KBS Strategic Opportunity REIT, Inc. (Form: 8-K, Received: 12/15/2016 06:04:14)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 8, 2016

KBS STRATEGIC OPPORTUNITY REIT, INC.

(Exact name of registrant specified in its charter)

______________________________________________________



Maryland	000-54382	26-3842535
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(IRS Employer Identification No.)

800 Newport Center Drive, Suite 700

Newport Beach, California 92660

(Address of principal executive offices)

Registrant's telephone number, including area code: (949) 417-6500

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 7.01 REGULATION FD DISCLOSURE

Information for KBS Strategic Opportunity REIT, Inc.’s (the “Company”) stockholders regarding its estimated value per share and other portfolio information is attached as Exhibit 99.3 to this Current Report on Form 8-K.

The information in this Item 7.01 of Form 8-K and the attached Exhibit 99.3 are furnished to the Securities and Exchange Commission (“SEC”), and shall not be deemed to be “filed” with the SEC for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act regardless of any general incorporation language in such filing.

ITEM 8.01 OTHER EVENTS

Estimated Value Per Share

On December 8, 2016, the Company’s board of directors approved an estimated value per share of the Company’s common stock of $14.81 based on the estimated value of the Company’s assets less the estimated value of the Company’s liabilities, or net asset value, divided by the number of shares outstanding as of September 30, 2016. There have been no material changes between September 30, 2016 and the date of this filing to the net values of the Company’s assets and liabilities that impacted the overall estimated value per share. The Company is providing this estimated value per share to assist broker-dealers that participated in the Company’s initial public offering in meeting their customer account statement reporting obligations under National Association of Securities Dealers Conduct Rule 2340 as required by the Financial Industry Regulatory Authority (“FINRA”). This valuation was performed in accordance with the provisions of and also to comply with Practice Guideline 2013–01, Valuations of Publicly Registered Non-Listed REITs, issued by the Investment Program Association (“IPA”) in April 2013.

The Company’s conflicts committee, composed of all of the Company’s independent directors, is responsible for the oversight of the valuation process, including the review and approval of the valuation process and methodologies used to determine the Company’s estimated value per share, the consistency of the valuation and appraisal methodologies with real estate industry standards and practices and the reasonableness of the assumptions used in the valuations and appraisals. The estimated value per share was based upon the recommendation and valuation prepared by KBS Capital Advisors LLC (the “Advisor”), the Company’s external advisor. The Advisor’s valuation of the Company’s consolidated investments in real estate properties and one of its unconsolidated joint venture investments in real estate properties was based (i) on appraisals of such investments performed by third-party valuation firms and (ii) in the case of one office property, the appraised value of the property reduced by valuation information provided by the Advisor related to the marketing of the property subsequent to the appraisal date. With the exception of the Company’s investments in undeveloped land, appraisals on all of the Company’s consolidated investments in real properties and one of its unconsolidated investments in real estate properties were performed by Duff & Phelps, LLC (“Duff & Phelps”). Appraisals of the Company’s investments in undeveloped land were performed by Landauer Services, LLC (“Landauer”), a division of Newmark Grubb Knight Frank. Duff & Phelps and Landauer, each an independent third-party valuation firm, also prepared appraisal reports, summarizing key inputs and assumptions, for each of the real estate properties they respectively appraised. The Advisor also performed valuations with respect to the Company’s real estate-related investment, one of its unconsolidated joint ventures, cash, other assets, mortgage debt and other liabilities. The methodologies and assumptions used to determine the estimated value of the Company’s assets and the estimated value of the Company’s liabilities are described further below.

The Advisor used the appraised values of the Company’s real estate properties and in the case of one of the Company's office properties, the appraised value of the property reduced by valuation information provided by the Advisor related to the marketing of the property subsequent to the appraisal date, together with the Advisor’s estimated value of each of the Company’s other assets and liabilities, to calculate and recommend an estimated value per share of the Company’s common stock. Upon (i) the conflicts committee’s receipt and review of the Advisor’s valuation report, including the Advisor’s summary of the appraisal reports prepared by Duff & Phelps and Landauer and the Advisor’s estimated value of each of the Company’s other assets and the Company’s liabilities, (ii) the conflicts committee’s review of the reasonableness of the Company’s estimated value per share resulting from the Advisor’s valuation process, and (iii) in light of other factors considered by the conflicts committee and the conflicts committee’s own extensive knowledge of the Company’s assets and liabilities, the conflicts committee concluded that the estimated value per share proposed by the Advisor was reasonable and recommended to the board of directors that it adopt $14.81 as the estimated value per share of the Company’s common stock. At the special meeting of the board of directors, the board of directors unanimously agreed to accept the recommendation of the conflicts committee and approved $14.81 as the estimated value of the Company’s common stock, which determination is ultimately and solely the responsibility of the board of directors.

The table below sets forth the calculation of the Company’s estimated value per share as of December 8, 2016, as well as the calculation of the Company’s prior estimated value per share as of December 8, 2015:



	December 8, 2016 Estimated Value per Share			December 8, 2015 Estimated Value per Share ⁽¹⁾			Change in Estimated Value per Share
Real estate properties ⁽²⁾	$	28.85		$	21.97		$	6.88
Real estate loan receivable	—			0.47			(0.47		)
Cash	0.73			0.43			0.30
Investments in unconsolidated joint ventures ⁽³⁾	2.76			2.38			0.38
Other assets	0.52			0.20			0.32
Mortgage debt ⁽⁴⁾	(12.12		)	(9.40		)	(2.72		)
Series A Debentures ⁽⁵⁾	(4.39		)	—			(4.39		)
Advisor participation fee potential liability	(0.50		)	(0.33		)	(0.17		)
Other liabilities	(0.58		)	(0.46		)	(0.12		)
Non-controlling interest ⁽⁶⁾	(0.46		)	(1.82		)	1.36
Estimated value per share	$	14.81		$	13.44		$	1.37
Estimated enterprise value premium	None assumed			None assumed			None assumed
Total estimated value per share	$	14.81		$	13.44		$	1.37

_____________________

⁽¹⁾ The December 8, 2015 estimated value per share was based upon the recommendation and valuation of our Advisor. The Company engaged Duff & Phelps and Landauer, to provide appraisals of the Company’s real estate properties and our Advisor performed valuations of our real estate-related investment, cash, other assets, mortgage debt and other liabilities. For more information relating to the December 8, 2015 estimated value per share and the assumptions and methodologies used by Duff & Phelps, Landauer and our advisor, see the Company’s Current Report on Form 8-K filed with the SEC on December 10, 2015.

⁽²⁾ The increase in the estimated value of real estate properties was due to acquisitions of real estate and increases in fair values of the Company’s real estate properties.

⁽³⁾ The increase in the estimated value of investments in unconsolidated joint ventures was primarily due to an increase in fair value of an investment in an unconsolidated joint venture which was attributable to an increase in fair value of the joint venture’s real estate investment.

⁽⁴⁾ The increase in mortgage debt was primarily due to additional borrowings to fund acquisitions of real estate and capital expenditures on real estate.

⁽⁵⁾ Amount relates to Series A Debentures issued in Israel on March 8, 2016.

⁽⁶⁾ The decrease in non-controlling interest is related to the Company’s acquisitions of its joint venture partners' membership interests in the Park Highlands I and Park Highlands II joint ventures.

The increase in the Company’s estimated value per share from the previous estimate was primarily due to the items noted below, which reflect the significant contributors to the increase in the estimated value per share from $13.44 to $14.81. The changes are not equal to the change in values of each real each asset and liability group presented in the table above due to real estate property acquisitions, debt financings and other factors, which caused the value of certain asset or liability groups to change with no impact to the Company’s fair value of equity or the overall estimated value per share.



	Change in Estimated Value per Share
December 8, 2015 estimated value per share	$	13.44
Changes to estimated value per share
Real estate
Real estate	1.24
Investments in unconsolidated joint ventures	0.25
Capital expenditures on real estate	(0.63		)
Total change related to real estate	0.86
Operating cash flows in excess of quarterly distributions declared	0.16
Acquisition and financing costs	(0.30		)
Acquisition of minority interest in consolidated joint ventures	0.73
Advisor participation fee potential liability	(0.16		)
Other changes	0.08
Total change in estimated value per share	$	1.37
December 8, 2016 estimated value per share	$	14.81

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, and these differences could be significant. The 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 U.S. generally accepted accounting principles (“GAAP”), nor does it represent a liquidation value of the Company’s assets and liabilities or the price at which the Company’s shares of common stock would trade at on a national securities exchange. The 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. The estimated value per share also does not take into account estimated disposition costs and fees for real estate properties that are not held for sale, debt prepayment penalties that could apply upon the prepayment of certain of the Company’s debt obligations or the impact of restrictions on the assumption of debt. The estimated value per share does consider any participation or incentive fees that would be due to the Advisor based on the aggregate net asset value of the Company and that would be payable in a hypothetical liquidation of the Company as of the valuation date in accordance with the terms of the Company’s advisory agreement. As of December 8, 2016, the Company had no potentially dilutive securities outstanding that would impact the estimated value per share of the Company’s common stock.

