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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________
FORM 10-K
______________________________________________________
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number 000-53649
______________________________________________________
KBS REAL ESTATE INVESTMENT TRUST II, INC.
(Exact Name of Registrant as Specified in Its Charter)
______________________________________________________
Maryland   26-0658752
(State or Other Jurisdiction of
Incorporation or Organization) 		  (I.R.S. Employer
Identification No.)
800 Newport Center Drive, Suite 700
Newport Beach, California
  92660
(Address of Principal Executive Offices)   (Zip Code)
(949) 417-6500
(Registrant’s Telephone Number, Including Area Code)
______________________________________________________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class   Name of Each Exchange on Which Registered
None   None
Trading Symbol(s)
____________________________________________________
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value per share
____________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  o  No  x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  o  No  x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes  x  No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  x  No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer   ¨    Accelerated Filer    ☐
Non-Accelerated Filer  
x 
   Smaller reporting company    ☐
Emerging growth company    ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act). Yes  ☐  No  x
There is no established market for the Registrant’s shares of common stock. On December 3, 2018, the board of directors of the Registrant approved an estimated value per share of the Registrant’s common stock of $4.95 (unaudited) based on the estimated value of the Registrant’s assets less the estimated value of the Registrant’s liabilities, divided by the number of shares outstanding, all as of September 30, 2018. For a full description of the methodologies used to value the Registrant’s assets and liabilities in connection with the calculation of the estimated value per share as of December 3, 2018, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Market Information” of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2018. On June 12, 2019, the Registrant’s board of directors declared a special distribution in the amount of $0.45 per share of common stock to stockholders of record as of the close of business on June 17, 2019 (the “Special Distribution”). Also on June 12, 2019, the Registrant’s board of directors approved an updated estimated value per share of its common stock of $4.50 (unaudited), effective June 17, 2019, to reflect the impact of the payment of the Special Distribution. This updated estimated value per share is based solely on the December 3, 2018 estimated value per share reduced for the impact of the payment of the Special Distribution. For a full description of the methodologies used in the Registrant’s estimated value per share determination as of June 12, 2019, see the Registrant’s Current Report on Form 8-K filed with the SEC on June 14, 2019. On November 13, 2019, the board of directors of the Registrant approved an estimated value per share of the Registrant’s common stock of $3.79 (unaudited) based on the estimated value of the Registrant’s assets less the estimated value of the Registrant’s liabilities, divided by the number of shares outstanding, all as of September 30, 2019, except for certain items discussed herein for which estimated values were adjusted subsequent to September 30, 2019. For a full description of the methodologies used to value the Registrant’s assets and liabilities in connection with the calculation of the estimated value per share as of November 13, 2019, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Market Information” in this Annual Report on Form 10-K.
There were approximately 185,848,343 shares of common stock held by non-affiliates as of June 30, 2019, the last business day of the Registrant’s most recently completed second fiscal quarter.
As of March 2, 2020, there were 185,168,769 outstanding shares of common stock of the Registrant.


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FORWARD-LOOKING STATEMENTS
Certain statements included in this Annual Report on Form 10-K are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of KBS Real Estate Investment Trust II, Inc. and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.
The following are some of the risks and uncertainties, although not all of the risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:
•We can give no assurance that we will be able to successfully implement the Plan of Liquidation (defined below) and sell our assets, pay our debts and distribute the net proceeds from liquidation to our stockholders as we expect. If we underestimated our existing obligations and liabilities or if unanticipated or contingent liabilities arise, the amount of liquidating distributions ultimately paid to our stockholders could be less than estimated.
•We may face unanticipated difficulties, delays or expenditures relating to our implementation of the Plan of Liquidation, which may reduce or delay our payment of liquidating distributions.
•We can give no assurance regarding the timing of asset dispositions in connection with the implementation of the Plan of Liquidation, the sale prices we will receive for our assets and the amount and timing of liquidating distributions to be received by our stockholders.
•We may face risks associated with legal proceedings, including stockholder litigation, that may be instituted against us related to the Plan of Liquidation.
•All of our executive officers, one of our directors and other key real estate and debt finance professionals are also officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor, the entity that acted as our dealer manager and/or other KBS-affiliated entities. As a result, they face conflicts of interest, including significant conflicts created by our advisor’s compensation arrangements with us and other KBS-sponsored programs and KBS-advised investors and conflicts in allocating time among us and these other programs and investors. These conflicts could result in unanticipated actions.
•We pay substantial fees to and expenses of our advisor and its affiliates. These payments increase the risk that our stockholders will not earn a profit on their investment in us and increase the risk of loss to our stockholders.
•We depend on tenants for the revenue generated by our real estate investments and, accordingly, the revenue generated by our real estate investments is dependent upon the success and economic viability of our tenants. Revenues from our properties could decrease due to a reduction in occupancy (caused by factors including, but not limited to, tenant defaults, tenant insolvency, early termination of tenant leases and non-renewal of existing tenant leases) and/or lower rental rates, making it more difficult for us to meet our debt service obligations and reducing our stockholders’ returns and the amount of liquidating distributions they receive.
•Our investments in real estate may be affected by unfavorable real estate market and general economic conditions, which could decrease the value of those assets. Revenues from our properties could decrease. Such events would make it more difficult for us to meet our debt service obligations and successfully implement the Plan of Liquidation, which could reduce our stockholders’ returns and the amount of liquidating distributions they receive.
•Disruptions in the financial markets, changes in the demand for office properties and uncertain economic conditions could adversely affect our ability to successfully implement our business strategy and the Plan of Liquidation, which could reduce our stockholders’ returns and the amount of liquidating distributions they receive.
•As of December 31, 2019, we had $376.6 million of variable debt outstanding, and we may incur additional variable rate debt in the future. The interest and related payments on our variable rate debt will vary with the movement of LIBOR or other indexes. Increases in one-month LIBOR or other indexes would increase the amount of our debt payments and could reduce our stockholders’ returns and the amount of liquidating distributions they receive.
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•Our share redemption program provides only for redemptions sought upon a stockholder’s death, “qualifying disability” or “determination of incompetence” (each as defined in the share redemption program document, and, together with redemptions sought in connection with a stockholder’s death, “Special Redemptions”). The dollar amounts available for such redemptions are determined by the board of directors and may be reviewed and adjusted from time to time. Additionally, redemptions are further subject to limitations described in our share redemption program. We do not expect to have funds available for ordinary redemptions in the future.
•As of December 31, 2019, we had classified two office properties as held for sale, which were subsequently sold on January 22, 2020. During the year ended December 31, 2019, we sold two office properties. During the year ended December 31, 2018, we sold three office buildings that were part of an eight-building office campus and received the repayment on one real estate loan receivable. As a result of our disposition activity, our general and administrative expenses, which are not directly related to the size of our portfolio, have increased as a percentage of our cash flow from operations and will continue to increase as we sell additional assets.
All forward-looking statements should be read in light of the risks identified in Part I, Item 1A of this Annual Report on Form 10-K.
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PART I

ITEM 1. BUSINESS
Overview
KBS Real Estate Investment Trust II, Inc. (the “Company”) was formed on July 12, 2007 as a Maryland corporation that elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2008 and it intends to operate in such a manner. The Company invested in a diverse portfolio of real estate and real estate-related investments. As used herein, the terms “we,” “our” and “us” refer to the Company and as required by context, KBS Limited Partnership II, a Delaware limited partnership (the “Operating Partnership”), and their subsidiaries. We conduct our business primarily through our Operating Partnership, of which we are the sole general partner. Subject to certain restrictions and limitations, our business is managed by KBS Capital Advisors LLC (“KBS Capital Advisors”), our external advisor, pursuant to an advisory agreement. KBS Capital Advisors conducts our operations and manages our portfolio of real estate investments. Our advisor owns 20,000 shares of our common stock. We have no paid employees.
On September 27, 2007, we filed a registration statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) to offer a maximum of 280,000,000 shares of common stock for sale to the public, of which 200,000,000 shares were registered in our primary offering and 80,000,000 shares were registered under our dividend reinvestment plan. We ceased offering shares of common stock in our primary offering on December 31, 2010. We sold 182,681,633 shares of common stock in the primary offering for gross offering proceeds of $1.8 billion. We terminated the offering under our dividend reinvestment plan effective May 29, 2014. We sold 30,903,504 shares of common stock under our dividend reinvestment plan for gross offering proceeds of $298.2 million. Also as of December 31, 2019, we had redeemed 28,303,101 of the shares sold in our offering for $257.1 million.
As of December 31, 2019, we owned six office properties (of which two were held for sale) and an office campus consisting of five office buildings.
Plan of Liquidation
On January 27, 2016, our board of directors formed a special committee (the “Special Committee”) composed of all of our independent directors to explore the availability of strategic alternatives involving us. As part of the process of exploring strategic alternatives, on February 23, 2016, the Special Committee engaged Evercore Group L.L.C. (“Evercore”) to act as our financial advisor and to assist the Special Committee with this process. Under the terms of the engagement, Evercore provided various financial advisory services, as requested by the Special Committee, as customary for an engagement in connection with exploring strategic alternatives.
On November 13, 2019, in connection with a review of potential strategic alternatives available to us, the Special Committee and our board of directors unanimously approved the sale of all of our assets and our dissolution pursuant to the terms of our plan of complete liquidation and dissolution (the “Plan of Liquidation”). The principal purpose of the Plan of Liquidation is to provide liquidity to our stockholders by selling our assets, paying our debts and distributing the net proceeds from liquidation to our stockholders. On March 5, 2020, our stockholders approved the Plan of Liquidation. For more information, see the Plan of Liquidation, which is included as an exhibit to this Annual Report on Form 10-K.
In accordance with the Plan of Liquidation, our objectives are to pursue an orderly liquidation of our company by selling all of our remaining assets, paying our debts and our known liabilities, providing for the payment of unknown or contingent liabilities, distributing the net proceeds from liquidation to our stockholders and winding up our operations and dissolving our company. While pursuing our liquidation pursuant to the Plan of Liquidation, we intend to continue to manage our portfolio of assets to maintain and, if possible, improve the quality and income-producing ability of our properties to enhance property stability and better position our remaining assets for sale.
We expect to distribute all of the net proceeds from liquidation to our stockholders within 24 months from March 5, 2020. Pursuant to the Plan of Liquidation, on March 5, 2020, our board of directors authorized an initial liquidating distribution in the amount of $0.75 per share of common stock to stockholders of record as of the close of business on March 5, 2020. See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Subsequent Events – Initial Liquidating Distribution Authorized.” We expect to pay multiple liquidating distribution payments to our stockholders during the liquidation process. However, if we cannot sell our assets and pay our debts within 24 months from March 5, 2020, or if the board of directors and the Special Committee determine that it is otherwise advisable to do so, pursuant to the Plan of Liquidation, we may transfer and assign our remaining assets to a liquidating trust. Upon such transfer and assignment, our stockholders will receive beneficial interests in the liquidating trust. We can give no assurance regarding the timing of asset dispositions in connection with the implementation of the Plan of Liquidation, the sale prices we will receive for our assets, and the amount or timing of liquidating distributions to be received by our stockholders.
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Real Estate Portfolio
Real Estate Investments
We made investments in core properties, which are generally lower risk, existing properties with at least 80% occupancy and minimal near-term lease rollover. We diversified our portfolio by investment size, investment type, investment risk and geographic region. As of December 31, 2019, our portfolio of real estate properties was composed of six office properties and an office campus consisting of five office buildings. On January 22, 2020, we sold two of these office properties.
The following charts illustrate the geographic diversification of our real estate portfolio (excluding the two properties held for sale as of December 31, 2019) based on total leased square feet and total annualized base rent as of December 31, 2019:
KBSRII-20191231_G1.JPG
KBSRII-20191231_G2.JPG
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(1) Annualized base rent represents annualized contractual base rental income as of December 31, 2019, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.
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We have a stable tenant base and we have tried to diversify our tenant base in order to limit exposure to any one tenant or industry. As of December 31, 2019, our portfolio of real estate properties (excluding the two properties held for sale as of December 31, 2019) was 76% occupied. Excluding the two properties held for sale, three tenants leasing space in our portfolio of real estate properties represented more than 10% of our total annualized base rent as of December 31, 2019. See Item 2, “Properties — Concentration of Credit Risks.”
Our top ten tenants leasing space in our portfolio of real estate properties (excluding the two properties held for sale as of December 31, 2019) represented approximately 75.0% of our total annualized base rent as of December 31, 2019. The chart below illustrates the diversity of tenant industries in our portfolio of real estate properties (excluding the two properties held for sale as of December 31, 2019) based on total annualized base rent as of December 31, 2019:
KBSRII-20191231_G3.JPG
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(1) Annualized base rent represents annualized contractual base rental income as of December 31, 2019, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.
(2) “Other professional services” includes professional services from several industries that are each individually less than 2% of total.
(3) “Other” includes any industry less than 1% of total.
As of December 31, 2019, our highest tenant industry concentrations (greater than 10% of annualized base rent) of our real estate portfolio (excluding the two properties held for sale as of December 31, 2019) were as follows:
Industry Number of Tenants
Annualized Base Rent (1)
(in thousands)
Percentage of
Annualized Base Rent
Finance 12    $ 20,818    29.1  %
Mining, Oil & Gas Extraction 3    13,154    18.4  %
Educational Services 1    11,728    16.4  %
$ 45,700    63.9  %
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(1) Annualized base rent represents annualized contractual base rental income as of December 31, 2019, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term. No other tenant industries accounted for more than 10% of annualized base rent.
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The total cost of our real estate portfolio (excluding the two properties held for sale as of December 31, 2019) as of December 31, 2019 was $865.0 million.
Financing Objectives
We financed the majority of our real estate investments with a combination of the proceeds we received from our initial public offering and debt. We used debt financing to increase the amount available for investment and to increase overall investment yields to us and our stockholders. We have also used debt financing to pay for capital improvements or repairs to properties; to refinance existing indebtedness; to pay distributions; to provide working capital and for other liquidity needs. As of December 31, 2019, the weighted-average interest rate on our debt was 3.2%.
We borrow funds at both fixed and variable rates; as of December 31, 2019, we had $40.6 million and $376.6 million of fixed and variable rate debt outstanding, respectively. As of December 31, 2019, the interest rate of our fixed debt was 3.5% and the weighted-average interest rate of our variable debt was 3.2%. The interest rate represents the actual interest rate in effect as of December 31, 2019, using interest rate indices as of December 31, 2019, where applicable.
The following is a schedule of maturities, including principal amortization payments, for all of our notes payable outstanding as of December 31, 2019 (in thousands):
2020 $ 321,857   
2021 —   
2022 —   
2023 95,350   
Thereafter —   
$ 417,207   

We plan to exercise our extension options available under our loan agreements, if applicable, or pay off or refinance the related notes payable prior to their maturity dates.
We limit our total liabilities to 75% of the cost (before deducting depreciation and other noncash reserves) of all of our tangible assets; however, we may exceed that limit if the majority of the conflicts committee approves each borrowing in excess of this limitation and we disclose such borrowings to our stockholders in our next quarterly report with an explanation from the conflicts committee of the justification for the excess borrowing. We did not exceed this limitation on borrowings during any quarter of 2019. As of December 31, 2019, our borrowings and other liabilities were approximately 38% of both the cost (before deducting depreciation and other noncash reserves) and book value (before deducting depreciation) of our tangible assets, respectively.
Economic Dependency
We are dependent on our advisor for certain services that are essential to us, including the management of the daily operations of our real estate investment portfolio; the disposition of real estate investments; the execution of the Plan of Liquidation; and other general and administrative responsibilities. In the event that our advisor is unable to provide any of these services, we will be required to obtain such services from other sources.
Competitive Market Factors
We face competition from various entities for prospective tenants and to retain our current tenants, including other REITs, pension funds, insurance companies, investment funds and companies, partnerships and developers. Many of these entities have substantially greater financial resources than we do and may be able to accept more risk than we can prudently manage, including risks with respect to the creditworthiness of a tenant. As a result of their greater resources, those entities may have more flexibility than we do in their ability to offer rental concessions to attract and retain tenants. This could put pressure on our ability to maintain or raise rents and could adversely affect our ability to attract or retain tenants. As a result, our financial condition, results of operations, cash flow, ability to satisfy our debt service obligations and ability to successfully implement the Plan of Liquidation may be adversely affected.
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We also face competition from many of the types of entities referenced above regarding the disposition of properties. These entities may possess properties in similar locations and/or of the same property types as ours and may be attempting to dispose of these properties at the same time we are attempting to dispose of some of our properties, providing potential purchasers with a larger number of properties from which to choose and potentially decreasing the sales price for such properties. Additionally, these entities may be willing to accept a lower return on their individual investments, which could further reduce the sales price of such properties. This competition could decrease the sales proceeds we receive for properties that we sell, assuming we are able to sell such properties, which could adversely affect our cash flows, the overall return for our stockholders and the amount and timing of liquidation distributions our stockholders receive.
Although we believe that we are well-positioned to compete effectively in each facet of our business, there is enormous competition in our market sector and there can be no assurance that we will compete effectively or that we will not encounter increased competition in the future that could limit our ability to conduct our business effectively and successfully implement the Plan of Liquidation.
Compliance with Federal, State and Local Environmental Law
Under various federal, state and local environmental laws, ordinances and regulations, a current or previous real property owner or operator may be liable for the cost of removing or remediating hazardous or toxic substances on, under or in such property. These costs could be substantial. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose liens on properties or restrictions on the manner in which properties may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us from entering into leases with prospective tenants that may be impacted by such laws. Environmental laws provide for sanctions for noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for the release of and exposure to hazardous substances, including asbestos-containing materials and lead-based paint. Third parties may seek recovery from real property owners or operators for personal injury or property damage associated with exposure to released hazardous substances and governments may seek recovery for natural resource damage. The cost of defending against claims of environmental liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury, property damage or natural resource damage claims could reduce our cash available for distribution to our stockholders.
All of our properties were subject to Phase I environmental assessments prior to the time they were acquired. Some of our properties are subject to potential environmental liabilities arising primarily from historic activities at or in the vicinity of the properties. Based on our environmental diligence and assessments of our properties and our purchase of pollution and remediation legal liability insurance with respect to some of our properties, we do not believe that environmental conditions at our properties are likely to have a material adverse effect on our operations.
Industry Segments
We invested in core real estate properties and real estate-related investments with the goal of acquiring a portfolio of income-producing investments. Our real estate properties exhibit similar long-term financial performance and have similar economic characteristics to each other. Accordingly, we aggregated our investments in real estate properties into one reportable business segment.
Employees
We have no paid employees. The employees of our advisor and its affiliates provide management, disposition, advisory and certain administrative services for us.
Principal Executive Office
Our principal executive offices are located at 800 Newport Center Drive, Suite 700, Newport Beach, CA 92660. Our telephone number, general facsimile number and website address are (949) 417-6500, (949) 417-6501 and www.kbsreitii.com, respectively.
Available Information
Access to copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other filings with the SEC, including amendments to such filings, may be obtained free of charge from the following website, www.kbsreitii.com, or through the SEC’s website, www.sec.gov. These filings are available promptly after we file them with, or furnish them to, the SEC.
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ITEM 1A. RISK FACTORS
The following are some of the risks and uncertainties that could cause our actual results, including those related to our implementation of the Plan of Liquidation, to differ materially from those presented in our forward-looking statements. The risks and uncertainties described below are not the only ones we face but do represent those risks and uncertainties that we believe are material to us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also harm our business.

Risks Related to the Plan of Liquidation
We may not be able to pay liquidating distributions to our stockholders at the times and in the amounts we currently expect.
We currently estimate that if we are able to successfully implement the Plan of Liquidation, our net proceeds from liquidation and, therefore, the amount of cash that our stockholders would receive for each share of our common stock that they then hold, would range between approximately $3.40 and $3.83 per share. We note that we previously paid (i) a special distribution in the amount of $4.50 per share to stockholders of record as of the close of business on September 15, 2014 and (ii) a special distribution of $0.45 per share to stockholders of record as of the close of business on June 17, 2019, all in connection with asset sales. We anticipate paying our liquidating distributions from the net proceeds from liquidation within 24 months after stockholder approval of the Plan of Liquidation. However, our expectations about the amount of liquidating distributions that we will pay and when we will pay them are based on certain estimates and assumptions, one or more of which may prove to be incorrect. As a result, the actual amount of liquidating distributions we pay to our stockholders may be more or less than we estimate and the liquidating distributions may be paid later than we predict.
If any of the parties to our future sale agreements default thereunder, or if these sales do not otherwise close, our liquidating distributions may be delayed or reduced.
As part of our implementation of the Plan of Liquidation, we will seek to enter into binding sale agreements for each of our properties. The consummation of the potential sales for which we will enter into sale agreements in the future will be subject to satisfaction of closing conditions. If any of the transactions contemplated by our future sale agreements do not close because of a buyer default, failure of a closing condition or for any other reason, we will need to locate a new buyer for the properties, which we may be unable to do promptly or at prices or on terms that are as favorable as the original sale agreement. We will also incur additional costs involved in locating a new buyer and negotiating a new sale agreement for these properties. These additional costs are not included in our projections. In the event that we incur these additional costs, our liquidating distributions paid to our stockholders would be delayed or reduced.
If we are unable to find buyers for some or all of our properties at our expected sales prices, our liquidating distributions may be delayed or reduced.
We have targeted disposition plans and time frame estimates for each of our remaining assets. Subsequent to December 31, 2019, we sold the Campus Drive Buildings. The net proceeds from this sale were included in the range of estimated net proceeds from liquidation discussed herein. We will market our other properties for sale over the coming months. There can be no assurance that any of our properties will sell for their projected sales prices.
In calculating the range of estimated net proceeds from liquidation, we assumed that we will be able to find buyers for all of our properties at amounts based on our estimated range of market values for each property. However, we may have overestimated the sales prices that we will ultimately be able to obtain for these assets. For example, in order to find buyers in a timely manner, we may be required to lower our asking price below the low end of our current estimate of the property’s market value. If we are not able to find buyers for these assets in a timely manner or if we have overestimated the sales prices we will receive, our liquidating distributions paid to our stockholders would be delayed or reduced. Furthermore, the range of estimated net proceeds from liquidation is based upon our estimates and assumptions as of November 13, 2019, but real estate market values are constantly changing and fluctuate with changes in interest rates, supply and demand dynamics, occupancy rates, rental rates, the availability of suitable buyers, the perceived quality and dependability of cash flows from properties and a number of other factors, both local and national. In addition, higher than anticipated transactional fees and expenses, environmental liabilities of which we are unaware or other unknown liabilities, if any, may adversely impact the net liquidation proceeds from those assets.
No assurance can be given as to the amount of liquidating distributions our stockholders will ultimately receive. For more information on the calculation of our range of estimated net proceeds from liquidation, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Market Information.”
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If we experience significant lease terminations and/or tenant defaults during the liquidation process or if our cash flow during the liquidation process is otherwise less than we expect, our liquidating distributions may be delayed or reduced.
In calculating our range of estimated net proceeds from liquidation, we assumed that we would not experience significant lease terminations not currently known to us and that we would not experience any significant unknown tenant defaults during the liquidation process that were not subsequently cured. Any currently known lease expirations and non-renewals of tenant leases were considered in calculating our range of estimated net proceeds from liquidation. Significant unknown lease terminations and/or tenant defaults during the liquidation process would adversely affect the resale value of the properties, which would reduce our range of estimated net proceeds from liquidation. To the extent that we receive less rental income than we expect during the liquidation process, our liquidating distributions will be reduced. We may also decide in the event of a tenant default to restructure the lease, which could require us to substantially reduce the rent payable to us under the lease, or make other modifications that are unfavorable to us.
If our liquidation costs or unpaid liabilities are greater than we expect, our liquidating distributions may be delayed or reduced.
Before paying the final liquidating distribution, we will need to pay or arrange for the payment of all of our transaction costs in the liquidation, all other costs and all valid claims of our creditors. Our board of directors may also decide to acquire one or more insurance policies covering unknown or contingent claims against us, for which we would pay a premium that has not yet been determined. Our board of directors may also decide to establish a reserve fund to pay these contingent claims. The amounts of the various transaction costs in the liquidation are not yet final, so we have used estimates of these costs in calculating the amounts of our range of estimated net proceeds from liquidation. To the extent that we have underestimated these costs in calculating our projections, our actual net proceeds from liquidation per share may be lower than the low end of our range of estimated net proceeds from liquidation per share. In addition, if the claims of our creditors are greater than we have anticipated or we decide to acquire one or more insurance policies covering unknown or contingent claims against us, our liquidating distributions may be delayed or reduced. Further, if we establish a reserve fund, payment of liquidating distributions to our stockholders may be delayed or reduced.
Our estimated range of liquidating distributions is based on our range in estimated value per share reduced for (i) expected closing costs and fees related to future dispositions of real estate investments and (ii) estimated corporate costs and other expenses of the liquidation and dissolution not covered from our cash flow from operations. Our estimated range of liquidating distributions may not reflect the value that stockholders will receive for their investment upon our liquidation pursuant to the Plan of Liquidation. Our estimated value per share and estimated range of liquidating distributions do not take into account how developments subsequent to the valuation date related to individual assets, the financial or real estate markets or other events may have increased or decreased the value of our portfolio.
On November 13, 2019, our board of directors approved an estimated value per share of our common stock of $3.79 (unaudited) based on the estimated value of our assets less the estimated value of our liabilities, or net asset value, divided by the number of shares outstanding, all as of September 30, 2019, except for certain items discussed in Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Market Information” for which estimated values were adjusted subsequent to September 30, 2019. We provided this estimated value per share to (i) assist us in calculating the range of estimated net proceeds from our Plan of Liquidation as discussed in our definitive proxy statement filed with the SEC on December 9, 2019, which Plan of Liquidation was approved by our stockholders on March 5, 2020, and (ii) assist broker-dealers that participated in our now-terminated initial public offering in meeting their customer account statement reporting obligations under Financial Industry Regulatory Authority (“FINRA”) Rule 2231. 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 Institute for Portfolio Alternatives (formerly known as the Investment Program Association) (“IPA”) in April 2013 (the “IPA Valuation Guidelines”). The estimated value per share was based upon the recommendation and valuation performed by our advisor. Our advisor’s valuation of our seven real estate properties owned as of November 13, 2019 was based on (i) appraisals of five of our real estate properties (the “Appraised Properties”) performed by CBRE, Inc. (“CBRE”), an independent third-party valuation firm, and (ii) the contractual sales price less estimated closing credits of two properties that were under contract to sell subsequent to September 30, 2019. Our advisor performed valuations with respect to our cash, other assets, mortgage debt and other liabilities.
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As with any valuation methodology, the methodologies used are based upon a number of estimates and assumptions that may not be accurate or complete. Different parties using different assumptions and estimates could derive a different estimated value per share of our common stock, and this difference could be significant. The estimated value per share is not audited and does not represent the fair value of our assets less the fair value of our liabilities according to U.S. generally accepted accounting principles (“GAAP”), nor does it represent a liquidation value of our assets and liabilities or the price at which our shares of common stock would trade on a national securities exchange. The estimated value per share does not reflect a discount for the fact that we are externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated value per share also does not take into account estimated disposition costs and fees related to future dispositions of real estate investments, debt prepayment penalties that could apply upon the prepayment of certain of our debt obligations or the impact of restrictions on the assumption of debt. We have generally incurred disposition costs and fees related to the sale of each real estate property since inception of 1.7% to 4.4% of the gross sales price less concessions and credits, with the weighted average being approximately 2.4% as of November 13, 2019.
Accordingly, with respect to the estimated value per share, we can give no assurance that:
•a stockholder would be able to resell his or her shares at this estimated value per share;
•our shares of common stock would trade at the estimated value per share on a national securities exchange;
•an independent third-party appraiser or third-party valuation firm would agree with our estimated value per share; or
•the methodology used to calculate our estimated value per share would be acceptable to FINRA or for compliance with ERISA reporting requirements.
Moreover, as discussed above, the November 13, 2019 estimated value per share does not represent a liquidation value of our assets and liabilities. If we are able to successfully implement the Plan of Liquidation, we estimate that our net proceeds from liquidation and, therefore, the amount of cash our stockholders would receive for each share of our common stock they then hold, could range between approximately $3.40 and $3.83 per share. The difference between the estimated value per share and the range of estimated net proceeds from liquidation reflects the fact that the estimated value per share does not take into consideration: (i) expected closing costs and fees related to future dispositions of real estate investments and (ii) estimated corporate costs and other expenses of the liquidation and dissolution not covered from our cash flow from operations. However, our expectations about the amount of liquidating distributions that we will pay and when we will pay them are based on many estimates and assumptions, one or more of which may prove to be incorrect. As a result, the actual amount of liquidating distributions we pay to our stockholders may be more or less than we estimate and the liquidating distributions may be paid later than we predict.
For a full description of the methodologies and assumptions used to value our assets and liabilities in connection with the calculation of the estimated value per share, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Market Information.”
In addition, the value of our shares will fluctuate over time in response to developments related to individual assets in our portfolio and the management of those assets, in response to fluctuations in the real estate and finance markets and due to other factors. As such, the estimated value per share and the estimated range of liquidating distributions do not take into account developments in our portfolio since November 13, 2019, including:
•potential future asset sales at values different from those used in the determination of the estimated value per share as well as any impairment charges related to these or other assets as a result of changes in the expected hold period, or the estimated cash flows for or future expenses related to these assets;
•any increases or decreases in value of any of our real estate investments;
•any disruptions in the real estate and financial markets or general economic conditions;
•any unforeseen capital expenditure requirements; or
•any inability to meet our existing debt service obligations, or to repay or refinance such obligations on attractive terms or at all at or prior to maturity.
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Pursuing the Plan of Liquidation may cause us to fail to qualify as a REIT, which would dramatically lower the amount of our liquidating distributions.
For so long as we qualify as a REIT and distribute all of our REIT taxable income, we generally are not subject to federal income tax. Although our board of directors does not presently intend to terminate our REIT status prior to paying the final liquidating distribution to our stockholders and our dissolution, our board of directors may take actions pursuant to the Plan of Liquidation that would result in such a loss of REIT status. Upon payment of the final liquidating distribution and our dissolution, our existence and our REIT status will terminate. However, there is a risk that our actions during the liquidation process may cause us to fail to meet one or more of the requirements that must be met in order to qualify as a REIT prior to completion of the Plan of Liquidation. For example, to qualify as a REIT, generally at least 75% of our gross income in each taxable year must come from real estate sources and generally at least 95% of our gross income in each taxable year must come from real estate sources and certain other sources that are itemized in the REIT tax laws, mainly interest and dividends. We may encounter difficulties satisfying these requirements during the liquidation process. In addition, in connection with that process, we may recognize ordinary income in excess of the cash received. The REIT rules require us to pay out a large portion of our ordinary income in the form of a dividend to our stockholders. However, to the extent that we recognize ordinary income without any cash available for distribution, and if we were unable to borrow to fund the required dividend or find another way to meet the REIT distribution requirements, we may cease to qualify as a REIT. Although we expect to comply with the requirements necessary to qualify as a REIT in any taxable year, if we are unable to do so, we will, among other things (unless entitled to relief under certain statutory provisions):
•not be allowed a deduction for dividends paid to stockholders in computing our taxable income;
•be subject to federal income tax on our taxable income, including recognized gains, at regular corporate rates;
•be subject to increased state and local taxes; and
•be disqualified from treatment as a REIT for the taxable year in which we lose our qualification and for the four following taxable years.
As a result of these consequences, our failure to qualify as a REIT could substantially reduce the amount of liquidating distributions we pay to our stockholders.
The sale of properties may cause us to incur penalty losses.
So long as we continue to qualify as a REIT, any net gain from “prohibited transactions” will be subject to a 100% tax. “Prohibited transactions” are sales of property held primarily for sale to customers in the ordinary course of a trade or business. The prohibited transactions tax is intended to prevent a REIT from retaining any profit from the sales of properties held primarily for sale to customers in the ordinary course of business. The Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) provides for a “safe harbor” which, if all its conditions are met, would protect a REIT’s property sales from being considered prohibited transactions. Whether property is held primarily for sale to customers in the ordinary course of a trade or business is a highly factual determination. We believe that all of our properties are held for investment and the production of rental income, and that none of the sales of our properties will constitute a prohibited transaction. We do not believe that the sales of our properties pursuant to the Plan of Liquidation should be subject to the prohibited transactions tax. However, due to the anticipated sales volume and other factors, the contemplated sales may not qualify for the protective safe harbor. There can, however, be no assurances that the U.S. Internal Revenue Service (the “Internal Revenue Service”) will not successfully challenge the characterization of properties we hold for purposes of applying the prohibited transaction tax.
The U.S. federal income tax treatment of distributions to stockholders may vary based on whether such distributions are made (1) prior to the Plan of Liquidation or (2) under the Plan of Liquidation.
Prior to the adoption of the Plan of Liquidation to the extent distributions in excess of current and accumulated earnings and profits (i) do not exceed a stockholder’s adjusted basis in our stock, such distributions will not be taxable to a stockholder, but rather a stockholder’s adjusted basis in our stock will be reduced; and, (ii) exceed a stockholder’s adjusted basis in our stock, such distributions will be included in income as long-term capital gain if the stockholder has held its shares for more than one year and otherwise as short-term capital gain.
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In general, upon approval of the Plan of Liquidation, distributions to stockholders under the Plan of Liquidation, including a stockholder’s pro rata share of the fair market value of any assets that are transferred to a liquidating trust, should not be taxable for U.S. federal income tax purposes until the aggregate amount of liquidating distributions to a stockholder exceeds such stockholder’s adjusted tax basis in our stock, and then should be taxable to such stockholder as capital gain (assuming such stockholder held our stock as a capital asset). To the extent the aggregate amount of liquidating distributions to a stockholder is less than such stockholder’s adjusted tax basis in our stock, such stockholder should recognize a capital loss (assuming such stockholder held our stock as a capital asset) in the year the final distribution is received. The transfer of our assets to a liquidating trust is a taxable event to our stockholders notwithstanding that the stockholders may not currently receive a distribution of cash or any other assets with which to satisfy the resulting tax liability.
Our expectations about the amount of liquidating distributions that we will pay and when we will pay them are based on many estimates and assumptions, one or more of which may prove to be incorrect.
In accordance with the Plan of Liquidation, our objectives are to pursue an orderly liquidation of our company by selling all of our remaining assets, paying our debts and our known liabilities, providing for the payment of unknown or contingent liabilities, distributing the net proceeds from liquidation to our stockholders and winding up our operations and dissolving our company. We expect to pay multiple liquidating distribution payments to our stockholders during the liquidation process and to pay the final liquidating distribution after we sell all of our assets, pay all of our known liabilities and provide for unknown liabilities. We expect to complete these activities within 24 months from March 5, 2020, the day our stockholders approved the Plan of Liquidation. However, our expectations about the amount of liquidating distributions that we will pay and when we will pay them are based on many estimates and assumptions, one or more of which may prove to be incorrect. As a result, the actual amount of liquidating distributions we pay to our stockholders may be more or less than we estimate and the liquidating distributions may be paid later than we predict. We do not expect to pay regular monthly distributions during the liquidation process. We intend to maintain adequate cash reserves for liquidity, capital expenditures, debt repayments, future Special Redemptions under our share redemption program and other future capital needs.
Distributing beneficial interests in a liquidating trust may trigger tax consequences to our stockholders.
The REIT provisions of the Internal Revenue Code generally require that each year we distribute as a dividend to our stockholders 90% of our REIT taxable income (determined without regard to the dividends paid deduction and excluding net capital gain). Liquidating distributions we pay pursuant to the Plan of Liquidation will qualify for the dividends paid deduction, provided that they are paid within 24 months of March 5, 2020, the date our stockholders approved the Plan of Liquidation. Conditions may arise which cause us not to be able to liquidate within such 24-month period. For instance, it may not be possible to sell our properties at acceptable prices during such period. In such event, rather than retain our properties and risk losing our status as a REIT, we may elect to transfer our remaining assets and liabilities to a liquidating trust in order to meet the 24-month requirement. Such a transfer would be treated as a distribution of our remaining assets to our stockholders, followed by a contribution of the assets to the liquidating trust. As a result, a stockholder would recognize gain to the extent such stockholder’s share of the cash and the fair market value of any assets received by the liquidating trust was greater than the stockholder’s basis in the stock, notwithstanding that the stockholder would not contemporaneously receive a distribution of cash or any other assets with which to satisfy the resulting tax liability. To the extent such stockholder’s share of the cash and the fair market value of any assets received by the liquidating trust is less than the stockholder’s basis in the stock, such loss is expected to be recognizable at the time of the transfer to the liquidating trust, but not before such time. In addition, it is possible that the fair market value of the assets received by the liquidating trust, as estimated for purposes of determining the extent of the stockholder’s gain at the time the beneficial interests in the liquidating trust are distributed to the stockholders, will exceed the cash or fair market value of property received by the liquidating trust on a sale of the assets. In this case, the stockholder would recognize a loss in a taxable year subsequent to the taxable year in which the gain was recognized, which loss may be limited under the Internal Revenue Code.
Our entity value may be adversely affected by adoption of the Plan of Liquidation.
Although prior to the acceptance for record of our articles of dissolution (the “Articles of Dissolution”) by the State Department of Assessments and Taxation of Maryland, our board of directors may terminate the Plan of Liquidation for any reason, subject to and contingent upon the approval of such termination by our stockholders, we are committed to winding-up our operations. This may adversely affect the value that a potential acquirer might place on us. It may also preclude other beneficial courses of action not yet identified by our board of directors.
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There can be no assurance that a planned liquidation pursuant to the Plan of Liquidation will maximize stockholder value to a greater extent at this time than would otherwise occur through other alternatives considered by our board of directors and the Special Committee.
Our stockholders will no longer participate in any future earnings or benefit from any increases in the value of our properties once such properties are sold. Although our board of directors and the Special Committee each believes that a planned liquidation is in our best interest and the best interest of our stockholders, it is possible that pursuing one or more of the other alternatives considered by our board of directors and the Special Committee would maximize stockholder value to a greater extent at this time. In that case, we will be foregoing those opportunities by implementing the Plan of Liquidation.
In certain circumstances, the board of directors may terminate, amend, modify or delay implementation of the Plan of Liquidation even if it is approved by our stockholders.
Our board of directors has adopted and approved the Plan of Liquidation. Nevertheless, prior to the acceptance for record of the Articles of Dissolution by the SDAT, the board of directors may terminate the Plan of Liquidation for any reason, subject to and contingent upon the approval of such termination by our stockholders. Notwithstanding approval of the Plan of Liquidation by our stockholders, our board of directors, or, if a liquidating trust is established, trustees of the liquidating trust, may make certain modifications or amendments to the Plan of Liquidation without further action by or approval of our stockholders to the extent permitted under law. Although our board of directors has no present intention to pursue any alternative to the Plan of Liquidation, our board of directors may conclude that terminating the Plan of Liquidation is in our best interest and the best interest of our stockholders. If our board of directors elects to pursue any alternative to the Plan of Liquidation, our stockholders would have to approve the termination of the Plan of Liquidation and may not receive any of the consideration currently estimated to be available for distribution to our stockholders pursuant to the Plan of Liquidation.
Our board of directors has the authority to sell our assets under terms less favorable than those assumed for the purpose of estimating our net liquidation value range.
Our board of directors has the authority to sell any and all of our properties on such terms and to such parties as the board of directors determines in its sole discretion. Notably, our stockholders will have no subsequent opportunity to vote on such matters and will, therefore, have no right to approve or disapprove the terms of such sales.
Our stockholders could, in some circumstances, be held liable for amounts they received from us in connection with our dissolution.
If we fail to create an adequate contingency reserve for payment of our expenses and liabilities, or if we transfer our assets to a liquidating trust and the contingency reserve and the assets held by the liquidating trust are less than the amount ultimately found payable in respect of expenses and liabilities, each of our stockholders could be held liable for the payment to our creditors of such stockholder’s pro rata portion of the excess, limited to the amounts previously received by the stockholder in distributions from us or the liquidating trust, as applicable. If a court holds at any time that we failed to make adequate provision for our expenses and liabilities or if the amount ultimately required to be paid in respect of such liabilities exceeds the amount available from the contingency reserve and the assets of the liquidating trust, our creditors could seek an injunction to prevent us from paying distributions under the Plan of Liquidation on the grounds that the amounts to be distributed are needed to provide for the payment of such expenses and liabilities. Any such action could delay or substantially diminish the amount of liquidating distributions to be paid to our stockholders or holders of beneficial interests of any liquidating trust.
We will continue to incur the expenses of complying with public company reporting requirements.
Until our liquidation and dissolution are complete, we have an obligation to continue to comply with the applicable reporting requirements of the Exchange Act, even if compliance with these reporting requirements is economically burdensome. In order to curtail expenses, we may, after filing our Articles of Dissolution, seek relief from the SEC from certain reporting requirements under the Exchange Act. We anticipate that, if we seek such relief and it is granted, we would continue to file current reports on Form 8-K to disclose material events relating to our liquidation and dissolution, along with any other reports that the SEC might require, but would discontinue filing annual and quarterly reports on Forms 10-K and 10-Q. However, we may not seek such relief or the SEC may not grant any such relief. To the extent that we delay filing the Articles of Dissolution or if we do not obtain reporting relief, we would be obligated to continue complying with the applicable reporting requirements of the Exchange Act. The expenses we incur in complying with the applicable reporting requirements would reduce the amount of liquidating distributions we pay to our stockholders.
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Approval of the Plan of Liquidation may lead to stockholder litigation, which could result in substantial costs and distract our management.
Extraordinary corporate actions by a company, such as our Plan of Liquidation, sometimes lead to lawsuits being filed against that company. We may become involved in this type of litigation in connection with the Plan of Liquidation. As of March 5, 2020, no such lawsuits relative to the Plan of Liquidation were pending or, to our knowledge, threatened. However, if such a lawsuit is filed against us, the litigation could be expensive and divert management’s attention from implementing the Plan of Liquidation.
Our directors and officers and our advisor and its affiliates may have conflicts of interest that may influence their actions during the implementation of the Plan of Liquidation and these conflicts may cause them to manage our liquidation in a manner not solely in the best interest of our stockholders.
Some of our directors and officers and our advisor and its affiliates have interests in our liquidation that are different from your interests as a stockholder. Some of the conflicts of interest presented by the liquidation are summarized below.
•All of our executive officers, including Messrs. Schreiber and Waldvogel and Ms. Yamane, are officers of our advisor and/or one or more of our advisor’s affiliates and are compensated by those entities, in part, for their service rendered to us. We currently do not pay any direct compensation to our executive officers. Mr. Schreiber is also one of our directors.
•Pursuant to the terms of the advisory agreement, our advisor is expected to be entitled to disposition fees in connection with the sale of our properties. These disposition fees, including fees for the sale of the Campus Drive Buildings, which sale closed on January 22, 2020, are estimated to be approximately $12.5 million, depending upon the prices we receive for the sale of our properties.
•Our advisor earns asset management fees from us and receives reimbursement of certain of its operating costs. Our advisor will continue to earn such fees and receive reimbursements as long as we continue to own any properties, and our advisor will receive reimbursements for expenses until our liquidation and dissolution are complete. Based on the properties we owned as of March 5, 2020 and the projected disposition dates for these assets, we project that we may pay our advisor an aggregate of approximately $8.6 million for asset management fees and reimbursement of certain of its operating expenses in 2020 and 2021 during the liquidation process, although this estimate may vary significantly based on the timing of property sales.
•Our advisor owns a total of 20,000 shares of our common stock, for which we estimate it will receive liquidating distributions of between approximately $68,000 and $76,600 in connection with our liquidation.
•Not including the 20,000 shares owned by our advisor referenced above, one of our directors owns an aggregate of 2,680 shares of our common stock, for which we estimate he will receive aggregate liquidating distributions of between approximately $9,112 and $10,264 in connection with our liquidation.
Because of the above conflicts of interest, our directors, our officers and our advisor may be motivated to make decisions or take actions based on factors other than the best interest of our stockholders throughout the liquidation process.
Our officers, our affiliated director, our advisor and the real estate professionals assembled by our advisor will face competing demands on their time which may adversely affect their management of our liquidation.
Our advisor is also the external advisor to KBS Real Estate Investment Trust III, Inc. (“KBS REIT III”) and KBS Growth & Income REIT, Inc. (“KBS Growth & Income REIT”), each of which is a KBS-sponsored non-traded REIT. Other KBS-advised investors are also advised by affiliates of our advisor, and an affiliate of our advisor serves as the U.S. asset manager for Prime US REIT, a Singapore real estate investment trust. These other programs and investors rely on many of the same real estate professionals as we do, including Mr. Schreiber. As a result of their obligations to these other KBS-sponsored programs and/or KBS-advised investors, Mr. Schreiber, our officers and our advisor’s other real estate professionals face conflicts of interest in allocating their time among us, KBS REIT III, KBS Growth & Income REIT, Prime US REIT, other KBS-advised investors and our advisor, as well as other business activities in which they are involved.

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Risks Related to an Investment in Us
Because no public trading market for our shares currently exists and because our share redemption program limits redemptions to Special Redemptions, our stockholders may not realize the cash value of their shares until we complete our liquidation pursuant to the Plan of Liquidation.
There is no public market for our shares and our stockholders may not sell their shares unless the buyer meets the applicable suitability and minimum purchase standards. Any sale must comply with applicable state and federal securities laws. Our charter prohibits the ownership of more than 9.8% of our stock by any person, unless exempted by our board of directors, which may inhibit large investors from purchasing our shares.
On May 15, 2014, our board of directors amended and restated our share redemption program to provide only for redemptions sought in connection with a Special Redemption. Such Special Redemptions are subject to an annual dollar limitation. On November 13, 2019, our board of directors approved an annual dollar limitation of $10.0 million in the aggregate for the calendar year 2020 (subject to review and adjustment during the year by the board of directors), and further subject to the limitations described in the share redemption program.
We do not expect to have funds available for ordinary redemptions in the future. Thus, except with respect to Special Redemptions, stockholders will not be able to sell any of their shares back to us pursuant to our share redemption program. In its sole discretion, our board of directors may amend, suspend or terminate our share redemption program upon ten business days’ notice, and we may increase or decrease the funding available for the redemption of shares under the program upon ten business days’ notice to stockholders.
Therefore, it will be difficult for our stockholders to sell their shares promptly or at all. If a stockholder is able to sell his or her shares, it would likely be at a substantial discount to our estimated range of liquidating distributions. It is also likely that our shares would not be accepted as the primary collateral for a loan.
We face significant competition for tenants and in the disposition of our assets, which could reduce the amount of liquidating distributions our stockholders receive and their overall return on investment.
We face competition from various entities for prospective tenants and to retain our current tenants, including other REITs, pension funds, insurance companies, investment funds and companies, partnerships and developers. Many of these entities have substantially greater financial resources than we do and may be able to accept more risk than we can prudently manage, including risks with respect to the creditworthiness of a tenant. As a result of their greater resources, those entities may have more flexibility than we do in their ability to offer rental concessions to attract and retain tenants. This could put pressure on our ability to maintain or raise rents and could adversely affect our ability to attract or retain tenants. As a result, our financial condition, results of operations, cash flow and ability to successfully implement our Plan of Liquidation may be adversely affected.
We also face competition from many of the types of entities referenced above regarding the disposition of properties. These entities may possess properties in similar locations and/or of the same property types as ours and may be attempting to dispose of these properties at the same time we are attempting to dispose of some of our properties, providing potential purchasers with a larger number of properties from which to choose and potentially decreasing the sales price for such properties. Additionally, these entities may be willing to accept a lower return on their individual investments, which could further reduce the sales price of such properties. This competition could decrease the sales proceeds we receive for properties that we sell, assuming we are able to sell such properties, which could adversely affect our cash flows, the overall return for our stockholders and the amount and timing of liquidating distributions our stockholders receive.
Disruptions in the financial markets and uncertain economic conditions could adversely affect our ability to successfully implement the Plan of Liquidation and reduce the amount and timing of liquidating distributions our stockholders receive.
We relied on debt financing to finance our real estate properties and we may have difficulty refinancing some of our debt obligations prior to or at maturity or we may not be able to refinance these obligations at terms as favorable as the terms of our existing indebtedness. We also may be unable to obtain additional debt financing on attractive terms or at all. If we are not able to refinance our existing indebtedness on attractive terms at the various maturity dates, we may be forced to dispose of some of our assets at prices lower than we estimated for our range of liquidating distributions. Volatile market conditions and a challenging global macro-economic environment may interfere with our ability to successfully implement the Plan of Liquidation and may reduce the amount and timing of liquidating distributions our stockholders receive.
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Disruptions in the financial markets and uncertain economic conditions could adversely affect the values of our investments. Any disruption to the debt and capital markets could result in fewer buyers seeking to acquire commercial properties and possible increases in capitalization rates and lower property values. Furthermore, any decline in economic conditions could negatively impact commercial real estate fundamentals and result in lower occupancy, lower rental rates and declining values in our real estate portfolio, which could have the following negative effects on us:
•the values of our investments in commercial properties could decrease below the amounts paid for such investments; and/or
•revenues from our properties could decrease due to fewer tenants and/or lower rental rates, decreasing the value of our properties.
All of these factors could reduce the amount of liquidating distributions our stockholders receive and their overall return on investment.
Because we depend upon our advisor and its affiliates to conduct our operations, any adverse changes in the financial health of our advisor or its affiliates or our relationship with them could hinder our performance and reduce the return on our stockholders’ investment.
We depend on our advisor to manage our operations and our portfolio of assets and to implement the Plan of Liquidation. Our advisor depends upon the fees and other compensation that it receives from us, KBS REIT III and KBS Growth & Income REIT and any future KBS-sponsored programs that it advises in connection with the purchase, management and sale of assets to conduct its operations. Any adverse changes to our relationship with, or the financial condition of, our advisor and its affiliates could hinder their ability to successfully manage our operations and our portfolio of investments and implement the Plan of Liquidation.
During the year ended December 31, 2019, we sold two office properties and classified two office properties as held for sale, which were subsequently sold on January 22, 2020. During the year ended December 31, 2018, we sold three office buildings that were part of an eight-building office campus and received the repayment on one real estate loan receivable. During the year ended December 31, 2017, we sold two office properties. As a result, our general and administrative expenses as a percentage of our cash flow from operations has increased and will continue to increase as we sell additional assets.
Our real estate properties generate cash flow in the form of rental revenues and tenant reimbursements. As a result of our recent dispositions, our cash flow from operations has decreased. Our general and administrative expenses are not directly related to the size of our portfolio and thus will not decrease proportionately. As a result, our general and administrative expenses as a percentage of cash flow from operations has increased and will continue to increase as we sell additional assets.
The loss of or the inability to retain or obtain key real estate and debt finance professionals at our advisor could delay or hinder implementation of our investment management strategy and the Plan of Liquidation, which could reduce the amount of liquidating distributions our stockholders receive and their overall return on investment.
Our success depends to a significant degree upon the contributions of Charles J. Schreiber, Jr. and the team of real estate and debt finance professionals at our advisor. Neither we nor our advisor nor its affiliates have employment agreements with these individuals and they may not remain associated with us, our advisor or its affiliates. If any of these persons were to cease their association with us, our advisor or its affiliates, we may be unable to find suitable replacements and our operating results could suffer as a result. We do not maintain key person life insurance on any person. We believe that our future success depends, in large part, upon our advisor’s and its affiliates’ ability to attract and retain highly skilled managerial, operational and marketing professionals. Competition for such professionals is intense, and our advisor and its affiliates may be unsuccessful in attracting and retaining such skilled individuals. Further, we have established strategic relationships with firms that have special expertise in certain services or detailed knowledge regarding real properties in certain geographic regions and in the disposition of our assets in such regions. Maintaining such relationships will be important for us to effectively compete with other investors for tenants in such regions. We may be unsuccessful in maintaining such relationships. If we lose or are unable to obtain the services of highly skilled professionals or do not establish or maintain appropriate strategic relationships, our ability to implement our investment management strategy and the Plan of Liquidation could be delayed or hindered, reducing the amount of liquidating distributions our stockholders receive and their overall return on investment.

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Our rights and the rights of our stockholders to recover claims against our independent directors are limited, which could reduce our stockholders’ and our recovery against our independent directors if they cause us to incur losses.
Maryland law provides that a director has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in the company’s best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Our charter provides that none of our independent directors shall be liable to us or our stockholders for monetary damages and that we will generally indemnify them for losses except in limited circumstances. As a result, our stockholders and we may have more limited rights against our independent directors than might otherwise exist under common law, which could reduce our stockholders’ and our recovery from these persons. In addition, we may be obligated to fund the defense costs incurred by our independent directors (as well as by our other directors, officers, employees (if we ever have employees) and agents) in some cases, which would decrease the cash otherwise available for distribution to our stockholders.
We face risks associated with security breaches through cyber-attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems.
We face risks associated with security breaches, whether through cyber-attacks or cyber intrusions over the Internet, malware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to systems inside our organization, and other significant disruptions of our IT networks and related systems. The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations. Although we make efforts to maintain the security and integrity of these types of IT networks and related systems, and we have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate this risk.
A security breach or other significant disruption involving our IT networks and related systems could:
•disrupt the proper functioning of our networks and systems and therefore our operations;
•result in misstated financial reports, violations of loan covenants and/or missed reporting deadlines;
•result in our inability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT;
•result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of, proprietary, confidential, sensitive or otherwise valuable information of ours or others, which others could use to compete against us or which could expose us to damage claims by third-parties for disruptive, destructive or otherwise harmful purposes and outcomes;
•require significant management attention and resources to remedy any damages that result;
•subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements; or
•damage our reputation among our stockholders.
Any or all of the foregoing could have a material adverse effect on our ability to successfully implement the Plan of Liquidation and could reduce the amount and timing of liquidating distributions our stockholders receive.
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Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland shall be the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders with respect to our company, our directors, our officers or our employees (we note we currently have no employees).  This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder believes is favorable for disputes with us or our directors, officers or employees, which may discourage meritorious claims from being asserted against us and our directors, officers and employees.  Alternatively, if a court were to find this provision of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.  We adopted this provision because we believe it makes it less likely that we will be forced to incur the expense of defending duplicative actions in multiple forums and less likely that plaintiffs’ attorneys will be able to employ such litigation to coerce us into otherwise unjustified settlements, and we believe the risk of a court declining to enforce this provision is remote, as the General Assembly of Maryland has specifically amended the Maryland General Corporation Law to authorize the adoption of such provisions.

Risks Related to Conflicts of Interest
Our advisor and its affiliates, including all of our executive officers, our affiliated director and other key real estate and debt finance professionals, face conflicts of interest caused by their compensation arrangements with us and with other KBS-sponsored programs, which could result in actions that are not in the best interests of our stockholders.
All of our executive officers, our affiliated director and other key real estate and debt finance professionals are also officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor, the entity that acted as our dealer manager, and/or other KBS-affiliated entities. Our advisor and its affiliates receive substantial fees from us. These fees could influence our advisor’s advice to us as well as the judgment of its affiliates. Among other matters, these compensation arrangements could affect their judgment with respect to:
•the continuation, renewal or enforcement of our agreements with our advisor and its affiliates, including the advisory agreement; and
•sales of properties and other investments, which entitle our advisor to disposition fees.
In addition, the fees our advisor receives in connection with the management of our assets are based on the cost of the investment, and not based on the quality of the investment or the quality of the services rendered to us.
Our advisor and its affiliates face conflicts of interest relating to the leasing and disposition of properties due to their relationship with other KBS-sponsored programs and/or KBS-advised investors, and such conflicts may not be resolved in our favor, which could reduce the amount of liquidating distributions our stockholders receive and their overall return on investment.
We and other KBS-sponsored programs and KBS-advised investors rely on our sponsor, KBS Holdings LLC, and other key real estate and debt finance professionals at our advisor, including Mr. Schreiber, to supervise the property management and leasing of properties. If the KBS team of real estate professionals directs creditworthy prospective tenants to properties owned by another KBS-sponsored program or KBS-advised investor when it could direct such tenants to our properties, our tenant base may have more inherent risk and our properties’ occupancy may be lower than might otherwise be the case.
In addition, we and other KBS-sponsored programs and KBS-advised investors rely on our sponsor and other key real estate professionals at our advisor to sell our properties. These KBS-sponsored programs and KBS-advised investors may possess properties in similar locations and/or of the same property types as ours and may be attempting to sell these properties at the same time we are attempting to sell some of our properties. If our advisor directs potential purchasers to properties owned by another KBS-sponsored program or KBS-advised investor when it could direct such purchasers to our properties, we may be unable to sell some or all of our properties at the time or at the price we otherwise would, which could reduce the amount of liquidating distributions our stockholders receive and their overall return on investment.
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Our sponsor, our officers, our advisor and the real estate, debt finance, management and accounting professionals assembled by our advisor face competing demands on their time and this may cause our operations to suffer and delay the implementation of the Plan of Liquidation.
We rely on our sponsor, our officers, our advisor and the real estate, debt finance, management and accounting professionals that our advisor retains, including Messrs. Schreiber and Jeffrey K. Waldvogel and Ms. Stacie K. Yamane, to provide services to us for the day-to-day operation of our business. KBS REIT III and KBS Growth & Income REIT are also advised by KBS Capital Advisors, and KBS Capital Advisors may serve as the advisor to future KBS-sponsored programs and KBS-advised investors. Further, our officers and directors are also officers and/or the affiliated director of other public KBS-sponsored programs. Messrs. Schreiber and Waldvogel and Ms. Yamane are also executive officers of KBS REIT III and KBS Growth & Income REIT. Messrs. Schreiber and Waldvogel and Ms. Yamane are executive officers of KBS Realty Advisors and its affiliates, the advisors of the private KBS-sponsored programs and the KBS-advised investors and the U.S. asset manager for Prime US REIT. Further, Mr. Schreiber is Chairman of the Board and a director of the external manager of Prime US REIT.
As a result of their interests in other KBS-sponsored programs, their obligations to KBS-advised investors and the fact that they engage in and will continue to engage in other business activities on behalf of themselves and others, Messrs. Schreiber and Waldvogel and Ms. Yamane face conflicts of interest in allocating their time among us, KBS REIT III, KBS Growth & Income REIT, KBS Capital Advisors, KBS Realty Advisors, other KBS-sponsored programs and/or other KBS-advised investors, as well as other business activities in which they are involved. In addition, KBS Capital Advisors and KBS Realty Advisors and their affiliates share many of the same key real estate, management and accounting professionals. During times of intense activity in other programs and ventures, these individuals may devote less time and fewer resources to our business than are necessary or appropriate to manage our business. Furthermore, some or all of these individuals may become employees of another KBS–sponsored program in an internalization transaction. If these events occur, the amount of liquidating distributions our stockholders receive and their overall return on investment may decline. See “ - Risks Relating to the Plan of Liquidation.”
All of our executive officers, our affiliated director and the key real estate and debt finance professionals assembled by our advisor face conflicts of interest related to their positions and/or interests in our advisor and its affiliates, which could hinder our ability to implement our business strategy and the Plan of Liquidation.
All of our executive officers, our affiliated director and the key real estate and debt finance professionals assembled by our advisor are also executive officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor and/or other KBS-affiliated entities. Through KBS-affiliated entities, some of these persons also serve as the investment advisors to KBS-advised investors and, through KBS Capital Advisors and KBS Realty Advisors, these persons serve as the advisor to KBS REIT III, KBS Growth & Income REIT and other KBS-sponsored programs. In addition, KBS Realty Advisors serves as the U.S. asset manager for Prime US REIT. As a result, they owe fiduciary duties to each of these entities, their stockholders, members and limited partners and these investors, which fiduciary duties may from time to time conflict with the fiduciary duties that they owe to us and our stockholders. Their loyalties to these other entities and investors could result in action or inaction that is detrimental to our business, which could harm the implementation of our business strategy and the Plan of Liquidation. Further, Mr. Schreiber and existing and future KBS-sponsored programs and KBS-advised investors generally are not and will not be prohibited from engaging, directly or indirectly, in any business or from possessing interests in any other business venture or ventures, including businesses and ventures involved in the acquisition, development, ownership, leasing or sale of real estate investments. If we do not successfully implement our business strategy and the Plan of Liquidation, the amount of liquidating distributions our stockholders receive and their overall return on investment may be reduced.
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Our board of directors’ loyalties to KBS REIT III, KBS Growth & Income REIT, Prime US REIT and possibly to future KBS-sponsored programs could influence its judgment, resulting in actions that may not be in our stockholders’ best interest or that result in a disproportionate benefit to another KBS-sponsored program at our expense.
All of our directors are also directors of KBS REIT III and our affiliated director is also an affiliated director of KBS Growth & Income REIT and an affiliated director of the external manager of Prime US REIT. The loyalties of our directors serving on the boards of directors of KBS REIT III, KBS Growth & Income REIT and the external manager of Prime US REIT, or possibly on the boards of directors of future KBS-sponsored programs, may influence the judgment of our board of directors when considering issues for us that also may affect other KBS-sponsored and advised programs, such as the following:
•We could enter into transactions with other KBS-sponsored programs, such as property sales or financing arrangements. Such transactions might entitle our advisor or its affiliates to increased fees and other compensation from either or both parties to the transaction. For example, property sales to other KBS-sponsored programs might entitle our advisor or its affiliates to acquisition fees in connection with its services to the purchaser in addition to disposition and other fees that we might pay to our advisor in connection with such transaction. Decisions of our board, the conflicts committee or the Special Committee regarding the terms of those transactions may be influenced by our board’s or the conflicts committee’s loyalties to such other KBS-sponsored programs.
•A decision of our board, the conflicts committee or the Special Committee regarding the timing of property sales could be influenced by concerns that the sales would compete with those of other KBS-sponsored programs.
Like us, KBS REIT III compensates each independent director with an annual retainer of $135,000, as well as compensation for attending meetings as follows:
•each member of the audit committee and conflicts committee is paid $10,000 annually for service on such committees (except that the chair of each of the audit committee and conflicts committee is paid $20,000 annually for service as the chair of such committees);
•after the tenth board of directors meeting of each calendar year, each independent director is paid (i) $2,500 for each in-person board of directors meeting attended for the remainder of the calendar year and (ii) $2,000 for each teleconference board of directors meeting attended for the remainder of the calendar year;
•after the tenth audit committee meeting of each calendar year, each member of the audit committee is paid (i) $2,500 for each in-person audit committee meeting attended for the remainder of the calendar year and (ii) $2,000 for each teleconference audit committee meeting attended for the remainder of the calendar year (except that the audit committee chair is paid $3,000 for each in-person and teleconference audit committee meeting attended after the tenth audit committee meeting of each calendar year, for the remainder of each calendar year); and
•after the tenth conflicts committee meeting of each calendar year, each member of the conflicts committee is paid (i) $2,500 for each in-person conflicts committee meeting attended for the remainder of the calendar year and (ii) $2,000 for each teleconference conflicts committee meeting attended for the remainder of the calendar year (except that the conflicts committee chair is paid $3,000 for each in-person and teleconference conflicts committee meeting attended after the tenth conflicts committee meeting of each calendar year, for the remainder of each calendar year).
In addition, we pay independent directors for attending other committee meetings as follows: each independent director is paid $2,000 in cash for each in-person and teleconference committee meeting attended (except that the committee chair is paid $3,000 for each in-person and teleconference committee meeting attended).
Like us, KBS REIT III reimburses directors for reasonable out-of-pocket expenses incurred in connection with attendance at board of directors meetings and committee meetings.

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Risks Related to Our Corporate Structure
Ownership limitations may restrict change of control or business combination opportunities in which our stockholders might receive a premium for their shares.
In order for us to qualify as a REIT for each taxable year, no more than 50% in value of our outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals during the last half of any calendar year. “Individuals” for this purpose include natural persons, and some entities such as private foundations. To preserve our REIT qualification, our charter generally prohibits any person from directly or indirectly owning more than 9.8% in value of our capital stock. This ownership limitation could have the effect of delaying, deferring or preventing a takeover or other transaction including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets), in which holders of our common stock might receive a premium for their shares over our estimated range of liquidating distributions or which stockholders might believe to be otherwise in their best interests.
Our charter permits our board of directors to issue stock with terms that may subordinate the rights of our common stockholders or discourage a third party from acquiring us in a manner that could result in a premium price to our stockholders.
Our board of directors may classify or reclassify any unissued common stock or preferred stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms or conditions of redemption of any such stock. Thus, our board of directors could authorize the issuance of preferred stock with priority as to distributions and amounts payable upon liquidation over the rights of the holders of our common stock. Such preferred stock could also have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price to holders of our common stock.
Our stockholders will have limited control over changes in our policies and operations and the implementation of the Plan of Liquidation, which increases the uncertainty and risks our stockholders face.
Our board of directors determines our major policies, including our policies regarding financing, debt capitalization, REIT qualification, distributions and liquidation pursuant to the Plan of Liquidation. Our board of directors may generally amend or revise these and other policies without a vote of the stockholders. Under Maryland General Corporation Law and our charter, our stockholders have a right to vote only on limited matters. Prior to the acceptance for record of the Articles of Dissolution by the SDAT, the board of directors may terminate the Plan of Liquidation for any reason, subject to and contingent upon the approval of such termination by our stockholders. Notwithstanding approval of the Plan of Liquidation by our stockholders, the board of directors, or, if a liquidating trust is established, trustees of the liquidating trust, may make certain modifications or amendments to the Plan of Liquidation without further action by or approval of our stockholders to the extent permitted under law. Although the board of directors has no present intention to pursue any alternative to the Plan of Liquidation, the board of directors may conclude that terminating the Plan of Liquidation is in our best interest and the best interest of our stockholders. If the board of directors elects to pursue any alternative to the Plan of Liquidation, our stockholders would have to approve the termination of the Plan of Liquidation and may not receive any of the consideration currently estimated to be available for distribution to our stockholders pursuant to the Plan of Liquidation. Our board’s broad discretion in setting policies and our stockholders’ inability to exert control over those policies increases the uncertainty and risks our stockholders face.
Our share redemption program only provides for Special Redemptions. We do not expect to have funds available for ordinary redemptions in the future.
Our share redemption program only provides for Special Redemptions. Such Special Redemptions are subject to an annual dollar limitation. On November 13, 2019, our board of directors approved an annual dollar limitation of $10.0 million in the aggregate for the calendar year 2020 (subject to review and adjustment during the year by the board of directors), and further subject to the limitations described in the share redemption program. Based on historical redemption activity, we believe the $10.0 million redemption limitation for the calendar year 2020 will be sufficient for Special Redemptions. During each calendar year, the annual dollar limitation for the share redemption program will be reviewed and may be adjusted from time to time.
We do not expect to have funds available for ordinary redemptions in the future. Except with respect to Special Redemptions, stockholders will not be able to sell any of their shares back to us pursuant to our share redemption program. In its sole discretion, our board of directors may amend, suspend or terminate our share redemption program upon ten business days’ notice, and we may increase or decrease the funding available for the redemption of shares under the program upon ten business days’ notice to stockholders.
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Payment of fees to KBS Capital Advisors and its affiliates reduces the amount of liquidating distributions our stockholders will receive and their overall return on investment.
KBS Capital Advisors and its affiliates performed services for us in connection with the selection and acquisition or origination of our investments, and continue to perform services for us in connection with the management, leasing and disposition of our properties and the implementation of the Plan of Liquidation. We pay them substantial fees for these services, which results in immediate dilution of the value of our stockholders’ investment in us.
Disposition fees and asset management fees reduce the amount of liquidating distributions our stockholders will receive and their overall return on investment. For information relating to fees potentially payable to our affiliates in connection with the implementation of the Plan of Liquidation, see “ - Risks Relating to the Plan of Liquidation.”
If we are unable to fund our capital needs during our liquidation, the amount of liquidating distributions our stockholders receive and their overall return on investment will be reduced.
When tenants do not renew their leases or otherwise vacate their space, we will often need to expend substantial funds for improvements to the vacated space in order to attract replacement tenants. Even when tenants do renew their leases we may agree to make improvements to their space as part of our negotiations. If we need additional capital in the future to improve or maintain our properties and prepare them for disposition or for any other reason, we may have to obtain funding from sources other than our cash flow from operations, such as borrowings and asset sales. If we cannot procure additional funding for capital improvements, our investments may generate lower cash flow, which would reduce the resale value of the properties and would reduce the amount of liquidating distributions our stockholders receive.
Although we are not currently afforded the protection of the Maryland General Corporation Law relating to deterring or defending hostile takeovers, our board of directors could opt into these provisions of Maryland law in the future, which may discourage others from trying to acquire control of us and may prevent our stockholders from receiving a premium price for their stock in connection with a business combination.
Under Maryland law, “business combinations” between a Maryland corporation and certain interested stockholders or affiliates of interested stockholders are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. Also under Maryland law, control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquirer, an officer of the corporation or an employee of the corporation who is also a director of the corporation are excluded from the vote on whether to accord voting rights to the control shares. Should our board opt into these provisions of Maryland law, it may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer. Similarly, provisions of Title 3, Subtitle 8 of the Maryland General Corporation Law could provide similar anti-takeover protection.
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General Risks Related to Investments in Real Estate
Economic, market and regulatory changes that impact the real estate market generally may decrease the value of our investments, weaken our operating results and reduce the amount of liquidating distributions our stockholders receive and their overall return on investment.
Our operating results and the performance of our properties are subject to the risks typically associated with real estate, any of which could decrease the value of our investments and could weaken our operating results, including:
•downturns in national, regional and local economic conditions;
•competition from other office buildings;
•adverse local conditions, such as oversupply or reduction in demand for office buildings and changes in real estate zoning laws that may reduce the desirability of real estate in an area;
•vacancies, changes in market rental rates and the need to periodically repair, renovate and re-let space;
•changes in interest rates and the availability of permanent mortgage financing, which may render the sale of a property difficult or unattractive;
•changes in tax (including real and personal property tax), real estate, environmental and zoning laws;
•natural disasters such as hurricanes, earthquakes and floods;
•acts of war or terrorism, including the consequences of terrorist attacks, such as those that occurred on September 11, 2001;
•the potential for uninsured or underinsured property losses; and
•periods of high interest rates and tight money supply.
Any of the above factors, or a combination thereof, could result in a decrease in our cash flow from operations and a decrease in the value of our investments, which would have an adverse effect on our operations and reduce the amount of liquidating distributions our stockholders receive and their overall return on investment.
If our assets fail to perform as expected during the implementation of the Plan of Liquidation, the amount of liquidating distributions our stockholders receive and their overall return on investment will be reduced.
Since breaking escrow in June 2008, we made acquisitions of real estate and real estate-related assets based on an underwriting analysis with respect to each asset and how the asset fits into our portfolio. If our assets do not perform as expected during the implementation of the Plan of Liquidation, the amount of liquidating distributions our stockholders receive and their overall return on investment will be reduced.
As of February 29, 2020, we owned four office properties and an office campus consisting of five office buildings. The amount of liquidating distributions our stockholders receive and their overall return on investment will be impacted by the performance and sales of these investments.
Union Bank Plaza represented approximately 18.9% of our total assets and approximately 35.3% of our total annualized base rent as of February 29, 2020. Corporate Technology Centre represented approximately 15.3% of our total assets and approximately 8.0% of our total annualized base rent as of February 29, 2020. The lease for the single tenant that occupied Corporate Technology Centre expired on October 31, 2018. As a result of renovating, rebranding and leasing-up, this property is currently 76.0% leased. We can give no assurance that we will be successful in our strategy to renovate and re-lease Corporate Technology Centre. If we are not successful in our strategy to renovate and re-lease the remaining vacant building, our operating results will suffer and the resale value of the property will be diminished. Granite Tower represented approximately 13.3% of our total assets and approximately 27.3% of our total annualized base rent as of February 29, 2020. Willow Oaks Corporate Center represented approximately 10.8% of our total assets and approximately 13.1% of our total annualized base rent as of February 29, 2020. Fountainhead Plaza represented approximately 10.3% of our total assets and approximately 16.3% of our total annualized base rent as of February 29, 2020. The amount of liquidating distributions our stockholders receive and their overall return on investment will be impacted by the performance and sales of these investments.
The geographic concentration of our portfolio makes us particularly susceptible to adverse economic developments in the Los Angeles, San Jose and Denver real estate markets, respectively. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for office space resulting from the local business climate, could adversely affect our operating results and reduce the amount of liquidating distributions our stockholders receive and their overall return on investment.
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Because of the concentration of our assets in four geographic areas, any adverse economic, real estate or business conditions in these areas could affect our operating results and reduce the amount of liquidating distributions our stockholders receive and their overall return on investment.
As of February 29, 2020, our real estate properties were located in California, Colorado, Virginia and Arizona. As a result, the geographic concentration of our portfolio makes it particularly susceptible to adverse economic developments in the California, Colorado, Virginia and Arizona real estate markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for office space resulting from the local business climate, could adversely affect our operating results and reduce the amount of liquidating distributions our stockholders receive and their overall return on investment.
Properties that have significant vacancies could be difficult to sell, which could diminish the return on these properties and adversely affect our cash flow and the amount of liquidating distributions our stockholders receive.
A property may incur vacancies either by the expiration and non-renewal of tenant leases or the continued default of tenants under their leases. If vacancies continue for a long period of time, we may suffer reduced revenues. In addition, the resale value of the property could be diminished because the market value of a particular property depends principally upon the value of the cash flow generated by the leases associated with that property. Such a reduction in the resale value of a property could also reduce the amount of liquidating distributions our stockholders receive. See the discussion of Corporate Technology Centre above.
We depend on tenants for our revenue generated by our real estate investments and the resale value of a property depends principally upon the value of the cash flow generated by the leases associated with that property. Accordingly, our ability to successfully implement the Plan of Liquidation is partially dependent upon the success and economic viability of our tenants and our ability to retain and attract tenants. Non-renewals, terminations or lease defaults could reduce our net income and the amount of liquidating distributions our stockholders receive.
The success of our real estate investments materially depends upon the financial stability of the tenants leasing the properties we own. The inability of a single major tenant or a significant number of smaller tenants to meet their rental obligations would significantly lower our net income. A non-renewal after the expiration of a lease term, termination or default by a tenant on its lease payments to us would cause us to lose the revenue associated with such lease and require us to find an alternative source of revenue to meet mortgage payments and prevent a foreclosure, if the property is subject to a mortgage. In the event of a tenant default or bankruptcy, we may experience delays in enforcing our rights as landlord of a property and may incur substantial costs in protecting our investment and re-leasing the property. Tenants may have the right to terminate their leases upon the occurrence of certain customary events of default and, in other circumstances, may not renew their leases or, because of market conditions, may only be able to renew their leases on terms that are less favorable to us than the terms of their initial leases. When tenants exercise early termination rights, our cash flow and earnings will be adversely affected to the extent that we are unable to generate an equivalent amount of net rental income by leasing the vacated space to new third party tenants. Further, some of our properties may be outfitted to suit the particular needs of the tenants. We may have difficulty replacing the tenants of these properties if the outfitted space limits the types of businesses that could lease that space without major renovation. If a tenant does not renew a lease or terminates or defaults on a lease, we may be unable to lease the property for the rent previously received or sell the property for the amount used in calculating our range of estimated net proceeds from liquidation, which will reduce the amount of liquidating distributions our stockholders receive. See the discussion of Corporate Technology Centre above.
The bankruptcy or insolvency of our tenants or delays by our tenants in making rental payments could seriously harm our operating results and the amount of liquidating distributions our stockholders receive.
Any bankruptcy filings by or relating to any of our tenants could bar us from collecting pre-bankruptcy debts from that tenant, unless we receive an order permitting us to do so from the bankruptcy court. A tenant bankruptcy could delay our efforts to collect past due balances under the relevant leases, and could ultimately preclude full collection of these sums. If a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages. Any unsecured claim we hold against a bankrupt entity may be paid only to the extent that funds are available and only in the same percentage as is paid to all other holders of unsecured claims. We may recover substantially less than the full value of any unsecured claims, which would harm our operating results and the amount of liquidating distributions our stockholders receive.
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Our inability to sell a property at the time and on the terms we want could reduce the amount of liquidating distributions our stockholders receive.
Many factors that are beyond our control affect the real estate market and could affect our ability to sell properties for the price, on the terms or within the time frame that we desire. These factors include general economic conditions, the availability of financing, interest rates and other factors, including supply and demand. Further, before we can sell a property on the terms we want, it may be necessary to expend funds to correct defects or to make improvements. However, we can give no assurance that we will have the funds available to correct such defects or to make such improvements. We may be unable to sell our properties at a profit. Our inability to sell properties at the time and on the terms we want could reduce the amount of liquidating distributions our stockholders receive.
Costs imposed pursuant to laws and governmental regulations may reduce the amount of liquidating distributions our stockholders receive.
Real property and the operations conducted on real property are subject to federal, state and local laws and regulations relating to protection of the environment and human health. We could be subject to liability in the form of fines, penalties or damages for noncompliance with these laws and regulations. These laws and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials, the remediation of contamination associated with the release or disposal of solid and hazardous materials, the presence of toxic building materials and other health and safety-related concerns.
Some of these laws and regulations may impose joint and several liability on the tenants, owners or operators of real property for the costs to investigate or remediate contaminated properties, regardless of fault, whether the contamination occurred prior to purchase, or whether the acts causing the contamination were legal. Our tenants’ operations, the condition of properties at the time we buy them, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties may affect our properties.
The presence of hazardous substances, or the failure to properly manage or remediate these substances, may hinder our ability to sell, rent or pledge such property as collateral for future borrowings. Any material expenditures, fines, penalties or damages we must pay will reduce the amount of liquidating distributions our stockholders receive.
The costs of defending against claims of environmental liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury or other damage claims could reduce the amount of liquidating distributions our stockholders receive.
Under various federal, state and local environmental laws, ordinances and regulations, a current or previous real property owner or operator may be liable for the cost of removing or remediating hazardous or toxic substances on, under or in such property. These costs could be substantial. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose liens on property or restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us from entering into leases with prospective tenants that may be impacted by such laws. Environmental laws provide for sanctions for noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for the release of and exposure to hazardous substances, including asbestos-containing materials and lead-based paint. Third parties may seek recovery from real property owners or operators for personal injury or property damage associated with exposure to released hazardous substances and governments may seek recovery for natural resource damage. The costs of defending against claims of environmental liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury, property damage or natural resource damage claims could reduce the amount of liquidating distributions our stockholders receive. All of our properties were subject to Phase I environmental assessments prior to the time they were acquired.
Costs associated with complying with the Americans with Disabilities Act may decrease the amount of liquidating distributions our stockholders receive.
Our properties may be subject to the Americans with Disabilities Act of 1990, as amended (the “Disabilities Act”). Under the Disabilities Act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The Disabilities Act has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services be made accessible and available to people with disabilities. The Disabilities Act’s requirements could require removal of access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages. Any funds used for Disabilities Act compliance will reduce the amount of liquidating distributions our stockholders receive.
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Uninsured losses relating to real property or excessively expensive premiums for insurance coverage could reduce the amount of liquidating distributions our stockholders receive.
There are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters, that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. Insurance policies relating to such events may not be available at reasonable costs, if at all. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. We may not have adequate coverage for such losses. If any of our properties incurs a casualty loss that is not fully insured, the value of our assets will be reduced by any such uninsured loss, which will reduce the value of our stockholders’ investment. In addition, other than any working capital reserve or other reserves we may establish, we have limited sources of funding to repair or reconstruct any uninsured property. Also, to the extent we must pay unexpectedly large amounts for insurance, we could suffer reduced earnings that would reduce the amount of liquidating distributions our stockholders receive.
Terrorist attacks and other acts of violence or war may affect the markets in which we operate, which could delay or hinder our ability to successfully implement our Plan of Liquidation and reduce the amount of liquidating distributions our stockholders receive and their overall return on investment.
Terrorist attacks or armed conflicts may directly impact the value of our properties through damage, destruction, loss or increased security costs. We have invested in major metropolitan markets. Insurance risks associated with potential acts of terrorism could sharply increase the premiums we pay for coverage against property and casualty claims or we may not be able to obtain insurance against the risk of terrorism because it may not be available or may not be available on terms that are economically feasible. The terrorism insurance that we obtain may not be sufficient to cover loss for damages to our properties as a result of terrorist attacks. The inability to obtain sufficient terrorism insurance or any terrorism insurance at all could limit our refinancing options as some mortgage lenders have begun to insist that specific coverage against terrorism be purchased by commercial owners as a condition of providing loans. If these events occur, the amount of liquidating distributions our stockholders receive and their overall return on investment may decline.

