KBS GROWTH & INCOME REIT, INC. ITEM 8.01 OTHER EVENTS
Investor Presentation Information for the stockholders ofKBS Growth & Income REIT, Inc. (the "Company," "we," "our" or "us") regarding the Company's estimated net asset value per share and other portfolio information is attached as Exhibit 99.1 to this Current Report on Form 8-K and the Company will use this presentation in connection with a webinar for stockholders and their financial professionals. The Company created a video of this webinar and attached as Exhibit 99.2 is a transcript of the video. Estimated Net Asset Value Per Share OnDecember 6, 2021 , the Company's board of directors approved an estimated net asset value ("NAV") per share of our common stock of$3.38 based on the estimated value of our assets less the estimated value of our liabilities, or NAV, divided by the number of shares outstanding, all as ofSeptember 30, 2021 . There have been no other material changes betweenSeptember 30, 2021 and the date of this filing that would impact the overall estimated NAV per share. This valuation was performed in accordance with the provisions of Practice Guideline 2013-01, Valuations of Publicly Registered, Non-Listed REITs, issued by theInstitute for Portfolio Alternatives (formerly known as theInvestment Program Association ) ("IPA") inApril 2013 (the "IPA Valuation Guidelines"). The Company's conflicts committee, composed solely of all of the Company's independent directors, is responsible for the oversight of the valuation process used to determine the estimated NAV per share of the Company's common stock, including the review and approval of the valuation and appraisal process and methodology used to determine the Company's estimated NAV per share, the consistency of the valuation and appraisal methodologies with real estate industry standards and practices, and the reasonableness of the assumptions used in the valuations and appraisals. With the approval of the Company's conflicts committee, the Company engagedDuff & Phelps, LLC ("Duff & Phelps"), an independent third-party real estate valuation firm, to provide a calculation of the range in estimated NAV per share of the Company's common stock as ofSeptember 30, 2021 . Duff & Phelps based this range in estimated NAV per share upon (i) appraisals of the Company's four real estate properties owned as ofSeptember 30, 2021 (the "Appraised Properties ") performed by Duff & Phelps, and (ii) valuations performed byKBS Capital Advisors, LLC (the "Advisor"), the Company's external advisor, with respect to the Company's cash, other assets, mortgage debt and other liabilities, which are disclosed in the Company's Quarterly Report on Form 10-Q for the period endedSeptember 30, 2021 . The appraisal reports Duff & Phelps prepared summarized the key inputs and assumptions involved in the appraisal of each of theAppraised Properties . Duff & Phelps' valuation was designed to follow the prescribed methodologies of the IPA Valuation Guidelines. The methodologies and assumptions used to determine the estimated value of the Company's assets and the estimated value of the Company's liabilities are described further below. Upon the conflicts committee's receipt and review of Duff & Phelps' valuation report, which included the appraised value of each of theAppraised Properties as noted in the appraisal reports prepared by Duff & Phelps and a summary of the estimated value of each of the Company's other assets and liabilities as determined by the Advisor and reviewed by Duff & Phelps, and in light of other factors considered by the conflicts committee and the conflicts committee's own extensive knowledge of the Company's assets and liabilities, the conflicts committee: (i) concluded that the range in estimated NAV per share of$2.78 to$4.04 , with an approximate mid-range value of$3.38 per share, as indicated in Duff & Phelps' valuation report and recommended by the Advisor, which approximate mid-range value was based on Duff & Phelps' appraisals of theAppraised Properties and valuations performed by the Advisor of the Company's cash, other assets, mortgage debt and other liabilities, was reasonable and (ii) recommended to the Company's board of directors that it adopt$3.38 as the estimated NAV per share of the Company's common stock, which mid-range value was determined by Duff & Phelps and recommended by the Advisor and which was based on Duff & Phelps' appraisals of theAppraised Properties and valuations performed by the Advisor of the Company's cash, other assets, mortgage debt and other liabilities. The Company's board of directors unanimously agreed to accept the recommendation of the conflicts committee and approved$3.38 as the estimated NAV per share of the Company's common stock, which determination is ultimately and solely the responsibility of the Company's board of directors. 2 -------------------------------------------------------------------------------- The table below sets forth the calculation of the Company's estimated NAV per share as ofDecember 6, 2021 as well as the calculation of the Company's prior estimated value per share as ofDecember 7, 2020 . Duff & Phelps was not responsible for establishing the estimated NAV per share as ofDecember 6, 2021 orDecember 7, 2020 , respectively. December 6, 2021 December 7, 2020 Change in Estimated Value Estimated Value Estimated Value per Share per Share (1) per Share Real estate properties (2) $ 13.66 $ 14.71 $ (1.05) Cash, restricted cash and cash equivalents (3) 0.80 0.22 0.58 Investment in unconsolidated joint venture (4) - 0.02 (0.02) Other assets 0.09 0.09 - Mortgage debt (5) (9.95) (8.89) (1.06) Other liabilities (1.22) (1.25) 0.03 Estimated NAV per share $ 3.38 $ 4.90 $ (1.52) Estimated enterprise value premium None assumed None assumed None assumed Total estimated NAV per share $ 3.38 $
4.90 $ (1.52)