The Company’s 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 the Company and the 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 the Company’s assets and liabilities:

Independent Valuation Firm

Duff & Phelps ⁽¹⁾ was selected by the Advisor and approved by the Company’s conflicts committee to appraise all of the Company’s consolidated investments in real estate properties and 110 William Street (defined below) but excluding the Company’s investments in undeveloped land. Landauer ⁽²⁾ was selected by the Advisor and approved by the Company’s conflicts committee to appraise the Company’s three investments in undeveloped land. Duff & Phelps and Landauer are engaged in the business of appraising commercial real estate properties and are not affiliated with the Company or the Advisor. The compensation the Company pays to Duff & Phelps and Landauer is based on the scope of work and not on the appraised values of the Company’s real estate 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. In preparing their appraisal reports, Duff & Phelps and Landauer did not, and were not requested to, solicit third-party indications of interest for the Company’s common stock in connection with possible purchases thereof or the acquisition of all or any part of the Company.

Duff & Phelps and Landauer collected all reasonably available material information that each deemed relevant in appraising the Company’s real estate properties. Duff & Phelps relied in part on property-level information provided by the Advisor, including (i) property historical and projected operating revenues and expenses; (ii) property lease agreements; and (iii) information regarding recent or planned capital expenditures. Landauer was provided with land surveys and development plans and relied in part on such information.

_____________________

⁽¹⁾ Duff & Phelps is actively engaged in the business of appraising commercial real estate properties similar to those owned by the Company in connection with public securities offerings, private placements, business combinations and similar transactions. The Company engaged Duff & Phelps to deliver an appraisal report relating to all of the Company’s consolidated investments in real estate properties, with the exception of the Company’s investments in undeveloped land, and Duff & Phelps received fees upon the delivery of such report. In addition, the Company has agreed to indemnify Duff & Phelps against certain liabilities arising out of this engagement. In the three years prior to the date of this filing, Duff & Phelps and its affiliates have provided a number of commercial real estate, appraisal and valuation services for the Company and/or its affiliates and have received fees in connection with such services. Duff & Phelps and its affiliates may from time to time in the future perform other commercial real estate, appraisal and valuation services for the Company and its 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 Duff & Phelps appraiser as certified in the applicable appraisal reports.

⁽²⁾ Landauer is actively engaged in the business of appraising commercial real estate properties similar to those owned by the Company in connection with public securities offerings, private placements, business combinations and similar transactions. The Company engaged Landauer to deliver appraisal reports relating to certain of the Company’s investments in undeveloped land and Landauer received fees upon the delivery of such reports. In addition, the Company has agreed to indemnify Landauer against certain liabilities arising out of this engagement. Landauer is an affiliate of Newmark Grubb Knight Frank, 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. Landauer and its affiliates may from time to time in the future perform other commercial real estate, appraisal, valuation and financial advisory services for the Company and its 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 Landauer appraiser as certified in the applicable appraisal reports.

In conducting their investigation and analyses, Duff & Phelps and Landauer took into account customary and accepted financial and commercial procedures and considerations as they deemed relevant. Although Duff & Phelps and Landauer reviewed information supplied or otherwise made available by the Company or the Advisor for reasonableness, they assumed and relied upon the accuracy and completeness of all such information and of all information supplied or otherwise made available to them 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 Duff & Phelps and Landauer, Duff & Phelps and Landauer 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 the Company’s management, board of directors and/or the Advisor. Duff & Phelps and Landauer relied on the Company to advise them promptly if any information previously provided became inaccurate or was required to be updated during the period of their review.

In performing their analyses, Duff & Phelps and Landauer 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 their control and the Company’s control, as well as certain factual matters. For example, unless specifically informed to the contrary, Duff & Phelps and Landauer assumed that the Company has clear and marketable title to each real estate property appraised, that no title defects exist, that any improvements were made in accordance with law, that no hazardous materials are present or were present previously, that no deed restrictions exist, and that no changes to zoning ordinances or regulations governing use, density or shape are pending or being considered. Furthermore, Duff & Phelps’ and Landauer’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 Duff & Phelps’ and Landauer’s analyses and conclusions. Duff & Phelps’ and Landauer’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 Company’s real estate properties may actually be sold could differ from Duff & Phelps’ and Landauer’s analyses.

Although Duff & Phelps and Landauer considered any comments received from the Company or the Advisor to their appraisal reports, the final appraised values of the Company’s real estate properties (with the exception of one office property that was actively being marketed for sale) were determined by Duff & Phelps and Landauer. The appraisal reports for the Company’s real estate properties are addressed solely to the Company to assist the Advisor in calculating and recommending an updated estimated value per share of the Company’s 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 the Company’s common stock and do not constitute a recommendation to any person to purchase or sell any shares of the Company’s common stock. In preparing their appraisal reports, Duff & Phelps and Landauer did not solicit third-party indications of interest for the Company’s real estate properties. While Duff & Phelps and Landauer are responsible for providing appraisals for the Company, Duff & Phelps and Landauer are not responsible for, did not calculate, and did not participate in the determination of the estimated value per share of the Company’s common stock.

The foregoing is a summary of the standard assumptions, qualifications and limitations that generally apply to Duff & Phelps’ and Landauer’s appraisal reports. All of the Duff & Phelps and Landauer appraisal reports, including the analysis, 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

Duff & Phelps and Landauer (in the case of the Company’s ownership of undeveloped land) appraised each of the Company’s real estate properties. Duff & Phelps and Landauer used various methodologies, as appropriate, such as the direct capitalization approach, discounted cash flow analyses and sales comparison approach. Duff & Phelps relied primarily on 10-year discounted cash flow analyses for the final valuations of each of the real estate properties (which exclude undeveloped land) and Landauer relied primarily on the sales comparison approach for the final valuations of the undeveloped land that it appraised. Duff & Phelps calculated the discounted cash flow value of the Company’s real estate properties (which exclude undeveloped land) using property-level cash flow estimates, terminal capitalization rates and discount rates that fall within ranges they believe would be used by similar investors to value the properties the Company owns based on recent comparable market transactions adjusted for unique property and market-specific factors. Landauer relied primarily on the sales comparison approach and estimated the value of the undeveloped land based on the most applicable recent comparable market transactions.

As of September 30, 2016, the Company owned 20 real estate assets (consisting of 11 office properties, one office campus consisting of nine office buildings and 18 acres of undeveloped land, one office portfolio consisting of four office buildings and 25 acres of undeveloped land, one office portfolio consisting of three office properties, one office/flex/industrial portfolio consisting of 21 buildings, one retail property, two apartment properties and two investments in undeveloped land encompassing an aggregate of 1,670 acres). As of September 30, 2016, the total appraised value of the Company’s consolidated real estate properties, excluding one office property discussed below, as provided by Duff & Phelps and Landauer using the appraisal methods described above was $1,570.9 million. In the case of one office property, the estimated value of $75.0 million was based upon the appraised value of the property reduced by valuation information provided by the Advisor related to the marketing of the property subsequent to the appraisal date. Based on the appraisal and valuation methodologies described above, the total estimated value of the Company’s consolidated real estate properties was $1,645.9 million. The total cost basis of these properties as of September 30, 2016 was $1,324.6 million. This amount includes the acquisition cost of $1,136.3 million, $38.0 million for the acquisition of minority interests in joint ventures, $133.1 million in capital expenditures, leasing commissions and tenant improvements since inception and including $17.3 million of acquisition fees and expenses as well as foreclosure costs. The total estimated real estate value as of September 30, 2016 compared to the total acquisition cost of the Company’s real estate properties plus subsequent capital improvements through September 30, 2016 results in an overall increase in the real estate value of approximately 24.2%. The following summarizes the key assumptions that were used in the discounted cash flow models used to arrive at the appraised real estate property values and sales comparison range of values used to arrive at the appraised values for undeveloped land:



	Range in Values	Weighted-Average Basis
Consolidated Investments in Real Estate Properties (Excluding Undeveloped Land)
Terminal capitalization rate	4.00% to 7.50%	6.65%
Discount rate	5.00% to 9.25%	8.05%
Net operating income compounded annual growth rate ⁽¹⁾	-0.84% to 14.44%	5.64%

Undeveloped Land
Price per acre ^{(2) (3)}	$96,963 to $774,918	$110,617

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⁽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 hold period) net of expenses over the holding 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.

