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KBS REIT Inks First Two Deals

KBS Real Estate Investment Trust in Newport Beach has kicked off its deal making with about $40 million worth of acquisitions in Florida and New York.

More buys, using a combination of money invested in the fund and debt, should be on the way soon for the real estate investment trust, said Charles Schreiber Jr., KBS chairman and chief executive.

The REIT plans to buy $300 million to $350 million worth of commercial properties by year’s end, Schreiber said.

Schreiber also is chief executive of Newport Beach’s KBS Realty Advisors, a prominent real estate investment firm that oversees the recently launched REIT and its brokerage operations.

To reach its acquisition target, KBS will have to increase the pace of fund raising for the trust’s investment pool.

The pool has attracted about $7.4 million from investors. KBS started raising funds in late January.

Schreiber said the relatively low figure isn’t a cause for alarm.

“We’re on schedule,” Schreiber said.

Most prospective investors want to see tangible evidence of what kind of deals the company is making before handing over their money, he said.

The typical size of an investment in the REIT is expected to be $70,000 to $75,000, though an investor can contribute as little as $5,000, Schreiber said.

KBS REIT wants to raise as much as $2 billion in its ongoing public offering, which is being handled through national and regional brokerages.

The first deal for KBS REIT was a $24.3 million buy of Sabal Pavilion, a four-story office building in East Tampa, Fla., about 10 miles from downtown Tampa.

The 120,500-square-foot building was built in 1998 and is fully leased to auto financier Ford Motor Credit Co.

The REIT said the Tampa deal fulfills a key objective: generating cash dividends from well-leased, income-producing properties.

KBS REIT also is looking at industrial and retail buildings in addition to offices. It’s focusing on deals in larger markets. The company plans to hold on to buildings for roughly five to seven years.

In its second deal, KBS REIT turned to the debt side of its investment strategy. It bought a $15.9 million loan from AIG Mortgage Capital LLC.

This loan is being used to fund some of the costs related to the $125 million conversion of an eight-story loft building in the Tribeca area of New York.

The property is being turned into a 10-story condominium building, which will hold 66 luxury units. KBS REIT is obligated to fund as much as $3 million under the loan.

Buying such loans allows the REIT to generate cash flow from interest payments. That’s attractive to investors seeking solid dividend payments, Schreiber said.

The company already has declared a cash dividend for its current shareholders, due Aug. 15.

“It’s a big first step for us,” Schreiber said.

KBS REIT plans to allot about 30% of its funds to similar debt deals in the $10 million to $50 million range. The rest will be invested in traditional real estate holdings like the Tampa deal.

Along with the dividend, the track record of KBS Realty, which has ties to some of the biggest names in OC, is likely to help draw more investor interest.

Also known as Koll Bren Schreiber Realty Advisors, KBS Realty is a venture of Schreiber, a former Koll Development Co. investment executive, and chairman Peter Bren, younger brother of The Irvine Company owner Donald Bren.

The company was founded in 1992, and has made or managed more than $6 billion in real estate investments for institutional investors.

Peter Bren is president of KBS REIT. Along with Schreiber, the executive team includes Peter McMillan, executive vice president and treasurer, and Keith Hall, executive vice president.

KBS Capital Markets Group, another recently created affiliate of KBS Realty, is handling fund raising for the REIT. Greg Brakovich is chief executive of KBS Capital Markets Group. He previously served as co-chief executive of MetLife Investors Group.

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Mark Mueller
Mark Mueller
Mark is the Editor-in-Chief of the Orange County Business Journal, one of the premier regional business newspapers in the country. He’s the fifth person to hold the editor’s position in the paper’s long history. He oversees a staff of about 15 people. The OCBJ is considered a must-read for area business executives. The print edition of the paper is the primary source of local news for most of the Business Journal’s subscribers, which includes most of OC’s major corporate and community players. Mark’s been with the paper since 2005, and long served as the real estate reporter for the paper, breaking hundreds of commercial and residential real estate stories. He took on the editor’s position in 2018.
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