Keppel-KBS US REIT responds to reports KBS Realty may list REIT in Singapore

Singapore two-dollar bills

Keppel-KBS US REIT’s manager responded on Monday to media reports that KBS Realty Advisors was considering listing a REIT in Singapore, highlighting the different teams advising it.

According to a July Bloomberg report citing people with knowledge of the matter, KBS Realty Advisors was aiming to raise at least US$1 billion from selling trust units in Singapore backed by 15 properties, with the IPO expected in the fourth quarter.

It noted that, as stated in the IPO prospectus in November 2017, there were two distinct teams within KBS Capital Advisors: the core strategy team and the core plus team.

The core plus team, operated by Peter McMillan III and Keith D. Hall, is involved in managing and operating KBS Strategic Opportunity REIT, or KBS SOR, and KBS Strategic Opportunity REIT II, or KBS SOR II, as well as Keppel-KBS US REIT, the filing on Monday said.

The core strategy team is operated separately by Peter M. Bren and Charles J. Schreiber Jr. and it mainly manages and operates KBS REIT, KBS REIT II, KBS REIT III and KBS Growth & Income REIT, collectively considered the Core Strategy REITs, which invest primarily in what it defines as core and some core plus real estate, it said.

It defines core real estate investment as tending to generate stable income with low risk, with risk and returns rising as it moves from core plus to value add and then to opportunistic, which is the riskiest.

“Keppel-KBS US REIT will be the only KBS-advised program with a core strategy that the core plus team manages. On the other hand, the core strategy team manages the Core Strategy REITs that would be expected to compete with Keppel-KBS US REIT for investments,” the filing Monday said.

“While the Manager is not in a position to confirm the accuracy of the articles, the procedures to deal with potential conflicts of interests will continue to apply in relation to any such proposed listing,” it added.

Keppel-KBS US REIT’s manager noted that McMillan and Hall are indirect shareholders of the manager, but Bren and Schreiber, who together own KBS Realty Advisors, are not shareholders of the manager. McMillan has stepped down from his officer and director positions on KBS REIT III, while Hall has stepped down as a member of the investment committee and officer for KBS REIT III, which is managed by the core strategy team, the filing said.

KBS Capital Advisors, which is the U.S. asset manager for Keppel-KBS US REIT, is one-third owned by McMillan and Hall and two-thirds owned by Bren and Schreiber, it said.

Keppel-KBS US REIT’s manager said it had been informed by McMillan and Hall that the core plus team may be reorganized and employed under a separate entity from the U.S. asset manager, which will be wholly owned by McMillan and Hall.

“While the manager [of Keppel-KBS US REIT] understands that there are presently no concrete developments, there is no assurance that such reorganisation will not occur,” the filing said, but noted that the reorganization were to occur, the core plus team would continue to be involved in managing the REIT.

According to the KBS website, it is one of the largest buyers of commercial real estate in the U.S. and has completed transactions exceeding US$37 billion. National Real Estate Investor ranked KBS as the eighth largest office owner globally in 2018, the website said.

Get the Shenton Wire morning briefing in your inbox