KBS Real Estate gets $1.01 billion three-year term loan and revolver

By Susanna Moon

Chicago, Nov. 9 – KBS Real Estate Investment Trust III, Inc. obtained a $1.01 billion three-year loan facility last Friday, consisting of $757.5 million term debt and $252.5 million revolving debt.

The company entered into an agreement with Bank of America, N.A., as administrative agent and Bank of America Merril Lynch, Wells Fargo Securities, LLC and U.S. Bank, NA as joint lead arrangers and joint bookrunners, according to an 8-K filed with the Securities and Exchange Commission.

Interest on the loans is one-month Libor plus180 basis points.

Proceeds may be used to repay debt, for tenant improvements, leasing commissions and capital improvements, for working capital or liquidity management.

The terms include an upsizing option for up to another $400 million in increments of $25 million, to a maximum of $1.41 billion, with 25% to be for revolving debt and 75% available for term debt.

At closing, $787.5 million of loans was funded, consisting of $757.5 million term debt and $30 million revolving debt, of which $776 million was used to pay off mortgage loans and the remainder used to pay origination fees and accrued interest.

Specifically, proceeds from the term debt were used to pay off and address the upcoming 2018 loan maturities for the existing Town Center Mortgage Loan, RBC Plaza Mortgage Loan, National Office Portfolio Mortgage Loan, 500 West Madison Mortgage Loan, Ten Almaden Mortgage Loan and Towers at Emeryville Mortgage Loan.

The portfolio loan facility matures on Nov. 3, 2020 with two 12-month extension options.

The loans may be prepaid.

Last Friday, the company’s indirect wholly owned subsidiary KBS REIT Properties III, LLC entered into three interest rate swap agreements for $451.5 million. As of that date, the company had three existing interest rate swaps for the paid off loans of $306 million. Because the existing interest rate swaps expire at various times from Jan. 1 through Jan. 1, 2020, the notional amount of the new interest rate swaps in the aggregate will increase to maintain a notional amount of $757.5 million.

The new and existing interest rate swaps in the aggregate effectively fix the interest rate on the term loans at a blended rate of 3.861%, effective through Nov. 1, 2022.

The loans are secured by RBC Plaza, Preston Commons, Sterling Plaza, One Washingtonian Center, Towers at Emeryville, Ten Almaden, Town Center and 500 West Madison. The company may substitute properties securing the loan at any time.

Wells Fargo Bank, NA is the syndication agent.

The REIT is based in Newport Beach, Calif.

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