Risks Associated with Debt Financing
We have obtained mortgage indebtedness, lines of credit and other borrowings, which increases our risk of loss due to potential foreclosure.
We have obtained lines of credit and long-term financing secured by our properties and other assets. We acquired many of our real properties by financing a portion of the price of the properties and mortgaging or pledging some or all of the properties purchased as security for that debt. We may also incur additional debt on properties that we already own in order to fund property improvements and other capital expenditures, and for other purposes. In addition, we may borrow as necessary or advisable to ensure that we maintain our qualification as a REIT for federal income tax purposes, including borrowings to satisfy the REIT requirement that we distribute at least 90% of our annual REIT taxable income to our stockholders (computed without regard to the dividends-paid deduction and excluding net capital gain). However, we can give our stockholders no assurance that we will be able to obtain such borrowings on satisfactory terms or at all.
If there is a shortfall between the cash flow generated by a mortgaged property and the cash flow needed to service mortgage debt on that property, then our operations may suffer and the amount of liquidating distributions our stockholders receive and their overall return on investment may decline. In addition, incurring mortgage debt increases the risk of loss of a property since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default, reducing the amount of liquidating distributions our stockholders receive.. For tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure even though we would not necessarily receive any cash proceeds. We have given and may give full or partial guarantees to lenders of mortgage or other debt on behalf of the entities that own our properties. When we give a guaranty on behalf of an entity that owns one of our properties, we will be responsible to the lender for satisfaction of all or a part of the debt or other amounts related to the debt if it is not paid by such entity. If any mortgages contain cross-collateralization or cross-default provisions, a default on a mortgage secured by a single property could affect mortgages secured by other properties.
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High mortgage rates or changes in underwriting standards may make it difficult for us to refinance properties, which could reduce the amount of liquidating distributions our stockholders receive during our liquidation.
We may be unable to refinance part or all of our mortgage debt when it becomes due or we may be unable to refinance mortgage debt on favorable terms. If interest rates are higher when we refinance properties, our income could be reduced. We may be unable to refinance or may only be able to partly refinance properties if underwriting standards, including loan to value ratios and yield requirements, among other requirements, are more strict than when we originally financed the properties. If any of these events occurs, our operations may suffer and the amount of liquidating distributions our stockholders receive and their overall return on investment may decline.
Lenders may require us to enter into restrictive covenants, which could cause our operations to suffer and the amount of liquidating distributions our stockholders receive and their overall return on investment may decline.
When providing financing, a lender may impose restrictions on us that affect our distribution and operating policies and our ability to incur additional debt. Loan agreements into which we enter may contain covenants that limit our ability to further mortgage a property or that prohibit us from discontinuing insurance coverage or replacing our advisor. These or other limitations could cause our operations to suffer and the amount of liquidating distributions our stockholders receive and their overall return on investment may decline.
Increases in interest rates and changes to the LIBOR settling process and potentially phasing out of LIBOR after 2021 could increase the amount of our debt payments and could reduce the amount of liquidating distributions our stockholders receive.
As of February 29, 2020, we had a total of $240.5 million of variable rate notes payable, and we may incur additional indebtedness in the future. Interest we pay reduces our cash flows. Since we have incurred and may continue to incur variable rate debt, increases in interest rates raise our interest costs, which reduces our cash flows. In addition, if we need to repay existing debt during periods of rising interest rates, we could be required to sell one or more of our properties at times or on terms which may not permit realization of the maximum return on such investments. Increases in interest rates may cause our operations to suffer and the amount of liquidating distributions our stockholders receive and their overall return on investment may decline.
Additionally, we pay interest under certain of our notes payable based on the London Interbank Offered Rate (“LIBOR”). LIBOR and certain other interest “benchmarks” may be subject to regulatory guidance and/or reform that could cause interest rates under our current or future debt agreements to perform differently than in the past or cause other unanticipated consequences. The United Kingdom’s Financial Conduct Authority, which regulates LIBOR, has announced that it intends to stop encouraging or requiring banks to submit rates for the calculation of LIBOR rates after 2021, and it is unclear whether new methods of calculating LIBOR will be established, such that LIBOR may continue to exist after 2021. While there is no consensus on what rate or rates may become accepted alternatives to LIBOR, the Alternative Reference Rates Committee, a steering committee comprised of U.S. financial market participants, selected the Secured Overnight Finance Rate (“SOFR”) as an alternative to LIBOR. SOFR is a broad measure of the cost of borrowing cash in the overnight U.S. treasury repo market, and the Federal Reserve Bank of New York started to publish the SOFR in May 2018. At this time, it is impossible to predict whether the SOFR or another reference rate will become an accepted alternative to LIBOR. The discontinuation, reform or replacement of LIBOR or any other benchmark rates may have an unpredictable impact on contractual mechanics in the credit markets or cause disruption to the broader financial markets, and could have an adverse effect on LIBOR-based interest rates on our current or future debt obligations.
We have broad authority to incur debt and high debt levels could cause our operations to suffer and the amount of liquidating distributions our stockholders receive and their overall return on investment may decline.
We limit our total liabilities to 75% of the cost (before deducting depreciation and other noncash reserves) of our tangible assets; however, we may exceed this limit if the majority of the conflicts committee approves each borrowing in excess of this limitation and we disclose such borrowings to our stockholders in our next quarterly report with an explanation from the conflicts committee of the justification for the excess borrowing. As of December 31, 2019, our borrowings and other liabilities were approximately 38% of both the cost (before deducting depreciation and other noncash reserves) and book value (before deducting depreciation) of our tangible assets, respectively. High debt levels would cause us to incur higher interest charges and higher debt service payments and may also be accompanied by restrictive covenants, which could cause our operations to suffer and the amount of liquidating distributions our stockholders receive and their overall return on investment may decline.

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Federal Income Tax Risks
In addition to the following risk factors, please see “ — Risks Related to the Plan of Liquidation” for information relating to tax risks associated with the Plan of Liquidation.
Failure to qualify as a REIT would reduce our net earnings available for distribution.
Our qualification as a REIT will depend upon our ability to meet requirements regarding our organization and ownership, distributions of our income, the nature and diversification of our income and assets and other tests imposed by the Internal Revenue Code. If we fail to qualify as a REIT for any taxable year after electing REIT status, we will be subject to federal income tax on our taxable income at corporate rates (a maximum rate of 35% applied through 2017, with a 21% rate beginning for 2018). In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year in which we lost our REIT status. Losing our REIT status would reduce our net earnings available for distribution to stockholders because of the additional tax liability. In addition, distributions to stockholders would no longer qualify for the dividends-paid deduction and we would no longer be required to pay distributions. If this occurs, we might be required to borrow funds or liquidate some investments at times or on terms that may not maximize the returns on such investments in order to pay the applicable tax.
Failure to qualify as a REIT would subject us to U.S. federal income tax, which would reduce the cash available for distribution to our stockholders.
We believe that we have operated and will continue to operate in a manner that will allow us to continue to qualify as a REIT for federal income tax purposes commencing with the taxable year ended December 31, 2008. However, the U.S. federal income tax laws governing REITs are extremely complex, and interpretations of the U.S. federal income tax laws governing qualification as a REIT are limited. Qualifying as a REIT requires us to meet various tests regarding the nature of our assets and our income, the ownership of our outstanding stock, and the amount of our distributions on an ongoing basis. Accordingly, we cannot be certain that we will be successful in operating so we can remain qualified as a REIT. While we intend to continue to operate so that we will qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, and the possibility of future changes in our circumstances, no assurance can be given that we will so qualify for any particular year. If we fail to qualify as a REIT in any calendar year and we do not qualify for certain statutory relief provisions, we would be required to pay U.S. federal income tax on our taxable income. We might need to borrow money or sell assets to pay that tax. Our payment of income tax would decrease the amount of our income available for distribution to our stockholders. Furthermore, if we fail to maintain our qualification as a REIT and we do not qualify for certain statutory relief provisions, we no longer would be required to distribute substantially all of our REIT taxable income to our stockholders. Unless our failure to qualify as a REIT were excused under federal tax laws, we would be disqualified from taxation as a REIT for the four taxable years following the year during which qualification was lost.
Even if we qualify as a REIT for U.S. federal income tax purposes, we may be subject to federal, state, local or other tax liabilities that reduce our cash flow and our ability to pay distributions to our stockholders.
Even if we qualify as a REIT for U.S. federal income tax purposes, we may be subject to some federal, state and local taxes on our income or property. For example:
•In order to qualify as a REIT, we must distribute annually at least 90% of our REIT taxable income to our stockholders (which is determined without regard to the dividends-paid deduction or net capital gain). To the extent that we satisfy the distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on the undistributed income.
•We will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions we pay in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.
•If we elect to treat property that we acquire in connection with a foreclosure of a mortgage loan or certain leasehold terminations as “foreclosure property,” we may avoid the 100% tax on the gain from a resale of that property, but the income from the sale or operation of that property may be subject to corporate income tax at the highest applicable rate.
•If we sell an asset, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business, our gain would be subject to the 100% “prohibited transaction” tax unless such sale were made by one of our taxable REIT subsidiaries or the sale met certain “safe harbor” requirements under the Internal Revenue Code.
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REIT distribution requirements could adversely affect our ability to execute our business plan.
We generally must distribute annually at least 90% of our REIT taxable income, subject to certain adjustments and excluding any net capital gain, in order for federal corporate income tax not to apply to earnings that we distribute. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on our undistributed REIT taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under federal tax laws. We also may decide to retain net capital gain we earn from the sale or other disposition of our property and pay U.S. federal income tax directly on such income. In that event, our stockholders would be treated as if they earned that income and paid the tax on it directly. However, stockholders that are tax-exempt, such as charities or qualified pension plans, would have no benefit from their deemed payment of such tax liability unless they file U.S. federal income tax returns and thereon seek a refund of such tax. We also will be subject to corporate tax on any undistributed REIT taxable income. We intend to pay distributions to our stockholders to comply with the REIT requirements of the Internal Revenue Code.
From time to time, we may generate taxable income greater than our income for financial reporting purposes, or our taxable income may be greater than our cash flow available for distribution to stockholders (for example, where a borrower defers the payment of interest in cash pursuant to a contractual right or otherwise). If we do not have other funds available in these situations we could be required to borrow funds, sell investments at disadvantageous prices or find another alternative source of funds to pay distributions sufficient to enable us to pay out enough of our taxable income to satisfy the REIT distribution requirements and to avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce our equity. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.
To maintain our REIT status, we may be forced to forego otherwise attractive opportunities, which may delay or hinder our ability to meet our investment objectives and reduce the amount of liquidating distributions our stockholders receive and their overall return on investment.
To qualify as a REIT, we must satisfy certain tests on an ongoing basis concerning, among other things, the sources of our income, nature of our assets and the amounts we distribute to our stockholders. We may be required to pay distributions to stockholders at times when it would be more advantageous to reinvest cash in our business or when we do not have funds readily available for distribution. Compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits and reduce the amount of liquidating distributions our stockholders receive and their overall return on investment.
If our operating partnership fails to maintain its status as a partnership for U.S. federal income tax purposes, its income would be subject to taxation and our REIT status would be terminated.
We intend to maintain the status of our operating partnership as a partnership for U.S. federal income tax purposes. However, if the Internal Revenue Service were to successfully challenge the status of our operating partnership as a partnership, it would be taxable as a corporation. In such event, this would reduce the amount of distributions that our operating partnership could make to us. This would also result in our losing REIT status and becoming subject to a corporate level tax on our own income. This would substantially reduce our cash available to pay distributions and the return on your investment. In addition, if any of the entities through which our operating partnership owns its properties, in whole or in part, loses its characterization as a partnership for U.S. federal income tax purposes, the underlying entity would become subject to taxation as a corporation, thereby reducing distributions to our operating partnership and jeopardizing our ability to maintain REIT status.
Potential characterization of distributions or gain on sale may be treated as unrelated business taxable income to tax-exempt investors.
If (i) all or a portion of our assets are subject to the rules relating to taxable mortgage pools, (ii) we are a “pension-held REIT,” (iii) a tax-exempt stockholder has incurred debt to purchase or hold our common stock, or (iv) the residual Real Estate Mortgage Investment Conduit interests, or REMICs, we buy (if any) generate “excess inclusion income,” then a portion of the distributions to and, in the case of a stockholder described in clause (iii), gains realized on the sale of common stock by such tax-exempt stockholder may be subject to U.S. federal income tax as unrelated business taxable income under the Internal Revenue Code.
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The tax on prohibited transactions will limit our ability to engage in transactions that would be treated as sales for U.S. federal income tax purposes.
A REIT’s net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of assets, other than foreclosure property, deemed held primarily for sale to customers in the ordinary course of business. We might be subject to this tax if we were to dispose of loans in a manner that was treated as a sale of the loans for U.S. federal income tax purposes. Therefore, in order to avoid the prohibited transactions tax, we may choose not to engage in certain sales of loans at the REIT level, even though the sales might otherwise be beneficial to us.
It may be possible to reduce the impact of the prohibited transaction tax by conducting certain activities through taxable REIT subsidiaries. However, to the extent that we engage in such activities through taxable REIT subsidiaries, the income associated with such activities may be subject to full corporate income tax.
Complying with REIT requirements may force us to liquidate investments at times or on terms that may not maximize the return on such investments.
To qualify as a REIT, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified REIT real estate assets, including certain mortgage loans and residential and commercial mortgage-backed securities. The remainder of our investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer, no more than 20% (25% for taxable years before 2018) of the value of our total assets can be represented by securities of one or more taxable REIT subsidiaries and no more than 25% of the value of our total assets can be represented by “non-qualified publicly offered REIT debt instruments.” If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate investments at times or on terms that may not maximize the return on such investments. These actions could have the effect of reducing our income and the amount of liquidating distributions our stockholders receive and their overall return on investment will be reduced.
The ability of our board of directors to revoke our REIT qualification without stockholder approval may subject us to U.S. federal income tax and reduce the amount of liquidating distributions our stockholders receive and their overall return on investment.
Our charter provides that our board of directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT. While we intend to elect and qualify to be taxed as a REIT, we may not elect to be treated as a REIT or may terminate our REIT election if we determine that qualifying as a REIT is no longer in our best interests. If we cease to be a REIT, we would become subject to U.S. federal income tax on our taxable income, which may have adverse consequences on the amount of liquidating distributions our stockholders receive.
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Changes recently made to the U.S. tax laws could have a negative impact on our business.
The President signed a tax reform bill into law on December 22, 2017 (the “Tax Cuts and Jobs Act”). Among other things, the Tax Cuts and Jobs Act: 
•Reduces the corporate income tax rate from 35% to 21% (including with respect to a taxable REIT subsidiary);
•Reduces the rate of U.S. federal withholding tax on distributions made to non-U.S. stockholders by a REIT that are attributable to gains from the sale or exchange of U.S. real property interests from 35% to 21%;
•If elected, allows an immediate 100% deduction of the cost of certain capital asset investments (generally excluding real estate assets), subject to a phase-down of the deduction percentage over time;
•Changes the recovery periods for certain real property and building improvements (for example, to 15 years for qualified improvement property under the modified accelerated cost recovery system if a technical correction is passed, and to 30 years (previously 40 years) for residential real property and 20 years (previously 40 years) for qualified improvement property under the alternative depreciation system);
•Restricts the deductibility of interest expense by businesses (generally, to 30% of the business’ adjusted taxable income) except, among others, real property businesses electing out of such restriction; we have not yet determined whether we and/or our subsidiaries can and/or will make such an election;
•Requires the use of the less favorable alternative depreciation system to depreciate real property in the event a real property business elects to avoid the interest deduction restriction above;
•Restricts the benefits of like-kind exchanges that defer capital gains for tax purposes to exchanges of real property;
•Permanently repeals the “technical termination” rule for partnerships, meaning sales or exchanges of the interests in a partnership will be less likely to, among other things, terminate the taxable year of, and restart the depreciable lives of assets held by, such partnership for tax purposes;
•Requires accrual method taxpayers to take certain amounts in income no later than the taxable year in which such income is taken into account as revenue in an applicable financial statement prepared under GAAP, which, with respect to certain leases, could accelerate the inclusion of rental income;
•Eliminates the federal corporate alternative minimum tax;
•Reduces the highest marginal income tax rate for individuals to 37% from 39.6% (excluding, in each case, the 3.8% Medicare tax on net investment income);
•Generally allows a deduction for individuals equal to 20% of certain income from pass-through entities, including ordinary dividends distributed by a REIT (excluding capital gain dividends and qualified dividend income), generally resulting in a maximum effective U.S. federal income tax rate applicable to such dividends of 29.6% compared to 37% (excluding, in each case, the 3.8% Medicare tax on net investment income); and
•Limits certain deductions for individuals, including deductions for state and local income taxes, and eliminates deductions for miscellaneous itemized deductions (including certain investment expenses).
Many of the provisions in the Tax Cuts and Jobs Act, in particular those affecting individual taxpayers, expire at the end of 2025.
As a result of the changes to U.S. federal tax laws implemented by the Tax Cuts and Jobs Act, our taxable income and the amount of distributions to our stockholders required in order to maintain our REIT status, and our relative tax advantage as a REIT, could change. As a REIT, we are required to distribute at least 90% of our taxable income to our stockholders annually.
The Tax Cuts and Jobs Act is a complex revision to the U.S. federal income tax laws with various impacts on different categories of taxpayers and industries, and will require subsequent rulemaking and interpretation in a number of areas. The long-term impact of the Tax Cuts and Jobs Act on the overall economy, government revenues, our tenants, us, and the real estate industry cannot be reliably predicted at this time. Furthermore, the Tax Cuts and Jobs Act may negatively impact certain of our tenants’ operating results, financial condition, and future business plans. The Tax Cuts and Jobs Act may also result in reduced government revenues, and therefore reduced government spending, which may negatively impact some of our tenants that rely on government funding. There can be no assurance that the Tax Cuts and Jobs Act will not negatively impact our operating results, financial condition, and future business operations.
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Dividends payable by REITs do not qualify for the reduced tax rates.
In general, the maximum tax rate for dividends payable to domestic stockholders that are individuals, trusts and estates is 20%. Dividends payable by REITs, however, are generally not eligible for this reduced rate; provided under current law, individuals may be able to deduct 20% of income received as ordinary REIT dividends, thus reducing the maximum effective U.S. federal income tax rate on such dividend. In addition, Treasury Regulations impose a minimum holding period for the 20% deduction that was not set forth in the Internal Revenue Code. Under the Treasury Regulations, in order for a REIT dividend with respect to a share of REIT stock to be treated as a qualified REIT dividend, the U.S. stockholder (i) must have held the share for more than 45 days during the 91-day period beginning on the date which is 45 days before the date on which such share becomes ex-dividend with respect to such dividend and (ii) cannot have been under an obligation to make related payments with respect to positions in substantially similar or related property, e.g., pursuant to a short sale. While this tax treatment does not adversely affect the taxation of REITs or dividends paid by REITs, the more favorable rates applicable to regular corporate dividends could cause investors who are individuals, trusts or estates to perceive investments in REITs to be relatively less attractive than investments in stock of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common stock.
Qualifying as a REIT involves highly technical and complex provisions of the Internal Revenue Code.
Qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our REIT qualification. Our continued qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. In addition, our ability to satisfy the requirements to qualify as a REIT depends in part on the actions of third parties over which we have no control or only limited influence, including in cases where we own an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes.
The taxation of distributions to our stockholders can be complex; however, distributions that we make to our stockholders generally will be taxable as ordinary income, which may reduce your anticipated return from an investment in us.
Distributions that we make to our taxable stockholders to the extent of our current and accumulated earnings and profits (and not designated as capital gain dividends or qualified dividend income) generally will be taxable as ordinary income. However, a portion of our distributions may (i) be designated by us as capital gain dividends generally taxable as long-term capital gain to the extent that they are attributable to net capital gain recognized by us, (ii) be designated by us as qualified dividend income generally to the extent they are attributable to dividends we receive from non-REIT corporations, if any, or (iii) constitute a return of capital generally to the extent that they exceed our current and accumulated earnings and profits as determined for U.S. federal income tax purposes. A return of capital distribution is not taxable, but has the effect of reducing the basis of a stockholder’s investment in our common stock.
Non-U.S. stockholders will be subject to U.S. federal withholding tax and may be subject to U.S. federal income tax on distributions received from us and upon the disposition of our shares.
Subject to certain exceptions, distributions received from us will be treated as dividends of ordinary income to the extent of our current or accumulated earnings and profits. Such dividends ordinarily will be subject to U.S. withholding tax at a 30% rate, or such lower rate as may be specified by an applicable income tax treaty, unless the distributions are treated as “effectively connected” with the conduct by the non-U.S. stockholder of a U.S. trade or business. Pursuant to the Foreign Investment in Real Property Tax Act of 1980, or FIRPTA, capital gain distributions attributable to sales or exchanges of “U.S. real property interests,” or USRPIs, generally (subject to certain exceptions for “qualified foreign pension funds” and certain “qualified shareholders”) will be taxed to a non-U.S. stockholder (other than a qualified foreign pension plan, entities wholly owned by a qualified foreign pension plan and certain publicly traded foreign entities) as if such gain were effectively connected with a U.S. trade or business unless FIRPTA provides an exemption. However, a capital gain dividend will not be treated as effectively connected income if (i) the distribution is received with respect to a class of stock that is regularly traded on an established securities market located in the United States and (ii) the non-U.S. stockholder does not own more than 10% of the class of our stock at any time during the one-year period ending on the date the distribution is received. We do not anticipate that our shares will be “regularly traded” on an established securities market for the foreseeable future, and therefore, this exception is not expected to apply.
Gain recognized by a non-U.S. stockholder upon the sale or exchange of our common stock generally will not be subject to U.S. federal income taxation unless such stock constitutes a USRPI under FIRPTA (subject to specific FIRPTA exemptions for certain non-U.S. stockholders). Our common stock will not constitute a USRPI so long as we are a “domestically-controlled qualified investment entity.” A domestically-controlled qualified investment entity includes a REIT if at all times during a specified testing period, less than 50% in value of such REIT’s stock is held directly or indirectly by non-U.S. stockholders. We believe, but cannot assure you, that we will be a domestically-controlled qualified investment entity.
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Even if we do not qualify as a domestically-controlled qualified investment entity at the time a non-U.S. stockholder sells or exchanges our common stock, gain arising from such a sale or exchange would not be subject to U.S. taxation under FIRPTA as a sale of a USRPI if: (a) our common stock is “regularly traded,” as defined by applicable Treasury Regulations, on an established securities market, and (b) such non-U.S. stockholder owned, actually and constructively, 10% or less of our common stock at any time during the five-year period ending on the date of the sale. However, it is not anticipated that our common stock will be “regularly traded” on an established market. We encourage you to consult your tax advisor to determine the tax consequences applicable to you if you are a non-U.S. stockholder.
We may be subject to adverse legislative or regulatory tax changes.
At any time, the U.S. federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be amended. We cannot predict when or if any new U.S. federal income tax law, regulation or administrative interpretation, or any amendment to any existing federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation or interpretation may take effect retroactively. We and our stockholders could be adversely affected by any such change in, or any new, U.S. federal income tax law, regulation or administrative interpretation.

Retirement Plan Risks
If the fiduciary of an employee benefit plan subject to ERISA (such as a profit sharing, Section 401(k) or pension plan) or an owner of a retirement arrangement subject to Section 4975 of the Internal Revenue Code (such as an individual retirement account (“IRA”)) fails to meet the fiduciary and other standards under ERISA or the Internal Revenue Code as a result of an investment in our stock, the fiduciary could be subject to penalties and other sanctions.
There are special considerations that apply to employee benefit plans subject to the Employee Retirement Income Security Act (“ERISA”) (such as profit sharing, Section 401(k) or pension plans) and other retirement plans or accounts subject to Section 4975 of the Internal Revenue Code (such as an IRA) or any entity whose assets include such assets that have invested in our shares. Fiduciaries, IRA owners and other benefit plan investors that have invested the assets of such a plan or account in our common stock should satisfy themselves that:
•the investment is consistent with their fiduciary and other obligations under ERISA and the Internal Revenue Code;
•the investment is made in accordance with the documents and instruments governing the plan or IRA, including the plan’s or account’s investment policy;
•the investment satisfies the prudence and diversification requirements of Sections 404(a)(1)(B) and 404(a)(1)(C) of ERISA and other applicable provisions of ERISA and the Internal Revenue Code;
•the investment in our shares, for which no public market currently exists, is consistent with the liquidity needs of the plan or IRA;
•the investment will not produce an unacceptable amount of “unrelated business taxable income” for the plan or IRA;
•our stockholders will be able to comply with the requirements under ERISA and the Internal Revenue Code to value the assets of the plan or IRA annually; and
•the investment will not constitute a prohibited transaction under Section 406 of ERISA or Section 4975 of the Internal Revenue Code.
With respect to the annual valuation requirements described above, we will provide an estimated value per share for our common stock annually. We can make no claim whether such estimated value per share will or will not satisfy the applicable annual valuation requirements under ERISA and the Internal Revenue Code. The Department of Labor or the Internal Revenue Service may determine that a plan fiduciary or an IRA custodian is required to take further steps to determine the value of our common stock. In the absence of an appropriate determination of value, a plan fiduciary or an IRA custodian may be subject to damages, penalties or other sanctions. For information regarding our estimated value per share, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities - Market Information” of this Annual Report on Form 10-K.
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Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA and the Internal Revenue Code may result in the imposition of civil and criminal penalties and could subject the fiduciary to claims for damages or for equitable remedies, including liability for investment losses. In addition, if an investment in our shares constitutes a prohibited transaction under ERISA or the Internal Revenue Code, the fiduciary or IRA owner who authorized or directed the investment may be subject to the imposition of excise taxes with respect to the amount invested. In addition, the investment transaction must be undone. In the case of a prohibited transaction involving an IRA owner, the IRA may be disqualified as a tax-exempt account and all of the assets of the IRA may be deemed distributed and subjected to tax. ERISA plan fiduciaries and IRA owners should consult with counsel before making an investment in our common stock.
If our assets are deemed to be plan assets, we and our advisor may be exposed to liabilities under Title I of ERISA and the Internal Revenue Code.
In some circumstances where an ERISA plan holds an interest in an entity, the assets of the entity are deemed to be ERISA plan assets unless an exception applies. This is known as the “look-through rule.” Under those circumstances, the obligations and other responsibilities of plan sponsors, plan fiduciaries and plan administrators, and of parties in interest and disqualified persons, under Title I of ERISA or Section 4975 of the Internal Revenue Code, may be applicable, and there may be liability under these and other provisions of ERISA and the Internal Revenue Code. We believe that our assets should not be treated as plan assets because the shares should qualify as “publicly-offered securities” that are exempt from the look-through rules under applicable Treasury Regulations. We note, however, that because certain limitations are imposed upon the transferability of shares so that we may qualify as a REIT, and perhaps for other reasons, it is possible that this exemption may not apply. If that is the case, and if we or our advisor are exposed to liability under ERISA or the Internal Revenue Code, our performance and results of operations could be adversely affected. Stockholders should consult with their legal and other advisors concerning the impact of ERISA and the Internal Revenue Code on their investment and our performance.

ITEM 1B. UNRESOLVED STAFF COMMENTS
We have no unresolved staff comments.

ITEM 2. PROPERTIES
As of December 31, 2019, our portfolio of real estate consisted of six office properties (including two properties that were held for sale) and an office campus consisting of five office buildings. Excluding the two properties held for sale, our four office properties and the office campus consisting of five office buildings encompassed in the aggregate 2.7 million rentable square feet. The total cost of our portfolio of real estate (excluding the two properties held for sale) was $865.0 million as of December 31, 2019. As of December 31, 2019, our portfolio of real estate (excluding the two properties held for sale) was approximately 76% occupied, the annualized base rent was $71.5 million and the average annualized base rent per square foot of our portfolio of real estate (excluding the two properties held for sale) was $34.51. As of December 31, 2019, the weighted-average remaining lease term of our portfolio of real estate (excluding the two properties held for sale), excluding options to extend, was 6.4 years.
In accordance with the Plan of Liquidation approved by our stockholders on March 5, 2020, our objectives are to pursue an orderly liquidation of our company by selling all of our remaining assets, paying our debts and our known liabilities, providing for the payment of unknown or contingent liabilities, distributing the net proceeds from liquidation to our stockholders and winding up our operations and dissolving our company. While pursuing our liquidation pursuant to the Plan of Liquidation, we intend to continue to manage our portfolio of assets to maintain and, if possible, improve the quality and income-producing ability of our properties to enhance property stability and better position our remaining assets for sale.
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As of December 31, 2019, the following properties (excluding the two properties held for sale) represented more than 10% of our total assets:
Property Location Rentable
Square
Feet 		Total Real
Estate, Net
(in thousands) 		Percentage
of Total
Assets
Annualized Base
Rent
(in thousands) (1)
Average
Annualized
Base Rent
per sq. ft. (2)
Occupancy Weighted
Average
Remaining
Lease Term
Union Bank Plaza Los Angeles, CA 701,888    $ 163,844    15.5  % $ 25,336    $ 44.30    81.5  % 5.3 years   
Corporate
Technology Centre (3)
San Jose, CA 415,492    133,246    12.6  % 5,774    33.39    41.6  % 7.4 years   
Granite Tower Denver, CO 591,070    114,474    10.8  % 19,399    34.99    93.8  % 8.8 years   
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of December 31, 2019, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.
(2) Average annualized base rent per square foot is calculated as the annualized base rent divided by the leased square feet.
(3) The lease for the single tenant who occupied Corporate Technology Centre expired on October 31, 2018. As a result of renovating, rebranding and marketing efforts, this property is 76% leased as of March 2, 2020.
For a discussion of our real estate portfolio, see Part I, Item 1, “Business” of this Annual Report on Form 10-K.
Portfolio Lease Expirations
The following table sets forth a schedule of expiring leases for our portfolio of real estate (excluding the two properties held for sale) by rentable square footage and by annualized base rent as of December 31, 2019:
Year of Expiration Number of Leases
Expiring
Annualized Base Rent (1)
(in thousands)
% of Portfolio
Annualized Base Rent
Leased Rentable
Square Feet
Expiring
% of Portfolio
Rentable Square Feet
Expiring
Month to Month 9    $ 1,112    1.6  % 117,449    5.7  %
2020 14    5,296    7.4  % 113,443    5.5  %
2021 8    5,712    8.0  % 135,971    6.6  %
2022 10    4,395    6.1  % 105,865    5.1  %
2023 6    12,699    17.8  % 477,314    23.0  %
2024 15    4,319    6.0  % 112,015    5.4  %
2025 8    2,161    3.0  % 54,284    2.6  %
2026 5    1,582    2.2  % 45,877    2.2  %
2027 6    6,863    9.6  % 200,933    9.7  %
2028 1    1,233    1.7  % 31,248    1.5  %
2029 1    3,277    4.6  % 122,948    5.9  %
Thereafter (2)
12    22,830    32.0  % 553,990    26.8  %
Total 95    $ 71,479    100.0  % 2,071,337    100.0  %
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of December 31, 2019, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.
(2) Represents leases expiring from 2030 through 2035.
For more information with respect to our tenants, see Part I, Item 1, “Business” of this Annual Report on Form 10-K.
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Concentration of Credit Risks
As of December 31, 2019, excluding the two properties held for sale, we had a concentration of credit risk related to the following tenant leases that represented more than 10% of our annualized base rent:
Annualized Base Rent Statistics
Tenant Property Tenant
Industry 		Square
Feet 		% of Portfolio
(Net Rentable
Sq. Ft.)
Annualized
Base Rent
(in thousands) (1)
% of Portfolio
Annualized
Base Rent 		Annualized
Base Rent
per Sq. Ft. 		Lease
Expiration
Union Bank Union Bank Plaza Finance 295,563    10.8%    $ 16,834    23.6%    $ 56.95   
05/31/2020
03/31/2021/
05/31/2021/
05/31/2022
05/31/2035 (2)(3)
The University of Phoenix Fountainhead Plaza Educational Services 445,957    16.3%    11,728    16.4%    26.30   
08/31/2023 (4)
Anadarko Petroleum Corporation Granite Tower Mining, Oil & Gas Extraction 360,584    13.2%    12,256    17.1%    33.99   
04/30/2021 /
04/30/2033 (5)
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of December 31, 2019, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.
(2) Represents the expiration dates of the lease as of December 31, 2019 and does not take into account any tenant renewal options. Pursuant to a lease amendment that we entered into with Union Bank on December 31, 2017, Union Bank surrendered 15,829 rentable square feet of its total rentable square footage on March 31, 2018 and 31,320 rentable square feet of its total rentable square footage on June 30, 2018. In addition, Union Bank also surrendered 321 parking area passes on March 31, 2018. During the year ended December 31, 2018, we received $11.4 million of lease termination fees from Union Bank, of which $8.5 million was deferred as of December 31, 2018. During the year ended December 31, 2018, $1.9 million was recognized as rental income and $1.0 million was recognized as other operating income in the accompanying consolidated statement of operations. During the year ended December 31, 2019, $1.2 million was recognized as rental income and $0.8 million was recognized as other operating income in the accompanying consolidated statements of operations, and $6.5 million was deferred as of December 31, 2019 and included in other liabilities on the accompanying consolidated balance sheet.
(3) On August 2, 2019, we entered into amended and restated lease agreements with Union Bank relating to Union Bank’s office, retail, and storage spaces, which amended the terms of the leases as follows: (i) remeasured the existing rentable square footage from 295,563 rentable square feet to 307,729 rentable square feet effective June 1, 2020, (ii) of the 307,729 rentable square feet, a total of 131,135 rentable square feet of office space and 11,985 rentable square feet of retail space will be surrendered at various dates between May 31, 2020 and May 31, 2022 and the remaining 164,609 rentable square feet will expire on May 31, 2035, and (iii) the addition of 3,152 rentable square feet of retail space for a 15-year lease term expiring on May 31, 2035. Each of Union Bank’s amended and restated office and retail lease agreements has two five-year extension options on all or a portion of the leased space and a one-time option to terminate and cancel the lease in its entirety effective May 31, 2032, by delivering eighteen months’ notice and subject to payment of lease termination fees. Union Bank also has two one-time options to terminate and cancel a portion of its lease.
(4) The University of Phoenix has two options to extend the term of this lease for five years per option term.
(5) Per the lease agreement, 64,841 rentable square feet will expire on April 30, 2021 and the remainder will expire on April 30, 2033. Anadarko Petroleum Corporation has an option to terminate all or a portion of its leased space effective April 30, 2028 or April 30, 2030.
No other tenant accounted for more than 10% of annualized base rent.

ITEM 3. LEGAL PROCEEDINGS
From time to time, we are party to legal proceedings that arise in the ordinary course of our business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition. Nor are we aware of any such legal proceedings contemplated by government authorities.

ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Stockholder Information
As of March 2, 2020, we had approximately 185.2 million shares of common stock outstanding held by a total of approximately 45,300 stockholders. The number of stockholders is based on the records of DST Systems, Inc., which serves as our transfer agent.
Market Information
No public market currently exists for our shares of common stock. In addition, our stockholders may not sell their shares unless the buyer meets the applicable suitability and minimum purchase requirements. Any sale must comply with applicable state and federal securities laws, and our charter prohibits the ownership of more than 9.8% of our stock by a single person, unless exempted by our board of directors. Consequently, there is the risk that our stockholders may not be able to sell their shares at a time or price acceptable to them.
We provide an estimated value per share to assist broker-dealers that participated in our now-terminated initial public offering in meeting their customer account statement reporting obligations under FINRA Rule 2231. This valuation was performed in accordance with the provisions of and also to comply with the IPA Valuation Guidelines. For this purpose, we estimated the value of the shares of our common stock as $3.79 (unaudited) per share as of December 31, 2019. We also provided this estimated value per share to assist us in calculating the range of estimated net proceeds from our Plan of Liquidation as discussed in our definitive proxy statement filed with the SEC on December 9, 2019, which Plan of Liquidation was approved by our stockholders on March 5, 2020. This estimated value per share is based on our board of directors’ approval on November 13, 2019 of an estimated value per share of our common stock of $3.79 (unaudited) based on the estimated value of our assets less the estimated value of our liabilities, or net asset value, divided by the number of shares outstanding, all as of September 30, 2019, except for certain items discussed herein for which estimated values were adjusted subsequent to September 30, 2019. There were no material changes between September 30, 2019 and November 13, 2019 that impacted the overall estimated value per share.
The conflicts committee, composed solely of all of our independent directors, is responsible for the oversight of the valuation process used to determine the estimated value per share of our common stock, including the review and approval of the valuation and appraisal processes and methodologies used to determine our 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 our advisor. Our advisor’s valuation of our seven real estate properties was based on (i) appraisals of five of our real estate properties (the “Appraised Properties”) performed by CBRE, Inc. (“CBRE”), an independent third-party valuation firm, and (ii) the contractual sales price less estimated closing credits of two properties that were under contract to sell subsequent to September 30, 2019. CBRE prepared appraisal reports, summarizing key inputs and assumptions, for each of the Appraised Properties. Our advisor performed valuations with respect to our cash, other assets, mortgage debt and other liabilities. The methodologies and assumptions used to determine the estimated value of our assets and the estimated value of our liabilities are described further below.
Our advisor used the appraised values of the Appraised Properties and the contractual sales price less estimated closing credits of the two properties that were under contract to sell subsequent to September 30, 2019, together with our advisor’s estimated value of each of our other assets and our liabilities, to calculate and recommend an estimated value per share of our common stock. Based on (i) the conflicts committee’s receipt and review of our advisor’s valuation report, including our advisor’s summary of the appraisal reports for the Appraised Properties prepared by CBRE and our advisor’s estimated value of each of our other assets and our liabilities, (ii) the conflicts committee’s review of the reasonableness of our estimated value per share resulting from our advisor’s valuation process, and (iii) other factors considered by the conflicts committee and the conflicts committee’s own extensive knowledge of our assets and liabilities, the conflicts committee concluded that the estimated value per share proposed by our advisor was reasonable and recommended to our board of directors that it adopt $3.79 (unaudited) as the estimated value per share of our common stock. The board of directors unanimously agreed to accept the recommendation of the conflicts committee and approved $3.79 (unaudited) as the estimated value per share of our common stock, which determination is ultimately and solely the responsibility of the board of directors.
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The table below sets forth the calculation of our estimated value per share as of November 13, 2019, as well as the calculation of our prior estimated value per share as of December 3, 2018:
November 13, 2019 Estimated Value per Share
December 3, 2018
Estimated Value per Share (1)
Change in Estimated Value per Share
Real estate properties (2)
$ 5.80    $ 6.77    $ (0.97)  
Cash 0.26    0.43    (0.17)  
Other assets 0.09    0.10    (0.01)  
Mortgage debt (2.25)   (2.23)   (0.02)  
Other liabilities (0.11)   (0.12)   0.01   
Estimated value per share $ 3.79    $ 4.95    $ (1.16)  
Estimated enterprise value premium None assumed None assumed None assumed
Total estimated value per share $ 3.79    $ 4.95    $ (1.16)  
_____________________
(1) The December 3, 2018 estimated value per share was based upon the recommendation and valuation of our advisor. Our advisor’s valuation of our nine real estate properties was based on appraisals of our real estate properties performed by CBRE. Our advisor performed valuations of our cash, other assets, mortgage debt and other liabilities. For more information relating to the December 3, 2018 estimated value per share and the assumptions and methodologies used by CBRE and our advisor, see our Current Report on Form 8-K filed with the SEC on December 7, 2018.
(2) The decrease in the estimated value of real estate properties per share was primarily due to dispositions of real estate properties subsequent to September 30, 2018 and the decrease in value of two properties that were under contract to sell subsequent to September 30, 2019.
The decrease in our estimated value per share from the previous estimate was primarily due to the items noted in the table below, which reflect the significant contributors to the decrease in the estimated value per share from $4.95 (unaudited) to $3.79 (unaudited). The changes are not equal to the change in values of each asset and liability group presented in the table above due to dispositions, debt repayments and other factors, which caused the value of certain asset or liability groups to change with no impact to our fair value of equity or the overall estimated value per share.
Change in Estimated Value per Share
December 3, 2018 estimated value per share $ 4.95   
Changes to estimated value per share
Real estate
Real estate properties (0.30)  
Selling costs related to properties sold (0.02)  
Capital expenditures on real estate (0.34)  
Total change related to real estate (0.66)  
Special distribution declared in June 2019 (0.45)  
Monthly distributions in excess of operating cash flows (1)
(0.04)  
Notes payable (0.01)  
Total change in estimated value per share $ (1.16)  
November 13, 2019 estimated value per share $ 3.79   
_____________________
(1) Operating cash flow reflects modified funds from operations (“MFFO”) adjusted to add back the amortization of deferred financing costs. We compute MFFO in accordance with the definition included in the practice guideline issued by the IPA in November 2010.
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As with any valuation methodology, the methodologies used are based upon a number of estimates and assumptions that may not be accurate or complete. Different parties using different assumptions and estimates could derive a different estimated value per share of our common stock, and this difference could be significant. The estimated value per share is not audited and does not represent the fair value of our assets less the fair value of our liabilities according to U.S. generally accepted accounting principles (“GAAP”), nor does it represent a liquidation value of our assets and liabilities (discussed below) or the price at which our shares of common stock would trade on a national securities exchange. The estimated value per share does not reflect a discount for the fact that we are externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated value per share also did not take into account estimated disposition costs and fees for real estate properties, debt prepayment penalties that could apply upon the prepayment of certain of our debt obligations or the impact of restrictions on the assumption of debt. We have generally incurred disposition costs and fees related to the sale of each real estate property since inception of 1.7% to 4.4% of the gross sales price less concessions and credits, with the weighted average being approximately 2.4%. 
Our estimated value per share takes into consideration any potential liability related to a subordinated participation in cash flows our advisor is entitled to upon meeting certain stockholder return thresholds in accordance with the advisory agreement. For purposes of determining the estimated value per share, our advisor calculated the potential liability related to this incentive fee based on a hypothetical liquidation of the assets and liabilities at their estimated fair values, after considering the impact of any potential closing costs and fees related to the disposition of real estate properties, and determined that there would be no liability related to the subordinated participation in cash flows.
As of November 13, 2019, we had no potentially dilutive securities outstanding that would impact the estimated value per share of our common stock.
The November 13, 2019 estimated value per share does not represent a liquidation value of our assets and liabilities. As discussed in our definitive proxy statement filed on December 9, 2019 with the SEC, in connection with a review of potential strategic alternatives available to us, our board of directors has determined that it is in our best interest and our stockholders to sell all of our properties and assets and liquidate and dissolve the company pursuant to the Plan of Liquidation. The Plan of Liquidation was approved by our stockholders on March 5, 2020.
If we are able to successfully implement the Plan of Liquidation, we estimate that our net proceeds from liquidation and, therefore, the amount of cash our stockholders would receive for each share of our common stock they then hold, could range between approximately $3.40 and $3.83 per share. The difference between the estimated value per share and the range of estimated net proceeds from liquidation reflects the fact that the estimated value per share does not take into consideration: (i) expected closing costs and fees related to future dispositions of real estate investments and (ii) estimated corporate costs and other expenses of the liquidation and dissolution not covered from our cash flow from operations.
Based on the estimated value per share as of November 13, 2019 and the estimated costs and expenses of liquidating and dissolving the company, we estimate the range in net proceeds from liquidation to be follows:
Range in estimated value per share $3.55 to $3.99
Estimated disposition costs and fees per share $(0.13) to $(0.14)
Estimated other dissolution costs per share $(0.02)  
Range in estimated net proceeds from liquidation per share $3.40 to $3.83

There are many factors that may affect the actual net proceeds from liquidation and the amount of liquidating distributions per share, including, among other things, the ultimate sale price of each asset, changes in market demand for office properties during the liquidation process, the amount of taxes, transaction fees and expenses relating to the liquidation and dissolution, and unanticipated or contingent liabilities arising subsequent to the filing date of our definitive proxy statement. No assurance can be given as to the amount of liquidating distributions we will ultimately pay to our stockholders. If we have underestimated our existing obligations and liabilities or if unanticipated or contingent liabilities arise, the amount of liquidating distributions ultimately distributed to our stockholders could be less than that set forth above. These estimates were based upon market, economic, financial and other circumstances and conditions existing as of the date of our definitive proxy statement, and any changes in such circumstances and conditions during the liquidation process could have a material effect on the ultimate amount of liquidating distributions we pay to our stockholders.
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Methodology
Our goal for the valuation was to arrive at a reasonable and supportable estimated value per share, using a process that was designed to be in compliance with the IPA Valuation Guidelines and using what we and our advisor deemed to be appropriate valuation methodologies and assumptions. The following is a summary of the valuation and appraisal methodologies, assumptions and estimates used to value our assets and liabilities:
Real Estate
Independent Valuation Firm: CBRE(1) was selected by our advisor and approved by our conflicts committee and board of directors to appraise the Appraised Properties. CBRE is not affiliated with us or our advisor. The compensation we paid to CBRE was based on the scope of work and not on the appraised values of the Appraised Properties.  The appraisals were performed in accordance with the Code of Ethics and the Uniform Standards of Professional Appraisal Practice, or USPAP, the real estate appraisal industry standards created by The Appraisal Foundation, as well as the requirements of the state where each real property is located.  Each appraisal was reviewed, approved and signed by an individual with the professional designation of MAI (Member of the Appraisal Institute). The use of the reports is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.
CBRE collected all reasonably available material information that it deemed relevant in appraising the Appraised Properties. CBRE obtained property-level information from our advisor, including (i) property historical and projected operating revenues and expenses; (ii) property lease agreements; and (iii) information regarding recent or planned capital expenditures. CBRE reviewed and relied in part on the property-level information provided by our advisor and considered this information in light of its knowledge of each property’s specific market conditions.
In conducting its investigation and analyses, CBRE took into account customary and accepted financial and commercial procedures and considerations as it deemed relevant. Although CBRE reviewed information supplied or otherwise made available by us or our advisor for reasonableness, it assumed and relied upon the accuracy and completeness of all such information and of all information supplied or otherwise made available to it by any other party and did not independently verify any such information. With respect to operating or financial forecasts and other information and data provided to or otherwise reviewed by or discussed with CBRE, CBRE assumed that such forecasts and other information and data were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of our management and/or our advisor. CBRE relied on us to advise it promptly if any information previously provided became inaccurate or was required to be updated during the period of its review.
In performing its analyses, CBRE made numerous other assumptions as of various points in time with respect to industry performance, general business, economic and regulatory conditions and other matters, many of which are beyond its and our control, as well as certain factual matters. For example, unless specifically informed to the contrary, CBRE assumed that we had clear and marketable title to the Appraised Properties, that no title defects existed, that any improvements were made in accordance with law, that no hazardous materials were present or had been present previously, that no deed restrictions existed, and that no changes to zoning ordinances or regulations governing use, density or shape were pending or being considered. Furthermore, CBRE’s analyses, opinions and conclusions were necessarily based upon market, economic, financial and other circumstances and conditions existing as of or prior to the date of the appraisal, and any material change in such circumstances and conditions may affect CBRE’s analyses and conclusions.  CBRE’s appraisal reports contain other assumptions, qualifications and limitations that qualify the analyses, opinions and conclusions set forth therein.  Furthermore, the prices at which the Appraised Properties may actually be sold could differ from their appraised values.



_____________________
(1) CBRE is actively engaged in the business of appraising commercial real estate properties similar to those we own in connection with public securities offerings, private placements, business combinations and similar transactions. We engaged CBRE to deliver appraisal reports relating to the Appraised Properties and CBRE received fees upon the delivery of such reports. In addition, we have agreed to indemnify CBRE against certain liabilities arising out of this engagement. CBRE is an affiliate of CBRE Group, Inc., a parent holding company of affiliated companies that are engaged in the ordinary course of business in many areas related to commercial real estate and related services. In the two years prior to November 13, 2019, CBRE and its affiliates provided a number of commercial real estate, appraisal, valuation and financial advisory services for us and our affiliates and have received fees in connection with such services. CBRE and its affiliates may from time to time in the future perform other commercial real estate, appraisal, valuation and financial advisory services for us and our affiliates in transactions related to the properties that are the subjects of the appraisals, so long as such other services do not adversely affect the independence of the applicable CBRE appraiser as certified in the applicable appraisal report.
In the ordinary course of its business, CBRE and its affiliates, directors and officers may structure and effect transactions for their own accounts or for the accounts of their customers in commercial real estate assets of the same kind and in the same markets as our assets.
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Although CBRE considered any comments to its appraisal reports received from us or our advisor, the final appraised values of the Appraised Properties were determined by CBRE.  The appraisal reports for the Appraised Properties are addressed solely to us to assist our advisor in calculating and recommending an updated estimated value per share of our common stock. The appraisal reports are not addressed to the public and may not be relied upon by any other person to establish an estimated value per share of our common stock and do not constitute a recommendation to any person to purchase or sell any shares of our common stock. In preparing its appraisal reports, CBRE did not solicit third-party indications of interest for the Appraised Properties. In preparing its appraisal reports, CBRE also did not, and was not requested to, solicit third-party indications of interest for our common stock in connection with possible purchases thereof or the acquisition of all or any part of us. While CBRE was responsible for providing appraisals for the Appraised Properties, CBRE was not responsible for, did not calculate, and did not participate in, the determination of the estimated value per share of our common stock.
The foregoing is a summary of the standard assumptions, qualifications and limitations that generally apply to CBRE’s appraisal reports. All of the CBRE appraisal reports, including the analyses, opinions and conclusions set forth in such reports, are qualified by the assumptions, qualifications and limitations set forth in the respective appraisal reports.
Real Estate Valuation
As of September 30, 2019, we owned seven real estate properties (consisting of six office properties and an office campus consisting of five office buildings). CBRE appraised each of the Appraised Properties and the two properties that were under contract to sell subsequent to September 30, 2019 were valued at the contractual sales price less estimated closing credits. CBRE appraised the Appraised Properties using various methodologies including the direct capitalization approach, discounted cash flow analyses and sales comparison approach and relied primarily on 10-year discounted cash flow analyses for the final appraisal of each of the Appraised Properties. CBRE calculated the discounted cash flow value of the Appraised Properties using property-level cash flow estimates, terminal capitalization rates and discount rates that fall within ranges it believes would be used by similar investors to value the Appraised Properties based on recent comparable market transactions adjusted for unique property and market-specific factors.
The total appraised value of the Appraised Properties as of September 30, 2019 was $773.0 million. The estimated value for the two real estate properties that were under contract to sell subsequent to September 30, 2019 was $303.0 million. Based on the appraisal and valuation methodologies described above, the estimated value of the seven real estate properties as of September 30, 2019 was $1.076 billion. The total cost basis of these properties as of September 30, 2019 was $1.459 billion. This amount includes the purchase prices of $1.209 billion, $233.3 million in capital expenditures, leasing commissions and tenant improvements since inception and $16.5 million of acquisition fees and expenses.
The following table summarizes the key assumptions that CBRE used in the 10-year discounted cash flow models to arrive at the appraised values for the Appraised Properties:
Range in Values
Weighted-Average Basis
Terminal capitalization rate
6.25% to 7.50% 6.78%
Discount rate
7.25% to 9.00% 7.82%
Net operating income compounded annual growth rate (1)
(1.06)% to 16.75% 5.94%
_____________________
(1) The net operating income compounded annual growth rates (“CAGRs”) reflect both the contractual and market rents and reimbursements (in cases where the contractual lease period is less than the valuation period of the property) net of expenses over the valuation period. The range of CAGRs shown is the constant annual rate at which the net operating income is projected to grow to reach the net operating income in the final year of the hold period for each of the properties. The high-end range in values reflects the lease up of a property with significant vacancy and that was 60% leased as of September 30, 2019.
While we believe that CBRE’s assumptions and inputs are reasonable, a change in these assumptions and inputs would significantly impact the appraised value of the Appraised Properties and thus, our estimated value per share. The table below illustrates the impact on the estimated value per share if the terminal capitalization rates or discount rates CBRE used to appraise the Appraised Properties were adjusted by 25 basis points, assuming all other factors remain unchanged. Additionally, the table below illustrates the impact on our estimated value per share if the terminal capitalization rates or discount rates were adjusted by 5% in accordance with the IPA Valuation Guidelines, assuming all other factors remain unchanged:
Increase (Decrease) on the Estimated Value per Share due to
Decrease of 25 basis points
Increase of 25 basis points
Decrease of 5%
Increase of 5%
Terminal capitalization rates
$ 0.11    $ (0.10)   $ 0.15    $ (0.13)  
Discount rates
0.09    (0.09)   0.14    (0.14)  

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Finally, each 1% change in the appraised value of the Appraised Properties would result in a change of $0.06 to the estimated value per share, assuming all other factors remain unchanged.
Notes Payable
The estimated values of our notes payable are equal to the GAAP fair values disclosed in our Quarterly Report on Form 10-Q for the period ended September 30, 2019. The estimated value of our notes payable does not equal the book value of the loans in accordance with GAAP. The GAAP fair values of our notes payable were determined using a discounted cash flow analysis. The discounted cash flow analysis was based on projected cash flow over the remaining loan terms, including extensions we expect to exercise, and on management’s estimates of current market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio and type of collateral.
As of September 30, 2019, the GAAP fair value and carrying value (excluding unamortized deferred financing costs of $0.9 million) of our notes payable were $418.2 million and $417.5 million, respectively. The weighted-average discount rate applied to the future estimated debt payments was approximately 3.20%. Our notes payable have a weighted-average remaining term of 1.3 years. The table below illustrates the impact on our estimated value per share if the discount rates were adjusted by 25 basis points, assuming all other factors remain unchanged, with respect to our notes payable. Additionally, the table below illustrates the impact on the estimated value per share if the discount rates were adjusted by 5% in accordance with the IPA Valuation Guidelines, assuming all other factors remain unchanged:
Increase (Decrease) on the Estimated Value per Share due to
Decrease of 25 basis points
Increase of 25 basis points
Decrease of 5%
Increase of 5%
Discount rates
(0.01)   0.01    —    —   

Other Assets and Liabilities
The carrying values of a majority of our other assets and liabilities are considered to equal their fair value due to their short maturities or liquid nature. Certain balances, such as straight-line rent receivables, lease intangible assets and liabilities, capital expenditures payable, deferred financing costs, unamortized lease commissions and unamortized lease incentives, have been eliminated for the purpose of the valuation due to the fact that the values of those balances were already considered in the valuation of the related asset or liability. Our advisor has also excluded redeemable common stock, as temporary equity does not represent a true liability to us and the shares that this amount represents are included in our total outstanding shares of common stock for purposes of calculating the estimated value per share of our common stock.
Limitations of the Estimated Value Per Share
As mentioned above, we are providing this estimated value per share (i) to assist us in calculating the range of estimated net proceeds from our Plan of Liquidation as discussed in our definitive proxy statement filed with the SEC on December 9, 2019, which Plan of Liquidation was approved by our stockholders on March 5, 2020, and (ii) to assist broker-dealers that participated in our now-terminated initial public offering in meeting their customer account statement reporting obligations. This valuation was performed in accordance with the provisions of and also to comply with the IPA Valuation Guidelines. The estimated value per share set forth above first appeared on the November 30, 2019 customer account statements that were mailed in December 2019. As with any valuation methodology, the methodologies used are based upon a number of estimates and assumptions that may not be accurate or complete. Different parties with different assumptions and estimates could derive a different estimated value per share of our common stock, and this difference could be significant. The estimated value per share is not audited and does not represent the fair value of our assets less the fair value of our liabilities according to GAAP.
Accordingly, with respect to the estimated value per share, we can give no assurance that:
•a stockholder would be able to resell his or her shares at this estimated value per share;
•our shares of common stock would trade at the estimated value per share on a national securities exchange;
•an independent third-party appraiser or other third-party valuation firm would agree with our estimated value per share; or
•the methodology used to calculate our estimated value per share would be acceptable to FINRA or for compliance with ERISA reporting requirements.
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Further, the estimated value per share as of November 13, 2019 is based on the estimated value of our assets less the estimated value of our liabilities divided by the number of shares outstanding, all as of September 30, 2019, except for certain items discussed herein for which estimated values were adjusted subsequent to September 30, 2019. The value of our shares will fluctuate over time in response to developments related to individual assets in our portfolio and the management of those assets, in response to the real estate and finance markets and due to other factors. The estimated value per share does not reflect a discount for the fact that we are externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated value per share did not take into account estimated disposition costs and fees for real estate properties, debt prepayment penalties that could apply upon the prepayment of certain of our debt obligations or the impact of restrictions on the assumption of debt. We have generally incurred disposition costs and fees related to the sale of each real estate property since inception of 1.7% to 4.4% of the gross sales price less concessions and credits, with the weighted average being approximately 2.4%. 
Moreover, as discussed above, the November 13, 2019 estimated value per share does not represent a liquidation value of our assets and liabilities. If we are able to successfully implement the Plan of Liquidation, we estimate that our net proceeds from liquidation and, therefore, the amount of cash our stockholders would receive for each share of our common stock they then hold, could range between approximately $3.40 and $3.83 per share.
Historical Estimated Values per Share
The historical reported estimated values per share of our common stock approved by our board of directors are set forth below:
Estimated Value per Share
Effective Date of Valuation
Filing with the Securities and Exchange Commission
$4.50 (1)
June 17, 2019 Current Report on Form 8-K, filed June 14, 2019
$4.95 December 3, 2018 Current Report on Form 8-K, filed December 7, 2018
$4.89   
December 8, 2017
Current Report on Form 8-K, filed December 11, 2017
$5.49   
December 14, 2016
Current Report on Form 8-K, filed December 15, 2016
$5.62   
December 8, 2015
Current Report on Form 8-K, filed December 9, 2015
$5.86   
December 4, 2014
Current Report on Form 8-K, filed December 4, 2014
$6.05 (2)
September 22, 2014
Current Report on Form 8-K, filed September 23, 2014
$10.29   
December 18, 2013
Current Report on Form 8-K, filed December 19, 2013
$10.29   
December 18, 2012
Current Report on Form 8-K, filed December 19, 2012
$10.11   
December 19, 2011
Current Report on Form 8-K, filed December 21, 2011
_____________________
(1) The estimated value per share of $4.50 resulted from the payment of a special distribution of $0.45 per share of common stock to stockholders of record as of June 17, 2019. Our board of directors declared a special distribution in the amount of $0.45 per share on the outstanding shares of our common stock on June 12, 2019 to all stockholders of record as of the close of business on June 17, 2019. This special distributions was paid on June 21, 2019 and was funded from our net proceeds from the disposition of two real estate properties in May 2019. The June 17, 2019 estimated value per share was based solely on the December 3, 2018 estimated value per share reduced for the impact of the special distribution.
(2) The estimated value per share of $6.05 resulted, in part, from the payment of a special distribution of $4.50 per share of common stock to stockholders of record as of September 15, 2014. Excluding the impact of the special distribution, our estimated value per share of common stock would have been $10.55 as of September 22, 2014. Our board of directors declared special distributions in the amount of $3.75, $0.30 and $0.45 per share on the outstanding shares of our common stock on July 8, 2014, August 5, 2014 and August 29, 2014, respectively, for an aggregate amount of $4.50 per share of common stock, to all stockholders of record as of the close of business on September 15, 2014. These special distributions were paid on September 23, 2014 and were funded from our proceeds from the disposition of nine real estate properties between May 2014 and August 2014 as well as cash on hand resulting primarily from the repayment or sale of five real estate loans receivable during 2013 and 2014.
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Distribution Information
In accordance with the Plan of Liquidation, our objectives are to pursue an orderly liquidation of our company by selling all of our remaining assets, paying our debts and our known liabilities, providing for the payment of unknown or contingent liabilities, distributing the net proceeds from liquidation to our stockholders and winding up our operations and dissolving our company. We expect to pay multiple liquidating distribution payments to our stockholders during the liquidation process and to pay the final liquidating distribution after we sell all of our assets, pay all of our known liabilities and provide for unknown liabilities. We expect to complete these activities within 24 months from March 5, 2020, the day our stockholders approved the Plan of Liquidation. Pursuant to the Plan of Liquidation, on March 5, 2020, our board of directors authorized an initial liquidating distribution in the amount of $0.75 per share of common stock to stockholders of record as of the close of business on March 5, 2020. See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Subsequent Events – Initial Liquidating Distribution Authorized.” Our expectations about the amount of liquidating distributions that we will pay and when we will pay them are based on many estimates and assumptions, one or more of which may prove to be incorrect. As a result, the actual amount of liquidating distributions we pay to our stockholders may be more or less than we estimate and the liquidating distributions may be paid later than we predict. We do not expect to pay regular monthly distributions during the liquidation process. We intend to maintain adequate cash reserves for liquidity, capital expenditures, debt repayments, future Special Redemptions under our share redemption program and other future capital needs. See Part I, Item 1A, “Risks Factors – Risks Related to the Plan of Liquidation.”
We have elected to be taxed as a REIT under the Internal Revenue Code and have operated as such beginning with our taxable year ended December 31, 2008. To maintain our qualification as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our REIT taxable income (computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board of directors deems relevant.
On June 12, 2019, our board of directors declared a special distribution in the amount of $0.45 per share of common stock to stockholders of record as of the close of business on June 17, 2019. Distributions declared per common share were $0.649 and $0.245 in the aggregate for the years ended December 31, 2019 and 2018, respectively. Other than the special distribution, distributions per common share were based on a monthly record date for each month during the period commencing January 2018 through October 2019.
Distributions declared during 2019 and 2018, aggregated by quarter, are as follows (dollars in thousands, except per share amounts):
2019
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
Total Distributions Declared $ 11,532    $ 95,187    $ 10,450    $ 3,479    $ 120,648   
Total Per Share Distribution $ 0.062    $ 0.512    $ 0.056    $ 0.019    $ 0.649   
2018
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
Total Distributions Declared $ 11,309    $ 11,420    $ 11,523    $ 11,502    $ 45,754   
Total Per Share Distribution $ 0.060    $ 0.061    $ 0.062    $ 0.062    $ 0.245   

The tax composition of our distributions declared for the years ended December 31, 2019 and 2018 was as follows:
2019 2018
Ordinary Income —  % 64  %
Capital Gain —  % 34  %
Return of Capital 100  % 2  %
Total 100  % 100  %