⁽²⁾ The weighted-average price per acre was primarily driven by the Company’s two investments in undeveloped land encompassing an aggregate of 1,670 acres located in North Las Vegas, Nevada. The weighted-average price per acre for these two investments in undeveloped land was approximately $100,000.

⁽³⁾ Excludes the residential entitlements acquired in conjunction with a real estate property acquisition. The residential entitlements permit construction of a 20-story multi-family building on undeveloped land and on top of an existing parking garage. The appraised value of the residential entitlements was $4.7 million.

While the Company believes that Duff & Phelps’ and Landauer’s assumptions and inputs are reasonable, a change in these assumptions and inputs would significantly impact the calculation of the appraised value of the Company’s real estate properties and, thus, its estimated value per share. As of September 30, 2016, certain of our real estate assets have non-stabilized occupancies. Appraisals may provide a sense of the value of the investment, but any appraisal of the property will be based on numerous estimates, judgments and assumptions that significantly affect the appraised value of the underlying property. An appraisal of a non-stabilized property, in particular, involves a high degree of subjectivity due to high vacancy levels and uncertainties with respect to future market rental rates and timing of lease-up and stabilization. Accordingly, different assumptions may materially change the appraised value of the property. The table below illustrates the impact on the estimated value per share if the terminal capitalization rates or discount rates were adjusted by 25 basis points, and assuming all other factors remain unchanged, with respect to the real estate properties referenced in the table above (excluding undeveloped land). Additionally, the table below illustrates the impact on the estimated value per share if the terminal capitalization rates or discount rates were adjusted by 5% in accordance with the IPA guidance:



	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	$	0.49	$	(0.46	)	$	0.70	$	(0.63	)
Discount rates	0.39		(0.38		)	0.65		(0.62		)

The table below illustrates the impact on the estimated value per share if the price per acre of the investments in undeveloped land was adjusted by 5%:



	Increase (Decrease) on the Estimated Value per Share due to
	Decrease of 5%			Increase of 5%
Price per acre	$	(0.14	)	$	0.14

Investments in Unconsolidated Joint Ventures

As of September 30, 2016, the Company held two investments in unconsolidated joint ventures. One of the investments in unconsolidated joint ventures represents a 60% interest in a joint venture which owns an office property containing 928,157 rentable square feet (“110 William Street”). The appraised value of 110 William Street as provided by Duff & Phelps was $434.9 million. The Advisor relied on the appraised value provided by Duff & Phelps along with the fair value of other assets and liabilities as determined by the Advisor, and then calculated the amount that the Company would receive in a hypothetical liquidation of the real estate at the appraised value and the other assets and liabilities at their fair values based on the profit participation thresholds contained in the joint venture agreement. The resulting amount was the fair value assigned to the Company’s 60% interest in this unconsolidated joint venture. As of September 30, 2016, the carrying value and estimated fair value of the Company’s investment in this unconsolidated joint venture were $70.8 million and $151.2 million, respectively.

Duff & Phelps relied on a 10-year discounted cash flow analyses for the final valuation of 110 William Street. The terminal capitalization rate, discount rate and CAGR used in the discounted cash flow model to arrive at the appraised value was 6.25%, 7.25% and 9.7%, respectively. The table below illustrates the impact on the estimated value per share if the terminal capitalization rates or discount rates were adjusted by 25 basis points, and assuming all other factors remain unchanged, with respect to 110 William Street. Additionally, the table below illustrates the impact on the estimated value per share if the terminal capitalization rates or discount rates were adjusted by 5% in accordance with the IPA guidance:



	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	$	0.09	$	(0.08	)	$	0.11	$	(0.10	)
Discount rates	0.06		(0.06		)	0.09		(0.09		)

The Company’s other unconsolidated joint venture investment represents an interest of less than 5% in a joint venture which owns 21 industrial properties and a master lease with respect to another industrial property encompassing 10.8 million square feet, and was valued by the Advisor using a discounted cash flow analysis of the expected distributions to the Company. The cash flow estimates used in the analysis were based on the Company’s participation interest in the estimated cash flows available after paying debt service through ultimate liquidation of the joint venture as described in the joint venture agreement. The cash flow estimates of the joint venture were reviewed by the Advisor. As of September 30, 2016, the carrying value and estimated fair value of the Company’s investment in this unconsolidated joint venture were $5.3 million and $6.1 million, respectively. The estimated value of the Company’s investment in this unconsolidated joint venture for purposes of the Company’s estimated value per share was calculated by applying an 8.5% discount rate to the estimated cash flows for a total value of $0.11 per share. Assuming all other factors remain unchanged, a decrease or increase in the discount rates of 25 basis points would have no impact on the estimated value per share. Additionally, a 5% decrease or increase in the discount rates would have no impact on the estimated value per share.

The estimated values of the Company’s notes payable are equal to the GAAP fair values disclosed in the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2016, but do not equal the book value of the loans in accordance with GAAP. The estimated values of the Company’s notes payable were determined using a discounted cash flow analysis. The cash flows were based on the remaining loan terms, including extensions the Company expects 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, 2016, the GAAP fair value and carrying value of the Company’s notes payable were $941.6 million and $936.3 million, respectively. The weighted-average discount rate applied to the future estimated debt payments, which have a weighted-average remaining term of 2.8 years, was approximately 3.58%. The table below illustrates the impact on the Company’s estimated value per share if the discount rates were adjusted by 25 basis points, and assuming all other factors remain unchanged, with respect to the Company’s 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 guidance:



	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	$	(0.03	)	$	0.03	$	(0.02	)	$	0.02

The Company's Series A Debentures are publicly traded on the Tel-Aviv Stock Exchange. The estimated value of the Company’s Series A Debentures is based on the quoted price on the Tel-Aviv Stock Exchange and foreign currency exchange rates as of September 30, 2016. As of September 30, 2016, the fair value and GAAP carrying value of the Company's Series A debentures were $250.2 million.

Non-controlling Interest

The Company has an ownership interest in four consolidated joint ventures as of September 30, 2016. As the Company consolidates these joint ventures, the entire amount of the underlying assets and liabilities are reflected at their fair values in the corresponding line items of the estimated value per share calculation. As a result, the Company also must consider the fair value of any non-controlling interest liability as of September 30, 2016. In determining this fair value, the Company considered the various profit participation thresholds in each of the joint ventures that must be measured in determining the fair value of the Company’s non-controlling interest liability. The Company used the real estate appraisals provided by Duff & Phelps and Landauer and calculated the amount that the joint venture partners would receive in a hypothetical liquidation of the underlying real estate properties (including all current assets and liabilities) at their current appraised values and the payoff of any related debt at its fair value, based on the profit participation thresholds contained in the joint venture agreements. The estimated payment to the joint venture partners was then reflected as the non-controlling interest liability in the Company’s calculation of its estimated value per share.

Participation Fee Potential Liability Calculation

In accordance with the advisory agreement, the Advisor is due a participation fee if after the Company’s stockholders have received, together as a collective group, aggregate distributions (including distributions that may constitute a return of capital for federal income tax purposes) sufficient to provide (i) a return of their net invested capital, or the amount calculated by multiplying the total number of shares purchased by stockholders by the issue price, reduced by any amounts to repurchase shares pursuant to the Company’s share redemption program, and (ii) a 7.0% per year cumulative, noncompounded return on such net invested capital, the Advisor is entitled to receive 15.0% of the Company’s net cash flows, whether from continuing operations, net sale proceeds or otherwise. Net sales proceeds means the net cash proceeds realized by us after deduction of all expenses incurred in connection with a sale, including disposition fees paid to the Advisor. The 7.0% per year cumulative, noncompounded return on net invested capital is calculated on a daily basis. In making this calculation, the net invested capital is reduced to the extent distributions in excess of a cumulative, noncompounded, annual return of 7.0% are paid (from whatever source), except to the extent such distributions would be required to supplement prior distributions paid in order to achieve a cumulative, noncompounded, annual return of 7.0% (invested capital is only reduced as described in this sentence; it is not reduced simply because a distribution constitutes a return of capital for federal income tax purposes). The 7.0% per year cumulative, noncompounded return is not based on the return provided to any individual stockholder. Accordingly, it is not necessary for each of the Company’s stockholders to have received any minimum return in order for the Advisor to participate in the Company’s net cash flows. In fact, if the Advisor is entitled to participate in the Company’s net cash flows, the returns of the Company’s stockholders will differ, and some may be less than a 7.0% per year cumulative, noncompounded return. This fee is payable only if we are not listed on an exchange. For purposes of determining the estimated value per share, the 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. The Advisor estimated the fair value of this liability to be $28.6 million or $0.50 per share as of the valuation date, and included the impact of this liability in its calculation of the Company’s estimated value per share.

