10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________________________

FORM 10-Q

______________________________________________________

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 333-207471

______________________________________________________

KBS GROWTH & INCOME REIT, INC.

(Exact Name of Registrant as Specified in Its Charter)

______________________________________________________

Maryland	47-2778257
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
800 Newport Center Drive, Suite 700 Newport Beach, California	92660
(Address of Principal Executive Offices)	(Zip Code)

(949) 417-6500

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x   No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer	o		Accelerated Filer	o
Non-Accelerated Filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	x
			Emerging growth company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x

As of August 3, 2018, there were 9,274,484 outstanding shares of Class A common stock and 290,216 outstanding shares of Class T common stock of KBS Growth & Income REIT, Inc.

INDEX TO FINANCIAL STATEMENTS

KBS GROWTH & INCOME REIT, INC.

FORM 10-Q

June 30, 2018

INDEX

PART I.	FINANCIAL INFORMATION
	Item 1.	Financial Statements	2
		Consolidated Balance Sheets as of June 30, 2018 (unaudited) and December 31, 2017	2
		Consolidated Statements of Operations (unaudited) for the Three and Six Months Ended June 30, 2018 and 2017	3
		Consolidated Statements of Stockholders’ Equity for the Year Ended December 31, 2017 and the Six Months Ended June 30, 2018 (unaudited)	4
		Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2018 and 2017	5
		Condensed Notes to Consolidated Financial Statements as of June 30, 2018 (unaudited)	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36
	Item 4.	Controls and Procedures	36
PART II.	OTHER INFORMATION		37
	Item 1.	Legal Proceedings	37
	Item 1A.	Risk Factors	37
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
	Item 3.	Defaults upon Senior Securities	40
	Item 4.	Mine Safety Disclosures	40
	Item 5.	Other Information	40
	Item 6.	Exhibits	41
SIGNATURES			42

1

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

KBS GROWTH & INCOME REIT, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

	June 30, 2018			December 31, 2017
	(unaudited)
Assets
Real estate:
Land	$	31,309		$	31,309
Building and improvements	142,813			142,400
Tenant origination and absorption costs	16,400			17,047
Total real estate, cost	190,522			190,756
Less accumulated depreciation and amortization	(13,626		)	(9,627		)
Total real estate, net	176,896			181,129
Cash and cash equivalents	5,219			2,523
Rent and other receivables	2,643			1,920
Above-market leases, net	165			180
Prepaid expenses and other assets, net	2,413			1,388
Total assets	$	187,336		$	187,140
Liabilities and stockholders’ equity
Notes payable, net	$	116,682		$	112,780
Accounts payable and accrued liabilities	2,278			2,717
Due to affiliates	2,703			1,787
Distributions payable	410			385
Below-market leases, net	4,652			5,910
Other liabilities	2,559			1,828
Total liabilities	129,284			125,407
Commitments and contingencies (Note 9)
Redeemable common stock	—			2,314
Stockholders’ equity
Preferred stock, $.01 par value; 10,000,000 shares authorized, no shares issued and outstanding	—			—
Class A common stock, $.01 par value per share; 500,000,000 shares authorized, 9,194,944 and 9,149,100 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively	92			91
Class T common stock, $.01 par value per share; 500,000,000 shares authorized, 287,878 shares and 281,537 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively	3			3
Additional paid-in capital	78,145			76,265
Cumulative distributions and net losses	(20,188		)	(16,940		)
Total stockholders’ equity	58,052			59,419
Total liabilities and stockholders’ equity	$	187,336		$	187,140

See accompanying condensed notes to consolidated financial statements.

2

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS GROWTH & INCOME REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share amounts)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
Revenues:
Rental income	$	4,825		$	3,290		$	9,239		$	6,526
Tenant reimbursements	867			877			1,995			1,656
Other operating income	37			20			76			38
Total revenues	5,729			4,187			11,310			8,220
Expenses:
Operating, maintenance, and management	1,336			878			2,205			1,623
Property management fees and expenses to affiliate	42			31			84			60
Real estate taxes and insurance	679			513			1,430			970
Asset management fees to affiliate	462			—			918			214
General and administrative expenses	362			422			755			763
Depreciation and amortization	2,784			1,822			5,093			3,540
Interest expense	797			757			1,768			1,500
Total expenses	6,462			4,423			12,253			8,670
Other income (loss):
Interest and other income	8			18			13			35
Loss from extinguishment of debt	—			(206		)	—			(206		)
Total other income (loss)	8			(188		)	13			(171		)
Net loss	$	(725	)	$	(424	)	$	(930	)	$	(621	)
Class A Common Stock:
Net loss	$	(703	)	$	(406	)	$	(902	)	$	(596	)
Net loss per common share, basic and diluted	$	(0.08	)	$	(0.04	)	$	(0.10	)	$	(0.07	)
Weighted-average number of common shares outstanding basic and diluted	9,096,617			9,076,034			9,095,895			9,020,742
Class T Common Stock:
Net loss	$	(22	)	$	(18	)	$	(28	)	$	(25	)
Net loss per common share, basic and diluted	$	(0.08	)	$	(0.07	)	$	(0.10	)	$	(0.11	)
Weighted-average number of common shares outstanding basic and diluted	286,721			261,613			285,165			214,044

See accompanying condensed notes to consolidated financial statements.

3

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS GROWTH & INCOME REIT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Year Ended December 31, 2017 and the Six Months Ended June 30, 2018 (unaudited)

(dollars in thousands)

	Common Stock								Additional Paid-in Capital			Cumulative Distributions and Net Losses			Total Stockholders’ Equity
	Class A					Class T
	Shares		Amounts			Shares	Amounts
Balance, December 31, 2016	8,846,164		$	88		94,018	$	1	$	71,992		$	(9,451	)	$	62,630
Net loss	—		—			—	—		—			(2,199		)	(2,199		)
Issuance of common stock	380,538		2			185,845	2		5,417			—			5,421
Transfers to redeemable common stock	—		—			—	—		(523		)	—			(523		)
Redemptions of common stock	(145,214	)	—			—	—		(1,210		)	—			(1,210		)
Stock dividends issued	67,612		1			1,674	—		706			(707		)	—
Distributions declared	—		—			—	—		—			(4,583		)	(4,583		)
Commissions on stock sales, related dealer manager fees and stockholder servicing fees to affiliate	—		—			—	—		(103		)	—			(103		)
Other offering costs to affiliate	—		—			—	—		(14		)	—			(14		)
Balance, December 31, 2017	9,149,100		91			281,537	3		76,265			(16,940		)	59,419
Net loss	—		—			—	—		—			(930		)	(930		)
Issuance of common stock	322,916		4			6,341	—		2,891			—			2,895
Transfers from redeemable common stock	—		—			—	—		1,300			—			1,300
Redemptions of common stock	(277,072	)	(3		)	—	—		(2,311		)	—			(2,314		)
Distributions declared	—		—			—	—		—			(2,318		)	(2,318		)
Balance, June 30, 2018	9,194,944		$	92		287,878	$	3	$	78,145		$	(20,188	)	$	58,052

See accompanying condensed notes to consolidated financial statements.

4

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS GROWTH & INCOME REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

	Six Months Ended June 30,
	2018			2017
Cash Flows from Operating Activities:
Net loss	$	(930	)	$	(621	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	5,093			3,540
Deferred rents	(721		)	(315		)
Allowance for doubtful accounts	90			(13		)
Amortization of above and below-market leases, net	(1,243		)	(759		)
Amortization of deferred financing costs	169			253
Unrealized gain on derivative instrument	(811		)	—
Loss from extinguishment of debt	—			206
Changes in operating assets and liabilities:
Rents and other receivables	(112		)	(90		)
Prepaid expenses and other assets	(543		)	62
Accounts payable and accrued liabilities	(203		)	(656		)
Due to affiliates	916			(11		)
Other liabilities	(283		)	8
Net cash provided by operating activities	1,422			1,604
Cash Flows from Investing Activities:
Improvements to real estate	(1,008		)	(310		)
Net cash used in investing activities	(1,008		)	(310		)
Cash Flows from Financing Activities:
Proceeds from notes payable	45,000			1,950
Principal payments on notes payable	(41,000		)	(11,260		)
Payments of deferred financing costs	(6		)	(103		)
Proceeds from issuance of common stock	1,881			2,522
Payments to redeem common stock	(2,314		)	(64		)
Payments of commissions on stock sales, related dealer manager fees to affiliate and other offering costs	—			(137		)
Distributions paid to common stockholders	(1,279		)	(1,065		)
Net cash provided by (used in) financing activities	2,282			(8,157		)
Net increase (decrease) in cash and cash equivalents	2,696			(6,863		)
Cash and cash equivalents, beginning of period	2,523			15,666
Cash and cash equivalents, end of period	$	5,219		$	8,803
Supplemental Disclosure of Cash Flow Information
Interest paid	$	2,362		$	1,245
Supplemental Disclosure of Noncash Investing and Financing Activities:
Stock dividends issued	$	—		$	476
Increase in cash distributions payable	$	25		$	5
Dividends paid to common stockholders through common stock issuances pursuant to the distribution reinvestment plan	$	1,014		$	1,199
Increase in redemptions payable	$	1,014		$	—
Increase in accrued improvements to real estate	$	—		$	914
Write-off of deferred financing costs	$	—		$	(206	)

See accompanying condensed notes to consolidated financial statements.

5

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS GROWTH & INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

1. ORGANIZATION

KBS Growth & Income REIT, Inc. (the “Company”) was formed on January 12, 2015 as a Maryland corporation that elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2015. Substantially all of the Company’s business is conducted through KBS Growth & Income Limited Partnership (the “Operating Partnership”), a Delaware limited partnership formed on January 14, 2015. The Company is the sole general partner of, and owns a 0.1% partnership interest in, the Operating Partnership. KBS Growth & Income REIT Holdings LLC (“REIT Holdings”), a Delaware limited liability company formed on January 14, 2015, owns the remaining 99.9% partnership interest in the Operating Partnership and is the sole limited partner. The Company is the sole member and manager of REIT Holdings.

