A 2011 investment in the Las Vegas land development market by an affiliate of KBS Realty Advisors appears to be paying off for the Newport Beach-based company, although a recent add-on deal indicates that land prices in the gambling mecca remain well below peak levels.
KBS Strategic Opportunity REIT Inc.—an investment fund that’s overseen by KBS and that raised about $250 million through a bond offering in Israel in April—recently said that it had increased its holdings in a 1,375-acre site in North Las Vegas with a $34.5 million deal for a former co-investor’s 46% stake in the property.
The site is part of a proposed master development called Park Highlands of more than 7,000 homes, as well as commercial and resort features, that’s seen only minimal construction to date.
The Park Highland development site totals 2,675 acres. That land was purchased by a consortium of builders and investors, including Irvine-based Standard Pacific Corp.—now part of CalAtlantic Group Inc.—in a 2005 deal with Nevada’s Bureau of Land management. The price was about $639 million, or $239,000 per acre.
The downturn that started in 2007 and ravaged the Las Vegas housing market quickly put any development plans on hold, with various owners of portions of the Park Highlands land filing multiple bankruptcies in the intervening years.
KBS Strategic Opportunity REIT grabbed its initial ownership of the 1,375-acre portion following one of those bankruptcies. A joint venture it was involved with paid $21 million—or a little more than $15,000 per acre—for the land in a bankruptcy auction in 2011.
That deal—in which KBS put up $10.5 million—gave its fund a 50.1% stake in the venture. The $34.5 million transaction announced this month, plus the purchase of a smaller stake in March, pushed its holdings in the venture to nearly 98%.
The land that KBS now owns has an appraised value of $136 million, according to KBS Strategic Opportunity REIT.
That works out to about $99,000 per acre, which, while up nearly seven-fold from 2011, is still less than half of the land’s 2005 per-acre valuation.
The land where KBS is now an investor is known as Villages at Tule Springs. It’s about 12 miles from downtown Las Vegas and 16 miles from the Las Vegas Strip.
Other investors in different parts of Park Highlands include Irvine-based master developer SunCal Cos., which took over a 208-acre site there in 2012 and is acting as the master developer of an additional 400 acres adjacent to its land.
SunCal paid a reported $19.8 million, or about $95,000 an acre, for its site, according to local reports.
Active Buyer
The Las Vegas deal marks the third notable deal that KBS Strategic Opportunity REIT has announced in a little more than a month.
In May it disclosed plans to spend nearly $300 million on an office tower in downtown San Francisco and a portfolio of business parks in the Seattle suburbs.
The REIT’s debt is publicly traded in Israel following its bond offering there this year, one of the largest offerings of its type by a U.S.-based real estate company in that country.
KBS Realty Advisors, which oversees that fund, in addition to several nontraded real estate investment trusts and other real estate-focused investment funds, is privately held.
The company ranks No. 16 on this week’s list of Orange County’s largest private companies, with a little more than $1 billion in revenue over the past year (see related stories, page 1; list on page 14).
KBS Realty Advisors is run by Charles Schreiber, a former Koll Development Co. executive, and Peter Bren, the brother of Irvine Company Chairman Donald Bren.
KBS and its affiliates have bought and sold more than $30 billion worth of offices, industrial buildings, apartments and other real estate assets over the past 13 years on behalf of pension funds and other institutional investors, as well as private investors who buy shares in its numerous nontraded REITS.