Other Assets and Liabilities

The carrying values of a majority of the Company’s 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, accrued capital expenditures, 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 value of those balances were already considered in the valuation of the related asset or liability. The Advisor has also excluded redeemable common stock as temporary equity does not represent a true liability to the Company and the shares that this amount represents are included in the Company’s total outstanding shares of common stock for purposes of calculating the estimated value per share of the Company’s common stock.

Different parties using different assumptions and estimates could derive a different estimated value per share, and these differences could be significant. 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 and in response to the real estate and finance markets.

Limitations of Estimated Value Per Share

As mentioned above, the Company is providing this estimated value per share to assist broker dealers that participated in the Company’s initial public offering in meeting their customer account statement reporting obligations. This valuation was performed in accordance with the provisions of and also to comply with IPA valuation guidelines.The estimated value per share set forth above will first appear on the December 31, 2016 customer account statements that will be mailed in January 2017. 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. The 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 estimated value per share, the Company can give no assurance that:

a stockholder would be able to resell his or her shares at this estimated value per share;

a stockholder would ultimately realize distributions per share equal to the Company’s estimated value per share upon liquidation of the Company’s assets and settlement of its liabilities or a sale of the Company;

the Company’s 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 the Company’s estimated value per share; or

the methodology used to calculate the Company’s estimated value per share would be acceptable to FINRA or for compliance with ERISA reporting requirements.

Further, the estimated value per share as of December 8, 2016 is 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, as of September 30, 2016. 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 and in response to the real estate and finance markets. The 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. The estimated value per share does not take into account estimated disposition costs and fees for real estate properties that are not held for sale or under contract for sale, debt prepayment penalties that could apply upon the prepayment of certain of the Company’s debt obligations or the impact of restrictions on the assumption of debt. The estimated value per share does consider any participation or incentive fees that would be due to the Advisor based on the aggregate net asset value of the Company which would be payable in a hypothetical liquidation of the Company as of the valuation date in accordance with the terms of the Company’s advisory agreement. The Company currently expects to utilize the Advisor and/or an independent valuation firm to update the estimated value per share no later than December 2017.

Dividend Reinvestment Plan

In accordance with its dividend reinvestment plan, at such time as the Company announces an updated estimated value per share, participants in the dividend reinvestment plan will acquire shares of common stock under the plan at a price equal to the updated estimated value per share of the Company’s common stock. The updated estimated value per share of the Company’s common stock is $14.81, and commencing on the next purchase date, which the Company expects to be in the first quarter of 2017, participants will acquire shares under the dividend reinvestment plan at $14.81 per share.

If a participant wishes to terminate participation in the dividend reinvestment plan effective as of the next purchase date, participants must notify the Company in writing of such decision, and the Company must receive the notice at least four business days prior to the last business day prior to the next purchase date.

Notice of termination should be sent by facsimile to (877) 593-1115 or by mail to:



Regular Mail KBS Strategic Opportunity REIT, Inc. c/o DST Systems, Inc. PO Box 219015 Kansas City, MO 64121-9015	Overnight Address KBS Strategic Opportunity REIT, Inc. c/o DST Systems, Inc. 430 W. 7th Street Kansas City, MO 64105

Share Redemption Program

On December 8, 2016, the Company’s board of directors adopted a tenth amended and restated share redemption program (the “Tenth SRP”). The Tenth SRP provides that, except for redemptions made upon a stockholder’s death, “qualifying disability” or “determination of incompetence” (each as defined in the share redemption program), the price at which the Company will redeem shares is 95% of the Company’s most recent estimated value per share as of the applicable redemption date. Upon the death, “qualifying disability” or “determination of incompetence” of a stockholder, the redemption price will continue to be equal to the Company’s most recent estimated value per share. The Tenth SRP also provides that, to the extent that in the last month of any calendar year (including December 2016) the amount of redemption requests in connection with a stockholder’s death, “qualifying disability or “determination of incompetence” is less than the amount of the $1.0 million reserved for such redemptions under the Tenth SRP, any excess funds may be used to redeem shares not requested in connection with a stockholder’s death, “qualifying disability or “determination of incompetence” during such month. The Tenth SRP will become effective on December 30, 2016. A copy of the full Tenth SRP is filed as Exhibit 99.4 to this Current Report on Form 8-K.

The Company redeems all shares in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence” on the last business day of each month. The Company redeems all other shares on the last business day of the quarter. On December 8, 2016, the Company’s board of directors approved an estimated value per share of the Company’s common stock of $14.81 based on the estimated value of the Company’s assets less the estimated value of the Company’s liabilities, or net asset value, divided by the number of shares outstanding as of September 30, 2016. The redemption prices based on the estimated value per share of $14.81 will be effective for the December 2016 redemption date, which is December 30, 2016. For a stockholder’s shares to be eligible for redemption in a given month or to withdraw a redemption request, the Company must receive a written notice from the stockholder or from an authorized representative of the stockholder in good order and on a form approved by the Company at least five business days before the redemption date, or by December 22, 2016 in the case of the December 30, 2016 redemption date.

Historical Estimated Values per Share

The historical reported estimated values per share of the Company’s common stock approved by the board of directors are set forth below:





Estimated Value per Share	Effective Date of Valuation	Filing with the Securities and Exchange Commission
$13.44	December 8, 2015	Current Report on Form 8-K, filed December 10, 2015
$12.24	December 9, 2014	Current Report on Form 8-K, filed December 11, 2014
$11.27	March 25, 2014	Current Report on Form 8-K, filed March 27, 2014

Forward-Looking Statements

The foregoing includes forward-looking statements within the meaning of the Federal Private Securities Litigation Reform Act of 1995. The Company intends that such forward-looking statements be subject to the safe harbors created by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include statements regarding the intent, belief or current expectations of the Company and members of its 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. Further, forward-looking statements speak only as of the date they are made, and the Company undertakes 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. Actual results may differ materially from those contemplated by such forward-looking statements. The valuation methodology for the Company’s real estate properties assumes the properties realize the projected cash flows and expected exit cap rates and that investors would be willing to invest in such properties at yields equal to the expected discount rates. Though the valuation estimates used in calculating the estimated value per share are Duff & Phelps’, Landauer’s or the Company’s and/or the Advisor’s best estimates as of December 8, 2016, the Company can give no assurance in this regard. These statements also depend on factors such as: future economic, competitive and market conditions; the Company’s ability to maintain occupancy levels and rental rates at its real estate properties; the borrower under the Company’s loan investment continuing to make required payments under the loan documents; the ability of the borrower to maintain occupancy levels and rental rates at the property securing the Company’s real estate-related investment; and other risks identified in Part I, Item IA of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 and subsequent periodic reports, as filed with the SEC. Actual events may cause the value and returns on the Company’s investments to be less than that used for purposes of the Company’s estimated value per share.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS



(d)		Exhibits

Ex.		Description

99.1		Consent of Duff & Phelps, LLC

99.2		Consent of Landauer Services, LLC

99.3		Presentation to Stockholders

99.4		Tenth Amended and Restated Share Redemption Program

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.




	KBS STRATEGIC OPPORTUNITY REIT, INC.

Dated: December 14, 2016	BY:	/s/ Jeffrey K. Waldvogel
		Jeffrey K. Waldvogel
		Chief Financial Officer, Treasurer and Secretary

CONSENT OF INDEPENDENT VALUATION EXPERT

We hereby consent to the reference to our name and description of our role in the valuation process of certain commercial real estate assets of KBS Strategic Opportunity REIT, Inc. (the “Company”) being included or incorporated by reference into the Company’s Registration Statement on Form S-3 (File No. 333-156633) and the related prospectus, included therein, by being filed on a Current Report on Form 8-K, to be filed on the date hereof. In giving this consent, we do not admit that we are within the category of persons whose consent is required by Section 7 of the Securities Act of 1933, as amended.