Subject to certain restrictions and limitations, the business of the Company is externally managed by KBS Capital Advisors LLC (the “Advisor”), an affiliate of the Company, pursuant to an advisory agreement between the Company and the Advisor initially entered into on June 11, 2015, and amended at various times thereafter (the “Advisory Agreement”). The Advisor conducts the Company’s operations and manages its portfolio of core real estate properties. On January 27, 2015, the Company issued 20,000 shares of its common stock to the Advisor at a purchase price of $10.00 per share. On June 11, 2015, these outstanding shares of common stock were designated Class A shares of common stock.

As of June 30, 2018, the Company had invested in four office properties. The Company intends to invest in a diverse portfolio of core real estate properties. The Company considers core properties to be existing properties with at least 80% occupancy. Based on the current market outlook, the Company expects its core focus in the U.S. office sector to reflect a value-creating core strategy, which is also known as a core-plus strategy.

The Company commenced a private placement offering exempt from registration pursuant to Rule 506(b) of Regulation D of the Securities Act of 1933, as amended, on June 11, 2015, pursuant to which the Company offered a maximum of $105,000,000 in shares of its Class A common stock for sale to accredited investors (the “Initial Private Offering”), of which $5,000,000 of Class A shares were offered pursuant to the Company’s distribution reinvestment plan. The Company ceased offering shares in the primary portion of the Initial Private Offering on April 27, 2016 and processed subscriptions for the primary Initial Private Offering dated on or prior to April 27, 2016 through May 30, 2016. KBS Capital Markets Group LLC (the “Dealer Manager”), an affiliate of the Advisor, served as the dealer manager of the Initial Private Offering pursuant to a dealer manager agreement dated June 11, 2015 (the “Initial Private Offering Dealer Manager Agreement”).

On February 4, 2015, the Company filed a registration statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) to register an initial public offering of its common stock to offer a maximum of $1,500,000,000 in shares of common stock for sale to the public in a primary offering, consisting of two classes of shares: Class A and Class T (the “Primary Offering”) and a maximum of $800,000,000 in both classes of shares of its common stock pursuant to the Company’s distribution reinvestment plan (the “DRP Offering” and, together with the Primary Offering, the “Public Offering”). The SEC declared the Company’s registration statement effective on April 28, 2016 and the Company retained the Dealer Manager to serve as the dealer manager of the Public Offering pursuant to a dealer manager agreement dated April 28, 2016 (the “Public Offering Dealer Manager Agreement”). The Company terminated the Primary Offering effective June 30, 2017.

The Company continues to offer shares of common stock pursuant to the DRP Offering. In some states, the Company will need to renew the registration statement annually to continue the DRP Offering. The Company may terminate the DRP Offering at any time.

On October 3, 2017, the Company launched a private placement offering exempt from registration pursuant to Rule 506(c) of Regulation D of the Securities Act pursuant to which the Company is currently offering a maximum of $1,000,000,000 in shares of its Class A common stock to accredited investors (the “Second Private Offering”). Prior to the launch of the Second Private Offering, on September 29, 2017, the Company entered into a dealer manager agreement (the “NCPS Dealer Agreement”) with the Advisor and North Capital Private Securities Corporation (“NCPS”) in connection with the Second Private Offering.

6

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS GROWTH & INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2018

(unaudited)

The Company sold 8,548,972 shares of Class A common stock for gross offering proceeds of $76.8 million in the Initial Private Offering, including 74,744 shares of Class A common stock under its distribution reinvestment plan for gross offering proceeds of $0.7 million.

The Company sold 122,721 and 270,415 shares of Class A and Class T common stock in the Primary Offering for aggregate gross offering proceeds of $3.9 million. As of June 30, 2018, the Company had sold 464,125 and 15,689 shares of Class A and Class T common stock in the DRP Offering for aggregate gross offering proceeds of $4.5 million.

As of June 30, 2018, the Company had sold 253,308 shares of Class A common stock in the Second Private Offering for aggregate gross offering proceeds of $2.2 million.

As of June 30, 2018, the Company had redeemed 422,286 Class A shares for $3.5 million.

On August 11, 2015, two of the individuals who own and control the Company’s sponsor, Charles J. Schreiber, Jr. (who also acts as chief executive officer, the chairman of the board and a director of the Company) and Peter M. Bren (who also acts as president and director of the Company), purchased 21,181.2380 and 21,181.2390 shares of Class A common stock, respectively, each for an aggregate purchase price of $172,500 or $8.144 per share. The per share purchase price reflects an 8.5% discount to the $8.90 offering price in the Private Offering in effect on the date of their purchase because selling commissions and dealer manager fees were not paid in connection with the sales. Mr. Bren’s investment was made on behalf of and for the account of three of his children, and he has disclaimed beneficial ownership of the shares. The Company issued these shares in private transactions exempt from the registration requirements pursuant to Section 4(a)(2) of the Securities Act of 1933.

As described above, the Company intends to use substantially all of the net proceeds from its private and public offerings to invest in a diverse portfolio of core real estate properties.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 2017, except for the Company’s adoption of the revenue recognition standards issued by the Financial Accounting Standards Board (“FASB”) effective on January 1, 2018. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2017 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”).

Principles of Consolidation and Basis of Presentation

The accompanying unaudited consolidated financial statements and condensed notes thereto have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the FASB Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements.  In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods.  Operating results for the six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.

The consolidated financial statements include the accounts of the Company, REIT Holdings, the Operating Partnership, and their direct and indirect wholly owned subsidiaries.  All significant intercompany balances and transactions are eliminated in consolidation. 

7

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS GROWTH & INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2018

(unaudited)

Use of Estimates

The preparation of the consolidated financial statements and the accompanying notes thereto in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

Segments

The Company had invested in four office properties as of June 30, 2018. Substantially all of the Company’s revenue and net loss is from real estate, and therefore, the Company currently operates in one reportable segment.

Revenue Recognition

Effective January 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU No. 2014-09”) using the modified retrospective approach, which requires a cumulative effect adjustment as of the date of the Company’s adoption.  Under the modified retrospective approach, an entity may also elect to apply this standard to either (i) all contracts as of January 1, 2018 or (ii) only to contracts that were not completed as of January 1, 2018.  A completed contract is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP that was in effect before the date of initial application. The Company elected to apply this standard only to contracts that were not completed as of January 1, 2018. 

Based on the Company’s evaluation of contracts within the scope of ASU No. 2014-09, revenue that is impacted by ASU No. 2014-09 includes revenue generated by sales of real estate, other operating income and tenant reimbursements for substantial services earned at the Company’s properties. The recognition of such revenue will occur when the services are provided and the performance obligations are satisfied. For the three and six months ended June 30, 2018, tenant reimbursements for substantial services accounted for under ASU No. 2014-09 were $28,000 and $64,000, respectively, and were included in tenant reimbursements on the accompanying statements of operations. 

Sales of Real Estate

Effective January 1, 2018, the Company adopted the guidance of ASC 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (“ASC 610-20”), which applies to sales or transfers to noncustomers of nonfinancial assets or in substance nonfinancial assets that do not meet the definition of a business.  Generally, the Company’s sales of real estate would be considered a sale of a nonfinancial asset as defined by ASC 610-20.

ASC 610-20 refers to the revenue recognition principles under ASU No. 2014-09.  Under ASC 610-20, if the Company determines it does not have a controlling financial interest in the entity that holds the asset and the arrangement meets the criteria to be accounted for as a contract, the Company would derecognize the asset and recognize a gain or loss on the sale of the real estate when control of the underlying asset transfers to the buyer.  As a result of the adoption of ASU 610-20, there was no impact to the Company’s consolidated financial statements of operations for the three and six months ended June 30, 2018 and 2017 since the Company did not sell any real estate properties for those periods.

Per Share Data

Basic net income (loss) per share of common stock is calculated by dividing net income (loss) by the weighted-average number of shares of common stock issued and outstanding during such period. Diluted net income (loss) per share of common stock equals basic net income (loss) per share of common stock as there were no potentially dilutive securities outstanding for the three and six months ended June 30, 2018 and 2017, respectively. For the purpose of determining the weighted average number of shares outstanding, stock dividends issued during the period presented are adjusted retroactively and treated as if they were issued and outstanding for all periods presented. 

8

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS GROWTH & INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2018

(unaudited)

During the three and six months ended June 30, 2017, the Company declared stock distributions of 0.00249999 and 0.00499998 shares per share outstanding, respectively, and issued a total of 23,160 and 45,846 shares. The Company ceased issuing stock dividends to all stockholders on September 5, 2017.  Stock dividends had been declared on a monthly basis and the amount declared per share outstanding assumed the share was issued and outstanding each date that was a record date for stock dividends during the periods presented. Stock dividends were issued in the same class of shares as the shares for which such stockholder received the stock dividend.

During the three and six months ended June 30, 2018, aggregate cash distributions declared per share of Class A common stock were $0.12787633 and $0.24708313, assuming the share was issued and outstanding each date that was a record date for distributions during the period. During the three and six months ended June 30, 2018, aggregate cash distributions declared per share of Class T common stock were $0.12787633 and $0.24708313, assuming the share was issued and outstanding each date that was a record date for distributions during the period. During the three and six months ended June 30, 2017, aggregate cash distributions declared per share of Class A common stock were $0.12465726 and $0.24794466, assuming the share was issued and outstanding each date that was a record date for distributions during the period. During the three and six months ended June 30, 2017, aggregate cash distributions declared per share of Class T common stock were $0.10005293 and $0.19885548, assuming the share was issued and outstanding each date that was a record date for distributions during the period. Distributions for the period from January 1, 2017 through June 30, 2017 were calculated at a rate of (i) $0.00136986 per share per day, less (ii) the applicable daily class-specific stockholder servicing fees accrued for and allocable to any class of common stock, divided by the number of shares of common stock of such class outstanding as of the close of business on each respective record date. Distributions for the period from January 1, 2018 through April 30, 2018 and from May 1, 2018 through June 30, 2018 were calculated at a rate of $0.00132452 per share per day and $0.00144493 per share per day, respectively. Each day during the six months ended June 30, 2018 and 2017 was a record date for distributions.

In accordance with FASB ASC Topic 260-10-45, Earnings Per Share, the Company uses the two-class method to calculate earnings per share. Basic earnings per share is calculated based on dividends declared (“distributed earnings”) and the rights of common shares and participating securities in any undistributed earnings, which represents net income remaining after deduction of dividends declared during the period. The undistributed earnings are allocated to all outstanding common shares based on the relative percentage of each class of shares to the total number of outstanding shares. The Company does not have any participating securities outstanding other than Class A Common Stock and Class T Common Stock during the periods presented.

