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KBS STRATEGIC OPPORTUNITY REIT, INC. : Regulation FD Disclosure, Other Events, Financial Statements and Exhibits (form 8-K)

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11/15/2018 | 01:15pm CET
ITEM 7.01 REGULATION FD DISCLOSURE
Information for KBS Strategic Opportunity REIT, Inc.'s (the "Company")
stockholders regarding its estimated value per share and other distribution
information are attached as Exhibit 99.3 and Exhibit 99.4 to this Current Report
on Form 8-K.
The information in this Item 7.01 of Form 8-K and the attached Exhibit 99.3 and
Exhibit 99.4 are furnished to the Securities and Exchange Commission ("SEC"),
and shall not be deemed to be "filed" with the SEC for any purpose, including
for the purposes of Section 18 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or otherwise subject to the liabilities of that
section and shall not be deemed to be incorporated by reference into any filing
under the Securities Act of 1933, as amended, or the Exchange Act regardless of
any general incorporation language in such filing.


ITEM 8.01 OTHER EVENTS
Estimated Value Per Share
On November 12, 2018, the Company's board of directors approved an estimated
value per share of the Company's common stock of $9.91 based on the estimated
value of the Company's assets less the estimated value of the Company's
liabilities, or net asset value, divided by the number of shares outstanding as
of September 30, 2018, with the exception of an adjustment to the Company's net
asset value to give effect to the November 12, 2018 authorization of a special
dividend of $2.95 per share on the outstanding shares of common stock of the
Company to the stockholders of record as of the close of business on
November 12, 2018 (the "Special Dividend"). Excluding the Special Dividend, the
Company's estimated value per share of common stock would be $12.86. Other than
the authorization of the Special Dividend, there have been no material changes
between September 30, 2018 and the date of this filing to the net values of the
Company's assets and liabilities that impacted the overall estimated value per
share. The Company is providing this estimated value per share to assist
broker-dealers that participated in the Company's initial public offering in
meeting their customer account statement reporting obligations under National
Association of Securities Dealers Conduct Rule 2340 as required by the Financial
Industry Regulatory Authority ("FINRA"). This valuation was performed in
accordance with the provisions of and also to comply with Practice Guideline
2013-01, Valuations of Publicly Registered Non-Listed REITs, issued by the
Investment Program Association ("IPA") in April 2013.
The Company's conflicts committee, composed of all of the Company's independent
directors, is responsible for the oversight of the valuation process, including
the review and approval of the valuation process and methodologies used to
determine the Company's estimated value 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. The estimated value per share was based upon the recommendation and
valuation prepared by KBS Capital Advisors LLC (the "Advisor"), the Company's
external advisor. The Advisor's valuation of the Company's consolidated
investments in real estate properties and two of its unconsolidated joint
venture investments in real estate properties was based on (i) appraisals of
such investments performed by third-party valuation firms and (ii) the
contractual sale price less estimated selling credits, disposition costs and
disposition fees of a portfolio of 21 office/flex/industrial buildings located
in Redmond, Washington (the "Westpark Portfolio"), which was under contract as
of September 30, 2018. Appraisals on (i) all of the Company's consolidated
investments in real properties, excluding investments in undeveloped land and
the Westpark Portfolio, and (ii) two of its unconsolidated investments in real
estate properties were performed by Duff & Phelps, LLC ("Duff & Phelps").
Appraisals of the Company's investments in undeveloped land were performed by
Colliers International Valuation & Advisory Services, LLC ("Colliers"). Duff &
Phelps and Colliers, each an independent third-party valuation firm, also
prepared appraisal reports, summarizing key inputs and assumptions, for each of
the real estate properties they respectively appraised. The Advisor performed
valuations with respect to the Company's real estate-related investments, one of
its unconsolidated joint ventures, cash, other assets, mortgage debt and other
liabilities. 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.

                                       1
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The Advisor used the appraised values of the Company's real estate properties
and, in the case of the Westpark Portfolio, the contractual sale price less
estimated selling credits, disposition costs and disposition fees, together with
the Advisor's estimated value of each of the Company's other assets and
liabilities and adjusted for the impact of the Special Dividend, to calculate
and recommend an estimated value per share of the Company's common stock. Upon
(i) the conflicts committee's receipt and review of the Advisor's valuation
report, including the Advisor's summary of the appraisal reports prepared by
Duff & Phelps and Colliers and the Advisor's estimated value of each of the
Company's other assets and the Company's liabilities, (ii) the conflicts
committee's review of the reasonableness of the Company's estimated value per
share resulting from the Advisor's valuation process, (iii) consideration of the
Special Dividend and (iv) 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 concluded that the estimated
value per share proposed by the Advisor was reasonable and recommended to the
board of directors that it adopt $9.91 as the estimated value per share of the
Company's common stock. At the special meeting of the board of directors, the
board of directors unanimously agreed to accept the recommendation of the
conflicts committee and approved $9.91 as the estimated value of the Company's
common stock, which determination is ultimately and solely the responsibility of
the board of directors.
The table below sets forth the calculation of the Company's estimated value per
share as of November 12, 2018, as well as the calculation of the Company's prior
estimated value per share as of December 7, 2017:
                                      November 12, 2018                 December 7, 2017              Change in Estimated
                                  Estimated Value per Share       Estimated Value per Share (1)         Value per Share
Real estate properties (2)       $                 20.57        $                     30.83         $           (10.26 )
Real estate equity securities
(3)                                                 1.82                               0.90                       0.92
Real estate debt securities                         0.32                               0.33                      (0.01 )
Cash                                                1.72                               0.60                       1.12
Investments in unconsolidated
joint ventures (4)                                  3.61                               3.26                       0.35
Other assets                                        0.36                               0.53                      (0.17 )
Mortgage debt (5)                                  (8.98 )                           (13.96 )                     4.98
Series A Debentures (6)                            (5.00 )                            (5.54 )                     0.54
Advisor participation fee
potential liability                                (0.62 )                            (0.54 )                    (0.08 )
Other liabilities                                  (0.57 )                            (0.71 )                     0.14
Non-controlling interest                           (0.37 )                            (0.59 )                     0.22
Special Dividend authorized on
December 7, 2017                                       -                              (3.61 )                     3.61
Estimated value per share
prior to November 12, 2018
Special Dividend authorization   $                 12.86        $                     11.50         $             1.36
Estimated enterprise value
premium                                     None assumed                       None assumed               None assumed
Special Dividend authorized on
November 12, 2018 (7)                              (2.95 )                                -                      (2.95 )
Total estimated value per
share                            $                  9.91        $                     11.50         $            (1.59 )