December 14, 2016	/s/ Duff & Phelps, LLC
	Duff & Phelps, LLC

CONSENT OF INDEPENDENT VALUATION EXPERT




December 14, 2016	/s/ Landauer Services, LLC
	Landauer Services, LLC

KBS Strategic Opportunity REIT Valuation and Portfolio Update December 15, 2016

Forward-Looking Statements The information contained herein should be read in conjunction with, and is qualified by, the information in the KBS Strategic Opportunity REIT, Inc. (“KBS Strategic Opportunity REIT”) Annual Report on Form 10-K for the year ended December 31, 2015, filed with the Securities and Commission Exchange (the “SEC”) on March 28, 2016 (the “Annual Report”), and in KBS Strategic Opportunity REIT’s Quarterly Report on Form 10-Q for the period ended September 30, 2016, filed with the SEC on November 14, 2016, including the “Risk Factors” contained therein. For a full description of the limitations, methodologies and assumptions used to value KBS Strategic Opportunity REIT’s assets and liabilities in connection with the calculation of KBS Strategic Opportunity REIT’s estimated value per share, see KBS Strategic Opportunity REIT’s Current Report on Form 8-K, filed with the SEC on December 15, 2016. Forward-Looking Statements Certain statements contained herein may be deemed to be forward-looking statements within the meaning of the Federal Private Securities Litigation Reform Act of 1995. KBS Strategic Opportunity REIT intends that such forward-looking statements be subject to the safe harbors created by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include statements regarding the intent, belief or current expectations of KBS Strategic Opportunity REIT and members of its 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. Further, forward-looking statements speak only as of the date they are made, and KBS Strategic Opportunity REIT undertakes 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. Actual results may differ materially from those contemplated by such forward-looking statements. The valuation methodology for KBS Strategic Opportunity REIT’s real estate investments assumes that its properties realize the projected cash flows and exit cap rates and that investors would be willing to invest in such properties at cap rates equal to the cap rates used in the valuation. Though the appraisals and valuation estimates used in calculating the estimated value per share are Duff & Phelps and Landauer Services’ best estimates as of September 30, 2016, and/or KBS Strategic Opportunity REIT’s and KBS Capital Advisors LLC’s (“the Advisor”) best estimates as of December 8, 2016, KBS Strategic Opportunity REIT can give no assurance that these estimated values will be realized by KBS Strategic Opportunity REIT. These statements also depend on factors such as future economic, competitive and market conditions, KBS Strategic Opportunity REIT’s ability to maintain occupancy levels and rental rates at its properties, and other risks identified in Part I, Item IA of KBS Strategic Opportunity REIT’s Annual Report on form 10-K for the year ended December 31, 2015, and its subsequent quarterly reports. Actual events may cause the value and returns on KBS Strategic Opportunity REIT’s investments to be less than that used for purposes of KBS Strategic Opportunity REIT’s estimated value per share. 2

Total Acquisitions1: $1,397,658,000 Current Portfolio Cost Basis2: $1,466,957,000 20 Equity Assets December 2016 Estimated Value of Portfolio3: $1,776,963,000 SOR Equity Raised4: $561,749,000 Portfolio Leverage5: 57% Percent Leased as of 9/30/166: 89% Occupancy at Acquisition6: 71% 1 Represents acquisition price (excluding closing costs) of real estate and loans acquired since inception (including investments which have been disposed), adjusted for KBS Strategic Opportunity REIT’s share of consolidated and unconsolidated joint ventures. This total is $1,513,045,000 including our partners’ shares of consolidated and unconsolidated joint ventures. Subsequent to acquisition, KBS Strategic Opportunity REIT foreclosed on or otherwise received title to the properties securing five of its original debt investments, all of which were non-performing loans at the time of acquisition. 2 Represents cost basis, which is acquisition price (net of closing credits and excluding closing costs) plus capital expenditures and acquisitions of minority interests in joint ventures, for real estate in the portfolio as of September 30, 2016, adjusted for KBS Strategic Opportunity REIT’s share of consolidated and unconsolidated joint ventures. This total is $1,588,787,000 including our partners’ shares of consolidated and unconsolidated joint ventures . 3 Value as of September 30, 2016, and is the net total of real estate, investments in unconsolidated JVs and minority interest as shown on page 6. 4 Represents gross offering proceeds from the sale of common stock in the primary portion of KBS Strategic Opportunity REIT’s initial public offering. 5 As of September 30, 2016, KBS Strategic Opportunity REIT’s consolidated borrowings were approximately 57% of the appraised va lue of consolidated properties. 6 For consolidated properties in the portfolio as of September 30, 2016. Portfolio Overview 3

 Estimated value per share2 calculated using information as of September 30, 2016 • Net asset value; no enterprise (portfolio) premium or discount applied • Considered potential participation fee that would be due to the advisor in a hypothetical liquidation if the required shareholder return thresholds are met.  KBS Strategic Opportunity REIT followed the IPA Valuation Guidelines, which included independent third-party appraisals for all of its consolidated properties and one of its two unconsolidated joint venture investments in real estate properties. Duff & Phelps and Landauer Services, LLC were engaged to provide appraisals of the estimated market values of real estate assets. Duff & Phelps provided appraisals of all investments in consolidated real estate properties (excluding undeveloped land) and 110 William Street, and Landauer provided appraisals of all investments in undeveloped land. The appraisals were performed in accordance with the Code of Professional Ethics and Standards of Profession Practice set forth by the Appraisal Institute and the Uniform Standards of Professional Appraisal Practice (USPAP). • The valuation of the Company’s real estate properties were based on (i) on appraisals of such investments performed by third-party valuation firms and (ii) in the case of one office property, the appraised value of the property reduced by valuation information provided by the Advisor related to the marketing of the property subsequent to the appraisal date.  Non-controlling interest liability due to our joint venture partners calculated by assuming a hypothetical liquidation of the underlying real estate properties at their current appraised values and the payoff of any related debt at its fair value, based on the profit participation thresholds contained in the joint venture agreements. 1For more information, see KBS Strategic Opportunity REIT’s Current Report on Form 8-K filed with the SEC on December 15, 2016. 2The estimated value of the REIT’s assets less the estimated value of the REIT’s liabilities, divided by the number of shares outstanding, all as of September 30, 2016. Valuation1 4

1Based on data as of September 30, 2016 2Based on data as of September 30, 2015 3Includes cash and cash equivalents, restricted cash, rents and other receivables, deposits and prepaid expenses as applicable. 4Includes accounts payable, accrued liabilities, security deposits, contingent liabilities and prepaid rent. Valuation1 Estimated Value of Portfolio 5 As of December 20161 As of December 20152 Assets: $1.874 Billion $1.500 Billion Real Estate (i) $1.646 Billion (88%) $1.295 Billion (86%) Investments in Unconsolidated JVs (i) $157.3 Million (8%) $140.4 Million (9%) Real Estate Loan Receivable (i) $27.9 Million (2%) Other Assets3 $71.1 Million (4%) $37.0 Million (3%) Liabilities: $1.003 Billion $601.2 Million Mortgage and Other Debt $941.6 Million $554.2 Million Advisor Incentive Fee Potential Liability $28.6 Million $19.5 Million Other Liabilities4 $32.8 Million $27.5 Million Minority Interest in Consolidated JVs (i) $26.2 Million $107.1 Million Net Equity at Estimated Value $845.1 Million $792.0 Million Estimated Value of Portfolio (before debt) sum of (i) $1.777 Billion $1.356 Billion

Valuation1 On December 8, 2016, KBS Strategic Opportunity REIT’s Board approved an estimated value per share of $14.81.1 The following is a summary of the estimated value per share changes within each asset and liability group. 6 1 Based on the estimated value of KBS Strategic Opportunity REIT’s assets less the estimated value of its liabilities, divided by the number of shares outstanding, all as of September 30, 2016. 2 Operating cash flow reflects adjusted modified funds from operations (“adjusted MFFO”), as disclosed in Forms 10-K and 10-Q filed with the SEC, plus the amortization of deferred financing costs. Change in Estimated Value Per Share December 2015 estimated value per share $13.44 Real Estate Real Estate 1.24 Investments in Unconsolidated JVs 0.25 Capital expenditures on Real Estate (0.63) Subtotal – Real Estate 0.86 Operating Cash Flows in Excess of Quarterly Distributions Declared2 Acquisition and Financing Costs Acquisition of Minority Interest in Consolidated JV’s Advisor Participation Fee Potential Liability Other Changes 0.16 (0.30) 0.73 (0.16) 0.08 Total Change 1.37 December 2016 estimated value per share $14.81

Valuation History 1 This represents the maximum per share offering price at which shares of KBS Strategic Opportunity REIT’s common stock were sold in the primary portion of its initial public offering. The per share offering price was determined arbitrarily and does not represent a valuation of KBS Strategic Opportunity REIT’s assets and/or liabilities during the offering. 2 The estimated value per share is based on the estimated value of the REIT’s assets less the estimated value of the REIT’s liabilities, or net asset value, divided by the number of shares outstanding as of September 30, 2016. For more information, please refer to KBS Strategic Opportunity REIT’s 8-K filed on December 15, 2016. Initial Offering Price: $10.001 Valuation History: – March 25, 2014 $11.27 – December 9, 2014 $12.24 – December 8, 2015 $13.44 – December 8, 20162 $14.81 7