For more information with respect to our distributions paid, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Distributions.”
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Unregistered Sales of Equity Securities
During the fiscal year ended December 31, 2019, we did not sell any equity securities that were not registered under the Securities Act of 1933.
Share Redemption Program
Our share redemption program provides only for redemptions sought upon a stockholder’s death, “qualifying disability” or “determination of incompetence” (each as defined in the share redemption program and, together with redemptions sought in connection with a stockholder’s death, “Special Redemptions”). Such redemptions are subject to the limitations described in the share redemption program document, including:
•During each calendar year, Special Redemptions are limited to an annual dollar amount determined by the board of directors, which may be reviewed during the year and increased or decreased upon ten business days’ notice to our stockholders. We may provide notice by including such information (a) in a Current Report on Form 8-K or in our annual or quarterly reports, all publicly filed with the Securities and Exchange Commission or (b) in a separate mailing to the stockholders. On December 3, 2018, our board of directors approved the dollar amount limitation for Special Redemptions for calendar year 2019 of $10.0 million in the aggregate. On November 13, 2019, our board of directors approved the same annual dollar limitation of $10.0 million in the aggregate for the calendar year 2020 (subject to review and adjustment during the year by the board of directors), and further subject to the limitations described in the share redemption program.
•During any calendar year, we may redeem no more than 5% of the weighted-average number of shares outstanding during the prior calendar year.
•We have no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland General Corporation Law, as amended from time to time, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency.
If we cannot repurchase all shares presented for redemption in any month because of the limitations on redemptions set forth in our share redemption program, then we will honor redemption requests on a pro rata basis, except that if a pro rata redemption would result in a stockholder owning less than the minimum purchase requirement described in our currently effective, or our most recently effective, registration statement as such registration statement has been amended or supplemented, then we would redeem all of such stockholder’s shares.
Upon a transfer of shares, any pending redemption requests with respect to such transferred shares will be canceled as of the date the transfer is accepted by us.  Stockholders wishing to continue to have a redemption request related to any transferred shares considered by us must resubmit their redemption request.
Pursuant to the share redemption program, redemptions made in connection with Special Redemptions are made at a price per share equal to the most recent estimated value per share of our common stock as of the applicable redemption date. We do not expect to have funds available for ordinary redemptions in the future.
On December 3, 2018, our board of directors approved an estimated value per share of our common stock of $4.95 (unaudited) (the “December EVPS”) based on the estimated value of our assets less the estimated value of our liabilities, divided by the number of shares outstanding, all as of September 30, 2018. The change in the redemption price became effective for the December 2018 redemption date, which was December 31, 2018, and was effective through the May 2019 redemption date, which was May 31, 2019. For a full description of the methodologies used to value our assets and liabilities in connection with the calculation of the December EVPS, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Market Information” of our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 13, 2019.
In connection with the declaration of the special distribution, on June 12, 2019, our board of directors approved an updated estimated value per share of our common stock of $4.50 (unaudited), effective June 17, 2019, which was the record date for the special distribution, based solely on subtracting the special distribution declared by our board of directors in the amount of $0.45 per share of common stock from the December EVPS of $4.95. This was the sole adjustment to the estimated value per share. The change in the redemption price became effective for the June 2019 redemption date, which was June 28, 2019, and was effective through the October 2019 redemption date, which was October 31, 2019. For a full description of the methodologies used to determine the estimated value per share, see our Current Report on Form 8-K filed with the SEC on June 14, 2019.
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On November 13, 2019, our board of directors approved an estimated value per share of our common stock of $3.79 (unaudited) based on the estimated value of our assets less the estimated value of our liabilities, divided by the number of shares outstanding, all as of September 30, 2019, except for certain items discussed herein for which estimated values were adjusted subsequent to September 30, 2019. The change in redemption price became effective for the November 2019 redemption date, which was November 29, 2019, and will be effective until the estimated value per share is updated. For a full description of the methodologies used to value our assets and liabilities in connection with the calculation of the estimated value per share, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Market Information.”
In connection with the approval of the Plan of Liquidation, on March 5, 2020, our board of directors amended and restated our share redemption program so that the redemption price takes into account the estimated range of liquidating distributions as disclosed in the Proxy Statement and any liquidating distributions declared by the Company’s board of directors. See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Subsequent Events – Amendment and Restatement of Share Redemption Program.”
We may amend, suspend or terminate our share redemption program for any reason upon ten business days’ notice to our stockholders, and we may increase or decrease the funding available for the redemption of shares under the program upon ten business days’ notice to our stockholders. We may provide this notice by including such information (a) in a Current Report on Form 8-K or in our annual or quarterly reports, all publicly filed with the SEC or (b) in a separate mailing to our stockholders.
The only redemptions we made under our share redemption program during the year ended December 31, 2019 were those that qualified as, and met the requirements for, Special Redemptions under our share redemption program, and we fulfilled all redemption requests that qualified as Special Redemptions under our share redemption program. We funded redemptions during the year ended December 31, 2019 with existing cash on hand. During the year ended December 31, 2019, we redeemed shares pursuant to our share redemption program as follows:
Month
Total Number of Shares
Redeemed (1)
Average Price Paid
Per Share (2)
Approximate Dollar Value of Shares
Available That May Yet Be Redeemed
Under the Program
January 2019 87,190    $ 4.95   
(3)
February 2019 80,441    $ 4.95   
(3)
March 2019 108,367    $ 4.95   
(3)
April 2019 150,957    $ 4.95   
(3)
May 2019 94,897    $ 4.95   
(3)
June 2019 71,919    $ 4.50   
(3)
July 2019 74,700    $ 4.50   
(3)
August 2019 140,594    $ 4.50   
(3)
September 2019 104,293    $ 4.50   
(3)
October 2019 89,644    $ 4.50   
(3)
November 2019 76,589    $ 3.79   
(3)
December 2019 83,166    $ 3.79   
(3)
Total 1,162,757   
_____________________
(1) We announced the adoption and commencement of the program on April 8, 2008. We announced amendments to the program on May 13, 2009 (which amendment became effective on June 12, 2009), on March 11, 2011 (which amendment became effective on April 10, 2011), on May 18, 2012 (which amendment became effective on June 17, 2012), on June 29, 2012 (which amendment became effective on July 29, 2012), on October 18, 2012 (which amendment became effective on November 17, 2012), on March 8, 2013 (which amendment became effective on April 7, 2013), on October 17, 2013 (which amendment became effective on November 16, 2013), on May 19, 2014 (which amendment became effective on June 18, 2014) and on December 7, 2018 (which amendment became effective on January 6, 2019).
(2) During the year ended December 31, 2019, shares eligible for redemption were redeemed at the prices set forth above.
(3) We limit the dollar value of shares that may be redeemed under the share redemption program as described above. During the year ended December 31, 2019, we redeemed 5.4 million of shares of common stock. For the year ended December 31, 2019, we fulfilled all redemption requests received in good order and eligible for redemption through the December 2019 redemption date. On November 13, 2019, our board of directors approved an annual dollar limitation for Special Redemptions of $10.0 million in the aggregate for the calendar year 2020. Based on the redemption limitations in our share redemption program and redemptions through February 29, 2020, we may redeem up to $9.5 million of shares in connection with Special Redemptions for the remainder of 2020.
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ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data as of and for the years ended December 31, 2019, 2018, 2017, 2016 and 2015 should be read in conjunction with the accompanying consolidated financial statements and related notes thereto and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (in thousands, except share and per share amounts):
As of December 31,
2019 2018 2017 2016 2015
Balance Sheet Data
Total real estate and real estate-related investments, net $ 866,731    $ 954,207    $ 1,044,792    $ 1,139,815    $ 1,192,512   
Total assets 1,059,049    1,157,017    1,225,110    1,286,780    1,364,530   
Total notes payable, net 416,607    415,208    502,299    523,771    546,077   
Total liabilities 511,826    485,543    530,528    559,873    596,600   
Redeemable common stock 10,000    10,000    10,000    10,000    10,000   
Total stockholders’ equity 537,223    661,474    684,582    716,907    757,930   

For the Years Ended December 31,
2019 2018 2017 2016 2015
Operating Data
Total revenues $ 112,112    $ 142,215    $ 149,459    $ 155,456    $ 165,295   
Net income 1,751    28,528    25,114    16,747    18,377   
Net income per common share, basic and diluted 0.01    0.15    0.13    0.09    0.10   
Other Data
Cash flows provided by operations 16,179    56,423    52,845    54,392    42,189   
Cash flows provided by investing activities 85,476    73,334    65,923    2,940    157,128   
Cash flows used in financing activities (130,460)   (140,713)   (80,134)   (82,116)   (306,598)  
Distributions declared 120,648    45,754    51,672    53,140    55,737   
Distributions declared per common share (1)
0.649    0.245    0.274    0.281    0.293   
Weighted -average number of common shares outstanding, basic and diluted    185,912,776    187,133,703    188,235,450    189,111,086    190,227,577   
Reconciliation of funds from operations (2)
Net income $ 1,751    $ 28,528    $ 25,114    $ 16,747    $ 18,377   
Depreciation of real estate assets 31,486    36,024    36,271    36,770    33,235   
Amortization of lease-related costs 9,403    14,178    17,776    21,998    23,036   
Impairment charge on real estate 14,300    —    —    —    23,082   
Gain on sales of real estate, net (30,752)   (24,884)   (17,486)   (9,093)   (27,421)  
FFO $ 26,188    $ 53,846    $ 61,675    $ 66,422    $ 70,309   
_____________________
(1) For more information related to distributions declared per common share for the years ended December 31, 2019 and 2018, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Distribution Information.”
(2) We believe that funds from operations (“FFO”) is a beneficial indicator of the performance of an equity REIT. We compute FFO in accordance with the current National Association of Real Estate Investment Trusts (“NAREIT”) definition. FFO represents net income, excluding gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), impairment losses on real estate assets, depreciation and amortization of real estate assets, and adjustments for unconsolidated partnerships and joint ventures. We believe FFO facilitates comparisons of operating performance between periods and among other REITs. However, our computation of FFO may not be comparable to other REITs that do not define FFO in accordance with the NAREIT definition or that interpret the current NAREIT definition differently than we do. Our management believes that historical cost accounting for real estate assets in accordance with U.S. generally accepted accounting principles (“GAAP”) implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities.
FFO is a non-GAAP financial measure and does not represent net income as defined by GAAP. Net income as defined by GAAP is the most relevant measure in determining our operating performance because FFO includes adjustments that investors may deem subjective, such as adding back expenses such as depreciation and amortization. Accordingly, FFO should not be considered as an alternative to net income as an indicator of our operating performance.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis should be read in conjunction with the “Selected Financial Data” above and our accompanying consolidated financial statements and the notes thereto. Also see “Forward-Looking Statements” preceding Part I and Part I, Item 1A, “Risk Factors.”
Overview
We were formed on July 12, 2007 as a Maryland corporation that elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2008 and we intend to operate in such a manner. We conduct our business primarily through our Operating Partnership, of which we are the sole general partner. Subject to certain restrictions and limitations, our business is managed by our advisor, KBS Capital Advisors LLC, pursuant to an advisory agreement. KBS Capital Advisors conducts our operations and manages our portfolio of real estate investments. Our advisor owns 20,000 shares of our common stock. We have no paid employees.
We invested in a diverse portfolio of real estate and real estate-related investments. As of December 31, 2019, we owned six office properties (of which two were held for sale) and an office campus consisting of five office buildings.
On September 27, 2007, we filed a registration statement on Form S-11 with the SEC to offer a maximum of 280,000,000 shares of common stock for sale to the public, of which 200,000,000 shares were registered in our primary offering and 80,000,000 shares were registered under our dividend reinvestment plan. We ceased offering shares of common stock in our primary offering on December 31, 2010. We sold 182,681,633 shares of common stock in our primary offering for gross offering proceeds of $1.8 billion. We terminated the offering under our dividend reinvestment plan effective May 29, 2014. We sold 30,903,504 shares of common stock under our dividend reinvestment plan for gross offering proceeds of $298.2 million. Also as of December 31, 2019, we had redeemed 28,303,101 shares sold in our offering for $257.1 million.
Plan of Liquidation
On January 27, 2016, our board of directors formed a special committee (the “Special Committee”) composed of all of our independent directors to explore the availability of strategic alternatives involving us. As part of the process of exploring strategic alternatives, on February 23, 2016, the Special Committee engaged Evercore Group L.L.C. (“Evercore”) to act as our financial advisor and to assist the Special Committee with this process. Under the terms of the engagement, Evercore provided various financial advisory services, as requested by the Special Committee, as customary for an engagement in connection with exploring strategic alternatives.
On November 13, 2019, in connection with a review of potential strategic alternatives available to us, the Special Committee and our board of directors unanimously approved the sale of all of our assets and our dissolution pursuant to the terms of our plan of complete liquidation and dissolution (the “Plan of Liquidation”). The principal purpose of the Plan of Liquidation is to provide liquidity to our stockholders by selling our assets, paying our debts and distributing the net proceeds from liquidation to our stockholders. On March 5, 2020, our stockholders approved the Plan of Liquidation. For more information, see the Plan of Liquidation, which is included as an exhibit to this Annual Report on Form 10-K.
In accordance with the Plan of Liquidation, our objectives are to pursue an orderly liquidation of our company by selling all of our remaining assets, paying our debts and our known liabilities, providing for the payment of unknown or contingent liabilities, distributing the net proceeds from liquidation to our stockholders and winding up our operations and dissolving our company. While pursuing our liquidation pursuant to the Plan of Liquidation, we intend to continue to manage our portfolio of assets to maintain and, if possible, improve the quality and income-producing ability of our properties to enhance property stability and better position our remaining assets for sale.
We expect to distribute all of the net proceeds from liquidation to our stockholders within 24 months from March 5, 2020. Pursuant to the Plan of Liquidation, on March 5, 2020, our board of directors authorized an initial liquidating distribution in the amount of $0.75 per share of common stock to stockholders of record as of the close of business on March 5, 2020. See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Subsequent Events – Initial Liquidating Distribution Authorized.” We expect to pay multiple liquidating distribution payments to our stockholders during the liquidation process. However, if we cannot sell our assets and pay our debts within 24 months from March 5, 2020, or if the board of directors and the Special Committee determine that it is otherwise advisable to do so, pursuant to the Plan of Liquidation, we may transfer and assign our remaining assets to a liquidating trust. Upon such transfer and assignment, our stockholders will receive beneficial interests in the liquidating trust. We can give no assurance regarding the timing of asset dispositions in connection with the implementation of the Plan of Liquidation, the sale prices we will receive for our assets, and the amount or timing of liquidating distributions to be received by our stockholders.

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Market Outlook – Real Estate and Real Estate Finance Markets
Volatility in global financial markets and changing political environments can cause fluctuations in the performance of the U.S. commercial real estate markets. Possible future declines in rental rates, slower or potentially negative net absorption of leased space and expectations of future rental concessions, including free rent to renew tenants early, to retain tenants who are up for renewal or to attract new tenants, may result in decreases in cash flows from investment properties. To the extent there are increases in the cost of financing due to higher interest rates, this may cause difficulty in refinancing debt obligations at terms as favorable as the terms of existing indebtedness.  Further, increases in interest rates would increase the amount of our debt payments under our variable rate debt obligations. Market conditions can change quickly, potentially negatively impacting the value of real estate investments. Volatile market conditions may interfere with our ability to successfully implement the Plan of Liquidation and reduce the amount and timing of liquidating distributions our stockholders receive. Management continuously reviews our portfolio and debt financing strategies to optimize our portfolio and the cost of our debt.

Liquidity and Capital Resources
As described above under “— Plan of Liquidation,” on March 5, 2020, our stockholders approved the sale of all of our assets and our dissolution pursuant to the terms of the Plan of Liquidation. We expect to sell all of our assets, pay all of our known liabilities, provide for unknown liabilities and distribute the net proceeds from liquidation to our stockholders. There can be no assurances regarding the amounts of any liquidating distributions or the timing thereof. Our principal demands for funds during our liquidation are and will be for: the payment of operating expenses, capital expenditures and general and administrative expenses, including expenses in connection with the Plan of Liquidation; payments under debt obligations; Special Redemptions of common stock pursuant to our share redemption program; and payments of distributions to stockholders pursuant to the Plan of Liquidation. During our liquidation, we intend to use our cash on hand and proceeds from the sale of real estate properties as our primary sources of liquidity. To the extent available, we also intend to use cash flow generated by our real estate investments and proceeds from debt financing; however, asset sales will further reduce cash flows from these sources during the implementation of the Plan of Liquidation.
Our share redemption program provides only for Special Redemptions. During each calendar year, such Special Redemptions are limited to an annual dollar amount determined by the board of directors, which may be reviewed during the year and increased or decreased upon ten business days’ notice to our stockholders. We do not expect to make ordinary redemptions in the future. On November 13, 2019, our board of directors approved an annual dollar limitation of $10.0 million in the aggregate for the calendar year 2020 for Special Redemptions (subject to review and adjustment during the year by the board of directors), and further subject to the limitations described in the share redemption program.
Our investments in real estate generate cash flow in the form of rental revenues and tenant reimbursements, which are reduced by operating expenditures, debt service payments, the payment of asset management fees and corporate general and administrative expenses. Cash flow from operations from our real estate investments is primarily dependent upon the occupancy level of our portfolio, the net effective rental rates on our leases, the collectibility of rent and operating recoveries from our tenants and how well we manage our expenditures. As of December 31, 2019, our real estate properties (excluding two properties held for sale as of December 31, 2019) were 76% occupied.
For the year ended December 31, 2019, our cash needs for capital expenditures and the payment of debt obligations were met with cash on hand and proceeds from asset sales. Operating cash needs during the same period were met with cash flow generated by our real estate. We paid distributions to our stockholders during the year ended December 31, 2019 using current period cash flow from operations, cash flow from operations in excess of distributions paid from prior periods, proceeds from debt financing and the net proceeds from the sales of two of our properties. We believe that our cash on hand, proceeds from the sales of real estate properties and, to the extent available, our cash flow from operations and proceeds available under our portfolio loan facility and mortgage loan will be sufficient to meet our liquidity needs during our liquidation. Asset sales will further reduce cash flows from operations and proceeds available from debt financing during the implementation of the Plan of Liquidation.
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On November 13, 2019, our board of directors approved an estimated value per share of our common stock of $3.79 (unaudited) based on the estimated value of our assets less the estimated value of our liabilities, divided by the number of shares outstanding, all as of September 30, 2019, except for certain items discussed herein for which estimated values were adjusted subsequent to September 30, 2019. For a full description of the assumptions, methodologies and limitations used to value our assets and liabilities in connection with the calculation of our estimated value per share, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Market Information.” The November 13, 2019 estimated value per share does not represent a liquidation value of our assets and liabilities. If we are able to successfully implement the Plan of Liquidation, we estimate that our net proceeds from liquidation and, therefore, the amount of cash our stockholders would receive for each share of our common stock they then hold, could range between approximately $3.40 and $3.83 per share. The difference between the estimated value per share and the range of estimated net proceeds from liquidation reflects the fact that the estimated value per share does not take into consideration: (i) expected closing costs and fees related to future dispositions of real estate investments and (ii) estimated corporate costs and other expenses of the liquidation and dissolution not covered from our cash flow from operations.
We expect to pay multiple liquidating distribution payments to our stockholders during the liquidation process and to pay the final liquidating distribution after we sell all of our assets, pay all of our known liabilities and provide for unknown liabilities. We expect to complete these activities within 24 months from March 5, 2020, the day our stockholders approved the Plan of Liquidation. However, our expectations about the amount of liquidating distributions that we will pay and when we will pay them are based on many estimates and assumptions, one or more of which may prove to be incorrect. As a result, the actual amount of liquidating distributions we pay to our stockholders may be more or less than we estimate and the liquidating distributions may be paid later than we predict. We do not expect to pay regular monthly distributions during the liquidation process. We intend to maintain adequate cash reserves for liquidity, capital expenditures, debt repayments, future Special Redemptions under our share redemption program and other future capital needs.
Cash Flows from Operating Activities
As of December 31, 2019, we owned six office properties (of which two were held for sale) and an office campus consisting of five office buildings. During the year ended December 31, 2019, net cash provided by operating activities was $16.2 million, compared to $56.4 million during the year ended December 31, 2018. The decrease in net cash provided by operating activities was primarily due to lease termination fees received in 2018, the disposition of assets and the lease expiration of a tenant that occupied 100% of Corporate Technology Centre. Cash flows from operating activities will continue to decrease in the future as a result of asset sales.
Cash Flows from Investing Activities
Net cash provided by investing activities was $85.5 million for the year ended December 31, 2019 and consisted of the following:
•$130.3 million of net proceeds from the sale of two office properties, and
•$44.8 million used for improvements to real estate.
Cash Flows from Financing Activities
During the year ended December 31, 2019, net cash used in financing activities was $130.5 million and consisted of the following:
•$134.4 million of proceeds from notes payable;
•$134.0 million of principal payments on notes payable;
•$124.5 million of cash used for distributions;
•$5.4 million of cash used for redemptions of common stock; and
•$0.9 million of payments of deferred financing costs.
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In addition to using our capital resources to meet our debt service obligations, for capital expenditures and for operating costs, we use our capital resources to make certain payments to our advisor. We paid our advisor fees in connection with the acquisition and origination of our assets and pay our advisor fees in connection with the management and disposition of our assets and for certain costs incurred by our advisor in providing services to us. Among the fees payable to our advisor is an asset management fee. With respect to investments in real estate, we pay our advisor a monthly asset management fee equal to one-twelfth of 0.75% of the amount paid or allocated to acquire the investment, plus the cost of any subsequent development, construction or improvements to the property. This amount includes any portion of the investment that was debt financed and is inclusive of acquisition fees and expenses related thereto. With respect to investments in loans and any investments other than real estate, we paid our advisor a monthly asset management fee calculated, each month, as one-twelfth of 0.75% of the lesser of (i) the amount paid or allocated to acquire or fund the loan or other investment (which amount included any portion of the investment that was debt financed and was inclusive of acquisition or origination fees and expenses related thereto) and (ii) the outstanding principal amount of such loan or other investment, plus the acquisition or origination fees and expenses related to the acquisition or funding of such investment, as of the time of calculation. We also continue to reimburse our advisor and our dealer manager for certain stockholder services.
As of December 31, 2019, we had $31.7 million of cash and cash equivalents and up to $112.0 million available for future disbursements under our portfolio loan facility and one of our mortgage loans, subject to certain conditions and restrictions set forth in the loan agreements, to meet our operational and capital needs. However, asset sales will further reduce funds available under our portfolio loan facility and one of our mortgage loans as properties are released as collateral from these loans.
In order to execute our investment strategy, we primarily utilized secured debt to finance a portion of our investment portfolio. Management remains vigilant in monitoring the risks inherent with the use of debt in our portfolio and is taking actions to ensure that these risks, including refinance and interest rate risks, are properly balanced with the benefit of using leverage. We limit our total liabilities to 75% of the cost (before deducting depreciation and other noncash reserves) of our tangible assets; however, we may exceed that limit if the majority of the conflicts committee approves each borrowing in excess of such limitation and we disclose such borrowings to our stockholders in our next quarterly report with an explanation from the conflicts committee of the justification for the excess borrowing. As of December 31, 2019, our borrowings and other liabilities were approximately 38% of both the cost (before deducting depreciation and other noncash reserves) and book value (before deducting depreciation) of our tangible assets, respectively.

Contractual Obligations
The following is a summary of our contractual obligations as of December 31, 2019 (in thousands):
  Payments Due During the Years Ending December 31,
Contractual Obligations Total 2020 2021 2022 2023
Outstanding debt obligations (1)
$ 417,207    $ 321,857    $ —    $ —    $ 95,350   
Interest payments on outstanding debt obligations (2)
$ 14,382    $ 5,837    $ 3,202    $ 3,202    $ 2,141   
_____________________
(1) Amounts include principal payments only based on maturity dates as of December 31, 2019; subject to certain conditions, the maturity dates of certain loans may be extended beyond what is shown above.
(2) Projected interest payments are based on the outstanding principal amounts, maturity dates and interest rates in effect as of December 31, 2019 (consisting of the contractual interest rate). We incurred interest expense of $15.7 million, excluding amortization of deferred financing costs of $1.5 million during the year ended December 31, 2019.

Results of Operations
In this section, we discuss the results of our operations for the year ended December 31, 2019 compared to the year ended December 31, 2018. For a discussion of the year ended December 31, 2018 compared to the year ended December 31, 2017, please refer to Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, which was filed with the SEC on March 13, 2019 and is incorporated herein by reference.
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As of December 31, 2018, we owned eight office properties and an office campus consisting of five office buildings. Subsequent to December 31, 2018, we sold two properties. As a result, as of December 31, 2019, we owned six office properties (of which two were held for sale) and an office campus consisting of five office buildings. The results of operations presented for the years ended December 31, 2019 and 2018 are not directly comparable due to disposition activities. Pursuant to the Plan of Liquidation, we will undertake an orderly liquidation by selling all of our assets, paying our debts, providing for known and unknown liabilities and distributing the net proceeds from liquidation to our stockholders. There can be no assurances regarding the amounts of any liquidating distributions or the timing thereof. In general, we expect income and expenses to decrease in future periods due to disposition activity.
Comparison of the year ended December 31, 2019 versus the year ended December 31, 2018
The following table provides summary information about our results of operations for the years ended December 31, 2019 and 2018 (dollar amounts in thousands):
  Years Ended
December 31, 		Increase
(Decrease) 		Percentage
Change
$ Change Due to
Dispositions (1)
$ Change
Due to Properties
Held Throughout
Both Periods (2)
  2019 2018
Rental income $ 105,287    $ 132,452    $ (27,165)   (21) % $ (14,432)   $ (12,733)  
Interest income from real estate loan receivable —    434    (434)   (100) % (434)   —   
Other operating income 6,825    9,329    (2,504)   (27) % (1,215)   (1,289)  
Operating, maintenance, and management costs 34,495    35,246    (751)   (2) % (3,874)   3,123   
Real estate taxes and insurance 18,128    19,268    (1,140)   (6) % (2,229)   1,089   
Asset management fees to affiliate 10,196    10,894    (698)   (6) % (965)   267   
General and administrative expenses 6,029    6,024    5    —  % n/a n/a
Depreciation and amortization 40,889    50,202    (9,313)   (19) % (5,636)   (3,677)  
Interest expense 17,214    17,884    (670)   (4) % (1,621)   951   
Impairment charges on real estate 14,300    —    14,300    100  % —    14,300   
Other interest income 608    1,159    (551)   (48) % n/a    n/a   
Loss from extinguishment of debt (470)   (212)   (258)   122  % (258)   —   
Gain on sale of real estate, net 30,752    24,884    5,868    24  % 5,868    —   
_____________________
(1) Represents the dollar amount increase (decrease) for the year ended December 31, 2019 compared to the year ended December 31, 2018 related to real estate investments disposed of and real estate-related investments repaid on or after January 1, 2018.
(2) Represents the dollar amount increase (decrease) for the year ended December 31, 2019 compared to the year ended December 31, 2018 related to real estate investments owned by us throughout both periods presented.
Rental income decreased from $132.5 million for the year ended December 31, 2018 to $105.3 million for the year ended December 31, 2019, primarily due to dispositions of real estate properties subsequent to January 1, 2018 and the expiration of a tenant lease for a tenant that occupied 100% of a real estate property on October 31, 2018, partially offset by an increase in rental income due to higher property tax recoveries at a real estate property held throughout both periods, which was due to a change in the arrangement whereby the tenant reimbursed us for property tax expenses during the year ended December 31, 2019 instead of the tenant paying the property tax bill directly during the year ended 2018. Overall, we expect rental income to decrease in future periods due to disposition activity and anticipated future dispositions of real estate properties. For the years ended December 31, 2019 and 2018, rental income from our real estate properties sold were $7.9 million and $22.3 million, respectively.
Interest income from our real estate loan receivable, recognized using the interest method, was $0.4 million for the year ended December 31, 2018. The borrower under our real estate loan receivable paid off the entire principal balance due to us on June 1, 2018.
Other operating income decreased from $9.3 million for the year ended December 31, 2018 to $6.8 million for the year ended December 31, 2019, primarily due to dispositions of real estate properties subsequent to January 1, 2018 and a decrease in parking revenues from a property held throughout both periods as a result of waiving a tenant’s parking charges in 2019 due to a new lease agreement. For the years ended December 31, 2019 and 2018, other operating income from our real estate properties sold were $0.8 million and $2.0 million, respectively.
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Operating, maintenance and management costs decreased from $35.2 million for the year ended December 31, 2018 to $34.5 million for the year ended December 31, 2019, primarily due to dispositions of real estate properties subsequent to January 1, 2018, offset by an increase in operating, maintenance and management costs at a real estate property held throughout both periods, which was due to a change in the arrangement whereby the tenant reimbursed us for these costs during the year ended December 31, 2019 instead of the tenant paying these costs directly during the year ended December 31, 2018. Also included in operating, maintenance and management costs for the year ended December 31, 2019 was $0.5 million of legal fees related to leasing. Upon adoption of the lease accounting standards of Topic 842, beginning January 1, 2019, as a lessor, we record legal costs incurred to negotiate an operating lease as an expense, as these costs are no longer capitalizable under the definition of initial direct costs under Topic 842. Prior to January 1, 2019, these legal costs were capitalized and included in real estate, cost. We expect operating, maintenance and management costs to decrease in future periods due to disposition activity and anticipated future dispositions of real estate properties, offset by general increases due to inflation. For the years ended December 31, 2019 and 2018, operating, maintenance and management costs from our real estate properties sold were $2.6 million and $6.5 million, respectively.
Real estate taxes and insurance decreased from $19.3 million for the year ended December 31, 2018 to $18.1 million for the year ended December 31, 2019, primarily due to dispositions of real estate properties subsequent to January 1, 2018, offset by an increase in property tax expenses of $0.7 million due to a higher property tax assessed value for one real estate property held throughout both periods, and a $0.2 million increase due to a change in the arrangement whereby the tenant at a property held throughout both periods reimbursed us for property tax expenses during the year ended December 31, 2019 instead of the tenant paying the property tax bill directly during the year ended December 31, 2018. We expect real estate taxes and insurance to decrease in future periods due to disposition activity and anticipated future dispositions of real estate properties, partially offset by increases due to higher property tax assessed values. For the years ended December 31, 2019 and 2018, real estate taxes and insurance from our real estate properties sold were $1.4 million and $3.6 million, respectively.
Asset management fees with respect to our real estate investments decreased from $10.9 million for the year ended December 31, 2018 to $10.2 million for the year ended December 31, 2019, primarily due to dispositions of real estate properties and the payoff of our real estate loan receivable subsequent to January 1, 2018, offset by a net increase in asset management fees for properties held throughout both periods due to an increase in capital improvements. All asset management fees incurred as of December 31, 2019 have been paid. We expect asset management fees to decrease in future periods due to disposition activity and anticipated future dispositions of real estate properties, partially offset by increases in capital improvements. For the years ended December 31, 2019 and 2018, asset management fees from our real estate properties sold and payoff of our last real estate loan receivable were $0.5 million and $1.4 million, respectively.
Depreciation and amortization decreased from $50.2 million for the year ended December 31, 2018 to $40.9 million for the year ended December 31, 2019 due to dispositions of real estate properties subsequent to January 1, 2018 and the classification of the Campus Drive Buildings to held for sale. Upon classifying a property as held for sale, we cease depreciation and amortization expense for that property. We expect depreciation and amortization to decrease in future periods due to disposition activity and anticipated future dispositions of real estate properties and an overall decrease in amortization of tenant origination costs related to lease expirations. For the years ended December 31, 2019 and 2018, depreciation and amortization from our real estate properties sold were $1.6 million and $7.2 million, respectively.
Interest expense decreased from $17.9 million for the year ended December 31, 2018 to $17.2 million for the year ended December 31, 2019. Included in interest expense for the year ended December 31, 2019 was $1.5 million of amortization of deferred financing costs. Included in interest expense for the year ended December 31, 2018 was $1.3 million of amortization of deferred financing costs and $0.3 million of debt refinancing costs. The decrease in interest expense is primarily due to an overall decrease in our outstanding loan balance as a result of repayments in connection with dispositions of real estate properties subsequent to January 1, 2018 and a decrease in one-month LIBOR and its impact on interest expense related to our variable debt. In general, we expect interest expense to decrease in future periods due to debt repayments related to disposition activity and anticipated future asset sales, which may be offset by certain fees and costs that may be incurred due to the prepayment of certain loans. Our interest expense in future periods will also vary based on fluctuations in one-month LIBOR (for our variable rate debt) and our level of future borrowings, which will depend on the availability and cost of debt financing, loan draws and any debt repayments we make. For the years ended December 31, 2019 and 2018, interest expense from the loans secured by our real estate properties sold was $0.8 million and $2.4 million, respectively.
During the year ended December 31, 2019, we recorded non-cash impairment charges of $14.3 million to write down the carrying value of our investment in the Campus Drive Buildings to their contractual sales price less estimated costs to sell. The impairment was primarily due to estimated closing costs and disposition fees, which are reflected upon classification of the Campus Drive Buildings to held for sale. Subsequent to December 31, 2019, we sold the Campus Drive Buildings. See “-Subsequent Events - Disposition of the Campus Drive Buildings” We did not record any impairment charges on our real estate properties during year ended December 31, 2018.
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Other interest income decreased from $1.2 million for the year ended December 31, 2018 to $0.6 million for the year ended December 31, 2019 due to the decrease in the average cash balance in our investment accounts and decrease in interest rates earned on our cash equivalents.  We expect other interest income to vary in future periods to the extent we have cash on hand and based on fluctuations in interest rates.
We recognized a gain on sale of real estate of $30.8 million related to dispositions of two real estate properties during the year ended December 31, 2019. During the year ended December 31, 2018, we recognized a gain on sale of real estate of $24.9 million related to dispositions of three office buildings that were part of an eight-building office campus.

Funds from Operations and Modified Funds from Operations
We believe that FFO is a beneficial indicator of the performance of an equity REIT. We compute FFO in accordance with the current NAREIT definition. FFO represents net income, excluding gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), impairment losses on real estate assets, depreciation and amortization of real estate assets, and adjustments for unconsolidated partnerships and joint ventures. We believe FFO facilitates comparisons of operating performance between periods and among other REITs. However, our computation of FFO may not be comparable to other REITs that do not define FFO in accordance with the NAREIT definition or that interpret the current NAREIT definition differently than we do. Our management believes that historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and provides a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities.
Changes in accounting rules have resulted in a substantial increase in the number of non-operating and non-cash items included in the calculation of FFO. As a result, our management also has used modified funds from operations (“MFFO”) as an indicator of our ongoing performance. MFFO excludes from FFO: adjustments related to contingent purchase price obligations; amounts relating to straight-line rents and amortization of above and below market intangible lease assets and liabilities; accretion of discounts and amortization of premiums on debt investments; amortization of closing costs relating to debt investments; impairments of real estate-related investments; mark-to-market adjustments included in net income; and gains or losses included in net income for the extinguishment or sale of debt or hedges. We compute MFFO in accordance with the definition of MFFO included in the practice guideline issued by the Institute for Portfolio Alternatives (formerly known as the Investment Program Association) (“IPA”) in November 2010 as interpreted by management. Our computation of MFFO may not be comparable to other REITs that do not compute MFFO in accordance with the current IPA definition or that interpret the current IPA definition differently than we do.
We believe that MFFO is helpful as a measure of ongoing operating performance because it excludes non-operating items included in FFO.  MFFO excludes non-cash items such as straight-line rental revenue.  Additionally, we believe that MFFO provides investors with supplemental performance information that is consistent with the performance indicators and analysis used by management, in addition to net income and cash flows from operating activities as defined by GAAP, to evaluate the sustainability of our operating performance. MFFO provides comparability in evaluating the operating performance of our portfolio with other non-traded REITs which typically have limited lives with short and defined acquisition periods and targeted exit strategies.  MFFO, or an equivalent measure, is routinely reported by non-traded REITs, and we believe often used by analysts and investors for comparison purposes.
FFO and MFFO are non-GAAP financial measures and do not represent net income as defined by GAAP. Net income as defined by GAAP is the most relevant measure in determining our operating performance because FFO and MFFO include adjustments that investors may deem subjective, such as adding back expenses such as depreciation and amortization and the other items described above. Accordingly, FFO and MFFO should not be considered as alternatives to net income as an indicator of our current and historical operating performance. In addition, FFO and MFFO do not represent cash flows from operating activities determined in accordance with GAAP and should not be considered an indication of our liquidity. We believe FFO and MFFO, in addition to net income and cash flows from operating activities as defined by GAAP, are meaningful supplemental performance measures; however, neither FFO nor MFFO reflects adjustments for the operations of properties and real estate-related investments sold, held for sale or repaid during the periods presented. During periods of significant disposition activity, FFO and MFFO are much more limited measures of future performance. In connection with our presentation of FFO and MFFO, we are providing information related to the proportion of MFFO related to properties sold and real estate-related investments repaid as of December 31, 2019.
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Although MFFO includes other adjustments, the exclusion of straight-line rent, the amortization of above- and below-market leases, unrealized gains and losses on derivative instruments and loss from extinguishment of debt are the most significant adjustments for the periods presented.  We have excluded these items based on the following economic considerations:
•Adjustments for straight-line rent.  These are adjustments to rental revenue as required by GAAP to recognize contractual lease payments on a straight-line basis over the life of the respective lease.  We have excluded these adjustments in our calculation of MFFO to more appropriately reflect the current economic impact of our in-place leases, while also providing investors with a useful supplemental metric that addresses core operating performance by removing rent we expect to receive in a future period or rent that was received in a prior period;
•Amortization of above- and below-market leases.  Similar to depreciation and amortization of real estate assets and lease related costs that are excluded from FFO, GAAP implicitly assumes that the value of intangible lease assets and liabilities diminishes predictably over time and requires that these charges be recognized currently in revenue.  Since real estate values and market lease rates in the aggregate have historically risen or fallen with local market conditions, management believes that by excluding these charges, MFFO provides useful supplemental information on the realized economics of the real estate;
•Unrealized gains and losses on derivative instruments.  These adjustments include unrealized gains (losses) from mark-to-market adjustments on interest rate swaps and losses due to hedge ineffectiveness.  The change in fair value of interest rate swaps not designated as a hedge and the change in fair value of the ineffective portion of interest rate swaps are non-cash adjustments recognized directly in earnings and are included in interest expense.  We have excluded these adjustments in our calculation of MFFO to more appropriately reflect the economic impact of our interest rate swap agreements; and
•Loss from extinguishment of debt. A loss from extinguishment of debt, which includes prepayment fees related to the extinguishment of debt, represents the difference between the carrying value of any consideration transferred to the lender in return for the extinguishment of a debt and the net carrying value of the debt at the time of settlement. We have excluded the loss from extinguishment of debt in our calculation of MFFO because these losses do not impact the current operating performance of our investments and do not provide an indication of future operating performance.
Our calculation of FFO, which we believe is consistent with the calculation of FFO as defined by NAREIT, is presented in the following table, along with our calculation of MFFO, for the years ended December 31, 2019, 2018 and 2017 (in thousands). No conclusions or comparisons should be made from the presentation of these periods.
  For the Years Ended December 31,
  2019 2018 2017
Net income $ 1,751    $ 28,528    $ 25,114   
Depreciation of real estate assets 31,486    36,024    36,271   
Amortization of lease-related costs 9,403    14,178    17,776   
Impairment charges on real estate 14,300    —    —   
Gain on sale of real estate, net (30,752)   (24,884)   (17,486)  
FFO 26,188    53,846    61,675   
Straight-line rent and amortization of above- and below-market leases 931    4,863    (102)  
Amortization of discounts and closing costs —    3    4   
Unrealized gains on derivative instruments —    —    (101)  
Loss from extinguishment of debt 470    212    —   
MFFO $ 27,589    $ 58,924    $ 61,476   

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Our calculation of MFFO above includes amounts related to the operations of four real estate properties that were sold, three office buildings that were part of an eight-building office campus that were sold and one real estate loan receivable that was paid off between January 1, 2017 and December 31, 2019; as well as two office properties that were held for sale as of December 31, 2019. Please refer to the table below with respect to the proportion of MFFO related to real estate properties sold or held for sale and the real estate-related investment paid off as of December 31, 2019 (in thousands).
  For the Years Ended December 31,
2019 2018 2017
MFFO by component:
Assets held for investment $ 13,795    $ 39,242    $ 44,940   
Real estate properties held for sale 10,694    9,634    9,705   
Real estate properties sold 3,100    9,664    5,873   
Real estate loans receivable paid off —    384    958   
MFFO $ 27,589    $ 58,924    $ 61,476   

FFO and MFFO may also be used to fund all or a portion of certain capitalizable items that are excluded from FFO and MFFO, such as tenant improvements, building improvements and deferred leasing costs.

Distributions
Distributions declared, distributions paid and cash flow from operations were as follows during 2019 (in thousands, except per share amounts):
Period
Distributions
Declared (1)
Distributions Declared
Per Share (1)
Distributions Paid (2)
Cash Flow From
Operations
First Quarter 2019 $ 11,532    $ 0.062    $ 11,564    $ 6,455   
Second Quarter 2019 95,187    0.512    95,194    6,024   
Third Quarter 2019 10,450    0.056    10,804    (1,532)  
Fourth Quarter 2019 3,479    0.019    6,960    5,232   
$ 120,648    $ 0.649    $ 124,522    $ 16,179   
_____________________
(1) “Distributions Declared” and “Distributions Declared Per Share” consist of the following:
•For each month commencing January 2019 through June 2019, our board of directors declared distributions per common share in the amount of $0.02062500 per share of common stock to stockholders of record based on a monthly record date. These distributions totaled approximately $23.1 million.
•On June 12, 2019, our board of directors declared the Special Distribution in the amount of $0.45 per share of common stock to stockholders of record as of the close of business on June 17, 2019. This Special Distribution totaled approximately $83.7 million.
•For each month commencing July 2019 through October 2019, our board of directors declared distributions per common share in the amount of $0.01875000 per share of common stock to stockholders of record based on a monthly record date. These distributions totaled approximately$13.9 million.
(2) Other than the Special Distribution, distributions were paid on a monthly basis, on or about the first business day of the following month.
For the year ended December 31, 2019, we paid aggregate distributions of $124.5 million, all of which were paid in cash. FFO and cash flow from operations for the year ended December 31, 2019 were $26.2 million and $16.2 million, respectively.  We funded our total distributions paid with $17.7 million of current period cash flow from operations, $11.7 million of cash flow from operations in excess of distributions paid from prior periods, $83.7 million of net proceeds from the sale of real estate and $11.4 million of proceeds from debt financing. For purposes of determining the source of our distributions paid and other than for special distributions, we assumed first that we use cash flow from operations from the relevant periods to fund distribution payments. See the reconciliation of FFO to net income above.
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In accordance with the Plan of Liquidation, our objectives are to pursue an orderly liquidation of our company by selling all of our remaining assets, paying our debts and our known liabilities, providing for the payment of unknown or contingent liabilities, distributing the net proceeds from liquidation to our stockholders and winding up our operations and dissolving our company. We expect to pay multiple liquidating distribution payments to our stockholders during the liquidation process and to pay the final liquidating distribution after we sell all of our assets, pay all of our known liabilities and provide for unknown liabilities. We expect to complete these activities within 24 months from March 5, 2020, the day our stockholders approved the Plan of Liquidation. Pursuant to the Plan of Liquidation, on March 5, 2020, our board of directors authorized an initial liquidating distribution in the amount of $0.75 per share of common stock to stockholders of record as of the close of business on March 5, 2020. See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Subsequent Events – Initial Liquidating Distribution Authorized.” Our expectations about the amount of liquidating distributions that we will pay and when we will pay them are based on many estimates and assumptions, one or more of which may prove to be incorrect. As a result, the actual amount of liquidating distributions we pay to our stockholders may be more or less than we estimate and the liquidating distributions may be paid later than we predict. We do not expect to pay regular monthly distributions during the liquidation process. We intend to maintain adequate cash reserves for liquidity, capital expenditures, debt repayments, future Special Redemptions under our share redemption program and other future capital needs. See Part I, Item 1A, “Risks Factors – Risks Related to the Plan of Liquidation.”

Critical Accounting Policies
Below is a discussion of the accounting policies that management considers critical in that they involve significant management judgments and assumptions, require estimates about matters that are inherently uncertain and because they are important for understanding and evaluating our reported financial results. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses.
Revenue Recognition - Operating Leases
Real Estate
On January 1, 2019, we adopted the lease accounting standards under Topic 842 including the package of practical expedients for all leases that commenced before the effective date of January 1, 2019. Accordingly, we (i) did not reassess whether any expired or existing contracts are or contain leases, (ii) did not reassess the lease classification for any expired or existing lease, and (iii) did not reassess initial direct costs for any existing leases. We did not elect the practical expedient related to using hindsight to reevaluate the lease term. In addition, we adopted the practical expedient for land easements and did not assess whether existing or expired land easements that were not previously accounted for as leases under the lease accounting standards of Topic 840 are or contain a lease under Topic 842.
In addition, Topic 842 provides an optional transition method to allow entities to apply the new lease accounting standards at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. We adopted this transition method upon our adoption of the lease accounting standards of Topic 842, which did not result in a cumulative effect adjustment to the opening balance of retained earnings on January 1, 2019. Our comparative periods presented in the financial statements will continue to be reported under the lease accounting standards of Topic 840.
In accordance with Topic 842, tenant reimbursements for property taxes and insurance are included in the single lease component of the lease contract (the right of the lessee to use the leased space) and therefore are accounted for as variable lease payments and are recorded as rental income on our statement of operations beginning January 1, 2019. In addition, we adopted the practical expedient available under Topic 842 to not separate nonlease components from the associated lease component and instead to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue recognition standard (Topic 606) and if certain conditions are met, specifically related to tenant reimbursements for common area maintenance which would otherwise be accounted for under the revenue recognition standard. We believe the two conditions have been met for tenant reimbursements for common area maintenance as (i) the timing and pattern of transfer of the nonlease components and associated lease components are the same and (ii) the lease component would be classified as an operating lease. Accordingly, tenant reimbursements for common area maintenance are also accounted for as variable lease payments and recorded as rental income on our statement of operations beginning January 1, 2019.
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We recognize minimum rent, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectibility is probable and record amounts expected to be received in later years as deferred rent receivable. If the lease provides for tenant improvements, we determine whether the tenant improvements, for accounting purposes, are owned by the tenant or us. When we are the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance (including amounts that can be taken in the form of cash or a credit against the tenant’s rent) that is funded is treated as a lease incentive and amortized as a reduction of rental revenue over the lease term. Tenant improvement ownership is determined based on various factors including, but not limited to:
•whether the lease stipulates how a tenant improvement allowance may be spent;
•whether the lessee or lessor supervises the construction and bears the risk of cost overruns;
•whether the amount of a tenant improvement allowance is in excess of market rates;
•whether the tenant or landlord retains legal title to the improvements at the end of the lease term;
•whether the tenant improvements are unique to the tenant or general purpose in nature; and
•whether the tenant improvements are expected to have any residual value at the end of the lease.
In accordance with Topic 842, we make a determination of whether the collectibility of the lease payments in an operating lease is probable. If we determine the lease payments are not probable of collection, we would fully reserve for any contractual lease payments, deferred rent receivable, and variable lease payments and would recognize rental income only if cash is received. Beginning January 1, 2019, these changes to our collectibility assessment are reflected as an adjustment to rental income. Prior to January 1, 2019, bad debt expense related to uncollectible accounts receivable and deferred rent receivable was included in operating, maintenance, and management expense in the statement of operations. Any subsequent changes to the collectibility of the allowance for doubtful accounts as of December 31, 2018, which was recorded prior to the adoption of Topic 842, are recorded in operating, maintenance, and management expense in the statement of operations.
Beginning January 1, 2019, we, as a lessor, record costs to negotiate or arrange a lease that would have been incurred regardless of whether the lease was obtained, such as legal costs incurred to negotiate an operating lease, as an expense and classify such costs as operating, maintenance, and management expense on our consolidated statement of operations, as these costs are no longer capitalizable under the definition of initial direct costs under Topic 842.
Sales of Real Estate
Prior to January 1, 2018, gains on real estate sold were recognized using the full accrual method at closing when collectibility of the sales price was reasonably assured, we were not obligated to perform additional activities that may be considered significant, the initial investment from the buyer was sufficient and other profit recognition criteria had been satisfied. Gain on sales of real estate may have been deferred in whole or in part until the requirements for gain recognition had been met.
Effective January 1, 2018, we adopted the guidance of ASC 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (“ASC 610-20”), which applies to sales or transfers to noncustomers of nonfinancial assets or in substance nonfinancial assets that do not meet the definition of a business.  Generally, our sales of real estate would be considered a sale of a nonfinancial asset as defined by ASC 610-20.
ASC 610-20 refers to the revenue recognition principles under ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).  Under ASC 610-20, if we determine we do not have a controlling financial interest in the entity that holds the asset and the arrangement meets the criteria to be accounted for as a contract, we would derecognize the asset and recognize a gain or loss on the sale of the real estate when control of the underlying asset transfers to the buyer.
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Real Estate
Depreciation and Amortization
Real estate costs related to the acquisition and improvement of properties are capitalized and amortized over the expected useful life of the asset on a straight-line basis. Repair and maintenance costs are charged to expense as incurred and significant replacements and betterments are capitalized. Repair and maintenance costs include all costs that do not extend the useful life of the real estate asset. We consider the period of future benefit of an asset to determine its appropriate useful life. Expenditures for tenant improvements are capitalized and amortized over the shorter of the tenant’s lease term or expected useful life. We anticipate the estimated useful lives of our assets by class to be generally as follows:
Buildings 25-40 years
Building improvements 10-25 years
Tenant improvements Shorter of lease term or expected useful life
Tenant origination and absorption costs Remaining term of related leases, including below-market renewal periods

Impairment of Real Estate and Related Intangible Assets and Liabilities
We continually monitor events and changes in circumstances that could indicate that the carrying amounts of our real estate and related intangible assets and liabilities may not be recoverable or realized. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets and liabilities may not be recoverable, we assess the recoverability by estimating whether we will recover the carrying value of the real estate and related intangible assets and liabilities through its undiscounted future cash flows and its eventual disposition. If, based on this analysis, we do not believe that we will be able to recover the carrying value of the real estate and related intangible assets and liabilities, we would record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets and liabilities.
Projecting future cash flows involves estimating expected future operating income and expenses related to the real estate and its related intangible assets and liabilities as well as market and other trends. Using inappropriate assumptions to estimate cash flows or the expected hold period until the eventual disposition could result in incorrect conclusions on recoverability and incorrect fair values of the real estate and its related intangible assets and liabilities and could result in the overstatement of the carrying values of our real estate and related intangible assets and liabilities and an overstatement of our net income.
Real Estate Held for Sale
We generally consider real estate to be “held for sale” when the following criteria are met: (i) management commits to a plan to sell the property, (ii) the property is available for sale immediately, (iii) the property is actively being marketed for sale at a price that is reasonable in relation to its current fair value, (iv) the sale of the property within one year is considered probable and (v) significant changes to the plan to sell are not expected. Real estate that is held for sale and its related assets are classified as “real estate held for sale” and “assets related to real estate held for sale,” respectively, for all periods presented in the accompanying consolidated financial statements. Notes payable and other liabilities related to real estate held for sale are classified as “notes payable related to real estate held for sale” and “liabilities related to real estate held for sale,” respectively, for all periods presented in the accompanying consolidated financial statements. Real estate classified as held for sale is no longer depreciated and is reported at the lower of its carrying value or its estimated fair value less estimated costs to sell. Operating results of properties and related gains on sales of properties that were disposed of or classified as held for sale in the ordinary course of business during the years ended December 31, 2019, 2018 and 2017 are included in continuing operations on the consolidated statements of operations.
Change in a Plan to Sell
When real estate is initially considered “held for sale” it is measured at the lower of its depreciated book value, or estimated fair value less estimated costs to sell. Changes in the market may compel us to decide to reclassify a property that was designated as held for sale to held for investment.  A property that is reclassified from held for sale to held for investment is measured and recorded at the lower of (i) its carrying amount before the property was classified as held for sale, adjusted for any depreciation and amortization expense that would have been recognized had the property been continuously classified as held and used, or (ii) its fair value at the date of the subsequent decision not to sell. Any adjustment to the carrying amount of the property as a result of the reclassification is included in income from continuing operations as an impairment charge on real estate held for investment.
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Fair Value Measurements
Under GAAP, we are required to measure certain financial instruments at fair value on a recurring basis. In addition, we are required to measure other non-financial and financial assets at fair value on a non-recurring basis (e.g., carrying value of impaired long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:
•Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;
•Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and
•Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.
When available, we utilize quoted market prices from independent third-party sources to determine fair value and classify such items in Level 1 or Level 2. In instances where the market for a financial instrument is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require us to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When we determine the market for a financial instrument owned by us to be illiquid or when market transactions for similar instruments do not appear orderly, we use several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and establish a fair value by assigning weights to the various valuation sources. Additionally, when determining the fair value of liabilities in circumstances in which a quoted price in an active market for an identical liability is not available, we measure fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach.
Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.
We consider the following factors to be indicators of an inactive market: (i) there are few recent transactions, (ii) price quotations are not based on current information, (iii) price quotations vary substantially either over time or among market makers (for example, some brokered markets), (iv) indexes that previously were highly correlated with the fair values of the asset or liability are demonstrably uncorrelated with recent indications of fair value for that asset or liability, (v) there is a significant increase in implied liquidity risk premiums, yields, or performance indicators (such as delinquency rates or loss severities) for observed transactions or quoted prices when compared with our estimate of expected cash flows, considering all available market data about credit and other nonperformance risk for the asset or liability, (vi) there is a wide bid-ask spread or significant increase in the bid-ask spread, (vii) there is a significant decline or absence of a market for new issuances (that is, a primary market) for the asset or liability or similar assets or liabilities, and (viii) little information is released publicly (for example, a principal-to-principal market).
We consider the following factors to be indicators of non-orderly transactions: (i) there was not adequate exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities under current market conditions, (ii) there was a usual and customary marketing period, but the seller marketed the asset or liability to a single market participant, (iii) the seller is in or near bankruptcy or receivership (that is, distressed), or the seller was required to sell to meet regulatory or legal requirements (that is, forced), and (iv) the transaction price is an outlier when compared with other recent transactions for the same or similar assets or liabilities.
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Income Taxes
We have elected to be taxed as a REIT under the Internal Revenue Code. To continue to qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, we generally will not be subject to federal income tax on income that we distribute as dividends to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially and adversely affect our net income and net cash available for distribution to stockholders. However, we believe that we are organized and operate in such a manner as to qualify for treatment as a REIT.

Subsequent Events
We evaluate subsequent events up until the date the consolidated financial statements are issued.
Disposition of the Campus Drive Buildings
On September 9, 2008, we, through an indirect wholly owned subsidiary, KBSII 100-200 Campus Drive, LLC, purchased two four-story office buildings located at 100 & 200 Campus Drive in Florham Park, New Jersey containing 590,458 rentable square feet on an approximate 71.1-acre parcel of land (the “100 & 200 Campus Drive Buildings”).
On October 10, 2008, we, through an indirect wholly owned subsidiary, KBSII 300-600 Campus Drive, LLC, purchased four four-story office buildings containing 578,388 rentable square feet (the “300-600 Campus Drive Buildings”). The 300-600 Campus Drive Buildings are located at 300, 400, 500 and 600 Campus Drive in Florham Park, New Jersey on an approximate 64.80-acre parcel of land.
On October 22, 2019, we, through indirect wholly owned subsidiaries, entered into a membership interest purchase and sale agreement and escrow instructions for the sale of all of the membership interests of KBSII 300-600 Campus Drive, LLC (the owner of the 300-600 Campus Drive Buildings) and KBSII 100-200 Campus Drive, LLC (the owner of the 100 & 200 Campus Drive Buildings)(together, the “Property Owners”) to a buyer (the “Purchaser”), an affiliate of Opal Holdings.
On January 22, 2020, we completed the sale of the membership interests in the Property Owners to the Purchaser for $311.0 million, before third-party closing costs of approximately $4.3 million and excluding disposition fees payable to our advisor. In connection with the disposition of the Campus Drive Buildings, we repaid $136.1 million of the outstanding principal balance due under the Portfolio Loan Facility and the Campus Drive Buildings were released as collateral from the Portfolio Loan Facility. Additionally, on January 23, 2020, we used a portion of the proceeds generated by the sale of the Property Owners to repay the entire outstanding principal balance of $40.6 million due under the Corporate Centre Technology Mortgage Loan.
Plan of Liquidation
On March 5, 2020, our stockholders approved the Plan of Liquidation. The principal purpose of the Plan of Liquidation is to provide liquidity to our stockholders by selling our assets, paying our debts and distributing the net proceeds from liquidation to our stockholders. For more information, see the Plan of Liquidation, which is included as an exhibit to this Annual Report on Form 10-K.
Initial Liquidating Distribution Authorized
Pursuant to the Plan of Liquidation, on March 5, 2020, our board of directors authorized an initial liquidating distribution in the amount of $0.75 per share of common stock to our stockholders of record as of the close of business on March 5, 2020 (the “Initial Liquidating Distribution”). The Initial Liquidating Distribution will be funded from proceeds from the sale of the Campus Drive Buildings. We expect to pay the Initial Liquidating Distribution on or about March 10, 2020.
Since the Initial Liquidating Distribution is a liquidating distribution pursuant to the Plan of Liquidation, it will reduce our stockholders’ remaining investment in us and reduce the estimated future liquidating distributions per share to be received by our stockholders by $0.75 per share.
Updated Estimated Value Per Share
As disclosed in the proxy statement and as of December 9, 2019, the date we filed the proxy statement with the SEC, we estimated that, if we are able to successfully implement the Plan of Liquidation, the amount of cash that our stockholders would receive for each share of our common stock that they then hold could range between approximately $3.40 and $3.83 per share.
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In connection with the authorization of the Initial Liquidating Distribution, on March 5, 2020, our board of directors approved an updated estimated value per share of our common stock of $2.87 (unaudited), effective March 5, 2020 (the “March 2020 Estimated Value Per Share”) to reflect the impact of the payment of the Initial Liquidating Distribution. We are providing the March 2020 Estimated Value Per Share to assist broker-dealers that participated in our now-terminated initial public offering in meeting their customer account statement reporting obligations under the Financial Industry Regulatory Authority Rule 2231.
The March 2020 Estimated Value Per Share is equal to the midpoint of the estimated range of liquidating distributions of $3.40 and $3.83 per share of $3.615, reduced by the Initial Liquidating Distribution of $0.75 per share of common stock. Thus, the March 2020 Estimated Value Per Share reflects the resulting reduction of the stockholders’ remaining investment in the company as a result of the Initial Liquidating Distribution. This valuation was performed in accordance with the provisions of and also to comply with the IPA Valuation Guidelines, reduced for the impact of expected disposition costs and fees related to future dispositions of real estate and estimated corporate and other liquidation and dissolution costs not covered by our cash flow from operations.
Determination of the November 13, 2019 Estimated Value Per Share and Estimated Range in Liquidating Distributions
As disclosed in our proxy statement, our range of estimated net proceeds from liquidation of approximately $3.40 and $3.83 is based on the range in estimated value per share of our common stock of $3.55 to $3.99 approved by our board of directors on November 13, 2019, and reduced for (i) expected disposition costs and fees related to future dispositions of real estate, and (ii) estimated corporate and other liquidation and dissolution costs not covered from our cash flow from operations. Our board of directors approved the November 13, 2019 estimated value per share, in part, to assist us in calculating the range of estimated net proceeds from liquidation. The November 13, 2019 estimated value per share of $3.79 (unaudited) is based on the estimated value of our assets less the estimated value of the our liabilities, or net asset value, divided by the number of shares outstanding, all as of September 30, 2019, except for certain items discussed this Annual Report under Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Market Information” for which estimated values were adjusted subsequent to September 30, 2019.
The methodologies and assumptions used to determine the estimated value of our assets and the estimated value of our liabilities are described in this Annual Report under Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Market Information.”
Limitations of the March 2020 Estimated Value Per Share
As mentioned above, we are providing the March 2020 Estimated Value Per Share to assist broker-dealers that participated in our now-terminated initial public offering in meeting their customer account statement reporting obligations. The March 2020 Estimated Value Per Share will first appear on the March 2020 customer account statements that will be mailed in April 2020. As with any valuation methodology, the methodologies used are based upon a number of estimates and assumptions that may not be accurate or complete. Different parties with different assumptions and estimates could derive a different estimated value per share, and this difference could be significant. The March 2020 Estimated Value Per Share is not audited and does not represent the fair value of our assets less the fair value of our liabilities according to GAAP.
Accordingly, with respect to the March 2020 Estimated Value Per Share, we can give no assurance:
•of the amount or timing of liquidating distributions we will ultimately be able to pay our stockholders;
•that a stockholder would be able to resell his or her shares at the March 2020 Estimated Value Per Share;
•that an independent third-party appraiser or third-party valuation firm would agree with the March 2020 Estimated Value Per Share; or
•that the methodology used to determine the March 2020 Estimated Value Per Share would be acceptable to FINRA or for compliance with ERISA reporting requirements.
The March 2020 Estimated Value Per Share is based on the estimated range of liquidating distributions per share to be received by our stockholders pursuant to the Plan of Liquidation, reduced by the amount of the Initial Liquidating Distribution, as described above. The value of our shares will fluctuate over time in response to developments related to individual assets in our portfolio and the management of those assets, in response to the real estate and finance markets, based on the amount of net proceeds we receive from the disposition of our remaining assets and due to other factors. The March 2020 Estimated Value Per Share does not reflect a discount for the fact that we are externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values.
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Amendment and Restatement of Share Redemption Program
In connection with the approval of the Plan of Liquidation, on March 5, 2020, our board of directors approved the Tenth Amended and Restated Share Redemption Program (the “Amended Share Redemption Program”).
The Amended Share Redemption Program changes the redemption price per share of our common stock eligible for redemption to take into account the estimated range of liquidating distributions as disclosed in the Proxy Statement and any liquidating distributions declared by our board of directors. The Amended Share Redemption Program sets the redemption price per share of our common stock eligible for redemption at (a) $3.615 (which represents the mid-point of the estimated range of liquidating distributions of $3.40 to $3.83 per share) less (b) the amount of any liquidating distributions on such share declared by our board of directors that have a record date prior to the applicable redemption date for such share. Thus, the redemption price per share of our common stock eligible for redemption on the March 31, 2020 redemption date will equal $2.87. We will report future redemption prices in a Current Report on Form 8-K or in our annual or quarterly reports, all publicly filed with the SEC.
There were no other changes in the Amended Share Redemption Program. The Amended Share Redemption Program will become effective on March 20, 2020. The Amended Share Redemption Program is filed as an exhibit to this Annual Report. The Amended Share Redemption Program continues to limit redemptions to redemptions sought in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence” (each as defined in the Amended Share Redemption Program).
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity, to fund the financing and refinancing of our real estate investment portfolio and to fund our operations. Our profitability and the value of our investment portfolio may be adversely affected during any period as a result of interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs.
The table below summarizes the outstanding principal balance, the interest rate and fair value of our notes payable based on the maturity dates, all as of December 31, 2019 (dollars in thousands):
Maturity Date Total Book Value Fair Value
2020 2021 2022 2023
Liabilities
Notes payable, principal outstanding
Fixed Rate $ 40,564    $ —    $ —    $ —    $ 40,564    $ 40,561   
Interest rate 3.5  % —    —    —  % —    3.5  %
Variable Rate $ 281,293    $ —    $ —    $ 95,350    $ 376,643    $ 377,313   
Effective interest rate (1)
3.1  % —    —    3.4  % 3.2  %
_____________________
(1) The effective interest rate represents the actual interest rate in effect as of December 31, 2019, using interest rate indices as of December 31, 2019, where applicable.
We borrow funds at a combination of fixed and variable rates. Interest rate fluctuations will generally not affect our future payments on our fixed rate debt unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. As of December 31, 2019, the fair value of our fixed rate debt was $40.6 million and the outstanding principal balance of our fixed rate debt was $40.6 million. The fair value estimate of our fixed rate debt is calculated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loans were originated as of December 31, 2019. With respect to our fixed rate instruments, we do not expect that fluctuations in interest rates, and the resulting change in fair value of our fixed rate instruments, would have a significant impact on our ongoing operations.
Conversely, movements in interest rates on our variable rate debt would change our future earnings and cash flows, but not significantly affect the fair value of those instruments. However, changes in required risk premiums would result in changes in the fair value of variable rate instruments. As of December 31, 2019, we were exposed to market risks related to fluctuations in interest rates on $376.6 million of variable rate debt outstanding. Based on interest rates as of December 31, 2019, if interest rates were 100 basis points higher or lower during the 12 months ending December 31, 2020, interest expense on our variable rate debt would increase or decrease by $3.8 million.
For a discussion of the interest rate risks related to the current capital and credit markets, see Part I, Item 1A, “Risk Factors.”

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Index to Financial Statements at page F-1 of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of the end of the period covered by this report, management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based upon, and as of the date of, the evaluation, our principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended.
In connection with the preparation of our Form 10-K, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. In making that assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013).
Based on its assessment, our management believes that, as of December 31, 2019, our internal control over financial reporting was effective based on those criteria. There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION
None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
We have provided below certain information about our directors and executive officers.
Name   Position(s)  
Age *
Charles J. Schreiber, Jr. Chairman of the Board, Chief Executive Officer, President and Director 68   
Jeffrey K. Waldvogel Chief Financial Officer, Treasurer and Secretary 42   
Stacie K. Yamane Chief Accounting Officer and Assistant Secretary 55   
Jeffrey A. Dritley Independent Director 63   
Stuart A. Gabriel, Ph.D. Independent Director 66   
Ron D. Sturzenegger Independent Director 60   
_____________________
* As of March 1, 2020.
Charles J. Schreiber, Jr. is our Chairman of the Board, our Chief Executive Officer and one of our directors, positions he has held since August 2007, August 2007 and July 2007, respectively. In August 2019, he was also elected as our President. He is also the Chief Executive Officer of our advisor and Chairman of the Board, Chief Executive Officer and a director of KBS Growth & Income REIT, positions he has held for these entities since October 2004 and January 2015, respectively. Mr. Schreiber is Chairman of the Board, Chief Executive Officer and a director of KBS REIT III, positions he has held since January 2010, January 2010 and December 2009, respectively. In August 2019, Mr. Schreiber was also elected as President of KBS Growth & Income REIT and KBS REIT III. Mr. Schreiber was Chairman of the Board, Chief Executive Officer and a director of KBS REIT I from June 2005 until its liquidation in December 2018. Other than de minimis amounts owned by family members or family trusts, Mr. Schreiber indirectly owns and controls a 33 1/3% interest in KBS Holdings LLC, which is the sole owner of our advisor and the entity that acted as our dealer manager. In addition, Mr. Schreiber controls the voting rights with respect to the 33 1/3% interest of KBS Holdings LLC held indirectly by the estate of Peter M. Bren (together with other family members). KBS Holdings is a sponsor of our company and is or was a sponsor of KBS REIT I, KBS REIT III, Pacific Oak Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, Pacific Oak Strategic Opportunity REIT II and KBS Growth & Income REIT, which were formed in 2007, 2005, 2009, 2008, 2009, 2013 and 2015, respectively.
Mr. Schreiber is the Chief Executive Officer of KBS Realty Advisors LLC and is a principal of Koll Bren Schreiber Realty Advisors, Inc., each an active and nationally recognized real estate investment advisor. These entities are registered as investment advisers with the SEC. Messrs. Bren and Schreiber were the founding partners of the KBS-affiliated investment advisors. The first investment advisor affiliated with Messrs. Bren and Schreiber was formed in 1992. As of December 31, 2019, KBS Realty Advisors, together with KBS affiliates, including our advisor, had been involved in the investment in or management of approximately $27.8 billion of real estate investments on behalf of institutional investors, including public and private pension plans, endowments and foundations, institutional and sovereign wealth funds, and the investors in us, KBS REIT I, KBS REIT III, Pacific Oak Strategic Opportunity REIT (advisory agreement terminated October 31, 2019), KBS Legacy Partners Apartment REIT, Pacific Oak Strategic Opportunity REIT II (advisory agreement terminated October 31, 2019) and KBS Growth & Income REIT. Through October 31, 2019, our advisor also served as the U.S. asset manager for Keppel Pacific Oak US REIT, and KBS Realty Advisors serves as the U.S. asset manager for Prime US REIT, both Singapore real estate investment trusts.
Mr. Schreiber oversees all aspects of our advisor’s and KBS Realty Advisors’ operations, including the acquisition, management and disposition of individual investments and portfolios of investments for KBS-sponsored programs and KBS-advised investors. He also directs all facets of our advisor’s and KBS Realty Advisors’ business activities and is responsible for investor relationships.
In addition, since July 2018, Mr. Schreiber has served as Chairman of the Board and a director for KBS US Prime Property Management Pte. Ltd., which is the external manager of Prime US REIT, a Singapore real estate investment trust that is listed on the Singapore Stock Exchange. Mr. Schreiber holds an indirect ownership interest in KBS US Prime Property Management Pte. Ltd. and KBS Asia Partners Pte. Ltd., which is the sponsor of Prime US REIT.
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Mr. Schreiber has been involved in real estate development, management, acquisition, disposition and financing for more than 40 years and with the acquisition, origination, management, disposition and financing of real estate-related debt investments for more than 30 years. Prior to forming the first KBS-affiliated investment advisor in 1992, he served as the Executive Vice President of Koll Investment Management Services and Executive Vice President of Acquisitions/Dispositions for The Koll Company. During the mid-1970s through the 1980s, he was Founder and President of Pacific Development Company and was previously Senior Vice President/Southern California Regional Manager of Ashwill-Burke Commercial Brokerage.
Mr. Schreiber graduated from the University of Southern California with a Bachelor’s Degree in Finance with an emphasis in Real Estate. During his four years at USC, he did graduate work in the then newly formed Real Estate Department in the USC Graduate School of Business. He is currently an Executive Board Member for the USC Lusk Center for Real Estate at the University of Southern California Marshall School of Business/School of Policy, Planning and Development. Mr. Schreiber also serves as a member of the Executive Committee for the Public Non-Listed REIT Council for the National Association of Real Estate Investment Trusts. He is also a member of the National Council of Real Estate Investment Fiduciaries. Mr. Schreiber has served as a member of the board of directors and executive committee of The Irvine Company since August 2016, and since December 2016, Mr. Schreiber has served on the Board of Trustees of The Irvine Company.
The board of directors has concluded that Mr. Schreiber is qualified to serve as a director, Chairman of the Board and as our Chief Executive Officer and President for reasons including his extensive industry and leadership experience. With more than 40 years of experience in real estate development, management, acquisition and disposition and more than 30 years of experience with the acquisition, origination, management, disposition and financing of real estate-related debt investments, he has the depth and breadth of experience to implement our business strategy. He gained his understanding of the real estate and real estate-finance markets through hands-on experience with acquisitions, asset and portfolio management, asset repositioning and dispositions. As our Chief Executive Officer and a principal of our advisor, Mr. Schreiber is best-positioned to provide the board of directors with insights and perspectives on the execution of our business strategy, our operations and other internal matters. Further, as a principal of KBS-affiliated investment advisors, as Chief Executive Officer, President, Chairman of the Board and a director of KBS REIT III and KBS Growth & Income REIT, as a director and trustee of The Irvine Company, as Chairman of the Board and a director of KBS US Prime Property Management Pte. Ltd. and as former Chief Executive Officer, Chairman of the Board and a director of KBS REIT I, Mr. Schreiber brings to the board of directors demonstrated management and leadership ability.
Jeffrey K. Waldvogel is our Chief Financial Officer, a position he has held since June 2015. In August 2018, he was also elected our Treasurer and Secretary. He is also the Chief Financial Officer of our advisor, a position he has held since June 2015. Since June 2015, he has served as Chief Financial Officer of KBS REIT III, and in July 2018, he was elected Treasurer and Secretary of KBS REIT III. He is also the Chief Financial Officer, Treasurer and Secretary of KBS Growth & Income REIT, positions he has held since June 2015, April 2017 and April 2017, respectively. From June 2015 until November 2019, he also served as the Chief Financial Officer, Treasurer and Secretary of Pacific Oak Strategic Opportunity REIT and Pacific Oak Strategic Opportunity REIT II. He was Chief Financial Officer of KBS REIT I and KBS Legacy Partners Apartment REIT from June 2015 until their respective liquidations in December 2018.
Mr. Waldvogel has been employed by an affiliate of our advisor since November 2010. With respect to the KBS-sponsored REITs advised by our advisor, he served as the Director of Finance and Reporting from July 2012 to June 2015 and as the VP Controller Technical Accounting from November 2010 to July 2012. In these roles Mr. Waldvogel was responsible for overseeing internal and external financial reporting, valuation analysis, financial analysis, REIT compliance, debt compliance and reporting, and technical accounting.
Prior to joining an affiliate of our advisor in 2010, Mr. Waldvogel was an audit senior manager at Ernst & Young LLP. During his eight years at Ernst & Young LLP, where he worked from October 2002 to October 2010, Mr. Waldvogel performed or supervised various auditing engagements, including the audit of financial statements presented in accordance with GAAP, as well as financial statements prepared on a tax basis. These auditing engagements were for clients in a variety of industries, with a significant focus on clients in the real estate industry.
In April 2002, Mr. Waldvogel received a Master of Accountancy Degree and Bachelor of Science from Brigham Young University in Provo, Utah. Mr. Waldvogel is a Certified Public Accountant (California).
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Stacie K. Yamane is our Chief Accounting Officer, a position she has held since October 2008. In August 2018, she was also elected our Assistant Secretary. From July 2007 to December 2008, Ms. Yamane served as our Chief Financial Officer and from July 2007 to October 2008, she served as our Controller. Ms. Yamane is also the Chief Accounting Officer, Portfolio Accounting of our advisor and Chief Accounting Officer of KBS REIT III and KBS Growth & Income REIT, positions she has held for these entities since October 2008, January 2010 and January 2015, respectively. From August 2009 until November 2019 and from February 2013 until November 2019 she served as Chief Accounting Officer of Pacific Oak Strategic Opportunity REIT and Pacific Oak Strategic Opportunity REIT II, respectively. From August 2009 until its liquidation in December 2018, she served as Chief Accounting Officer of KBS Legacy Partners Apartment REIT; from October 2008 until its liquidation in December 2018, she served as Chief Accounting Officer of KBS REIT I. From October 2004 to October 2008, Ms. Yamane served as Fund Controller of our advisor; from June 2005 to December 2008, she served as Chief Financial Officer of KBS REIT I and from June 2005 to October 2008, she served as Controller of KBS REIT I.
Ms. Yamane also serves as Senior Vice President/Controller, Portfolio Accounting for KBS Realty Advisors LLC, a position she has held since 2004. She served as a Vice President/Portfolio Accounting with KBS-affiliated investment advisors from 1995 to 2004. At KBS Realty Advisors, from 2004 through 2015, Ms. Yamane was responsible for client accounting/reporting for two real estate portfolios. These portfolios consisted of industrial, office and retail properties as well as land parcels. Ms. Yamane worked closely with portfolio managers, asset managers, property managers and clients to ensure the completion of timely and accurate accounting, budgeting and financial reporting. In addition, she assisted in the supervision and management of KBS Realty Advisors’ accounting department.
Prior to joining an affiliate of KBS Realty Advisors in 1995, Ms. Yamane was an audit manager at Kenneth Leventhal & Company, a CPA firm specializing in real estate. During her eight years at Kenneth Leventhal & Company, Ms. Yamane performed or supervised a variety of auditing, accounting and consulting engagements including the audit of financial statements presented in accordance with GAAP, as well as financial statements presented on a cash and tax basis, the valuation of asset portfolios and the review and analysis of internal control systems. Her experiences with various KBS-affiliated entities and Kenneth Leventhal & Company give her almost 30 years of real estate experience.
Ms. Yamane received a Bachelor of Arts Degree in Business Administration with a dual concentration in Accounting and Management Information Systems from California State University, Fullerton. She is a Certified Public Accountant (inactive California).
Jeffrey A. Dritley is one of our independent directors and is chair of the conflicts committee, positions he has held since October 2017 and July 2019, respectively. He is also an independent director and chair of the conflicts committee of KBS REIT III, positions he has held since October 2017 and July 2019, respectively. Mr. Dritley is Founder and Managing Partner of Kearny Real Estate Company. Kearny, headquartered in Los Angeles, is a partnership of experienced real estate professionals active in the acquisition, entitlement, repositioning, development, leasing, management and disposition of large, complex commercial projects in Southern California. Since 1993, Kearny has been involved in approximately $4.4 billion of projects including the acquisition and work-out of approximately $2.3 billion of distressed real estate debt.
From 1993 to 2001, Mr. Dritley served as a Managing Director of Morgan Stanley, where he was responsible for the Morgan Stanley Real Estate Fund’s (“MSREF”) West Coast operations and was a member of the global investment committee. During his tenure, MSREF was involved in over $3 billion of transactions, including significant acquisitions, refinancings and work-outs. From 1986 to 1993, Mr. Dritley was employed by The Koll Company, a major real estate development company in the western United States. From 1979 to 1984, Mr. Dritley was employed by Peat, Marwick, Mitchell in Kansas City and New York City.
Mr. Dritley has 30 years of experience in the real estate industry. His experience has ranged from the acquisition, entitlement, development and redevelopment of over 14 million square feet of properties in Southern California, to creating and managing an organization with over 100 employees in the United States, Europe and Asia focused on buying and restructuring non-performing loans.
From 2009 to 2016 Mr. Dritley served as a director, chairman of the compensation committee and member of the investment committee of Bixby Land Company, a private REIT with assets exceeding $1 billion, and from 2008 to 2016, he served as a Senior Advisor to Trigate Property Partners, a real estate private equity firm that manages a partnership with CalSTRS. He also has been active in several professional organizations, including the Los Angeles County Economic Development Corporation, for which he served on the Executive Committee, the Urban Land Institute and the Los Angeles Chapter of NAIOP, of which he is a past president. His community involvement included serving on the board of the Neighborhood Youth Association in Venice, California and volunteering his time for youth sports and Boy Scouts. Mr. Dritley is a Certified Public Accountant and holds a Bachelor’s Degree in Business Administration from the University of Missouri and an MBA from Harvard Business School.
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The board of directors has concluded that Mr. Dritley is qualified to serve as an independent director for reasons including his expertise in real estate acquisition, restructuring and disposition. His over 30 years of experience in the real estate industry gives him significant experience that will be of great benefit to our company and make him well-positioned to advise the board of directors with respect to potential investment, restructuring and disposition opportunities. As Founder and Managing Partner of Kearny Real Estate Company, Mr. Dritley has encountered the myriad of practical, operational and other challenges that face large real estate companies like ours. Further, in the course of serving on the board of directors of Bixby Land Company and as a Senior Advisor to Trigate Property Partners, Mr. Dritley has developed strong leadership and consensus building skills that are a valuable asset to the board of directors. In addition, as a Certified Public Accountant, he possesses valuable expertise in evaluating the financial and operational results of companies such as ours.
Stuart A. Gabriel, Ph.D. is one of our independent directors and is chair of the audit committee, positions he has held since March 2008 and August 2018, respectively. Professor Gabriel is also an independent director and is chair of the audit committee of KBS REIT III, positions he has held since September 2010 and August 2018, respectively. Professor Gabriel was an independent director of KBS REIT I from June 2005 until its liquidation in December 2018. Since June 2007, Professor Gabriel has served as Director of the Richard S. Ziman Center for Real Estate and Professor of Finance and Arden Realty Chair at the UCLA Anderson School of Management. Prior to joining UCLA he was Director and Lusk Chair in Real Estate at the USC Lusk Center for Real Estate, a position he held from 1999 to 2007. Professor Gabriel also served as Professor of Finance and Business Economics in the Marshall School of Business at the University of Southern California, a position he held from 1990 to 2007. He received a number of awards at UCLA and USC for outstanding graduate teaching. In 2004, he was elected President of the American Real Estate and Urban Economics Association. Professor Gabriel serves on the editorial boards of seven academic journals. He is also a Fellow of the Homer Hoyt Institute for Advanced Real Estate Studies. Since March 2016, Professor Gabriel has served on the board of directors of KB Home and is a member of its audit committee. Professor Gabriel has published extensively on the topics of real estate finance and urban and regional economics. His teaching and academic research experience include analysis of real estate and real estate capital markets performance as well as structured finance products, including credit default swaps, commercial mortgage-backed securities and collateralized debt obligations. Professor Gabriel serves as a consultant to numerous corporate and governmental entities. From 1986 through 1990, Professor Gabriel served on the economics staff of the Federal Reserve Board in Washington, D.C. He also has been a Visiting Scholar at the Federal Reserve Bank of San Francisco. Professor Gabriel holds a Ph.D. in Economics from the University of California, Berkeley.
The board of directors has concluded that Professor Gabriel is qualified to serve as an independent director for reasons including his extensive knowledge and understanding of the real estate and finance markets and real estate finance products. As a professor of real estate finance and economics, Professor Gabriel brings unique perspective to the board of directors. His years of research and analysis of the real estate and finance markets make Professor Gabriel well-positioned to advise us with respect to our investment and financing strategy. This expertise also makes him an invaluable resource for assessing and managing risks facing our company. Through his experience as a director of KBS REIT III and KB Home and as a former director of KBS REIT I, he also has an understanding of the requirements of serving on a public company board.
Ron D. Sturzenegger is one of our independent directors, a position he has held since September 2019. On August 28, 2019, Mr. Sturzenegger was also appointed as an independent director of KBS REIT III.
Mr. Sturzenegger has over 30 years of experience in the real estate industry through his career at major financial institutions. From July 2014 to January 2018, Mr. Sturzenegger was Enterprise Business & Community Engagement Executive at Bank of America, responsible for leading Bank of America’s strategy to integrate the delivery of its products and services to customers and clients in 90 key U.S. markets. In his role overseeing Enterprise Business & Community Engagement, he was responsible for driving global integration opportunities across the enterprise. In addition, Mr. Sturzenegger led Bank of America’s strategy through which leaders representing all the company’s various businesses in a given market or community worked together to integrate the delivery of products and services for customers and clients, including the oversight of the Market Presidents Organization.
From August 2011 to April 2015, Mr. Sturzenegger was on the Management Committee of Bank of America and Legacy Asset Servicing (LAS) Executive at Bank of America, whose responsibilities included resolving legacy mortgage issues following Bank of America’s acquisition of Countrywide Financial and Merrill Lynch during the financial crisis and the downturn in the U.S. housing markets, the management of the servicing of current, delinquent and at-risk loans, and the development and implementation of operational capabilities and processes to address regulators’ concerns regarding robo-signing.
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From January 2009 to August 2011, Mr. Sturzenegger served as Managing Director and Global Head of Real Estate, Gaming and Lodging Investment Banking at Bank of America Merrill Lynch, and from January 2002 to December 2008, Mr. Sturzenegger served as Managing Director and Global Head of Real Estate, Gaming and Lodging Investment Banking for Bank of America Securities. From July 1998 to December 2001, he served as Head of Real Estate Mergers and Acquisitions at Bank of America Securities. From July 1986 to June 1998, Mr. Sturzenegger served in various roles at Morgan Stanley in Real Estate Investment Banking. From 1982 to 1984, Mr. Sturzenegger was a Financial Analyst with Bain & Company.
Since January 2020, Mr. Sturzenegger has served on the board of trustees of Conversus StepStone Private Markets. He is a member of its audit committee and nominating and governance committee and serves as the chair of its independent trustees committee. Mr. Sturzenegger serves on the Executive Committee for the policy advisory board for the Fisher Center for Real Estate & Urban Economics. He a member of the advisory board of the Stanford Professionals in Real Estate. Mr. Sturzenegger and his wife previously served as Chairs of the Parents’ Advisory Board for Stanford University. Mr. Sturzenegger holds a Bachelor of Science Degree in Industrial Engineering from Stanford University and an MBA from Harvard Business School.
The board of directors has concluded that Mr. Sturzenegger is qualified to serve as an independent director for reasons including his extensive real estate industry, investment banking and leadership experience. Mr. Sturzenegger’s 30 years of experience in the real estate industry through his career at major financial institutions given him the depth and breadth of experience from which to draw in advising our company. Through his executive and management roles at Bank of America, Mr. Sturzenegger brings to the board demonstrated management and leadership ability.
Corporate Governance
The Audit Committee
Our board of directors has established an audit committee. The audit committee’s function is to assist the board of directors in fulfilling its responsibilities by overseeing (i) our accounting and financial reporting processes, (ii) the integrity of our financial statements, (iii) our independent registered public accounting firm’s qualifications, performance and independence, and (iv) the performance of our internal audit function. The audit committee fulfills these responsibilities primarily by carrying out the activities enumerated in the audit committee charter. The audit committee charter is available on our website at www.kbsreitii.com.
The members of the audit committee are Jeffrey A. Dritley, Stuart A. Gabriel, Ph.D.(chair) and Ron D. Sturzenegger (appointed September 2019). The board of directors has determined that all of the members of the audit committee are “independent” as defined by the New York Stock Exchange. All of the members of the audit committee have significant financial and/or accounting experience, and the board of directors has determined that all of the members of the audit committee satisfy the SEC’s requirements for an “audit committee financial expert.” Barbara R. Cambon served as a member of the audit committee from March 2008 until her resignation from the audit committee in July 2018.
Code of Conduct and Ethics
We have adopted a Code of Conduct and Ethics that applies to all of our executive officers and directors, including but not limited to, our principal executive officer, principal financial officer and principal accounting officer. Our Code of Conduct and Ethics can be found at www.kbsreitii.com.