_____________________
(1) The December 7, 2017 estimated value per share was based upon the
recommendation and valuation of the Advisor. The Company engaged Duff & Phelps
and Newmark Knight Frank Valuation & Advisory, LLC ("Newmark"), a division of
Newmark Knight Frank to provide appraisals of the Company's real estate
properties, investments in undeveloped land and two of its unconsolidated
investments in real estate properties and the Advisor performed valuations of
the Company's real estate-related investments, one of its unconsolidated joint
ventures, cash, other assets, mortgage debt and other liabilities. For more
information relating to the December 7, 2017 estimated value per share and the
assumptions and methodologies used by Duff & Phelps, Newmark and the Advisor,
see the Company's Current Report on Form 8-K filed with the SEC on December 13,
2017.
(2) The decrease in the estimated value of real estate properties was due to
dispositions of real estate properties, partially offset by acquisitions of real
estate and increases in fair values of the Company's real estate properties. The
estimated value per share of the Company's real estate properties as of
November 12, 2018 includes the Westpark Portfolio, which was under contract to
sell as of September 30, 2018.
(3) The increase in the estimated value of real estate equity securities was due
to acquisitions of real estate equity securities subsequent to September 30,
2017.
(4) The increase in the estimated value of investments in unconsolidated joint
ventures was primarily due to an increase in fair values of the real estate held
by the unconsolidated joint ventures, partially offset by a return of capital
distribution from one joint venture.
(5) The decrease in mortgage debt was primarily due to repayments upon asset
sales, partially offset by borrowings to fund acquisitions of real estate and
capital expenditures on real estate. The estimated value per share of the
Company's mortgage debt as of November 12, 2018 includes the mortgage debt
expected to be repaid in connection with the sale of the Westpark Portfolio.
(6) Amount relates to Series A Debentures issued in Israel on March 8, 2016. The
decrease is due to a decrease in fair value of the Series A Debentures, which
are publicly traded on the Tel-Aviv Stock Exchange, and the change in foreign
exchange rate of the Israeli new Shekel.
(7) On November 12, 2018, the Company's board of directors authorized the
Special Dividend, which the Company expects to pay in December 2018. The Special
Dividend is expected to paid in a combination of cash and stock with cash funded
from the sale of real estate properties.

                                       2
--------------------------------------------------------------------------------


The increase in the Company's estimated value per share before the impact of the
Special Dividend from the previous estimate was primarily due to the items noted
below, which reflect the significant contributors to the increase in the
estimated value per share from $11.50 to $12.86. The changes are not equal to
the change in values of each real each asset and liability group presented in
the table above due to real estate property acquisitions, dispositions, debt
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, 2017 estimated value per share                          $       

11.50

Changes to estimated value per share
Investments
Real estate                                                                 

1.31

Investments in unconsolidated joint ventures                                

0.64

Investments in debt and equity securities                                        (0.04 )
Capital expenditures on real estate                                              (0.66 )
Total change related to investments                                         

1.25

Operating cash flows in excess of quarterly distributions declared (1)

0.16

Foreign currency gain                                                       

0.10

Selling, acquisition and financing costs (2)                                     (0.19 )
Advisor disposition and acquisition fees (3)                                     (0.11 )
Mortgage debt and Series A debentures                                       

0.14

Self-Tender offer price discount (4)                                        

0.10

Advisor Participation fee potential liability                                    (0.10 )
Other                                                                       

0.01

Total change in estimated value per share prior to November 12, 2018 Special Dividend declaration

                                   $       

1.36

Estimated value per share prior to November 12, 2018 Special Dividend declaration

                                                $       

12.86

Special Dividend (5)                                                             (2.95 )
November 12, 2018 estimated value per share                         $       

9.91

_____________________

(1) Operating cash flow reflects modified funds from operations ("MFFO")
adjusted to deduct capitalized interest expense, real estate taxes and insurance
and add back the amortization of deferred financing costs. The Company computes
MFFO in accordance with the definition included in the practice guideline issued
by the IPA in November 2010.
(2) Selling, acquisition and financing costs include approximately $3.0 million,
or $0.06 per share, for the anticipated Westpark Portfolio sale subsequent to
September 30, 2018.
(3) Advisor disposition fees include approximately $1.7 million, or $0.03 per
. . .


ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d)    Exhibits

Ex.    Description

99.1     Consent of Duff & Phelps, LLC

99.2     Consent of Colliers International

99.3 Letter to Stockholders Regarding Special Dividend, including Questions

       and Answers

99.4     Presentation to Stockholders



                                       14

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© Edgar Online, source Glimpses

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