Real Estate Updates 8 Westmoor Center The appraised value increased $13.1 million from prior year appraised value due to the following:  The asset performed well in 2016. The physical occupancy was approximately 83% as of September 30, 2016 compared to 79% as of September 30, 2015.  The REIT signed a long-term lease (128 months) with a tenant for over 100,000 rentable square feet commencing in July 2016. The starting rental rate for this lease is $17.00 psf compared to a projection of $15.50 psf in prior year appraisal.  Vacancy rates in the northwest Denver submarket has improved year-over-year from a vacancy rate of 12.3% in prior year to 10.4% in the current year. Rent growth in the submarket has remained steady at approximately 5% from prior year to current year. Plaza Buildings The appraised value increased $10.6 million from prior year appraised value due to the following:  The property has experienced consistent year-over-year gains as a result of continued improvements throughout the overall market, as well as directly at the property as occupancy has increased from 76% as of September 30, 2015 to 85% as of September 30, 2016.  Both cap and discount rates throughout the overall region have declined.  As a result of market conditions, starting rental rates have increased and general vacancy has decreased. Bellevue Tech Center The appraised value increased $8.1 million from prior year appraised value due to the following: • The property has experienced consistent year-over-year gains as a result of continued improvements throughout the overall market, as well as directly at the property as occupancy has increased from 93% as of September 30, 2015 to 98% as of September 30, 2016. • Both cap and discount rates throughout the overall region have declined. • Strong rent growth resulting from market tightening. Starting rent at the asset is projected to be between $19-24 psf compared $16.50-21.50 psf in the prior year.

2016 Milestones 1. Successfully Issued $250 million AA- Rated Israeli Bond 2. Purchased/committed $357 million for new growth assets with bond proceeds • Westpark Portfolio, Redmond, WA • 353 Sacramento Street, San Francisco • Battery Point Mortgage Portfolio • Park Highlands, Las Vegas, NV (acquisition of non-controlling interests) 3. Growing the portfolio to $1.777 billion 4. Executed agreement for first land sale in Park Highlands (estimated closing February 2017) 5. Achieved NAV growth 6. Filed preliminary S-11 for daily NAV conversion 9

Israeli Bond Offering Description  Bond offering backed by KBS Strategic Opportunity REIT’s assets with the goal of increasing the size of the portfolio through additional acquisitions March 2016 : 2023 Bonds  Amount: NIS 970 million (Approx. $250 million)  Ratings: AA- / AA-  Duration: 7 years (4.4 years weighted average)  Coupon: 4.25% Financial Covenants  Minimum Equity: $475 million  Debt/EBITDA Ratio: <17  Net Debt/CAP: <70%  Minimum EBITDA: $50 million  Interest Payment Deposit: 0.5 years 10

Recent Acquisition Westpark Portfolio Location Redmond, WA Westpark Business Park No. of Buildings 14 two-story office buildings Size 580,104 SF Year Built 1989-1992 % Leased at acquisition 77% Redmond Center Court No. of Buildings 2 industrial buildings Size 77,492 SF Year Built 1987 % Leased at acquisition 100% Pacific Business & Technology Center No. of Buildings 5 flex buildings Size 120,876 SF Year Built 1986-1988 % Leased at acquisition 98% Purchase Price $125.8 Million • 21 Suburban Office/Flex/Industrial buildings, • 778,472 square feet over 41 acres • 82% leased at acquisition • Diverse tenant roster with more than 100 tenants; no one tenant occupies more than 5% of the rentable square feet of the Westpark portfolio • Close proximity to the Microsoft headquarters WESTPARK REDMOND CBD Going In Cap rate: 6.1% Going In Occupancy: 82% 11

• 23-story Class A office tower located adjacent to Embarcadero Center in San Francisco’s Financial District • Protected bay and city views, numerous nearby amenities and is walkable to the Bay Area Rapid Transit terminal (BART) • Encompasses 273,856 square feet of office space and 10,895 square feet of street-level retail 353 Sacramento Purchase price $168.0 Million Location San Francisco, CA Property type Office Floors/Size 23 Floors / 284,751 SF Year built 1982 % Leased at acquisition 85% Going-in cap rate 3.1% Leasing Opportunity Going-in occupancy with known vacates 80% Avg. in-place rent psf $42 Avg. market rent psf $70 Total projected capital expenditures $13.5 million Projected stabilized cap rate 7% New Leasing Tenant #1 (Relocation commencing Oct. 2016) Size 9,117 sf Starting rent $68 psf Term 60 months Tenant #2 (Renewal commencing Oct. 2016) Size 11,023 sf Starting rent $70 psf Term 64 months Recent Acquisition 12

13 Park Highlands Acquisition of Non-Controlling Interests On March 18, 2016, the REIT increased its membership interest in the Park Highlands joint venture from 50.1% to 51.58% by acquiring an additional 1.48% membership interest from one of the joint venture partners, who was also the managing member. On March 18, 2016, the Company increased its membership interest in the Park Highlands II joint venture from 99.5% to 100% by acquiring the remaining 0.5% membership interest from its joint venture partner, who was also the managing member. On June 6, 2016, the Company increased its membership interest in the Park Highlands joint venture from 51.58% to 97.62% by acquiring an additional 46.04% membership interest from one of the joint venture partners. On June 25, 2016, the Company increased its membership interest in the Park Highlands joint venture from 97.62% to 100% by acquiring the remaining 2.38% membership interest from one of the joint venture partners. JV Member Price Paid to Acquire JV Partner Interest JV Partner Interest Liability at Time of Acquisition Discount (Addt'l Owner's Equity) Crescent Bay 741,000$ 12,820,000$ 12,079,000$ Benchmark 34,500,000 63,939,000 29,439,000 Other 2,745,000 2,858,000 113,000 Total 37,986,000$ 79,617,000$ 41,631,000$ Recent Acquisition

14 University House First Mortgage Loan The University House First Mortgage Loan, with an outstanding principal balance of $27.9 million, matured on June 30, 2015 without repayment. On April 21, 2016, the Company assigned the loan to an unrelated third party for total proceeds of $31.6 million, which reflects the outstanding principal balance of $27.9 million, interest and default interest due of $3.6 million and other costs incurred of $0.1 million. Loan Payoff

Estimated Value Changes Since Inception 15

16 Portfolio Occupancy 1 Reflects weighted-average lease percentage as of the acquisition date taking into account all real estate owned as of each respective date. 2 Includes future leases that had been executed, but not yet commenced as of September 30, 2016. 40.00% 45.00% 50.00% 55.00% 60.00% 65.00% 70.00% 75.00% 80.00% 85.00% 90.00% 95.00% 100.00% 3/ 1 /20 1 1 5/ 1 /20 1 1 7/ 1 /20 1 1 9/ 1 /20 1 1 1 1 /1/2 0 1 1 1/ 1 /20 1 2 3/ 1 /20 1 2 5/ 1 /20 1 2 7/ 1 /20 1 2 9/ 1 /20 1 2 1 1 /1/2 0 1 2 1/ 1 /20 1 3 3/ 1 /20 1 3 5/ 1 /20 1 3 7/ 1 /20 1 3 9/ 1 /20 1 3 1 1 /1/2 0 1 3 1/ 1 /20 1 4 3/ 1 /20 1 4 5/ 1 /20 1 4 7/ 1 /20 1 4 9/ 1 /20 1 4 1 1 /1/2 0 1 4 1/ 1 /20 1 5 3/ 1 /20 1 5 5/ 1 /20 1 5 7/ 1 /20 1 5 9/ 1 /20 1 5 1 1 /1/2 0 1 5 1/ 1 /20 1 6 3/ 1 /20 1 6 5/ 1 /20 1 6 7/ 1 /20 1 6 9/ 1 /20 1 6 Occupancy at Acquisition1 vs Actual Leased %2 Delta Actual Leased % Leased % at Acquisition

