KBS Real Estate Investment Trust III Inc.
12/23/2024 | Press release | Distributed by Public on 12/23/2024 16:18
Material Agreement Form 8 K
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
Accenture Tower Loan
On November 2, 2020, KBS Real Estate Investment Trust III, Inc. ("KBS REIT III"), through an indirect wholly owned subsidiary (the "Accenture Tower Borrower"), entered into a loan facility with U.S. Bank, National Association, as administrative agent (the "Agent"), joint lead arranger and co-book runner; Bank of America, N.A., as syndication agent, joint lead arranger and co-book runner; and each of the financial institutions signatory thereto as lenders (as amended and modified, the "Accenture Tower Loan"). The current lenders under the Accenture Tower Loan are U.S. Bank, National Association, Bank of America, N.A., Deutsche Pfandbriefbank AG and the National Bank of Kuwait S.A.K.P. Grand Caymans Branch (the "Accenture Tower Lenders"). The Accenture Tower Loan is secured by Accenture Tower (the "Property").
On December 18, 2024, KBS REIT III, through the Accenture Tower Borrower, entered into a third extension agreement with the Accenture Tower Lenders (the "Third Extension Agreement") to extend the maturity date of the Accenture Tower Loan to December 20, 2024. Under the Third Extension Agreement, the Agent and the Accenture Tower Lenders waived the requirement for KBS REIT Properties III, LLC ("REIT Properties III"), KBS REIT III's indirect wholly owned subsidiary, as guarantor, to satisfy the net worth covenant, the leverage ratio covenant and the EBITDA to fixed charges ratio covenant through the extended maturity date of December 20, 2024.
On December 20, 2024, KBS REIT III, through the Accenture Tower Borrower, entered into a fourth modification agreement with the Accenture Tower Lenders (the "Fourth Modification Agreement"). Pursuant to the Fourth Modification Agreement, the Accenture Tower Lenders agreed to extend the maturity date of the Accenture Tower Loan to November 2, 2026, with an additional 12-month extension option available pursuant to the loan agreement, subject to certain terms and conditions contained in the loan documents.
Prior to the Fourth Modification Agreement, the Accenture Tower Loan bore interest at the one-month Secured Overnight Financing Rate ("Term SOFR") plus 235 basis points. Pursuant to the Fourth Modification Agreement, the Accenture Tower Loan bears interest at one-month Term SOFR plus 300 basis points.
As of December 20, 2024, the outstanding principal balance of the Accenture Tower Loan was $306.0 million. The Fourth Modification Agreement converted all of the outstanding indebtedness under the Accenture Tower Loan into non-revolving, term debt and provides that any future funding advanced under the loan will be non-revolving, term debt. Pursuant to the Fourth Modification Agreement, the aggregate commitment under the Accenture Tower Loan was increased to $322.0 million, consisting of the outstanding principal balance of $306.0 million and $16.0 million of new funding ("New Availability") that may be advanced in accordance with, and subject to the terms and conditions of, the Fourth Modification Agreement. Subject to the terms and conditions in the Fourth Modification Agreement, proceeds from the New Availability may be used solely for approved tenant improvements, leasing commissions and capital improvement costs, certain approved monthly operating shortfall amounts at the Property, taxes and insurance attributable to the Property, or other capital expenditures related to the Property, and the New Funding is only available to the extent there are not sufficient funds available from the Cash Sweep Collateral Account (defined below).
The Fourth Modification Agreement provides that 100% of excess cash flow (the "Accenture Tower Excess Cash Flow") from the Property be deposited monthly into a cash collateral account maintained with the Agent in the name of the Accenture Tower Borrower (the "Cash Sweep Collateral Account"). Funds may not be withdrawn from the Cash Sweep Collateral Account without the prior written consent of the Agent. So long as no default exists under the Accenture Tower Loan and subject to the terms and conditions in the Fourth Modification Agreement, the Accenture Tower Borrower will be permitted to withdraw funds from the Cash Sweep Collateral Account for the payment or reimbursement of (i) approved tenant improvements, leasing commissions and capital improvement costs, (ii) monthly operating shortfall amounts at the Property, (iii) taxes and insurance attributable to the Property and (iv) certain other cash flow needs of the Accenture Tower Borrower. Upon the occurrence and during the continuance of a default and on the maturity date, the Agent has the right to withdraw funds from the Cash Sweep Collateral Account and/or other required accounts and apply such funds to any due and payable obligations of the Accenture Tower Borrower. "Accenture Tower Excess Cash Flow" for any calendar month means an amount equal to (i) gross revenues from the Property less (ii) provided that a default does not exist (a) approved operating expenses of the Property, (b) principal and interest paid with respect to the Accenture Tower Loan, and (c) in certain cases, a limited amount of REIT-level general and administrative expenses, Permitted Asset Management Fees, approved tenant improvements, leasing commissions and capital improvement costs and legal fees related to the Accenture Tower Loan.