ITEM 11. EXECUTIVE COMPENSATION
Compensation of Executive Officers
Our conflicts committee, which is composed of all of our independent directors, discharges our board of directors’ responsibilities relating to the compensation of our executives. However, we currently do not have any paid employees and our executive officers do not receive any compensation directly from us for services rendered to us. Our executive officers are officers and/or employees of, or hold an indirect ownership interest in, our advisor and/or its affiliates, and our executive officers are compensated by these entities, in part, for their services to us or our subsidiaries. See Part III, Item 13, “Certain Relationships and Related Transactions and Director Independence — Report of the Conflicts Committee — Certain Transactions with Related Persons” for a discussion of the fees paid to our advisor and its affiliates.
Compensation of Directors
If a director is also one of our executive officers, we do not pay any compensation to that person for services rendered as a director. The amount and form of compensation payable to our independent directors for their service to us is determined by the conflicts committee, based upon recommendations from our advisor. One of our executive officers, Mr. Schreiber, manages and controls our advisor, and through our advisor, he is involved in recommending and setting the compensation to be paid to our independent directors.
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We have provided below certain information regarding compensation earned by or paid to our directors during fiscal year 2019.
Name Fees Earned or
Paid in Cash in 2019 		  All Other
Compensation 		  Total
Barbara R. Cambon (1)
$ 77,500       $ —       $ 77,500   
Jeffrey A. Dritley 163,193    —    163,193   
Stuart A. Gabriel, Ph.D. 168,000       —       168,000   
Ron D. Sturzenegger (2)
55,667       —       55,667   
Peter McMillan III (3) (4)
—       —       —   
Charles J. Schreiber, Jr. (3)
—       —       —   
_____________________
(1) Ms. Cambon, who previously served as one of our independent directors, resigned from the board of directors effective as of June 26, 2019.
(2) On September 3, 2019, Mr. Sturzenegger was appointed as one of our independent directors.
(3) Directors who are also our executive officers do not receive compensation for services rendered as a director.
(4) Mr. McMillan’s term as a director ended on February 26, 2019.
Cash Compensation
We compensate each of our independent directors with an annual retainer of $135,000 as well as paying compensation to our independent directors for attending board of directors, audit committee, conflicts committee and Special Committee meetings as follows:
•each member of the audit committee and conflicts committee will be paid $10,000 annually for service on such committees (except that the chair of each of the audit committee and conflicts committee will be paid $20,000 annually for service as the chair of such committees);
•after the tenth board of directors meeting of each calendar year, each independent director will be paid (i) $2,500 for each in-person board of directors meeting attended for the remainder of the calendar year and (ii) $2,000 for each teleconference board of directors meeting attended for the remainder of the calendar year;
•after the tenth audit committee meeting of each calendar year, each member of the audit committee will be paid (i) $2,500 for each in-person audit committee meeting attended for the remainder of the calendar year and (ii) $2,000 for each teleconference audit committee meeting attended for the remainder of the calendar year (except that the audit committee chair will be paid $3,000 for each in-person and teleconference audit committee meeting attended after the tenth audit committee meeting of each calendar year, for the remainder of each calendar year);
•after the tenth conflicts committee meeting of each calendar year, each member of the conflicts committee will be paid (i) $2,500 for each in-person conflicts committee meeting attended for the remainder of the calendar year and (ii) $2,000 for each teleconference conflicts committee meeting attended for the remainder of the calendar year (except that the conflicts committee chair will be paid $3,000 for each in-person and teleconference conflicts committee meeting attended after the tenth conflicts committee meeting of each calendar year, for the remainder of each calendar year); and
•each member of the Special Committee will be paid (i) $2,000 for each in-person Special Committee meeting attended and (ii) $2,000 for each teleconference Special Committee meeting attended (except that the Special Committee chair will be paid $3,000 for each in-person and teleconference Special Committee meeting attended).
All directors receive reimbursement of reasonable out-of-pocket expenses incurred in connection with attendance at board of directors meetings and committee meetings.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Stock Ownership
The following table shows, as of March 2, 2020, the amount of our common stock beneficially owned (unless otherwise indicated) by (1) any person who is known by us to be the beneficial owner of more than 5% of the outstanding shares of our common stock, (2) our directors, (3) our executive officers, and (4) all of our directors and executive officers as a group.
Name and Address of Beneficial Owner (1)
 
Amount and Nature
of Beneficial Ownership (2)
  Percentage of all Outstanding Shares
Jeffrey A. Dritley, Independent Director   —    —   
Stuart A. Gabriel, Ph.D., Independent Director   2,680 *
Charles J. Schreiber, Jr., Chairman of the Board, Chief Executive Officer, President and Director  
20,000 (3)
*
Ron D. Sturzenegger, Independent Director   —    —   
Jeffrey K. Waldvogel, Chief Financial Officer, Treasurer and Secretary   —    —   
Stacie K. Yamane, Chief Accounting Officer and Assistant Secretary   —    —   
All executive officers and directors as a group
22,680 (3)
*
_____________________
* Less than 1% of the outstanding common stock.
(1) The address of each named beneficial owner is 800 Newport Center Drive, Suite 700, Newport Beach, California 92660.
(2) None of the shares is pledged as security.
(3) Includes 20,000 shares owned by KBS Capital Advisors, which is indirectly controlled by Charles J. Schreiber, Jr.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Director Independence
A majority of our board of directors, Messrs. Dritley, Gabriel and Sturzenegger, meet the independence criteria as specified in our charter. Our charter defines an independent director as a director who is not and has not for the last two years been associated, directly or indirectly, with our sponsor, KBS Holdings, or our advisor, KBS Capital Advisors. A director is deemed to be associated with our sponsor or our advisor if he or she (i) owns an interest in our sponsor, our advisor or any of their affiliates; (ii) is employed by our sponsor, our advisor or any of their affiliates; (iii) is an officer or director of our sponsor, our advisor or any of their affiliates, (iv) performs services, other than as a director, for us; (v) is a director for more than three REITs organized by our sponsor or advised by our advisor; or (vi) has any material business or professional relationship with our sponsor, our advisor or any of their affiliates. A business or professional relationship will be deemed material per se if the annual gross revenue derived by the director from our sponsor, our advisor or any of their affiliates (excluding fees for serving as an independent director of us or other REIT or real estate program advised or managed by our advisor or its affiliates) exceeds 5% of (1) the director’s annual gross revenue derived from all sources during either of the last two years or (2) the director’s net worth on a fair market value basis. An indirect relationship is defined to include circumstances in which the director’s spouse, parents, children, siblings, mothers- or fathers-in-law, sons- or daughters-in-law or brothers- or sisters-in-law is or has been associated with us, our sponsor, our advisor or any of their affiliates.
In addition, and although our shares are not listed for trading on any national securities exchange, all of our current independent directors are “independent” as defined by the New York Stock Exchange. The board of directors has affirmatively determined that Jeffrey A. Dritley, Stuart A. Gabriel, Ph.D. and Ron D. Sturzenegger (appointed September 2019) each satisfies the New York Stock Exchange independence standards.
Barbara R. Cambon, who served as one of our independent directors from March 2008 until her resignation from the board of directors on June 26, 2019, met the independence criteria as specified in our charter. On June 13, 2018, an affiliate of our advisor offered Ms. Cambon the positions of chief executive officer and chief investment officer of KBS US Prime Property Management Pte. Ltd., which is the external manager of Prime US REIT. On June 14, 2018, Ms. Cambon verbally accepted the offer, subject to mutual agreement of written documentation of all terms. As a result of her acceptance of this offer, our board of directors determined that Ms. Cambon was no longer “independent” as defined under the rules of the New York Stock Exchange, and Ms. Cambon resigned from the audit committee. Ms. Cambon resigned from the board of directors and conflicts committee in connection with her appointment as chief executive officer and chief investment officer of KBS US Prime Property Management Pte. Ltd.
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Report of the Conflicts Committee
Review of Our Policies
The conflicts committee has reviewed our policies and determined that they are in the best interest of our stockholders. Set forth below is a discussion of the basis for that determination.
Disposition, Portfolio Management and Distribution Policies during Implementation of the Plan of Liquidation. On November 13, 2019, in connection with a review of potential strategic alternatives available to us, and based on developments in the portfolio over the prior six months with respect to key lease executions and the completion of certain capital projects that enhance property stability and better position our remaining assets for sale, the Special Committee and the board of directors concluded that a planned liquidation pursuant to the Plan of Liquidation was in the Company’s best interest and the best interest of our stockholders and the Special Committee and our board of directors unanimously approved the sale of all of our assets and our dissolution pursuant to the terms of the Plan of Liquidation. The principal purpose of the Plan of Liquidation is to provide liquidity to our stockholders by selling our assets, paying our debts and distributing the net proceeds from liquidation to our stockholders. On March 5, 2020, our stockholders approved the Plan of Liquidation. For more information, see the Plan of Liquidation, which is included as an exhibit to this Annual Report on Form 10-K.
In accordance with the Plan of Liquidation, our objectives are to pursue an orderly liquidation of our company by selling all of our remaining assets, paying our debts and our known liabilities, providing for the payment of unknown or contingent liabilities, distributing the net proceeds from liquidation to our stockholders and winding up our operations and dissolving our company. While pursuing our liquidation pursuant to the Plan of Liquidation, we intend to continue to manage our portfolio of assets to maintain and, if possible, improve the quality and income-producing ability of our properties to enhance property stability and better position our remaining assets for sale.
We expect to distribute all of the net proceeds from liquidation to our stockholders within 24 months from March 5, 2020. Pursuant to the Plan of Liquidation, on March 5, 2020, our board of directors authorized an initial liquidating distribution in the amount of $0.75 per share of common stock to stockholders of record as of the close of business on March 5, 2020. See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Subsequent Events – Initial Liquidating Distribution Authorized.” We expect to pay multiple liquidating distribution payments to our stockholders during the liquidation process and to pay the final liquidating distribution after we sell all of our assets, pay all of our known liabilities and provide for unknown liabilities. However, if we cannot sell our assets and pay our debts within 24 months from March 5, 2020, or if the board of directors and the Special Committee determine that it is otherwise advisable to do so, pursuant to the Plan of Liquidation, we may transfer and assign our remaining assets to a liquidating trust. Upon such transfer and assignment, our stockholders will receive beneficial interests in the liquidating trust. We can give no assurance regarding the timing of asset dispositions in connection with the implementation of the Plan of Liquidation, the sale prices we will receive for our assets, and the amount or timing of liquidating distributions to be received by our stockholders. We do not expect to pay regular monthly distributions during the liquidation process. We intend to maintain adequate cash reserves for liquidity, capital expenditures, debt repayments, future Special Redemptions under our share redemption program and other future capital needs.
During the year ended December 31, 2019, we sold two office properties. As of December 31, 2019, our portfolio of real estate properties was composed of six office properties and an office campus consisting of five office buildings. On January 22, 2020, we sold two of these office properties, the Campus Drive Buildings.
Our operating performance and our ability to successfully implement the Plan of Liquidation cannot be accurately predicted and may deteriorate in the future due to numerous factors, including those discussed under “Forward - Looking Statements” and Part I, Item 1A, “Risk Factors.”
Borrowing Policies. In order to execute our investment strategy, we primarily utilized secured debt to finance a portion of our investment portfolio. We have also used debt financing to pay for capital improvements or repairs to properties; to refinance existing indebtedness; to pay distributions; to provide working capital and for other liquidity needs. Management remains vigilant in monitoring the risks inherent with the use of debt in our portfolio and is taking actions to ensure that these risks, including refinance and interest rate risks, are properly balanced with the benefit of using leverage. We limit our total liabilities to 75% of the cost (before deducting depreciation and other noncash reserves) of our tangible assets; however, we may exceed that limit if the majority of the conflicts committee approves each borrowing in excess of this limitation and we disclose such borrowings to our stockholders in our next quarterly report with an explanation from the conflicts committee of the justification for the excess borrowing. As of January 31, 2020, our borrowings and other liabilities were approximately 31% of both the cost (before deducting depreciation and other noncash reserves) and book value (before deducting depreciation) of our tangible assets, respectively.
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Policy Regarding Working Capital Reserves. We establish an annual budget for capital requirements and working capital reserves that we update periodically during the year. We may use cash on hand, proceeds from asset sales, debt proceeds and cash flow from operations to meet our needs for working capital for the upcoming year and to build a moderate level of cash reserves.
Policies Regarding Operating Expenses. Under our charter, we are required to limit our total operating expenses to the greater of 2% of our average invested assets or 25% of our net income for the four most recently completed fiscal quarters, as these terms are defined in our charter, unless the conflicts committee has determined that such excess expenses were justified based on unusual and non-recurring factors. Operating expenses for the four fiscal quarters ended December 31, 2019 did not exceed the charter-imposed limitation. For the four consecutive quarters ended December 31, 2019, total operating expenses represented approximately 1.2% of our average invested assets and approximately 59.2% of net income.
Policy Regarding Transactions with Related Persons. Our charter requires the conflicts committee to review and approve all transactions between us and our advisor, any of our officers or directors or any of their affiliates. Prior to entering into a transaction with a related party, a majority of the conflicts committee must conclude that the transaction is fair and reasonable to us. In addition, our Code of Conduct and Ethics lists examples of types of transactions with related parties that would create prohibited conflicts of interest and requires our officers and directors to be conscientious of actual and potential conflicts of interest with respect to our interests and to seek to avoid such conflicts or handle such conflicts in an ethical manner at all times consistent with applicable law. Our executive officers and directors are required to report potential and actual conflicts to the Compliance Officer, currently our advisor’s Chief Audit Executive, via the Ethics Hotline or directly to the audit committee chair, as appropriate.
Certain Transactions with Related Persons. The conflicts committee has reviewed the material transactions between our affiliates and us since the beginning of 2019 as well as any such currently proposed transactions. Set forth below is a description of such transactions and the conflicts committee’s report on their fairness.
We have entered into agreements with certain affiliates pursuant to which they provide services to us. All of our executive officers and our affiliated director are also officers, directors, managers, or key professionals of and/or holders of a direct or indirect controlling interest in our advisor and other affiliated KBS entities. Charles J. Schreiber, Jr. is the Chairman of our Board, our Chief Executive Officer, our President and our affiliated director. Our advisor is owned and controlled by KBS Holdings, our sponsor. Charles J. Schreiber, Jr. indirectly controls our sponsor and our advisor.
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Our Relationship with KBS Capital Advisors. Since our inception, our advisor has provided day-to-day management of our business. Among the services that are provided or have been provided by our advisor under the terms of the advisory agreement are the following:
•finding, presenting and recommending to us real estate and real estate-related investment opportunities consistent with our investment policies and objectives;
•structuring the terms and conditions of our investments, sales and joint ventures;
•acquiring properties and other investments on our behalf in compliance with our investment objectives and policies;
•sourcing and structuring our loan originations and acquisitions;
•arranging for financing and refinancing of our properties and our other investments;
•entering into leases and service contracts for our properties;
•supervising and evaluating each property manager’s performance;
•reviewing and analyzing the properties’ operating and capital budgets;
•assisting us in obtaining insurance;
•generating an annual budget for us;
•reviewing and analyzing financial information for each of our assets and our overall portfolio;
•formulating and overseeing the implementation of strategies for the administration, promotion, management, operation, maintenance, improvement, financing and refinancing, marketing, leasing and disposition of our properties and other investments;
•performing investor-relations services;
•maintaining our accounting and other records and assisting us in filing all reports required to be filed with the SEC, the Internal Revenue Service and other regulatory agencies;
•engaging in and supervising the performance of our agents, including our registrar and transfer agent; and
•performing any other services reasonably requested by us.
Our advisor is subject to the supervision of the board of directors and only has such authority as we may delegate to it as our agent. The advisory agreement has a one-year term expiring May 21, 2020, subject to an unlimited number of successive one-year renewals upon the mutual consent of the parties. From January 1, 2019 through the most recent date practicable, which was January 31, 2020, we compensated our advisor as set forth below.
With respect to investments in real estate, we pay our advisor a monthly asset management fee equal to one-twelfth of 0.75% of the amount paid or allocated to acquire the investment, plus the cost of any subsequent development, construction or improvements to the property. This amount includes any portion of the investment that was debt financed and is inclusive of acquisition fees and expenses related thereto. In the case of investments made through joint ventures, the asset management fee is determined based on our proportionate share of the underlying investment. With respect to investments in loans and any investments other than real estate, we paid our advisor a monthly asset management fee calculated, each month, as one-twelfth of 0.75% of the lesser of (i) the amount paid or allocated to acquire or fund the loan or other investment (which amount included any portion of the investment that was debt financed and was inclusive of acquisition or origination fees and expenses related thereto) and (ii) the outstanding principal amount of such loan or other investment, plus the acquisition or origination fees and expenses related to the acquisition or funding of such investment, as of the time of calculation. Asset management fees from January 1, 2019 through January 31, 2020 totaled approximately $10.9 million, all of which had been paid as of January 31, 2020.
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Under the advisory agreement, our advisor and its affiliates have the right to seek reimbursement from us for all costs and expenses they incur in connection with their provision of services to us, including our allocable share of our advisor’s overhead, such as rent, employee costs, utilities, accounting software and cybersecurity costs. We reimburse our advisor for our allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to us. In the future, our advisor may seek reimbursement for additional employee costs. However, we will not reimburse our advisor or its affiliates for employee costs in connection with services for which our advisor earns acquisition, origination or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries and benefits our advisor or its affiliates may pay to our executive officers. From January 1, 2019 through January 31, 2020, we incurred $356,000 of operating expenses reimbursable to our advisor, including $257,000 of employee costs, of which 91,000 was payable as of January 31, 2020. We also reimburse our advisor for certain of our direct costs incurred from third parties that were initially paid by our advisor on our behalf.
For substantial assistance in connection with the sale of properties or other investments, we pay our advisor or its affiliates 1.0% of the contract sales price of each property or other investment sold; provided, however, in no event may aggregate disposition fees paid to our advisor, its affiliates and unaffiliated third parties exceed 6.0% of the contract sales price. From January 1, 2019 through January 31, 2020, we incurred $4.4 million of disposition fees, all of which had been paid as of January 31, 2020.
The conflicts committee considers our relationship with our advisor during 2019 to be fair. The conflicts committee believes that the amounts payable to our advisor under the advisory agreement are similar to those paid by other publicly offered, unlisted, externally advised REITs and that this compensation is necessary in order for our advisor to provide the desired level of services to us and our stockholders.
Our Relationship with KBS Capital Markets Group. We have entered into a fee reimbursement agreement (the “AIP Reimbursement Agreement”) with KBS Capital Markets Group LLC, the entity that acted as our dealer manager (the “Dealer Manager”), pursuant to which we agreed to reimburse our dealer manager for certain fees and expenses it incurs for administering our participation in the DTCC Alternative Investment Product Platform with respect to certain accounts of our stockholders serviced through the platform. From January 1, 2019 through January 31, 2020, we incurred $97,000 of costs and expenses related to the AIP Reimbursement Agreement, of which $15,000 was payable as of January 31, 2020.
The conflicts committee believes that this arrangement with KBS Capital Markets Group is fair.
Insurance Program. As of January 1, 2019, we, together with KBS REIT III, KBS Growth & Income REIT, the Dealer Manager, our advisor and other KBS-affiliated entities, had entered into an errors and omissions and directors and officers liability insurance program where the lower tiers of such insurance coverage were shared. The cost of these lower tiers is allocated by our advisor and its insurance broker among each of the various entities covered by the program, and is billed directly to each entity. In June 2019, we renewed our participation in the program. The program is effective through June 30, 2020.
The conflicts committee believes this arrangement is fair.
During the year ended December 31, 2019 and from January 1, 2020 through January 31, 2020, no other transactions occurred between us and KBS REIT III, Pacific Oak Strategic Opportunity REIT (advisory agreement with KBS Capital Advisors terminated as of October 31, 2019 and dealer manager agreement with KBS Capital Markets Group terminated as of December 31, 2019), Pacific Oak Strategic Opportunity REIT II (advisory agreement with KBS Capital Advisors terminated as of October 31, 2019 and dealer manager agreement with KBS Capital Markets Group terminated as of December 31, 2019), KBS Growth & Income REIT, our advisor, the Dealer Manager or other KBS-affiliated entities.
On November 1, 2019, Pacific Oak Strategic Opportunity REIT and Pacific Oak Strategic Opportunity REIT II transferred the management of the companies to a new external advisor, Pacific Oak Capital Advisors LLC. The transfer of management allows our advisor to focus on its current core asset portfolios, while the Pacific Oak group of companies focuses primarily on its current opportunistic portfolios. Pacific Oak Capital Advisors, LLC is owned and managed by Keith D. Hall and Peter McMillan III. Together, through GKP Holding LLC, Messrs. Hall and McMillan continue to indirectly own a 33 1/3% interest in our advisor and the Dealer Manager.
Currently Proposed Transactions. There are no currently proposed material transactions with related persons other than those covered by the terms of the agreements described above.
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The conflicts committee has determined that the policies set forth in this Report of the Conflicts Committee are in the best interests of our stockholders because they provide us with the highest likelihood of achieving our objectives.
March 5, 2020
The Conflicts Committee of the Board of Directors:
Jeffrey A. Dritley (chair), Stuart A. Gabriel, Ph.D. and Ron D. Sturzenegger


ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Independent Registered Public Accounting Firm
During the year ended December 31, 2019, Ernst & Young LLP served as our independent registered public accounting firm and provided certain tax and other services. Ernst & Young has served as our independent registered public accounting firm since our formation.
Pre-Approval Policies
In order to ensure that the provision of such services does not impair the independent registered public accounting firm’s independence, the audit committee charter imposes a duty on the audit committee to pre-approve all auditing services performed for us by our independent registered public accounting firm, as well as all permitted non-audit services. In determining whether or not to pre-approve services, the audit committee considers whether the service is a permissible service under the rules and regulations promulgated by the SEC. The audit committee may, in its discretion, delegate to one or more of its members the authority to pre-approve any audit or non-audit services to be performed by our independent registered public accounting firm, provided any such approval is presented to and approved by the full audit committee at its next scheduled meeting.
For the years ended December 31, 2019 and 2018, all services rendered by Ernst & Young were pre-approved in accordance with the policies and procedures described above.
Principal Independent Registered Public Accounting Firm Fees
The audit committee reviewed the audit and non-audit services performed by Ernst & Young, as well as the fees charged by Ernst & Young for such services. In its review of the non-audit service fees, the audit committee considered whether the provision of such services is compatible with maintaining the independence of Ernst & Young. The aggregate fees billed to us for professional accounting services, including the audit of our annual financial statements by Ernst & Young for the years ended December 31, 2019 and 2018, are set forth in the table below.
  2019    2018
Audit fees $ 565,500    $ 527,500   
Audit-related fees —    —   
Tax fees 96,591    89,865   
All other fees 1,100    1,412   
Total $ 663,191    $ 618,777   

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For purposes of the preceding table, Ernst & Young’s professional fees are classified as follows:
•Audit fees - These are fees for professional services performed for the audit of our annual financial statements and the required review of quarterly financial statements and other procedures performed by Ernst & Young in order for them to be able to form an opinion on our consolidated financial statements. These fees also cover services that are normally provided by independent registered public accounting firms in connection with statutory and regulatory filings or engagements.
•Audit-related fees - These are fees for assurance and related services that traditionally are performed by independent registered public accounting firms that are reasonably related to the performance of the audit or review of our financial statements, such as due diligence related to acquisitions and dispositions, attestation services that are not required by statute or regulation, internal control reviews and consultation concerning financial accounting and reporting standards.
•Tax fees - These are fees for all professional services performed by professional staff in our independent registered public accounting firm’s tax division, except those services related to the audit of our financial statements. These include fees for tax compliance, tax planning and tax advice, including federal, state and local issues. Services may also include assistance with tax audits and appeals before the Internal Revenue Service and similar state and local agencies, as well as federal, state and local tax issues related to due diligence.
•All other fees - These are fees for any services not included in the above-described categories.
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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)Financial Statement Schedules
See the Index to Financial Statements at page F-1 of this report.
The following financial statement schedule is included herein at pages F-31 through F-32 of this report:
Schedule III - Real Estate Assets and Accumulated Depreciation and Amortization

(b)Exhibits

Ex.    Description
2.1
3.1   
3.2   
4.1   
4.2
10.1
10.2
10.3
10.4
10.5
10.6
10.7
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Ex.    Description
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
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Ex.    Description
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
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Ex.    Description
10.36
10.37
10.38
10.39
10.40
10.41
10.42
10.43
10.44
10.45
10.46
10.47
10.48
10.49
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Ex.    Description
10.50
10.51
10.52
10.53
10.54
10.55
10.56
10.57
10.58
10.59
10.60
10.61
10.62
10.63
10.64
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Ex.    Description
10.65
10.66
10.67
10.68
10.69
21.1
31.1
31.2
32.1
32.2
99.1
99.2
101.INS Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB Inline XBRL Taxonomy Extension Label Linkbase
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase
104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)


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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements
F-2
F-3
F-4
F-5
F-6
F-7
Financial Statement Schedule
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of
KBS Real Estate Investment Trust II, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of KBS Real Estate Investment Trust II, Inc. (the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes and financial statement schedule listed in the Index at Item 15(a), Schedule III - Real Estate Assets and Accumulated Depreciation and Amortization (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2007.
Irvine, California
March 6, 2020
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KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
December 31,
  2019 2018
Assets
Real estate:
Land $ 118,955    $ 118,955   
Buildings and improvements 590,950    550,802   
Tenant origination and absorption costs 28,025    30,846   
Total real estate held for investment, cost 737,930    700,603   
Less accumulated depreciation and amortization (141,323)   (116,714)  
Total real estate held for investment, net 596,607    583,889   
Real estate held for sale, net 270,124    370,318   
Total real estate, net 866,731    954,207   
Cash and cash equivalents 31,674    57,730   
Restricted cash 15,208    17,957   
Rents and other receivables, net 82,470    67,232   
Above-market leases, net 150    224   
Assets related to real estate held for sale 39,975    46,817   
Prepaid expenses and other assets 22,841    12,850   
Total assets $ 1,059,049    $ 1,157,017   
Liabilities and stockholders’ equity
Notes payable:
Notes payable, net $ 300,780    $ 266,296   
Notes payable related to real estate held for sale, net 115,827    148,912   
Total notes payable, net 416,607    415,208   
Accounts payable and accrued liabilities 68,539    48,903   
Due to affiliate 59    55   
Distributions payable —    3,874   
Below-market leases, net 164    308   
Liabilities related to real estate held for sale 10,012    6   
Other liabilities 16,445    17,189   
Total liabilities 511,826    485,543   
Commitments and contingencies (Note 10)
Redeemable common stock 10,000    10,000   
Stockholders’ equity:
Preferred stock, $.01 par value; 10,000,000 shares authorized, no shares issued and outstanding
—    —   
Common stock, $.01 par value; 1,000,000,000 shares authorized, 185,302,037 and 186,464,794 shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively
1,853    1,865   
Additional paid-in capital 1,662,555    1,667,897   
Cumulative distributions in excess of net income (1,127,185)   (1,008,288)  
Total stockholders’ equity 537,223    661,474   
Total liabilities and stockholders’ equity $ 1,059,049    $ 1,157,017   

See accompanying notes to consolidated financial statements.
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KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
  Years Ended December 31,
  2019 2018 2017
Revenues:
Rental income $ 105,287    $ 132,452    $ 139,048   
Interest income from real estate loans receivable —    434    1,060   
Other operating income 6,825    9,329    9,351   
Total revenues 112,112    142,215    149,459   
Expenses:
Operating, maintenance, and management 34,495    35,246    34,719   
Real estate taxes and insurance 18,128    19,268    19,816   
Asset management fees to affiliate 10,196    10,894    11,617   
General and administrative expenses 6,029    6,024    4,541   
Depreciation and amortization 40,889    50,202    54,047   
Interest expense 17,214    17,884    17,466   
Impairment charges on real estate 14,300    —    —   
Total expenses 141,251    139,518    142,206   
Other income:
Other interest income 608    1,159    375   
Loss from extinguishment of debt
(470)   (212)   —   
Gain on sales of real estate, net
30,752    24,884    17,486   
Total other income 30,890    25,831    17,861   
Net income $ 1,751    $ 28,528    $ 25,114   
Net income per common share, basic and diluted $ 0.01    $ 0.15    $ 0.13   
Weighted-average number of common shares outstanding, basic and diluted
185,912,776    187,133,703    188,235,450   

See accompanying notes to consolidated financial statements.
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KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(dollars in thousands)
      Additional Paid-in Capital Cumulative Distributions in Excess of Net Income (Loss) Total Stockholders’ Equity
 
 Common Stock
  Shares Amounts
Balance, December 31, 2016 188,719,952    $ 1,887    $ 1,679,524    $ (964,504)   $ 716,907   
Net income —    —    —    25,114    25,114   
Redemptions of common stock (1,053,650)   (10)   (5,757)   —    (5,767)  
Distributions declared —    —    —    (51,672)   (51,672)  
Balance, December 31, 2017    187,666,302    $ 1,877    $ 1,673,767    $ (991,062)   $ 684,582   
Net income —    —    —    28,528    28,528   
Redemptions of common stock (1,201,508)   (12)   (5,870)   —    (5,882)  
Distributions declared —    —    —    (45,754)   (45,754)  
Balance, December 31, 2018 186,464,794    $ 1,865    $ 1,667,897    $ (1,008,288)   $ 661,474   
Net income —    —    —    1,751    1,751   
Redemptions of common stock (1,162,757)   (12)   (5,342)   —    (5,354)  
Distributions declared —    —    —    (120,648)   (120,648)  
Balance, December 31, 2019 185,302,037    $ 1,853    $ 1,662,555    $ (1,127,185)   $ 537,223   

See accompanying notes to consolidated financial statements.
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KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
  Years Ended December 31,
  2019 2018 2017
Cash Flows from Operating Activities:
Net income $ 1,751    $ 28,528    $ 25,114   
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 40,889    50,202    54,047   
Impairment charges on real estate 14,300    —    —   
Noncash interest income on real estate-related investments —    3    4   
Deferred rent 1,003    3,717    (864)  
Bad debt expense —    371    515   
Amortization of above- and below-market leases, net (72)   1,037    762   
Amortization of deferred financing costs 1,513    1,272    1,106   
Unrealized gain on derivative instruments —    —    (101)  
Loss from extinguishment of debt 470    212    —   
Gain on sale of real estate, net (30,752)   (24,884)   (17,486)  
Changes in operating assets and liabilities:
Rents and other receivables (16,709)   (38,367)   (2,610)  
Prepaid expenses and other assets (13,942)   (8,186)   (2,635)  
Accounts payable and accrued liabilities 18,861    34,657    (4,203)  
Due to affiliate 4    (29)   43   
Other liabilities (1,137)   7,890    (847)  
Net cash provided by operating activities 16,179    56,423    52,845   
Cash Flows from Investing Activities:
Proceeds from sale of real estate 130,283    94,015    83,410   
Improvements to real estate (44,807)   (34,601)   (17,639)  
Principal repayments on real estate loans receivable —    13,920    152   
Net cash provided by investing activities 85,476    73,334    65,923   
Cash Flows from Financing Activities:
Proceeds from notes payable 134,350    375,000    —   
Principal payments on notes payable (134,010)   (460,765)   (21,663)  
Payments of deferred financing costs (924)   (2,810)   (915)  
Payments to redeem common stock (5,354)   (5,882)   (5,767)  
Distributions paid to common stockholders (124,522)   (46,256)   (51,789)  
Net cash used in financing activities (130,460)   (140,713)   (80,134)  
Net (decrease) increase in cash, cash equivalents and restricted cash (28,805)   (10,956)   38,634   
Cash, cash equivalents and restricted cash, beginning of period 75,687    86,643    48,009   
Cash, cash equivalents and restricted cash, end of period $ 46,882    $ 75,687    $ 86,643   
Supplemental Disclosure of Cash Flow Information:
Interest paid $ 15,895    $ 16,686    $ 16,314   
Supplemental Disclosure of Noncash Investing and Financing Activities:
Accrued improvements to real estate $ 5,592    $ 4,818    $ 3,737   
Distributions payable $ —    $ 3,874    $ 4,376   

See accompanying notes to consolidated financial statements.

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KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019

1. ORGANIZATION
KBS Real Estate Investment Trust II, Inc. (the “Company”) was formed on July 12, 2007 as a Maryland corporation that elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2008. The Company conducts its business primarily through KBS Limited Partnership II, a Delaware limited partnership formed on August 23, 2007 (the “Operating Partnership”), and its subsidiaries. The Company is the sole general partner of and directly owns a 0.1% partnership interest in the Operating Partnership. The Company’s wholly-owned subsidiary, KBS REIT Holdings II LLC, a Delaware limited liability company formed on August 23, 2007 (“KBS REIT Holdings II”), owns the remaining 99.9% partnership interest in the Operating Partnership and is its sole limited partner.
The Company invested in a diverse portfolio of real estate and real estate-related investments. As of December 31, 2019, the Company owned six office properties (of which two were held for sale) and an office campus consisting of five office buildings.
Subject to certain restrictions and limitations, the business of the Company is managed by KBS Capital Advisors LLC (the “Advisor”), an affiliate of the Company, pursuant to an advisory agreement the Company renewed with the Advisor on June 6, 2019 (the “Advisory Agreement”). The Advisory Agreement is effective through May 21, 2020 and may be renewed for an unlimited number of one-year periods upon the mutual consent of the Advisor and the Company. Either party may terminate the Advisory Agreement upon 60 days’ written notice. The Advisor owns 20,000 shares of the Company’s common stock.
Upon commencing its initial public offering (the “Offering”), the Company retained KBS Capital Markets Group LLC (the “Dealer Manager”), an affiliate of the Advisor, to serve as the dealer manager of the Offering. The Company ceased offering shares of common stock in its primary offering on December 31, 2010 and terminated its primary offering on March 22, 2011. The Company terminated its dividend reinvestment plan effective May 29, 2014.
The Company sold 182,681,633 shares of common stock in its primary offering for gross offering proceeds of $1.8 billion. The Company sold 30,903,504 shares of common stock under its dividend reinvestment plan for gross offering proceeds of $298.2 million. Also as of December 31, 2019, the Company had redeemed 28,303,101 shares sold in the Offering for $257.1 million.
Plan of Liquidation
On January 27, 2016, the Company’s board of directors formed a special committee (the “Special Committee”) composed of all of the Company’s independent directors to explore the availability of strategic alternatives involving the Company.
On November 13, 2019, in connection with a review of potential strategic alternatives available to the Company, the Special Committee and the board of directors unanimously approved the sale of all of the Company’s assets and the dissolution of the Company pursuant to the terms of the plan of complete liquidation and dissolution (the “Plan of Liquidation”). The principal purpose of the Plan of Liquidation is to provide liquidity to the Company’s stockholders by selling the Company’s assets, paying its debts and distributing the net proceeds from liquidation to the Company’s stockholders. On March 5, 2020, the Company’s stockholders approved the Plan of Liquidation. For more information, see the Plan of Liquidation, which is included as an exhibit to this Annual Report on Form 10-K.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The consolidated financial statements and accompanying notes thereto have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the Securities and Exchange Commission (“SEC”).
The consolidated financial statements include the accounts of the Company, KBS REIT Holdings II, the Operating Partnership, and their direct and indirect wholly owned subsidiaries.  All significant intercompany balances and transactions are eliminated in consolidation.
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KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2019

Use of Estimates
The preparation of the consolidated financial statements and the accompanying notes thereto in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.
Reclassifications
Certain amounts in the Company’s prior period consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of prior periods. Upon adoption of the lease accounting standards of Topic 842 on January 1, 2019 (described below), the Company accounted for tenant reimbursements for property taxes, insurance and common area maintenance as variable lease payments and recorded these amounts as rental income on the statement of operations. For the years ended December 31, 2018 and 2017, the Company reclassified $10.6 million and $11.5 million, respectively, of tenant reimbursement revenue for property taxes, insurance, and common area maintenance to rental income for comparability purposes.
In addition, during the year ended December 31, 2019, the Company sold two office properties and as of December 31, 2019, the Company had classified two office properties as held for sale. As a result, certain assets and liabilities were reclassified to held for sale on the consolidated balance sheets for all periods presented.
Revenue Recognition - Operating Leases
Real Estate
On January 1, 2019, the Company adopted the lease accounting standards under Topic 842 including the package of practical expedients for all leases that commenced before the effective date of January 1, 2019. Accordingly, the Company (i) did not reassess whether any expired or existing contracts are or contain leases, (ii) did not reassess the lease classification for any expired or existing lease, and (iii) did not reassess initial direct costs for any existing leases. The Company did not elect the practical expedient related to using hindsight to reevaluate the lease term. In addition, the Company adopted the practical expedient for land easements and did not assess whether existing or expired land easements that were not previously accounted for as leases under the lease accounting standards of Topic 840 are or contain a lease under Topic 842.
In addition, Topic 842 provides an optional transition method to allow entities to apply the new lease accounting standards at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. The Company adopted this transition method upon its adoption of the lease accounting standards of Topic 842, which did not result in a cumulative effect adjustment to the opening balance of retained earnings on January 1, 2019. The Company’s comparative periods presented in the financial statements will continue to be reported under the lease accounting standards of Topic 840.
In accordance with Topic 842, tenant reimbursements for property taxes and insurance are included in the single lease component of the lease contract (the right of the lessee to use the leased space) and therefore are accounted for as variable lease payments and are recorded as rental income on the Company’s statement of operations beginning January 1, 2019. In addition, the Company adopted the practical expedient available under Topic 842 to not separate nonlease components from the associated lease component and instead to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue recognition standard (Topic 606) and if certain conditions are met, specifically related to tenant reimbursements for common area maintenance which would otherwise be accounted for under the revenue recognition standard. The Company believes the two conditions have been met for tenant reimbursements for common area maintenance as (i) the timing and pattern of transfer of the nonlease components and associated lease components are the same and (ii) the lease component would be classified as an operating lease. Accordingly, tenant reimbursements for common area maintenance are also accounted for as variable lease payments and recorded as rental income on the Company’s statement of operations beginning January 1, 2019.
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KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2019

The Company recognizes minimum rent, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectibility is probable and records amounts expected to be received in later years as deferred rent receivable. If the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or the Company. When the Company is the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance (including amounts that can be taken in the form of cash or a credit against the tenant’s rent) that is funded is treated as a lease incentive and amortized as a reduction of rental revenue over the lease term. Tenant improvement ownership is determined based on various factors including, but not limited to:
•whether the lease stipulates how a tenant improvement allowance may be spent;
•whether the lessee or lessor supervises the construction and bears the risk of cost overruns;
•whether the amount of a tenant improvement allowance is in excess of market rates;
•whether the tenant or landlord retains legal title to the improvements at the end of the lease term;
•whether the tenant improvements are unique to the tenant or general purpose in nature; and
•whether the tenant improvements are expected to have any residual value at the end of the lease.
In accordance with Topic 842, the Company makes a determination of whether the collectibility of the lease payments in an operating lease is probable. If the Company determines the lease payments are not probable of collection, the Company would fully reserve for any contractual lease payments, deferred rent receivable, and variable lease payments and would recognize rental income only if cash is received. Beginning January 1, 2019, these changes to the Company’s collectibility assessment are reflected as an adjustment to rental income. Prior to January 1, 2019, bad debt expense related to uncollectible accounts receivable and deferred rent receivable was included in operating, maintenance, and management expense in the statement of operations. Any subsequent changes to the collectibility of the allowance for doubtful accounts as of December 31, 2018, which was recorded prior to the adoption of Topic 842, are recorded in operating, maintenance, and management expense in the statement of operations.
Beginning January 1, 2019, the Company, as a lessor, records costs to negotiate or arrange a lease that would have been incurred regardless of whether the lease was obtained, such as legal costs incurred to negotiate an operating lease, as an expense and classifies such costs as operating, maintenance, and management expense on the Company’s consolidated statement of operations, as these costs are no longer capitalizable under the definition of initial direct costs under Topic 842.
Sales of Real Estate
Prior to January 1, 2018, gains on real estate sold were recognized using the full accrual method at closing when collectibility of the sales price was reasonably assured, the Company was not obligated to perform additional activities that may be considered significant, the initial investment from the buyer was sufficient and other profit recognition criteria had been satisfied. Gain on sales of real estate may have been deferred in whole or in part until the requirements for gain recognition had been met.
Effective January 1, 2018, the Company adopted the guidance of ASC 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (“ASC 610-20”), which applies to sales or transfers to noncustomers of nonfinancial assets or in substance nonfinancial assets that do not meet the definition of a business.  Generally, the Company’s sales of real estate would be considered a sale of a nonfinancial asset as defined by ASC 610-20.
ASC 610-20 refers to the revenue recognition principles under ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).  Under ASC 610-20, if the Company determines it does not have a controlling financial interest in the entity that holds the asset and the arrangement meets the criteria to be accounted for as a contract, the Company would derecognize the asset and recognize a gain or loss on the sale of the real estate when control of the underlying asset transfers to the buyer.
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KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2019

Real Estate Loan Receivable
Interest income on the Company’s real estate loan receivable was recognized on an accrual basis over the life of the investment using the interest method. Direct loan origination fees and origination or acquisition costs, as well as acquisition premiums or discounts, were amortized over the term of the loan as an adjustment to interest income.
Cash and Cash Equivalents
The Company recognizes interest income on its cash and cash equivalents as it is earned and classifies such amounts as other interest income.
Real Estate
Depreciation and Amortization
Real estate costs related to the acquisition and improvement of properties are capitalized and amortized over the expected useful life of the asset on a straight-line basis. Repair and maintenance costs are charged to expense as incurred and significant replacements and betterments are capitalized. Repair and maintenance costs include all costs that do not extend the useful life of the real estate asset. The Company considers the period of future benefit of an asset to determine its appropriate useful life. Expenditures for tenant improvements are capitalized and amortized over the shorter of the tenant’s lease term or expected useful life. The Company anticipates the estimated useful lives of its assets by class to be generally as follows:
Buildings
25-40 years
Building improvements
10-25 years
Tenant improvements Shorter of lease term or expected useful life
Tenant origination and absorption costs Remaining term of related leases, including below-market renewal periods

Impairment of Real Estate and Related Intangible Assets and Liabilities
The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate and related intangible assets and liabilities may not be recoverable or realized. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets and liabilities may not be recoverable, the Company assesses the recoverability by estimating whether the Company will recover the carrying value of the real estate and related intangible assets and liabilities through its undiscounted future cash flows and its eventual disposition. If, based on this analysis, the Company does not believe that it will be able to recover the carrying value of the real estate and related intangible assets and liabilities, the Company would record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets and liabilities.
Projecting future cash flows involves estimating expected future operating income and expenses related to the real estate and its related intangible assets and liabilities as well as market and other trends. Using inappropriate assumptions to estimate cash flows or the expected hold period until the eventual disposition could result in incorrect conclusions on recoverability and incorrect fair values of the real estate and its related intangible assets and liabilities and could result in the overstatement of the carrying values of the Company’s real estate and related intangible assets and liabilities and an overstatement of the Company’s net income.
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KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2019

Real Estate Held for Sale
The Company generally considers real estate to be “held for sale” when the following criteria are met: (i) management commits to a plan to sell the property, (ii) the property is available for sale immediately, (iii) the property is actively being marketed for sale at a price that is reasonable in relation to its current fair value, (iv) the sale of the property within one year is considered probable and (v) significant changes to the plan to sell are not expected. Real estate that is held for sale and its related assets are classified as “real estate held for sale” and “assets related to real estate held for sale,” respectively, for all periods presented in the accompanying consolidated financial statements. Notes payable and other liabilities related to real estate held for sale are classified as “notes payable related to real estate held for sale” and “liabilities related to real estate held for sale,” respectively, for all periods presented in the accompanying consolidated financial statements. Real estate classified as held for sale is no longer depreciated and is reported at the lower of its carrying value or its estimated fair value less estimated costs to sell. Operating results of properties and related gains on sales of properties that were disposed of or classified as held for sale in the ordinary course of business during the years ended December 31, 2019, 2018 and 2017 are included in continuing operations on the Company’s consolidated statements of operations.
Change in a Plan to Sell
When real estate is initially considered “held for sale” it is measured at the lower of its depreciated book value or estimated fair value less estimated costs to sell. Changes in the market may compel the Company to decide to reclassify a property that was designated as held for sale to held for investment.  A property that is reclassified from held for sale to held for investment is measured and recorded at the lower of (i) its carrying amount before the property was classified as held for sale, adjusted for any depreciation and amortization expense that would have been recognized had the property been continuously classified as held and used, or (ii) its fair value at the date of the subsequent decision not to sell. Any adjustment to the carrying amount of the property as a result of the reclassification is included in income from continuing operations as an impairment charge on real estate held for investment.
Cash and Cash Equivalents
The Company considers all short-term (with an original maturity of three months or less), highly-liquid investments utilized as part of the Company’s cash-management activities to be cash equivalents. Cash equivalents may include cash and short-term investments. Short-term investments are stated at cost, which approximates fair value.
The Company’s cash and cash equivalents balance exceeds federally insurable limits as of December 31, 2019. The Company monitors the cash balances in its operating accounts and adjusts the cash balances as appropriate; however, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, the Company has experienced no loss or lack of access to cash in its operating accounts.
Restricted Cash
Restricted cash is comprised of lender impound reserve accounts on the Company’s borrowings for capital improvements and replacements.
Rents and Other Receivables
The Company periodically evaluates the collectibility of amounts due from tenants and maintains an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under lease agreements. In addition, the Company maintains an allowance for deferred rent receivable that arises from the straight-lining of rents. The Company exercises judgment in establishing these allowances and considers payment history and current credit status of its tenants in developing these estimates.
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KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2019

Deferred Financing Costs
Deferred financing costs represent commitment fees, loan fees, legal fees and other third-party costs associated with obtaining financing and are presented on the balance sheet as a direct deduction from the carrying value of the associated debt liability. These costs are amortized over the terms of the respective financing agreements using the effective interest method. Unamortized deferred financing costs are generally expensed when the associated debt is refinanced or repaid before maturity unless specific rules are met that would allow for the carryover of such costs to the refinanced debt. Deferred financing costs incurred before an associated debt liability is recognized are included in prepaid and other assets on the balance sheet. Costs incurred in seeking financing transactions that do not close are expensed in the period in which it is determined that the financing will not close.
Fair Value Measurements
Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other non-financial and financial assets at fair value on a non-recurring basis (e.g., carrying value of impaired long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:
•Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;
•Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and
•Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.
When available, the Company utilizes quoted market prices from independent third-party sources to determine fair value and classifies such items in Level 1 or Level 2. In instances where the market for a financial instrument is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When the Company determines the market for a financial instrument owned by the Company to be illiquid or when market transactions for similar instruments do not appear orderly, the Company uses several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and establishes a fair value by assigning weights to the various valuation sources. Additionally, when determining the fair value of liabilities in circumstances in which a quoted price in an active market for an identical liability is not available, the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach.
Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.
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KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2019

The Company considers the following factors to be indicators of an inactive market: (i) there are few recent transactions, (ii) price quotations are not based on current information, (iii) price quotations vary substantially either over time or among market makers (for example, some brokered markets), (iv) indexes that previously were highly correlated with the fair values of the asset or liability are demonstrably uncorrelated with recent indications of fair value for that asset or liability, (v) there is a significant increase in implied liquidity risk premiums, yields, or performance indicators (such as delinquency rates or loss severities) for observed transactions or quoted prices when compared with the Company’s estimate of expected cash flows, considering all available market data about credit and other nonperformance risk for the asset or liability, (vi) there is a wide bid-ask spread or significant increase in the bid-ask spread, (vii) there is a significant decline or absence of a market for new issuances (that is, a primary market) for the asset or liability or similar assets or liabilities, and (viii) little information is released publicly (for example, a principal-to-principal market).
The Company considers the following factors to be indicators of non-orderly transactions: (i) there was not adequate exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities under current market conditions, (ii) there was a usual and customary marketing period, but the seller marketed the asset or liability to a single market participant, (iii) the seller is in or near bankruptcy or receivership (that is, distressed), or the seller was required to sell to meet regulatory or legal requirements (that is, forced), and (iv) the transaction price is an outlier when compared with other recent transactions for the same or similar assets or liabilities.
Redeemable Common Stock
The Company has a share redemption program pursuant to which stockholders may sell their shares to the Company only in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence” (each as defined in the share redemption program and, together with redemptions sought in connection with a stockholder’s death, “Special Redemptions”). Such redemptions are subject to the limitations described in the share redemption program document, including:
•During each calendar year, Special Redemptions are limited to an annual dollar amount determined by the board of directors, which may be reviewed during the year and increased or decreased upon ten business days’ notice to the Company’s stockholders. The Company may provide notice by including such information (a) in a Current Report on Form 8-K or in its annual or quarterly reports, all publicly filed with the SEC or (b) in a separate mailing to its stockholders. The dollar limitation for calendar year 2019 was $10.0 million. On November 13, 2019, the Company’s board of directors approved the same annual dollar amount limitation for Special Redemptions for calendar year 2020 of $10.0 million in the aggregate, as may be reviewed and adjusted from time to time by the board of directors.
•During any calendar year, the Company may redeem no more than 5% of the weighted-average number of shares outstanding during the prior calendar year.
•The Company has no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland General Corporation Law, as amended from time to time, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency.
If the Company cannot repurchase all shares presented for redemption in any month because of the limitations on redemptions set forth in the Company’s share redemption program, then it will honor redemption requests on a pro rata basis, except that if a pro rata redemption would result in a stockholder owning less than the minimum purchase requirement described in the Company’s currently effective, or its most recently effective, registration statement as such registration statement has been amended or supplemented, then the Company would redeem all of such stockholder’s shares.
Pursuant to the share redemption program, redemptions made in connection with Special Redemptions are made at a price per share equal to the most recent estimated value per share of the Company’s common stock as of the applicable redemption date. The Company does not expect to have funds available for ordinary redemptions in the future.
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KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2019

On December 3, 2018, the Company’s board of directors approved an estimated value per share of the Company’s common stock of $4.95 (unaudited) (the “December EVPS) based on the estimated value of the Company’s assets less the estimated value of the Company’s liabilities, divided by the number of shares outstanding, all as of September 30, 2018. The change in the redemption price became effective for the December 2018 redemption date, which was December 31, 2018, and was effective through the May 2019 redemption date, which was May 31, 2019.
In connection with the declaration of the Special Distribution (defined below), on June 12, 2019, the Company’s board of directors approved an updated estimated value per share of the Company’s common stock of $4.50 (unaudited), effective June 17, 2019, which was the record date for the Special Distribution, based solely on subtracting the Special Distribution declared by the Company’s board of directors in the amount of $0.45 per share of common stock from the December EVPS of $4.95. This was the sole adjustment to the estimated value per share. The change in the redemption price became effective for the June 2019 redemption date, which was June 28, 2019, and was effective through the October 2019 redemption date, which was October 31, 2019.
On November 13, 2019, the Company’s board of directors approved an estimated value per share of the Company’s common stock of $3.79 (unaudited) based on the estimated value of the Company’s assets less the estimated value of the Company’s liabilities, divided by the number of shares outstanding, all as of September 30, 2019, except that two properties that went under contract to sale subsequent to September 30, 2019 were valued at their contractual sales price less estimated closing credits. The change in the redemption price became effective for the November 2019 redemption date, which was November 29, 2019, and will be effective until the estimated value per share is updated.
The Company may amend, suspend or terminate the share redemption program for any reason upon ten business days’ notice to stockholders. The Company may provide this notice by including such information (a) in a Current Report on Form 8-K or in its annual or quarterly reports, all publicly filed with the SEC or (b) in a separate mailing to stockholders.
The Company records amounts that are redeemable under the share redemption program as redeemable common stock in the accompanying consolidated balance sheets because the shares are mandatorily redeemable at the option of the holder and therefore their redemption is outside the control of the Company. Pursuant to the share redemption program, effective for redemptions on or after June 18, 2014, the maximum amount redeemable under the Company’s share redemption program is limited to an annual dollar amount determined by Company’s board of directors, as described above. However, because the amounts that can be redeemed in future periods are determinable and only contingent on an event that is likely to occur (e.g., the passage of time), the Company presents the amounts available for future redemptions in future periods as redeemable common stock in the accompanying consolidated balance sheets.
The Company classifies financial instruments that represent a mandatory obligation of the Company to redeem shares as liabilities. The Company’s redeemable common shares are contingently redeemable at the option of the holder. When the Company determines it has a mandatory obligation to redeem shares under the share redemption program, it will reclassify such obligations from temporary equity to a liability based upon their respective settlement values.
For the year ended December 31, 2019, the Company redeemed 1,162,757 shares sold in the Offering for $5.4 million, which represented all redemption requests received in good order and eligible for redemption as Special Redemptions under the share redemption program through the December 2019 redemption date.
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KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2019

Related Party Transactions
The Company has entered into the Advisory Agreement with the Advisor. This agreement entitles the Advisor to specified fees upon the provision of certain services with regard to the management of the Company’s investments, among other services, and the disposition of investments, as well as reimbursement of certain costs incurred by the Advisor in providing services to the Company. In addition, the Advisor is entitled to certain other fees, including an incentive fee upon achieving certain performance goals, as detailed in the Advisory Agreement. The Company has entered into a fee reimbursement agreement (the “AIP Reimbursement Agreement”) with the Dealer Manager pursuant to which the Company agreed to reimburse the Dealer Manager for certain fees and expenses it incurs for administering the Company’s participation in the DTCC Alternative Investment Product Platform (“AIP Platform”) with respect to certain accounts of the Company’s investors serviced through the platform. The Advisor and Dealer Manager also serve or served as the advisor and dealer manager, respectively, for KBS Real Estate Investment Trust, Inc. (“KBS REIT I”) (which liquidated in December 2018), KBS Real Estate Investment Trust III, Inc. (“KBS REIT III”), Pacific Oak Strategic Opportunity REIT, Inc., formerly KBS Strategic Opportunity REIT, Inc., (“Pacific Oak Strategic Opportunity REIT”) (advisory agreement terminated as of October 31, 2019 and the dealer manager agreement terminated as of December 31, 2019), KBS Legacy Partners Apartment REIT, Inc. (“KBS Legacy Partners Apartment REIT”) (which liquidated in December 2018), Pacific Oak Strategic Opportunity REIT II, Inc., formerly KBS Strategic Opportunity REIT II, Inc., (“Pacific Oak Strategic Opportunity REIT II”) (advisory agreement terminated as of October 31, 2019 and the dealer manager agreement terminated as of December 31, 2019) and KBS Growth & Income REIT, Inc. (“KBS Growth & Income REIT”).
On November 1, 2019, Pacific Oak Strategic Opportunity REIT and Pacific Oak Strategic Opportunity REIT II each entered into advisory agreements with a new external advisor, Pacific Oak Capital Advisors, LLC. Pacific Oak Capital Advisors, LLC is part of a group of companies formed, owned and managed by Keith D. Hall and Peter McMillan III. Together, through GKP Holding LLC, Messrs. Hall and McMillan continue to indirectly own a 33 1/3% interest in the Advisor and the Dealer Manager.
The Company records all related party fees as incurred, subject to any limitations described in the Advisory Agreement.
Operating Expenses
Under the Advisory Agreement, the Advisor has the right to seek reimbursement from the Company for all costs and expenses it incurs in connection with the provision of services to the Company, including the Company’s allocable share of the Advisor’s overhead, such as rent, employee costs, accounting software and cybersecurity costs. Commencing July 1, 2010, the Company has reimbursed the Advisor for the Company’s allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to the Company. In the future, the Advisor may seek reimbursement for additional employee costs. The Company will not reimburse the Advisor for employee costs in connection with services for which the Advisor earns acquisition, origination or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries and benefits the Advisor or its affiliates may pay to the Company’s executive officers. In addition, the Company reimburses the Advisor for certain of the Company’s direct costs incurred from third parties that were initially paid by the Advisor on the Company’s behalf.
Asset Management Fee
With respect to investments in real estate, the Company pays the Advisor a monthly asset management fee equal to one-twelfth of 0.75% of the amount paid or allocated to acquire the investment, plus the cost of any subsequent development, construction or improvements to the property. This amount includes any portion of the investment that was debt financed and is inclusive of acquisition fees and expenses related thereto. In the case of investments made through joint ventures, the asset management fee will be determined based on the Company’s proportionate share of the underlying investment.
With respect to investments in loans and any investments other than real estate, the Company paid the Advisor a monthly fee calculated, each month, as one-twelfth of 0.75% of the lesser of (i) the amount paid or allocated to acquire or fund the loan or other investment (which amount included any portion of the investment that was debt financed and was inclusive of acquisition or origination fees and expenses related thereto) and (ii) the outstanding principal amount of such loan or other investment, plus the acquisition or origination fees and expenses related to the acquisition or funding of such investment, as of the time of calculation.
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KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2019

With respect to an investment that has suffered an impairment in value, reduction in cash flow or other negative circumstances, such investment may either be excluded from the calculation of the asset management fee described above or included in such calculation at a reduced value that is recommended by the Advisor and the Company’s management and then approved by a majority of the Company’s independent directors, and this change in the fee will be applicable to an investment upon the earlier to occur of the date on which (i) such investment is sold, (ii) such investment is surrendered to a person other than the Company, its direct or indirect wholly owned subsidiary or a joint venture or partnership in which the Company has an interest, (iii) the Advisor determines that it will no longer pursue collection or other remedies related to such investment, or (iv) the Advisor recommends a revised fee arrangement with respect to such investment. As of December 31, 2019, the Company has not determined to calculate the asset management fee at an adjusted value for any investments or to exclude any investments from the calculation of the asset management fee.
Disposition Fee
For substantial assistance in connection with the sale of properties or other investments, the Company pays the Advisor or its affiliates 1.0% of the contract sales price of each property or other investment sold; provided, however, in no event may the disposition fees paid to Advisor, its affiliates and unaffiliated third parties exceed 6.0% of the contract sales price.
Income Taxes
The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended. To continue to qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company’s annual REIT taxable income to stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax on income that it distributes as dividends to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially and adversely affect the Company’s net income and net cash available for distribution to stockholders. However, the Company believes that it is organized and operates in such a manner as to qualify for treatment as a REIT.
The Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements. Neither the Company nor its subsidiaries have been assessed interest or penalties by any major tax jurisdictions. The Company’s evaluations were performed for all open tax years through December 31, 2019. As of December 31, 2019, returns for the calendar years 2015 through 2018 remain subject to examination by major tax jurisdictions.
Per Share Data
Basic net income (loss) per share of common stock is calculated by dividing net income (loss) by the weighted-average number of shares of common stock issued and outstanding during such period. Diluted net income (loss) per share of common stock equals basic net income (loss) per share of common stock as there were no potentially dilutive securities outstanding during the years ended December 31, 2019, 2018 and 2017, respectively.
On June 12, 2019, the Company’s board of directors declared a special distribution in the amount of $0.45 per share of common stock to stockholders of record as of the close of business on June 17, 2019 (the “Special Distribution”). Distributions declared per common share were $0.649, $0.245 and $0.274 in the aggregate for the years ended December 31, 2019, 2018 and 2017, respectively. Other than the Special Distribution, distributions per common share were based on a monthly record date for each month during the period commencing January 2017 through October 2019. Distributions declared per common share assumes each share was issued and outstanding each day that was a record date for distributions during this period.
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KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2019

Segments
The Company invested in core real estate properties and real estate-related investments with the goal of acquiring a portfolio of income-producing investments. The Company’s real estate properties exhibit similar long-term financial performance and have similar economic characteristics to each other. Accordingly, the Company aggregated its investments in real estate properties into one reportable business segment.
Square Footage, Occupancy and Other Measures
Square footage, occupancy, number of tenants and other similar measures, including annualized base rent and annualized base rent per square foot, used to describe real estate investments included in these notes to the consolidated financial statements are presented on an unaudited basis and are outside the scope of the Company’s independent registered public accounting firm’s review of the Company’s financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board.
Recently Issued Accounting Standards Update
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments (“ASU No. 2016-13”).  ASU No. 2016-13 affects entities holding financial assets and net investments in leases that are not accounted for at fair value through net income.  The amendments in ASU No. 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected.  The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net carrying value at the amount expected to be collected on the financial asset.  ASU No. 2016-13 also amends the impairment model for available-for-sale securities.  An entity will recognize an allowance for credit losses on available-for-sale debt securities as a contra-account to the amortized cost basis rather than as a direct reduction of the amortized cost basis of the investment, as is currently required.  ASU No. 2016-13 also requires new disclosures.  For financial assets measured at amortized cost, an entity will be required to disclose information about how it developed its allowance for credit losses, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes.  For financing receivables and net investments in leases measured at amortized cost, an entity will be required to further disaggregate the information it currently discloses about the credit quality of these assets by year of the asset’s origination for as many as five annual periods. For available-for-sale securities, an entity will be required to provide a roll-forward of the allowance for credit losses and an aging analysis for securities that are past due.  ASU No. 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years.  The Company does not expect the adoption of ASU No. 2016-13 will have a material impact on its financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework -Changes to the Disclosure Requirements for Fair Value Measurement (“ASU No. 2018-13”).  The primary focus of ASU 2018-13 is to improve the effectiveness of the disclosure requirements for fair value measurements.  ASU No. 2018-13 removes the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for the timing of transfers between levels and the valuation processes for Level 3 fair value measurements. It also adds a requirement to disclose changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and to disclose the range and weighted average of significant unobservable inputs used to develop recurring and nonrecurring Level 3 fair value measurements. For certain unobservable inputs, entities may disclose other quantitative information in lieu of the weighted average if the other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop the Level 3 fair value measurements.  In addition, public entities are required to provide information about the measurement uncertainty of recurring Level 3 fair value measurements from the use of significant unobservable inputs if those inputs reasonably could have been different at the reporting date. ASU No. 2018-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years.  Entities are permitted to early adopt either the entire standard or only the provisions that eliminate or modify the requirements. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company does not expect the adoption of ASU No. 2018-13 will have a material impact on its financial statements.
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Table of Contents
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2019

3. REAL ESTATE HELD FOR INVESTMENT
As of December 31, 2019, the Company’s portfolio of real estate held for investment was composed of four office properties and an office campus consisting of five office buildings, encompassing in the aggregate approximately 2.7 million rentable square feet. As of December 31, 2019, the Company’s real estate portfolio held for investment was 76% occupied. The following table summarizes the Company’s portfolio of real estate held for investment as of December 31, 2019 (in thousands):
Property Date Acquired City State Property Type Total Real Estate
at Cost 		Accumulated Depreciation and Amortization Total Real Estate, Net
Willow Oaks Corporate Center 08/26/2009 Fairfax VA Office $ 120,226    $ (25,842)   $ 94,384   
Union Bank Plaza 09/15/2010 Los Angeles CA Office 201,685    (37,841)   163,844   
Granite Tower 12/16/2010 Denver CO Office 147,329    (32,855)   114,474   
Fountainhead Plaza 09/13/2011 Tempe AZ Office 119,383    (28,724)   90,659   
Corporate Technology Centre 03/28/2013 San Jose CA Office 149,307    (16,061)   133,246   
$ 737,930    $ (141,323)   $ 596,607   