_____________________
(1) TheDecember 7, 2020 estimated value per share was based upon a calculation of the range in estimated NAV per share of the Company's common stock as ofSeptember 30, 2020 by Duff & Phelps and the recommendation of the Advisor. Duff & Phelps based this range in estimated NAV per share upon appraisals of the Company's three real estate properties and an investment in an office property held through an unconsolidated joint venture performed by Duff & Phelps, and valuations performed by the Advisor with respect to the Company's cash, other assets, mortgage debt and other liabilities. For more information relating to theDecember 7, 2020 estimated value per share and the assumptions and methodologies used by Duff & Phelps and the Advisor, see the Company's Current Report on Form 8-K filed with theSEC onDecember 15, 2020 . (2) The decrease in the estimated value of real estate properties per share was primarily due to a net decrease in the appraised values of the real estate properties after taking into consideration of capital expenditures incurred, partially offset by the consolidation of a property that was previously owned through a joint venture. See note 4 below. The net decrease in the appraised values of the real estate properties is primarily due to (i) a property located inPortland, Oregon where the Company is projecting longer lease-up periods for the vacant office space as demand for office space inPortland has significantly declined as a result of both the COVID-19 pandemic, with employees continuing to work from home, and the impact of the disruptions caused by protests and demonstrations in the downtown area and (ii) a property located inHouston, Texas where the COVID-19 pandemic has added to an already slumping oil and gas industry, resulting in increased vacancy and expanding capitalization rates across the office marketplace. (3) The increase in the estimated value of cash, restricted cash and cash equivalents per share primarily relates to the net proceeds received from the revolving portion of the Company's term loan. (4) The Company purchased the joint venture partner's 50% equity interest related to the 210 W. Chicago property onOctober 5, 2020 . (5) The increase in the estimated value of mortgage debt per share was primarily due to additional borrowings under the Company's term loan. The decrease in the Company's estimated value per share from the previous estimate was primarily due to the items noted in the table below, which reflect the significant contributors to the decrease in the estimated value per share from$4.90 to$3.38 . The changes are not equal to the change in values of each asset and liability group presented in the table above due to changes in the amount of shares outstanding, capital expenditures and related financings and other factors, which caused the value of certain asset or liability groups to change with no impact to the Company's fair value of equity or the overall estimated value per share. Change in Estimated Value per Share December 7, 2020 estimated value per share $ 4.90 Changes to estimated value per share Real estate Real estate (1.54) Capital expenditures on real estate (0.13) Total change related to real estate (1) (1.67)
Modified operating cash flows in excess of distributions declared (2)
0.24
Notes payable (0.08)
Interest rate swaps 0.17
Deferral of asset management fee liability (0.17)
Other changes, net (0.01)
Total change in estimated value per share (1.52)
December 6, 2021 estimated value per share $ 3.38
_____________________
(1) Decrease is primarily due to a net decrease in appraised values of real estate properties after taking into consideration capital expenditures incurred. The net decrease in the appraised values of the real estate properties was primarily due to (i) a property located inPortland, Oregon where the Company is projecting longer lease-up periods for the vacant office space as a result of both the COVID-19 pandemic, with employees continuing to work from home, and the impact of the disruptions caused by protests and demonstrations in the downtown area and (ii) a property located inHouston, Texas where the COVID-19 pandemic has added to an already slumping oil and gas industry, resulting in increased vacancy and expanding capitalization rates across the office marketplace. (2) Modified operating cash flow reflects modified funds from operations ("MFFO") adjusted to add back the amortization of deferred financing costs and deferral of asset management fee. The Company computes MFFO in accordance with the definition included in the practice guideline issued by IPA inNovember 2010 . 3 -------------------------------------------------------------------------------- As with any valuation methodology, the methodologies used are based upon a number of estimates and assumptions that may not be accurate or complete. Different parties using different assumptions and estimates could derive a different estimated NAV per share of the Company's common stock, and these differences could be significant. In particular, due in part to our relatively small asset base and the number of shares of our common stock outstanding, even modest changes in key assumptions made in appraising our real estate properties could have a very significant impact on the estimated value of our shares. See the discussion under "Real Estate - Real Estate Valuation" below. The estimated NAV per share is not audited and does not represent the fair value of the Company's assets less the fair value of the Company's liabilities according toU.S. generally accepted accounting principles ("GAAP"), nor does it represent a liquidation value of the Company's assets and liabilities or the price at which the Company's shares of common stock would trade on a national securities exchange. The estimated NAV per share does not reflect a discount for the fact that the Company is externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated NAV per share also does not take into account estimated disposition costs and fees for real estate properties, debt prepayment penalties that could apply upon the prepayment of certain of the Company's debt obligations and the impact of restrictions on the assumption of debt and should not be considered a liquidation value of the Company's assets and liabilities. The Company would generally expect disposition costs and fees related to the sale of each of its real estate properties to be between 2.25% to 2.75% of the gross sales price, less concessions and credits. As ofSeptember 30, 2021 , the Company had no potentially dilutive securities outstanding that would impact the estimated NAV per share of its common stock. The Company's estimated NAV per share takes into consideration any potential liability related to a subordinated participation in cash flows the Advisor is entitled to upon meeting certain stockholder return thresholds in accordance with the advisory agreement. For purposes of determining the estimated NAV per . . . ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS (d) Exhibits Ex. Description 99.1December 10, 2021 Presentation 99.2 Transcript of Presentation to Stockholders 104 Cover Page Interactive Data File (embedded within the Inline
XBRL document)
10
--------------------------------------------------------------------------------
© Edgar Online, source