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The Fourth Modification Agreement restricts the Accenture Tower Borrower, REIT Properties III, KBS Limited Partnership III (the "Operating Partnership") and KBS REIT III from making Restricted Payments (as defined below) without the prior consent of the required Accenture Tower Lenders. Notwithstanding the foregoing, (i) KBS REIT III may pay KBS Capital Advisors LLC (the "Advisor") 90% of the asset management fees associated with the Property ("Permitted Asset Management Fees") (with the remaining 10% of the asset management fees associated with the Property being deferred until the Accenture Tower Borrower has paid in full its obligations under the Accenture Tower Loan) and (ii) the Accenture Tower Borrower may distribute to KBS REIT III certain REIT-level general and administrative expenses allocated to the Property, provided that in each case no such payments may be made without the consent of the required Accenture Tower Lenders during the occurrence and continuance of a noticed default that has not been cured or waived, if the Agent has delivered to the Accenture Tower Borrower a reservation of rights or similar letter relating to a default that has not be waived or if the Agent determines a monthly operating shortfall exists at the Property. Further, provided no event of default exists, REIT Properties III, the Operating Partnership and KBS REIT III may make Restricted Payments as necessary for KBS REIT III to maintain its status as a real estate investment trust for federal income tax purposes and to avoid any liability for federal and state income or excise taxes. "Restricted Payments" include (a) any distribution, dividend or redemption with respect to any equity interests in the Accenture Tower Borrower or the direct or indirect owners of the Accenture Tower Borrower, (b) any payment on account of the purchase, redemption, cancellation or termination of any equity interests in the Accenture Tower Borrower or the direct or indirect owners of the Accenture Tower Borrower or any option, warrant or other right to acquire any equity interest in the Accenture Tower Borrower or any direct or indirect owners of Accenture Tower Borrower, or (c) any other payment by the Accenture Tower Borrower to its direct or indirect owners or any person that controls the Accenture Tower Borrower including, without limitation, the payment of any asset management fees or general or administrative expenses.
The Fourth Modification Agreement requires the Accenture Tower Borrower to maintain a debt service coverage ratio and REIT Properties III, as guarantor, to satisfy the EBITDA to interest charges ratio covenant, subject to certain terms and conditions in the loan documents, commencing with the December 31, 2024 calendar quarter reporting period. Additionally, pursuant to the Fourth Modification Agreement, neither Accenture Tower Borrower nor REIT Properties III may enter into any new swaps.
Additionally, the Fourth Modification Agreement provides that a default will occur under the Accenture Tower Loan (i) if a written demand for payment following a default is delivered to REIT Properties III and not paid when due under (a) any loan facility under which REIT Properties III is a guarantor or borrower or (b) any other indebtedness of REIT Properties III where the demand made is greater than $5.0 million and the required Accenture Tower Lenders elect to call a default or (ii) if any pledge documents are entered into with respect to the membership interests of the Accenture Tower Borrower or its direct owner that are not in compliance with the terms and conditions of the Fourth Modification Agreement.
In connection with the Fourth Modification Agreement, the Accenture Tower Borrower paid the Accenture Tower Lenders a loan modification fee of $995,600, paid the Agent an administrative fee of $100,000 and paid certain legal and other costs of the Agent and the Accenture Tower Lenders. The Accenture Tower Borrower also agreed to pay the Accenture Tower Lenders an exit fee in the amount of $650,000, which is due on the earliest to occur of the maturity date and the repayment of the loan in full.
REIT Properties III is providing a guaranty of (i) payment of, and agrees to protect, defend, indemnify and hold harmless the Agent and the Accenture Tower Lenders for, from and against, any liability, obligation, loss, damage, costs and expenses (including reasonable attorney's fees), and any litigation which may at any time be imposed upon, incurred or suffered by the Agent or Accenture Tower Lenders because of (a) certain intentional acts committed by the Accenture Tower Borrower, (b) fraud or intentional misrepresentations by the Accenture Tower Borrower or REIT Properties III in connection with the loan documents, and (c) certain bankruptcy or insolvency proceedings under state or federal law; (ii) payment for liability related to certain environmental matters; and (iii) full payment of all obligations under the Accenture Tower Loan in the event of (a) certain bankruptcy or insolvency proceedings related to the Accenture Tower Borrower, REIT Properties III, any of their direct or indirect members or the Property, (b) the failure of the Accenture Tower Borrower, its direct owner or REIT Properties III to comply with certain requirements of the Accenture Tower Loan documents or (c) certain bad faith interference or claims by the Accenture Tower Borrower, REIT Properties III or any of their affiliates following a default under the Accenture Tower Loan, the enforcement of rights or remedies under the loan documents or litigation related thereto. In addition, REIT Properties III is providing a principal guaranty of 25% of the outstanding balance of the Accenture Tower Loan, a guaranty of obligations under certain swaps and a guaranty of payment of reasonable fees and expenses of legal counsel in connection with the enforcement of the guaranty.
Amendment to Advisory Agreement
In connection with the Fourth Modification Agreement, on December 20, 2024, KBS REIT III and the Advisor entered into an amendment to the advisory agreement between the parties to defer a portion of the asset management fee associated with the Property as described above.
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