As of December 31, 2019, the following properties represented more than 10% of the Company’s total assets:
Property Location Rentable
Square Feet 		Total Real Estate, Net
(in thousands) 		Percentage of Total Assets
Annualized Base Rent
(in thousands) (1)
Average Annualized Base Rent per Sq. Ft. Occupancy
Union Bank Plaza Los Angeles, CA 701,888    $ 163,844    15.5  % $ 25,336    $ 44.30    82  %
Corporate Technology Centre San Jose, CA 415,492    133,246    12.6  % 5,774    33.39    42  %
Granite Tower Denver, CO 591,070    114,474    10.8  % 19,399    34.99    94  %
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of December 31, 2019, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term. Annualized base rent excludes leases that have been executed but have not commenced as of December 31, 2019.
Operating Leases
The Company’s real estate properties held for investment are leased to tenants under operating leases for which the terms and expirations vary. As of December 31, 2019, the leases had remaining terms, excluding options to extend, of up to 15.4 years with a weighted-average remaining term of 6.4 years. Some of the leases have provisions to extend the term of the leases, options for early termination for all or part of the leased premises after paying a specified penalty, rights of first refusal to purchase the property at competitive market rates, and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires a security deposit from the tenant in the form of a cash deposit and/or a letter of credit. The amount required as a security deposit varies depending upon the terms of the respective lease and the creditworthiness of the tenant, but generally is not a significant amount. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in other liabilities in the accompanying consolidated balance sheets and totaled $3.7 million and $2.5 million as of December 31, 2019 and 2018, respectively.
During the years ended December 31, 2019, 2018 and 2017, the Company recognized deferred rent from tenants, net of lease incentive amortization, of $(1.0) million, $(3.7) million and $0.9 million, respectively. As of December 31, 2019 and 2018, the cumulative deferred rent balance was $81.8 million and $61.7 million, respectively, and is included in rents and other receivables on the accompanying balance sheets. The cumulative deferred rent balance included $54.4 million and $38.6 million of unamortized lease incentives as of December 31, 2019 and 2018, respectively. As of December 31, 2019 and 2018, lease incentive payable was $52.8 million and $35.2 million, respectively, and is included in accounts payable and accrued liabilities on the accompanying balance sheets.
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KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2019

As of December 31, 2019, the future minimum rental income from the Company’s properties held for investment under non-cancelable operating leases was as follows (in thousands):
2020 $ 49,751   
2021 47,279   
2022 51,902   
2023 50,379   
2024 39,445   
Thereafter 282,544   
$ 521,300   

As of December 31, 2019, the Company had approximately 88 tenants over a diverse range of industries and geographic areas in its portfolio of real estate held for investment. The Company’s highest tenant industry concentrations (greater than 10% of annualized base rent) were as follows:
Industry Number of Tenants
Annualized Base Rent (1)
(in thousands)
Percentage of
Annualized Base Rent
Finance 12    $ 20,818    29.1  %
Mining, Oil & Gas Extraction 3    13,154    18.4  %
Educational Services 1    11,728    16.4  %
$ 45,700    63.9  %
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of December 31, 2019, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.
No other tenant industries accounted for more than 10% of annualized base rent. The Company had not identified any material tenant credit issues as of December 31, 2019. During the year ended December 31, 2019, the Company recorded an adjustment to rental income of $0.9 million for lease payments that were deemed not probable of collection and a net recovery of bad debt of $0.1 million, which was included in operating, maintenance, and management expense in the accompanying consolidated statements of operations. During the years ended December 31, 2018 and 2017, the Company recorded bad debt expense of $0.4 million and $0.5 million, respectively, which was included in operating, maintenance and management expense in the accompanying consolidated statement of operations.
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Table of Contents
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2019

As of December 31, 2019, the Company had a concentration of credit risk related to the following tenant leases that represented more than 10% of the Company’s annualized base rent:
Annualized Base Rent Statistics
Tenant Property Tenant
Industry 		Square
Feet 		% of Portfolio
(Net Rentable
Sq. Ft.)
Annualized Base
Rent
(in thousands) (1)
% of
Portfolio
Annualized
Base Rent 		Annualized
Base Rent
per Sq. Ft. 		Lease
Expiration
Union Bank Union Bank Plaza Finance 295,563    10.8%    $ 16,834    23.6%    $ 56.95   
05/31/2020/
03/31/2021/
05/31/2021/
05/31/2022/
05/31/2035 (2)(3)
The University of Phoenix Fountainhead Plaza Educational Services 445,957    16.3%    11,728    16.4%    26.30   
08/31/2023 (4)
Anadarko Petroleum Corporation Granite Tower Mining, Oil & Gas Extraction 360,584    13.2%    12,256    17.1%    33.99   
04/30/2021 /
04/30/2033 (5)
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of December 31, 2019, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.
(2) Represents the expiration dates of the lease as of December 31, 2019 and does not take into account any tenant renewal options. Pursuant to a lease amendment that the Company entered into with Union Bank on December 31, 2017, Union Bank surrendered 15,829 rentable square feet of its total rentable square footage on March 31, 2018 and 31,320 rentable square feet of its total rentable square footage on June 30, 2018. In addition, Union Bank also surrendered 321 parking area passes on March 31, 2018. During the year ended December 31, 2018, the Company received $11.4 million of lease termination fees from Union Bank, of which $8.5 million was deferred as of December 31, 2018. During the year ended December 31, 2018, $1.9 million was recognized as rental income and $1.0 million was recognized as other operating income in the accompanying consolidated statement of operations. During the year ended December 31, 2019, $1.2 million was recognized as rental income and $0.8 million was recognized as other operating income in the accompanying consolidated statements of operations, and $6.5 million was deferred as of December 31, 2019 and included in other liabilities on the accompanying consolidated balance sheets.
(3) On August 2, 2019, the Company entered into amended and restated lease agreements with Union Bank relating to Union Bank’s office, retail, and storage spaces, which amended the terms of the leases as follows: (i) remeasured the existing rentable square footage from 295,563 rentable square feet to 307,729 rentable square feet effective June 1, 2020, (ii) of the 307,729 rentable square feet, a total of 131,135 rentable square feet of office space and 11,985 rentable square feet of retail space will be surrendered at various dates between May 31, 2020 and May 31, 2022 and the remaining 164,609 rentable square feet will expire on May 31, 2035, and (iii) the addition of 3,152 rentable square feet of retail space for a 15-year lease term expiring on May 31, 2035. Each of Union Bank’s amended and restated office and retail lease agreements has two five-year extension options on all or a portion of the leased space and a one-time option to terminate and cancel the lease in its entirety effective May 31, 2032, by delivering eighteen months’ notice and subject to payment of lease termination fees. Union Bank also has two one-time options to terminate and cancel a portion of its lease.
(4) The University of Phoenix has two options to extend the term of this lease for five years per option term.
(5) Per the lease agreement, 64,841 rentable square feet will expire on April 30, 2021 and the remainder will expire on April 30, 2033. Anadarko Petroleum Corporation has an option to terminate all or a portion of its leased space effective April 30, 2028 or April 30, 2030.
No other tenant accounted for more than 10% of annualized base rent.
Geographic Concentration Risk
As of December 31, 2019, the Company’s net investments in real estate properties held for investment in California and Colorado represented 28.1% and 10.8% of the Company’s total assets, respectively.  As a result, the geographic concentration of the Company’s portfolio makes it particularly susceptible to adverse economic developments in the California and Colorado real estate markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for office space resulting from the local business climate, could adversely affect the Company’s operating results and reduce the amount of liquidating distributions the Company’s stockholders receive and their overall return on investment.
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KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2019

4. TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND
BELOW-MARKET LEASE LIABILITIES
As of December 31, 2019 and 2018, the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities (excluding fully amortized assets and liabilities and accumulated amortization) were as follows (in thousands):
  Tenant Origination and
Absorption Costs 		Above-Market
Lease Assets 		Below-Market
Lease Liabilities
  2019 2018 2019 2018 2019 2018
Cost $ 28,025    $ 30,846    $ 835    $ 835    $ (1,154)   $ (2,635)  
Accumulated amortization (17,731)   (16,869)   (685)   (611)   990    2,327   
Net amount $ 10,294    $ 13,977    $ 150    $ 224    $ (164)   $ (308)  

Increases (decreases) in net income as a result of amortization of the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities for the years ended December 31, 2019, 2018 and 2017 were as follows (in thousands):
  Tenant Origination and
Absorption Costs 		Above-Market
Lease Assets 		Below-Market
Lease Liabilities
  For the Years Ended December 31, For the Years Ended December 31, For the Years Ended December 31,
  2019 2018 2017 2019 2018 2017 2019 2018 2017
Amortization $ (3,707)   $ (6,928)   $ (9,412)   $ (74)   $ (1,894)   $ (2,348)   $ 146    $ 857    $ 1,586   

The remaining unamortized balance for these outstanding intangible assets and liabilities as of December 31, 2019 will be amortized for the years ending December 31 as follows (in thousands):
Tenant Origination and
Absorption Costs 		Above-Market
Lease Assets 		Below-Market
Lease Liabilities
2020 $ (3,519)   $ (74)   $ 82   
2021 (3,256)   (73)   79   
2022 (2,150)   (3)   3   
2023 (1,369)   —    —   
$ (10,294)   $ (150)   $ 164   
Weighted-Average Remaining Amortization Period 3.2 years 2.0 years 2.0 years


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KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2019

5. REAL ESTATE HELD FOR SALE
During the year ended December 31, 2019, the Company sold two office properties, and as of December 31, 2019, the Company had classified two office properties as held for sale. During the year ended December 31, 2018, the Company sold 3 office buildings that were part of an eight-building office campus. During the year ended December 31, 2017, the Company sold two office properties. The results of operations for the properties sold during the years ended December 31, 2019, 2018 and 2017 and the two office properties classified as held for sale as of December 31, 2019 are included in continuing operations on the Company’s consolidated statements of operations. The following table summarizes certain revenue and expenses related to the Company’s real estate properties that were sold during the years ended December 31, 2019, 2018 and 2017 and the two office properties classified as held for sale as of December 31, 2019, which were included in continuing operations (in thousands):
  Years Ended December 31,
  2019 2018 2017
Revenues
Rental income $ 39,174    $ 53,319    $ 61,889   
Other operating income 1,475    2,804    3,089   
Total revenues 40,649    56,123    64,978   
Expenses
Operating, maintenance, and management 12,529    16,191    17,320   
Real estate taxes and insurance 4,469    6,697    8,574   
Asset management fees to affiliate 3,492    4,641    5,398   
General and administrative expenses 167    120    47   
Depreciation and amortization 12,304    21,034    23,363   
Interest expense 5,504    6,735    6,683   
Impairment charges on real estate 14,300    —    —   
Total expenses $ 52,765    $ 55,418    $ 61,385   

The following summary presents the major components of assets and liabilities related to real estate held for sale as of December 31, 2019 and 2018. (in thousands):
  December 31, 2019 December 31, 2018
Assets related to real estate held for sale
Total real estate, at cost $ 320,549    $ 427,335   
Accumulated depreciation and amortization (50,425)   (57,017)  
Real estate held for sale, net 270,124    370,318   
Other assets 39,975    46,817   
Total assets related to real estate held for sale $ 310,099    $ 417,135   
Liabilities related to real estate held for sale
Notes payable, net $ 115,827    $ 148,912   
Other liabilities 10,012    6   
Total liabilities related to real estate held for sale $ 125,839    $ 148,918   

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Table of Contents
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2019

As of December 31, 2019, the following properties held for sale represented more than 10% of the Company’s total assets:
Property Location Rentable
Square
Feet 		Total Real
Estate, Net
(in thousands) 		Percentage of
Total Assets
Annualized
Base Rent
(in thousands) (1)
Average
Annualized
Base Rent
per Sq. Ft. 		Occupancy
Campus Drive Buildings (2)
Florham Park, NJ 1,189,494    $ 270,124    25.5  % $ 32,181    $ 32.78    83  %
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of December 31, 2019, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term. Annualized base rent excludes leases that have been executed but have not commenced as of December 31, 2019.
(2) Subsequent to December 31, 2019, the Company, through indirect wholly owned subsidiaries, sold the 100 & 200 Campus Driving Buildings and the 300-600 Campus Buildings (together, the “Campus Drive Buildings”) to a purchaser unaffiliated with the Company or the Advisor. See Note 11, “Subsequent Events - Disposition of the Campus Drive Buildings.”
During the year ended December 31, 2019, the Company recorded non-cash impairment charges of $14.3 million to write down the carrying value of the Company’s investment in the Campus Drive Buildings to their contractual sales price less estimated costs to sell. The impairment was primarily due to estimated closing costs and disposition fees, which are reflected upon classification of the Campus Drive Buildings to held for sale. Subsequent to December 31, 2019, the Company sold the Campus Drive Buildings to a purchaser unaffiliated with the Company or the Advisor. See Note 11, “Subsequent Events - Disposition of Campus Drive Buildings.”

6. NOTES PAYABLE
As of December 31, 2019 and 2018, the Company’s notes payable, including notes payable related to real estate held for sale, consisted of the following (dollars in thousands):
  Book Value as of
December 31, 2019 		Book Value as of
December 31, 2018
Contractual
Interest Rate as of
December 31, 2019 (1)
Effective
Interest Rate as of
December 31, 2019 (1)
Payment
Type
Maturity
Date (2)
Corporate Technology Centre Mortgage Loan (3)
$ 40,564    $ 41,868    3.50%    3.5%    Principal & Interest    04/01/2020
Portfolio Loan Facility (4)
281,293    375,000   
One-month LIBOR + 1.45%
3.1%    Interest Only    03/29/2020
Granite Tower Mortgage Loan (5)
95,350    —   
One-month LIBOR + 1.65%
3.4%    (5) 09/01/2023
Total notes payable principal outstanding $ 417,207    $ 416,868   
Deferred financing costs, net (600)   (1,660)  
Total notes payable, net $ 416,607    $ 415,208   
_____________________
(1) Contractual interest rate represents the interest rate in effect under the loan as of December 31, 2019. Effective interest rate is calculated as the actual interest rate in effect as of December 31, 2019, using interest rate indices as of December 31, 2019, where applicable.
(2) Represents the initial maturity date or the maturity date as extended as of December 31, 2019; subject to certain conditions, the maturity dates of certain loans may be extended beyond the maturity date shown.
(3) The loan documents require the Company to reserve for the annual charges for real estate taxes by making monthly deposits to an account held by the lender, subject to certain terms and conditions contained in the loan documents. On January 23, 2020, the Company repaid the outstanding principal and accrued interest due under the Corporate Technology Centre Mortgage Loan.
(4) On August 30, 2019, the Company repaid $62.0 million due under this loan and Granite Tower was released as security from the Portfolio Loan Facility. See below, “- Recent Financing Transactions - Granite Tower Mortgage Loan.” As of December 31, 2019, the Portfolio Loan Facility was secured by the 100 & 200 Campus Drive Buildings, the 300-600 Campus Drive Buildings, Willow Oaks Corporate Center, Union Bank Plaza and Fountainhead Plaza. As of December 31, 2019, $281.3 million of term debt of the Portfolio Loan Facility was outstanding and $62.4 million of revolving debt remained available for future disbursements, subject to certain terms and conditions set forth in the loan documents. As of December 31, 2019, there are two one-year extension options remaining under the Portfolio Loan Facility. Subsequent to December 31, 2019, in connection with the disposition of the Campus Drive Buildings, the Company repaid $136.1 million due under this loan and the 100 & 200 Campus Drive Buildings and the 300-600 Campus Drive Buildings were released as security from the Portfolio Loan Facility. See Note 11, “Subsequent Events – Disposition of the Campus Drive Buildings.”
(5) See below, “- Recent Financing Transaction - Granite Tower Mortgage Loan.”
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KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2019

During the years ended December 31, 2019, 2018 and 2017, the Company incurred $17.2 million, $17.9 million and $17.5 million of interest expense, respectively. As of December 31, 2019 and 2018, $1.2 million and $1.3 million, respectively, of interest expense were payable. Included in interest expense for the years ended December 31, 2019, 2018 and 2017 were $1.5 million, $1.3 million and $1.1 million of amortization of deferred financing costs, respectively. Also included in interest expense for the year ended December 31, 2018 was $0.3 million of debt refinancing costs.
The following is a schedule of maturities, including principal amortization payments, for all notes payable outstanding as of December 31, 2019 (in thousands):
2020 $ 321,857   
2021 —   
2022 —   
2023 95,350   
Thereafter —   
$ 417,207   

Certain of the Company’s notes payable contain financial debt covenants. As of December 31, 2019, the Company was in compliance with these debt covenants.
Recent Financing Transaction
Granite Tower Mortgage Loan
On August 30, 2019, in connection with the partial principal repayment of the Portfolio Loan Facility, the Company, through an indirect wholly owned subsidiary (the “Granite Tower Mortgage Loan Borrower”), entered into a four-year mortgage loan with an unaffiliated lender (the “Granite Tower Mortgage Loan Agent”) for borrowings of up to $145.0 million (the “Granite Tower Mortgage Loan”). As of December 31, 2019, $95.4 million had been disbursed to the Company with the remaining loan balance of $49.6 million available for future disbursements, subject to certain conditions set forth in the loan agreement. The Granite Tower Mortgage Loan matures on September 1, 2023. The Granite Tower Mortgage Loan bears interest at a floating rate of 165 basis points over one-month LIBOR during the term of the loan. Monthly payments are initially interest-only. On January 1, 2022, monthly payments for the Granite Tower Mortgage Loan will begin to include principal and interest with principal payments calculated using an amortization schedule of 30 years for the balance of the loan term, with the remaining principal balance, all accrued and unpaid interest and any other amounts due at maturity. The Company has the right to repay all or a portion of the Granite Tower Mortgage Loan without fee, premium or penalty, subject to certain conditions contained in the loan agreement.
KBS REIT Properties II, LLC (“REIT Properties II”), the Company’s wholly owned subsidiary, is providing a guaranty of (i) payment of, and agrees to protect, defend, indemnify and hold harmless the Granite Tower Mortgage Loan Agent and each lender for, from and against, any liability, obligation, deficiency, loss, damage, costs and expenses (including reasonable attorney’s fees), and any litigation which may at any time be imposed upon, incurred or suffered by the Granite Tower Mortgage Loan Agent or any lender because of (a) certain intentional actions committed by the Granite Tower Mortgage Loan Borrower, (b) fraud or intentional misrepresentations by the Granite Tower Mortgage Loan Borrower or REIT Properties II in connection with the loan documents as described in the guaranty agreement, and (c) certain bankruptcy or insolvency proceedings involving the Granite Tower Mortgage Loan Borrower, as such acts are described in the guaranty, and (ii) upon and subject to the events and conditions described in the guaranty, payment of certain indemnity obligations of the Granite Tower Mortgage Loan Borrower related to environmental matters.
REIT Properties II also provides a limited completion guaranty of all obligations of the Granite Tower Mortgage Loan Borrower under an amendment of a major tenant’s lease up to a maximum guaranteed amount of $45.7 million.

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Table of Contents
KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2019

7. FAIR VALUE DISCLOSURES
Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other non-financial and financial assets at fair value on a non-recurring basis (e.g., carrying value of impaired long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:
•Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;
•Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and
•Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.
The fair value for certain financial instruments is derived using a combination of market quotes, pricing models and other valuation techniques that involve significant management judgment. The price transparency of financial instruments is a key determinant of the degree of judgment involved in determining the fair value of the Company’s financial instruments. Financial instruments for which actively quoted prices or pricing parameters are available and for which markets contain orderly transactions will generally have a higher degree of price transparency than financial instruments for which markets are inactive or consist of non-orderly trades. The Company evaluates several factors when determining if a market is inactive or when market transactions are not orderly. The following is a summary of the methods and assumptions used by management in estimating the fair value of each class of assets and liabilities for which it is practicable to estimate the fair value:
Cash and cash equivalents, restricted cash, rent and other receivables, and accounts payable and accrued liabilities: These balances approximate their fair values due to the short maturities of these items.
Notes payable: The fair value of the Company’s notes payable is estimated using a discounted cash flow analysis based on management’s estimates of current market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio, type of collateral and other credit enhancements. Additionally, when determining the fair value of liabilities in circumstances in which a quoted price in an active market for an identical liability is not available, the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach. The Company classifies these inputs as Level 3 inputs.
The following were the face values, carrying amounts and fair values of the Company’s notes payable as of December 31, 2019 and 2018, which carrying amounts do not generally approximate the fair values (in thousands):
  December 31, 2019 December 31, 2018
  Face Value Carrying Amount Fair Value Face Value Carrying Amount Fair Value
Financial liabilities:
Notes payable $ 417,207    $ 416,607    $ 417,874    $ 416,868    $ 415,208    $ 416,163   

Disclosure of the fair values of financial instruments is based on pertinent information available to the Company as of the period end and requires a significant amount of judgment. Low levels of transaction volume for certain financial instruments have made the estimation of fair values difficult and, therefore, both the actual results and the Company’s estimate of value at a future date could be materially different.
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KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2019

Assets Recorded at Fair Value
During the year ended December 31, 2019, the Company measured the following assets at fair value on a nonrecurring basis (in thousands):
Fair Value Measurements Using
Total Quoted Prices in Active 
Markets for Identical Assets
(Level 1) 		Significant Other
Observable Inputs
(Level 2) 		Significant
Unobservable Inputs
(Level 3)
Nonrecurring Basis:
Impaired real estate held for sale (1)
$ 295,803    $ —    $ —    $ 295,803   
_____________________
(1) Amount represents the fair value for the Campus Drive Buildings which were impacted by an impairment charge during the year, as of the date that the fair value measurement was made. The carrying value for the real estate asset may have subsequently increased or decreased from the fair value reflected due to activity that has occurred since the measurement date. See Note 5, “Real Estate Held for Sale” for a further discussion on the impaired real estate property.
As of December 31, 2019, the Campus Drive Buildings were classified as held for sale and were measured at estimated fair value, as these properties were impaired and the carrying values of these properties were adjusted to estimated fair value. The Company estimated the fair value for these impaired real estate properties held for sale based on the contractual sales price, less estimated costs to sell.

8. RELATED PARTY TRANSACTIONS
The Company has entered into the Advisory Agreement with the Advisor. This agreement entitles the Advisor to specified fees upon the provision of certain services with regard to the management of the Company’s investments, among other services, and the disposition of investments, as well as reimbursement of certain costs incurred by the Advisor in providing services to the Company. In addition, the Advisor is entitled to certain other fees, including an incentive fee upon achieving certain performance goals, as detailed in the Advisory Agreement. The Company has also entered into a fee reimbursement agreement with the Dealer Manager pursuant to which the Company agreed to reimburse the Dealer Manager for certain fees and expenses it incurs for administering the Company’s participation in the Depository Trust & Clearing Corporation Alternative Investment Product Platform with respect to certain accounts of the Company’s investors serviced through the platform. The Advisor and Dealer Manager also serve or served as the advisor and dealer manager, respectively, for KBS REIT I (which liquidated in December 2018), KBS REIT III, Pacific Oak Strategic Opportunity REIT (advisory agreement terminated as of October 31, 2019 and the dealer manager agreement terminated as of December 31, 2019), KBS Legacy Partners Apartment REIT (which liquidated in December 2018), Pacific Oak Strategic Opportunity REIT II (advisory agreement terminated as of October 31, 2019 and the dealer manager agreement terminated as of December 31, 2019) and KBS Growth & Income REIT.
On November 1, 2019, Pacific Oak Strategic Opportunity REIT and Pacific Oak Strategic Opportunity REIT II each entered into advisory agreements with a new external advisor, Pacific Oak Capital Advisors, LLC. Pacific Oak Capital Advisors, LLC is part of a group of companies formed, owned and managed by Keith D. Hall and Peter McMillan III. Together, through GKP Holding LLC, Messrs. Hall and McMillan continue to indirectly own a 33 1/3% interest in the Advisor and the Dealer Manager.
As of January 1, 2017, the Company, together with KBS REIT I, KBS REIT III, KBS Growth & Income REIT, Pacific Oak Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, Pacific Oak Strategic Opportunity REIT II, the Dealer Manager, the Advisor and other KBS-affiliated entities, had entered into an errors and omissions and directors and officers liability insurance program where the lower tiers of such insurance coverage were shared. The cost of these lower tiers is allocated by the Advisor and its insurance broker among each of the various entities covered by the program, and is billed directly to each entity. At the June 2017 renewal, KBS REIT I elected to cease participation in the program and obtained separate insurance coverage. At the June 2018 renewal, Pacific Oak Strategic Opportunity REIT, Pacific Oak Strategic Opportunity REIT II and KBS Legacy Partners Apartment REIT elected to cease participation in the program and obtained separate insurance coverage. In June 2019, the Company renewed its participation in the program. The program is effective through June 30, 2020.
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KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2019

During the years ended December 31, 2019, 2018 and 2017, no other business transactions occurred between the Company and KBS REIT I, KBS REIT III, Pacific Oak Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, Pacific Oak Strategic Opportunity REIT II, KBS Growth & Income REIT, the Advisor, the Dealer Manager or other KBS-affiliated entities.
Pursuant to the terms of these agreements, summarized below are the related-party costs incurred by the Company for the years ended December 31, 2019, 2018 and 2017, respectively, and any related amounts payable as of December 31, 2019 and 2018 (in thousands):
  Incurred
Years Ended December 31, 		Payable as of
December 31,
  2019 2018 2017 2019 2018
Expensed
Asset management fees $ 10,196    $ 10,894    $ 11,617    $ —    $ —   
Reimbursement of operating expenses (1)
325    373    238    59    55   
Disposition fees (2)
1,334    972    865    —    —   
$ 11,855    $ 12,239    $ 12,720    $ 59    $ 55   
_____________________
(1) Reimbursable operating expenses primarily consists of internal audit personnel costs, accounting software and cybersecurity related expenses incurred by the Advisor under the Advisory Agreement. The Company has reimbursed the Advisor for the Company’s allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to the Company. These amounts totaled $232,000, $244,000, and $213,000 for the years ended December 31, 2019, 2018 and 2017, respectively, and were the only type of employee costs reimbursed under the Advisory Agreement for the years ended December 31, 2019, 2018 and 2017. The Company will not reimburse for employee costs in connection with services for which the Advisor earns acquisition, origination or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries or benefits the Advisor or its affiliates may pay to the Company’s executive officers. In addition to the amounts above, the Company reimburses the Advisor for certain of the Company’s direct costs incurred from third parties that were initially paid by the Advisor on behalf of the Company.
(2) Disposition fees with respect to real estate sold are included in the gain on sale of real estate, net, in the accompanying consolidated statements of operations. 
During each of the years ended December 31, 2018 and 2017, the Advisor reimbursed the Company $0.1 million for property insurance rebates.

9. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Presented below is a summary of the unaudited quarterly financial information for the years ended December 31, 2019 and 2018 (in thousands, except per share amounts):
2019
First Quarter Second Quarter Third Quarter Fourth Quarter
Revenues $ 29,882    $ 27,674    $ 26,423    $ 28,133   
Net (loss) income (4,900)   26,778    (19,492)   (635)  
Net (loss) income per common share, basic and diluted (0.03)   0.14    (0.10)   —   
Distributions declared per common share 0.062    0.512    0.056    0.019   

2018
First Quarter Second Quarter Third Quarter Fourth Quarter
Revenues $ 35,676    $ 34,622    $ 32,682    $ 39,235   
Net (loss) income (979)   26,374    (454)   3,587   
Net (loss) income per common share, basic and diluted (0.01)   0.14    —    0.02   
Distributions declared per common share 0.060    0.061    0.062    0.062   


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KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2019

10. COMMITMENTS AND CONTINGENCIES
Economic Dependency
The Company is dependent on the Advisor for certain services that are essential to the Company, including the disposition of real estate investments; management of the daily operations of the Company’s real estate investment portfolio; and other general and administrative responsibilities. In the event the Advisor is unable to provide any of these services, the Company will be required to obtain such services from other sources.
Environmental
As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. Compliance with existing environmental laws is not expected to have a material adverse effect on the Company’s financial condition and results of operations as of December 31, 2019.
Legal Matters
From time to time, the Company is party to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on the Company’s results of operations or financial condition, which would require accrual or disclosure of the contingency and possible range of loss. Additionally, the Company has not recorded any loss contingencies related to legal proceedings in which the potential loss is deemed to be remote.

11. SUBSEQUENT EVENTS
The Company evaluates subsequent events up until the date the consolidated financial statements are issued.
Disposition of Campus Drive Buildings
On September 9, 2008, the Company, through an indirect wholly owned subsidiary, KBSII 100-200 Campus Drive, LLC, purchased two four-story office buildings located at 100 & 200 Campus Drive in Florham Park, New Jersey containing 590,458 rentable square feet on an approximate 71.1-acre parcel of land (the “100 & 200 Campus Drive Buildings”).
On October 10, 2008, the Company, through an indirect wholly owned subsidiary, KBSII 300-600 Campus Drive, LLC, purchased four four-story office buildings containing 578,388 rentable square feet (the “300-600 Campus Drive Buildings”). The 300-600 Campus Drive Buildings are located at 300, 400, 500 and 600 Campus Drive in Florham Park, New Jersey on an approximate 64.80-acre parcel of land.
On October 22, 2019, the Company, through indirect wholly owned subsidiaries, entered into a membership interest purchase and sale agreement and escrow instructions for the sale of all of the membership interests of KBSII 300-600 Campus Drive, LLC (the owner of the 300-600 Campus Drive Buildings) and KBSII 100-200 Campus Drive, LLC (the owner of the 100 & 200 Campus Drive Buildings)(together, the “Property Owners”) to a buyer (the “Purchaser”), an affiliate of Opal Holdings.
On January 22, 2020, the Company completed the sale of the membership interests in the Property Owners to the Purchaser for $311.0 million, before third-party closing costs of approximately $4.3 million and excluding disposition fees payable to the Advisor. In connection with the disposition of the Campus Drive Buildings, the Company repaid $136.1 million of the outstanding principal balance due under its Portfolio Loan Facility and the Campus Drive Buildings were released as collateral from the Portfolio Loan Facility. Additionally, on January 23, 2020, the Company used a portion of the proceeds generated by the sale of the Property Owners to repay the entire outstanding principal balance of $40.6 million due under the Corporate Centre Technology Mortgage Loan.
Plan of Liquidation
On March 5, 2020, the Company’s stockholders approved the Plan of Liquidation. The principal purpose of the Plan of Liquidation is to provide liquidity to the Company’s stockholders by selling the Company’s assets, paying its debts and distributing the net proceeds from liquidation to the Company’s stockholders. For more information, see the Plan of Liquidation, which is included as an exhibit to this Annual Report on Form 10-K.
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KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2019

Initial Liquidating Distribution Authorized
Pursuant to the Plan of Liquidation, on March 5, 2020, the Company’s board of directors authorized an initial liquidating distribution in the amount of $0.75 per share of common stock to the Company’s stockholders of record as of the close of business on March 5, 2020 (the “Initial Liquidating Distribution”). The Initial Liquidating Distribution will be funded from proceeds from the sale of the Campus Drive Buildings. The Company expects to pay the Initial Liquidating Distribution on or about March 10, 2020.
Since the Initial Liquidating Distribution is a liquidating distribution pursuant to the Plan of Liquidation, it will reduce the Company’s stockholders’ remaining investment in the Company and reduce the estimated future liquidating distributions per share to be received by the Company’s stockholders by $0.75 per share.
Updated Estimated Value Per Share
As disclosed in the proxy statement and as of December 9, 2019, the date the Company filed the proxy statement with the SEC, the Company estimated that, if the Company is able to successfully implement the Plan of Liquidation, the amount of cash that its stockholders would receive for each share of the Company’s common stock that they then hold could range between approximately $3.40 and $3.83 per share.
In connection with the authorization of the Initial Liquidating Distribution, on March 5, 2020, the Company’s board of directors approved an updated estimated value per share of the Company’s common stock of $2.87 (unaudited), effective March 5, 2020 (the “March 2020 Estimated Value Per Share”) to reflect the impact of the payment of the Initial Liquidating Distribution. The Company is providing the March 2020 Estimated Value Per Share to assist broker-dealers that participated in the Company’s now-terminated initial public offering in meeting their customer account statement reporting obligations under the Financial Industry Regulatory Authority Rule 2231.
The March 2020 Estimated Value Per Share is equal to the midpoint of the estimated range of liquidating distributions of $3.40 and $3.83 per share of $3.615, reduced by the Initial Liquidating Distribution of $0.75 per share of common stock. Thus, the March 2020 Estimated Value Per Share reflects the resulting reduction of the stockholders’ remaining investment in the Company as a result of the Initial Liquidating Distribution. 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 Institute for Portfolio Alternatives (“IPA”) in April 2013 (the “IPA Valuation Guidelines”), reduced for the impact of expected disposition costs and fees related to future dispositions of real estate and estimated corporate and other liquidation and dissolution costs not covered by the Company’s cash flow from operations.
Determination of the November 13, 2019 Estimated Value Per Share and Estimated Range in Liquidating Distributions
As disclosed in the proxy statement, the Company’s range of estimated net proceeds from liquidation of approximately $3.40 and $3.83 is based on the range in estimated value per share of the Company’s common stock of $3.55 to $3.99 approved by the Company’s board of directors on November 13, 2019, and reduced for (i) expected disposition costs and fees related to future dispositions of real estate, and (ii) estimated corporate and other liquidation and dissolution costs not covered from the Company’s cash flow from operations. The Company’s board of directors approved the November 13, 2019 estimated value per share, in part, to assist the Company in calculating the range of estimated net proceeds from liquidation. The November 13, 2019 estimated value per share of $3.79 (unaudited) is 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, all as of September 30, 2019, with the exception of certain adjustments described in this Annual Report under Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Market Information” for which estimated values were adjusted subsequent to September 30, 2019.
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 in this Annual Report under Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Market Information.”
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KBS REAL ESTATE INVESTMENT TRUST II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2019

Limitations of the March 2020 Estimated Value Per Share
As mentioned above, the Company is providing the March 2020 Estimated Value Per Share to assist broker-dealers that participated in the Company’s now-terminated initial public offering in meeting their customer account statement reporting obligations. The March 2020 Estimated Value Per Share will first appear on the March 2020 customer account statements that will be mailed in April 2020. As with any valuation methodology, the methodologies used are based upon a number of estimates and assumptions that may not be accurate or complete. Different parties with different assumptions and estimates could derive a different estimated value per share, and this difference could be significant. The March 2020 Estimated Value Per Share is not audited and does not represent the fair value of the Company’s assets less the fair value of the Company’s liabilities according to GAAP.
Accordingly, with respect to the March 2020 Estimated Value Per Share, the Company can give no assurance:
•of the amount or timing of liquidating distributions the Company will ultimately be able to pay its stockholders;
•that a stockholder would be able to resell his or her shares at the March 2020 Estimated Value Per Share;
•that an independent third-party appraiser or third-party valuation firm would agree with the March 2020 Estimated Value Per Share; or
•that the methodology used to determine the March 2020 Estimated Value Per Share would be acceptable to FINRA or for compliance with ERISA reporting requirements.
The March 2020 Estimated Value Per Share is based on the estimated range of liquidating distributions per share to be received by the Company’s stockholders pursuant to the Plan of Liquidation, reduced by the amount of the Initial Liquidating Distribution, as described above. The value of the Company’s shares will fluctuate over time in response to developments related to individual assets in the Company’s portfolio and the management of those assets, in response to the real estate and finance markets, based on the amount of net proceeds the Company receives from the disposition of its remaining assets and due to other factors. The March 2020 Estimated Value Per Share does not reflect a discount for the fact that the Company is externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values.
Amendment and Restatement of Share Redemption Program
In connection with the approval of the Plan of Liquidation, on March 5, 2020, the board of directors approved the Company’s Tenth Amended and Restated Share Redemption Program (the “Amended Share Redemption Program”).
The Amended Share Redemption Program changes the redemption price per share of the Company’s common stock eligible for redemption to take into account the estimated range of liquidating distributions as disclosed in the Proxy Statement and any liquidating distributions declared by the Company’s board of directors. The Amended Share Redemption Program sets the redemption price per share of the Company’s common stock eligible for redemption at (a) $3.615 (which represents the mid-point of the estimated range of liquidating distributions of $3.40 to $3.83 per share) less (b) the amount of any liquidating distributions on such share declared by the Company’s board of directors that have a record date prior to the applicable redemption date for such share. Thus, the redemption price per share of the Company’s common stock eligible for redemption on the March 31, 2020 redemption date will equal $2.87. The Company will report future redemption prices in a Current Report on Form 8-K or in its annual or quarterly reports, all publicly filed with the SEC.
There were no other changes in the Amended Share Redemption Program. The Amended Share Redemption Program will become effective on March 20, 2020. The Amended Share Redemption Program is filed as an exhibit to this Annual Report. The Amended Share Redemption Program continues to limit redemptions to redemptions sought in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence” (each as defined in the Amended Share Redemption Program).

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KBS REAL ESTATE INVESTMENT TRUST II, INC.
SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION AND AMORTIZATION
December 31, 2019
(dollar amounts in thousands)
Description Location Ownership
Percent 		Encumbrances Initial Cost to Company
Cost
Capitalized
Subsequent
to Acquisition (2)
Gross Amount at which Carried at Close of Period Accumulated
Depreciation
and
Amortization 		Original
Date of
Construction 		Date Acquired
Land
Building and
Improvements (1)
Total Land
Building and
Improvements (1)
Total (3)
Properties Held for Investment
Willow Oaks Corporate Center Fairfax, VA 100%   
(4)
$ 25,300    $ 87,802    $ 113,102    $ 7,124    $ 25,300    $ 94,926    $ 120,226    $ (25,842)   1986/1989/2003 08/26/2009
Union Bank Plaza Los Angeles, CA 100%   
(4)
24,000    190,232    214,232    (12,547)   24,000    177,685    201,685    (37,841)   1967 09/15/2010
Granite Tower Denver, CO 100%    $ 95,350    8,850    141,438    150,288    (2,959)   8,850    138,479    147,329    (32,855)   1983 12/16/2010
Fountainhead Plaza Tempe, AZ 100%   
(4)
12,300    123,700    136,000    (16,617)   12,300    107,083    119,383    (28,724)   2011 09/13/2011
Corporate Technology Centre San Jose, CA 100%    40,564    48,505    102,894    151,399    (2,092)   48,505    100,802    149,307    (16,061)   1999/2001 03/28/2013
Total Properties Held for Investment 118,955    646,066    765,021    (27,091)   118,955    618,975    737,930    (141,323)  
Properties Held for Sale
100 & 200 Campus Drive Buildings Florham Park, NJ 100%   
(4)
10,700    188,509    199,209    (47,049)   9,461    142,699    152,160    (22,341)   1988/1989 09/09/2008
300-600 Campus Drive Buildings Florham Park, NJ 100%   
(4)
9,717    185,445    195,162    (26,773)   9,121    159,268    168,389    (28,084)   1997/1999 10/10/2008
Total Properties Held for Sale 20,417    373,954    394,371    (73,822)   18,582    301,967    320,549    (50,425)  
TOTAL    $ 139,372    $ 1,020,020    $ 1,159,392    $ (100,913)   $ 137,537    $ 920,942    $ 1,058,479    $ (191,748)  
_____________________
(1) Building and improvements includes tenant origination and absorption costs.
(2) Costs capitalized subsequent to acquisition is net of impairments and write-offs of fully depreciated/amortized assets.
(3) The aggregate cost of real estate for federal income tax purposes was $1.3 billion (unaudited) as of December 31, 2019.
(4) These properties are security for the Portfolio Loan Facility, which had an outstanding principal balance of $281.3 million as of December 31, 2019.


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KBS REAL ESTATE INVESTMENT TRUST II, INC.
SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION AND AMORTIZATION (CONTINUED)
December 31, 2019
(in thousands)
2019 2018 2017
Real Estate
Balance at the beginning of the year $ 1,127,938    $ 1,207,445    $ 1,275,847   
Improvements 59,768    35,681    16,616   
Write-off of fully depreciated and fully amortized assets (2,821)   (38,035)   (13,095)  
Impairments (14,300)   —    —   
Sales (112,106)   (77,153)   (71,923)  
Balance at the end of the year $ 1,058,479    $ 1,127,938    $ 1,207,445   
Accumulated depreciation and amortization
Balance at the beginning of the year $ 173,731    $ 176,576    $ 150,111   
Depreciation and amortization expense 41,145    46,043    50,079   
Write-off of fully depreciated and fully amortized assets (2,821)   (38,035)   (13,095)  
Impairments —    —    —   
Sales (20,307)   (10,853)   (10,519)  
Balance at the end of the year $ 191,748    $ 173,731    $ 176,576   

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ITEM 16. FORM 10-K SUMMARY
None.

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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Newport Beach, State of California, on March 6, 2020.
  KBS REAL ESTATE INVESTMENT TRUST II, INC.
By:   /s/ Charles J. Schreiber, Jr.
  Charles J. Schreiber, Jr.
  Chairman of the Board,
Chief Executive Officer, President and Director
(principal executive officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Name Title Date
/s/ CHARLES J. SCHREIBER, JR. Chairman of the Board,
Chief Executive Officer, President and Director
(principal executive officer) 		March 6, 2020
Charles J. Schreiber, Jr.
/s/ JEFFREY K. WALDVOGEL Chief Financial Officer, Treasurer and Secretary
(principal financial officer) 		March 6, 2020
Jeffrey K. Waldvogel
/s/ STACIE K. YAMANE Chief Accounting Officer and Assistant Secretary
(principal accounting officer) 		March 6, 2020
Stacie K. Yamane
/s/ JEFFREY A. DRITLEY Director March 6, 2020
Jeffrey A. Dritley
/s/ STUART A. GABRIEL, PH.D. Director March 6, 2020
Stuart A. Gabriel, Ph.D.
/s/ RON D. STURZENEGGER Director March 6, 2020
Ron D. Sturzenegger




Exhibit 2.1

KBS REAL ESTATE INVESTMENT TRUST II, INC.
PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION
March 5, 2020
1.Approval and Effectiveness of Plan. This Plan of Complete Liquidation and Dissolution (the “Plan”) of KBS Real Estate Investment Trust II, Inc., a Maryland corporation (the “Company”), the sale of all or substantially all of the assets of the Company, and the dissolution of the Company have been determined by the Board of Directors of the Company (the “Board”) to be advisable and in the best interest of the Company and its stockholders (the “Stockholders”), and have been approved by the Board. The Board has directed that the Plan, the sale of all or substantially all of the assets of the Company and the dissolution of the Company pursuant thereto, be submitted to the Stockholders for approval. The Plan shall become effective upon approval of the Plan, and the sale of all or substantially all of the assets of the Company and the dissolution of the Company pursuant thereto, by the Stockholders. The date of the Stockholders’ approval is hereinafter referred to as the “Effective Date.
2.Voluntary Liquidation and Dissolution. On and after the Effective Date, the Company shall voluntarily liquidate and dissolve in accordance with Section 331 of the Internal Revenue Code of 1986, as amended, and the Maryland General Corporation Law (the “MGCL”). Pursuant to the Plan, the Company shall, acting for itself or in its capacity as the general partner of KBS Limited Partnership II, a Delaware limited partnership (the “Operating Partnership”), sell, convey, transfer and deliver or otherwise dispose of all of the assets of the Company and cause the Operating Partnership to sell, convey, transfer and deliver or otherwise dispose of all of the assets of the Operating Partnership in one or more transactions, without further approval of the Stockholders. Within thirty (30) days after the Effective Date, the officers of the Company shall file a return on Form 966 with the Director of Internal Revenue for and on behalf of the Company.
3.Sales of Assets.
(a)The Company, acting for itself or in its capacity as the general partner of the Operating Partnership, as appropriate, is authorized to sell or to cause the Operating Partnership and the subsidiaries of the Operating Partnership to sell, upon such terms as may be deemed advisable, any or all of their assets for cash, notes, redemption of equity or such other assets as may be conveniently liquidated or distributed to the Stockholders.
(b)The Company, the Operating Partnership and the Operating Partnership’s subsidiaries shall not authorize or transfer assets pursuant to any sale agreement between the Company, the Operating Partnership or the Operating Partnership’s subsidiaries, on the one hand, and an affiliate of the Company, the Operating Partnership or the Operating Partnership’s subsidiaries, on the other hand, unless a majority of directors, including a majority of independent directors, not otherwise interested in the transaction determine that the transaction is fair and reasonable to the Company, the Operating Partnership or the Operating Partnership’s subsidiaries, as the case may be.
4.Payment of Creditors; Distributions to Stockholders. Subject to Section 8 hereof, the proper officers of the Company are authorized and directed to proceed promptly to: (a) collect its assets; (b) dispose of such assets as are not to be distributed in kind to the Stockholders; (c) pay or create a reserve fund for the payment of or otherwise adequately provide for the payment of all of the liabilities and obligations of the Company, the Operating Partnership and the Operating Partnership’s subsidiaries; (d) pay all expenses incidental to the Plan, including all counsel fees, accountants’ fees, advisory fees and such other fees and taxes as are necessary to effectuate the Plan; (e) cause the Operating Partnership to distribute its remaining assets, either in cash or in kind, to the limited and general partners of the Operating Partnership, in one or more distributions, in accordance with the terms and provisions of the Limited Partnership Agreement of the Operating Partnership; (f) distribute all the remaining assets of the Company, either in cash or in kind, to the Stockholders in one or more distributions, in accordance with the terms and provisions of the Company’s Second Articles of Amendment and Restatement, as may be amended from time to time (the “charter”); and (g) do every other act necessary or advisable to wind up the affairs of the Company, the Operating Partnership and its subsidiaries and to dissolve the Company, the Operating Partnership and its subsidiaries. Upon the sale or other disposition of the assets of the Company and the payment of, or provision for, all of the liabilities and obligations of the Company, the Company shall be deemed to have liquidated.



5.Reserve Fund. The Company, acting for itself or in its capacity as the general partner of the Operating Partnership, as appropriate, is authorized, but not required, to establish, or to cause the Operating Partnership to establish, one or more reserve funds, in a reasonable amount and as may be deemed advisable, to meet known liabilities and liquidating expenses and estimated, unascertained or contingent liabilities and expenses. Creation of a reserve fund may be accomplished by a recording in the Company’s accounting ledgers of any accounting or bookkeeping entry which indicates the allocation of funds so set aside for payment. The Company is also authorized, but not required, to create a reserve fund by placing cash or property in escrow with an escrow agent for a specified term together with payment instructions. Any undistributed amounts remaining in such an escrowed reserve fund at the end of its term shall be returned to the Company, the liquidating trust referred to below or such other successor-in-interest to the Company as may then exist or, if no such entity is then in existence, shall be delivered to the abandoned property unit of the Maryland State Comptroller’s office. The Company may also create a reserve fund by any other reasonable means.
6.Insurance Policies. The Company is authorized, but not required, to procure for itself and/or as general partner to procure for the Operating Partnership, as appropriate, one or more insurance policies, in a reasonable amount and as may be deemed advisable, to cover unknown or unpaid liabilities and liquidating expenses and unascertained or contingent liabilities and expenses.
7.Articles of Dissolution. Upon the sale or the assignment and conveyance of all or substantially all of the assets of the Company, and the taking of all actions required under the laws of the State of Maryland in connection with the liquidation and dissolution of the Company, the proper officers of the Company are authorized and directed to file articles of dissolution with the State Department of Assessments and Taxation of Maryland (the “Department”) pursuant to Section 3-407 of the MGCL and to take all other appropriate and necessary action to dissolve the Company under Maryland law. Prior to filing articles of dissolution, the Company shall give notice to its known creditors and employees as required by Section 3-404 of MGCL (alternatively, the Board may determine that the Company has no employees or known creditors) and satisfy all other prerequisites to such filing under Maryland law. Upon the Department’s acceptance of the articles of dissolution for record, as provided by Section 3-408(a) of the MGCL, the Company shall be dissolved.
8.Effect and Timing of Distributions. Upon the complete distribution of all assets of the Company (the “Final Distribution”) to the holders of outstanding shares of common stock, par value $0.01 per share, of the Company (the “Common Stock”) and the dissolution of the Company as contemplated by Section 7 above, all such shares of Common Stock shall be canceled and no longer deemed outstanding and all rights of the holders thereof as Stockholders shall cease and terminate. The Company shall use commercially reasonable efforts to cause the liquidation and dissolution of the Company to occur and to pay the Final Distribution to holders of outstanding shares of Common Stock no later than the second anniversary of the Effective Date.
9.Final Distribution as Distribution in Kind of Liquidating Trust Beneficial Interests. In the event that the Board deems it necessary or advisable in order to preserve the Company’s status as a REIT or otherwise avoid the payment of income tax, the Board deems it necessary or advisable in order to enable the Company to terminate its obligation to file quarterly reports and audited annual financial statements with the Securities and Exchange Commission (the “Commission”) or the Board determines it is otherwise advantageous or appropriate to do so, the Board may cause the Company to pay the Final Distribution as a distribution in kind of beneficial interests in a trust (the “Liquidating Trust”), at such time as the Board deems appropriate in its sole discretion (provided only that any remaining outstanding units of limited partnership interest in the Operating Partnership have been completely redeemed prior to the transfer and assignment mentioned below), substantially as follows:
(a)The Board may create the Liquidating Trust under Maryland statutory or common law and may transfer and assign, and may, as general partner, cause the Operating Partnership to transfer and assign, to the Liquidating Trust all of the assets of the Company, the Operating Partnership and the Operating Partnership’s subsidiaries of every sort whatsoever, including their unsold properties, assets, claims, contingent claims and causes of action, subject to all of their unsatisfied debts, liabilities and expenses, known or unknown, contingent or otherwise. From and after the date of such transfer and assignment of assets (subject to liabilities) to the Liquidating Trust, the Board, the Company, the Operating Partnership and the Operating Partnership’s subsidiaries shall have no interest of any character in and to any such assets and all of such assets shall thereafter by held by the Liquidating Trust.
(b)Simultaneously with such transfer and assignment, shares of beneficial interest in the Liquidating Trust shall be deemed to be distributed to each holder of shares of Common Stock, all of whom shall


automatically and without any need for notice or presentment be deemed to hold corresponding shares of beneficial interest in the Liquidating Trust. Such distribution of shares of beneficial interest in the Liquidating Trust shall constitute the Final Distribution of all of the assets of the Company to the Stockholders under Section 8 above.
(c)The initial trustees of the Liquidating Trust shall be designated by the Board.
(d)The declaration of trust or other instrument governing the Liquidating Trust (the “Declaration of Trust”) shall provide, among other things, that, immediately following such transfer, assignment and distribution, each share of beneficial interest in the Liquidating Trust shall have a claim upon the assets of the Liquidating Trust that is the substantial economic equivalent of the claims each share of Common Stock had upon the combined assets of the Company and the Operating Partnership immediately prior to the transfer, assignment and distribution. The Declaration of Trust shall further provide that the Liquidating Trust’s activities shall be limited to conserving, protecting and selling the assets transferred to it and distributing the proceeds therefrom, including holding such assets for the benefit of the holders of beneficial interests in the Liquidating Trust, temporarily investing such proceeds and collecting income therefrom, providing for the debts, liabilities and expenses of the Company and the Operating Partnership, paying liquidating distributions to the holders of shares of beneficial interest in the Liquidating Trust and taking other actions as may be deemed necessary or appropriate by the trustees to conserve and protect the assets of the Liquidating Trust and provide for the orderly liquidation thereof.
(e)Approval of the Plan shall constitute the approval by the Stockholders of the transfer and assignment to the Liquidating Trust, the form and substance of the Declaration of Trust as approved by the Board and the appointment of trustees selected by the Board.
10.Termination of Exchange Act Registration. Immediately prior to any transfer to the Liquidating Trust, or at such other time as the Board considers appropriate, the Board and the proper officers of the Company are authorized to cause the Company to file a Form 15 (or take other appropriate action) to terminate the registration of the Common Stock under the U.S. Securities Exchange Act of 1934, as amended.
11.Interpretation; General Authority. The Board, the trustees of the Liquidating Trust and the proper officers of the Company are hereby authorized to interpret the provisions of the Plan and are hereby authorized and directed to take such actions, to give such notices to creditors, stockholders and governmental entities, to make such filings with governmental entities and to execute such agreements, conveyances, assignments, transfers, certificates and other documents, as may, in their judgment, be necessary or advisable in order to wind up expeditiously the affairs of the Company and complete the liquidation and dissolution thereof, including, without limitation: (a) the execution of any contracts, deeds, assignments or other instruments necessary or appropriate to sell or otherwise dispose of any or all property of the Company, the Operating Partnership, the Operating Partnership’s subsidiaries or the Liquidating Trust, whether real or personal, tangible or intangible; (b) the appointment of other persons to carry out any aspect of the Plan; and (c) the temporary investment of funds in such medium as the Board or the trustees of the Liquidating Trust may deem appropriate.
12.Director Compensation. The independent members of the Board shall continue to receive compensation until the Final Distribution, provided that they remain members of the Board.
13.Indemnification. The Company and/or the Board shall reserve sufficient assets and/or obtain or maintain such insurance (including, without limitation, directors and officers insurance) as shall be necessary or advisable to provide the continued indemnification of the directors, officers and agents of the Company and such other parties whom the Company has agreed to indemnify, to the maximum extent provided by the charter and bylaws of the Company, any existing indemnification agreement to which the Company is a party and applicable law. At the discretion of the Board, such insurance may include coverage for the periods after the dissolution of the Company, including periods after the termination of any Liquidating Trust, and may include coverage for trustees, officers, employees and agents of such Liquidating Trust.
14.Governing Law. The validity, interpretation and performance of the Plan shall be controlled by and construed under the laws of the State of Maryland.
15.Termination of Plan of Liquidation; Amendment. Prior to the acceptance for record of the Company’s articles of dissolution by the Department, the Board may terminate the Plan for any reason, subject to and contingent upon the approval of such termination by the Company’s stockholders. Notwithstanding approval of the Plan by the Stockholders, the Board or the trustees of the Liquidating Trust may make certain modifications or amendments to the Plan without further action by or approval of the Stockholders to the extent permitted under law.


Exhibit 4.2
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
As of December 31, 2019, KBS Real Estate Investment Trust II, Inc.’s common stock, $0.01 par value per share, was registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). References in the following discussion to the “Company,” “we,” “our” and “us” mean KBS Real Estate Investment Trust II, Inc., unless the context otherwise requires or otherwise expressly stated, and references to “you” and “your” mean holders of our common stock.
Description of Our Common Stock
The following description of our common stock does not purport to be complete and is subject to and qualified in its entirety by reference to Maryland General Corporation Law and to our charter and bylaws, copies of which are filed as exhibits to the Annual Report on Form 10-K to which this Exhibit 4.2 is a part.
General
Our charter authorizes the issuance of 1,010,000,000 shares of capital stock, of which 1,000,000,000 shares are designated as common stock with a par value of $0.01 per share and 10,000,000 shares are designated as preferred stock with a par value of $0.01 per share. In addition, our board of directors may amend our charter to increase or decrease the amount of our authorized shares. As of December 31, 2019, we had not issued any shares of preferred stock.
Common Stock
The holders of our common stock are entitled to one vote per share on all matters submitted to a stockholder vote, including the election of our directors. Our charter does not provide for cumulative voting in the election of our directors. Therefore, the holders of a majority of our outstanding common shares can elect our entire board of directors. Unless applicable law requires otherwise, and except as our charter may provide with respect to any series of preferred stock that we may issue in the future, the holders of our common stock will possess exclusive voting power.
Holders of our common stock are entitled to receive such distributions as declared from time to time by our board of directors out of legally available funds, subject to any preferential rights of any preferred stock that we issue in the future. In any liquidation, each outstanding share of common stock entitles its holder to share (based on the percentage of shares held) in the assets that remain after we pay our liabilities and any preferential distributions owed to preferred stockholders. Holders of shares of our common stock do not have preemptive rights, which means that you will not have an automatic option to purchase any new shares that we issue, nor do holders of our shares have any preference, conversion, exchange, sinking fund, redemption or appraisal rights. Our common stock is non-assessable by us upon our receipt of the consideration for which our board of directors authorized its issuance.
Our board of directors has authorized the issuance of shares of our capital stock without certificates. We do not expect to issue shares in certificated form. Information regarding restrictions on the transferability of our shares that, under Maryland law, would otherwise have been required to appear on our share certificates will instead be furnished to stockholders upon request and without charge.



We maintain a stock ledger that contains the name and address of each stockholder and the number of shares that the stockholder holds. With respect to uncertificated stock, we will continue to treat the stockholder registered on our stock ledger as the owner of the shares until the new owner delivers a properly executed form to us, which form we will provide to any registered holder upon request.
Preferred Stock
Our charter authorizes our board of directors to designate and issue one or more classes or series of preferred stock without stockholder approval. Our board of directors may determine the relative rights, preferences and privileges of each class or series of preferred stock so issued, which may be more beneficial than the rights, preferences and privileges attributable to our common stock. The issuance of preferred stock could have the effect of delaying or preventing a change in control. Our board of directors has no present plans to issue preferred stock but may do so at any time in the future without stockholder approval.
Meetings and Special Voting Requirements
An annual meeting of our stockholders will be held each year, at least 30 days after delivery of our annual report. Special meetings of stockholders may be called only upon the request of a majority of our directors, a majority of our independent directors, our chief executive officer, our president or upon the written request of stockholders holding at least 10% of the shares entitled to be cast on any issue proposed to be considered at the special meeting. Upon receipt of a written request of stockholders holding at least 10% of the shares entitled to be cast stating the purpose of the special meeting, our secretary will provide all of our stockholders written notice of the meeting and the purpose of such meeting. The meeting must be held not less than 15 days or more than 60 days after the distribution of the notice of the meeting. The presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at any stockholder meeting constitutes a quorum. Unless otherwise provided by the Maryland General Corporation Law or our charter, the affirmative vote of a majority of all votes cast is necessary to take stockholder action. With respect to the election of directors, each candidate nominated for election to the board of directors must receive a majority of the votes present, in person or by proxy, in order to be elected. Therefore, if a nominee receives fewer “for” votes than “withhold” votes in an election, then the nominee will not be elected.
Our charter provides that the concurrence of the board is not required in order for the stockholders to amend the charter, dissolve the corporation or remove directors. However, we have been advised that Section 2-604 of the Maryland General Corporation Law does require board approval in order to amend our charter or dissolve. Without the approval of a majority of the shares entitled to vote on the matter, the board of directors may not:
•amend the charter to adversely affect the rights, preferences and privileges of the stockholders;
•amend charter provisions relating to director qualifications, fiduciary duties, liability and indemnification, conflicts of interest, investment policies or investment restrictions;
•cause our liquidation or dissolution after our initial investment in property;
• sell all or substantially all of our assets other than in the ordinary course of business; or
•cause our merger or reorganization.
Our advisory agreement with KBS Capital Advisors has a one-year term but may be renewed for an unlimited number of successive one-year periods upon the mutual consent of KBS Capital Advisors and us. Our independent directors annually review our advisory agreement with KBS Capital Advisors. While the stockholders do not have the ability to vote to replace KBS Capital Advisors or to select a new


advisor, stockholders do have the ability, by the affirmative vote of a majority of the shares entitled to vote on such matter, to remove a director from our board.
Advance Notice for Stockholder Nominations for Directors and Proposals of New Business
In order for a stockholder to nominate a director or propose new business at the annual stockholders’ meeting, our bylaws generally require that the stockholder give notice of the nomination or proposal not less than 90 days prior to the first anniversary of the date of the mailing of the notice for the preceding year’s annual stockholders’ meeting, unless such nomination or proposal is made pursuant to the company’s notice of the meeting or by or at the direction of our board of directors. Our bylaws contain a similar notice requirement in connection with nominations for directors at a special meeting of stockholders called for the purpose of electing one or more directors. Failure to comply with the notice provisions will make stockholders unable to nominate directors or propose new business.
Restriction on Ownership of Shares
Ownership Limit
To maintain our REIT qualification, not more than 50% in value of our outstanding shares may be owned, directly or indirectly, by five or fewer individuals (including certain entities treated as individuals under the Internal Revenue Code) during the last half of each taxable year. In addition, at least 100 persons who are independent of us and each other must beneficially own our outstanding shares for at least 335 days per 12-month taxable year or during a proportionate part of a shorter taxable year. Each of the two requirements specified in the two preceding sentences shall not apply to any period prior to the second year for which we elected to be taxed as a REIT. We may prohibit certain acquisitions and transfers of shares so as to ensure our continued qualification as a REIT under the Internal Revenue Code. However, we cannot assure you that this prohibition will be effective.
To help ensure that we meet these tests, our charter prohibits any person or group of persons from acquiring, directly or indirectly, beneficial ownership of more than 9.8% of our aggregate outstanding shares unless exempted by our board of directors. Our board of directors may waive this ownership limit with respect to a particular person if the board receives evidence that ownership in excess of the limit will not jeopardize our REIT status. For purposes of this provision, we treat corporations, partnerships and other entities as single persons.
Any attempted transfer of our shares that, if effective, would result in a violation of our ownership limit or would result in our shares being owned by fewer than 100 persons will be null and void and will cause the number of shares causing the violation to be automatically transferred to a trust for the exclusive benefit of one or more charitable beneficiaries. The prohibited transferee will not acquire any rights in the shares. The automatic transfer will be deemed to be effective as of the close of business on the business day prior to the date of the attempted transfer. We will designate a trustee of the trust that will not be affiliated with us or the prohibited transferee. We will also name one or more charitable organizations as a beneficiary of the share trust.
Shares held in trust will remain issued and outstanding shares and will be entitled to the same rights and privileges as all other shares of the same class or series. The prohibited transferee will not benefit economically from any of the shares held in trust, will not have any rights to dividends or distributions and will not have the right to vote or any other rights attributable to the shares held in the trust. The trustee will receive all dividends and distributions on the shares held in trust and will hold such dividends or distributions in trust for the benefit of the charitable beneficiary. The trustee may vote any shares held in trust.



Within 20 days of receiving notice from us that any of our shares have been transferred to the trust for the charitable beneficiary, the trustee will sell those shares to a person designated by the trustee whose ownership of the shares will not violate the above restrictions. Upon the sale, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the prohibited transferee and to the charitable beneficiary as follows. The prohibited transferee will receive the lesser of (i) the price paid by the prohibited transferee for the shares or, if the prohibited transferee did not give value for the shares in connection with the event causing the shares to be held in the trust (e.g., a gift, devise or other similar transaction), the market price (as defined in our charter) of the shares on the day of the event causing the shares to be held in the trust and (ii) the price received by the trustee from the sale or other disposition of the shares. Any net sale proceeds in excess of the amount payable to the prohibited transferee will be paid immediately to the charitable beneficiary. If, prior to our discovery that shares have been transferred to the trust, the shares are sold by the prohibited transferee, then (i) the shares shall be deemed to have been sold on behalf of the trust and (ii) to the extent that the prohibited transferee received an amount for the shares that exceeds the amount he was entitled to receive, the excess shall be paid to the trustee upon demand.
In addition, shares held in the trust for the charitable beneficiary will be deemed to have been offered for sale to us, or our designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in the transfer to the trust (or, in the case of a devise or gift, the market price at the time of the devise or gift) and (ii) the market price on the date we, or our designee, accept the offer. We will have the right to accept the offer until the trustee has sold the shares. Upon a sale to us, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the prohibited transferee.
Any person who acquires or attempts to acquire shares in violation of the foregoing restrictions or who would have owned the shares that were transferred to any such trust must give us immediate written notice of such event, and any person who proposes or attempts to acquire or receive shares in violation of the foregoing restrictions must give us at least 15 days’ written notice prior to such transaction. In both cases, such persons shall provide to us such other information as we may request in order to determine the effect, if any, of such transfer on our status as a REIT.
The foregoing restrictions will continue to apply until our board of directors determines it is no longer in our best interest to continue to qualify as a REIT. The ownership limit does not apply to any underwriter in an offering of our shares or to a person or persons exempted from the ownership limit by our board of directors based upon appropriate assurances that our qualification as a REIT would not be jeopardized.
Within 30 days after the end of each taxable year, every owner of 5% or more of our outstanding capital stock will be asked to deliver to us a statement setting forth the number of shares owned directly or indirectly by such person and a description of how such person holds the shares. Each such owner shall also provide us with such additional information as we may request in order to determine the effect, if any, of his or her beneficial ownership on our status as a REIT and to ensure compliance with our ownership limit.
These restrictions could delay, defer or prevent a transaction or change in control of our company that might involve a premium price for our shares of common stock or otherwise be in the best interests of our stockholders.
Suitability Standards and Minimum Purchase Requirements



Our charter provides that, until our common stock is listed on a national securities exchange, to purchase our common stock, the purchaser must represent to us:
(i)that such purchaser (or, in the case of sales to fiduciary accounts, that the beneficiary, the fiduciary account or the grantor or donor who directly or indirectly supplies the funds to purchase the shares if the grantor or donor is the fiduciary) has a minimum annual gross income of $70,000 and a net worth (excluding home, home furnishings and automobiles) of not less than $70,000; or
(ii)that such purchaser (or, in the case of sales to fiduciary accounts, that the beneficiary, the fiduciary account or the grantor or donor who directly or indirectly supplies the funds to purchase the shares if the grantor or donor is the fiduciary) has a net worth (excluding home, home furnishings and automobiles) of not less than $250,000.
Further each issuance or transfer of shares of common stock shall comply with the requirements regarding minimum initial and subsequent cash investment amounts set forth in our Registration Statement (No. 333-146341) on Form S-11 as such registration statement has been amended or supplemented as of the date of such issuance or transfer or any lower applicable state requirements with respect to minimum initial and subsequent cash investment amounts in effect as of the date of the issuance or transfer. Subsequent purchasers, i.e., potential purchasers of your shares, must also meet the net worth or income standards, and unless you are transferring all of your shares, you may not transfer your shares in a manner that causes you or your transferee to own fewer than the number of shares required to meet the minimum purchase requirements, except for the following transfers without consideration: transfers by gift, transfers by inheritance, intrafamily transfers, family dissolutions, transfers to affiliates and transfers by operation of law. These suitability and minimum purchase requirements may make it more difficult for you to sell your shares.
Inspection of Books and Records
As a part of our books and records, we maintain at our principal office an alphabetical list of the names of our stockholders, along with their addresses and telephone numbers and the number of shares held by each of them. We update this stockholder list at least quarterly and it is available for inspection at our principal office by a stockholder or his or her designated agent upon request of the stockholder. We will also mail this list to any stockholder within 10 days of receipt of his or her request. We may impose a reasonable charge for expenses incurred in reproducing such list. Stockholders, however, may not sell or use this list for commercial purposes. The purposes for which stockholders may request this list include matters relating to their voting rights. Each stockholder who receives a copy of the stockholder list shall keep such list confidential and shall sign a confidentiality agreement to the effect that such stockholder will keep the stockholder list confidential and share such list only with its employees, representatives or agents who agree in writing to maintain the confidentiality of the stockholder list.
If our advisor or our board of directors neglects or refuses to exhibit, produce or mail a copy of the stockholder list as requested, our advisor and/ or board, as the case may be, shall be liable to the stockholder requesting the list for the costs, including attorneys’ fees, incurred by that stockholder for compelling the production of the stockholder list and any actual damages suffered by the stockholder for the neglect or refusal to produce the list. It shall be a defense that the actual purpose and reason for the requests for inspection or for a copy of the stockholder list is not for a proper purpose but is instead for the purpose of securing such list of stockholders or other information for the purpose of selling such list or copies thereof, or of using the same for a commercial purpose (such as to solicit the purchase of our shares) other than in the interest of the applicant as a stockholder relative to the affairs of our company. We may require that the stockholder requesting the stockholder list represent that the request is not for a commercial purpose unrelated to the stockholder’s interest in our company. The remedies provided by our


charter to stockholders requesting copies of the stockholder list are in addition to, and do not in any way limit, other remedies available to stockholders under federal law, or the law of any state.
Business Combinations
Under the Maryland General Corporation Law, business combinations between a Maryland corporation and an interested stockholder or the interested stockholder’s affiliate are prohibited for five years after the most recent date on which the stockholder becomes an interested stockholder. For this purpose, the term “business combination” includes mergers, consolidations, share exchanges, asset transfers and issuances or reclassifications of equity securities. An “interested stockholder” is defined for this purpose as: (1) any person who beneficially owns ten percent or more of the voting power of the corporation’s shares; or (2) an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner of ten percent or more of the voting power of the then outstanding voting shares of the corporation. A person is not an interested stockholder under the statute if the board of directors approved in advance the transaction by which he otherwise would have become an interested stockholder. However, in approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board.
After the five-year prohibition, any business combination between the corporation and an interested stockholder generally must be recommended by the board of directors of the corporation and approved by the affirmative vote of at least: (1) 80% of the votes entitled to be cast by holders of outstanding voting shares of the corporation; and (2) two-thirds of the votes entitled to be cast by holders of voting shares of the corporation other than shares held by the interested stockholder or its affiliate with whom the business combination is to be effected, or held by an affiliate or associate of the interested stockholder.
These super-majority vote requirements do not apply if the corporation’s common stockholders receive a minimum price, as defined under the Maryland General Corporation Law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares.
None of these provisions of the Maryland General Corporation Law will apply, however, to business combinations that are approved or exempted by the board of directors of the corporation prior to the time that the interested stockholder becomes an interested stockholder. We have opted out of these provisions by resolution of our board of directors. However, our board of directors may, by resolution, opt in to the business combination statute in the future.
Control Share Acquisitions
The Maryland General Corporation Law provides that control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquirer, an officer of the corporation or an employee of the corporation who is also a director of the corporation are excluded from the vote on whether to accord voting rights to the control shares. “Control shares” are voting shares that, if aggregated with all other shares owned by the acquirer or with respect to which the acquirer has the right to vote or to direct the voting of, other than solely by virtue of revocable proxy, would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting power:
•one-tenth or more but less than one-third;
•one-third or more but less than a majority; or



•a majority or more of all voting power.
Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. Except as otherwise specified in the statute, a “control share acquisition” means the acquisition of control shares.
Once a person who has made or proposes to make a control share acquisition has undertaken to pay expenses and has satisfied other required conditions, the person may compel the board of directors to call a special meeting of stockholders to be held within 50 days of the demand to consider the voting rights of the shares. If no request for a meeting is made, the corporation may itself present the question at any stockholders meeting.
If voting rights are not approved for the control shares at the meeting or if the acquiring person does not deliver an “acquiring person statement” for the control shares as required by the statute, the corporation may redeem any or all of the control shares for their fair value, except for control shares for which voting rights have previously been approved. Fair value is to be determined for this purpose without regard to the absence of voting rights for the control shares, and is to be determined as of the date of the last control share acquisition or of any meeting of stockholders at which the voting rights for control shares are considered and not approved.
If voting rights for control shares are approved at a stockholders meeting and the acquirer becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights. The fair value of the shares as determined for purposes of these appraisal rights may not be less than the highest price per share paid in the control share acquisition. Some of the limitations and restrictions otherwise applicable to the exercise of dissenters’ rights do not apply in the context of a control share acquisition.
The control share acquisition statute does not apply to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or to acquisitions approved or exempted by the charter or bylaws of the corporation.
Our bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of our stock. There can be no assurance that this provision will not be amended or eliminated at any time in the future.
Subtitle 8
Subtitle 8 of Title 3 of the Maryland General Corporation Law permits a Maryland corporation with a class of equity securities registered under the Securities Exchange Act of 1934, as amended, and at least three independent directors to elect to be subject, by provision in its charter or bylaws or a resolution of its board of directors and notwithstanding any contrary provision in the charter or bylaws, to any or all of five provisions:
•a classified board,
•a two-thirds vote requirement for removing a director,
•a requirement that the number of directors be fixed only by vote of the directors,
•a requirement that a vacancy on the board be filled only by the remaining directors and for the remainder of the full term of the directorship in which the vacancy occurred, and
•a majority requirement for the calling of a special meeting of stockholders.