9

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS GROWTH & INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2018

(unaudited)

The Company’s calculated earnings per share for the three and six months ended June 30, 2018 and 2017 were as follows (in thousands, except share and per share amounts):

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
Net loss	$	(725	)	$	(424	)	$	(930	)	$	(621	)
Less: Class A Common Stock cash distributions declared	1,163			1,128			2,248			2,226
Less: Class T Common Stock cash distributions declared	37			26			70			42
Undistributed net loss	$	(1,925	)	$	(1,578	)	$	(3,248	)	$	(2,889	)
Class A Common Stock:
Undistributed net loss	$	(1,866	)	$	(1,534	)	$	(3,150	)	$	(2,822	)
Class A Common Stock cash distributions declared	1,163			1,128			2,248			2,226
Net loss	$	(703	)	$	(406	)	$	(902	)	$	(596	)
Net loss per common share, basic and diluted	$	(0.08	)	$	(0.04	)	$	(0.10	)	$	(0.07	)
Weighted-average number of common shares outstanding, basic and diluted	9,096,617			9,076,034			9,095,895			9,020,742
Class T Common Stock:
Undistributed net loss	$	(59	)	$	(44	)	$	(98	)	$	(67	)
Class T Common Stock cash distributions declared	37			26			70			42
Net loss	$	(22	)	$	(18	)	$	(28	)	$	(25	)
Net loss per common share, basic and diluted	$	(0.08	)	$	(0.07	)	$	(0.10	)	$	(0.11	)
Weighted-average number of common shares outstanding, basic and diluted	286,721			261,613			285,165			214,044

Square Footage, Occupancy and Other Measures

 Square footage, occupancy, number of tenants and other measures, including annualized base rent and annualized base rent per square foot, or amounts derived from such measures, used to describe real estate investments included in these condensed notes to consolidated financial statements are presented on an unaudited basis and outside the scope of the Company’s independent registered public accounting firm’s review of the Company’s financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board.

10

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS GROWTH & INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2018

(unaudited)

Recently Issued Accounting Standards Update

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU No. 2016-02”). The amendments in ASU No. 2016-02 change the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU No. 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of ASU No. 2016-02 as of its issuance is permitted. ASU No. 2016-02 requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact of adopting the new lease accounting standard on its consolidated financial statements. Upon adoption of ASU No. 2016-02, the Company expects to adopt the package of practical expedients for all leases that commenced before the effective date of January 1, 2019. Accordingly, the Company will 1) not reassess whether any expired or existing contracts are or contain leases, 2) not reassess the lease classification for any expired or existing lease, and 3) not reassess initial direct costs for any existing leases. The Company does not expect to elect the practical expedient related to using hindsight to reevaluate the lease term. In addition, the Company expects to adopt the practical expedient for land easements to not assess whether existing or expired land easements that were not previously accounted for as leases under the current lease accounting standards of Topic 840 are or contain a lease under Topic 842.

In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842), Targeted Improvements (“ASU No. 2018-11”), which provides lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component and, instead to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue recognition standard (Topic 606) and if certain conditions are met. Upon adoption of the lease accounting standard under Topic 842, the Company expects to adopt this practical expedient, specifically related to its tenant reimbursements which would otherwise be accounted for under the new revenue recognition standard. The Company believes the two conditions have been met for tenant reimbursements as 1) the timing and pattern of transfer of the nonlease components and associated lease components are the same and 2) the lease component would be classified as an operating lease. In addition. ASU No. 2018-11, provides an additional optional transition method to allow entities to apply the new lease accounting standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. An entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new lease accounting standard will continue to be reported under the current lease accounting standards of Topic 840. The Company expects to adopt this transition method upon adoption of the lease accounting standard of Topic 842 on January 1, 2019.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments (“ASU No. 2016-13”).  ASU No. 2016-13 affects entities holding financial assets and net investments in leases that are not accounted for at fair value through net income.  The amendments in ASU No. 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected.  The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset.  ASU No. 2016-13 also amends the impairment model for available-for-sale securities.  An entity will recognize an allowance for credit losses on available-for-sale debt securities as a contra-account to the amortized cost basis rather than as a direct reduction of the amortized cost basis of the investment, as is currently required.  ASU No. 2016-13 also requires new disclosures.  For financial assets measured at amortized cost, an entity will be required to disclose information about how it developed its allowance for credit losses, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes.  For financing receivables and net investments in leases measured at amortized cost, an entity will be required to further disaggregate the information it currently discloses about the credit quality of these assets by year of the asset’s origination for as many as five annual periods. For available for sale securities, an entity will be required to provide a roll-forward of the allowance for credit losses and an aging analysis for securities that are past due.  ASU No. 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years.  Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  The Company is still evaluating the impact of adopting ASU No. 2016-13 on its financial statements, but does not expect the adoption of ASU No. 2016-13 to have a material impact on its financial statements.

11

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS GROWTH & INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2018

(unaudited)

3. REAL ESTATE

As of June 30, 2018, the Company owned four office properties containing 683,952 rentable square feet, which were collectively 97% occupied. The following table provides summary information regarding the properties owned by the Company as of June 30, 2018 (in thousands):

Property	Date Acquired	City	State	Property Type	Total Real Estate at Cost		Accumulated Depreciation and Amortization			Total Real Estate, Net
Von Karman Tech Center	08/12/2015	Irvine	CA	Office	$	20,829	$	(1,933	)	$	18,896
Commonwealth Building	06/30/2016	Portland	OR	Office	76,718		(6,378		)	70,340
The Offices at Greenhouse	11/14/2016	Houston	TX	Office	47,242		(3,930		)	43,312
Institute Property	11/09/2017	Chicago	IL	Office	45,733		(1,385		)	44,348
					$	190,522	$	(13,626	)	$	176,896

As of June 30, 2018, the following properties represented more than 10% of the Company’s total assets:

Property	Location	Rentable Square Feet	Total Real Estate, Net (in thousands)		Percentage of Total Assets		Annualized Base Rent (in thousands)(1)		Average Annualized Base Rent per sq. ft.		Occupancy
Von Karman Tech Center	Irvine, CA	101,161	$	18,896	10.1	%	$	2,249	$	22.90	97.1	%
Commonwealth Building	Portland, OR	224,122	70,340		37.5	%	5,727		26.79		95.4	%
The Offices at Greenhouse	Houston, TX	203,284	43,312		23.1	%	4,201		20.66		100.0	%
Institute Property	Chicago, IL	155,385	44,348		23.7	%	3,385		23.37		93.2	%

_____________________

⁽¹⁾ Annualized base rent represents annualized contractual base rental income as of June 30, 2018, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.

12

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS GROWTH & INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2018

(unaudited)

Operating Leases

The Company’s real estate properties are leased to tenants under operating leases for which the terms and expirations vary. As of June 30, 2018, the leases had remaining terms, excluding options to extend, of up to 8.9 years with a weighted-average remaining term of 4.3 years. Some of the leases have provisions to extend the term of the leases, options for early termination for all or a part of the leased premises after paying a specified penalty, and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires a security deposit from the tenant in the form of a cash deposit and/or a letter of credit. The amount required as a security deposit varies depending upon the terms of the respective lease and the creditworthiness of the tenant, but generally is not a significant amount. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in other liabilities in the accompanying consolidated balance sheets and totaled $1.1 million and $1.2 million as of June 30, 2018 and December 31, 2017, respectively.

During the six months ended June 30, 2018 and 2017, the Company recognized deferred rent from tenants, net of lease incentive amortization, of $0.7 million and $0.3 million, respectively. As of June 30, 2018 and December 31, 2017, the cumulative deferred rent balance was $2.5 million and $1.8 million, respectively, and is included in rents and other receivables on the accompanying balance sheets. The cumulative deferred rent balance included $0.2 million and $0.2 million of unamortized lease incentives as of June 30, 2018 and December 31, 2017, respectively.

As of June 30, 2018, the future minimum rental income from the Company’s properties under its non-cancelable operating leases was as follows (in thousands):

July 1, 2018 through December 31, 2018	$	7,375
2019	14,314
2020	14,308
2021	12,902
2022	11,131
Thereafter	16,483
	$	76,513

As of June 30, 2018, the Company had a concentration of credit risk related to AECOM, one of the tenants in The Offices at Greenhouse in the engineering industry, which represented 19% of the Company’s annualized base rent. The tenant individually occupied 140,922 rentable square feet or approximately 21% of the total rentable square feet of the Company’s real estate portfolio. Of the 140,922 rentable square feet, 5,195 rentable square feet expires on July 24, 2019, with twothree-year extension options, and 135,727 rentable square feet expires on December 31, 2024, with twofive-year extension options. As of June 30, 2018, the annualized base rent for this tenant was approximately $3.0 million or $21.39 per square foot. No other tenant represented more than 10% of the Company’s annualized base rent.

13

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS GROWTH & INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2018

(unaudited)

As of June 30, 2018, the Company’s real estate properties were leased to approximately 80 tenants over a diverse range of industries. The Company’s highest tenant industry concentration (greater than 10% of annualized base rent) was as follows:

Industry	Number of Tenants	Annualized Base Rent (1) (in thousands)		Percentage of Annualized Base Rent
Professional, scientific and technical	14	$	5,910	38.0	%
Information technology	9	1,849		11.9	%

_____________________

⁽¹⁾ Annualized base rent represents annualized contractual base rental income as of June 30, 2018, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.

As of June 30, 2018, no other tenant industries accounted for more than 10% of annualized base rent. No material tenant credit issues have been identified at this time.

4. TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES

As of June 30, 2018 and December 31, 2017, the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities (excluding fully amortized assets and liabilities and accumulated amortization) were as follows (in thousands):

	Tenant Origination and Absorption Costs						Above-Market Lease Assets						Below-Market Lease Liabilities
	June 30, 2018			December 31, 2017			June 30, 2018			December 31, 2017			June 30, 2018			December 31, 2017
Cost	$	16,400		$	17,047		$	213		$	213		$	(7,226	)	$	(7,838	)
Accumulated Amortization	(4,781		)	(3,480		)	(48		)	(33		)	2,574			1,928
Net Amount	$	11,619		$	13,567		$	165		$	180		$	(4,652	)	$	(5,910	)

Increases (decreases) in net income as a result of amortization of the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities for the three and six months ended June 30, 2018 and 2017 were as follows (in thousands):

	Tenant Origination and Absorption Costs						Above-Market Lease Assets						Below-Market Lease Liabilities
	For the Three Months Ended June 30,						For the Three Months Ended June 30,						For the Three Months Ended June 30,
	2018			2017			2018			2017			2018		2017
Amortization	$	(1,130	)	$	(703	)	$	(7	)	$	(7	)	$	803	$	423

	Tenant Origination and Absorption Costs						Above-Market Lease Assets						Below-Market Lease Liabilities
	For the Six Months Ended June 30,						For the Six Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017			2018		2017
Amortization	$	(1,948	)	$	(1,336	)	$	(15	)	$	(15	)	$	1,258	$	774

14

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS GROWTH & INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2018

(unaudited)

5. NOTES PAYABLE

As of June 30, 2018, the Company’s notes payable consisted of the following (dollars in thousands):

	Book Value as of June 30, 2018			Book Value as of December 31, 2017			Contractual Interest Rate as of June 30, 2018 (1)	Effective Interest Rate at June 30, 2018 (1)	Payment Type	Maturity Date (2)
Commonwealth Building Mortgage Loan (3)	$	45,000		$	41,000		One-month LIBOR + 1.80%	3.79%	Interest Only	02/01/2023
Term Loan (4)	72,800			72,800			One-month LIBOR + 2.00%	3.99%	Interest Only	11/09/2020
Notes payable principal outstanding	$	117,800		$	113,800
Deferred financing costs, net	(1,118		)	(1,020		)
Notes payable, net	$	116,682		$	112,780

_____________________

⁽¹⁾Contractual interest rate represents the interest rate in effect under the loan as of June 30, 2018. Effective interest rate is calculated as the actual interest rate in effect as of June 30, 2018 (consisting of the contractual interest rate), using interest rate indices as of June 30, 2018, where applicable.

⁽²⁾Represents the maturity date as of June 30, 2018; subject to certain conditions, the maturity dates of certain loans may be extended beyond the dates shown.

⁽³⁾ On January 18, 2018, the Company, through an indirect wholly owned subsidiary, closed the refinancing of the initial Commonwealth Building mortgage loan with an unaffiliated lender (the “Refinancing”) for a maximum loan amount of up to $51.4 million. With the proceeds from the Refinancing, the Company repaid $41.0 million of principal in satisfaction of the initial Commonwealth Building mortgage loan. Under the current Commonwealth Building Mortgage Loan under the Refinancing, monthly payments are interest-only with the remaining principal balance, all accrued and unpaid interest and all other sums due under the loan documents payable at maturity. If the LIBOR rate is equal to or greater than 2.90% for five consecutive business days, the Company has 30 days to enter into an interest rate cap agreement with a LIBOR strike rate of 3.90% or less. The Company has the right to prepay all or a portion of the loan under the Refinancing commencing on February 1, 2019, subject to certain fees and conditions contained in the loan documents. As of June 30, 2018, $45.0 million of the Commonwealth Building Mortgage Loan was outstanding and $6.4 million remained available for future disbursements, subject to certain terms and conditions set forth in the loan documents.

⁽⁴⁾ As of June 30, 2018, the outstanding balance under the Term Loan consisted of $48.5 million of term commitment and $24.3 million of revolving commitment, which bears interest at a rate per annum equal to 2.0% over one-month LIBOR. The Term Loan is secured by The Offices at Greenhouse, Von Karman Tech Center and Institute Property.

During the three and six months ended June 30, 2018, the Company incurred $0.8 million and $1.8 million of interest expense, respectively. During the three and six months ended June 30, 2017, the Company incurred $0.8 million and $1.5 million of interest expense, respectively. As of June 30, 2018 and December 31, 2017, $0.4 million and $0.3 million of interest expense were payable, respectively. Included in interest expense during the three and six months ended June 30, 2018 were $0.1 million and $0.2 million of amortization of deferred financing costs, respectively. Also included in interest expense during the six months ended June 30, 2018 was $0.2 million of debt refinancing costs. Included in interest expense during the three and six months ended June 30, 2017 were $0.1 million and $0.3 million of amortization of deferred financing costs, respectively. Interest expense was reduced by $0.4 million and $0.8 million as a result of a change in fair value of the Company’s derivative instruments for the three and six months ended June 30, 2018, respectively.

The following is a schedule of maturities, including principal amortization payments, for all notes payable outstanding as of June 30, 2018 (in thousands):

July 1, 2018 through December 31, 2018	$	—
2019	—
2020	72,800
2021	—
2022	—
Thereafter	45,000
	$	117,800

15

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS GROWTH & INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2018

(unaudited)

6. DERIVATIVE INSTRUMENTS

The Company enters into derivative instruments for risk management purposes to hedge its exposure to cash flow variability caused by changing interest rates. The primary goal of the Company’s risk management practices related to interest rate risk is to prevent changes in interest rates from adversely impacting the Company’s ability to achieve its investment return objectives. The Company does not enter into derivatives for speculative purposes.

The Company enters into interest rate swaps as a fixed rate payer to mitigate its exposure to rising interest rates on its variable rate notes payable. The value of interest rate swaps is primarily impacted by interest rates, market expectations about interest rates, and the remaining life of the instrument. In general, increases in interest rates, or anticipated increases in interest rates, will increase the value of the fixed rate payer position and decrease the value of the variable rate payer position. As the remaining life of the interest rate swap decreases, the value of both positions will generally move towards zero.

The following table summarizes the notional amount and other information related to the Company’s interest rate swaps as of June 30, 2018 and December 31, 2017. The notional amount is an indication of the extent of the Company’s involvement in each instrument at that time, but does not represent exposure to credit, interest rate or market risks (dollars in thousands):

	June 30, 2018			December 31, 2017				Weighted-Average  Fix Pay Rate	Weighted-Average Remaining Term in Years
Derivative Instruments	Number of Instruments	Notional Amount		Number of Instruments	Notional Amount		Reference Rate as of June 30, 2018
Derivative instruments not designated as hedging instruments
Interest Rate Swaps (1)	2	$	78,533	1	$	48,533	One-month LIBOR/ Fixed at 2.07% - 2.82%	2.36%	3.23

_____________________

⁽¹⁾ Includes a forward interest rate swap in the amount of $48.5 million, which will become effective on November 1, 2018 and maturing on November 1, 2021 and a forward interest rate swap in the amount of $30.0 million, which will become effective on April 1, 2019 and maturing on November 1, 2022.

The following table sets forth the fair value of the Company’s derivative instruments as well as their classification on the consolidated balance sheets as of June 30, 2018 and December 31, 2017 (dollars in thousands):

		June 30, 2018			December 31, 2017
Derivative Instruments	Balance Sheet Location	Number of Instruments	Fair Value		Number of Instruments	Fair Value
Derivative instruments not designated as hedging instruments
Interest Rate Swaps	Prepaid expenses and other assets, at fair value	2	$	989	1	$	178

The change in fair value of a derivative instrument that is not designated as a cash flow hedge is recorded as interest expense in the accompanying consolidated statements of operations. The following table summarizes the effects of derivative instruments on the Company’s consolidated statements of operations (in thousands):

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2018			2017		2018			2017
Income statement related
Derivatives not designated as hedging instruments
Unrealized gain on interest rate swaps	$	(439	)	$	—	$	(811	)	$	—
Decrease in interest expense as a result of derivatives	$	(439	)	$	—	$	(811	)	$	—

16

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS GROWTH & INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2018

(unaudited)

7. FAIR VALUE DISCLOSURES

Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other non-financial and financial assets at fair value on a non-recurring basis (e.g., carrying value of long-lived assets). Fair value, as defined under GAAP, is the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:

• Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

• Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

• Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

The fair value for certain financial instruments is derived using a combination of market quotes, pricing models and other valuation techniques that involve significant management judgment. The price transparency of financial instruments is a key determinant of the degree of judgment involved in determining the fair value of the Company’s financial instruments. Financial instruments for which actively quoted prices or pricing parameters are available and for which markets contain orderly transactions will generally have a higher degree of price transparency than financial instruments for which markets are inactive or consist of non-orderly trades. The Company evaluates several factors when determining if a market is inactive or when market transactions are not orderly. The following is a summary of the methods and assumptions used by management in estimating the fair value of each class of financial instrument for which it is practicable to estimate the fair value:

Cash and cash equivalents, rent and other receivables, and accounts payable and accrued liabilities: These balances approximate their fair values due to the short maturities of these items.

Derivative instruments:The Company’s derivative instruments are presented at fair value on the accompanying consolidated balance sheets. The valuation of these instruments is determined using a proprietary model that utilizes observable inputs. As such, the Company classifies these inputs as Level 2 inputs. The proprietary model uses the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and volatility. The fair values of interest rate swaps are estimated using the market standard methodology of netting the discounted fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of interest rates (forward curves) derived from observable market interest rate curves. In addition, credit valuation adjustments, which consider the impact of any credit risks to the contracts, are incorporated in the fair values to account for potential nonperformance risk.

Notes payable: The fair value of the Company’s notes payable is estimated using a discounted cash flow analysis based on management’s estimates of current market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio, type of collateral and other credit enhancements. Additionally, when determining the fair value of liabilities in circumstances in which a quoted price in an active market for an identical liability is not available, the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach. The Company classifies these inputs as Level 3 inputs.

17

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS GROWTH & INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2018

(unaudited)

The following were the face values, carrying amounts and fair values of the Company’s notes payable as of June 30, 2018 and December 31, 2017, which carrying amounts generally do not approximate the fair values (in thousands):

	June 30, 2018						December 31, 2017
	Face Value		Carrying Amount		Fair Value		Face Value		Carrying Amount		Fair Value
Financial liabilities:
Notes payable	$	117,800	$	116,682	$	119,250	$	113,800	$	112,780	$	114,327

Disclosure of the fair values of financial instruments is based on pertinent information available to the Company as of the period end and requires a significant amount of judgment. The actual value could be materially different from the Company’s estimate of value.

