KBS Realty Advisors appears to be going out-of-country again to raise money for a new real estate fund.
The Newport Beach-based firm, which buys large commercial properties and real estate-related investments through a variety of private funds and real estate investment trusts, is exploring an offering that would be publicly traded on one of Asia’s largest stock exchanges.
The proposed REIT, which would be listed on Singapore’s main stock exchange, the SGX, is setting out to raise over $500 million. It would include nearly a dozen U.S.-based office properties, according to the Wall Street Journal, which first reported the news.
The listing would be made in a venture between KBS and a real estate affiliate of Singapore-based conglomerate Keppel Corp., according to the Sept. 7 Wall Street Journal report.
Specific properties that would back up the REIT haven’t been disclosed. Buildings in Denver, Seattle and Houston, all home to KBS-owned office towers, were cited as potential candidates.
No Orange County buildings owned by KBS and affiliates were cited as potential parts of the offering. The company’s website lists just one OC property in its portfolio: a low-rise office project in Irvine.
The company has an extensive portfolio outside of the area to choose from. As of June, KBS-affiliated funds owned nearly 40 million square feet of commercial property in the U.S. valued at about $11 billion, according to the company’s website. It’s one of the country’s 10 largest office owners by square footage.
KBS officials declined to comment last week on the offering or the Wall Street Journal report, and no paperwork related to the proposed registration statement had been filed with the SGX.
Michelson Precedent
If the offering proceeds, it would be the second REIT—a type of security that invests in real estate property or mortgages—on the SGX exclusively focused on U.S.-based properties.
The first to do so also has OC ties.
The Manulife US REIT launched last year on the SGX and is backed by four U.S. properties, including the 20-story Michelson tower a few blocks from John Wayne Airport in Irvine.
Toronto-based Manulife Financial Corp., best known in the U.S. for its John Hancock Life Insurance Co. division, paid a reported $277 million for the 536,000-square-foot Michelson in 2012. The tower was built just before the last recession and has since had a handful of owners and wildly fluctuating prices among the sales. At last year’s listing on the SGX, it was valued at $317.8 million, and as of June its valuation had reached $342 million, assuming a 5.6% capitalization rate, according to regulatory filings.
The Manulife US REIT was billed as the first pure-play U.S. office REIT listed in Asia. Its shares are up more than 14% since the IPO, and its valuation is nearly $700 million. Other properties owned by the REIT are based in Atlanta, Los Angeles and New Jersey.
The SGX is already home to about 40 REITs, most backed by Asian properties, with just Manulife’s offering targeting U.S. offices. The offerings typically produce yields of about 7%, according to the Wall Street Journal report.
Israel Debt
KBS Realty has recent experience with listings outside of the U.S. Last year, its KBS Strategic Opportunity REIT Inc., one of its several nontraded REITs, raised nearly $250 million through a bond offering in Israel.
The bonds trade on the Tel-Aviv Stock Exchange, which, unlike U.S. counterparts, allows companies to make debt-based public offerings. The deal was the first bond issuance by a U.S.-based REIT in Israel and one of the largest bond offerings a U.S. company has made there.
The 4.25% bonds have a seven-year term, with 20% of the principal payable each year from 2019 to 2023, according to regulatory filings. Shares for the debt offering have increased in price about 12% since the offering.
KBS used proceeds from the offering to buy more than $300 million worth of property, including an office building in downtown San Francisco and a portfolio of business parks in the Seattle suburbs.
Company executives said at the time of the Israel offering that they took interest in it after seeing other U.S.-based companies, particularly some based in New York, access Israel’s debt markets.
KBS Realty Advisors is run by Charles Schreiber Jr., a former Koll Development Co. executive, and Peter Bren, the brother of Irvine Co. Chairman Donald Bren.
Peter Bren works out of the company’s New York office, while Schreiber is based in Newport Beach and serves on the board of Irvine Co., OC’s dominant real estate company, whose headquarters are in Newport Center.
KBS and 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.