We have added provisions to our charter that prohibit us, until such time that our shares of common stock are listed on a national securities exchange, from electing to be subject to the provisions under Subtitle 8. Through provisions in our bylaws unrelated to Subtitle 8, we already vest in our board of directors the exclusive power to fix the number of directorships. Our bylaws may be amended by our stockholders or the board of directors.
Forum for Certain Litigation
Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, shall be the sole and exclusive forum for (i) any derivative action brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Company to us or to our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Maryland General Corporation Law, or (iv) any action asserting a claim that is governed by the internal affairs doctrine, and any record or beneficial stockholder of the Company who commences such an action shall cooperate in a request that the action be assigned to the court’s Business and Technology Case Management Program.
Registrar and Transfer Agent
DST Systems, Inc. serves as our registrar and transfer agent.
Restrictions on Roll-Up Transactions
A Roll-up Transaction is a transaction involving the acquisition, merger, conversion or consolidation, directly or indirectly, of us and the issuance of securities of an entity that is created or would survive after the successful completion of a Roll-up Transaction, which we refer to as a Roll-up Entity. This term does not include:
•a transaction involving our securities that have been for at least 12 months listed on a national securities exchange; or
•a transaction involving only our conversion into a trust or association if, as a consequence of the transaction, there will be no significant adverse change in the voting rights of our stockholders, the term of our existence, the compensation to our advisor or our investment objectives.
In connection with any proposed Roll-up Transaction, an appraisal of all our assets will be obtained from a competent independent appraiser. Our assets will be appraised on a consistent basis, and the appraisal will be based on an evaluation of all relevant information and will indicate the value of our assets as of a date immediately preceding the announcement of the proposed Roll-up Transaction. If the appraisal will be included in a prospectus used to offer the securities of a Roll-Up Entity, the appraisal will be filed with the SEC and, if applicable, the states in which registration of such securities is sought, as an exhibit to the registration statement for the offering. The appraisal will assume an orderly liquidation of assets over a 12-month period. The terms of the engagement of the independent appraiser will clearly state that the engagement is for our benefit and the benefit of our stockholders. A summary of the appraisal, indicating all material assumptions underlying the appraisal, will be included in a report to our stockholders in connection with any proposed Roll-up Transaction.
In connection with a proposed Roll-up Transaction, the person sponsoring the Roll-up Transaction must offer to our stockholders who vote “no” on the proposal the choice of:
(1)accepting the securities of the Roll-up Entity offered in the proposed Roll-up Transaction; or



(2)one of the following:
(A)remaining as stockholders of us and preserving their interests in us on the same terms and conditions as existed previously; or
(B)receiving cash in an amount equal to the stockholders’ pro rata share of the appraised value of our net assets.
We are prohibited from participating in any proposed Roll-up Transaction:
•that would result in our stockholders having democracy rights in a Roll-up Entity that are less than those provided in our charter and bylaws, including rights with respect to the election and removal of directors and the other voting rights of our stockholders, annual reports, annual and special meetings of stockholders, the amendment of our charter and our dissolution;
•that includes provisions that would operate to materially impede or frustrate the accumulation of shares by any purchaser of the securities of the Roll-up Entity, except to the minimum extent necessary to preserve the tax status of the Roll-up Entity, or that would limit the ability of an investor to exercise the voting rights of its securities of the Roll-up Entity on the basis of the number of shares held by that investor;
• in which investors’ rights of access to the records of the Roll-up Entity would be less than those provided in our charter and described above under “Description of Shares—Meetings and Special Voting Requirements”; or
•in which any of the costs of the Roll-up Transaction would be borne by us if the Roll-up Transaction would not be approved by our stockholders.


Exhibit 10.64

THIRD AMENDMENT TO LEASE
This Third Amendment to Lease (“Third Amendment”) dated this 14th day of October, 2019 (“Effective Date”), is by and between KBSII GRANITE TOWER, LLC, a Delaware limited liability company (“Landlord”), and INTEGRIS HOLDINGS LLC, a Colorado limited liability company, and INTEGRIS PARTNERS, LTD., a Colorado limited liability company (jointly and severally as “Tenant”).
RECITALS
A.Cumberland Office Park, LLC, a Georgia limited liability company, as the predecessor to Landlord, and Tenant, entered into that certain Office Lease Agreement dated April 28, 2008 (“Original Lease”), which Original Lease was subsequently amended by virtue of that certain First Amendment to Lease dated June 7, 2013 (“First Amendment”), which Original Lease was subsequently amended by virtue of that certain Second Amendment to Lease dated November 29, 2013 (“Second Amendment”), with respect to premises currently consisting of approximately 3,041 rentable square feet known as Suite 2750 (“Premises”) on the twenty­ seventh (27th) floor of the building currently known as Granite Tower located at 1099 18th Street, Denver, Colorado 80202 (“Building”).
B.The Original Lease, First Amendment and Second Amendment are collectively referred to herein as the "Lease."
C.Landlord is the current owner of the Building and is the successor Landlord under the Lease..
D.The term (“Term”) of the Lease for the Premises expires on February 29, 2020.
E.Tenant wishes to extend the Term for the Premises for a period of sixty-five (65) months commencing March 1, 2020, and Landlord desires to agree to the same, subject to the following terms and conditions.
NOW, THEREFORE, in consideration of the mutual obligations and covenants contained in this Third Amendment and the Lease, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:
1.Definitions and Recitals. Except such terms and words as are defined herein, any other capitalized terms and words used herein shall have the meaning attributed to them as set out in the Lease. The above Recitals are specifically incorporated herein by reference.
2.Extension Term. The Term of the Lease for the Premises shall be extended by sixty-five (65) months commencing on March 1, 2020 (“Extension Term Commencement Date”), and expiring on July 31, 2025 (“Extension Term”). Upon the Effective Date hereof, all references in the Lease to the "Expiration Date" shall mean July 31, 2025.

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3.Monthly Rent for the Extension Term. Commencing on the Extension Term Commencement Date, the monthly installments of Basic Annual Rent for the Premises shall be the following through the duration of the Extension Term:
Term $ Per Sq. Ft. Sq. Ft. Monthly Base Rent Periodic Base Rent
3-1-20 to 7-31-20
$42.00 3,041    $10,643.50 $53,217.50*
8-1-20 to 2-28-21
$42.00 3,041    $10,643.50 $74,504.50
3-1-21 to 2-28-22
$42.84 3,041    $10,856.37 $130,276.44
3-1-22 to 2-28-23
$43.70 3,041    $11,074.31 $132,891.72
3-1-23 to 2-29-24
$44.57 3,041    $11,294.78 $135,537.36
3-1-24 to 2-28-25
$45.46 3,041    $11,520.32 $138,243.84
3-1-25 to 7-31-25
$46.37 3,041    $11,750.39 $58,751.95

* Notwithstanding anything to the contrary contained in this Third Amendment, Landlord agrees not to demand or collect from Tenant monthly installments of Basic Annual Rent for the Premises for the period beginning on March 1, 2020, ending on July 31, 2020 (collectively, the “Abatement Period”) (collectively, the “Rent Abatement”). The Rent Abatement afforded by this Section will be of no force or effect if there has occurred, as of the date on which any installment of Basic Annual Rent would otherwise be due during the Abatement Period, (i) an event of default beyond any applicable notice and cure period, or (ii) if Tenant does not occupy the entirety of the Premises, or (iii) an assignment of the Lease has occurred or a sublease of all or any portion of the Premises exists. Except for such Rent Abatement, all of the terms and conditions of this Lease will be applicable during the Abatement Period. The Rent Abatement shall also apply to Tenant’s Share of Operating Expenses and Taxes during the Abatement Period.
4.Premises. Landlord and Tenant acknowledge that the Premises shall not be subject to remeasurement by Landlord during the Extension Term.
5.Base Year. Commencing on the Extension Term Commencement Date, “Base Year”, as defined in Section 1.l(j) of the Original Lease, shall be redefined to mean the calendar year 2020.
6.Condition of the Premises. Tenant agrees to accept the Premises in its "as-is" condition. Tenant is not entitled to any improvements thereto or thereof or to any allowance or credit for improvements thereto or thereof, except as set forth herein. Notwithstanding the foregoing, Landlord agrees to act as construction manager to perform the following improvements and rehabilitation work in the Premises (the "Tenant Improvements"). After Landlord has received executed copies of this Third Amendment from Tenant, Landlord shall perform the following Tenant Improvements to the Premises:
i.Installation of new Building standard carpet throughout the Premises;
ii.new paint in reception area of the Premises;

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iii.one (1) additional pane of glass in conference room wall to match existing; and
iv.repair/clean all window coverings in a good and workmanlike manner and per Building standard finishes, including moving Tenant's furniture as required.
The Tenant Improvements shall be completed by Landlord prior to the Extension Term Commencement Date. Landlord shall select the contractor to complete the Tenant Improvements, and except as set forth herein, shall have no further obligations with respect to repair or replacement of items in the Premises except as set forth in the Lease. From and after the Effective Date, Paragraph 7 of the Second Amendment is deemed deleted in its entirety.
7.Allowance. As of the Extension Term Commencement Date, Tenant shall be entitled to an allowance from Landlord equal to Twelve Thousand One Hundred Sixty-Four Dollars ($12,164.00) based on Four Dollars ($4.00) per rentable square feet of the Premises (“Allowance”). From and after the Extension Term Commencement Date, the Allowance shall be applied by Landlord as a credit against future Rent.
8.Expansion Option and Recapture Right. From and after the Effective Date, Paragraph 8 of the Second Amendment is deemed deleted in its entirety.
9.Renewal Option. Landlord and Tenant acknowledge that the terms of Paragraph 9 of the Second Amendment shall be applicable and that Tenant shall have a five (5) year Renewal Option upon the expiration of the Extension Term.
10.Parking. From and after the Extension Term Commencement Date, Landlord and Tenant acknowledge that Landlord shall make available up to three (3) parking spaces in the Parking Garage. Current monthly parking rates are Two Hundred· Ten Dollars ($210.00) per space, per month for unreserved parking spaces and Two Hundred Sixty Dollars ($260.00) per space, per month for reserved parking spaces, subject to market adjustments by Landlord.
11.Notice and Payment of Rent. Upon the mutual execution of this Third Amendment, the notice addresses for Landlord in Paragraph 1.1M of the Lease and the address for payment of Rent are deemed deleted and replaced with the following:
If to Landlord: KBSII Granite Tower, LLC
c/o Transwestern
1099 18th Street, Suite 2110
Denver, Colorado 80202
With a simultaneous
copies to: 		Koll Bren Schreiber Realty Advisors, Inc.
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attn: Clint Copulos, Senior Vice President
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and: Moye White LLP
1400 16th Street, 6th Floor
Denver, Colorado 80202
Attn: Thomas M. List, Esq.
Telephone: (303) 292-2900
Facsimile: (303) 6292-4510
For Payment of Rent:
KBSII Granite Tower, LLC
c/o Transwestern
1099 18th Street, Suite 2110
Denver, CO 80202
12.Inducement Recapture in Event of Default. Any agreement by Landlord for free or abated rent or other charges applicable to the Premises, or for the giving or paying by Landlord to or for Tenant of any cash or other bonus, inducement or consideration for Tenant's entering into this Third Amendment, including, but not limited to, any tenant finish allowance, all of which concessions are hereinafter referred to as "Inducement Provisions" shall be deemed conditioned upon Tenant's not being in default beyond any applicable notice and cure periods. Upon the occurrence of an event of default of this Lease by Tenant beyond any applicable notice and cure period, any such Inducement Provision shall automatically be deemed deleted from this Lease and of no further force or effect, and any rent, other charge, bonus, inducement or consideration theretofore abated, given or paid by Landlord under such an Inducement Provision shall be immediately due and payable by Tenant to Landlord, and recoverable by Landlord, as additional rent due under this Lease, notwithstanding any subsequent cure of said event of default by Tenant. The acceptance by Landlord of rent or the cure of the event of default which initiated the operation of this Paragraph 11 shall not be deemed a waiver by Landlord of the provisions of this Paragraph 11 unless specifically so stated in writing by Landlord at the time of such acceptance.
13.Broker. Tenant represents and warrants that, except for Jones Lang LaSalle, , agent for Landlord, and Colorado Commercial Companies, agent for Tenant, no claims exist for payment of any brokerage commissions or finder's fees in connection with this Third Amendment by reason of Tenant having had any dealings with any other broker in connection therewith, and Tenant agrees to indemnify, defend and hold harmless Landlord from and against all claims, liabilities and expenses, including reasonable attorneys' fees, arising from any claims for payment of any brokerage commissions or finder's fees related to any misrepresentation hereunder by Tenant.
14.Anti-Terrorism Statute Compliance. Tenant hereby represents and warrants to Landlord that Tenant is not: (1) in violation of any Anti-Terrorism Law; (2) conducting any business or engaging in any transaction or dealing with any prohibited Person, including the making or receiving or any contribution of funds, goods or services to or for the benefit of any Prohibited Person; (3) dealing in, or otherwise engaging in any transaction relating to, any property or interest in property blocked pursuant to Executive Order No. 13221; (4) engaging in

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or conspiring to engage in any transaction that evades or avoids, or had the purpose of evading or avoiding, or attempts to violate any of the prohibitions set forth in any Anti-Terrorism Law; or (5) a Prohibited Person, nor are any of its partners, members, managers, officers or directors a Prohibited Person. As used herein, “Antiterrorism Law” is defined as any law relating to terrorism, anti-terrorism, money laundering or anti-money laundering activities, including Executive Order No. 13224 and Title 3 of the USA Patriot Act. As used herein “Executive Order No. 13224” is defined as Executive Order No. 13224 on Terrorist Financing effective September 24, 2001, and relating to “Blocking Property and Prohibiting Transactions With Persons Who Commit, or Support Terrorism” “Prohibited Person” is defined as (i) a person or entity that is listed in the Annex to Executive Order 13224; (ii) a person or entity with whom Tenant or Landlord is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law, or (iii) a person or entity that is named as a "specially designated national and blocked person' on the most current list published by the U.S. Treasury Department Office Of Foreign Assets Control as its official website, http://www.treas.gov/ofac/tll sdn.pdf or at any replacement website or other official publication of such list. “USA Patriot Act” is defined as the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001" (Public Law 107-56).
15.Tenants Representations and Warranties. Tenant hereby represents, warrants and agrees that: (1) there exists no breach, default or event of default by Landlord under the Lease, or any event or condition which, with notice or passage of time or both, would constitute a breach, default or event of default by Landlord under the Lease; (2) the Lease continues to be a legal, valid and binding agreement and obligation of Tenant; and (3) Tenant has no current offset or defense to their performance or obligations under the Lease. Tenant hereby waives and releases all demands, charges, claims, accounts or causes of action of any nature against Landlord or Landlord's employees or agents, including without limitation, both known and unknown demands, charges, claims, accounts, and causes of action that have previously arisen out of or in connection with the Lease.
16.Miscellaneous.
(a)In the event of any litigation arising out of or in connection with this Third Amendment, the prevailing party shall be awarded reasonable attorney's fees, cost and expenses.
(b)The Lease, as modified herein, remains in full force and effect and is ratified by Landlord and Tenant. In the event of any conflict between the Lease and this Third Amendment, the terms and conditions of this Third Amendment shall control. Capitalized terms not defined herein shall have the same meaning as set forth in the Lease.
(c)This Third Amendment is binding upon and inures to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns. Except as expressly provided herein, Tenant has not assigned or transferred any interest in the Lease, as amended, and has full power and authority to execute this Third Amendment.
(d)Time is of the essence herein, unless waived by Landlord, which it shall have the right, but not the obligation to do.

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(e)This Third Amendment shall be governed by and construed in accordance with the laws of the State of Colorado.
(f)This document may be executed in any number of counterparts, which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Third Amendment to Lease on the day and year fist above written.
[Signatures appear on following page]

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LANDLORD:
KBSII Granite Tower, LLC,
By: KBS Capital Advisors, LLC
as Owner’s Representative
By: /s/ Clint Copulos
Clint Copulos, Senior Vice President
TENANT:
INTEGRIS HOLDINGS LLC,
a Colorado limited liability company
By: /s/ Patrick Seese
Name: Patrick Seese
Title: Managing Director
INTEGRIS PARTNERS, LTD.,
a Colorado limited liability company
By: /s/ Robert Heilbronm Sr.
Name: Robert Heilbronm Sr.
Title: Managing Director
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Exhibit 10.65
TWELFTH AMENDMENT TO LEASE
This Twelfth Amendment to Lease (this “Twelfth Amendment”) is made and entered into by and between KBSII FOUNTAINHEAD LLC, a Delaware limited liability company (“Landlord”), as successor-in-interest to US Real Estate Limited Partnership (“Original Landlord”), and THE UNIVERSITY OF PHOENIX, INC., an Arizona corporation (“Tenant”), effective as of July ________, 2019 (the “Effective Date”).
W I T N E S S E T H
WHEREAS, Landlord and Tenant are parties to that certain Fountainhead Corporate Park Lease, dated June 29, 2009 originally entered by and between Original Landlord and Tenant (the “Original Lease”), as amended by (i) that certain First Amendment to Lease, dated August 11, 2009 (the “First Amendment”), (ii) that certain Second Amendment to Lease, dated November 1, 2009 (the “Second Amendment”), (iii) that certain Third Amendment to Lease, dated February 19, 2010 (the “Third Amendment”), (iv) that certain Fourth Amendment to Lease, dated March 11, 2011 (the “Fourth Amendment”), (v) that certain Fifth Amendment to Lease, dated August 3, 2011 (the “Fifth Amendment”), (vi) that certain Sixth Amendment to Lease, dated December 22, 2011 (the “Sixth Amendment”), (vii) that certain Seventh Amendment to Lease, dated June 1, 2012 (the “Seventh Amendment”), (viii) that certain Eighth Amendment to Lease, dated August 18, 2017 (the “Eighth Amendment”), (ix) that certain Ninth Amendment to Lease, dated April 2018 (the “Ninth Amendment;”); (x) that certain Tenth Amendment to Lease, dated January 2, 2019 (the “Tenth Amendment”), and (xi) that certain Eleventh Amendment to Lease, dated February 6, 2019 (the “Eleventh Amendment”; the Original Lease, as so amended, being the “Lease”), pursuant to which Tenant is currently leasing from Landlord certain real property and improvements located at 1625 Fountainhead Parkway, Tempe, Arizona 85282 and 1601 Fountainhead Parkway, Tempe, Arizona 85282 (collectively, the “Premises”);
WHEREAS, pursuant to that certain Sublease, dated August 12, 2014 (the “Original Concentrix Sublease”), by and between Concentrix Corporation, a New York Corporation (“Concentrix”), as amended by that certain First Amendment to Sublease, dated September 11, 2014 (the “First Amendment to Concentrix Sublease”), and that certain Second Amendment to Sublease, dated February 2015 (the “Second Amendment to Conentrix Sublease”; and together with the Original Concentrix Sublease, and the First Amendment to Concentrix Sublease, collectively, the “Concentrix Sublease”), Concentrix sublet a portion of the Premises from Tenant;
WHEREAS, pursuant to that certain Consent, Recognition, Non-Disturbance and Attornment Agreement of Landlord, dated September 11, 2014 (the “Origina1 Concentrix Consent”) by and among Landlord, Tenant and Concentrix, as amended by that certain First Amendment to Consent, Recognition, Non-Disturbance and Attornment Agreement of Landlord, dated March 3, 2015 (the “First Amendment to Concentrix, Consent”; and together with the Original Concentrix Consent, collectively, the “Concentrix Consent”), Landlord consented to Tenant subleasing a portion of the Premises to Concentrix;
WHEREAS, pursuant to the Original Concentrix Consent, Tenant posted a letter of credit, dated September 15, 2014 issued by JP Morgan Chase Bank, N.A. (the “Original JP Morgan Chase
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UOPX – Spring Center, AZ – Twelfth Amendment to Lease     EXECUTION VERSION


Bank Letter of Credit”), to secure the performance of certain obligations under the Lease as more particularly set forth in the Concentrix Consent;
WHEREAS, pursuant to the First Amendment to Concentrix Consent, the Original JP Morgan Chase Letter of Credit was amended by that certain Amendment No. 1, dated January 28, 2015 (the “First Amendment to JP Morgan Chase Letter of Credit”);
WHEREAS, the Original JP Morgan Chase Letter of Credit, as amended by the First Amendment to JP Morgan Chase Letter of Credit, was further amended by that certain Amendment No. 2, dated June 22, 2016 (the “Second Amendment to JP Morgan Chase Letter of Credit”; and together with the Original JP Morgan Chase Letter of Credit and the First Amendment to JP Morgan Chase Letter of Credit collectively, the “JP Morgan Chase Letter of Credit”),
WHEREAS, the JP Morgan Chase Letter of Credit was subsequently replaced with a new letter of credit, dated January 20, 2017, issued by Bank of the West, a California banking corporation (“BOTW”) (the “Original BOTW Letter of Credit”);
WHEREAS, pursuant to that certain Sublease, dated August 18, 2017 (the “Original BOTW Sublease”), by and between Tenant and Bank of the West, a California banking corporation (“BOTW”), as amended by that certain First Amendment to Sublease, dated December 29, 2017 (the “First Amendment to BOTW Sublease”), and that certain Second Amendment to Sublease, dated February 1, 2018 (the “Second Amendment to BOTW Sublease”; and together with the Original BOTW Sublease, and the First Amendment to BOTW Sublease, collectively, the “BOTW Sublease”), BOTW sublet a portion of the Premises from Tenant;
WHEREAS, pursuant to that certain Consent, Recognition, Non-Disturbance and Attornment Agreement of Landlord, dated August 24, 2017 (the “Original BOTW Consent”), by and among Landlord, Tenant and BOTW, as amended by that certain First Amendment to Consent, Recognition, Non-Disturbance and Attornment Agreement of Landlord, dated December 29, 2017 (the “First Amendment to BOTW Consent”), and that certain Second Amendment to Consent, Recognition, Non-Disturbance and Attornment Agreement of Landlord, dated April 2018 (the “Second Amendment to BOTW Consent”; and together with the Original BOTW Consent and the First Amendment to BOTW Consent, collectively, the “BOTW Consent”), Landlord consented to Tenant subleasing a portion of the Premises to BOTW;
WHEREAS, pursuant to the Original BOTW Consent and the Eighth Amendment, the Original BOTW Letter of Credit was amended by Amendment No. 1, dated August 29, 2017 (the “First Amendment to BOTW Letter of Credit”), and Tenant furnished a financial guarantee bond, dated August 21, 2017 (the “Original Surety Bond”) to further secure certain obligations to Landlord under the Lease;
WHEREAS, pursuant to the Second Amendment to BOTW Consent and the Ninth Amendment, the Original BOTW Letter of Credit, as amended by the First Amendment to BOTW Letter of Credit, was further amended by that certain Amendment No. 2, dated March 20, 2018 (the “Second Amendment to BOTW Letter of Credit”; and together with the Original BOTW Letter of Credit, and the First Amendment to BOTW Letter of Credit, collectively, the “BOTW Letter of

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UOPX – Spring Center, AZ – Twelfth Amendment to Lease     EXECUTION VERSION


Credit”), and the Original Surety Bond was amended by Rider, dated June 8, 2018 (the “Surety Bond Rider”; and together with the Original Surety Bond, collectively, the “Surety Bond”);
WHEREAS, pursuant to the terms of the Eleventh Amendment, the BOTW Letter of Credit was replaced with a new letter of credit, dated February 19, 2019, issued by UMB Bank, N.A. (“UMB”) (the “UMB Letter of Credit”);
WHEREAS, in connection with Tenant's request that Landlord release Tenant from its obligations under the Lease with respect to the Surety Bond, Landlord and Tenant are entering into this Twelfth Amendment in order to modify the requirements of the UMB Letter of Credit and to release Tenant from its obligations with respect to the Surety Bond;
WHEREAS, Landlord and Tenant desire to amend the Lease, all as more particularly provided below.
NOW, THEREFORE, pursuant to the foregoing, and in consideration of the mutual covenants and agreements contained in the Lease and herein, Landlord and Tenant hereby agree that the Lease is hereby modified and amended as set forth below:
1.Defined Terms. All capitalized terms used herein shall have the same meaning as defined in the Lease, unless otherwise defined in this Twelfth Amendment.
2.UMB Letter of Credit. As of the Effective Date of this Twelfth Amendment, the UMB Letter of Credit is currently in the amount of $10,300,000.00 (the “UMB Letter of Credit Amount”). The UMB Letter of Credit Amount is scheduled to reduce in accordance with a reduction schedule set forth in the UMB Letter of Credit. Tenant is requesting that Landlord release Tenant from its obligations under the Lease with respect to the Surety Bond. As consideration for Landlord agreeing to release Tenant from its obligations under the Lease with respect to the Surety Bond, Tenant hereby agrees to cause UMB, on or before August 31, 2019 (the “First Amendment to UMB Letter of Credit Delivery Date”), to issue and deposit with Landlord an amendment to the UMB Letter of Credit (the “First Amendment to UMB Letter of Credit”) in the form attached hereto as Exhibit A, pursuant to the terms of which the UMB Letter of Credit shall be amended to provide that: (i) the UMB Letter of Credit Amount shall be increased to $14,150,000.00 (the “New UMB Letter of Credit Amount”); and (ii) if Tenant is not then in default under the terms of the Lease past applicable notice and cure periods set forth in the Lease, the New UMB Letter of Credit Amount shall reduce based on the following reduction schedule (which reduction schedule shall be in lieu of the reduction schedule set forth in the UMB Letter of Credit, which such reduction schedule shall be of no further force or effect):
Letter of Credit Adjustment Date New UMB Letter of Credit Amount
August 31, 2020 $10,760,000.00
August 31, 2021 $7,330,748.00
August 31, 2022 $3,910,014.00

In the event the First Amendment to UMB Letter of Credit is not delivered to Landlord on or before the First Amendment to UMB Letter of Credit Delivery Date, this Twelfth Amendment

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UOPX – Spring Center, AZ – Twelfth Amendment to Lease     EXECUTION VERSION


shall be deemed null and void. Tenant shall be obligated to reimburse Landlord, within thirty (30) days after receipt of a written invoice, for all of its actual out-of-pocket costs incurred in connection with this Twelfth Amendment and the other related ancillary agreements contemplated therein.
3.Surety Bond. Subject to the delivery of the First Amendment to New UMB Letter of Credit to Landlord in accordance with the terms of Paragraph 2 of this Twelfth Amendment, effective as of the First Amendment to UMB Letter of Credit Delivery Date, Tenant shall have no further obligations under the Lease with respect to the Surety Bond, and accordingly, all references contained in the Lease to the Surety Bond, including, without limitation, the references to the Surety Bond contained in Paragraph 3 of the Eighth Amendment, Paragraph 3 of the Ninth Amendment, Paragraph 13 of the Original BOTW Consent and Paragraph 8(ii) of the Second Amendment to BOTW Consent shall be null and void and of no further force or effect. Landlord shall, within five (5) business days of the issuance and deposit of the First Amendment to UMB Letter of Credit with Landlord, return the Surety Bond to Tenant.
4.Guaranty. APOLLO EDUCATION GROUP, INC., an Arizona corporation formerly known as Apollo Group, Inc. (the “Guarantor”), executed that certain Guaranty, dated as of June 29, 2009, in favor of Landlord under the Lease (the “Guaranty”), for the benefit of Tenant. The effectiveness of this Twelfth Amendment shall be subject to and conditioned upon Guarantor joining in the execution of this Twelfth Amendment, and such execution shall evidence only: (i) the consent of Guarantor to the terms and conditions of this Twelfth Amendment; (ii) the agreement of Guarantor that the Guaranty is and shall remain in full force and effect following the execution of this Twelfth Amendment; and (iii) the liability of Guarantor under the Guaranty shall extend to and cover all of the obligations of Tenant under the Lease, as amended by this Twelfth Amendment.
5.Brokers. Tenant represents and warrants to Landlord that it has had no dealings with any broker or agent in connection with the negotiation or execution of this Twelfth Amendment, and Tenant hereby agrees to indemnify and hold Landlord harmless from and against any and all costs, expenses or liability for commissions or other compensations or charges claimed by any broker or agent claiming to have represented Tenant with respect to this Twelfth Amendment or the transactions evidenced hereby.
6.Miscellaneous. With the exception of those terms and conditions specifically modified and amended herein, the herein referenced Lease shall remain in full force and effect in accordance with all their respective terms and conditions. In the event of any conflict between the terms and provisions of this Twelfth Amendment and the terms and provisions of the Lease, the terms and provisions of this Twelfth Amendment shall supersede and control.
7.Counterparts/Facsimile Signatures. This Twelfth Amendment may be executed in any number of counterparts, each of which shall be deemed an original, and all of such counterparts shall constitute one agreement. To facilitate execution of this Twelfth Amendment, the parties may execute and exchange facsimile counterparts of the signature pages and facsimile counterparts shall serve as originals.
[Signature Page Follows]

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UOPX – Spring Center, AZ – Twelfth Amendment to Lease     EXECUTION VERSION


IN WITNESS WHEREOF, the parties hereto have executed this Twelfth Amendment on the dates set forth in the respective signature blocks below, to be effective for all purposes, however as of the Effective Date.

LANDLORD:
KBSII FOUNTAINHEAD, LLC,
a Delaware limited liability company
By: KBS Capital Advisors, LLC,
a Delaware limited liability company,
as agent
By:
/s/ Tim Helgeson
Tim Helgeson,
Senior Vice President
Date: 8/6/2019
TENANT:
THE UNIVERSITY OF PHOENIX, INC.,
an Arizona corporation
By: /s/ Chris Lynne
Name: Chris Lynne
Title: Chief Financial Officer
Date: July ___, 2019
8/2/2019

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UOPX – Spring Center, AZ – Twelfth Amendment to Lease     EXECUTION VERSION


JOINDER
APOLLO EDUCATION GROUP, INC., an Arizona corporation, acting in its capacity as Guarantor, join in the execution of this Twelfth Amendment to Lease for the purposes specified in Paragraph 4 of this Twelfth Amendment to Lease.
GUARANTOR:
APOLLO EDUCATION GROUP, INC.,
an Arizona corporation
By: /s/ William Molina
Name: William Molina
Title: V.P., Tax
Date: July ___, 2019
7/31/2019

6
UOPX – Spring Center, AZ – Twelfth Amendment to Lease     EXECUTION VERSION


Exhibit A
Form of First Amendment to UMB Letter of Credit
[see attached]

7
UOPX – Spring Center, AZ – Twelfth Amendment to Lease     EXECUTION VERSION


AMENDMENT REQUEST FOR LETTER OF CREDIT

To: UMB BANK, N.A.
International Trade Services
1008 Oak Street, Kansas City, Missouri 64106 		Date: 07/31/19
We hereby authorize and request you to amend the following Letter of Credit: SB50656
LETTER OF CREDIT NO: SB50656
IN FAVOR OF: KBSII FOUNTAINHEAD, LLC
METHOD OF DELIVERY: _X_ COURIER ____ SWIFT
1) INCREASE LC AMOUNT BY $3,850,000.00 TO $14,150,000.00
2) REPLACE THE CURRENT REDUCTION SCHEDULING READING:
REDUCTION DATE NEW BALANCE
AUGUST 31, 2020 $7,330,748.00
AUGUST 31, 2021 $3,910,014.00
WITH:
REDUCTION DATE NEW BALANCE
AUGUST 31, 2020 $10,760,000.00
AUGUST 31, 2021 $7,330,748.00
AUGUST 31, 2022 $3,910,014.00
OTHER INSTRUCTIONS
All other terms and conditions remain unchanged.
Debit LC fees from account _____________
THE UNIVERSITY OF PHOENIX, INC.
__________________________________
Name of Applicant
/s/ Chris Lynne
(Authorized Signature



Exhibit 10.66
CONSENT BY LANDLORD TO SUBLEASE AGREEMENT
The undersigned, KBSII Fountainhead, LLC, a Delaware limited liability company (“Landlord”), is the current owner of all of the landlord’s right, title and interest in and to that certain Fountainhead Corporation Park Lease dated June 29, 2009 (as heretofore amended, the “Lease”), entered into by and between Landlord and The University of Phoenix, Inc., an Arizona corporation, as tenant (the “Sublessor”), for certain premises (“Premises”) in the buildings located at 1601 and 1625 W. Fountainhead Parkway, Tempe, Arizona hereby consents to the Sublessor’s entering into that certain Sublease, dated October 2019 (the “Sublease Agreement”), subletting of a portion of the Premises, consisting of 17,552 rentable square feet of space, having an address of Suite 200 in the building located at 1601 W. Fountainhead Parkway, Tempe, Arizona (“Subleased Premises”), to Walden University, LLC, a Florida limited liability company (“Sublessee”), upon and subject to the express understandings and conditions that:
1.Landlord neither approves nor disapproves the terms, conditions and agreements contained in the Sublease Agreement between Sublessor and Sublessee and assumes no liability or obligation of any kind whatsoever on account of anything contained in the Sublease Agreement.
2.By executing this Consent by Landlord to Sublease (“Consent”), Landlord shall not be deemed to have waived any rights under the Lease nor shall Landlord be deemed to have waived the Sublessor’s or Sublessee’s obligations to obtain any required consents under the Lease (other than consent to the Sublease Agreement itself).
3.Sublessee shall be liable for any and all of Sublessor’s obligations under and as set forth in the Lease with respect to the Subleased Premises, including without limitation, the duty to perform all of the obligations of the ”Tenant” under the Lease with respect to the Subleased Premises but only to the extent arising during the term of the Sublease Agreement.
4.Sublessor shall be and continue to remain liable for (a) the payment of any and all rental amounts payable under the Lease (including any additional rent), any and all adjustments to rent, any and all parking fees and other related charges, and any and all other payments required to be made by the “Tenant'” under the Lease, all as set forth in the Lease, and (b) the full and prompt performance of all of the obligations of the “Tenant” under and as set forth in the Lease.
5.Simultaneously with its execution of this Consent, Sublessor shall pay to Landlord the reasonable cost of Landlord’s legal fees.
6.Nothing contained in the Sublease Agreement shall be taken or construed to in any way modify, alter, waive or affect any of the terms, covenants or conditions contained in the Lease.
7.There shall be no further subletting or assignment of all or any portion of the Premises demised under the Lease except in accordance with the terms and conditions of the Lease.
8.Sublessor and Sublessee each certify, represent, warrant and covenant that: (i) it is not acting and will not act, directly or indirectly, for or on behalf of any person, group, entity, or nation named by any Executive Order or the United States Treasury Department as a terrorist, “Specially Designated National and Blocked Person”, or

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other banned or blocked person, entity, nation or transaction pursuant to any law, order, rule, or regulation that is enforced or administered by the Office of Foreign Assets Control; and (ii) it is not engaged in this transaction, directly or indirectly on behalf of, or instigating or facilitating this transaction, directly or indirectly on behalf of, any such person, group, entity or nation. Sublessor and Sublessee each hereby agree to defend (with counsel reasonably acceptable to Landlord), indemnify and hold harmless Landlord and its designated property management company, and their respective partners, members, affiliates and subsidiaries, and all of their respective officers, directors, shareholders, employees, servants, partners, representatives, insurers and agents from and against any and all claims or damages arising from or related to any such breach of the foregoing certifications, representations, warranties and covenants.
9.This Consent may be executed in any number of counterparts, each of which shall be deemed an original, and all of such counterparts shall constitute one agreement. To facilitate execution of this Consent, the parties may execute and exchange facsimile counterparts of the signature pages and facsimile counterparts shall serve as originals.
[Signature Page Follows]

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IN WITNESS WHEREOF, Landlord, Sublessor and Sublessee have executed this Consent on the respective dates set forth below, to be effective for all purposes, however, as of the ___ day of ________________, 2019 (the “Effective Date”), and this Consent shall be effective only if executed by Landlord, Sublessor, and Sublessee.
LANDLORD:
KBSII FOUNTAINHEAD, LLC,
a Delaware limited liability company
By: KBS Capital Advisors, LLC,
a Delaware limited liability company,
as agent
By:
/s/ Tim Helgeson
Tim Helgeson,
Senior Vice President
Date: ________________, 2019
SUBLESSOR:
THE UNIVERSITY OF PHOENIX, INC.,
an Arizona corporation
By: /s/ Chris Lynne
Name: Chris Lynne
Title: Chief Financial Officer
Date: 12/10/2019
SUBLESSEE:
WA:DEN UNIVERSITY, LLC,
a Florida limited liability company
By: /s/ Francisco Velasco
Name: Francisco Velasco
Title: Chief Procurement Officer
Date: December 10, 2019
[End of Signatures]
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Exhibit 10.67

[EXECUTION VERSION]


MEMBERSHIP INTEREST PURCHASE AND SALE AGREEMENT
AND ESCROW INSTRUCTIONS
BY AND BETWEEN
KBSII REIT ACQUISITION I, LLC, a Delaware limited liability company, and
KBSII REIT ACQUISITION II, LLC, a Delaware limited liability company
(each, a “Seller”, and collectively, “Seller”)
AND
100-600 Campus Drive, LLC, a New Jersey limited liability company
(“Buyer”)
[Park Avenue at Morris County, 100-600 Campus Drive, Florham Park, New Jersey]


TABLE OF CONTENTS
Page
1. BASIC TERMS AND DEFINITIONS; REFERENCES 2
1.1 Basic Terms and Definitions 2
1.2 References 3
2. PURCHASE AND SALE 3
3. PURCHASE PRICE AND DEPOSIT 3
3.1 Purchase Price 3
3.2 Payment of Purchase Price 3
3.3 Disposition of Deposit Upon Failure to Close 4
3.4 Independent Contract Consideration 4
4. PROPERTY INFORMATION; TITLE REVIEW; INSPECTIONS AND DUE DILIGENCE; TENANT ESTOPPEL CERTIFICATES; CONFIDENTIALITY 4
4.1 Property Information 4
4.2 Title and Survey Review; Title Policy 5
4.3 Inspections; Due Diligence Period 7
4.4 Tenant Estoppel Certificates; SNDAs 8
4.5 Contracts 9
4.6 Confidentiality 9
5. OPERATIONS AND RISK OF LOSS 10
5.1 Ongoing Operations 10
5.2 New Contracts 10
5.3 Leasing Arrangements 10
5.4 Damage or Condemnation 11
5.5 Reliance Letters 11
6. SELLER’S AND BUYER’S DELIVERIES 12


6.1 Seller’s Deliveries into Escrow 12
6.2 Buyer’s Deliveries into Escrow 13
6.3 Closing Statements/Escrow Fees 13
6.4 Post-Closing Deliveries 13
7. CONDITIONS TO BUYER’S AND SELLER’S OBLIGATIONS 13
7.1 Conditions to Buyer’s Obligations 13
7.2 Conditions to Seller’s Obligations 14
8. CLOSE OF ESCROW; POSSESSION 15
9. ESCROW 15
9.1 Closing 15
9.2 Escrow and Title Charges 16
9.3 Procedures Upon Failure of Condition 17
10. PRORATIONS 17
10.1 Collected Rent 17
10.2 Operating Costs and Additional Rent Reconciliation 18
10.3 Taxes and Assessments 19
10.4 Contracts 19
10.5 Tenant Deposits 19
10.6 Utilities and Utility Deposits 19
10.7 Owner Deposits 20
10.8 Percentage Rents 20
10.9 Cash Balances 20
10.10 Final Adjustment After Closing 21
11. SELLER’S REPRESENTATIONS AND WARRANTIES; AS-IS 21
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11.1 Seller’s Representations and Warranties 21
11.2 As-Is 24
12. BUYER’S COVENANTS; REPRESENTATIONS AND WARRANTIES; RELEASE;
ERISA; INDEMNIFICATION 		26
12.1 Basic Terms and Definitions 26
12.2 Basic Terms and Definitions 27
12.3 Basic Terms and Definitions 28
13. DEFAULT AND DAMAGES 29
13.1 DEFAULT BY NUMBER 29
13.2 Default by Seller 29
14. BROKER’S COMMISSIONS 30
15. MISCELLANEOUS PROVISIONS 31
15.1 Notices 31
15.2 Assignment; Binding on Successors and Assigns 32
15.3 Work Product 33
15.4 Further Assurances 33
15.5 Attorney’s Fees 33
15.6 Survival of Representations, Warranties, Covenants, Obligations and
Agreements 		33
15.7 Entire Agreement 34
15.8 Governing Law 35
15.9 Counterparts 35
15.10 Headings; Construction 35
15.11 Time of Essence 35
15.12 Partial Validity; Severability 35
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15.13 No Third Party Beneficiaries 35
15.14 Intentionally Omitted 35
15.15 Joint Product of Parties 35
15.16 Calculation of Time Periods 35
15.17 Procedure for Indemnity 36
15.18 Waiver of Jury Trial 36
15.19 No Personal Liability 36
15.20 Joint and Several Liability 36
15.21 Bulk Sale 36
15.22 Interpretation 37
15.23 Post-Closing Net Worth Requirement 38

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MEMBERSHIP INTEREST PURCHASE AND SALE AGREEMENT
AND ESCROW INSTRUCTIONS
THIS MEMBERSHIP INTEREST PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS (this “Agreement”) is made and entered into as of October 22, 2019, (the “Effective Date”) between KBSII REIT ACQUISITION I, LLC, a Delaware limited liability company (the “100-200 Seller”), and KBSII REIT ACQUISITION II, LLC, a Delaware limited liability company (the “300-600 Seller”, and collectively with 100-200 Seller, each, a “Seller”, and collectively, “Seller”), and 100-600 Campus Drive, LLC, a New Jersey limited liability company (“Buyer”), with reference to the following:
A.100-200 Seller presently is the sole member of KBSII 100-200 CAMPUS DRIVE, LLC, a Delaware limited liability company (the “100-200 Property Owner”) under that certain Amended and Restated Limited Liability Company Agreement of KBSII 100-200 CAMPUS DRIVE, LLC dated as of March 26, 2018 (the “100-200 Operating Agreement”).
B.300-600 Seller presently is the sole member of KBSII 300-600 CAMPUS DRIVE, LLC, a Delaware limited liability company (the “300-600 Property Owner”, and together with the 100-200 Property Owner, the “Property Owners”) under that certain Amended and Restated Limited Liability Company Agreement of KBSII 300-600 CAMPUS DRIVE, LLC dated as of July 9, 2013 (the “300-600 Operating Agreement”, and together with the 100-200 Operating Agreement, the “Operating Agreements”).
C.Buyer desires to directly or indirectly acquire, and the Seller desires to sell, all of the member interests in the Property Owners (the “Interests”).
E.The Property Owners are the owners of the improved real property (the “Real Property”) described in Exhibit A attached hereto, together with the buildings and all other improvements located thereon (collectively, the “Improvements”); all references hereinafter made to the Real Property shall be deemed to include all rights, privileges, easements and appurtenances benefiting the Real Property and/or the Improvements situated thereon, including, without limitation, all mineral and water rights and all easements, rights-of-way and other appurtenances used or connected with the beneficial use or enjoyment of the Real Property. In addition, the Property Owners, collectively (a) own the personal property, equipment, supplies and fixtures (collectively, the “Personal Property”) listed on Exhibit B attached hereto or that are otherwise left on the Real Property at the Close of Escrow (as defined in Section 8.1 hereof) to the extent owned by the Property Owners, (b) are the lessors under the leases listed on Exhibit C-1 attached hereto (the “Leases”), and (c) are parties to the contracts listed on Exhibit C-2 and Exhibit C-3 attached hereto and all contracts hereafter entered into by Property Owners to the extent permitted by the provisions of this Agreement (the “Contracts”). The Real Property, the Improvements, the Personal Property, the Leases, the Contracts, and any and all licenses, approvals, certificates, permits, warranties, guaranties, indemnities, plans, maps, rental contracts, and other documents and instruments pertaining to the Real Property or Personal Property therein in which the Property Owners have an interest (the “Intangible Property”) are sometimes hereinafter collectively referred to as the “Property.” Notwithstanding anything to the contrary contained herein, the term “Property” shall expressly exclude any Rents (as such term is defined in Section 10.1 hereof) or any other amounts payable by tenants under the Leases
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for periods prior to the Close of Escrow (as such term is defined in Section 8.1 hereof), any Rents or other amounts payable by any former tenants of the Property, and any judgments, stipulations, orders, or settlements with the tenants under the Leases or former tenants of the Property to the extent related to the period prior to the Close of Escrow, in accordance with Section 10 hereof.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.1BASIC TERMS AND DEFINITIONS; REFERENCES
1.1Basic Terms and Definitions.
Effective Date. The effective date of this Agreement shall be the date set forth above (“Effective Date”).
(a)Closing Date. The last day that Close of Escrow may occur shall be December 16, 2019, at 1:30 p.m. (California time) (the “Closing Date”).
(b)Title Review Period. The “Title Review Period” shall end October 30, 2019, at 5:00 p.m. (California time).
(c)Due Diligence Period. The “Due Diligence Period” shall end on October 30, 2019, at 5:00 p.m. (California time).
(d)Escrow Holder. The escrow holder shall be Commonwealth Land Title Insurance Company (“Escrow Holder”), whose address is 4100 Newport Place Drive, Suite 120, Newport Beach, California 92660, Escrow Officer: Joy Eaton; Telephone: (949) 724-3145; E-Mail: joyeaton@cltic.com.
(e)Title Company and Agent. The title company shall be Commonwealth Land Title Insurance Company, whose address is 888 S. Figueroa Street, Suite 2100, Los Angeles, California 90017, Title Coordinator: Amy Musselman; Telephone: (213) 330-3041; E-Mail: asmusselman@cltic.com (“Title Company”), and the Title Agent shall be Riverside Abstract, whose address is 3839 Flatlands Avenue, Suite 208, Brooklyn, New York 11234, Attn: Shaul C. Greenwald, Esq.; Telephone: (718) 252-4200; E-Mail: sgreenwald@rsabstract.com (“Title Agent”).
Notwithstanding anything herein to the contrary, to the extent the Title Agent:
(i)requires from Seller anything not required by the Title Company in connection with the issuance of the Title Policy and/or any endorsements issued in connection therewith, or
(ii)is unwilling to accept from Seller the form of owner’s affidavit accepted by the Title Company in connection with the issuance of the Title Policy, or

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(iii)is unwilling to insure over or indorse over any title exceptions that the Title Company is willing to indorse or insure over,
then Seller shall have the right, in its sole and absolute discretion, to replace the Title Agent with the Title Company, and the Title Company shall issue the Title Policy without the involvement of the Title Agent; it being understood and agreed by Buyer that Seller will not be providing to the Title Agent any documentation with respect to the formation of Property Owners or the authority of Seller to enter into the transaction contemplated by this Agreement other than certificates of good standing from the state in which Seller and Property Owners were formed, a certificate of qualification from the Secretary of the State of New Jersey for the Property Owners, certified copies of Seller’s certificate of formation filed with the Secretary of State of the State of Delaware, resolutions of Seller authorizing the transactions contemplated by this Agreement, copies of the Operating Agreements, and such other documents and certificates reasonably required by the Title Company to issue the Title Policy (the “Entity Documents”), in the form required by this Agreement, subject only to the Permitted Exceptions and without special premium to Buyer.
1.2References. All references to Exhibits refer to Exhibits attached to this Agreement and all such Exhibits are incorporated herein by reference. The words “herein,” “hereof,” “hereinafter” and words of similar import refer to this Agreement as a whole and not to any particular Section hereof.
2.PURCHASE AND SALE
Subject to the terms and conditions of this Agreement, Seller agrees to sell, assign and transfer to Buyer and Buyer agrees to purchase from Seller, for the purchase price set forth in Section 3 hereof, all of Seller’s right, title and interest in and to the Interests.
3.PURCHASE PRICE AND DEPOSIT
3.1Purchase Price. The purchase price for the Interests shall be Three Hundred Twenty-Million Dollars ($320,000,000.00) (the “Purchase Price”).
3.2Payment of Purchase Price. The Purchase Price shall be payable as follows:
3.2.1Within two business days of the execution of this Agreement by Buyer and Seller, and as a condition precedent to the effectiveness hereof, Buyer shall deposit in escrow with Escrow Holder, in cash or current funds, the sum of Two Million and No/100 Dollars ($2,000,000.00) (the “Initial Deposit”). Immediately upon Escrow Holder’s receipt of the Initial Deposit (the “Opening of Escrow”), Escrow Holder shall invest the same in a federally insured interest-bearing account acceptable to Seller and Buyer, with all interest accruing thereon credited to the Purchase Price. For purposes of this Agreement, any interest accruing on the Initial Deposit from time to time shall be deemed part of the Initial Deposit. Upon the expiration of the Due Diligence Period, if Buyer has not previously terminated this Agreement by its terms, then: (i) Buyer shall deposit in escrow with Escrow Holder, in cash or current funds, the additional sum of Two Million and No/100 Dollars ($2,000,000.00) (the “Additional Deposit”), and (ii) the Initial Deposit and Additional Deposit (hereinafter referred
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to as the “Deposit”) shall become nonrefundable subject to the terms and conditions of this Agreement. The Deposit shall be held in escrow by Escrow Holder pursuant to the terms and conditions of this Agreement.
3.2.2Provided all the conditions in Section 7.1 hereof have been satisfied or waived by Buyer, Buyer shall deposit in cash or current funds with Escrow Holder no later than 1:30 p.m. (California time) on the Closing Date (as defined in Section 1.1(b) hereof) an amount equal to the Purchase Price, less the Deposit and all interest accrued thereon plus or minus applicable prorations pursuant to Section 10 hereof.
3.2.3The parties hereto acknowledge that the Real Property is comprised of multiple tax lots, and Property Owners are comprised of multiple limited liability companies. Notwithstanding anything elsewhere in this Agreement to the contrary, Buyer shall have the right to allocate portions of the Purchase Price across such tax lots or limited liability companies, as applicable, as Buyer shall elect in its sole and absolute discretion, so long as Buyer provides written notice of such allocation no less than ten (10) business days prior to the Closing Date.
3.3Disposition of Deposit Upon Failure to Close. If the Close of Escrow fails to occur due to Buyer’s default under this Agreement (all of the conditions to Buyer’s obligation to close having been satisfied or waived), then the disposition of the Deposit and all interest accrued thereon shall be governed by Section 13.1 hereof; if the Close of Escrow fails to occur due to Seller’s default under this Agreement (all of the conditions to Seller’s obligation to close having been satisfied or waived), then the disposition of the Deposit and all interest accrued thereon shall be governed by Section 13.2 hereof; and if the Close of Escrow fails to occur due to the failure of any of the conditions set forth in Sections 7.1 or 7.2 hereof other than as a result of Buyer’s or Seller’s default under this Agreement, then the disposition of the Deposit and all interest accrued thereon shall be governed by Section 9.3 hereof.
3.4Independent Contract Consideration. Additionally, at the same time as the deposit of the Deposit with the Escrow Holder, Buyer shall deliver to Seller in cash the sum of One Hundred and No/100 Dollars ($100.00) (the “Independent Contract Consideration”) which amount has been bargained for and agreed to as consideration for Buyer’s exclusive option to purchase the Interests and the right to inspect the Real Property as provided herein, and for Seller’s execution and delivery of this Agreement. The Independent Contract Consideration is in addition to and independent of all other consideration provided in this Agreement, and is nonrefundable in all events.
4.PROPERTY INFORMATION; TITLE REVIEW; INSPECTIONS AND DUE DILIGENCE; TENANT ESTOPPEL CERTIFICATES; CONFIDENTIALITY
4.1Property Information. Seller shall make available to Buyer within two (2) business days after the date of this Agreement, to the extent in Seller’s possession, and to the extent not already made available to Buyer, the following, all of which shall be made available for review and copying (at Buyer’s cost and expense) via electronic data room (with access provided to Buyer at no cost to Buyer), at the Real Property or at the Property Owners’ local property manager’s offices (collectively, the “Property Information”):

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(a)the Leases;
(b)a current rent roll for the Real Property, indicating rents collected, scheduled rents and concessions, delinquencies, and security deposits held (collectively, the “Rent Rolls”);
(c)the most current operating statements for the Real Property, if available (collectively, the “Operating Statements”);
(d)copies of the Contracts;
(e)existing land title surveys, if any, for the Real Property (collectively, the “Existing Surveys”);
(f)any environmental, soils and/or engineering reports prepared for the Property Owners or their predecessors;
(g)ad valorem tax bills, notices, assessed valuations, protests and other similar documents for the last three (3) years;
(h)material written notices received from or delivered to governmental authorities during the last three (3) years;
(i)insurance loss runs with respect to the Property for the most recent three (3) years;
(j)all licenses, permits and approvals pertaining to the operation and management of the Property to the extent located at the Property Owners’ local property manager’s offices; and
(k)the Operating Agreements and certification of formations for the Seller.
Under no circumstances shall Buyer be entitled to review any appraisals relating to the Property or any internal financial audits relating to the Property.
4.2Title and Survey Review; Title Policy.
4.2.1Delivery of Title Report. Buyer acknowledges that it has received from the Title Company a preliminary title report or title commitment covering the Real Property (the “Title Report”), together with copies of all documents (collectively, the “Title Documents”) referenced in the Title Report. Buyer, at its option and expense, may (a) obtain a new survey for the Real Property or (b) cause one or more of the Existing Surveys to be updated or recertified. Buyer understands and acknowledges that if Buyer elects to obtain a new survey or an updated or recertified survey for the Real Property the completion and/or delivery of the surveys or updated or recertified surveys shall not be a condition precedent to the Close of Escrow. Notwithstanding the foregoing, Buyer further acknowledges that Seller makes no representations or warranties, and Seller shall have no responsibility, with respect to the completeness of the Title Documents made available to Buyer by the Title Company.

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4.2.2Title Review and Cure. Commencing from the date of this Agreement and continuing through and including the Title Review Period, Buyer shall have the right to approve or disapprove the condition of title to the Real Property. On or before the expiration of the Title Review Period, Buyer shall deliver to Seller and Escrow Holder written notice (“Buyer’s Title Notice”) of Buyer’s approval or disapproval of the matters reflected in the Title Report and any Existing Survey; Buyer’s Title Notice delivered by Buyer to Seller must state that it is a “Buyer’s Title Notice being delivered in accordance with the provisions of Section 4.2.2 of the Purchase Agreement.” The failure of Buyer to deliver to Seller Buyer’s Title Notice on or before the expiration of the Title Review Period shall be deemed to constitute Buyer’s approval of the condition of title to the Real Property, other than those title matters, if any, that Seller is expressly obligated to remove in accordance with this Agreement. If Buyer disapproves any matter of title shown in the Title Report or Existing Survey for the Real Property in Buyer’s Title Notice, then Buyer shall be deemed to have elected to terminate this Agreement, in which event the Deposit shall be immediately returned to Buyer and Buyer shall immediately return all Property Information to Seller, whereupon this Agreement shall automatically terminate, the parties shall be released from all further obligations under this Agreement (except pursuant to any provisions which by their terms survive a termination of this Agreement). Notwithstanding anything stated to the contrary herein, Seller covenants and agrees to remove (or cause to be removed) from the Property (which obligation shall be deemed satisfied if the same is insured over and the amount secured by any of the instruments referenced in clauses (a) and (b) below have been paid and the holders of the same are obligated to cause the same to be released from the Property) concurrently with the Close of Escrow (a) all deeds of trust, mortgages and/or other debt instruments to the extent executed by the Property Owners or expressly assumed by the Property Owners in writing, and (b) any other monetary liens (other than mechanic’s liens that are considered Permitted Exceptions) which are of an ascertainable amount, and do not exceed $500,000 in the aggregate and are capable of being removed upon the payment of no more than $500,000 in the aggregate.
4.2.3Delivery of Title Policy at Closing. As a condition precedent to the Close of Escrow, the Title Company shall have issued and delivered to Buyer, or shall have committed to issue and deliver to Buyer, with respect to the Real Property, a Standard Coverage Owner’s Policy of Title Insurance (2006 Form) (the “Title Policy”) issued by the Title Company as of the Closing Date, in the amount of the Purchase Price insuring the Property Owners as owners of good, marketable and indefeasible fee simple title to the Real Property, subject only to the Permitted Exceptions (as hereinafter defined) at standard rates and without additional premium to Buyer. For purposes of this Agreement, “Permitted Exceptions” shall mean and include (a) any lien to secure payment of real estate taxes, including special assessments, not delinquent, (b) all matters which could be revealed or disclosed by a physical inspection or a survey of the Real Property and matters affecting the Real Property which are created by or with the written consent of Buyer or which do not materially and deleteriously affect Buyer’s contemplated use of the Real Property, (c) the rights of the tenants under the Leases affecting the Real Property, (d) all exceptions disclosed by the Title Report relating to the Real Property and which are approved or deemed approved by Buyer in accordance with Section 4.2.2 hereof, (e) any exception for liens (and/or potential liens) for services, labor or materials heretofore or hereafter furnished to the Property for which Buyer is entitled to a credit at Closing pursuant to this Agreement, for which Buyer is expressly responsible for payment under the terms of this Agreement, and/or which arises from any services, labor or materials contracted for by any
6


tenant at the Property and with respect to which any such tenant is responsible for payment under the terms of its Lease, and (f) all applicable laws, ordinances, rules and governmental regulations (including, without limitation, those relating to building, zoning and land use) affecting the development, use, occupancy or enjoyment of the Real Property.
4.2.4Multiple Policies. Notwithstanding anything in this Agreement to the contrary, Buyer shall have the right to insure title to the Real Property pursuant to one or more Title Policies covering some or all of the tax lots comprising the Real Property. If Buyer elects to purchase multiple Title Policies, then Buyer shall be permitted to allocate the Purchase Price across the Title Policies, determined in its sole and absolute discretion, so long as no additional burdens or material obligations are imposed upon Seller.
4.3Inspections; Due Diligence Period.
4.3.1Inspections in General. Commencing from the Effective Date and continuing through and including the expiration of the Due Diligence Period, Buyer, its agents, and employees shall have a limited license (the “License”) to enter upon the Real Property for the purpose of making non-invasive inspections at Buyer’s sole risk, cost and expense. Before any such entry, Buyer shall provide Seller and Property Owners with a certificate of insurance naming Seller and Property Owners as an additional insured and with an insurer and insurance limits and coverage reasonably satisfactory to Seller. In addition, but solely to the extent of any employees engaged in such inspection (if any), Buyer, its agents, contractors, or subcontractors shall maintain, and shall have provided evidence reasonably satisfactory to Seller of Workers Compensation Insurance (including a Waiver of Subrogation endorsement in favor of Seller) with coverage amounts required by the applicable statutes of either the state where (a) such entry occurs, or (b) employees of the Buyer, its agents, contractors, or subcontractors, as applicable, are domiciled. All of such entries upon the Real Property shall be at reasonable times during normal business hours and after at least twenty-four (24) hours prior notice (including telephonic or e-mail notice) to Seller or Seller’s agent, and Seller or Seller’s agent shall have the right to accompany Buyer during any activities performed by Buyer on the Real Property. Notwithstanding anything stated to the contrary herein, Buyer shall have no right to inspect any of the occupied space in the Real Property, and Buyer shall not contact or speak to any of the tenants under the Leases, unless Buyer provides Seller with no less twenty-four (24) hours prior written notice of such intention and Seller or Seller’s representative is present during such inspections and/or discussions with tenants; any discussions with tenants shall immediately cease at the tenant’s request and any discussions with tenants must be limited to their existing tenancy and premises and may not involve any lease renegotiations. Seller agrees to make itself or its representatives reasonably available to be present during Buyer’s inspections and/or discussions with tenants. Inspections by Buyer shall not interfere with the rights of tenants. At Seller’s request, Buyer shall provide Seller (at no cost to Seller) with a copy of the results of any tests and inspections made by Buyer, excluding only market and economic feasibility studies. If any inspection or test disturbs the Real Property, Buyer will restore the Real Property to the same condition as existed before the inspection or test. Buyer shall defend, indemnify Seller and hold Seller, Seller’s trustees, officers, tenants, agents, contractors and employees and the Real Property harmless from and against any and all losses, costs, damages, claims, or liabilities, including but not limited to, mechanics’ and materialmens’ liens and Seller’s reasonable attorneys’ fees, arising out of or in connection with Buyer’s, or its agents’, contractors’,
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employees’, or invitees’ entry upon or inspection of the Real Property, except to the extent caused by the gross negligence or willful misconduct of Seller or Seller’s trustees, officers, tenants, agents, contractors or employees. The License shall be revoked upon termination of this Agreement. The provisions of this Section 4.3.1 shall survive the Close of Escrow or the earlier termination of this Agreement.
4.3.2Environmental Inspections. The inspections under Section 4.3.1 may include non-invasive Phase I environmental inspections of the Real Property, but no Phase II environmental inspections or other invasive inspections or sampling of soil or materials, including without limitation construction materials, either as part of the Phase I inspections or any other inspections, shall be performed without the prior written consent of Seller, which may be withheld in its sole and absolute discretion, and if consented to by Seller, the proposed scope of work and the party who will perform the work shall be subject to Seller’s review and approval. At Seller’s request, Buyer shall deliver to Seller (at no cost to Seller) copies of any Phase II or other environmental reports to which Seller consents as provided above.
4.3.3Termination During Due Diligence Period. If Buyer determines, in its sole discretion for any reason or no reason (other than for reasons relating to environmental matters or other matters relating to the physical condition of the Real Property), before the expiration of the Due Diligence Period, that the Property and/or the Interests are unacceptable for Buyer’s purposes, Buyer shall have the right to terminate this Agreement by giving to Seller notice of termination (“Termination Notice”) before the expiration of the Due Diligence Period (which notice may be transmitted via e-mail to Seller and Seller’s attorney), in which event the Deposit shall be immediately refunded to Buyer (together with all interest earned thereon), Buyer shall immediately return all Property Information to Seller and, except for those provisions of this Agreement which expressly survive the termination of this Agreement, the parties hereto shall have no further obligations hereunder. If Buyer fails to deliver a Termination Notice to Seller on or before the expiration of the Due Diligence Period, then Buyer shall be deemed to be satisfied with all aspects of all the Property and the Interests, including, without limitation, the condition and suitability of all the Property for Buyer’s intended use, and Buyer shall be obligated to acquire the Interests in accordance with the provisions of this Agreement. Buyer’s delivery of a Termination Notice to Seller shall constitute Buyer’s election to terminate this Agreement as provided above in this Section 4.3.3. Buyer acknowledges and agrees that Buyer has reviewed, and approved, all environmental matters relating to the Real Property and relating to the physical condition of the Real Property, and that Buyer shall have no right to terminate this Agreement as provided in this Section 4.3 to the extent arising out of any environmental matters relating to the Real Property and/or any matters relating to the physical condition of the Real Property.
4.4Tenant Estoppel Certificates; SNDAs. Seller shall endeavor to secure and deliver to Buyer by the Closing Date estoppel certificates for all Leases consistent with the information in the Rent Rolls and substantially in the form attached hereto as Exhibit D or such form as may be required under the applicable Leases and disclosing no material uncured defaults by the landlord under such Lease. Buyer may terminate this Agreement upon two (2) business days written notice to Seller if, no less than three (3) business days prior to the Closing Date, Seller fails to deliver to Buyer estoppel certificates substantially in the form attached hereto as Exhibit D or such form as may be required under any particular Lease and disclosing no material
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uncured defaults by the landlord under such Lease (“Tenant Estoppel Certificates”), executed by tenants under Leases covering at least seventy-five percent (75%) of the leased rental floor area of the Real Property and meeting the foregoing requirements. Seller will provide Buyer with the executed Tenant Estoppel Certificates promptly upon receipt thereof by Seller. Buyer shall be deemed to have approved an executed Tenant Estoppel Certificate unless it notifies Seller in writing of its disapproval of the same within the earlier to occur of (i) three (3) business days following its receipt of the same and (ii) the Closing Date.
Following the expiration of the Due Diligence Period (and not until the expiration of the Due Diligence Period), Buyer shall be entitled, with respect to any Tenant Estoppel Certificate that Buyer has received and approved in writing (or waived in writing its right to receive and approve), to deliver to such tenants for signature subordination, non-disturbance and attornment agreements (“SNDA’s”) provided Buyer provides to Seller, not less than thirty (30) days prior to the Closing Date, the form of SNDA (which SNDA must contain language making it clear that the SNDA shall be of no force or effect until the Closing occurs under this Agreement). Under no circumstances shall Buyer’s receipt of executed SNDA’s from tenants be a condition precedent to Buyer’s obligation to consummate the transaction contemplated under this Agreement.
4.5Contracts. After the Close of Escrow, the Property Owners shall continue to be responsible for all obligations arising under the Contracts, provided that, after the Close of Escrow, the Property Owners shall have a right to terminate any Contract in accordance with the terms of such Contract, in the Property Owners’ sole and absolute discretion. In addition, to the extent that any of the work being performed under the construction contracts listed in Exhibit C-3 (“Construction Contracts”) attached hereto is not completed or paid for prior to the Closing Date, Buyer shall be entitled to a credit towards the Purchase Price equal to the remaining balance under such Construction Contracts, but only to the extent (a) the same remains unpaid as of the Closing Date,  and (b) Buyer has not otherwise received a credit towards the Purchase Price for such unpaid work under such Construction Contracts in the form of tenant improvement allowances for such tenants as reflected on Schedule 1-2 and pursuant to Section 5.3 hereof.   In connection with the foregoing, prior to the Closing Date, upon written request by Buyer, Seller shall provide to Buyer evidence reasonably satisfactory to Buyer confirming the amounts, if any, that remain owing under the Construction Contracts.
4.6Confidentiality. Prior to the Close of Escrow or in the event the Close of Escrow never occurs, the Property Information and all other information, other than matters of public record or matters generally known to the public, furnished to, or obtained through inspection of the Real Property and/or the Interests by, Buyer, its affiliates, lenders, employees, attorneys, accountants and other professionals or agents relating to the Real Property and/or the Interests, will be treated by Buyer, its affiliates, lenders, employees and agents as confidential, and will not be disclosed to anyone (except as reasonably required in connection with Buyer’s evaluation of the Real Property and the Interests) except to Buyer’s consultants who agree to maintain the confidentiality of such information, and will be returned to Seller by Buyer if the Close of Escrow does not occur. The terms of this Agreement will not be disclosed to anyone prior to or after the Close of Escrow except to Buyer’s and Seller’s members, managers, investors, consultants, lenders and equity sources who agree to maintain the confidentiality of such information and Seller and Buyer agree not to make any public announcements or public
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disclosures or communicate with any media with respect to the subject matter hereof without the prior written consent of the other party (in their sole and absolute discretion). The confidentiality provisions of this Section 4.6 shall not apply to any disclosures made by Buyer or Seller as required by law, by court order, or in connection with any subpoena served upon Buyer or Seller; provided Buyer and Seller shall provide each other with written notice before making any such disclosure. Notwithstanding the foregoing and anything to the contrary in this Agreement, nothing contained herein shall impair Seller’s (or any Seller affiliate’s) right to disclose information relating to this Agreement, the Interests or the Property (a) to any due diligence representatives and/or consultants that are engaged by, work for or are acting on behalf of, any securities dealers and/or broker dealers evaluating Seller or its affiliates, (b) in connection with any filings (including any amendment or supplement to any S-11 filing) with governmental agencies (including the United States Securities and Exchange Commission) by any REIT holding an interest (direct or indirect) in Seller, and (c) to any broker/dealers in the Seller’s or any REIT’s broker/dealer network and any of the REIT’s or Seller’s investors.
5.OPERATIONS AND RISK OF LOSS
5.1Ongoing Operations. During the pendency of this Agreement, but subject to the limitations set forth below, Seller shall cause the Property Owners to carry on its businesses and activities relating to the Real Property substantially in the same manner as it did before the date of this Agreement, including, without limitation, by continuing to maintain all insurance policies carried by Seller with respect to the Property as of the Effective Date so long as such insurance policies can be maintained at commercially reasonable rates. Between the Effective Date and the Closing Date, Seller shall not permit the Property Owners to voluntarily encumber the Property with any easement, covenant, restriction, lien or encumbrance, or exception to title to which either (i) Buyer has not given its prior written consent or (ii) is not capable of being satisfied by Seller on or prior to the Closing Date. The new and pending lease transactions (the “New and Pending Lease Transactions”) reflected on Schedule 1-1 and Schedule 1-2 attached hereto shall be deemed approved by Buyer for purposes of this Agreement.
5.2New Contracts. Beginning on the Effective Date, Seller will not permit the Property Owners to enter into any contract that will be an obligation affecting the Real Property subsequent to the Close of Escrow (except contracts entered into in the ordinary course of business that are terminable without cause on 30-days’ notice), without the prior written consent of the Buyer, which may be withheld in Buyer’s sole discretion; provided, however, Buyer’s consent shall not be required for any contracts required to enable the Property Owners to comply with the terms of the Leases or required to address any health, safety or zoning conditions at the Property (the “Required Contracts”). Buyer shall receive a credit at Closing for the unpaid amounts, if any, under any Required Contracts that Seller has caused the Property Owners to enter into under the provisions of this Section 5.2 to the extent Buyer did not consent to the same.
5.3Leasing Arrangements. Prior to the expiration of the Due Diligence Period, Seller may cause the Property Owners to, without Buyer’s consent, enter into new leases of space in the Real Property and amendments, expansions and renewals of the Leases, in each case on commercially reasonable terms, provided that Seller provides Buyer with prior written notice of the same. Following the expiration of the Due Diligence Period, except for the New and
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Pending Lease Transactions, Seller shall obtain Buyer’s consent, which may be withheld in Buyer’s sole discretion, before causing the Property Owners to enter into any new lease of space in the Real Property and before entering into a Lease amendment, expansion, or renewal; provided, however, Buyer’s consent shall not be required for any Lease amendment, expansion and/or renewal which is provided for in the Lease and with respect to which the Property Owners do not have any discretion. Buyer shall be deemed to have consented to any new lease or any Lease amendment, expansion, or renewal if it has not rejected Seller’s request within five (5) days after its receipt of Seller’s written request for consent, together with a copy of the Lease amendment, expansion, or renewal or the new lease. At the Close of Escrow, (a) Buyer shall reimburse Seller for commissions, legal fees, the cost of tenant improvements, and all other leasing costs and expenses paid by the Property Owners with respect to all New and Pending Lease Transactions entered into and listed on Schedule 1-1 attached hereto and with respect to all other Lease amendments, expansions or renewals or new leases that were entered into pursuant to this Section 5.3 between the Effective Date and the Close of Escrow, and (b) Buyer shall be entitled to a credit towards the Purchase Price equal to the leasing commissions, tenant improvement allowances and free rent credits referred to in Schedule 1-2 attached hereto to the extent such transaction has been entered into and the amounts set forth on Schedule 1-2 attached hereto remain unpaid and due and owing as of the Close of Escrow.
5.4Damage or Condemnation. Risk of loss resulting from any condemnation or eminent domain proceeding which is commenced or has been threatened against the Real Property before the Close of Escrow, and risk of loss to the Real Property due to fire, flood or any other cause before the Close of Escrow, shall remain with Seller. If before the Close of Escrow the Real Property or any portion thereof shall be materially damaged, or if the Real Property or any material portion thereof shall be subjected to a bona fide threat of condemnation or shall become the subject of any proceedings, judicial, administrative or otherwise, with respect to the taking by eminent domain or condemnation, then Buyer may elect not to acquire the Interests by delivering written notice of such election to Seller within fifteen (15) days after Buyer learns of the damage or taking, in which event Buyer shall no longer be obligated to purchase, and Seller shall no longer be obligated to sell, the Interests. If the Closing Date is within the aforesaid 15-day period, then the Close of Escrow shall be extended to the next business day following the end of said 15-day period. If no such election is made, and in any event if the damage is not material, this Agreement shall remain in full force and effect, and the purchase contemplated herein, less any interest taken by eminent domain or condemnation, shall be effected with no further adjustment. For purposes of this Section 5.4, the phrase(s) (i) “Material damage” or “Materially damaged” means damage reasonably exceeding five percent (5%) of the Purchase Price of the Interests, and (ii) “material portion” means any portion of the Real Property that has a “fair market value” exceeding five percent (5%) of the Purchase Price of the Interests.
5.5Reliance Letters. During the pendency of this Agreement, Seller shall reasonably cooperate (at no cost, expense, liability or potential liability to Seller) with Buyer’s efforts to obtain reliance letters for any existing property condition reports with respect to all or any portion of the Property.