As of June 30, 2018, the Company measured the following assets at fair value (in thousands):

			Fair Value Measurements Using
	Total		Quoted Prices in Active Markets  for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring Basis:
Asset derivatives - interest rate swaps	$	989	$	—	$	989	$	—

8. RELATED-PARTY TRANSACTIONS

Pursuant to the Advisory Agreement, the Initial Private Offering Dealer Manager Agreement and the Public Offering Dealer Manager Agreement, the Company is or was obligated to pay the Advisor and the Dealer Manager specified fees upon the provision of certain services related to the Initial Private Offering and the Public Offering, the investment of funds in real estate, management of the Company’s investments and for other services (including, but not limited to, the disposition of investments). The Company was also obligated to reimburse the Advisor and Dealer Manager for certain organization and offering costs incurred by the Advisor and the Dealer Manager on behalf of the Company, and the Company is obligated to reimburse the Advisor for acquisition and origination expenses and certain operating expenses incurred on behalf of the Company or incurred in connection with providing services to the Company. The Advisor is entitled to certain other fees, including an incentive fee upon achieving certain performance goals, as detailed in the Advisory Agreement. In addition, the Advisor will pay all offering expenses related to the Second Private Offering without reimbursement by the Company.

In addition, in connection with certain property acquisitions, the Company, through indirect wholly owned subsidiaries, has entered into separate Property Management Agreements (defined below) with KBS Management Group, LLC, an affiliate of the Advisor (the “Co-Manager”).

The Company has also entered into a fee reimbursement agreement with the Dealer Manager pursuant to which the Company agreed to reimburse the Dealer Manager for certain fees and expenses it incurs for administering the Company’s participation in the DTCC Alternative Investment Product Platform with respect to certain accounts of the Company’s investors serviced through the platform.

The Advisor also serves as the advisor for KBS Real Estate Investment Trust, Inc. (“KBS REIT I”), KBS Real Estate Investment Trust II, Inc. (“KBS REIT II”), KBS Real Estate Investment Trust III, Inc. (“KBS REIT III”), KBS Strategic Opportunity REIT, Inc. (“KBS Strategic Opportunity REIT”), KBS Legacy Partners Apartment REIT, Inc. (“KBS Legacy Partners Apartment REIT”) and KBS Strategic Opportunity REIT II, Inc. (“KBS Strategic Opportunity REIT II”). The Dealer Manager also serves as the dealer manager for KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT and KBS Strategic Opportunity REIT II.

18

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS GROWTH & INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2018

(unaudited)

The Company, together with KBS REIT I, KBS REIT II, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, KBS REIT III, KBS Strategic Opportunity REIT II, the Dealer Manager, the Advisor and other KBS affiliated entities, entered into an errors and omissions and directors and officers liability insurance program where the lower tiers of such insurance coverage are shared. The cost of these lower tiers is allocated by the Advisor and its insurance broker among each of the various entities covered by the program and is billed directly to each entity. The allocation of these shared coverage costs is proportionate to the pricing by the insurance marketplace for the first tiers of directors and officers liability coverage purchased individually by each REIT. The Advisor’s and the Dealer Manager’s portion of the shared lower tiers’ cost is proportionate to the respective entities’ prior cost for the errors and omissions insurance. In June 2018, the Company renewed its participation in the program. At renewal, KBS Strategic Opportunity REIT, KBS Strategic Opportunity REIT II and Legacy Partners Apartment REIT elected to cease participation in the program and obtain separate insurance coverage. The program is effective through June 30, 2019. KBS REIT I elected to cease participation in the program at the June 2017 renewal and obtained separate insurance coverage.

During the six months ended June 30, 2018 and 2017, no other business transactions occurred between the Company and KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT and KBS Strategic Opportunity REIT II.

Pursuant to the terms of these agreements, summarized below are the related-party costs incurred by the Company for the three and six months ended June 30, 2018 and 2017, respectively, and any related amounts payable as of June 30, 2018 and December 31, 2017 (in thousands).

	Incurred										Payable as of
	Three Months Ended June 30,					Six Months Ended June 30,
	2018		2017			2018		2017			June 30, 2018		December 31, 2017
Expensed
Asset management fees (1)	$	462	$	—		$	918	$	214		$	1,336	$	418
Reimbursement of operating expenses (2)	53		50			106		104			19		18
Property management fees (3)	42		31			84		60			10		13
Other Arrangement
Advisor advance for cash distributions (4)	—		—			—		—			1,338		1,338
Additional Paid-in Capital
Selling commissions	—		17			—		78			—		—
Dealer manager fees	—		15			—		50			—		—
Stockholder servicing fees (5)	—		(77		)	—		(26		)	—		—
Reimbursable other offering costs (6)	—		(9		)	—		14			—		—
	$	557	$	27		$	1,108	$	494		$	2,703	$	1,787

_____________________

⁽¹⁾ Through August 8, 2017, the asset management fee payable to the Advisor was a monthly fee equal to one-twelfth of 1.6% of the cost of the Company’s investments, less any debt secured by or attributable to the investments. Beginning on August 9, 2017, the asset management fee is a monthly fee payable to the Advisor in an amount equal to one-twelfth of 1.0% of the cost of the Company’s investments including the portion of the investment that is debt financed. As of June 30, 2018, the Company had accrued and deferred payment of $1.3 million of asset management fees related to the fourth quarter of 2017 through the second quarter of 2018.

⁽²⁾ See “Reimbursable Operating Expenses” below.

⁽³⁾ See “Real Estate Property Co-Management Agreements” below.

⁽⁴⁾ See “Advance from the Advisor” below.

⁽⁵⁾ The Public Offering was terminated effective June 30, 2017. Pursuant to the terms of the Class T shares as set forth in the Articles Supplementary and Multiple Class Plan of the Company, the Company ceased accruing for stockholder servicing fees after June 30, 2017 and reversed the amounts previously accrued.

⁽⁶⁾ See “Organization and Offering Costs” below.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS GROWTH & INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2018

(unaudited)

During the six months ended June 30, 2018, the Advisor paid the Company a $10,655 property insurance rebate.

Reimbursable Operating Expenses

Reimbursable operating expenses primarily related to directors and officers liability insurance, legal fees, state and local taxes, accounting software and cybersecurity related expenses incurred by the Advisor under the Advisory Agreement. The Company has reimbursed the Advisor for the Company’s allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to the Company. These amounts totaled $50,213 and $103,212 for the three and six months ended June 30, 2018, respectively, and $49,399 and $101,741 for the three and six months ended June 30, 2017, respectively, and were the only type of employee costs reimbursed under the Advisory Agreement for the three and six months ended June 30, 2018 and 2017, respectively. The Company does not reimburse for employee costs in connection with services for which the Advisor earned or earns acquisition, origination or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries or benefits the Advisor or its affiliates may pay to the Company’s executive officers. In addition to the amounts above, the Company reimburses the Advisor for certain of the Company’s direct costs incurred from third parties that were initially paid by the Advisor on behalf of the Company.

Effective September 29, 2017, the Company eliminated its obligation to reimburse expenses incurred by the Advisor in connection with providing services pursuant to the Advisory Agreement, other than (i) the allocable portion of the costs of the internal audit department and (ii) promotional costs and expenses related to the leasing of properties.

Commencing with the quarter ended December 31, 2016, the Advisor must reimburse the Company the amount by which the Company’s aggregate total operating expenses for the four fiscal quarters then ended exceed the greater of 2% of the Company’s average invested assets or 25% of the Company’s net income, unless the conflicts committee has determined that such excess expenses were justified based on unusual and non-recurring factors. Operating expenses for the four fiscal quarters ended June 30, 2018 did not exceed the charter-imposed limitation.

Advance from the Advisor

The Advisor advanced funds to the Company, which are non-interest bearing, for distribution record dates through the period ended May 31, 2016. As of June 30, 2018, the total advanced funds due to the Advisor from the Company was approximately $1.3 million. The Company is only obligated to repay the Advisor for its advance if and to the extent that:

(i) the Company’s modified funds from operations (“MFFO”), as such term is defined by the Institute for Portfolio Alternatives and interpreted by the Company, for the immediately preceding month exceeds the amount of cash distributions declared for record dates of such prior month (an “MFFO Surplus”), and the Company will pay the Advisor the amount of the MFFO Surplus to reduce the principal amount outstanding under the advance, provided that such payments shall only be made if management in its sole discretion expects an MFFO Surplus to be recurring for at least the next two calendar quarters, determined on a quarterly basis; or

(ii) Excess proceeds from third-party financings are available (“Excess Proceeds”), provided that the amount of any such Excess Proceeds that may be used to repay the principal amount outstanding under the advance shall be determined by the conflicts committee in its sole discretion.

In determining whether Excess Proceeds are available to repay the advance, the Company’s conflicts committee will consider whether cash on hand could have been used to reduce the amount of third-party financing provided to us. If such cash could have been used instead of third-party financing, the third-party financing proceeds will be available to repay the advance.

20

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS GROWTH & INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2018

(unaudited)

Real Estate Property Co-Management Agreements

In connection with its property acquisitions, the Company, through separate, indirect, wholly-owned subsidiaries, entered into separate property management agreements (each, a “Property Management Agreement”) with the Co-Manager for each of its properties. Under each Property Management Agreement, the Co-Manager will provide certain management services related to these properties in addition to those provided by the third-party property managers. In exchange for these services, the Company will pay the Co-Manager a monthly fee equal to a percentage of the rent, payable and actually collected for the month from each of the properties. Each Property Management Agreement has an initial term of one year and will be deemed renewed for successive one-year periods provided it is not terminated. Each party may terminate the Property Management Agreement without cause on 30 days’ written notice to the other party and may terminate each Property Management Agreement for cause on 5 days’ written notice to the other party upon the occurrence of certain events as detailed in each Property Management Agreement.

Property Name	Effective Date	Annual Fee Percentage
Von Karman Tech Center	07/31/2015	1.50%
Commonwealth Building	07/01/2016	1.25%
The Offices at Greenhouse	11/14/2016	0.25%
Institute Property	11/09/2017	1.00%

Organization and Offering Costs

Offering costs include all expenses incurred in connection with the offerings of securities by the Company. Organization costs include all expenses incurred in connection with the formation of the Company, including but not limited to legal fees and other costs to incorporate the Company.