17 Portfolio Occupancy1 Consolidated Properties in Portfolio at Sept. 30, 2016 and Sept. 30 , 2015 Occupancy at Acquisition Leased% as of Sept 2015 Leased % as of Sept 2016 % Change Since Sept 2015 % Change Since Acquisition Northridge Center (Atlanta, GA) 40% 81.7% 93.9% 12.2% 53.9% Iron Point Business Park (Folsom, CA) 38% 93.7% 97.0% 3.3% 59.0% Richardson Portfolio (Richardson, TX) 49% 87.0% 88.3% 1.3% 39.3% Bellevue Technology Center (Bellevue, WA) 62% 96.9% 98.2% 1.4% 36.2% Powers Ferry Landing (Atlanta, GA) 32% 94.9% 94.9% 0.0% 62.9% 1800 West Loop South (Houston, TX) 76% 88.1% 87.8% -0.3% 11.8% West Loop I & II (Houston, TX) 77% 78.5% 89.0% 10.5% 12.0% Burbank Collection (Burbank, CA) 57% 75.0% 88.5% 13.5% 31.5% Austin Suburban Portfolio (Austin, TX) 75% 83.1% 85.5% 2.4% 10.5% Westmoor Center (Westminster, CO) 81% 81.6% 82.7% 1.2% 1.7% Central Building (Seattle, WA) 82% 93.8% 94.2% 0.4% 12.2% 50 Congress (Boston, MA) 88% 92.7% 96.8% 4.1% 8.8% 1180 Raymond (Newark, NJ) 72% 94.0% 89.0% -5.0% 17.0% Maitland Promenade II (Orlando, FL) 77% 95.5% 93.8% -1.7% 16.8% Plaza Buildings (Bellevue, WA) 81% 81.0% 85.1% 4.0% 4.1% 424 Bedford (Brooklyn, NY) 97% 100.0% 97.0% -3.0% 0.0% Weighted-Average/Total 69% 87.1% 89.4% 2.3% 20.5% Acquisitions from Oct. 1, 2015 to Sept. 30, 2016 Westpark Portfolio (Redmond, WA) 82% N/A 83.4% N/A 1.4% 353 Sacramento (San Francisco, CA) 85% N/A 89.2% N/A 4.2% Weighted-Average/Total 83% N/A 84.9% N/A 2.1% Consolidated Portfolio Weighted-Average/Total 71% 87.1% 88.6% 1.5% 17.1% 1 For consolidated properties, and includes future leases that had been executed, but not yet commenced, as of September 30, 2015, and September 30, 2016, as applicable.

Distribution History1 Record Date Payment Date Amount/Share Reason 12/23/2011 12/28/2011 $0.30 Estimated increase in portfolio value, as supported by completed broker opinions of value (BOVs) 2/14/2012 2/17/2012 $0.02309337 Gain on the sale of 1 Roseville building 4/16/2012 4/30/2012 $0.025 Gain from paying off loan at a discount, disposition of Roseville land and estimated increased value in the portfolio 7/20/2012 7/31/2012 $0.35190663 Estimated increase in portfolio value, as supported by a second round of completed BOVs 3/22/2013 4/4/2013 $0.06153498 Gain from the unsolicited sale of one building in the Richardson Portfolio 11/13/2013 12/5/2013 $0.38 100% of forecasted taxable income for 2013, including gains from the sales of 2 Powers Ferry buildings, the remaining 4 Roseville buildings, and the payoff of Ponte Palmero mortgage loan 3/31/2014 4/15/2014 $0.04931507 Based on Board’s determination of available cash flow; 2.0% Annualized 6/16/2014 6/23/2014 $0.056096 Based on Board’s determination of available cash flow; 2.25% Annualized 9/15/2014 9/24/2014 $0.069315 Based on Board’s determination of available cash flow; 2.75% Annualized 12/15/2014 12/29/2014 $0.088219 Based on Board’s determination of available cash flow; 3.5% Annualized 3/20/2015 3/26/2015 $0.09246575 Based on Board’s determination of available cash flow; 3.75% Annualized 6/18/2015 6/25/2015 $0.09349315 Based on Board’s determination of available cash flow; 3.75% Annualized 9/21/2015 9/28/2015 $0.09452055 Based on Board’s determination of available cash flow; 3.75% Annualized 12/15/2015 12/22/2015 $0.09452055 Based on Board’s determination of available cash flow; 3.75% Annualized 3/22/2016 3/29/2016 $0.09323770 Based on Board’s determination of available cash flow; 3.75% Annualized 6/17/2016 6/22/2016 $0.09323770 Based on Board’s determination of available cash flow; 3.75% Annualized 9/16/2016 9/22/2016 $0.09426230 Based on Board’s determination of available cash flow; 3.75% Annualized 12/8/2016 12/15/2016 $0.09426230 Based on Board’s determination of available cash flow; 3.75% Annualized Total $2.15448005 1 Based on all distributions declared, but not necessarily paid as of December 8, 2016. 18

Stockholder Performance KBS Strategic Opportunity REIT is providing this estimated value per share to assist broker dealers that participated in its initial public offering in meeting their customer account statement reporting obligations. 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. KBS Strategic Opportunity REIT can give no assurance that:  a stockholder would be able to resell his or her shares at this estimated value per share;  a stockholder would ultimately realize distributions per share equal to KBS Strategic Opportunity REIT's estimated value per share upon liquidation or sale of KBS Strategic Opportunity REIT;  KBS Strategic Opportunity REIT's 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 KBS Strategic Opportunity REIT's estimated value per share; or  the methodology used to estimate KBS Strategic Opportunity REIT's value per share would be acceptable to FINRA or for compliance with ERISA reporting requirements. Further, the estimated value per share as of December 8, 2016 is based on the estimated value of KBS Strategic Opportunity REIT's assets less the estimated value of KBS Strategic Opportunity REIT's liabilities, or net asset value, divided by the number of shares outstanding as of September 30, 2016. All of KBS Strategic Opportunity REIT's assets and liabilities were valued as of September 30, 2016. 19

Stockholder Performance Hypothetical Performance of First and Last Investors Assumes all distributions have been taken in cash and stockholder has held shares since the dates below1 (1) Does not reflect the hypothetical performance of investment by stockholders that participated in the dividend reinvestment plan. (2) KBS Strategic Opportunity REIT is providing this estimated value per share to assist broker dealers that participated in its initial public offering in meeting their customer account statement reporting obligations. 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. KBS Strategic Opportunity REIT can give no assurance that:  a stockholder would be able to resell his or her shares at this estimated value per share;  a stockholder would ultimately realize distributions per share equal to KBS Strategic Opportunity REIT's estimated value per share upon liquidation or sale of KBS Strategic Opportunity REIT;  KBS Strategic Opportunity REIT's 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 KBS Strategic Opportunity REIT's estimated value per share; or  the methodology used to estimate KBS Strategic Opportunity REIT's value per share would be acceptable to FINRA or for compliance with ERISA reporting requirements. Further, the estimated value per share as of December 8, 2016 is based on the estimated value of KBS Strategic Opportunity REIT's assets less the estimated value of KBS Strategic Opportunity REIT's liabilities, or net asset value, divided by the number of shares outstanding as of September 30, 2016. All of KBS Strategic Opportunity REIT's assets and liabilities were valued as of September 30, 2016. Estimated Value Per Share as of December 8, 2016 (2) Cumulative Cash Distributions Per Share Received as of December 8, 2016 Sum of Estimated Value Per Share and Cumulative Cash Distributions Per Share Received, as of December 8, 2016 First Investor (Invested at Escrow Break on April 19, 2010): $14.81 $2.06 $16.87 Last Investor (Invested at Close of Public Offering on Nov. 14, 2012): $14.81 $1.36 $16.17 20

$0.44 $0.62 $0.98 $1.36 $11.27 $12.24 $13.44 $14.81 $10.00 $11.71 $12.86 $14.42 $16.17 Offering price Mar-2014 Dec-14 Dec-15 Breakdown of Late Cash Investor Value Cumulative Distributions Estimated Value Per Share $1.14 $1.32 $1.68 $2.06 $11.27 $12.24 $13.44 $14.81 $10.00 $12.41 $13.56 $15.12 $16.87 Offering Price Mar-14 Dec-14 Dec-15 Breakdown of Early Cash Investor Value Cumulative Distributions Estimated Value Per Share Stockholder Performance Hypothetical Performance of Early and Late Investors $10.00 Share Price, All Distributions Received in Cash “Valuation Information” for an early cash investor assumes all distributions received in cash and no share redemptions and reflect the cash payment amounts (all distributions paid since inception) per share for a hypothetical investor who invested on or before escrow break and consequently has received all distributions paid by the REIT. “Cumulative distributions” for an early cash investor and a late cash investor assumes all distributions received in cash and no share redemptions, and reflect the cash payment amounts (all distributions paid since investment) per share for a hypothetical investor who invested on April 19, 2010, and November 14, 2012, respectively. The “offering price” of $10.00 reflects the maximum per share purchase price in the primary initial public offering. 21 Offering Closed Nov. 14, 2012 Offering Closed Nov. 14, 2012 Dec-16 Dec-16

Share Redemption Program On December 8, 2016, the REIT adopted an amended and restated share redemption program: • Shares will be redeemed at 95% of the REIT’s most recent estimated value per share as of the applicable redemption date, except for redemptions made upon a stockholder’s death, “qualifying disability” or “determination of incompetence.” • Upon the death, “qualifying disability” or “determination of incompetence” of a stockholder, the redemption price will continue to be equal to the REIT’s most recent estimated value per share. • The amended share redemption program will be effective for the December 2016 redemption date, which is December 30, 2016. Please see the Valuation 8-K for full details. 22

