred between the Company and the other KBS-sponsored programs. On May 18, 2012, KBS Strategic Opportunity REIT, Inc. made an $8.0 million investment in a joint venture in which the Company indirectly owns a participation interest through another joint venture investment.
Pursuant to the terms of the Advisory Agreement and the AIP Reimbursement Agreement, summarized below are the related-party costs incurred by the Company for the three months ended March 31, 2015 and 2014, respectively, and any related amounts payable as of March 31, 2015 and December 31, 2014 (in thousands):
 
Incurred
 
Payable
 
Three Months Ended March 31,
 
March 31,
 
December 31,
 
2015
 
2014
 
2015
2014
Expensed
 
 
 
 
 
 
 
Asset management fees(1)
$
2,420

 
$
2,516

 
$

 
$

Reimbursement of operating expenses(2)
49

 
49

 
80

 
45

Disposition fees(3)
1,185

 
376

 
616

 
399

 
$
3,654

 
$