With respect to the Public Offering, the Advisor and the Dealer Manager generally paid the organization and offering expenses of the Company incurred in the Primary Offering (other than selling commissions, dealer manager fees and stockholder servicing fees) directly.

The Company reimbursed the Advisor, the Dealer Manager and its affiliates up to 1% of gross proceeds raised in the Primary Offering for commercially reasonable organization and offering expenses (other than selling commissions, dealer manager fees and stockholder servicing fees). The Advisor, the Dealer Manager and their affiliates were responsible for all organization and other offering expenses (which excludes selling commissions, dealer manager fees and stockholder servicing fees) paid related to the Primary Offering to the extent they exceeded 1% of gross proceeds raised in the Primary Offering. The Company did not reimburse the Dealer Manager for wholesaling compensation expenses.

During the Initial Private Offering, the Company was obligated to reimburse the Advisor and its affiliates for all organization and offering costs (excluding wholesaling compensation expenses) paid by them on behalf of the Company.

The Advisor has agreed to pay directly all offering expenses related to the Second Private Offering without reimbursement by the Company.

Through June 30, 2018, the Advisor and its affiliates had incurred organization and other offering costs (which exclude selling commissions, dealer manager fees and stockholder servicing fees) on the Company’s behalf in connection with the Public Offering of approximately $4.4 million. As of June 30, 2018, the Company had recorded $39,358 of organization and other offering expenses related to the Public Offering, which amounts represent the Company’s maximum liability for organization and other offering costs as of June 30, 2018 based on the limitations described above. As of June 30, 2018, the Company had recorded $1.5 million of organization and other offering costs related to the Initial Private Offering. Organization costs were expensed as incurred and offering costs are deferred and charged to stockholders’ equity as such amounts were reimbursed to the Advisor, the Dealer Manager or their affiliates from the gross proceeds of the applicable offering.

As of June 30, 2018, the Advisor had incurred $3.6 million in offering expenses related to the Second Private Offering.

21

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS GROWTH & INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2018

(unaudited)

9. COMMITMENTS AND CONTINGENCIES

Economic Dependency

The Company depends on the Advisor for certain services that are essential to the Company, including the identification, evaluation, negotiation, acquisition and disposition of investments; management of the daily operations of the Company’s investment portfolio; and other general and administrative responsibilities. In the event that the Advisor is unable to provide such services, the Company will be required to obtain such services from other sources.

Legal Matters

From time to time, the Company may become party to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on the Company’s results of operations or financial condition, which would require accrual or disclosure of the contingency and possible range of loss. Additionally, the Company has not recorded any loss contingencies related to legal proceedings in which the potential loss is deemed to be remote.

Environmental

As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. Although there can be no assurance, the Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s property, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the property could result in future environmental liabilities.

10. SUBSEQUENT EVENTS

The Company evaluates subsequent events up until the date the consolidated financial statements are issued.

Cash Distributions Paid

On July 2, 2018, the Company paid cash distributions of $0.4 million, which related to distributions on the Company’s common stock, declared for daily record dates for each day in the period from June 1, 2018 through June 30, 2018. On August 1, 2018, the Company paid cash distributions of $0.4 million, which related to distributions on the Company’s common stock, declared for daily record dates for each day in the period from July 1, 2018 through July 31, 2018.

Distributions Authorized

On July 16, 2018, the Company’s board of directors authorized cash distributions on the outstanding shares of all classes of the Company’s common stock based on daily record dates for the period from August 1, 2018 through August 31, 2018, which the Company expects to pay in September 2018. On August 6, 2018, the Company’s board of directors authorized cash distributions on the outstanding shares of all classes of the Company’s common stock based on daily record dates for the period from September 1, 2018 through September 30, 2018, which the Company expects to pay in October 2018, and the period from October 1, 2018 through October 31, 2018, which the Company expects to pay in November 2018. Investors may choose to receive cash distributions or purchase additional shares through the Company’s distribution reinvestment plan. Distributions for these periods will be calculated based on stockholders of record each day during these periods at a rate of $0.00144493 per share per day.

22

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the accompanying financial statements of KBS Growth & Income REIT, Inc. and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to KBS Growth & Income REIT, Inc., a Maryland corporation, and, as required by context, KBS Growth & Income Limited Partnership, a Delaware limited partnership, which we refer to as the “Operating Partnership,” and to their subsidiaries.

Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of KBS Growth & Income REIT, Inc. and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.

The following are some of the risks and uncertainties, although not all of the risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:

• We depend on our advisor and its affiliates to conduct our operations. We pay fees to our advisor and its affiliates in connection with the management of our investments that are based on the cost of the investment, not on the quality of the investment or services rendered to us. These fees decrease the amount of cash available for distribution to our stockholders.

• We commenced investment operations on August 12, 2015 in connection with the acquisition of an office property and we have a limited operating history. As of June 30, 2018, we owned four office buildings with a fair value of $197.8 million and we have not acquired or identified any additional real estate investments that it is reasonably probable we will acquire with the proceeds from our offering stage. As such, our stockholders will not have an opportunity to evaluate investments before we make them.

• All of our executive officers, our affiliated directors and other key real estate and debt finance professionals are also officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor, and/or other KBS‑affiliated entities. As a result, our executive officers, our affiliated directors, some of our key real estate and debt finance professionals, our advisor and its affiliates face conflicts of interest, including significant conflicts created by our advisor’s and its affiliates’ compensation arrangements with us and other KBS‑sponsored programs and KBS‑advised investors and conflicts in allocating time among us and these other programs and investors. Although we have adopted corporate governance measures to ameliorate some of the risks posed by these conflicts, these conflicts could result in action or inaction that is not in the best interests of our stockholders.

• Because investment opportunities that are suitable for us may also be suitable for other KBS‑sponsored programs or KBS‑advised investors, our advisor and its affiliates face conflicts of interest relating to the purchase of properties. Any such conflicts in directing investment opportunities may not be resolved in our favor.

• If we are unable to raise substantial funds in our offering stage, we may not be able to acquire a diverse portfolio of real estate investments, which may cause the value of an investment in us to vary more widely with the performance of specific assets and cause our general and administrative expenses to constitute a greater percentage of our revenue. Raising fewer proceeds in our offering stage, therefore, could increase the risk that our stockholders will lose money in their investment.

• We may fund distributions from any source, including, without limitation, offering proceeds or borrowings. Distributions paid through June 30, 2018 have been funded in part with debt financing, including advances from our advisor, and cash resulting from a waiver of asset management fees by our advisor. Distributions funded from sources other than our cash flow from operations will result in dilution to subsequent investors, reduce funds available for investment in assets and may reduce the overall return to our stockholders.

• Our advisor waived its asset management fee for the second and third quarters of 2017 and deferred its asset management fee for the fourth quarter of 2017 through the second quarter of 2018. If our advisor determines to no longer waive or defer certain fees owed to them, our ability to fund our operations and to fund our distributions may be adversely affected.

23

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

• Our policies do not limit us from incurring debt until our aggregate borrowings would exceed 75% of the cost (before deducting depreciation or other non‑cash reserves) of our tangible assets, and we may exceed this limit with the approval of the conflicts committee of our board of directors. High debt levels could limit the amount of cash we have available to distribute and could result in a decline in the value of our stockholders’ investment.

• We have debt obligations with variable interest rates and may incur additional variable rate debt in the future. The interest and related payments will vary with the movement of LIBOR or other indexes. Increases in the indexes could increase the amount of our debt payments and limit our ability to pay distributions to our stockholders.

• If we are unable to locate investments with attractive yields while we are investing the proceeds raised in our offering stage, our distributions and the long‑term returns of our investors may be lower.

• We depend on tenants for the revenue generated by any real estate investments we make and, accordingly, the revenue generated by our real estate investments is dependent upon the success and economic viability of our tenants. Revenues from any properties we acquire could decrease due to a reduction in occupancy and/or lower rental rates, making it more difficult for us to meet any debt service obligations we have incurred and limiting our ability to pay distributions to our stockholders.

• Any real estate investments we make may be affected by unfavorable real estate market and general economic conditions, which could decrease the value of those assets and reduce the investment return to our stockholders. These events could make it more difficult for us to meet debt service obligations and limit our ability to pay distributions to our stockholders.

• We cannot predict with any certainty how much, if any, of our distribution reinvestment plan proceeds will be available for general corporate purposes including, but not limited to: the repurchase of shares under our share redemption program; capital expenditures, tenant improvement costs and leasing costs related to any real estate properties we acquire; reserves required by any financings of real estate investments; the acquisition of real estate investments; and the repayment of debt. If such funds are not available from our distribution reinvestment plan offering, then we may have to use a greater proportion of our cash flow from operations to meet these cash requirements, which would reduce cash available for distributions and could limit our ability to redeem shares under our share redemption program.

• In February 2018, we exhausted funds available for all redemptions under our share redemption program for the remainder of 2018, and we can provide no assurances as to when we will be able to honor all redemption requests submitted.

All forward-looking statements should be read in light of the risks identified herein and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2017, all filed with the Securities and Exchange Commission (the “SEC”).

Overview

We were formed on January 12, 2015 as a Maryland corporation that elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2015 and we intend to continue to operate in such a manner. Substantially all of our business is conducted through our Operating Partnership, of which we are the sole general partner. Subject to certain restrictions and limitations, our business is externally managed by our advisor pursuant to an advisory agreement. KBS Capital Advisors manages our operations and our portfolio of core real estate properties. KBS Capital Advisors also provides asset-management, marketing, investor-relations and other administrative services on our behalf. Our advisor acquired 20,000 shares of our Class A common stock for an initial investment of $200,000. We have no paid employees.

We commenced a private placement offering exempt from registration pursuant to Rule 506(b) of Regulation D of the Securities Act of 1933, as amended (the “Securities Act”), on June 11, 2015, pursuant to which we offered a maximum of $105,000,000 of shares of our Class A common stock for sale to accredited investors, of which $5,000,000 of Class A shares were offered pursuant to our distribution reinvestment plan. We ceased offering shares in the primary portion of our private offering on April 27, 2016 and processed subscriptions for the primary portion of the private offering dated on or prior to April 27, 2016 through May 30, 2016. KBS Capital Markets Group LLC, an affiliate of our advisor, served as the dealer manager of the offering pursuant to a dealer manager agreement.