2017 Goals & Objectives 1) Continue to implement a value-add strategy for remaining and new assets, primarily through lease-up and repositioning 2) Explore value-add opportunities for existing assets, primarily in land holdings, both direct development and added entitlements 3) Refinance upcoming maturities to capitalize on an ever competitive lending environment 4) Distribute available cash to stockholders through growing rents, leasing and refinancing in 2017 5) Strategically sell assets and consider special distributions 6) Explore target liquidity options, including foreign exchanges and daily NAV conversion, while managing continued value creation 23

Shareholder Communication  Statements will reflect new estimated value per share of $14.81 beginning with December 2016 statements.  Shareholder letter will be included with December 2016 statements mailed in early January 2017.  Estimated value per share visible through DST will be updated to show new estimated value.  Expected next NAV date: December 2017 24

For more information, please contact your financial advisor or KBS Capital Markets Group at (866) 527-4264. KBS Capital Markets Group Member FINRA & SIPC 800 Newport Center Drive, Suite 700 Newport Beach, CA 92660 www.kbs-cmg.com Thank you! 25

TENTH AMENDED AND RESTATED SHARE REDEMPTION PROGRAM

Effective as of December 30, 2016

The board of directors of KBS Strategic Opportunity REIT, Inc., a Maryland corporation (the “Company”), has adopted an 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 (a) holders of the Company’s shares of Common Stock (the “Shares”) who have held their Shares for at least one year, provided that, if the Company is redeeming all of a stockholder’s Shares, then there is no holding period requirement for Shares purchased pursuant to the Company’s dividend reinvestment plan and (b) stockholders or authorized representatives of stockholders qualifying for the special redemption provisions set forth in paragraphs 6, 7 and 8 below.

For purposes of determining the time period a redeeming stockholder has held each Share, the time period begins as of the date the stockholder acquired the Share; provided, that Shares purchased by the redeeming stockholder pursuant to the Company’s dividend reinvestment plan will be deemed to have been acquired on the same date as the initial Share to which the dividend reinvestment plan Shares relate. The date of the Share’s original issuance by the Company is not determinative.

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 . Except as stated in paragraph 6 below with respect to redemption requests made upon a stockholder’s death, Qualifying Disability (as defined in paragraph 7 below) or Determination of Incompetence (as defined in paragraph 8 below), the Company will redeem the Shares of a Qualifying Stockholder at a price equal to 95.0% of the Company’s most recent estimated value per Share as of the applicable Ordinary Redemption Date (as defined in paragraph 5 below).

4. Limitations on Redemption . Notwithstanding anything contained in this SRP to the contrary, the Company’s obligation to redeem Shares pursuant to paragraphs 2 and 6 hereof is limited by each of the following:

a. Unless the Shares are being redeemed in connection with a stockholder’s death, Qualifying Disability (as defined in paragraph 7) or Determination of Incompetence (as defined in paragraph 8), the Company may not redeem Shares unless the stockholder has held the shares for one year.

b. During any calendar year, the Company may redeem only the number of Shares that the Company can purchase with the amount of net proceeds from the sale of Shares under the Company’s dividend reinvestment plan during the prior calendar year; provided , however , that this limit may be increased or decreased by the Company upon ten business days’ notice to the Company’s stockholders. The Company’s board of directors may approve an increase in this limit to the extent that the Company has received proceeds from asset sales or the refinancing of debt or for any other reason deemed appropriate by the board of directors. 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. To the extent that the Company redeems less than the number of Shares that the Company can purchase in any calendar year with the amount of net proceeds from the sale of Shares under the Company’s dividend reinvestment plan during the prior calendar year plus any additional funds approved by the Company, such excess capacity to redeem Shares during any calendar year shall be added to the Company’s capacity to otherwise redeem Shares during the subsequent calendar year. Furthermore, during any calendar year, once the Company has received requests for redemptions, whether in connection with a stockholder’s death, Qualifying Disability (as defined in paragraph 7) or Determination of Incompetence (as defined in paragraph 8), or otherwise, that if honored, and when combined with all prior redemptions made during the calendar year, would result in the amount of remaining funds available for the redemption of additional Shares in such calendar year being $1.0 million or less, the last $1.0 million of available funds shall be reserved exclusively for Shares being redeemed in connection with a stockholder’s death, Qualifying Disability (as defined in paragraph 7) or Determination of Incompetence (as defined in paragraph 8). To the extent that, in the last month of any calendar year, the amount of redemption requests in connection with a stockholder’s death, Qualifying Disability or Determination of Incompetence is less than the amount of available funds reserved for such redemptions in accordance with the previous sentence, any excess funds may be used to redeem shares not in connection with a stockholder’s death, Qualifying Disability or Determination of Incompetence during such month.

c. During any fiscal quarter, the Company may redeem no more than $3.0 million of Shares (excluding Shares redeemed in connection with a stockholder’s death, Qualifying Disability or Determination of Incompetence). To the extent that, in a given fiscal quarter, the Company redeems less than the sum of (a) $3.0 million of Shares (excluding Shares redeemed in connection with a stockholder’s death, Qualifying Disability or Determination of Incompetence) and (b) any excess capacity carried over to such fiscal quarter from a prior fiscal quarter as described below, any remaining excess capacity to redeem Shares in such fiscal quarter shall be added to the Company’s capacity to otherwise redeem Shares (excluding Shares redeemed in connection with a stockholder’s death, Qualifying Disability or Determination of Incompetence) during the succeeding fiscal quarter. This limit may be increased or decreased by the Company upon ten business days’ notice to the Company’s stockholders. The Company’s board of directors may approve an increase in this limit to the extent that the Company has received proceeds from asset sales or the refinancing of debt or for any other reason deemed appropriate by the board of

directors. 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. For the avoidance of doubt, any additional funds authorized by the Company’s board of directors pursuant to the terms of a prior version of the SRP and not used for redemptions in prior fiscal quarters shall continue to be available for redemptions in succeeding fiscal quarters under this paragraph 4.

d. 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.

e. 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 in connection with a stockholder’s death, Qualifying Disability or Determination of Incompetence on the last business day of each month (the “Special Redemption Date”). The Company will redeem all other Shares on the last business day of each fiscal quarter (the “Ordinary Redemption Date”). For a stockholder’s Shares to be eligible for redemption in a given month or quarter, as applicable, the program administrator must receive a written redemption request from the stockholder or from an authorized representative of the stockholder setting forth the number of Shares requested to be redeemed at least five business days before the Special Redemption Date or the Ordinary Redemption Date, as applicable. If the Company cannot repurchase all Shares presented for redemption in any month or quarter, as applicable, 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 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 stockholder’s Shares.

If the Company does not completely satisfy a redemption request on a Special Redemption Date or Ordinary Redemption Date, as applicable, because the program administrator did not receive the request in time, because of the limitations on redemption 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 Special Redemption Date or Ordinary Redemption Date, as applicable, on which funds are available for redemption, unless the redemption request is withdrawn. Any 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 Special Redemption Date or Ordinary Redemption Date, as applicable.

6. Special Provision upon a Stockholder’s Death, Qualifying Disability or Determination of Incompetence . The Company will treat redemption requests made upon a

stockholder’s death, Qualifying Disability (as defined in paragraph 7) or Determination of Incompetence (as defined in paragraph 8) differently, as follows:

a. There is no one-year holding requirement.

b. The redemption price per Share will be the Company’s most recent estimated value per Share as of the applicable Special Redemption Date (as defined in paragraph 5 above).

Except as specifically set forth in this paragraph 6, redemptions upon a stockholder’s death, Qualifying Disability (as defined in paragraph 7) or Determination of Incompetence (as defined in paragraph 8) are subject to the same limitations and terms and conditions as other redemptions, including the limitations on redemptions set forth in paragraph 4 and the redemption request procedures set forth in paragraph 5.

7. Qualifying Disability Determinations . In order for a disability to entitle a stockholder to the special redemption terms described in paragraph 6 (a “Qualifying Disability”), (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 special redemption terms described in paragraph 6. 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 for special redemption terms, except in the limited circumstances when the investor 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 special redemption terms described in paragraph 6 (a “Determination of Incompetence”), 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 special redemption terms described in paragraph 6. 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 amend, suspend or terminate the SRP for any reason upon ten business days’ notice to the Company’s stockholders. For the avoidance of doubt, amendments of the SRP may be made effective as of December 30, 2016 if notice of any such amendment is provided to the Company’s stockholders no later than December 15, 2016. 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.

The SRP provides 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.