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KBS Launches $1 Billion Online Real Estate Fund Offering

Major CRE Investor Expands Direct-to-Investor Capitalization Model as Online Syndication Seeks Bigger Role in Real Estate Investment
February 26, 2018
The Offices at Greenhouse in Houston is one of four office properties owned by the new KBS fund


Nontraded REIT KBS Growth & Income REIT, which closed its public offering in June 2017 after raising gross proceeds of just $6.7 million, has now turned to private crowdfunding to continue raising investment funds.

KBS Growth & Income REIT launched its initial public offering in April 2016 hoping to raise $1.5 billion in two years. However, the REIT's fundraising efforts were hampered after increased regulatory and federal scrutiny prompted new rules for the non-traded REIT sector, and many investors decided to take a wait-and-see approach, resulting in a sharp plunge in fundraising for the formerly robust sector.

At the same time, the Securities & Exchange Commission opened up a new avenue of fundraising through crowdfunding -- the practice of funding a project or venture by raising smaller amounts of money from a larger number of people, typically via the Internet.

KBS is now offering its new fund, the KBS Growth & Income Fund, through an online marketplace called CrowdStreet and its own direct-to-investor platform at KBSDirect.com, which is powered by CrowdStreet technology. The new real estate fund is an indirect wholly owned subsidiary of KBS Growth & Income REIT.

After beta-testing online fundraising last October through KBSDirect.com, the new fund is the first offering in the Newport Beach, CA-based real estate investment firm's 26-year history in which investors are able to directly buy shares online

"Launching the KBS Growth & Income Fund on the CrowdStreet Marketplace is an important part of our omnichannel marketing strategy to reach registered investment advisors, accredited investors and their financial advisors," said Lew Feldman, president of KBSDirect.com. "It enables us to take advantage of new, proven distribution opportunities, while serving the real estate investment needs of the modern investor."

KBSDirect.com has upped the size of its fundraising target for the fund to $1 billion and is also now offering it on the CrowdStreet Marketplace, potentially opening its fundraising to an even larger pool of investors.

"Commercial real estate investing is going through a dramatic transformation. For individual investors and the trusted advisors who serve them, real estate investing is moving from a fee-laden, high-load broker/dealer environment to one where online platforms support institutional-quality investments and aligned interests among the investor, the advisor and the fund, with lower fees, commissions and administrative costs," said Peter Bren, chairman of KBS Realty Advisors and KBS Capital Advisors.

The KBS Growth & Income REIT currently owns four assets through the fund totaling $197.8 million in gross value:

  • The Offices at Greenhouse, a 203,221-square-foot office building in Houston;
  • The Commonwealth, a 219,742-square-foot office building in Portland;
  • Von Karman Tech Center, a 101,161-square-foot office building in Irvine, CA; and
  • 213 W. Institute, a 157,166-square-foot office property in Chicago.

    "When the 11th largest global owner of office real estate commits to an online direct-to-investor capitalization model, it speaks volumes about the future of online syndication for commercial real estate," said CEO Tore Steen. "The CrowdStreet and KBSDirect.com partnership signifies a massive shift in how commercial real estate will be accessed by investors in the future."

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