We sold 8,548,972 shares of our Class A common stock for gross offering proceeds of $76.8 million in our initial private offering, including 74,744 shares of our Class A common stock under our distribution reinvestment plan for gross offering proceeds of $0.7 million.

24

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

On February 4, 2015, we filed a registration statement on Form S-11 with the SEC to register an initial public offering to offer a maximum of $1,500,000,000 in shares of common stock for sale to the public in the primary offering, consisting of two classes of shares: Class A and Class T and a maximum of $800,000,000 in both classes of shares of our common stock pursuant to our distribution reinvestment plan. The SEC declared our registration statement effective on April 28, 2016 and we retained KBS Capital Markets Group LLC to serve as the dealer manager of the initial public offering. We terminated our primary initial public offering effective June 30, 2017. We are continuing to offer shares of common stock pursuant to our publicly registered distribution reinvestment plan offering.

We sold 122,721 and 270,415 shares of Class A and Class T common stock in the initial primary public offering, respectively, for aggregate gross offering proceeds of $3.9 million. As of June 30, 2018, we had sold 464,125 and 15,689 shares of Class A and Class T common stock under our distribution reinvestment plan, respectively, for aggregate gross offering proceeds of $4.5 million.

On October 3, 2017, we launched a second private placement offering exempt from registration pursuant to Rule 506(c) of Regulation D of the Securities Act pursuant to which we are currently offering a maximum of $1,000,000,000 in shares of our Class A common stock to accredited investors. Prior to the launch of the second private placement offering, on September 29, 2017, we entered a dealer manager agreement (the “NCPS Dealer Agreement”) with KBS Capital Advisors and North Capital Private Securities Corporation (“NCPS”) in connection with the second private placement offering. As of June 30, 2018, we sold 253,308 shares of Class A common stock in the second private offering for aggregate gross offering proceeds of $2.2 million.

As of June 30, 2018, we had redeemed 422,286 Class A shares for $3.5 million.

We intend to use substantially all of the net proceeds from our offerings to invest in a diverse portfolio of core real estate properties. We consider core properties to be existing properties with at least 80% occupancy. Based on the current market outlook, we expect our core focus in the U.S. office sector to reflect a value-creating core strategy, which is also known as a core-plus strategy. As of June 30, 2018, we owned four office buildings.

KBS Capital Advisors makes recommendations on all investments to our board of directors. All proposed real estate investments must be approved by at least a majority of our board of directors, including a majority of the conflicts committee. Unless otherwise provided by our charter, the conflicts committee may approve a proposed real estate investment without action by the full board of directors if the approving members of the conflicts committee constitute at least a majority of the board of directors.

We elected to be taxed as a REIT under the Internal Revenue Code, beginning with the taxable year ended December 31, 2015. If we meet the REIT qualification requirements, we generally will not be subject to federal income tax on the income that we distribute to our stockholders each year. If we fail to qualify for taxation as a REIT in any year after electing REIT status, our income will be taxed at regular corporate rates, and we may be precluded from qualifying for treatment as a REIT for the four-year period following our failure to qualify. Such an event could materially and adversely affect our net income and cash available for distribution to our stockholders. However, we are organized and will operate in a manner that will enable us to qualify for treatment as a REIT for federal income tax purposes beginning with our taxable year ended December 31, 2015, and we will continue to operate so as to remain qualified as a REIT for federal income tax purposes thereafter.

Market Outlook – Real Estate and Real Estate Finance Markets

Volatility in global financial markets and changing political environments can cause fluctuations in the performance of the U.S. commercial real estate markets.  Possible future declines in rental rates, slower or potentially negative net absorption of leased space and expectations of future rental concessions, including free rent to renew tenants early, to retain tenants who are up for renewal or to attract new tenants, may result in decreases in cash flows from investment properties. Increases in the cost of financing due to higher interest rates  may cause difficulty in refinancing debt obligations prior to or at maturity or at terms as favorable as the terms of existing indebtedness.  Market conditions can change quickly, potentially negatively impacting the value of real estate investments. Management continuously reviews our investment and debt financing strategies to optimize our portfolio and the cost of our debt exposure.

25

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Liquidity and Capital Resources

We are dependent upon the net proceeds from our offering stage to conduct our operations. We will obtain the capital required to make real estate investments and conduct our operations from the proceeds of our offering stage, from secured or unsecured financings from banks and other lenders and from any undistributed funds from our operations. As of June 30, 2018, we had raised approximately $87.5 million in gross offering proceeds from the sale of shares of our common stock in our initial private offering, second private offering and initial public offering. We terminated our primary initial public offering effective June 30, 2017 and launched a private offering solely to accredited investors pursuant to Rule 506(c) of Regulation D of the Securities Act on October 3, 2017. We continue to offer shares of common stock under our publicly registered distribution reinvestment plan.

If we are unable to raise substantial funds during our offering stage, we will make fewer investments resulting in less diversification in terms of the number and size of investments we make and the value of an investment in us will fluctuate more significantly with the performance of the specific assets we acquire. Further, we will have certain fixed operating expenses, including certain expenses as a publicly offered REIT, regardless of whether we are able to raise substantial funds during our offering stage. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and cash flow and limiting our ability to make distributions to our stockholders. We expect to establish a modest working capital reserve from our offering proceeds for maintenance and repairs of real properties, as we expect the vast majority of leases for the properties we acquire will provide for tenant reimbursement of operating expenses. However, to the extent that we have insufficient funds for such purposes, we may establish additional reserves from gross offering proceeds, out of cash flow from operations or net cash proceeds from the sale of properties.

As of June 30, 2018, we owned four office properties that were 97% occupied. We acquired these investments with the proceeds from the sale of our common stock in the private offering and debt financing, including a bridge loan from our advisor that we have since repaid. Operating cash needs during the six months ended June 30, 2018 were met through cash flow generated by our real estate investments and with proceeds from our offerings.

Our investments in real estate generate cash flow in the form of rental revenues and tenant reimbursements, which are reduced by operating expenditures, capital expenditures, debt service payments, the payment of asset management fees and corporate general and administrative expenses. Cash flow from operations from real estate investments will be primarily dependent upon the occupancy level of our portfolio, the net effective rental rates on our leases, the collectibility of rent and operating recoveries from our tenants and how well we manage our expenditures.

Our advisor advanced funds to us, which are non-interest bearing, for distribution record dates through the period ended May 31, 2016. We are only obligated to repay our advisor for its advance if and to the extent that:

(i) Our modified funds from operations (“MFFO”), as such term is defined by the Institute for Portfolio Alternatives and interpreted by us, for the immediately preceding month exceeds the amount of distributions declared for record dates of such prior month (an “MFFO Surplus”), and we will pay our advisor the amount of the MFFO Surplus to reduce the principal amount outstanding under the advance, provided that such payments shall only be made if management in its sole discretion expects an MFFO Surplus to be recurring for at least the next two calendar quarters, determined on a quarterly basis; or

(ii) Excess proceeds from third-party financings are available (“Excess Proceeds”), provided that the amount of any such Excess Proceeds that may be used to repay the principal amount outstanding under the advance shall be determined by the conflicts committee in its sole discretion.

In determining whether Excess Proceeds are available to repay the advance, our conflicts committee will consider whether cash on hand could have been used to reduce the amount of third-party financing provided to us. If such cash could have been used instead of third-party financing, the third-party financing proceeds will be available to repay the advance.

We expect that once we have fully invested the proceeds raised during our offering stage, our debt financing and other liabilities will be between 45% and 65% of the cost of our tangible assets (before deducting depreciation and other non-cash reserves). Though this is our target leverage, our charter does not limit us from incurring debt until our aggregate borrowings would exceed 300% of our net assets (before deducting depreciation and other non-cash reserves), which is effectively 75% of the cost of our tangible assets (before deducting depreciation and other non-cash reserves), though we may exceed this limit under certain circumstances. To the extent financing in excess of this limit is available at attractive terms, the conflicts committee may approve debt in excess of this limit. As of June 30, 2018, our aggregate borrowings were approximately 66% of our net assets before deducting depreciation and other non-cash reserves.

26

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

In addition to making investments in accordance with our investment objectives, we have used a portion of our capital resources to make certain payments to our advisor, the affiliated dealer manager of our initial private offering and initial public offering and our affiliated property manager. These payments include payments to our dealer manager for selling commissions, the dealer manager fee and the stockholder servicing fee, and payments to the dealer manager and our advisor for reimbursement of certain organization and other offering expenses. See “—Organization and Offering Costs” below.

We make payments to our advisor in connection with the management of our assets and costs incurred by our advisor in providing certain services to us. Through August 8, 2017, the asset management fee payable to our advisor was a monthly fee equal to one-twelfth of 1.6% of the cost of our investments, less any debt secured by or attributable to our investments. As of August 9, 2017, the asset management fee is a monthly fee payable to our advisor in an amount equal to one-twelfth of 1.0% of the cost of our investments including the portion of the investment that is debt financed. The cost of our real property investments is calculated as the amount paid or allocated to acquire the real property, plus budgeted capital improvement costs for the development, construction or improvements to the property once such funds are disbursed pursuant to a final approved budget and fees and expenses related to the acquisition, but excluding acquisition fees paid or payable to our advisor. In the case of investments made through joint ventures, the asset management fee is determined based on our proportionate share of the underlying investment. Our advisor waived asset management fees for the second and third quarters of 2017 and deferred payment of asset management fees related to the periods from October 2017 through June 2018. Our advisor’s waiver and deferral of its asset management fees resulted in additional cash being available to fund our operations. If our advisor chooses to no longer waive or defer such fees, our ability to fund our operations and our distributions at the current rate may be adversely affected.

We also pay fees to KBS Management Group, LLC (the “Co-Manager”), an affiliate of our advisor, pursuant to property management agreements with the Co-Manager, for certain property management services at our properties.

We elected to be taxed as a REIT and to operate as a REIT beginning with our taxable year ended December 31, 2015. To maintain our qualification as a REIT, we will be required to make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (computed without regard to the dividends-paid deduction and excluding net capital gain). Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board of directors deems relevant. Provided we have sufficient available cash flow, we intend to authorize and declare cash distributions based on daily record dates and pay cash distributions on a monthly basis. We have not established a minimum distribution level.

