KBS REIT II to offer dividend upon sale of Chicago office building

Firm to offer another way besides public listing for REIT sponsors to provide liquidity to investors.
JUN 05, 2014
More liquidity is coming to nontraded real estate investment trust investors, this time in the form of a one-time dividend to shareholders. KBS Real Estate Investment Trust II Inc. has agreed to sell a large office building in Chicago for $850 million. The property is a big chunk of the REIT, accounting for 19.5% of the company's total revenues for the first quarter of the year. Known as KBS REIT II, the REIT has $2.86 billion in assets and was launched in 2008. Advisers and their clients should keep a watch for the distribution, according to the company. If it completes the sale of the Chicago property, KBS REIT II “expects to make a special distribution to stockholders of a significant portion of the net proceeds from the sale,” after various payments, the company said in a filing with the Securities and Exchange Commission. (See also: REIT firm KBS battling Schorsch's American Realty Capital over claim of trade secret theft) KBS REIT II spokesman Mike Besack said the company had no comment beyond the SEC filing. The company gave no indication when it would deliver the special distribution to investors. The REIT's move to sell off assets and offer a special dividend or limited liquidity is more in line with how nontraded REITs worked before the credit crisis, industry observers said. Since then, the emphasis has shifted to listing such a REIT on an exchange or merging it with a publicly traded REIT because of the success of various nontraded REITs sponsored by American Realty Capital and others that have listed or merged. “They're looking to monetize individual assets or groups of assets in a good real estate market,” said Kevin Gannon, president, managing director of Robert A. Stanger & Co. Inc. “They decided they would do better with this type” of exit, he said. “Office assets haven't priced as well” as other real estate sectors, including net lease properties, he said. Selling off parts of the REIT's portfolio may make sense over listing the company. “There's not a perception of a premium in the public market for a listed company with a lot of office assets,” he said.

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