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6.SELLER’S AND BUYER’S DELIVERIES
6.1Seller’s Deliveries into Escrow. No less than one (1) business day prior to the Closing Date, Seller shall deliver, or cause to be delivered, into Escrow (as such term is defined in Section 9 hereof) to the Escrow Holder the following:
(a)Assignment. An assignment and assumption of the Interests (the “Assignment”) in the form attached hereto as Exhibit E and made a part hereof, duly executed by Seller, conveying to Buyer the Interests.
(b)Operating Agreement Amendments. Amendments (collectively, the “Operating Agreement Amendments”) to the Operating Agreements for the Property Owners in the form agreed to in writing by Seller and Buyer (in their sole and absolute discretion) prior to the expiration of the Due Diligence Period.
(c)Resignations. Written resignations of all managers, officers and/or directors of the Property Owners, if any.
(d)State Law Disclosures. Such disclosures and reports as are required by applicable state and local law in connection with the conveyance of the Interests.
(e)FIRPTA. A certificate executed by Seller stating that Seller is not a “foreign person” as defined in the Federal Foreign Investment in Real Property Tax Act of 1980.
(f)Seller’s Residency Certification/Exemption. A State of New Jersey Seller’s Residency Certification/Exemption, if required by applicable law.
(g)Affidavit of Consideration. A State of New Jersey Affidavit of Consideration for Use by Seller, if required by applicable law.
(h)Evidence of Authority. The Entity Documents.
(i)Rent Roll. An updated Rent Roll dated no earlier than three (3) Business Days prior to the Closing Date.
(j)Balance Sheet. A balance sheet (“Balance Sheet”) of each Property Owner dated no later than the first (1st) day of the month in which the Closing occurs, reflecting all liabilities of any kind (whether actual, contingent or otherwise) accrued through the date of the Balance Sheet, other than liabilities which will be paid in full through the Escrow Agent from the Purchase Price proceeds at Closing.
(k)Estoppels and SNDAs. To the extent not previously delivered to Buyer, each of the Tenant Estoppel Certificates and SNDAs obtained by Seller pursuant to Section 4.4 of this Agreement.
(l)Seller’s Reaffirmation. A certificate of Seller confirming whether the representations and warranties made by Seller in Section 11.1 hereof continue to be true and correct in all material respects as of the Closing Date.
(m)Owner’s Affidavit. An owner’s affidavit in form and substance of the affidavit attached hereto as Exhibit I, duly executed by Seller.
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(n)Additional Documents. Any additional documents that Escrow Holder or the Title Company may reasonably require for the proper consummation of the transaction contemplated by this Agreement.
6.2Buyer’s Deliveries into Escrow. No less than one (1) business day prior to the Closing Date, Buyer shall deliver into Escrow to the Escrow Holder the following:
(a)Purchase Price. The Purchase Price, less the Deposit that is applied to the Purchase Price, plus or minus applicable prorations, in accordance with Section 3.2.2, in immediate, same day federal funds wired for credit into the Escrow Holder’s escrow account; provided, notwithstanding the foregoing to the contrary, the same may be deposited by Buyer on the Closing Date no later than 1:00 p.m. (California time).
(b)Assignment. The Assignment, duly executed by Buyer.
(c)Affidavit of Consideration. A State of New Jersey Affidavit of Consideration for Use by Buyer, if required by applicable law.
(d)State Law Disclosures. Such disclosures and reports as are required by applicable state and local law in connection with the conveyance of the Interests.
(e)Additional Documents. Any additional documents that Escrow Holder or the Title Company may reasonably require for the proper consummation of the transaction contemplated by this Agreement.
6.3Closing Statements/Escrow Fees. Concurrently with the Close of Escrow, Seller and Buyer shall deposit with the Escrow Holder executed closing statements consistent with this Agreement in the form required by the Escrow Holder.
6.4Post-Closing Deliveries. Immediately after the Close of Escrow, to the extent in Seller’s or the Property Owners’ possession, Seller shall deliver to the offices of Buyer’s property manager: the original Leases; copies or originals of all Contracts, receipts for deposits, and unpaid bills; all keys, if any, used in the operation of the Real Property; all tax information relating to the Property Owners, and, if in Seller’s or the Property Owners’ possession, any “as-built” plans and specifications of the Improvements.
7.CONDITIONS TO BUYER’S AND SELLER’S OBLIGATIONS
7.1Conditions to Buyer’s Obligations. The Close of Escrow and Buyer’s obligation to consummate the transaction contemplated by this Agreement are subject to the satisfaction of the following conditions for Buyer’s benefit (or Buyer’s waiver thereof, it being agreed that Buyer may waive any or all of such conditions) on or prior to the Closing Date or on the dates designated below for the satisfaction of such conditions:
(a)All of Seller’s representations and warranties contained herein shall be
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true and correct in all material respects as of the date of this Agreement and as of the Closing Date, subject to any qualifications hereafter made to any of Seller’s representations as provided for in Section 11.1 hereof;
(b)As of the Closing Date, Seller shall have performed its respective obligations hereunder and all deliveries to be made at Close of Escrow by Seller shall have been tendered;
(c)There shall exist no actions, suits, arbitrations, claims, attachments, proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization or other proceedings, pending or threatened against Seller or against the Property Owners that are not covered by insurance;
(d)There shall exist no pending or threatened action, suit or proceeding with respect to Seller or the Property Owners before or by any court or administrative agency which seeks to restrain or prohibit, or to obtain damages or a discovery order with respect to, this Agreement or the consummation of the transaction contemplated hereby;
(e)Subject to Section 4.4 above, no less than three (3) business days prior to the Closing Date (as the same may be extended under the terms of this Agreement), Seller shall have delivered or caused to be delivered to Buyer, Tenant Estoppel Certificates complying with the provisions of Section 4.4 above, which Tenant Estoppel Certificates shall be consistent with the information set forth in the Rent Rolls; and
(f)As of the Closing Date, there shall have been no material adverse changes since the expiration of the Due Diligence Period in the condition of the Property (including, but not limited to, the Leases (except for any amendments to the Leases provided for under this Agreement and except for the expiration of any Lease pursuant to the express terms of any Lease), except any changes in the condition of the Property covered by the provisions of Section 5.4 herein.
(g)The Title Company shall be irrevocably committed to issue the Title Policy to the Property Owners effective as of the Closing Date, subject only to the Permitted Exceptions and without additional premium to Buyer.
If, notwithstanding the nonsatisfaction of any such condition, the Close of Escrow occurs, there shall be no liability on the part of Seller for breaches of representations and warranties of which Buyer had knowledge as of the Close of Escrow.
7.2Conditions to Seller’s Obligations. The Close of Escrow and Seller’s obligations to consummate the transaction contemplated by this Agreement are subject to the satisfaction of the following conditions for Seller’s benefit (or Seller’s waiver thereof, it being agreed that Seller may waive any or all of such conditions) on or prior to the Closing Date or the dates designated below for the satisfaction of such conditions:
(a)All of Buyer’s representations and warranties contained herein shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date;

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(b)As of the Closing Date, Buyer has performed its obligations hereunder and all deliveries to be made at Close of Escrow by Buyer shall have been tendered including, without limitation, the deposit with Escrow Holder of the amounts set forth in Section 6.2(a) hereof;
(c)There shall exist no actions, suits, arbitrations, claims, attachments, proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization or other proceedings, pending or threatened against Buyer that would materially and adversely affect Buyer’s ability to perform its obligations under this Agreement;
(d)There shall exist no pending or threatened action, suit or proceeding with respect to Buyer before or by any court or administrative agency which seeks to restrain or prohibit, or to obtain damages or a discovery order with respect to, this Agreement or the consummation of the transaction contemplated hereby;
(e)Seller shall have received all consents and approvals from (i) all governmental bodies from whom such consents and approvals are necessary in order to consummate the Close of Escrow, and (ii) all third parties from whom such consents or approvals are necessary under all contracts, covenants and other agreements relating to the Real Property and which have been recorded against the Real Property or are contained in the Property Information made available to Buyer, but only to the extent Seller’s or Property Owners’ failure to obtain such consents and/or approvals would prevent Seller from consummating the Close of Escrow.
8.CLOSE OF ESCROW; POSSESSION
8.1“Close of Escrow” shall mean and refer to Seller’s receipt of the Purchase Price and the other amounts due Seller in accordance with the provisions of Section 9.1(b) below. The Escrow and Buyer’s right to purchase the Interests will terminate automatically if the Close of Escrow does not occur on or before 1:30 p.m. (California time) on the Closing Date.
8.2Upon the Close of Escrow, Escrow Holder will release the fully-executed Assignment, delivering sole exclusive possession of the Interests to Buyer.
9.ESCROW
9.1Closing. The escrow (the “Escrow”) for the consummation of this transaction shall be established with Escrow Holder at the address indicated in Section 15.1 hereof by the deposit of an original signed copy of this Agreement with Escrow Holder contemporaneously with the execution hereof. This Agreement shall constitute both an agreement among Buyer and Seller and escrow instructions for Escrow Holder. If Escrow Holder requires separate or additional escrow instructions which it deems necessary for its protection, Seller and Buyer hereby agree promptly upon request by Escrow Holder to execute and deliver to Escrow Holder such separate or additional escrow instructions (the “Additional Instructions”). In the event of any conflict or inconsistency between this Agreement and the Additional Instructions, this Agreement shall prevail and govern, and the Additional Instructions shall so provide. The Additional Instructions shall not modify or amend the provisions of this Agreement unless otherwise agreed to in writing by Seller and Buyer.

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On the Closing Date, provided that the conditions set forth in Sections 7.1 and 7.2 hereof have been satisfied or waived, Escrow Holder shall take the following actions in the order indicated below:
(a)With respect to all closing documents delivered to Escrow Holder hereunder, and to the extent necessary, Escrow Holder is authorized to insert into all blanks requiring the insertion of dates the Closing Date or such other date as Escrow Holder may be instructed in writing by Seller and Buyer;
(b)Deliver to Seller, (i) in cash or current funds, the Purchase Price, plus or minus, as the case may be, the amounts determined in accordance with the provisions of Section 10 hereof, and (ii) fully-executed originals of (A) the Assignment, and (B) the other documents required to be delivered to Buyer;
(c)Deliver to Buyer fully-executed originals of (A) the Assignment, and (B) those items referred to in Section 6.1 hereof (including, where applicable, Seller’s (or the applicable party’s) signed counterparts of the same);
(d)Cause the Title Company to issue the Title Policy for the Real Property in accordance with the provisions of Section 4.2.3 hereof;
(e)Submit the amendment to the Property Owners’ Certificate of Formation for filing with the Delaware Secretary of State; and
(f)Deliver to Seller and Buyer a final closing statement which has been certified by Escrow Holder to be true and correct.
9.2Escrow and Title Charges.
(a)Upon the Close of Escrow, escrow, title charges and other closing costs shall be allocated between Seller and Buyer as follows:
(i)Seller shall pay: (1) the “Controlling Interest Transfer Tax” payable in connection with the transfer of the Interests, and (2) one-half (½) of any escrow fees or similar charges of Escrow Holder.
(ii)Buyer shall pay: (1) the premiums for the Title Policy and all title other title costs, and (2) one-half (½) of any escrow fees or similar charges of Escrow Holder. If Buyer desires ALTA extended coverage for any Title Policy, Buyer shall pay the premiums and any additional costs (including any survey costs) for such coverage (additional to the premiums for standard coverage) and the cost of any endorsements to the Title Policy, if required by Buyer.
(iii)Buyer shall pay all costs incurred in connection with Buyer’s updating or recertifying the Existing Surveys or obtaining any surveys for the Real Property.
(iv)Except to the extent otherwise specifically provided herein,
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all other expenses incurred by Seller and Buyer with respect to the negotiation, documentation and closing of this transaction, including, without limitation, Buyer’s and Seller’s attorneys’ fees, shall be borne and paid by the party incurring same.
(b)If the Close of Escrow does not occur by reason of Buyer’s or Seller’s default under this Agreement, then all escrow and title charges (including cancellation fees) shall be borne by the party in default.
9.3Procedures Upon Failure of Condition. Except as otherwise expressly provided herein, if any condition set forth in Sections 7.1 or 7.2 hereof is not timely satisfied or waived for a reason other than the default of Buyer or Seller in the performance of its respective obligations under this Agreement:
(a)This Agreement, the Escrow and the respective rights and obligations of Seller and Buyer hereunder shall terminate (other than the indemnity and insurance obligations of Buyer set forth in Sections 4.3.1 and 14 hereof and the confidentiality provisions of Section 4.6 hereof which shall survive such termination) at the written election of the party for whose benefit such condition was imposed, which written election must be made on or prior to the Closing Date;
(b)Escrow Holder shall promptly return to Buyer all funds of Buyer in its possession, including the Deposit and all interest accrued thereon, and to Seller and Buyer all documents deposited by them respectively, which are then held by Escrow Holder;
(c)Buyer shall return to Seller the Property Information and Buyer shall deliver to Seller all Work Product (as such term is defined in Section 15.3 hereof); and
(d)Any escrow cancellation and title charges shall be borne equally by Seller and Buyer.
10.PRORATIONS
If the Purchase Price is received by Seller’s depository bank in time to credit to Seller’s account on the Closing Date, the day the Close of Escrow occurs shall belong to Buyer and all prorations hereinafter provided to be made as of the Close of Escrow shall each be made as of the end of the day before the Closing Date. If the cash portion of the Purchase Price is not so received by Seller’s depository bank on the Closing Date, then the day the Close of Escrow occurs shall belong to Seller and such proration shall be made as of the end of the day that is the Closing Date. In each such proration set forth below, the portion thereof applicable to periods beginning as of Close of Escrow shall be credited to Buyer or charged to Buyer as applicable and the portion thereof applicable to periods ending as of Close of Escrow shall be credited to Seller or charged to Seller as applicable.
10.1Collected Rent. All rent (including, without limitation, all base rents, additional rents and retroactive rents, and expressly excluding tenant reimbursements for Operating Costs, as hereinafter defined) and all other income (and any applicable state or local tax on rent) (hereinafter collectively referred to as “Rents”) collected under Leases in effect on the Closing Date in respect of the month (or other applicable collection period) in which the Closing Date
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occurs (the “Current Month”), shall be prorated on a per diem basis based upon the number of days in the Current Month prior to the Closing Date and the number of days in the Current Month on and after the Closing Date. Uncollected Rent shall not be prorated and, to the extent payable for the period prior to the Close of Escrow, shall remain the property of Seller. Buyer shall apply Rent from tenants that are collected after the Close of Escrow as follows:
(a)First, to Seller and Buyer, in an amount equal to all Rent owing by such tenant to the Property Owners and Buyer in respect of the Current Month on a per diem basis based upon the number of days in the Current Month prior to the Closing Date and the number of days in the Current Month on and after the Closing Date, which shall be allocated as set forth above in this Section 10;
(b)Next, to Buyer in an amount equal to all Rents owing by such tenant for the period after the Current Month through the end of the month in which such amount is collected; and;
(c)Next, after Rents for all current periods have been paid in full, to Seller, in payment of fixed rents owed by such tenant to the Property Owners for the period prior to the Current Month.
Buyer will make reasonable efforts, without suit, to collect any Rents applicable to the period before the Close of Escrow including, without limitation, sending to tenants bills for the payment of past due Rents during the first six (6) month period following the Closing Date. If Buyer incurs third-party costs in connection with the collection of past due Rents, Buyer may subtract a pro rata share of third-party costs actually incurred by Buyer in connection therewith.  Rents collected by Buyer and/or Property Owners after the Closing Date to which Seller is entitled shall be paid to Seller within thirty (30) days after receipt thereof by Buyer and/or Property Owners.  From and after the date which is six (6) months after the Closing Date, Seller may pursue collection of any Rents that were past due as of the Closing Date, provided that Seller shall have no right to terminate any Lease or any tenant’s occupancy under any Lease in connection therewith.
10.2Operating Costs and Additional Rent Reconciliation. Property Owners, as landlord under the Leases, are currently collecting from tenants under the Leases additional rent to cover taxes, insurance, utilities (to the extent not paid directly by tenants), common area maintenance and other operating costs and expenses (collectively, “Operating Costs”) in connection with the ownership, operation, maintenance and management of the Real Property. To the extent that any additional rent (including, without limitation, estimated payments for Operating Costs) is paid by tenants to the landlord under the Leases based on an estimated payment basis (monthly, quarterly, or otherwise) for which a future reconciliation of actual Operating Costs to estimated payments is required to be performed at the end of a reconciliation period, Buyer and Seller shall make an adjustment at the Close of Escrow for the applicable reconciliation period (or periods, if the Leases do not have a common reconciliation period) based on a comparison of the actual Operating Costs to the estimated payments at the Close of Escrow. If, as of the Close of Escrow, Property Owners have received additional rent payments in excess of the amount that tenants will be required to pay, based on the actual Operating Costs as of the Close of Escrow, Buyer shall receive a credit in the amount of such excess. If, as of the
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Close of Escrow, Property Owners have received additional rent payments that are less than the amount that tenants would be required to pay based on the actual Operating Costs as of the Close of Escrow, Seller shall receive a credit in the amount of such deficiency; provided, however, Seller shall not be entitled to the portion, if any, of such deficiency for which Seller received a credit at the Close of Escrow under clause (b) of Section 10.3 hereof. Operating Costs that are not payable by tenants either directly or reimbursable under the Leases shall be prorated between Seller and Buyer and shall be reasonably estimated by the parties if final bills are not available.
10.3Taxes and Assessments. Real estate taxes and assessments imposed by any governmental authority (“Taxes”) with respect to the Real Property for the current fiscal year of the applicable taxing authority in which the Closing Date occurs and that are not yet due and payable or that have not yet been paid and that are not (and will not be) reimbursable by tenants under the Leases (or under leases entered into after the Close of Escrow for vacant space existing at the Close of Escrow) as Operating Costs shall be prorated as of the Close of Escrow based upon the most recent ascertainable assessed values and tax rates and based upon the number of days Buyer and Seller will have owned the Real Property during such relevant tax year. Seller shall receive a credit for any Taxes paid by Property Owners and applicable to (a) any period after the Close of Escrow, and (b) any period before the Close of Escrow to the extent reimbursable as Operating Costs by (i) existing tenants under the Leases and not yet received from such tenants, or (ii) future tenants that may execute leases covering space in the Real Property that is vacant as of the Close of Escrow.
10.4Contracts. At Close of Escrow, the Property Owners shall continue to be responsible for all obligations arising out of the Contracts.
10.5Tenant Deposits. All tenant security deposits actually received by Property Owners (and interest thereon if required by law or contract to be earned thereon) and not theretofore applied to tenant obligations under the Leases shall be credited to Buyer at the Close of Escrow or placed in escrow if required by law. At the Close of Escrow, Property Owners shall continue to be responsible for the tenant security deposits, but only to the extent of those tenant security deposits actually credited to Buyer (“Transferred Security Deposits”). Buyer will indemnify, defend, and hold Seller harmless from and against all demands and claims made by tenants arising out of the transfer or disposition of any Transferred Security Deposits and will reimburse Seller for all reasonable attorneys’ fees incurred or that may be incurred as a result of any such claims or demands as well as for all loss, expenses, verdicts, judgments, settlements, interest, costs and other expenses incurred or that may be incurred by Seller as a result of any such claims or demands by tenants.
10.6Utilities and Utility Deposits. Utilities for the Real Property (excluding utilities for which payment is made directly by tenants), including water, sewer, electric, and gas, based upon the last reading of meters prior to the Close of Escrow, shall be prorated. Seller shall be entitled to a credit for all security deposits made by the Property Owners and held by any of the utility companies providing service to the Real Property. Seller shall endeavor to obtain meter readings on the day before the Closing Date, and if such readings are obtained, there shall be no proration of such items and Seller shall pay, or cause to be paid, at Close of Escrow the bills therefor for the period to the day preceding the Close of Escrow, and Buyer shall pay the bills therefor for the period subsequent thereto. If the utility company will not issue separate bills,
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Buyer will receive a credit against the Purchase Price for Seller’s portion and the Property Owners will pay the entire bill prior to delinquency after Close of Escrow. If Property Owners have paid utilities no more than thirty (30) days in advance in the ordinary course of business, then Buyer shall be charged its portion of such payment at Close of Escrow. Buyer shall be responsible for making any security deposits required by utility companies providing service to the Real Property. If any apportionment is not based on an actual current reading, then upon the taking of a subsequent actual reading, the parties shall, within ten (10) business days following notice of the determination of such actual reading, readjust such apportionment and Seller shall promptly deliver to Buyer, or Buyer shall promptly deliver to Seller, as the case may be, the amount determined to be due upon such adjustment.
10.7Owner Deposits. Seller shall receive a credit at the Close of Escrow for all bonds, deposits, letters of credit, set aside letters or other similar items, if any, that are outstanding with respect to the Real Property that have been provided by the Property Owners or any of their affiliates to any governmental agency, public utility, or similar entity (collectively, “Owner Deposits”).
10.8Percentage Rents. Percentage rents (“Percentage Rents”) actually collected for the month in which the Close of Escrow occurs shall be prorated as of the Closing Date. Percentage Rents due after the Close of Escrow shall not be prorated; provided, however, after Buyer has completed any reconciliation of actual Percentage Rents payable and estimated Percentage Rents paid by the subject tenants, and all reconciled amounts have been paid, a reconciliation shall be made between Seller and Buyer with regard to such Percentage Rents. Pursuant to such reconciliation, Seller and Buyer shall be entitled to their proportionate share of all Percentage Rents paid for the subject fiscal Lease year used to calculate each tenant’s Percentage Rents (less any out-of-pocket costs incurred in collecting said amounts, which shall belong to Buyer) based on the number of days of such fiscal year prior to the Closing Date and the number of days of such fiscal year following the Closing Date Property Owners and Buyer owned the Property (and adjusted for any amount of Percentage Rent prorated at Closing or received by Seller or Buyer). As used in this paragraph, the term “Percentage Rents” shall not include and shall have deducted from such Percentage Rent amount any “base” or “minimum” rent component which is payable each month (regardless of actual sales), which “base” or “minimum” rent component shall be prorated or otherwise handled in the manner provided in this Agreement. Buyer will make reasonable efforts, without suit, to collect all Percentage Rents payable after the Close of Escrow and relating to the period prior to the Close of Escrow, and all Percentage Rents which are delinquent as of the Close of Escrow, including, without limitation, sending to tenants bills for the payment of the same. Percentage Rents collected by Buyer after the Closing Date to which Seller is entitled shall be paid to Seller within thirty (30) days after receipt thereof by Buyer.  In no event whatsoever may Seller pursue collection of any Percentage Rents until after the six (6) month period immediately following the Closing Date.
10.9Cash Balances Seller shall, prior to Close of Escrow, attempt to cause the Property Owners to close out all bank and other financial accounts of the Property Owners. However, as to any bank and other financial accounts of the Property Owners that are not closed out as of the Close of Escrow, Seller shall receive a credit upon Close of Escrow in an amount equal to all cash on deposit in such accounts, and Seller shall, after the Close of Escrow either, provide all necessary paperwork and authorizations to grant Buyer control of such accounts or
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arrange for all funds in such accounts for which Seller received a credit at Closing to be remitted to Buyer.
10.10Final Adjustment After Closing. If final prorations cannot be made at the Close of Escrow for any item being prorated under this Section 10, then, provided Buyer and Seller both identify any such proration (“Post Closing Proration”) in writing before the Close of Escrow, Buyer and Seller agree to allocate such items on a fair and equitable basis as soon as invoices or bills are available and applicable reconciliation with tenants have been completed, with final adjustment to be made as soon as reasonably possible after the Close of Escrow (but in no event later than ninety (90) days after the Close of Escrow, except that adjustments arising from Percentage Rents under Section 10.8 hereof shall not be subject to such 90-day limitation, but shall be made as soon as reasonably possible), to the effect that income and expenses are received and paid by the parties on an accrual basis with respect to their period of ownership. Payments in connection with the final adjustment shall be due no later than ninety (90) days after the Close of Escrow, except that adjustments relating to Percentage Rents under Section 10.8 hereof shall not be subject to such 90-day limitation, but shall be made as soon as reasonably possible. Seller, at Seller’s sole cost and expense, shall have reasonable access to, and the right, at reasonable times and on reasonable prior notice, to inspect and audit, Property Owners’ books to confirm the final prorations for a period of one hundred eighty (180) days after the Close of Escrow. Notwithstanding anything to the contrary stated in this Section 10, except for any reconciliation arising out of Percentage Rents under Section 10.8 hereof, and except for any Post Closing Prorations (which must be determined and paid within ninety (90) days after the Close of Escrow), all prorations made under this Section 10 shall be final as of the Close of Escrow and shall not be subject to further adjustment (whether due to an error or for any other reason) after the Close of Escrow.
11.SELLER’S REPRESENTATIONS AND WARRANTIES; AS-IS
11.1Seller’s Representations and Warranties. In consideration of Buyer’s entering into this Agreement and as an inducement to Buyer to purchase the Real Property from Seller, Seller makes the following representations and warranties to Buyer:
(a)Seller is a limited liability company organized and in good standing under the laws of the State of Delaware. Seller has the legal right, power and authority to enter into this Agreement and to consummate the transactions contemplated hereby, and the execution, delivery and performance of this Agreement have been duly authorized and no other action by Seller is requisite to the valid and binding execution, delivery and performance of this Agreement, except as otherwise expressly set forth herein.
(b)Seller is the sole owner of the Interests. No other Person has the right or option to purchase the Interests.
(c)This Agreement and all agreements, instruments and documents herein provided to be executed by Seller are and as of the Closing will be duly authorized, executed and delivered by and are and will be binding upon Seller, and at the time of Closing will be the legal, valid and binding obligations of Seller, and do not and, at the time of the execution of this Agreement and at the time of Closing will not, violate any provision of any agreement or judicial
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order to which Seller or the Interests are subject as of the date of this Agreement.
(d)Seller has delivered or otherwise made available to Buyer true and complete copies of the Operating Agreements. The Operating Agreements have not been modified, supplemented or amended except as described herein.
(e)Seller has not filed, nor has Seller received service of process with respect to the filing of, a petition under the federal bankruptcy law or any state insolvency laws or laws of reorganization of debtors.
(f)To Seller’s Actual Knowledge, except as disclosed on Schedule 2 attached hereto, Property Owners have received no written notice from any governmental agency in the last 12 months that the Property or the current use and operation thereof violate any applicable federal, state or municipal law, statute, code, ordinance, rule or regulation (including those relating to environmental matters), except with respect to such violations as have been fully cured prior to the date hereof.
(g)To Seller’s Actual Knowledge, except as disclosed on Schedule 2 attached hereto, Property Owners have not received written notice from any governmental agency of any currently pending or threatened condemnation proceedings relating to the Property.
(h)To Seller’s Actual Knowledge, except as disclosed on Schedule 2 attached hereto, except with respect to slip and fall and similar claims or matters covered by Property Owners’ commercial liability insurance policy, (i) Property Owners have not received service of process with respect to any litigation that has been filed and is continuing against Seller or Property Owners that arises out of the ownership of the Property, and (ii) Property Owners have not received written notice threatening the filing of any litigation against Seller or Property Owners arising out of the ownership of the Property.
(i)There is no agreement to which Seller is a party or to Seller’s Actual Knowledge binding on Seller which would prevent Seller from consummating the transaction contemplated by this Agreement.
(j)Seller is not a “foreign person” within the meaning of Section 1445 of the Internal Revenue Code 1986, as amended, or any regulations promulgated thereunder.
(k)To Seller’s Actual Knowledge, neither Seller, nor any person controlling or controlled by Seller, is a country, territory, individual or entity named on a Government List, and the monies used in connection with this Agreement and amounts committed with respect thereto, were not and are not derived from any activities that contravene any applicable anti-money laundering or anti-bribery laws and regulations (including funds being derived from any person, entity, country or territory on a Government List or engaged in any unlawful activity defined under Title 18 of the United States Code, Section 1956(c)(7)).  For purposes of this paragraph “Government List” means any of (a) the two lists maintained by the United States Department of Commerce (Denied Persons and Entities), (b) the list maintained by the United States Department of Treasury (Specially Designated Nationals and Blocked Persons), and (c) the two lists maintained by the United States Department of State (Terrorist Organizations and Debarred Parties).

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(l)Seller is not a party in interest with respect to any employee benefit or other plan within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or Section 4975(e)(1) of the Code, which is subject to ERISA or Section 4975 of the Code.
(m)Except for the property management and leasing agreements entered into by Property Owners (which will be terminated on or before the Closing Date), all service, maintenance, management, construction and other similar contracts entered into by Property Owners in connection with the Property, and which are still in effect as of the Effective Date, are set forth on Exhibit C-2 and C-3 attached hereto.
(n)Property Owners have not entered into any union contracts, collective bargaining agreements or similar agreements or arrangements with respect to the Property that are still in effect, and there are no persons employed at the Property by Seller or the Property Owners, or, to Seller’s Actual Knowledge, any managing agent thereof, who shall be the responsibility of Buyer or the Property Owners after the Closing Date.
(o)To Seller’s Actual Knowledge, the balance sheets of Property Owners attached hereto as Exhibit H and made a part hereof are true and correct in all material respects as of the date set forth therein.
For purposes of this Section 11.1, the phrase “To Seller’s Actual Knowledge” shall mean the actual (and not implied, imputed, or constructive) knowledge of Shannon Hill (whom the Seller represents is the asset manager for the Real Property), without any inquiry or investigation of any other parties, including, without limitation, the tenants and the property manager of the Real Property.
The representations and warranties made by Seller in this Agreement shall survive the Close of Escrow for a period of six (6) months subject to, and in accordance with, the provisions of Section 15.6(d). If, after the Effective Date, but before the Close of Escrow, Seller becomes aware of any facts or changes in circumstances that would cause any of its representations and warranties in this Agreement to be untrue at Close of Escrow, Seller may notify Buyer in writing of such fact. In such case, or in the event Buyer, through its representative, Shaya Prager (“Buyer’s Representative”) obtains actual knowledge that any of Seller’s representations and warranties are untrue at Close of Escrow, Buyer, as its sole and exclusive remedy, shall have the right to either (i) terminate this Agreement to the extent that the failure of any such representation or warranty to be true would have a material adverse impact on Property or the Interests, in which case the Deposit shall be immediately returned to Buyer and neither party shall have any rights or obligations under this Agreement (except for Sections 4.3.1, 15.3 and 15.5 which survive termination of this Agreement); or (ii) to the extent Buyer is permitted to terminate this Agreement pursuant to clause (i) above, accept a qualification to Seller’s representations and warranties as of the Close of Escrow and complete the purchase and sale of the Interests without any rights to recovery for breach of the unqualified representation and warranty. Other than as set forth in the immediately preceding sentence, if Buyer proceeds with the Close of Escrow, Buyer shall be deemed to have expressly waived any and all remedies for the breach of any representation or warranty actually known by Buyer’s Representative prior to the Close of Escrow.

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11.2As-Is. As of the expiration of the Due Diligence Period, Buyer will have:
(a)examined and inspected the Property and will know and be satisfied with the physical condition, quality, quantity and state of repair of the Property in all respects (including, without limitation, the compliance of the Real Property with the Americans With Disabilities Act of 1990 Pub.L. 101-336, 104 Stat. 327 (1990), and any comparable local or state laws (collectively, the “ADA”)) and by proceeding with this transaction following the expiration of the Due Diligence Period shall be deemed to have determined that the same is satisfactory to Buyer;
(b)reviewed the Property Information and all instruments, records and documents which Buyer deems appropriate or advisable to review in connection with this transaction, including, but not by way of limitation, any and all architectural drawings, plans, specifications, surveys, building and occupancy permits, any licenses, leases, contracts, warranties and guarantees relating to the Real Property or the business conducted thereon, and any documentation relating to the Interests, and Buyer, by proceeding with this transaction following the expiration of the Due Diligence Period, shall be deemed to have determined that the same and the information and data contained therein and evidenced thereby are satisfactory to Buyer;
(c)reviewed all applicable laws, ordinances, rules and governmental regulations (including, but not limited to, those relating to building, zoning and land use) affecting the development, use, occupancy or enjoyment of the Real Property, and Buyer, by proceeding with this transaction following the expiration of the Due Diligence Period, shall be deemed to have determined that the same are satisfactory to Buyer; and
(d)at its own cost and expense, made its own independent investigation respecting the Interests and/or the Property and all other aspects of this transaction, and shall have relied thereon and on the advice of its consultants in entering into this Agreement, and Buyer, by proceeding with this transaction following the expiration of the Due Diligence Period, shall be deemed to have determined that the same are satisfactory to Buyer; provided, however, the foregoing shall not be deemed to relieve Seller of its continuing covenants and obligations in this Agreement between the Effective Date and the Close of Escrow with respect to the Property (including, without limitation, with respect to title), nor shall the foregoing in any way impair Buyer’s ability to rely on Seller’s representations and warranties set forth in this Agreement with respect to the purchase of the Interests from Seller.
TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, AND EXCEPT FOR SELLER’S COVENANTS AND OBLIGATIONS EXPRESSLY STATED IN THIS AGREEMENT AND SELLER’S REPRESENTATIONS AND WARRANTIES IN SECTION 11.1 OF THIS AGREEMENT AND IN ANY EXECUTED DOCUMENT DELIVERED BY SELLER TO BUYER AT THE CLOSE OF ESCROW (“SELLER’S COVENANTS AND WARRANTIES”), THIS SALE IS MADE AND WILL BE MADE WITHOUT REPRESENTATION, COVENANT, OR WARRANTY OF ANY KIND (WHETHER EXPRESS, IMPLIED, OR, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW) BY SELLER. AS A MATERIAL PART OF THE CONSIDERATION FOR THIS AGREEMENT, BUYER AGREES TO ACCEPT THE INTERESTS AND THE
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PROPERTY OWNERS’ INTEREST IN THE PROPERTY ON AN “AS IS” AND “WHERE IS” BASIS, WITH ALL FAULTS, AND WITHOUT ANY REPRESENTATION OR WARRANTY, ALL OF WHICH SELLER HEREBY DISCLAIMS, EXCEPT FOR SELLER’S COVENANTS AND WARRANTIES. EXCEPT FOR SELLER’S COVENANTS AND WARRANTIES, NO WARRANTY OR REPRESENTATION IS MADE BY SELLER AS TO FITNESS FOR ANY PARTICULAR PURPOSE, MERCHANTABILITY, DESIGN, QUALITY, CONDITION, OPERATION OR INCOME, COMPLIANCE WITH DRAWINGS OR SPECIFICATIONS, ABSENCE OF DEFECTS, ABSENCE OF HAZARDOUS OR TOXIC SUBSTANCES, ABSENCE OF FAULTS, FLOODING, OR COMPLIANCE WITH LAWS AND REGULATIONS INCLUDING, WITHOUT LIMITATION, THOSE RELATING TO HEALTH, SAFETY, AND THE ENVIRONMENT (INCLUDING, WITHOUT LIMITATION, THE ADA). EXCEPT FOR SELLER’S COVENANTS AND WARRANTIES, BUYER ACKNOWLEDGES THAT BUYER HAS ENTERED INTO THIS AGREEMENT WITH THE INTENTION OF MAKING AND RELYING UPON ITS OWN INVESTIGATION OF THE INTERESTS, THE PROPERTY OWNERS AND THE ENTITY DOCUMENTS AND THE PHYSICAL, ENVIRONMENTAL, ECONOMIC USE, COMPLIANCE, AND LEGAL CONDITION OF THE PROPERTY AND THAT BUYER IS NOT NOW RELYING, AND WILL NOT LATER RELY, UPON ANY REPRESENTATIONS AND WARRANTIES MADE BY SELLER OR ANYONE ACTING OR CLAIMING TO ACT, BY, THROUGH OR UNDER OR ON SELLER’S BEHALF CONCERNING THE PROPERTY, THE INTERESTS, THE PROPERTY OWNERS OR THE ENTITY DOCUMENTS. ADDITIONALLY, BUYER AND SELLER HEREBY AGREE THAT (A) EXCEPT FOR SELLER’S COVENANTS AND WARRANTIES, BUYER IS TAKING THE INTERESTS AND THE PROPERTY OWNERS’ INTEREST IN THE PROPERTY “AS IS” WITH ALL LATENT AND PATENT DEFECTS AND THAT EXCEPT FOR SELLER’S COVENANTS AND WARRANTIES, THERE IS NO WARRANTY BY SELLER THAT THE PROPERTY IS FIT FOR A PARTICULAR PURPOSE, (B) EXCEPT FOR SELLER’S COVENANTS AND WARRANTIES, BUYER IS SOLELY RELYING UPON ITS EXAMINATION OF THE PROPERTY, AND (C) EXCEPT FOR SELLER’S COVENANTS AND WARRANTIES, BUYER TAKES THE INTERESTS AND THE PROPERTY OWNERS’ INTERESTS IN THE PROPERTY UNDER THIS AGREEMENT UNDER THE EXPRESS UNDERSTANDING THAT THERE ARE NO EXPRESS OR IMPLIED WARRANTIES (EXCEPT FOR SELLER’S COVENANTS AND WARRANTIES).
WITH RESPECT TO THE FOLLOWING, AND EXCEPT FOR SELLER’S COVENANTS AND WARRANTIES, BUYER FURTHER ACKNOWLEDGES AND AGREES THAT NEITHER SELLER NOR THE PROPERTY OWNERS SHALL HAVE ANY LIABILITY, OBLIGATION OR RESPONSIBILITY OF ANY KIND AND THAT NEITHER SELLER NOR THE PROPERTY OWNERS HAVE MADE ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND RELATING TO:
1.THE CONTENT OR ACCURACY OF ANY REPORT, STUDY, OPINION OR CONCLUSION OF ANY SOILS, TOXIC, ENVIRONMENTAL OR OTHER ENGINEER OR OTHER PERSON OR ENTITY WHO HAS EXAMINED THE PROPERTY OR ANY ASPECT THEREOF;
2.THE CONTENT OR ACCURACY OF ANY OF THE ITEMS (INCLUDING,
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WITHOUT LIMITATION, THE PROPERTY INFORMATION) DELIVERED TO BUYER PURSUANT TO BUYER’S REVIEW OF THE INTERESTS, THE PROPERTY OWNERS, THE ENTITY DOCUMENTS AND THE CONDITION OF THE PROPERTY; OR
3.THE CONTENT OR ACCURACY OF ANY PROJECTION, FINANCIAL OR MARKETING ANALYSIS OR OTHER INFORMATION GIVEN TO BUYER BY SELLER OR REVIEWED BY BUYER WITH RESPECT TO THE INTERESTS, THE PROPERTY OWNERS, THE ENTITY DOCUMENTS OR THE PROPERTY.
BUYER ALSO ACKNOWLEDGES THAT THE REAL PROPERTY MAY OR MAY NOT CONTAIN ASBESTOS AND, IF THE REAL PROPERTY CONTAINS ASBESTOS, THAT BUYER MAY OR MAY NOT BE REQUIRED TO REMEDIATE ANY ASBESTOS CONDITION IN ACCORDANCE WITH APPLICABLE LAW.
BUYER IS A SOPHISTICATED REAL ESTATE INVESTOR AND IS, OR WILL BE AS OF THE CLOSE OF ESCROW, FAMILIAR WITH THE INTERESTS, THE PROPERTY OWNERS, THE ENTITY DOCUMENTS AND THE REAL PROPERTY AND ITS SUITABILITY FOR BUYER’S INTENDED USE. THE PROVISIONS OF THIS SECTION 11.2 SHALL SURVIVE INDEFINITELY ANY CLOSING OR TERMINATION OF THIS AGREEMENT AND SHALL NOT BE MERGED INTO THE DOCUMENTS EXECUTED AT CLOSE OF ESCROW.
/s/ Authorized Signatory
BUYER’S INITIALS
12.BUYER’S COVENANTS, REPRESENTATIONS AND WARRANTIES; RELEASE; ERISA; INDEMNIFICATION
In consideration of Seller entering into this Agreement and as an inducement to Seller to sell the Interests to Buyer, Buyer makes the following covenants, representations and warranties:
12.1Buyer’s Representations and Warranties.
(a)Authority. Buyer is a limited liability company formed and in good standing under the laws of the State of New York. Buyer has the legal right, power and authority to enter into this Agreement and to consummate the transactions contemplated hereby, and the execution, delivery and performance of this Agreement have been duly authorized and no other action by Buyer is requisite to the valid and binding execution, delivery and performance of this Agreement, except as otherwise expressly set forth herein. There is no agreement to which Buyer is a party or to Buyer’s knowledge binding on Buyer which is in conflict with this Agreement.
(b)Executive Order 13224. To the best of Buyer’s knowledge, neither Buyer nor any of its respective affiliates or constituents, nor any of their respective brokers or other agents acting in any capacity in connection with the transactions contemplated by this Agreement is or will be (a) conducting any business or engaging in any transaction or dealing with any person appearing on the U.S. Treasury Department’s Office of Foreign Assets Control
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(“OFAC”) list of restrictions and prohibited persons (“Prohibited Person”) (which lists can be accessed at the following web address: http://www.ustreas.gov/offices/enforcement/ofac/), including the making or receiving of any contribution of funds, goods or services to or for the benefit of any Prohibited Person; (b) dealing in, or otherwise engaging in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224 dated September 24, 2001, relating to “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism”; or (c) engaging in or conspiring to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempting to violate, any of the prohibitions set forth in any U.S. anti-money laundering law.
(c)No Public Market. Buyer understands that no public market now exists for any of the Interests and that Seller has made no assurances that a public market will ever exist for the Interests.
(d)Interests Acquired for Investment. The Interests to be purchased by Buyer will be acquired for investment for Buyer’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that Buyer has no present intention of selling, granting any participation in, or otherwise distributing the same.
(e)Accredited Investor. Buyer is an “accredited investor” within the meaning of Rule 501(a) promulgated under the Securities Act. Buyer understands the risks of, and considerations relating to, the purchase of the Interests. Buyer, by reason of its business and financial experience, (i) has such knowledge, sophistication and experience in financial and business matters and in making investment decisions of this type that it is capable of evaluating the merits and risks of a purchase of the Interests and making an informed investment decision, (ii) is capable of protecting its own interest or has engaged representatives or advisors to assist in protecting its interests, and (iii) is capable of bearing the economic risk of such purchase.
12.2Release. By proceeding with this transaction following the expiration of the Due Diligence Period, Buyer shall be deemed to have made its own independent investigation of the Interests, the Property Owners, the Property, the Property Information and the presence of Hazardous Materials on the Real Property as Buyer deems appropriate. Accordingly, subject to the representations and warranties of Seller expressly set forth in Section 11.1 hereof, Buyer, on behalf of itself and all of its officers, directors, shareholders, employees, representatives and affiliated entities (collectively, the “Releasors”) hereby expressly waives and relinquishes any and all rights and remedies Releasors may now or hereafter have against the Property Owners, the Seller and their successors and assigns, partners, shareholders, officers and/or directors (the “Seller Parties”), whether known or unknown, which may arise from or be related to (a) the Interests and/or the Property Owners, (b) the physical condition, quality, quantity and state of repair of the Real Property and the prior management and operation of the Real Property, (c) the Property Information or any other information relating to the Property provided to Buyer by Seller or Seller’s agents, (d) the Real Property’s compliance or lack of compliance with any federal, state or local laws or regulations, and (e) any past, present or future presence or existence of Hazardous Materials on, under or about the Real Property or with respect to any past, present or future violation of any rules, regulations or laws, now or hereafter enacted, regulating or governing the use, handling, storage or disposal of Hazardous Materials, including, without limitation, (i) any and all rights and remedies Releasors may now or hereafter have under the Comprehensive Environmental Response Compensation and Liability Act of 1980 (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation and Recovery Act, and the Toxic Substance Control Act, all as amended, and any similar state, local or federal environmental law, rule or regulation,
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and (ii) any and all claims, whether known or unknown, now or hereafter existing, with respect to the Real Property under Section 107 of CERCLA (42 U.S.C.A. §9607). As used herein, the term “Hazardous Material(s)” includes, without limitation, any hazardous or toxic materials, substances or wastes, such as (1) any materials, substances or wastes which are toxic, ignitable, corrosive or reactive and which are regulated by any local governmental authority, or any agency of the United States government, (2) any other material, substance, or waste which is defined or regulated as a hazardous material, extremely hazardous material, hazardous waste or toxic substance pursuant to any laws, rules, regulations or orders of the United States government, or any local governmental body, (3) asbestos, (4) petroleum and petroleum based products, (5) formaldehyde, (6) polychlorinated biphenyls (PCBs), and (7) freon and other chlorofluorocarbons.
/s/ Authorized Signatory
BUYER’S INITIALS
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BUYER, ON BEHALF OF ITSELF AND THE OTHER RELEASORS, HEREBY ASSUMES ALL RISK AND LIABILITY RESULTING OR ARISING FROM, OR RELATING TO THE OWNERSHIP, USE, CONDITION, LOCATION, MAINTENANCE, REPAIR, OR OPERATION OF, THE PROPERTY.
THE FOREGOING WAIVERS, RELEASES AND AGREEMENTS BY BUYER, ON BEHALF OF ITSELF AND THE RELEASORS, SHALL SURVIVE THE CLOSE OF ESCROW AND THE TRANSFER OF THE INTERESTS AND SHALL NOT BE DEEMED MERGED INTO THE ASSIGNMENT.
12.3ERISA. Buyer is not purchasing the Interests with “plan assets” of an Employee Benefit Plan subject to Title I of the Employee Retirement Income Security Act of 1974 (as amended from time to time, the “Act,” and together with any regulation, rule or judicial or administrative case, order, or pronouncement arising under or connected with the Act, “ERISA”) or of a plan subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”). Buyer shall take all actions reasonably requested by Seller for the purpose of ensuring, to Seller’s satisfaction, that the transactions contemplated herein will comply with ERISA and not result in an imposition of an excise tax under Section 4975 of the Code; such actions shall include, without limitation, the making of such further representations and warranties as Seller’s counsel reasonably deems necessary to ensure that neither this Agreement nor any of the transactions contemplated herein will violate ERISA or result in an imposition of an excise tax under Section 4975 of the Code. In the event that this Agreement, or any transaction or other action by Seller in connection herewith, shall be deemed to violate ERISA or result in an imposition of an excise tax under Section 4975 of the Code, Seller may immediately terminate this Agreement (without any liability to Seller) in accordance with, and subject to the terms and conditions of, Section 9.3 hereof as if such termination arose from a failed condition under Section 9.3 hereof.

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13.DEFAULT AND DAMAGES
13.1DEFAULT BY BUYER. BUYER AND SELLER HEREBY ACKNOWLEDGE AND AGREE THAT, IN THE EVENT THE CLOSE OF ESCROW FAILS TO OCCUR DUE TO A BUYER DEFAULT (ALL OF THE CONDITIONS TO BUYER’S OBLIGATIONS TO CLOSE HAVING BEEN SATISFIED OR WAIVED), SELLER WILL SUFFER DAMAGES IN AN AMOUNT WHICH WILL, DUE TO THE SPECIAL NATURE OF THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT AND THE SPECIAL NATURE OF THE NEGOTIATIONS WHICH PRECEDED THIS AGREEMENT, BE IMPRACTICAL OR EXTREMELY DIFFICULT TO ASCERTAIN. IN ADDITION, BUYER WISHES TO HAVE A LIMITATION PLACED UPON THE POTENTIAL LIABILITY OF BUYER TO SELLER IN THE EVENT THE CLOSE OF ESCROW FAILS TO OCCUR DUE TO A BUYER DEFAULT, AND WISHES TO INDUCE SELLER TO WAIVE OTHER REMEDIES WHICH SELLER MAY HAVE IN THE EVENT OF A BUYER DEFAULT. BUYER AND SELLER, AFTER DUE NEGOTIATION, HEREBY ACKNOWLEDGE AND AGREE THAT THE AMOUNT OF THE DEPOSIT REPRESENTS A REASONABLE ESTIMATE OF THE DAMAGES WHICH SELLER WILL SUSTAIN IN THE EVENT OF SUCH BUYER DEFAULT. BUYER AND SELLER HEREBY AGREE THAT SELLER MAY, IN THE EVENT THE CLOSE OF ESCROW FAILS TO OCCUR DUE TO A BUYER DEFAULT (ALL OF THE CONDITIONS TO BUYER’S OBLIGATIONS TO CLOSE HAVING BEEN SATISFIED OR WAIVED), TERMINATE THIS AGREEMENT BY WRITTEN NOTICE TO BUYER AND ESCROW HOLDER, CANCEL THE ESCROW AND RECEIVE THE DEPOSIT AS LIQUIDATED DAMAGES AND ESCROW HOLDER SHALL IMMEDIATELY DELIVER THE DEPOSIT TO SELLER. SUCH RETENTION OF THE DEPOSIT BY SELLER IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLER AND SHALL NOT BE DEEMED TO CONSTITUTE A FORFEITURE OR PENALTY.
NOTHING IN THIS SECTION 13.1 SHALL (A) PREVENT OR PRECLUDE ANY RECOVERY OF ATTORNEYS’ FEES OR OTHER COSTS INCURRED BY SELLER PURSUANT TO SECTION 15.5 OR (B) IMPAIR OR LIMIT THE EFFECTIVENESS OR ENFORCEABILITY OF THE INDEMNIFICATION OBLIGATIONS OF BUYER CONTAINED IN SECTION 4.3.1 AND SECTION 14 HEREOF.
13.2Default by Seller. If Seller defaults in its obligations to sell and convey the Interests to Buyer pursuant to this Agreement, Buyer’s sole and exclusive remedy shall be to elect one of the following: (a) to terminate this Agreement, in which event Buyer shall be entitled to the return by the Escrow Holder to Buyer of the Deposit; provided, however, in the event of Seller Willful Default (as defined below), then, in addition to the return of the Deposit, Buyer shall be reimbursed by Seller for all of Buyer’s third party reasonable, actual and documented out-of-pocket costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements and third party due diligence costs), in an amount not to exceed $100,000.00 in the aggregate, or (b) to bring a suit for specific performance provided that any suit for specific performance must be brought as to the Interests within 30 days of the Closing Date, Buyer’s waiving the right to bring suit at any later date to the extent permitted by law. This Agreement confers no present right, title or interest in the Interests or the Property to Buyer and Buyer agrees not to file a lis pendens or other similar notice against the Real Property except in connection with, and after, the proper filing of a suit for specific performance. If specific performance is not available as remedy due to the action of Seller, Buyer shall be deemed to have chosen clause (a) of this Section 13.2. As used herein, “Seller Willful Default” shall mean Seller’s willful refusal to close hereunder in accordance with the terms of this Agreement, provided either: (i) specific performance is not available to Buyer as a remedy or (ii) (1) the reasons for Buyer’s refusal to close hereunder do not include conditions beyond Seller’s control or the unmarketability of title; and (2) Purchaser has satisfied
29


all conditions then required to be satisfied by it under this Agreement, is not otherwise in default under this Agreement and is ready, willing and able to perform all of its obligations under this Agreement. Nothing in this Section 13.2 shall (A) prevent or preclude any recovery of attorneys’ fees or other costs incurred by Buyer pursuant to Section 15.5 or (B) impair or limit the effectiveness or enforceability of the indemnification obligations of Seller contained in Section 14 hereof.
14.BROKER’S COMMISSIONS
Except for CBRE, Seller’s broker (“Broker”), neither party hereto has had any contact or dealing regarding the Interests or the Real Property, or any communication in connection with the subject matter of this transaction, through any licensed real estate broker or other person who can claim a right to a commission or finder’s fee as a procuring cause of the sale contemplated herein. In the event that any other broker or finder perfects a claim for a commission or finder’s fee, the party responsible for the contact or communication on which the broker or finder perfected such claim shall indemnify, save harmless and defend the other party (and if the other party is the Seller, shall indemnify, hold harmless and defend Seller and the Property Owners) from said claim and all costs and expenses (including reasonable attorneys’ fees) incurred by the other party in defending against the same. Seller agrees to pay Broker’s commission pursuant to a separate agreement.

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15.MISCELLANEOUS PROVISIONS
15.1Notices. All written notices or demands of any kind which either party hereto may be required or may desire to serve on the other in connection with this Agreement shall be served by personal service, by registered or certified mail, recognized overnight courier service or by e-mail. Any such notice or demand so to be served by registered or certified mail, recognized overnight courier service or e-mail shall be delivered with all applicable delivery charges thereon fully prepaid and, if the party so to be served be Buyer, addressed to Buyer as follows:
100-600 Campus Drive, LLC
950 Airport Road
Lakewood, New Jersey 08701
Attention: Shaya Prager
Telephone No: (732) 664-0422
E-Mail: sp@opalhs.com
with a copy thereof to:
Stein Adler Dabah & Zelkowitz LLP
1633 Broadway, 46th Floor
New York, New York 10019
Attention: Michael E. Dabah, Esq.
Telephone No: (212) 867-5620
E-Mail: mdabah@steinadlerlaw.com
and, if the party so to be served be Seller, addressed to Seller as follows:
c/o KBS Capital Advisors LLC
590 Madison Avenue, 26th Floor
New York, New York 10022
Attention: Shannon Hill
Telephone No: (212) 600-2904
Fax No.: (212) 644-1372
E-Mail: shill@kbs.com
with copies thereof to:
James Chiboucas, Esq.
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Telephone No.: (949) 417-6555
E-Mail: jchiboucas@kbs.com
and
Greenberg Traurig
18565 Jamboree Road, Suite 500

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Irvine, California 92612
Attention: L. Bruce Fischer, Esq.
Telephone No.: (949) 732-6670
E-Mail: fischerb@gtlaw.com
and, if the party to be served be Escrow Holder, addressed to Escrow Holder as follows:
Commonwealth Land Title Insurance Company
4100 Newport Place Drive, Suite 120
Newport Beach, California 92660
Attention: Joy Eaton
Telephone No.: (949) 724-3145
E-Mail: joyeaton@cltic.com
Service of any such notice or demand so made by personal delivery, registered or certified mail, recognized overnight courier or e-mail shall be deemed complete on the date of actual delivery as shown by the addressee’s registry or certification receipt or, as to e-mail, on the date sent (provided that a copy of such notice or demand is delivered by any of the other methods provided above within one (1) business day following the date the e-mail is sent, as applicable, or at the expiration of the third (3rd) business day after the date of dispatch, whichever is earlier in time. Either party hereto may from time to time, by notice in writing served upon the other as aforesaid, designate a different mailing address to which or a different person to whose attention all such notices or demands are thereafter to be addressed. Counsel for a party may give notice or demand on behalf of such party, and such notice or demand shall be treated as being sent by such party.
15.2Assignment; Binding on Successors and Assigns. Buyer shall not assign, transfer or convey its rights or obligations under this Agreement or with respect to the Interests without the prior written consent of Seller, which consent Seller may withhold in its sole, absolute and subjective discretion; provided, however, Buyer may assign its rights under this Agreement without Seller’s consent to one or more single entity Affiliates (as hereinafter defined), but in no event greater than three (3) single entity Affiliates, so long as (i) Buyer provides Seller with notice of such assignment at least ten (10) days before the Closing Date of its intentions to assign its rights under this Agreement to each Affiliate, which notice must be accompanied by the name of all assignees and such assignees’ signature block, (ii) each Affiliate assumes, jointly and severally, in writing Buyer’s obligations hereunder and each Affiliate agrees in writing to be subject to all of the terms and conditions set forth in this Agreement pursuant to an assignment and assumption agreement substantially in the form attached hereto as Exhibit F and made a part hereof (the “Assignment and Assumption Agreement”), (iii) Buyer shall not be released from its obligations hereunder; and (iv) the assignees to which Buyer is assigning this Agreement are able to make the representation and warranty in Section 12.1(b) herein without violating the same. As used in this Section 15.2, the term “Affiliate” means (a) an entity (which may not consist of more than one entity) that directly or indirectly controls, is controlled by or is under common control with the Buyer, (b) any fund or entity sponsored by Buyer, or (c) an entity (which may not consist of more than one entity) at least a majority of whose economic interest is owned by Buyer; and the term “control” means the power to direct the management of such entity through voting rights, ownership or contractual obligations. Any attempted
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assignment in violation of the provisions of this Section 15.2 shall be void and Buyer shall be deemed in default hereunder. Any permitted assignments shall not relieve the assigning party from its liability under this Agreement. Subject to the foregoing, and except as provided to the contrary herein, the terms, covenants, conditions and warranties contained herein and the powers granted hereby shall inure to the benefit of and bind all parties hereto and their respective heirs, executors, administrators, successors and assigns, and all subsequent owners of the Property.
15.3Work Product. Effective upon and in the event of a termination of this Agreement for any reason, Buyer shall assign and deliver to Seller (at no cost to Seller), and does hereby assign without the need for any further act or instrument (at no cost to Seller), all reports, plans, studies, documents, written information and the like which has been generated by Buyer’s third party consultants, whether prior to the Opening of Escrow or during the period of Escrow in connection with Buyer’s evaluation of the Interests and the environmental and physical condition of the Real Property (collectively, the “Work Product”). In such event, Buyer shall deliver the Work Product which has been assigned to Seller not later than five (5) days after the date of the termination of this Agreement. The Work Product shall be fully paid for and shall not be subject to any lien, encumbrance or claim of any kind. Buyer shall also return all materials and information (including, without limitation, the Property Information) given to it by Seller or its consultants during Escrow, in the same condition as delivered to Buyer.
15.4Further Assurances. In addition to the acts and deeds recited herein and contemplated to be performed, executed or delivered by Seller or Buyer, Seller and Buyer hereby agree to perform, execute and deliver, or cause to be performed, executed and delivered, on the Closing Date or thereafter any and all such further acts, deeds and assurances as Buyer or Seller, as the case may be, may reasonably require in order to consummate fully the transactions contemplated hereunder, and Seller shall reasonably cooperate (at no cost, expense, liability or potential liability) with Buyer’s requests and at Buyer’s expense in connection with any litigation involving any portion of the Property, provided, Seller shall not be required to institute any proceedings in connection with the same.
15.5Attorneys’ Fees. If any legal action or any arbitration or other proceeding is brought or if an attorney is retained for the enforcement of this Agreement or any portion thereof, or because of any alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, the prevailing party shall be entitled to recover from the other reimbursement for the reasonable fees of attorneys and other costs (including court costs and witness fees) incurred by it, in addition to any other relief to which it may be entitled. The term “prevailing party” means the party obtaining substantially the relief sought, whether by compromise, settlement or judgment.
15.6Survival of Representations, Warranties, Covenants, Obligations and Agreements.
(a)Except as otherwise expressly provided below in this Section 15.6, none of the representations, warranties, covenants, obligations or agreements contained in this Agreement shall survive the Close of Escrow or the earlier termination of this Agreement.
(b)Notwithstanding the provisions of Section 15.6(a), the indemnification
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provisions of Buyer under Sections 4.3.1 and 14 hereof and the provisions of Sections 4.6, 11.2, 13.2, 15.3, 15.5, 15.17, 15.19 and 15.20 hereof (collectively, the “Surviving Termination Obligations”) shall survive the termination of this Agreement without limitation, and any claim based upon any breach of a representation or warranty, or a breach of a covenant, obligation or agreement included in any of the Surviving Termination Obligations shall be actionable and enforceable at any time after the date of the termination of this Agreement.
(c)Notwithstanding the provisions of Section 15.6(a), the indemnification provisions of Buyer under Sections 4.3.1, 14 and 10.5 hereof, the provisions of Sections 4.6, 10.1, 10.4, 10.8, 10.9, 11.2, 12.2, and 12.3 and the provisions of Sections 15.5, 15.17, 15.19 and 15.20 hereof (collectively, the “Surviving Closing Obligations”) shall survive the Close of Escrow without limitation, and any claim based upon any breach of a representation or warranty, or a breach of a covenant, obligation or agreement included in any of the Surviving Closing Obligations shall be actionable and enforceable at any time after the Closing.
(d)Notwithstanding the provisions of Section 15.6(a), the indemnification provisions of Seller under Section 14 hereof and the provisions of Sections 11.1, 12.1 and 15.23 hereof (collectively, the “Limited Surviving Closing Obligations”) shall survive the Close of Escrow only for a period of six (6) months immediately following the Closing Date, and any claim based upon any breach of a representation or warranty, or a breach of a covenant, obligation or agreement included in any of the Limited Surviving Closing Obligations shall be actionable and enforceable if and only if written notice of such claim is given to the party which allegedly breached such representation or warranty, or breached such covenant, obligation or agreement, within six (6) months after the Closing Date. Notwithstanding anything stated to the contrary in this Agreement, in no event shall Seller’s liability, if any, with respect to any Limited Surviving Closing Obligations and/or any Surviving Closing Obligations (but specifically excluding Seller’s liability, if any, with respect to Seller’s representations and warranties set forth in Sections 11.1(a) – (e) and Sections 11.1(m)-(o) above) exceed Five Million Dollars ($5,000,000.00) in the aggregate; provided further, however, that in no event shall Seller’s liability, if any, with respect to Seller’s representations and warranties set forth in Sections 11.1(a) – (e) and Section 11.1(m)-(o) above exceed Seven Hundred Fifty Thousand Dollars ($750,000.00) in the aggregate.
15.7Entire Agreement. This Agreement contains the entire agreement and understanding of the parties in respect to the subject matter hereof, and the parties intend for the literal words of this Agreement to govern and for all prior negotiations, drafts, and other extrinsic communications, whether oral or written, to have no significance or evidentiary effect. The parties further intend that neither this Agreement nor any of its provisions may be changed, amended, discharged, waived or otherwise modified orally except only by an instrument in writing duly executed by the party to be bound thereby. The parties hereto fully understand and acknowledge the importance of the foregoing sentence and are aware that the law may permit subsequent oral modification of a contract notwithstanding contract language which requires that any such modification be in writing, but Buyer and Seller fully and expressly intend that the foregoing requirements as to a writing be strictly adhered to and strictly interpreted and enforced by any court which may be asked to decide the question. Each party hereto acknowledges that this Agreement accurately reflects the agreements and understandings of the parties hereto with respect to the subject matter hereof and hereby waive any claim against the other party which
34


such party may now have or may hereafter acquire to the effect that the actual agreements and understandings of the parties hereto with respect to the subject matter hereof may not be accurately set forth in this Agreement.
15.8Governing Law. This Agreement shall be governed by the laws of the State of New Jersey.
15.9Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
15.10Headings; Construction. The various headings of this Agreement are included for convenience only and shall not affect the meaning or interpretation of this Agreement or any provision hereof. When the context and construction so require, all words used in the singular herein shall be deemed to have been used in the plural and the masculine shall include the feminine and the neuter and vice versa. The use in this Agreement of the term “including” and related terms such as “include” shall in all cases mean “without limitation.” All references to “days” in this Agreement shall be construed to mean calendar days unless otherwise expressly provided and all references to “business days” shall be construed to mean days on which national banks are open for business.
15.11Time of Essence. Seller and Buyer hereby acknowledge and agree that time is strictly of the essence with respect to each and every term, condition, obligation and provision hereof and failure to perform timely any of the terms, conditions, obligations or provisions hereof by either party shall constitute a material breach of, and non-curable (but waivable) default under this Agreement by the parties so failing to perform.
15.12Partial Validity; Severability. If any term or provision of this Agreement or the application thereof to any person or circumstance shall, to any extent, be held invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each such term and provision of this Agreement shall be valid and be enforced to the fullest extent permitted by law.
15.13No Third Party Beneficiaries. This Agreement is for the sole and exclusive benefit of the parties hereto and their respective permitted successors and assigns, and no third party is intended to, or shall have, any rights hereunder.
15.14Intentionally Omitted.
15.15Joint Product of Parties. This Agreement is the result of arms-length negotiations between Seller and Buyer and their respective attorneys. Accordingly, neither party shall be deemed to be the author of this Agreement and this Agreement shall not be construed against either party.
15.16Calculation of Time Periods. Unless otherwise specified, in computing any period of time described herein, the day of the act or event after which the designated period of time begins to run is not to be included and the last day of the period so computed is to be
35


included at, unless such last day is a Saturday, Sunday or legal holiday for national banks in California or New York City, in which event the period shall run until the end of the next day which is neither a Saturday, Sunday, or legal holiday. Unless otherwise expressly provided herein, the last day of any period of time described herein shall be deemed to end at 5:00 p.m. (California time).
15.17Procedure for Indemnity. The following provisions govern actions for indemnity under this Agreement. Promptly after receipt by an indemnitee of notice of any claim, such indemnitee will, if a claim in respect thereof is to be made against the indemnitor, deliver to the indemnitor written notice thereof and the indemnitor shall have the right to participate in and, if the indemnitor agrees in writing that it will be responsible for any costs, expenses, judgments, damages, and losses incurred by the indemnitee with respect to such claim, to assume the defense thereof, with counsel mutually satisfactory to the parties; provided, however, that an indemnitee shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnitor, if the indemnitee reasonably believes that representation of such indemnitee by the counsel retained by the indemnitor would be inappropriate due to actual or potential differing interests between such indemnitee and any other party represented by such counsel in such proceeding. The failure of indemnitee to deliver written notice to the indemnitor within a reasonable time after indemnitee receives notice of any such claim shall relieve such indemnitor of any liability to the indemnitee under this indemnity only if and to the extent that such failure is prejudicial to its ability to defend such action, and the omission so to deliver written notice to the indemnitor will not relieve it of any liability that it may have to any indemnitee other than under this indemnity. If an indemnitee settles a claim without the prior written consent of the indemnitor, then the indemnitor shall be released from liability with respect to such claim unless the indemnitor has unreasonably withheld such consent.
15.18Waiver of Jury Trial. To the extent permitted by applicable law, the parties hereby waive any right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
15.19No Personal Liability. Notwithstanding anything stated to the contrary herein, Seller’s liability under this Agreement shall be limited to Seller’s interest in the Interests and neither Seller, Seller’s constituent partners and/or members, Seller’s asset manager, nor Seller’s directors, employees or agents shall have any personal liability hereunder.
15.20Joint and Several Liability. If Buyer or Seller is comprised of more than one individual or entity, all obligations and liabilities of Buyer and Seller, as applicable, under this Agreement shall be joint and several as to each of the individuals or entities comprising Buyer or Seller, as applicable.
15.21Bulk Sale. Buyer shall comply with N.J.S.A. 54:32B-22(c) and N.J.S.A. 54:50-38 in respect of the transaction contemplated by this Agreement and Seller shall cooperate, to the extent reasonably required, in connection with such compliance.  In furtherance thereof: (i) Seller shall prepare and deliver the Asset Transfer Tax Declaration (the “TTD”) in the form prescribed by the Director (the “Director”) of the New Jersey Division of Taxation (the “Division”), so that such form is received by the Division not more than five (5) days after receipt by Seller of written notice from the Division that it has received the Tax Notification
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(defined below); and (ii) Buyer shall deliver a Notification of Sale, Transfer or Assignment in Bulk (Form C-9600) (a “Tax Notification”)  and a copy of this Agreement to the Director, by registered or certified mail or overnight delivery, so that such Tax Notification is received by the Director not less than ten (10) days prior to the Closing Date.  Seller shall promptly provide all information reasonably requested by Buyer to enable Buyer to complete the Tax Notification.  If, at any time prior to the Closing Date, the Director informs Buyer that the Division may have a claim for taxes imposed or to be imposed on Seller (a “Claim”), including, without limitation, any tax on any gain realized from the transaction contemplated by this Agreement and any interest or penalties on delinquent amounts (such taxes, interest and penalties, collectively, “Bulk Sale Taxes”), then Buyer and Seller shall proceed to Closing in accordance with the terms of this Agreement, provided, that, at the Closing, Buyer shall withhold from the Purchase Price an amount equal to the Claim and the Escrow Holder shall hold such amount (hereinafter referred to as the “Tax Escrow”) in escrow in accordance with the terms of this Agreement; provided further, however, that if the amount of Bulk Sales Taxes to be assessed in connection with such Claim is reasonably expected to exceed Two Million Dollars ($2,000,000.00), then Seller, at its option, may elect to either (a) extend the Closing Date to the earlier of the date which is (i) ten (10) Business Days after the resolution of the Claim, or (ii) sixty (60) days after the then existing Closing Date, or (b) terminate this Agreement, by delivering written notice of such election to Buyer on or prior to the then existing Closing Date; provided further, however, in the event Seller elects to terminate this Agreement pursuant to clause (b) above, Buyer may postpone Seller’s election to terminate this Agreement by extending the Closing Date to the earlier of the date which is (i) ten (10) Business Days after the resolution of the Claim, or (ii) sixty (60) days after the then existing Closing Date, by delivering to Seller written notice of the same on or prior to the Closing Date. In the event this Agreement is terminated pursuant to the provisions of this Section 15.21, the parties shall be released from all further obligations under this Agreement (except pursuant to any provisions which by their terms survive a termination of this Agreement), the Deposit shall be immediately returned to Buyer, Buyer shall be reimbursed by Seller for all of Buyer’s third party reasonable, actual and documented out-of-pocket costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements and third party due diligence costs), in an amount not to exceed $100,000.00 in the aggregate, and Buyer shall immediately return all Property Information to Seller. If, after the Close of Escrow, the Director or Seller requests that Buyer pay all or any portion of the Claim on behalf of Seller, Buyer shall direct Escrow Holder to, and the Escrow Holder shall, promptly release to the Division of Taxation such amount from the Tax Escrow. If the Director informs the Buyer that the Claim has been fully paid or that Buyer has no further liability for the Claim, Buyer shall direct Escrow Holder to, and the Escrow Holder shall, promptly release the Tax Escrow (or the balance thereof) to Seller.  Notwithstanding anything to the contrary contained herein, Seller shall have the right to negotiate with the Director regarding the Claim; provided, however, that: (i) Buyer shall be entitled to comply with all instructions of the Director; (ii) the Closing Date shall not be delayed as a result of such negotiations; and (iii) Buyer shall not be liable for any amount in excess of the Tax Escrow.
15.22Interpretation. The terms and conditions of this Agreement shall be interpreted and construed to take into account the fact that the Interests are owned, collectively, by two different Sellers, and therefore, notwithstanding anything stated to the contrary in this Agreement, it is expressly understood and agreed by the parties hereto that each of the covenants, agreements, representations and warranties set forth in this Agreement are being
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made by each Seller, as to itself and the Interest it owns (and as to the Property it indirectly owns), and no covenants, agreements, representations and warranties of a Seller shall relate to the other Seller or any Interest owned by the other Seller.
15.23Post-Closing Net Worth Requirement. Seller hereby covenants that, from the Closing Date to the end of the six (6) month period following the Closing Date (the “Survival Period”), or, in the event Buyer has properly delivered written notice (in accordance with the provisions of Section 15.6(d)) to Seller prior to the expiration of the Survival Period for the breach of any of Seller's representations and warranties and has, no later than thirty (30) calendar days following the expiration of the Survival Period, brought an action with respect to any such breach claimed in such written notice, to the conclusion of such action, Seller shall maintain, or have access to, assets of no less than Five Million Seven Hundred Fifty Thousand and No/100 Dollars ($5,750,000.00). The provisions of this Section 15.23 shall survive the Close of Escrow for a period of six (6) months.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written.
[Signatures on following pages]


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“BUYER”

100-600 CAMPUS DRIVE, LLC,
a New Jersey limited liability company



By: /s/ Authorized Signatory
Name: Authorized Signatory
Its: Member

S-1


“SELLER”
KBSII REIT ACQUISITION I, LLC,
a Delaware limited liability company
By: KBS REIT PROPERTIES II, LLC,
a Delaware limited liability company,
it sole membership
By: KBS LIMITED PARTNERSHIP II,
a Delaware limited partnership,
its sole member
By: KBS REAL ESTATE INVESTMENT TRUST II, INC.,
a Maryland corporation,
its general partner
By:
/s/ Charles J. Schreiber, Jr.
Charles J. Schreiber, Jr.,
Chief Executive Officer

KBSII REIT ACQUISITION II, LLC,
a Delaware limited liability company
By: KBS REIT PROPERTIES II, LLC,
a Delaware limited liability company,
it sole membership
By: KBS LIMITED PARTNERSHIP II,
a Delaware limited partnership,
its sole member
By: KBS REAL ESTATE INVESTMENT TRUST II, INC.,
a Maryland corporation,
its general partner
By:
/s/ Charles J. Schreiber, Jr.
Charles J. Schreiber, Jr.,
Chief Executive Officer

S-2


AGREED TO THIS 23RD
DAY OF OCTOBER, 2019,
AS TO PROVISIONS RELATING TO
ESCROW HOLDER:
COMMONWEALTH LAND TITLE
INSURANCE COMPANY
By /s/ Authorized Signatory
Its AVP
S-3


LIST OF EXHIBITS AND SCHEDULES
EXHIBIT A — Description of Real Property
EXHIBIT B — Description of Personal Property
EXHIBIT C-1 — List of Leases
EXHIBIT C-2 — List of Contracts
EXHIBIT D — Form of Tenant Estoppel Certificate
EXHIBIT E — Form of Assignment
EXHIBIT F — Form of Assignment and Assumption of Purchase Agreement
EXHIBIT G — Intentionally Omitted
EXHIBIT H — Balance Sheets of Property Owners
EXHIBIT I — Form of Owner’s Affidavit
SCHEDULE 1-1 — Description of New and Pending Lease Transactions (Buyer’s Responsibility)
SCHEDULE 1-2 — Description of New and Pending Lease Transactions (Seller’s Responsibility)
SCHEDULE 2 — Disclosures



EXHIBIT A
Description of Real Property
(Attached)

A-1


LEGAL DESCRIPTION
KBSII 100-200 CAMPUS DRIVE, LLC
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE BOROUGH OF FLORHAM PARK, COUNTY OF MORRIS, STATE OF NEW JERSEY AND IS DESCRIBED AS FOLLOWS:
Tract 1 - Fee Parcel:
Lot 4.02, Block 1201 as shown on a map entitled "Final Plat of Major Subdivision, Florham Park Corporate Centre, Phase 1, Block 1201, Lot 4, Borough of Florham Park, Morris County, New Jersey", prepared by Storch Engineers and filed in the Morris County Clerk's Office on November 23, 1988 as Map No. 4720.
Tract 2 - Fee Parcel:
Lot 4.04 in Block 1201 as shown on a map entitled "Final Plat of Major Subdivision, Florham Park Corporate Centre, Phase II, Block 1201, Lot 4, Borough of Florham Park, Morris County, New Jersey",prepared by Storch Engineers and filed in the Morris County Clerk's Office on September 15, 1989 as Map No. 4799.
Tract 3 - Easement Parcel:
Together with the beneficial easement rights as set forth in that certain Deed providing a perpetual non-exclusive access easement over and across Campus Drive, the Landscaping Islands (as defined in the Landscaping Maintenance Agreement), the Campus Drive Jug Handle (as defined in the Landscaping Maintenance Agreement) and the Campus Drive Jug Handle Basin (as defined in the Landscaping Maintenance Agreement) recorded in Book 3503, page 287, and in that Landscaping Maintenance Agreement dated October 17, 2000, recorded in Deed Book 5270, page 150, Morris County Clerk's Office, Morris County, New Jersey.
Tract 4 - Easement Parcel:
Together with the beneficial easement rights as set forth in that certain Deed providing a non-exclusive easement to develop, install, use, maintain, repair, inspect, remove and replace the Common Facilities (as defined in the Declaration), a non-exclusive easement in, upon, over, under, across, and through the Lots (as defined in the Declaration) for surface water drainage and runoff, and a non-exclusive blanket easement for entry upon, over, across, and through the Lots for the purpose for carrying out the objectives of the Declaration, as described in that Declaration of Cross-Easements recorded in Deed Book 4262, page 258, as amended by First Amended Declaration of Cross-Easements as set forth in Deed Book 4748, page 36.
BEING ALSO KNOWN AS (REPORTED FOR INFORMATIONAL PURPOSES ONLY):
Block 1201, Lot 7, on the official tax map of the Borough of Florham Park, County of Morris, State of New Jersey.
Block 1201, Lot 5, on the official tax map of the Borough of Florham Park, County of Morris, State of New Jersey.

A-2


LEGAL DESCRIPTION KBSII 300-600 CAMPUS DRIVE, LLC
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE BOROUGH OF FLORHAM PARK, COUNTY OF MORRIS, STATE OF NEW JERSEY AND IS DESCRIBED AS FOLLOWS:
Tract 1 - Fee Parcel:
Lot 4.03 in Block 1201 as shown on a map entitled "Final Plat of Major Subdivision Florham Park Corporate Centre Phase II, Block 1201, Lot 4, Borough of Florham Park, Morris County, New Jersey" prepared by Storch Engineers and filed in the Morris County Clerk's Office on September 15, 1989 as Map No. 4799.
Tract 2 - Easement Parcel
Together with the beneficial easement rights as set forth in that certain Deed providing a perpetual non-exclusive access easement over and across Campus Drive, the Landscaping Islands (as defined in the Landscaping Maintenance Agreement), the Campus Drive Jug Handle (as defined in the Landscaping Maintenance Agreement) and the Campus Drive Jug Handle Basin (as defined in the Landscaping Maintenance Agreement) recorded in Book 3503, page 287, and in that Landscaping Maintenance Agreement dated October 17, 2000, recorded in Deed Book 5270, page 150, Morris County Clerk's Office, Morris County, New Jersey.
Tract 3 - Easement Parcel:
Together with the beneficial easement rights as set forth in that certain Deed providing a non-exclusive
easement to develop, install, use, maintain, repair, inspect, remove and replace the Common Facilities (as defined in the Declaration), a non-exclusive easement in, upon, over, under, across, and through the Lots (as defined in the Declaration) for surface water drainage and runoff, and a non-exclusive blanket easement for entry upon, over, across, and through the Lots for the purpose for carrying out the objectives of the Declaration, as described in that Declaration of Cross-Easements recorded in Deed Book 4262, page 258, as amended by First Amended Declaration of Cross-Easements as set forth in Deed Book 4748, page 36.
BEING ALSO KNOWN AS (REPORTED FOR INFORMATIONAL PURPOSES ONLY):
Block 1201, Lot 6, on the official tax map of the Borough of Florham Park, County of Morris, State of New Jersey.


A-3


EXHIBIT B
Description of Personal Property
All Management Office Furniture
Five (5) Laptops
Five (5) Keyboards
Ten (10) Monitors
3 Yamaha Golf Carts
3 Dewalt 18V Drill
1 Dewalt 18V Sawzall
1 Milwaukee Cordless Sawzall 
1 Dremel 3000
1 Dewalt Cordless Camera
2 Fluke 322 Tester
1 dewalt Circular Saw
28 6 feet ladders
6 8 feet ladders
1 Ridgid K-45 snake
1 Subaru EA 190V Power Washer
1 Bostitch Pancake GGOM200 Air Compressor
1 Bosch 11224 VSR Hammer drill
1 Milwaukee Cordless caulk gun
2 Ridgid 12 Gal Shop Vacuum
2 Redmax EBZ7150 Leaf Blower
4 24 feet Extension ladders
1 Billy Goat Leaf vacuum
1 Paslode Angled finish Nailer
1 Generac 8000 watts generator
1 Magnum Prox 19 Paint Sprayer

B-1


EXHIBIT C-1
List of Leases
(Attached)

C-1


List of Leases
100 Campus Drive
Cablevision Lightpath-NJ, Inc.
Building Access Telecommunications Lease – Wire Line – Fiber Optic dated July 1, 2008
Jersey Central Power & Light
Revocable License Agreement dated __, 2008
Amendment to Revocable License Agreement dated September 25, 2018
Reinsurance Management, Inc.; 7,188 sf, suite 101
Lease Agreement dated September ___, 1995
First Amendment to Lease dated July 28, 1997
Second Amendment to Lease dated February 21, 2002
Third Amendment to Lease dated January 2, 2003
Fourth Amendment to Lease dated October 19, 2006
Assignment and Assumption of Lease dated July 1, 2012
Guaranty of Lease Dated July 1, 2012
Fifth Amendment to Lease dated July 16, 2012
Leasing Commission Agreement dated September 20, 2012
Sixth Amendment to Lease dated October 16, 2017
Coldwell Banker Real Estate Services LLC d/b/a Coldwell Banker Residential Brokerage; 9,420 sf, suite 102
Lease Agreement dated October 17, 2016
Guaranty of Lease dated October 17, 2016
Lease Commencement Letter dated January 25, 2017
Bright Horizons Children’s Centers LLC; 2,482 sf, suite 104
Lease Agreement dated July 9, 2001
First Amendment of Lease dated May 2, 2011
Guaranty dated May 2, 2011
Second Amendment of Lease dated March 24, 2016
Fidia Pharma USA Inc.; 9,488 sf; suite 105
Lease Agreement dated February 27, 2017
Lease Commencement Letter dated July 17, 2017
Raich Ende Malter & Co., LLP; 7,829 sf, suite 106
Lease Agreement dated May 28, 2013
Lease Commencement Letter dated September 10, 2013
CBRE, Inc; 4,398 sf, suite 109
Lease Agreement dated April 27, 2011
First Amendment of Lease dated August 11, 2015
Steward Partners Global Advisory, LLC; 8,818 sf, suite 110

C-1


Lease Agreement dated December 21, 2018
Lease Commencement Letter dated June 17, 2019
Clausen Miller P.C.; 2,644 sf, suite 112
Lease Agreement dated February 4, 2013
Lease Commencement Letter dated April 17, 2013
First Amendment to Lease dated June 22, 2018
Dartcor Food Service; 1,982 sf, suite 113
Food Service Agreement dated September 9, 2008
First Amendment to Food Service Agreement dated June 6, 2016
Second Amendment to Food Service Agreement dated September 1, 2016
Third Amendment to Food Service Agreement dated July 1, 2017
Boyar & Suozzo, P.A.; 1,977 sf, suite 116
Lease Agreement dated March 10, 2014
Lease Commencement Letter dated June 26, 2014
First Amendment dated February 14, 2019
Hisamitsu America, Inc.; 4,526 sf; suite 117
Lease Agreement dated September 17, 2007
Commencement Date Letter dated November 29, 2007
Assignment and Assumption of Lease dated April 1, 2010
First Amendment of Lease dated November 29, 2012
Assignment and Assumption of Lease dated November 29, 2012
Second Amendment of Lease dated June 28, 2017
Conduent Incorporated; 32,865 sf (suite 200), 17,644 sf (suite 201), 6,175 sf (suite 340), 23,332 sf (suite
310) – total 80,016 sf
Lease Agreement dated October 13, 2016
First Amendment to Lease dated June 23, 2017
License Agreement dated July 12, 2017
Lease Commencement Letter dated February 15, 2017
Lease Commencement Letter for First Amendment space dated January 8, 2018
Second Amendment to Lease dated February 15, 2018
Amendment to License Agreement dated February 15, 2018
Third Amendment to Lease dated June 4, 2018
Lease Commencement Letter for Second Amendment space dated July 5, 2018
Lease Commencement Letter for Third Amendment space dated November 2, 2018
License Agreement dated February 20, 2019 (for suite 110)
Logical Design Solutions, Inc.; 20,681 sf; suite 205
Lease Agreement dated May 13, 2015
Waiver and Consent dated November 30, 2015
Lease Commencement Letter dated January 4, 2016
First Amendment of Lease dated June 27, 2019
Cellectar Biosciences, Inc.; 3,983 sf, suite 207

C-2


Lease Agreement dated June 4, 2018
Lease Commencement Letter dated October 25, 2018
Jacobs Levy Equity Management, Inc.; 22,983 sf (suite 211) and 2,368 sf (B4)
Lease Agreement dated July 17, 2001
Commencement Date Letter dated November 17, 2006
First License Agreement Amendment dated September 1, 2007
First Amendment to Lease dated April 3, 2010
Second Amendment to Lease dated September 2, 2014
The Weisscom Group LTD. D/B/A W2O Group; 24,956 sf; suite 300
Lease Agreement dated December 26, 2017
Merrill Lynch, Pierce, Fenner & Smith, Inc.; 50,518 sf (suite 350), 4,075 sf (suite 108), 644 sf (suite 114), 59 sf (suite 360), 750 sf (B2) - total 56,046 sf
Lease Agreement dated March 9, 1991
First Amendment to Lease dated October 29, 1993
Second Amendment to Lease dated February 27, 1995
Lease Subordination, Non-Disturbance and Attornment Agreement dated September 29, 1995
Third Amendment to Lease dated June 15, 1996
Executive Office Lease dated September, 1996
Fourth Amendment to Lease dated June 9, 1999
Fifth Amendment to Lease dated July 18, 2000
Sublease dated February 28, 2008
Consent to Sublease dated February 28, 2008
Sixth Amendment to Lease dated October, 27, 2010
License Agreement for Storage Space dated April 11, 2011
Seventh Amendment to Lease dated April 24, 2013
Eighth Amendment to Lease dated September 5, 2014
First Amendment to License Agreement dated October 13, 2014
Subordination, Nondisturbance and Attornment Agreement dated March 5, 2015
Wiss & Company, LLP; 41,513 sf, suite 400
Lease Agreement dated May 13, 2019
Unified Physician Management, LLC
Lease dated July 18, 2019
200 Campus Drive
Lightower Fiber Networks II, LLC
Telecommunications License Agreement dated June 8, 2017
Dartcor Food Service
Food Service Agreement dated January 31, 2011
First Amendment to Food Service Agreement dated June 6, 2016
Second Amendment to Food Service Agreement dated September 1, 2016

C-3


Third Amendment to Food Service Agreement dated July 1, 2017
Ameriprise Holdings, Inc.; 12,134 sf; suite 150
Lease Subordination, Non-Disturbance and Attornment Agreement dated March 17, 2011
Lease Agreement dated March 18, 2011
First Amendment of Lease dated November 21, 2016
Robert W. Baird & Co. Incorporated; 3,832 sf, suite 170
Lease Agreement dated May 25, 2017
Lease Commencement Letter dated September 22, 2017
Wells Fargo Clearing Services, LLC, F/K/A Wells Fargo Advisors, LLC, D/B/A Wells Fargo Advisors; 16,199 sf (suite 200), 3,103 sf (suite 165), 2,720 sf (suite 220), 3,050 sf (suite 221), 5,398 sf (suite 225) – total 30,470 sf
Lease Agreement dated February 16, 2016
Base Rent Credit Notice dated March 5, 2018
Subordination, Nondisturbance and Attornment Agreement dated March 17, 2016
First Amendment to Lease dated April 27, 2018
Newsome O’Donnell, LLC; 6,604 sf; suite 205
Lease Agreement dated July __, 2012
Clyde & Co US LLP; 21,962 sf; suite 300
Lease Agreement dated August 26, 2010
Subordination, Non-Disturbance and Attornment Agreement dated August 26, 2010
Lease Commencement Letter dated December 28, 2010
Caremark, L.L.C.; 27,346 sf (suite 310), 6,733 sf (suite 311) – total 34,079 sf
Lease Agreement dated July 18, 2013
Memorandum of Lease dated July 18, 2013
Reimbursement Agreement dated July 18, 2013
Amendment of Office Lease Agreement dated January 23, 2014
Subordination, Non-Disturbance and Attornment Agreement dated July 25, 2013
Wilson Elser Moskowitz Edelman & Dicker, LLP; 48,255 sf; suite 400
Lease Agreement dated June 30, 2010
Leonardo DRS, Inc.; 7,786 sf, suite 410
Lease Agreement dated February 15, 2019
Lease Commencement Letter dated June 6, 2019
NASS Enterprises LLC, D/B/A The Goddard School; 8,253 sf; suite 100
Guaranty of Lease dated March 20, 2015
Lease Agreement dated March 25, 2015
Lease Commencement Letter dated August 26, 2016
Cablevision

C-4


Telecommunications License Agreement dated April 13, 2016
300 Campus Drive
Shionogi Inc.; 5,889 sf( suite 110), 11,000 sf (suite 200), 12,790 sf (suite 210), 2,566 sf (suite 220), 25,527 sf (suite 300) – total 57,772 sf
Guaranty of Lease dated November 26, 2010
Lease Agreement dated November 29, 2010
Subordination, Non-Disturbance and Attornment Agreement dated November 29, 2010
First Amendment of Lease dated December 22, 2015
Amendment to Guaranty of Lease dated February 24, 2016
Morgan Stanley Smith Barney Financing LLC; 4,636 sf (suite 120), 5,083 sf (suite 111), 27,152 sf (suite 400) – total 36,871 sf
Lease Agreement dated July 19, 2000
First Amendment to lease dated April 16, 2008
Second Amendment to lease dated November 18, 2008
Assignment and Assumption of Leases dated May 31, 2009
Amendment of Lease dated December 24, 2014
Acknowledgement of Cost of Work dated February 15, 2015
Commencement Letter dated June 9, 2015
Amendment of Lease dated June 27, 2017
Documents from the 400 Building but part of the same lease at 300:
Agreement of Lease dated March 18, 1998
First Amendment to lease dated February 2, 1999
Second Amendment to lease dated April 16, 2008
Third Amendment to lease dated November 18, 2008
400 Campus Drive
PricewaterhouseCoopers, LLP; 47,797 sf (suite 400), 17,821 sf (suite 100), 23,297 sf (suite 120), 45,445 sf (suite 200), 48,603 sf (suite 300) – total 182,963
Lease Agreement dated December 30, 2014
Subordination, Nondisturbance, and Attornment Agreement dated December 31, 2014
Possession Date letter dated June 18, 2015
First Amendment to Lease dated September 8, 2015
Surrender of Swing Space dated November 1, 2016
Surrender of Swing space dated February 17, 2017
New Cingular Wireless PCS, LLC
Site Access Telecommunications Lease dated March 16, 2006
C-5


500 Campus Drive
Dartcor Food Service; 6,673 sf
Food Service Agreement dated October 10, 2008
Letter Agreement dated October 24, 2012
First Amendment to Food Service Agreement dated June 6, 2016
Second Amendment to Food Service Agreement dated September 1, 2016
Third Amendment to Food Service Agreement dated July 1, 2017
UBS Financial Services Inc.; 35,366 sf (suite 200), 8,838 sf (suite 210), 857 sf (suite 220) – total 45,061
Lease Agreement dated September 17, 1998
First Amendment to Lease dated August 5, 2008
Second Amendment to Lease dated June 23, 2011
Third Amendment to Lease dated February 1, 2012
Insperity Support Services L.P.; 16,200 sf; suite 300
Lease Agreement dated March 11, 2014
Amendment of Lease Agreement dated April 17, 2014
Commencement Letter dated June 30, 2014
Bank of America, National Association; 15,877 sf; suite 310
Lease Agreement dated December 4, 2013
First Amendment dated April 17, 2014
Lease Commencement Letter dated October 30, 2014
Second Amendment of Lease dated May 29, 2019
Accenture LLP; 13,762 (suite 320), 9,550 sf (suite 115) – total 23,312 sf
Lease Agreement dated May 5, 2004
First Amendment dated July 12, 2004
Second Amendment of Lease dated November 26, 2014
Lease Commencement Letter for Second Amendment space dated February 9, 2015
Third Amendment of Lease dated January 31, 2017
Lease Commencement Letter for Third Amendment space dated June 23, 2017
Greenberg Traurig LLP; 47,040 sf (suite 400), 4,302 sf (suite 330) -total 51,342 sf
Lease Agreement dated September 30, 2014
Subordination, Nondisturbance, and Attornment Agreement dated September 30, 2014
First Amendment of Lease Agreement dated September 18, 2015
Omnipoint Communications, Inc.

C-6


Site Access and Telecommunications Lease Dated March 1, 2008
Level 3 Communications, LLC
Telecommunications License Agreement dated March 10, 2017

Cablevision Lightpath NJ LLC
Telecommunications License Agreement dated September 25, 2017
600 Campus Drive
Drinker Biddle & Reath LLP; 4,409 sf (suite 100), 26,600 sf (suite 200), 26,870 sf (suite 300) – total 57,879 sf
Lease Agreement dated June 26, 2013
Second Amendment dated January 31, 2003
Third Amendment to Agreement of Lease dated June 26, 2013
Subordination, Non-Disturbance and Attornment Agreement dated June 27, 2013
Lease Commencement Letter dated April 8, 2014
Costar Realty Information, Inc.; 6,049 sf; suite 140
Lease Agreement dated December 1, 2014
Lease Commencement Letter dated December 11, 2014
Endurance Assurance Corporation; 26,996 sf (suite 400), 8,799 sf (suite 130) – total 35,795 sf
Lease Agreement dated November 27, 2013
Lease Commencement Letter dated February 7, 2014
First Amendment to Lease dated October 10, 2018
Subordination Non-Disturbance, and Attornment Agreement dated October 29, 2018 (date recorded)
Lease Commencement Letter dated April 15, 2019

C-7


EXHIBIT C-2
List of Contracts
(Attached)

C-2


KBSRIIQ42019EX1067P11.JPG

C-2


KBSRIIQ42019EX1067P21.JPG

C-2


KBSRIIQ42019EX1067P31.JPG
C-2


EXHIBIT C-3
List of Construction Contracts

NAME OF CONTRACTOR DATE OF CONTRACT TYPE OF WORK EXPECTED COMPLETION DATE TOTAL CONTRACT SUM
AMOUNT PAID*
BALANCE DUE*
             
100 CAMPUS DRIVE            
             
TKE Aug-17 ELEVATOR MODERNIZATION 19-Nov $ 1,475,374.10 $ 1,325,949.10 $ 149,425.00
Corporate Contracting Sep-19 WISS & COMPANY/TI 1/15/2020 $ 2,929,222.81 $ - $ 2,929,222.81
Protective Measures Jul-19 WISS & COMPANY/TI 1/15/2020 $ 86,654.00 $ - $ 86,654.00
Studio 1200 Jun-19 WISS & COMPANY/TI 1/15/2020 $ 284,150.00 $ 241,927.50 $ 42,222.50
TO BE DETERMINED   UNIFIED PHYSICIAN/TI 1Q20 $ 1,116,652.00 $ - $ 1,116,652.00
             
             
200 CAMPUS DRIVE            
             
TKE Aug-17 ELEVATOR MODERNIZATION 19-Nov $ 752,451.89 $ 681,732.69 $ 70,719.20
             
300 CAMPUS DRIVE            
             
ROOFCO Jul-19 ROOF REPLACEMENT Oct-19 $ 141,688.71 $ - $ 141,688.71
TO BE DETERMINED   PAVING 19-Nov $ 38,300.00 $ - $ 38,300.00
             
             
C-3


400 CAMPUS DRIVE            
             
ROOFCO Jul-19 ROOF REPLACEMENT Aug-19 $ 263,573.10 $ 227,215.84 $ 36,357.26
TO BE DETERMINED   PAVING 19-Nov $ 65,000.00 $ - $ 65,000.00
             
             
500 CAMPUS DRIVE            
             
ROOFCO Jul-19 ROOF REPLACEMENT Sep-19 $ 264,028.50 $ 223,303.84 $ 40,724.66
TO BE DETERMINED   PAVING 19-Nov $ 65,000.00 $ - $ 65,000.00
TO BE DETERMINED   BANK OF AMERICA /TI TI Allowance Not Available $ 246,094.00 $ - $ 246,094.00
      Until May 20202      
             
600 CAMPUS DRIVE            
             
ROOFCO Jul-19 ROOF REPLACEMENT Sep-19 $ 264,028.50 $ 223,303.84 $ 40,724.66
TO BE DETERMINED   PAVING 19-Nov $ 38,300.00 $ - $ 38,300.00
             

*As of _______________________, 2019

C-3


EXHIBIT D
Form of Tenant Estoppel Certificate
(Attached)

D-1
ADMIN 35895383v6

TENANT ESTOPPEL CERTIFICATE
The undersigned (“Tenant”) hereby certifies to _______________________________________, a ________________________________ (“Landlord”), ______________________________________________ (“Seller”), and ________________________, a _____________________________, and its successors and assigns (collectively, “Buyer”), as of the date of this estoppel certificate (“Estoppel Certificate”):
A.Tenant is the Lessee under that certain Lease dated ________________ relating to __________________ (the “Premises”), together with any amendments thereto (collectively, the “Lease”).
B.The dates of all amendments to the Lease are as follows:
C.There are no other agreements, oral or in writing, between Landlord and Tenant with respect to the Premises excepted as identified above.
D.The Lease is in full force and effect.
E.To Tenant’s actual knowledge, no default exists under the Lease by Landlord, nor, to Tenant’s actual knowledge, has any condition occurred which, but for the passage of time or the giving of notice, or both, would constitute a default by Landlord. To Tenant’s actual knowledge, Tenant is not in default under the Lease, nor, to Tenant’s actual knowledge, has any condition occurred which, but for the passage of time or the giving of notice, or both, would constitute a default by Tenant.
F.To Tenant’s actual knowledge, Tenant has no claim or demand against the Landlord.
G.Monthly base rent is equal to $______ and has been paid through _________________, 20__.
H.Tenant’s security deposit held by Landlord is $______________________.
I.Tenant has no right or option to purchase any portion of the real property upon which the Premises are situated.
Tenant acknowledges that this Estoppel Certificate is being given in order to induce Buyer to purchase, and Seller to sell, interests in Landlord, and for Buyer to take on the obligations of Landlord. Buyer, Seller and Landlord are entitled to rely upon this Estoppel Certificate.
Dated:__________________, 20__


D-2


“TENANT”
By: ______________________________
______________________________
(Print Name)  (Title)

D-3


EXHIBIT E
Form of Assignment
(Attached)

E-1


FORM OF ASSIGNMENT AND ASSUMPTION OF INTERESTS
THIS ASSIGNMENT AND ASSUMPTION OF INTERESTS (this “Assignment”) is dated as of _________________ (“Transfer Date”) and is entered into by and between __________________, a __________________________ (“Assignee”), and ______________, a Delaware limited liability company (“Assignor”).
R E C I T A L S :
A.Assignor holds all of the membership interests (the “Interests”) in _______ pursuant to that certain _________________________ dated as of ________________ (the “Operating Agreement”).
B.Assignor wishes to transfer the Interests to Assignee, and Assignee has agreed to purchase the Interests on the terms and conditions described in that certain Membership Interest Purchase and Sale Agreement dated as of _____________, 20___ (the “Sale Agreement”).
C.In consideration of the covenants herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Assignor and Assignee hereby agree to the following terms and conditions.
Terms and Conditions
1.Definitions. Capitalized terms used but not defined in this Assignment shall have the respective meanings set forth in the Sale Agreement.
2.Assignment. Assignor hereby transfers, assigns, sets over and delivers to Assignee all of the Interests held by Assignor, effective for all purposes as of the Transfer Date.
3.Assumption by Assignee. Assignee, by its acceptance of this Assignment, hereby assumes all obligations of Assignor as a member of _______ arising under the Operating Agreement as of the Transfer Date.
4.Captions. The captions and headings used in this Assignment are for convenience only and do not in any way affect, limit, amplify or modify the terms and provisions hereof.
5.Governing Law. This Assignment and the rights of the Assignor and the Assignee shall be governed by, interpreted and enforced in accordance with the internal laws of the State of Delaware without regard to principles of conflicts of laws.
6.Counterparts. This Assignment may be executed in several counterparts. If so executed, each of such counterparts shall be deemed an original for all purposes and all counterparts shall, collectively, constitute one agreement. In making proof of this Assignment, it shall not be necessary to produce or account for more than one such counterpart.
7.Limitation of Assignors’ Liability. Liability of the Assignor under this Assignment shall be limited as set forth in the Sale Agreement.
8.Parties Bound. This Assignment shall be binding upon and inure to the benefit of Assignor and Assignee and their respective successors and assigns.
[Signature Page Follows]

E-1


Signature Page for Assignment and Assumption Agreement
“ASSIGNEE:”
By:
Name:
Title:
“ASSIGNOR:”
By:
Name:
Title:

E-2


EXHIBIT F
ASSIGNMENT AND ASSUMPTION OF MEMBERSHIP INTEREST PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS
This Assignment and Assumption of Membership Interest Purchase and Sale Agreement and Escrow Instructions (“Assignment”) is entered into between ________________ (“Assignor”), and ________________ (“Assignee”), as of _________ __, 20__ (“Effective Date”).
RECITALS
A.Pursuant to the terms of that certain Membership Interest Purchase and Sale Agreement and Escrow Instructions dated _______, 20__ by and between _____________ (“Seller”), as seller, and Assignor, as buyer, as amended (the “Purchase Agreement”), Assignor agreed to acquire the Interests (as such term is defined in the Purchase Agreement).
B.Assignor desires to assign, without recourse, representation or warranty, all of its rights, benefits, liabilities and obligations arising under the Purchase Agreement (and related documents) to Assignee, and Assignee desires to assume all of said rights, benefits, liabilities and obligations subject to the terms of this Assignment.
NOW, THEREFORE, in consideration of the foregoing promises, the mutual undertakings of the parties set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, the parties agree as follows:
1.Recitals. The above recitals are incorporated herein by reference.
2.Assignment and Assumption. Assignor hereby transfers, assigns and conveys to Assignee, without recourse, representation or warranty, express or implied, all of Assignor’s rights, interests, liabilities and obligations in, to and under the Purchase Agreement (and related documents). Assignee hereby assumes all such rights, interests, liabilities and obligations, and joins in all representations, warranties, releases, and indemnities, of Assignor under the Purchase Agreement (and related documents). Assignor agrees it shall not be released from its obligations under the Purchase Agreement as a result of this Assignment, and Assignee agrees that its acquisition of the Interests pursuant to the Purchase Agreement shall be subject to all terms and conditions thereof, including without limitation all release and as-is provisions of the Purchase Agreement. Notwithstanding the foregoing, (a) Seller shall have the right to deal exclusively with Assignee with respect to all matters pertaining to and/or arising out of the Purchase Agreement, (b) Assignor’s approval or consent shall not be required in connection with any amendment or modification to the Purchase Agreement hereafter entered into by and between Seller and Assignee, and (c) any and all amendments to the Purchase Agreement hereafter entered into by and between Seller and Assignee shall be binding on Assignor.
3.Successors and Assigns. This Assignment shall be binding upon and inure to the benefit of the parties’ successors and assigns.

F-3


4.Counterparts. This Assignment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which when taken together shall constitute one and the same instrument. Each counterpart may be delivered by facsimile transmission. The signature page of any counterpart may be detached therefrom without impairing the legal effect of the signature(s) thereon provided such signature page is attached to any other counterpart identical thereto.
Executed as of the date set forth above.
ASSIGNOR:
_______________
By:  _____________________________
Its:  _____________________________
ASSIGNEE:
_______________
By:  _____________________________
Its:  _____________________________

F-4


EXHIBIT G
Intentionally Omitted



G-1


EXHIBIT H
Balance Sheets
(Attached)
H-1


KBSRIIQ42019EX1067P41.JPG

H-1


KBSRIIQ42019EX1067P51.JPG


H-2


EXHIBIT I
Form of Owner’s Affidavit
(Attached)

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OWNER’S AFFIDAVIT
TITLE ORDER:
ESCROW ORDER:
PROPERTY:
COUNTY:
STATE:
KBSII REIT ACQUISITION I, LLC, a Delaware limited liability company, and KBSII REIT ACQUISITION II, LLC, a Delaware limited liability company (collectively, “Seller,” and individually, a “Seller”), as seller, and 100-600 CAMPUS DRIVE, LLC, a New Jersey limited liability company (“Buyer”), as buyer, are parties to that certain Membership Interest Purchase and Sale Agreement and Escrow Instructions (the “Purchase Agreement”) dated ________, 2019, as the same has been amended and modified, relating to the improved real property (the “Real Property”) referred to in Exhibit “A” attached hereto and made a part hereof and pursuant to the terms of which Seller has agreed to sell, and Buyer has agreed to purchase, all of Sellers’ interest in KBSII 100-200 Campus Drive, LLC, a Delaware limited liability company, and KBSII 300-600 Campus Drive, LLC, a Delaware limited liability company (collectively, the “Property Owners,” and, individually, a “Property Owner;” Each Property Owner, individually, owns a portion of the Real Property, as more particularly set forth in Exhibit A attached hereto.
In connection with the consummation of the transactions contemplated by the Purchase Agreement, and in connection with Commonwealth Land Title Insurance Company’s (the “Company”) issuing a new owner’s title policy in favor of each of the Property Owners (as to the portion of the Real Property each Property Owner owns), and issuing a non-imputation indorsement to each such owner’s title policy (collectively, the “Indorsements”), Each Seller, as to itself, and as to the Property Owner it owns, and as to the Real Property owned by such Property Owner, hereby represents and warrants to the Company the following:
1.Each Property Owner is organized and existing under the laws of the State of Delaware.
2.To each Seller’s actual knowledge, (i) each Property Owner’s operating agreement is in full force and effect, and (ii) no proceedings are pending for the dissolution of either Property Owner.
3.To each Seller’s actual knowledge, the leases described on Exhibit “B” attached hereto constitute all of the written leases affecting the Real Property with the current tenants of the Real Property.
4.To each Seller’s actual knowledge, except as disclosed in Exhibit ”C” attached hereto and made a part hereof, (a) there is no capital improvement work currently being constructed (or that was constructed during the last 6 months) on the Real Property that is the subject of a written contract with either Property Owner which could give rise to a mechanic’s or materialman’s lien on the Real Property, and (b) neither Property Owner has entered into any contracts for the furnishing of labor, materials, or services for construction purposes with respect to the Real Property to be furnished subsequent to the date of this owner’s affidavit.
5.Neither Seller shall hereafter permit the Property Owner it owns to cause any encumbrances or other instruments to be recorded against the Real Property owned by such Property Owner through the date of the closing under the Purchase Agreement.
6.To each Seller’s actual knowledge, other than as disclosed in that certain title commitment dated ___________, 2019, under order number ___________, and issued by the Company (the “Title Commitment”), and other than such other documents and/or instruments that may be recorded against the Real Property (whether or not disclosed in the Title Commitment), there are no liens, encumbrances, restrictions, easements or other adverse claims created by the Property Owners or their respective affiliates against title to the Real Property.
Each Seller, as to the representations and warranties made by such Seller as to the Property Owner its owns, and is to the Real Property owned by such Property Owner, hereby indemnifies the Company against any loss, cost or damage which the Company may suffer by virtue of any claim made under either of the Indorsements due to the
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existence of any lien, encumbrance, right, restriction, easement or other claim against, or with respect to, title to the Real Property which was not disclosed in the representations and warranties set forth above, but which should have been so disclosed in order to make all such representations and warranties true and correct in all material respects. Sellers understand that such loss, cost or damage includes any court costs and attorney’s fees expended by the Company in defending the title or interest of the Property Owners against any such lien, encumbrance, right, restriction, easement or other claim.
For purposes hereof, the “actual knowledge” of each Seller shall be limited to the actual knowledge (and not implied, imputed, or constructive) of Shannon Hill, who has been the asset manager for the Real Property for the last five (5) years and is the person that is most likely to know the information that is the subject of the representations and warranties made above. Notwithstanding anything contained herein to the contrary, the representations and warranties set forth in this owner’s affidavit shall only survive the closing of the transactions contemplated by the Purchase Agreement until ____________, 2020 [9 months after the Closing], after which date this owner’s affidavit shall be of no further force or effect and the Company shall have no further rights hereunder (notwithstanding that one or more of the representations and/or warranties set forth herein may prove to be incorrect). This owner’s affidavit is being executed for the sole and exclusive benefit of the Company and no other party or person shall have any rights hereunder. Seller hereby covenants that, from the date of this owner’s affidavit through the survival period referenced above (or, in the event the Company has delivered written notice to Seller prior to the expiration of such survival period for the breach of any of Seller's representations and warranties set forth above, and has, no later than thirty (30) calendar days following the expiration of such survival period, brought an action with respect to any such breach claimed in such written notice, to the conclusion of such action), Seller shall maintain, or have access to, assets of no less than Twenty Million and No/100 Dollars ($20,000,000.00).
Executed as of __________, 2019
[SIGNATURES ON NEXT PAGE]

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SELLER:
_______________________________________________
_______________________________________________

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EXHIBIT A
LEGAL DESCRIPTION
ATTACHED



EXHIBIT B
LIST OF LEASES
ATTACHED



EXHIBIT C
IMPROVEMENT WORK
ATTACHED



SCHEDULE 1-1
Description of New and Pending Lease Transactions (Buyer’s Responsibility)
1.None



SCHEDULE 1-2
Description of New and Pending Lease Transactions (Seller’s Responsibility)
(Attached)



KBSRIIQ42019EX1067P61.JPG


SCHEDULE 2
Disclosures
1. None


Exhibit 10.68
FIRST AMENDMENT TO MEMBERSHIP INTEREST PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS
This FIRST AMENDMENT TO MEMBERSHIP INTEREST PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS (this “Amendment”) is made and entered into as of October 30, 2019, between KBSII REIT ACQUISITION I, LLC and KBSII REIT ACQUISITION II, LLC, each a Delaware limited liability company (collectively, “Seller”), and 100-600 CAMPUS DRIVE, LLC, a New Jersey limited liability company ( “Buyer”).
W I T N E S S E T H:
WHEREAS, Seller and Buyer entered into that certain Membership Interest Purchase and Sale Agreement and Escrow Instructions, dated as of October 22, 2019 (the “Original Agreement”), covering the Interests in the Property Owners, as defined and more particularly described in the Original Agreement;
WHEREAS, the parties desire to amend the Original Agreement for the purpose of extending the Due Diligence Period (as defined therein);
NOW THEREFORE, in consideration of the mutual promises and agreements herein contained, and other good and valuable consideration the sufficiency and receipt of which are hereby acknowledged, the parties hereby agree as follows:
1.Definitions: All references in the Original Agreement to “this Agreement,” “this agreement,” or the “Agreement,” or similar references, shall mean the Original Agreement, as amended by this Amendment. All other capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Original Agreement. The Original Agreement as hereby amended is referred to as the “Agreement”.
2.Amendments to the Original Agreement: The Original Agreement is hereby amended by deleting the text of Section 1.1(c) thereof and replacing it with the following sentence:
“Due Diligence Period. The “Due Diligence Period” shall end on October 31, 2019 at 5:00 p.m. (California time).”
3.Modification/Confirmation: This Amendment contains the entire agreement between the parties hereto relating to the transactions contemplated hereby, and all prior or contemporaneous agreements, understandings, representations and statements, oral or written, are merged herein. This Amendment may not be modified or amended other than by a written instrument executed by both parties. Except as specifically modified and amended by this Amendment, there are no other changes or modifications to the Original Agreement and all of the terms, covenants and conditions of the Original Agreement, as modified and amended by this Amendment, are hereby ratified and confirmed and shall continue to be and remain in full force and effect as applicable to Seller and Buyer. To the extent of any inconsistency between the Original Agreement and this Amendment, the terms of this Amendment shall control.


4.Counterparts: This Amendment may be executed in two or more counterparts and by facsimile or electronic signature, each of which shall be binding as originals and all of which, when taken together, shall for all purposes constitute one agreement binding on all of the parties hereto, notwithstanding that all parties shall not have executed the same counterparts.
5.Successors and Assigns: The covenants, agreements, terms, provisions and conditions contained in this Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
[remainder of page intentionally left blank]


IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first written above.
BUYER
100-600 CAMPUS DRIVE, LLC.
a New Jersey limited liability company
By: /s/ Shaya Prager
Name: Shaya Prager
Its: _____________________________
SIGNATURES CONTINUED ON FOLLOWING PAGE


[Signature Page – First Amendment to Membership Interest Purchase and Sale Agreement and Escrow Instructions]
[100-600 Campus Drive]


SELLER
KBSII REIT ACQUISITION I, LLC,
a Delaware limited liability company
By: KBS REIT PROPERTIES II, LLC,
a Delaware limited liability company,
it sole membership
By: KBS LIMITED PARTNERSHIP II,
a Delaware limited partnership,
its sole member
By: KBS REAL ESTATE INVESTMENT TRUST II, INC.,
a Maryland corporation,
its general partner
By:
/s/ Charles J. Schreiber, Jr.
Charles J. Schreiber, Jr.,
Chief Executive Officer

KBSII REIT ACQUISITION II, LLC,
a Delaware limited liability company
By: KBS REIT PROPERTIES II, LLC,
a Delaware limited liability company,
it sole membership
By: KBS LIMITED PARTNERSHIP II,
a Delaware limited partnership,
its sole member
By: KBS REAL ESTATE INVESTMENT TRUST II, INC.,
a Maryland corporation,
its general partner
By:
/s/ Charles J. Schreiber, Jr.
Charles J. Schreiber, Jr.,
Chief Executive Officer

[Signature Page – First Amendment to Membership Interest Purchase and Sale Agreement and Escrow Instructions]
[100-600 Campus Drive]


Exhibit 10.69
SECOND AMENDMENT TO MEMBERSHIP INTEREST PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS
THIS SECOND AMENDMENT TO MEMBERSHIP INTEREST PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS (this “Second Amendment”) is made as of the 31st day of October, 2019, by and between KBSII REIT ACQUISITION I, LLC, a Delaware limited liability company (the “100-200 Seller”), and KBSII REIT ACQUISITION II, LLC, a Delaware limited liability company (the “300-600 Seller”, and collectively with 100-200 Seller, each, a “Seller”, and collectively, “Seller”), and 100-600 Campus Drive, LLC, a New Jersey limited liability company (“Buyer”). In consideration of the mutual promises and covenants contained herein, the parties hereto agree as follows:
RECITALS
A.Seller and Buyer are parties to that certain Membership Interest Purchase and Sale Agreement and Escrow Instructions dated as of October 22, 2019, as amended by that certain First Amendment to Membership Interest Purchase and Sale Agreement and Escrow Instructions dated as of October 30, 2019 (as amended, the “Purchase Agreement”). All initially-capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement unless the context clearly indicates otherwise.
B.Seller and Buyer have agreed to modify the terms of the Purchase Agreement as set forth in this Second Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intended to be legally bound, Seller and Buyer agree as follows:
1.Recitals. The Recitals set forth above are hereby incorporated herein by reference as if the same were fully set forth herein.
2.Decrease in Purchase Price. Notwithstanding anything to the contrary in the Purchase Agreement (including, without limitation, Section 3.1 thereof), the Purchase Price shall be, and hereby is, decreased from Three Hundred Twenty-Million and 00/100 Dollars ($320,000,000.00) to Three Hundred Eleven Million and 00/100 Dollars ($311,000,000.00).
3.Closing Date Extension. Notwithstanding anything to the contrary in the Purchase Agreement, Buyer may extend the Closing Date to January 16, 2020, provided that on or prior to December 2, 2019, Buyer delivers to Seller written notice of Buyer's intention to extend the Closing Date and Buyer deposits with Escrow Holder concurrently with such written notice an additional deposit, in cash or current funds, in the amount of One Million Dollars ($1,000,000.00)(the "First Extension Deposit"), and if such extension right is exercised by Buyer as provided above, Buyer may further extend the Closing Date to January 31, 2020, provided that on or prior to December 31, 2019, Buyer delivers to Seller written notice of Buyer's intention to extend the Closing Date and Buyer deposits with Escrow Holder concurrently with such written notice an additional deposit, in cash or current funds, in the amount of One Million Dollars ($1,000,000.00)(the "Second Extension Deposit", and together with the First Extension Deposit, the “Extension Deposit”). The Extension Deposit, once made,


shall be credited at the Close of Escrow towards the Purchase Price and will be treated as part of the Deposit.
4.New and Pending Leases (Buyer’s Responsibility). Schedule 1-1 attached to the Purchase Agreement shall be, and hereby is, deleted and Schedule 1-1 attached hereto is hereby inserted in its place.
5.List of Leases. Exhibit C-1 attached to the Purchase Agreement shall be, and hereby is, deleted and Exhibit C-1 attached hereto is hereby inserted in its place.
6.Escrow Holder. Section 1.1(d) of the Purchase Agreement shall be, and hereby is, deleted in its entirety and the following paragraph shall be substituted in its place:
“(d)Escrow Holder. The escrow holder shall be Riverside Abstract, whose address is 3839 Flatlands Avenue, Suite 208, Brooklyn, New York 11234, Attn: Shaul C. Greenwald, Esq.; Telephone: (718) 252-4200; E-Mail: sgreenwald@rsabstract.com.”
7.Notices. The notice address for the Escrow Holder in Section 15.1 of the Purchase Agreement shall be, and hereby is, deleted in its entirety and the following notice address shall be substituted in its place:
“Riverside Abstract
3839 Flatlands Avenue, Suite 208
Brooklyn, New York 11234,
Attn: Shaul C. Greenwald, Esq.
Telephone: (718) 252-4200;
E-Mail: sgreenwald@rsabstract.com”
8.Form of Operating Agreement Amendment and Name Change.
(a)In accordance with the terms and provisions of Section 6.1(b) of the Purchase Agreement, the form of Operating Agreement Amendment agreed to by Seller and Buyer shall be the form of Operating Agreement Amendment attached hereto as Exhibit A.
(b)Within five (5) business day after the Closing, Buyer agrees to file with the Secretary of State of the State of Delaware and the Treasurer of the State of New Jersey the appropriate documents required to change the name of the Company to the name referenced in the Operating Agreement Amendment delivered at Closing (which name may not include the words “KBS”, “Koll” “Bren” or “Schreiber”). In the event Buyer fails to file the required documents within one (1) business day as provided above, Seller shall automatically be appointed as Buyer’s attorney-in-fact for the sole purpose of filing such documents on behalf of Buyer. The terms and provisions of this Section 8(b) shall survive the Closing.
9.Intentionally Omitted.
10.Effectiveness of Agreement. Except as modified by this Second Amendment, all the terms of the Purchase Agreement shall remain unchanged and in full force and effect.



11.Counterparts. This Second Amendment may be executed in counterparts, and all counterparts together shall be construed as one document.
12.Telecopied/Emailed Signatures. A counterpart of this Second Amendment that is signed by one party to this Second Amendment and telecopied/emailed to the other party to this Second Amendment or its counsel (i) shall have the same effect as an original signed counterpart of this Second Amendment, and (ii) shall be conclusive proof, admissible in judicial proceedings, of such party’s execution of this Second Amendment.
13.Successors and Assigns. All of the terms and conditions of this Second Amendment shall apply to benefit and bind the successors and assigns of the respective parties.
IN WITNESS WHEREOF, Seller and Buyer have entered into this Second Amendment as of the date first above stated.
[SIGNATURES ON NEXT PAGE]



SELLER
KBSII REIT ACQUISITION I, LLC,
a Delaware limited liability company
By: KBS REIT PROPERTIES II, LLC,
a Delaware limited liability company,
it sole membership
By: KBS LIMITED PARTNERSHIP II,
a Delaware limited partnership,
its sole member
By: KBS REAL ESTATE INVESTMENT TRUST II, INC.,
a Maryland corporation,
its general partner
By:
/s/ Charles J. Schreiber, Jr.
Charles J. Schreiber, Jr.,
Chief Executive Officer

KBSII REIT ACQUISITION II, LLC,
a Delaware limited liability company
By: KBS REIT PROPERTIES II, LLC,
a Delaware limited liability company,
it sole membership
By: KBS LIMITED PARTNERSHIP II,
a Delaware limited partnership,
its sole member
By: KBS REAL ESTATE INVESTMENT TRUST II, INC.,
a Maryland corporation,
its general partner
By:
/s/ Charles J. Schreiber, Jr.
Charles J. Schreiber, Jr.,
Chief Executive Officer



BUYER
100-600 CAMPUS DRIVE, LLC.
a New Jersey limited liability company
By: /s/ Shaya Prager
Name: Shaya Prager
Its: _____________________________



AGREED TO THIS 31th DAY OF OCTOBER, 2019
AS TO THE PROVISIONS IN THE PURCHASE AGREEMENT (AS AMENDED)
RELATING TO ESCROW HOLDER:
RIVERSIDE ABSTRACT
By: /s/ Authorized Signatory
Its: CFO



BY ITS SIGNATURE HERO, COMMONWEALTH LAND TITLE INSURANCE
COMPANY ACKNOWLEDGES AND AGREES IT SHALL NO LONGER SERVE AS THE
ESCROW HOLDER UNDER THE PURCHASE AGREEMENT (AS AMENDED):
COMMONWEALTH LAND TITLE INSURANCE COMPANY
By: _________________________
Its: __________________________


EXHIBIT A
Form of Operating Agreement Amendment
(Attached)

8


FIRST AMENDMENT TO
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT OF
[KBSII 100-200 CAMPUS DRIVE, LLC][KBSII 300-600 CAMPUS DRIVE, LLC]
This First Amendment to Amended and Restated Limited Liability Company Agreement of [KBSII 100-200 Campus Drive, LLC][KBSII 300-600 Campus Drive, LLC] (this “Amendment”) is entered into as of ____________, 2019 (the “Effective Date”), by [_____________________], a [______] limited liability company, as the sole member (the “Member”) of the Company (defined below).
R E C I T A L S
A.[KBSII 100-200 Campus Drive, LLC][KBSII 300-600 Campus Drive, LLC] is a Delaware limited liability company (the “Company”).
B.The Company is governed pursuant to that certain Amended and Restated Limited Liability Company Agreement of the Company dated [March 26, 2018][July 9, 2013] (the “Original Agreement”) entered into by [KBSII REIT Acquisition I, LLC] [KBSII REIT Acquisition II, LLC] (the “Original Member”).
C.Pursuant to a certain Assignment and Assumption of Interests, dated [_________], between Original Member, as assignor, and Member, as assignee, Original Member assigned to Member 100% of Original Member’s ownership interest in the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants set forth in the Original Agreement and this Amendment and further good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Members agree as follows:
1.Definitions. All initially capitalized terms used, but not defined or otherwise cross-referenced, in this Amendment shall have the same meaning that such terms have in the Original Agreement. The Original Agreement is hereby modified such that any term defined therein which is defined or otherwise cross-referenced in this Amendment shall have the meaning set forth in this Amendment.
2.Amendment to Original Agreement.
(a)Name. Section 1 of the Original Agreement is hereby amended by deleting the text thereof in its entirety and replacing it with the following words:
“3. Name.

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The name of the Company is [____________________________________][Name may not include “KBS”, “Koll” “Bren” or “Schreiber”].”
(b)Registered Office. Section 3 of the Original Agreement is hereby amended by deleting the text thereof in its entirety and replacing it with the following words:
“3. Registered Office.
The address of the registered office of the Company in the State of Delaware is [____________________________________].”
(c)Registered Agent. Section 4 of the Original Agreement is hereby amended by deleting the text thereof in its entirety and replacing it with the following words:
“4. Registered Agent. The name and address of the registered agent of the Company for service of process on the Company in the State of Delaware is [_______________________________].”
(d)Members. Section 5 of the Original Agreement is hereby amended by deleting therefrom the name and address of the Original Member and replacing it as follows:
Name: [_____________] Address: [__________] [__________]
3.Ratification. Except as expressly modified by this Amendment, the Original Agreement shall remain in full force and effect and is hereby ratified and confirmed by the Member.
4.Execution. This Amendment may be executed in any number of counterparts, and each such counterpart shall for all purposes be deemed to be an original, and all such counterparts together constitute but one and the same agreement. Further, facsimile or electronic (e.g., .pdf format) copies of signatures shall be considered originals for purposes of binding the parties hereto.
[Remainder of page left blank; signatures follow.]

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IN WITNESS WHEREOF, the parties have executed this Amendment effective as of the date first written above.
MEMBER:
[INSERT SIGNATURE BLOCK]
[AMENDMENT TO AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF _____________________]


EXHIBIT C-1
List of Leases
(Attached)






List of Leases
100 Campus Drive
Cablevision Lightpath-NJ, Inc.
Building Access Telecommunications Lease – Wire Line – Fiber Optic dated July 1, 2008
Jersey Central Power & Light
Revocable License Agreement dated __, 2008
Amendment to Revocable License Agreement dated September 25, 2018
Reinsurance Management, Inc.; 7,188 sf, suite 101
Lease Agreement dated September ___, 1995
First Amendment to Lease dated July 28, 1997
Second Amendment to Lease dated February 21, 2002
Third Amendment to Lease dated January 2, 2003
Fourth Amendment to Lease dated October 19, 2006
Assignment and Assumption of Lease dated July 1, 2012
Guaranty of Lease Dated July 1, 2012
Fifth Amendment to Lease dated July 16, 2012
Sixth Amendment to Lease dated October 16, 2017
Coldwell Banker Real Estate Services LLC d/b/a Coldwell Banker Residential Brokerage; 9,420 sf, suite 102
Lease Agreement dated October 17, 2016
Guaranty of Lease dated October 17, 2016
Lease Commencement Letter dated January 25, 2017
Bright Horizons Children’s Centers LLC; 2,482 sf, suite 104
Lease Agreement dated July 9, 2001
First Amendment of Lease dated May 2, 2011
Guaranty dated May 2, 2011
Second Amendment of Lease dated March 24, 2016
Fidia Pharma USA Inc.; 9,488 sf; suite 105
Lease Agreement dated February 27, 2017
Lease Commencement Letter dated July 17, 2017
Raich Ende Malter & Co., LLP; 7,829 sf, suite 106
Lease Agreement dated May 28, 2013
Lease Commencement Letter dated September 10, 2013
CBRE, Inc; 4,398 sf, suite 109
Lease Agreement dated April 27, 2011
First Amendment of Lease dated August 11, 2015
Steward Partners Global Advisory, LLC; 8,818 sf, suite 110
Lease Agreement dated December 21, 2018
Lease Commencement Letter dated June 17, 2019



Clausen Miller P.C.; 2,644 sf, suite 112
Lease Agreement dated February 4, 2013
Lease Commencement Letter dated April 17, 2013
First Amendment to Lease dated June 22, 2018
Dartcor Food Service; 1,982 sf, suite 113
Food Service Agreement dated September 9, 2008
First Amendment to Food Service Agreement dated June 6, 2016
Second Amendment to Food Service Agreement dated September 1, 2016
Third Amendment to Food Service Agreement dated July 1, 2017
Boyar & Suozzo, P.A.; 1,977 sf, suite 116
Lease Agreement dated March 10, 2014
Lease Commencement Letter dated June 26, 2014
First Amendment dated February 14, 2019
Hisamitsu America, Inc.; 4,526 sf; suite 117
Lease Agreement dated September 17, 2007
Commencement Date Letter dated November 29, 2007
Assignment and Assumption of Lease dated April 1, 2010
First Amendment of Lease dated November 29, 2012
Assignment and Assumption of Lease dated November 29, 2012
Second Amendment of Lease dated June 28, 2017
Conduent Incorporated; 32,865 sf (suite 200), 17,644 sf (suite 201), 6,175 sf (suite 340), 23,332 sf (suite 310) – total 80,016 sf
Lease Agreement dated October 13, 2016
First Amendment to Lease dated June 23, 2017
License Agreement dated July 12, 2017
Lease Commencement Letter dated February 15, 2017
Lease Commencement Letter for First Amendment space dated January 8, 2018
Second Amendment to Lease dated February 15, 2018
Amendment to License Agreement dated February 15, 2018
Third Amendment to Lease dated June 4, 2018
Lease Commencement Letter for Second Amendment space dated July 5, 2018
Lease Commencement Letter for Third Amendment space dated November 2, 2018
License Agreement dated February 20, 2019 (for suite 110)
Logical Design Solutions, Inc.; 13,807 sf; suite 205
Lease Agreement dated May 13, 2015
Waiver and Consent dated November 30, 2015
Lease Commencement Letter dated January 4, 2016
First Amendment of Lease dated June 27, 2019
Cellectar Biosciences, Inc.; 3,983 sf, suite 207
Lease Agreement dated June 4, 2018
Lease Commencement Letter dated October 25, 2018



Jacobs Levy Equity Management, Inc.; 22,983 sf (suite 211) and 2,368 sf (B4)
Lease Agreement dated July 17, 2001
Commencement Date Letter dated November 17, 2006
First License Agreement Amendment dated September 1, 2007
First Amendment to Lease dated April 3, 2010
Second Amendment to Lease dated September 2, 2014
The Weisscom Group LTD. D/B/A W2O Group; 24,956 sf; suite 300
Lease Agreement dated December 26, 2017
Merrill Lynch, Pierce, Fenner & Smith, Inc.; 50,518 sf (suite 350), 4,075 sf (suite 108), 644 sf (suite 114), 59 sf (suite 360), 750 sf (B2) - total 56,046 sf
Lease Agreement dated March 9, 1991
First Amendment to Lease dated October 29, 1993
Second Amendment to Lease dated February 27, 1995
Lease Subordination, Non-Disturbance and Attornment Agreement dated September 29, 1995
Third Amendment to Lease dated June 15, 1996
Executive Office Lease dated September, 1996
Fourth Amendment to Lease dated June 9, 1999
Fifth Amendment to Lease dated July 18, 2000
Sublease dated February 28, 2008
Consent to Sublease dated February 28, 2008
Sixth Amendment to Lease dated October, 27, 2010
License Agreement for Storage Space dated April 11, 2011
Seventh Amendment to Lease dated April 24, 2013
Eighth Amendment to Lease dated September 5, 2014
First Amendment to License Agreement dated October 13, 2014
Subordination, Nondisturbance and Attornment Agreement dated March 5, 2015
Wiss & Company, LLP; 41,513 sf, suite 400
Lease Agreement dated May 13, 2019
Unified Physician Management, LLC
Lease dated July 18, 2019
200 Campus Drive
Lightower Fiber Networks II, LLC
Telecommunications License Agreement dated June 8, 2017
Dartcor Food Service
Food Service Agreement dated January 31, 2011
First Amendment to Food Service Agreement dated June 6, 2016
Second Amendment to Food Service Agreement dated September 1, 2016
Third Amendment to Food Service Agreement dated July 1, 2017
Ameriprise Holdings, Inc.; 12,134 sf; suite 150



Lease Subordination, Non-Disturbance and Attornment Agreement dated March 17, 2011
Lease Agreement dated March 18, 2011
First Amendment of Lease dated November 21, 2016
Robert W. Baird & Co. Incorporated; 3,832 sf, suite 170
Lease Agreement dated May 25, 2017
Lease Commencement Letter dated September 22, 2017
Wells Fargo Clearing Services, LLC, F/K/A Wells Fargo Advisors, LLC, D/B/A Wells Fargo Advisors; 16,199 sf (suite 200), 3,103 sf (suite 165), 2,720 sf (suite 220), 3,050 sf (suite 221), 5,398 sf (suite 225) – total 30,470 sf
Lease Agreement dated February 16, 2016
Base Rent Credit Notice dated March 5, 2018
Subordination, Nondisturbance and Attornment Agreement dated March 17, 2016
First Amendment to Lease dated April 27, 2018
Newsome O’Donnell, LLC; 6,604 sf; suite 205
Lease Agreement dated July __, 2012
Clyde & Co US LLP; 21,962 sf; suite 300
Lease Agreement dated August 26, 2010
Subordination, Non-Disturbance and Attornment Agreement dated August 26, 2010
Lease Commencement Letter dated December 28, 2010
Caremark, L.L.C.; 27,346 sf (suite 310), 6,733 sf (suite 311) – total 34,079 sf
Lease Agreement dated July 18, 2013
Memorandum of Lease dated July 18, 2013
Reimbursement Agreement dated July 18, 2013
Amendment of Office Lease Agreement dated January 23, 2014
Subordination, Non-Disturbance and Attornment Agreement dated July 25, 2013
Wilson Elser Moskowitz Edelman & Dicker, LLP; 48,255 sf; suite 400
Lease Agreement dated June 30, 2010
Leonardo DRS, Inc.; 7,786 sf, suite 410
Lease Agreement dated February 15, 2019
Lease Commencement Letter dated June 6, 2019
NASS Enterprises LLC, D/B/A The Goddard School; 8,253 sf; suite 100
Guaranty of Lease dated March 20, 2015
Lease Agreement dated March 25, 2015
Lease Commencement Letter dated August 26, 2016
Cablevision
Telecommunications License Agreement dated April 13, 2016



300 Campus Drive
Shionogi Inc.; 5,889 sf( suite 110), 11,000 sf (suite 200), 12,790 sf (suite 210), 2,566 sf (suite 220), 25,527 sf (suite 300) – total 57,772 sf
Guaranty of Lease dated November 26, 2010
Lease Agreement dated November 29, 2010
Subordination, Non-Disturbance and Attornment Agreement dated November 29, 2010
First Amendment of Lease dated December 22, 2015
Amendment to Guaranty of Lease dated February 24, 2016
Morgan Stanley Smith Barney Financing LLC; 4,636 sf (suite 120), 5,083 sf (suite 111), 27,152 sf (suite 400) – total 36,871 sf
Lease Agreement dated July 19, 2000
First Amendment to lease dated April 16, 2008
Second Amendment to lease dated November 18, 2008
Assignment and Assumption of Leases dated May 31, 2009
Amendment of Lease dated December 24, 2014
Acknowledgement of Cost of Work dated February 15, 2015
Commencement Letter dated June 9, 2015
Amendment of Lease dated June 27, 2017
Documents from the 400 Building but part of the same lease at 300:
Agreement of Lease dated March 18, 1998
First Amendment to lease dated February 2, 1999
Second Amendment to lease dated April 16, 2008
Third Amendment to lease dated November 18, 2008
400 Campus Drive
PricewaterhouseCoopers, LLP; 47,797 sf (suite 400), 17,821 sf (suite 100), 23,297 sf (suite 120), 45,445 sf (suite 200), 48,603 sf (suite 300) – total 182,963
Lease Agreement dated December 30, 2014
Subordination, Nondisturbance, and Attornment Agreement dated December 31, 2014
Possession Date letter dated June 18, 2015
First Amendment to Lease dated September 8, 2015
Surrender of Swing Space dated November 1, 2016
Surrender of Swing space dated February 17, 2017
New Cingular Wireless PCS, LLC
Site Access Telecommunications Lease dated March 16, 2006
500 Campus Drive
Dartcor Food Service; 6,673 sf
Food Service Agreement dated October 10, 2008
Letter Agreement dated October 24, 2012
First Amendment to Food Service Agreement dated June 6, 2016
Second Amendment to Food Service Agreement dated September 1, 2016



Third Amendment to Food Service Agreement dated July 1, 2017
UBS Financial Services Inc.; 35,366 sf (suite 200), 8,838 sf (suite 210), 857 sf (suite 220) – total 45,061
Lease Agreement dated September 17, 1998
First Amendment to Lease dated August 5, 2008
Second Amendment to Lease dated June 23, 2011
Third Amendment to Lease dated February 1, 2012
Insperity Support Services L.P.; 16,200 sf; suite 300
Lease Agreement dated March 11, 2014
Amendment of Lease Agreement dated April 17, 2014
Commencement Letter dated June 30, 2014
Bank of America, National Association; 15,877 sf; suite 310
Lease Agreement dated December 4, 2013
First Amendment dated April 17, 2014
Lease Commencement Letter dated October 30, 2014
Second Amendment of Lease dated May 29, 2019
Accenture LLP; 13,762 (suite 320), 9,550 sf (suite 115) – total 23,312 sf
Lease Agreement dated May 5, 2004
First Amendment dated July 12, 2004
Second Amendment of Lease dated November 26, 2014
Lease Commencement Letter for Second Amendment space dated February 9, 2015
Third Amendment of Lease dated January 31, 2017
Lease Commencement Letter for Third Amendment space dated June 23, 2017
Greenberg Traurig LLP; 47,040 sf (suite 400), 4,302 sf (suite 330) -total 51,342 sf
Lease Agreement dated September 30, 2014
Subordination, Nondisturbance, and Attornment Agreement dated September 30, 2014
First Amendment of Lease Agreement dated September 18, 2015
Omnipoint Communications, Inc.
Site Access and Telecommunications Lease Dated March 1, 2008
Level 3 Communications, LLC
Telecommunications License Agreement dated March 10, 2017
Cablevision Lightpath NJ LLC
Telecommunications License Agreement dated September 25, 2017
600 Campus Drive
Drinker Biddle & Reath LLP; 4,409 sf (suite 100), 26,600 sf (suite 200), 26,870 sf (suite 300) – total 57,879 sf
Lease Agreement dated June 26, 2013
Second Amendment dated January 31, 2003
Third Amendment to Agreement of Lease dated June 26, 2013
Subordination, Non-Disturbance and Attornment Agreement dated June 27, 2013



Lease Commencement Letter dated April 8, 2014
Costar Realty Information, Inc.; 6,049 sf; suite 140
Lease Agreement dated December 1, 2014
Lease Commencement Letter dated December 11, 2014
Endurance Assurance Corporation; 26,996 sf (suite 400), 8,799 sf (suite 130) – total 35,795 sf
Lease Agreement dated November 27, 2013
Lease Commencement Letter dated February 7, 2014
First Amendment to Lease dated October 10, 2018
Subordination Non-Disturbance, and Attornment Agreement dated October 29, 2018 (date recorded)
Lease Commencement Letter dated April 15, 2019


SCHEDULE 1-1
Description of New and Pending Lease Transactions (Buyer’s Responsibility)

Tenant
Lease
Suite
Sq Ft
Leasing Commission
Tenant Improvement
Allowance
Legal
Credit Review
United Physicians
Management
(UPM)

1st Amendment -
Expansion

410

5,810

*6.75% Commission
-5% to Newmark
-2.75% to AY

*$50 psf

Legal cost to negotiate
lease.

NA

Jacob’s Levy

New Lease -
Tenant relocating
to larger space

415
27,465

*6.75% Commission
-5% to Newmark
-2.75% to AY

*$52.50 psf

Legal cost to negotiate
lease.

Credit Review
Up to $1,500
*note that some portio of the LC for UPM may shift to the TI.



Exhibit 21.1

Subsidiaries of KBS REIT II


CA Capital Management Services, LLC
KBSII Pierre LaClede Center, LLC
KBS Limited Partnership II
KBSII REIT Acquisition I, LLC
KBS REIT Holdings II LLC
KBSII REIT Acquisition II, LLC
KBS REIT Properties II, LLC
KBSII REIT Acquisition V, LLC
KBS TRS Services, LLC
KBSII REIT Acquisition VI, LLC
KBSII 100-200 Campus Drive, LLC
KBSII REIT Acquisition XV, LLC
KBSII 300-600 Campus Drive, LLC
KBSII REIT Acquisition XVII, LLC
KBSII 445 South Figueroa, LLC
KBSII REIT Acquisition XVIII, LLC
KBSII Corporate Technology Centre, LLC
KBSII REIT Acquisition XXIV, LLC
KBSII Emerald View, LLC
KBSII REIT Acquisition XXVI, LLC
KBSII Fountainhead, LLC
KBSII Willow Oaks, LLC
KBSII Granite Tower, LLC



Exhibit 31.1
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Charles J. Schreiber, Jr., certify that:
1.I have reviewed this annual report on Form 10-K of KBS Real Estate Investment Trust II, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 6, 2020 By:
/S/ CHARLES J. SCHREIBER, JR.     
Charles J. Schreiber, Jr.
Chairman of the Board,
Chief Executive Officer, President and Director
(principal executive officer)





Exhibit 31.2
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Jeffrey K. Waldvogel, certify that:
1.I have reviewed this annual report on Form 10-K of KBS Real Estate Investment Trust II, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 6, 2020 By:
/S/ JEFFREY K. WALDVOGEL    
Jeffrey K. Waldvogel
Chief Financial Officer, Treasurer and Secretary
(principal financial officer)



Exhibit 32.1
Certification pursuant to 18 U.S.C. Section 1350,
as Adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 10-K of KBS Real Estate Investment Trust II, Inc. (the “Registrant”) for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Charles J. Schreiber Jr., Chief Executive Officer, President and Director of the Registrant, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge and belief:
1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date: March 6, 2020 By:
/S/ CHARLES J. SCHREIBER, JR.    
Charles J. Schreiber, Jr.
Chairman of the Board,
Chief Executive Officer, President and Director
(principal executive officer)
 





Exhibit 32.2
Certification pursuant to 18 U.S.C. Section 1350,
as Adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 10-K of KBS Real Estate Investment Trust II, Inc. (the “Registrant”) for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Jeffrey K. Waldvogel, the Chief Financial Officer, Treasurer and Secretary of the Registrant, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge and belief:
1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date: March 6, 2020 By:
/S/ JEFFREY K. WALDVOGEL    
Jeffrey K. Waldvogel
Chief Financial Officer, Treasurer and Secretary
(principal financial officer)



Exhibit 99.2
TENTH AMENDED AND RESTATED SHARE REDEMPTION PROGRAM
Adopted March 5, 2020
The board of directors of KBS Real Estate Investment Trust II, Inc., a Maryland corporation (the “Company”), has adopted a Tenth Amended and Restated Share Redemption Program (the “SRP”), the terms and conditions of which are set forth below. Capitalized terms shall have the same meaning as set forth in the Company’s charter unless otherwise defined herein.
1.Qualifying Stockholders. “Qualifying Stockholders” are holders of the Company’s shares of Common Stock (the “Shares”) or authorized representatives of such stockholders seeking redemption upon a stockholder’s death, Qualifying Disability (as defined in paragraph 7) or Determination of Incompetence (as defined in paragraph 8).
2.Share Redemption. Subject to the terms and conditions of this SRP, including the limitations on redemptions set forth in paragraph 4 and the procedures for redemption set forth in paragraph 5, the Company will redeem such number of Shares as requested by a Qualifying Stockholder.
3.Redemption Price. The redemption price per Share for all Qualifying Stockholders is equal to (a) $3.615 less (b) the amount of any liquidating distributions on such Share declared by the Company’s Board of Directors that have a record date prior to the applicable Redemption Date (as defined in paragraph 5 below) for such Share. The Company will report the redemption price in a Current Report on Form 8-K or in its annual or quarterly reports, all publicly filed with the Securities and Exchange Commission.
4.Limitations on Redemption. Notwithstanding anything contained in this SRP to the contrary, the Company’s obligation to redeem Shares pursuant to paragraphs 1, 2, 7 and 8 hereof is limited by each of the following:
(a)During each calendar year, redemptions sought in connection with a stockholder's death, Qualifying Disability or Determination of Incompetence will be limited to an annual dollar amount determined by the board of directors, which may be reviewed during the year and increased or decreased upon ten business days’ notice to the Company’s stockholders. The Company may provide notice by including such information (a) in a Current Report on Form 8-K or in its annual or quarterly reports, all publicly filed with the Securities and Exchange Commission or (b) in a separate mailing to the stockholders.
(b)During any calendar year, the Company may redeem no more than 5% of the weighted-average number of Shares outstanding during the prior calendar year.
(c)The Company has no obligation to redeem Shares if the redemption would violate the restrictions on distributions under Maryland General Corporation Law, as


amended from time to time, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency.
5.Procedures for Redemption. The Company has engaged a third party to administer the SRP. Upon any change to the identity or the mailing address of the program administrator, the Company will notify stockholders of such change. The Company will redeem Shares on the last business day of each month (the “Redemption Date”). For a Qualifying Stockholder’s Shares to be eligible for redemption in a given month, the program administrator must receive a written redemption request from the Qualifying Stockholder setting forth the number of Shares requested to be redeemed at least five business days before the Redemption Date. If the Company cannot repurchase all Shares presented for redemption in any month because of the limitations on redemptions set forth in paragraph 4, then the Company will honor redemption requests on a pro rata basis, except that if a pro rata redemption would result in a Qualifying Stockholder owning less than the minimum purchase requirement described in a currently effective, or the most recently effective, registration statement of the Company, as such registration statement has been amended or supplemented, then the Company would redeem all of such Qualifying Stockholder’s Shares.
If the Company does not completely satisfy a redemption request on a Redemption Date because the program administrator did not receive the request in time, because of the limitations on redemptions set forth in paragraph 4 or because of a suspension of the SRP, then the Company will treat the unsatisfied portion of the redemption request as a request for redemption at the next Redemption Date funds are available for redemption, unless the redemption request is withdrawn. Any Qualifying Stockholder can withdraw a redemption request by sending written notice to the program administrator, provided such notice is received at least five business days before the Redemption Date.
6.Intentionally Omitted.
7.Qualifying Disability Determinations. In order for a disability to entitle a stockholder to the redemption terms available for a “Qualifying Disability” under this SRP, (1) the stockholder must receive a determination of disability based upon a physical or mental condition or impairment arising after the date the stockholder acquired the Shares to be redeemed, and (2) such determination of disability must be made by the governmental agency responsible for reviewing the disability retirement benefits that the stockholder could be eligible to receive (the “Applicable Government Agency”). The Applicable Government Agencies are limited to the following: (i) if the stockholder paid Social Security taxes and, therefore, could be eligible to receive Social Security disability benefits, then the Applicable Governmental Agency is the Social Security Administration or the agency charged with responsibility for administering Social Security disability benefits at that time if other than the Social Security Administration; (ii) if the stockholder did not pay Social Security taxes and, therefore, could not be eligible to receive Social Security disability benefits, but the stockholder could be eligible to receive disability benefits under the Civil Service Retirement System (“CSRS”), then the Applicable Governmental Agency is the U.S. Office of Personnel Management or the agency charged with responsibility for administering CSRS benefits at that time if other than the Office of Personnel Management; or (iii) if the stockholder did not pay Social Security taxes and, therefore, could not be eligible to receive Social Security benefits but suffered a disability that resulted in the stockholder’s discharge from military service under conditions that were other than dishonorable


and, therefore, could be eligible to receive military disability benefits, then the Applicable Governmental Agency is the Department of Veterans Affairs or the agency charged with the responsibility for administering military disability benefits at that time if other than the Department of Veterans Affairs.
Disability determinations by governmental agencies for purposes other than those listed above, including but not limited to worker’s compensation insurance, administration or enforcement of the Rehabilitation Act or Americans with Disabilities Act, or waiver of insurance premiums will not entitle a stockholder to the redemption terms available for a Qualifying Disability under this SRP. Redemption requests following an award by the applicable governmental agency of disability benefits must be accompanied by: (1) the investor’s initial application for disability benefits and (2) a Social Security Administration Notice of Award, a U.S. Office of Personnel Management determination of disability under CSRS, a Department of Veterans Affairs record of disability-related discharge or such other documentation issued by the Applicable Governmental Agency that the Company deems acceptable and that demonstrates an award of the disability benefits.
As the following disabilities do not entitle a worker to Social Security disability benefits, they do not qualify a stockholder for the redemption terms available for a Qualifying Disability under this SRP, except in the limited circumstances when the stockholder is awarded disability benefits by the other Applicable Governmental Agencies described above:
(a)disabilities occurring after the legal retirement age; and
(b)disabilities that do not render a worker incapable of performing substantial gainful activity.
8.Determination of Incompetence. In order for a determination of incompetence or incapacitation to entitle a stockholder to the redemption terms available for a “Determination of Incompetence” under this SRP, a state or federal court located in the United States (a “U.S. Court”) must declare, determine or find the stockholder to be (i) mentally incompetent to enter into a contract, to prepare a will or to make medical decisions or (ii) mentally incapacitated, in both cases such determination must be made by a U.S. Court after the date the stockholder acquired the Shares to be redeemed.
A determination of incompetence or incapacitation by any person or entity other than a U.S. Court, or for any purpose other than those listed above, will not entitle a stockholder to the redemption terms available for a Determination of Incompetence under this SRP. Redemption requests following a Determination of Incompetence by a U.S. Court must be accompanied by the court order, determination or the certificate of the court declaring the stockholder incompetent or incapacitated.
9.Termination, Suspension or Amendment of the SRP by the Company. The Company may (a) amend, suspend or terminate the SRP for any reason or (b) increase or decrease the funding available for the redemption of Shares pursuant to paragraph 4(a) hereof, each upon ten business days’ notice to the Company’s stockholders. The Company may provide notice by including such information (i) in a Current Report on Form 8-K or in its annual or


quarterly reports, all publicly filed with the Securities and Exchange Commission or (ii) in a separate mailing to the stockholders.
The SRP provides Qualifying Stockholders a limited ability to redeem Shares for cash until a secondary market develops for the Shares. If and when such a secondary market develops, the SRP will terminate.
10.Notice of Redemption Requests. Qualifying Stockholders who desire to redeem their Shares must provide written notice to the Company on the form provided by the Company.
11.Liability of the Company. The Company shall not be liable for any act done in good faith or for any good faith omission to act.
12.Governing Law. The SRP shall be governed by the laws of the State of Maryland.