Under our charter, we are required to limit our total operating expenses to the greater of 2% of our average invested assets or 25% of our net income for the four most recently completed fiscal quarters, as these terms are defined in our charter, unless the conflicts committee has determined that such excess expenses were justified based on unusual and non-recurring factors. Operating expenses for the four fiscal quarters ended June 30, 2018 did not exceed the charter-imposed limitation.

Cash Flows from Operating Activities

As of June 30, 2018, we owned four office properties. During the six months ended June 30, 2018, net cash provided by operating activities was $1.4 million, compared to net cash provided by operating activities of $1.6 million during the six months ended June 30, 2017. We expect that our cash flows from operating activities will increase in future periods to the extent we make additional acquisitions of real estate and the related operations of such investments.

Cash Flows from Investing Activities

Net cash used in investing activities was $1.0 million for the six months ended June 30, 2018 and consisted of cash used for improvements to real estate.

Cash Flows from Financing Activities

During the six months ended June 30, 2018, net cash provided by financing activities was $2.3 million and consisted primarily of the following:

• $4.0 million of net cash provided by debt financing as a result of proceeds from notes payable of $45.0 million, offset by principal payments on notes payable of $41.0 million;

• $2.3 million of cash used for redemptions of common stock;

• $1.9 million of net cash provided by offering proceeds related to our second private offering; and

• $1.3 million of net cash distributions, after giving effect to distributions reinvested by stockholders of $1.0 million.

27

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Contractual Commitments and Contingencies

The following is a summary of our contractual obligations as of June 30, 2018 (in thousands).

			Payments Due During the Years Ending December 31,
Contractual Obligations	Total		Remainder of 2018		2019-2020		2021-2022		Thereafter
Outstanding debt obligations (1)	$	117,800	$	—	$	72,800	$	—	$	45,000
Interest payments on outstanding debt obligations (2)	14,704		2,324		8,819		3,411		150

_____________________

⁽¹⁾ Amounts include principal payments only.

⁽²⁾ Projected interest payments are based on the outstanding principal amount, maturity date and contractual interest rate in effect as of June 30, 2018 (consisting of the contractual interest rate). We incurred interest expense of $2.2 million, excluding amortization of deferred financing costs totaling $0.2 million, debt refinancing costs of $0.2 million and unrealized gains on derivative instruments of $0.8 million during the six months ended June 30, 2018.

Results of Operations

Overview

We conducted a primary initial public offering from April 28, 2016 through June 30, 2017 and are continuing to offer shares in our publicly registered distribution reinvestment plan offering. On October 3, 2017 we launched a private placement offering exempt from registration pursuant to Rule 506(c) of Regulation D of the Securities Act. Prior to our initial public offering, we conducted a private placement offering exempt from registration pursuant to Rule 506(b) of Regulation D of the Securities Act, that commenced on June 11, 2015. Our results of operations as of June 30, 2018 are not indicative of those expected in future periods as we commenced investment operations on August 12, 2015 in connection with our first investment and have since been raising money in and investing the proceeds from our offerings. As of June 30, 2017, we owned three office properties. We acquired one office property after June 30, 2017 and owned four office properties as of June 30, 2018. The results of operations presented for the three and six months ended June 30, 2018 and 2017 are not directly comparable due to our acquisition activity. In general, we expect that our income and expenses related to our portfolio will increase in future periods to the extent we make additional acquisitions of real estate investments.

Comparison of the three months ended June 30, 2018 versus the three months ended June 30, 2017

	For the Three Months Ended June 30,					Increase (Decrease)			Percentage Change		$ Change Due to Acquisition (1)		$ Change Due to Property  Held Throughout Both Periods (2)
	2018		2017
Rental income	$	4,825	$	3,290		$	1,535		47	%	$	1,523	$	12
Tenant reimbursements	867		877			(10		)	(1	)%	8		(18		)
Other operating income	37		20			17			85	%	20		(3		)
Operating, maintenance and management costs	1,336		878			458			52	%	324		134
Property management fees and expenses to affiliate	42		31			11			35	%	10		1
Real estate taxes and insurance	679		513			166			32	%	259		(93		)
Asset management fees to affiliate	462		—			462			100	%	109		353
General and administrative expenses	362		422			(60		)	(14	)%	n/a		n/a
Depreciation and amortization	2,784		1,822			962			53	%	1,092		(130		)
Interest expense	797		757			40			5	%	125		(85		)
Interest and other income	8		18			(10		)	(56	)%	—		(10		)
Loss from extinguishment of debt	—		(206		)	206			(100	)%	—		206

_____________________

⁽¹⁾Represents the dollar amount increase for the three months ended June 30, 2018 compared to the three months ended June 30, 2017 related to a real estate investment acquired on or after April 1, 2017.

⁽²⁾ Represents the dollar amount increase (decrease) for the three months ended June 30, 2018 compared to the three months ended June 30, 2017 with respect to the real estate investment owned by us throughout both periods presented.

28

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Rental income and tenant reimbursements increased from $4.2 million for the three months ended June 30, 2017 to $5.7 million for the three months ended June 30, 2018, primarily as a result of the growth in our real estate portfolio. We expect rental income and tenant reimbursements to increase in future periods to the extent we make additional acquisitions of real estate investments.

Operating, maintenance, and management costs increased from $0.9 million for the three months ended June 30, 2017 to $1.3 million for the three months ended June 30, 2018, primarily as a result of the growth in our real estate portfolio; $0.3 million and $0.1 million of these costs relate to legal fees incurred in connection with a water intrusion damage claim at Von Karman Tech Center. We expect operating, maintenance, and management costs to increase in future periods to the extent we make additional acquisitions of real estate investments.

Property management fees and expenses to affiliate increased from $31,000 for the the three months ended June 30, 2017 to $42,000 for the three months ended June 30, 2018, primarily as a result of the growth in our real estate portfolio. We expect property management fees to increase in future periods to the extent we make additional acquisitions of real estate investments.

Real estate taxes and insurance increased from $0.5 million for the three months ended June 30, 2017 to $0.7 million for the three months ended June 30, 2018, primarily as a result of the growth in our real estate portfolio, partially offset by a $0.1 million decrease in property tax due to the reassessment of property value at The Offices at Greenhouse. We expect real estate taxes and insurance to increase in future periods to the extent we make additional acquisitions of real estate investments.

Asset management fees to affiliate for the three months ended June 30, 2018 was $0.5 million. Asset management fees to affiliate for the three months ended June 30, 2017 was $0.2 million, all of which were waived by our advisor. The overall increase in asset management fees before factoring any fees waived was due to the growth in our real estate portfolio as well as an amendment to our advisory agreement on August 9, 2017, which amended the terms of the asset management fees. We expect asset management fees to increase in future periods to the extent we make additional real estate investments.

Depreciation and amortization increased from $1.8 million for the three months ended June 30, 2017 to $2.8 million for the three months ended June 30, 2018, primarily as a result of the growth in our real estate portfolio. We expect depreciation and amortization to increase in future periods to the extent we make additional acquisitions of real estate investments.

Interest expense remained consistent at $0.8 million for the three months ended June 30, 2018 and 2017. Included in interest expense is the amortization of deferred financing costs of $0.1 million and $0.1 million for the three months ended June 30, 2018 and 2017, respectively. Included in interest expense during the three months ended June 30, 2018 was $0.4 million of unrealized gains on interest rate swaps. We expect interest expense to increase in the future as a result of anticipated borrowings in future periods to the extent we make additional acquisitions of real estate investments.

During the three months ended June 30, 2017, we recognized a loss from extinguishment of debt of $0.2 million related to the write-off of unamortized deferred financing costs as a result of the pay-off of the Von Karman Tech Center Mortgage Loan on May 9, 2017.

29

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Comparison of the six months ended June 30, 2018 versus the six months ended June 30, 2017

	For the Six Months Ended June 30,					Increase (Decrease)			Percentage Change		$ Change Due to Acquisition (1)		$ Change Due to Property  Held Throughout Both Periods (2)
	2018		2017
Rental income	$	9,239	$	6,526		$	2,713		42	%	$	2,663	$	50
Tenant reimbursements	1,995		1,656			339			20	%	207		132
Other operating income	76		38			38			100	%	41		(3		)
Operating, maintenance and management costs	2,205		1,623			582			36	%	470		112
Property management fees and expenses to affiliate	84		60			24			40	%	20		4
Real estate taxes and insurance	1,430		970			460			47	%	495		(35		)
Asset management fees to affiliate	918		214			704			329	%	217		487
General and administrative expenses	755		763			(8		)	(1	)%	n/a		n/a
Depreciation and amortization	5,093		3,540			1,553			44	%	1,694		(141		)
Interest expense	1,768		1,500			268			18	%	248		20
Interest and other income	13		35			(22		)	(63	)%	—		(22		)
Loss from extinguishment of debt	—		(206		)	206			(100	)%	—		206

_____________________

⁽¹⁾Represents the dollar amount increase for the six months ended June 30, 2018 compared to the six months ended June 30, 2017 related to a real estate investment acquired on or after January 1, 2017.

⁽²⁾ Represents the dollar amount increase (decrease) for the six months ended June 30, 2018 compared to the six months ended June 30, 2017 with respect to the real estate investment owned by us throughout both periods presented.

Rental income and tenant reimbursements increased from $8.2 million for the six months ended June 30, 2017 to $11.2 million for the six months ended June 30, 2018, primarily as a result of the growth in our real estate portfolio. We expect rental income and tenant reimbursements to increase in future periods to the extent we make additional acquisitions of real estate investments.

Operating, maintenance, and management costs increased from $1.6 million for the six months ended June 30, 2017 to $2.2 million for the six months ended June 30, 2018, primarily as a result of the growth in our real estate portfolio; $0.5 million and $0.1 million of these costs relate to legal fees incurred in connection with a water intrusion damage claim at Von Karman Tech Center. We expect operating, maintenance, and management costs to increase in future periods to the extent we make additional acquisitions of real estate investments.

Property management fees and expenses to affiliate increased from $60,000 for the the six months ended June 30, 2017 to $84,000 for the six months ended June 30, 2018, primarily as a result of the growth in our real estate portfolio. We expect property management fees to increase in future periods to the extent we make additional acquisitions of real estate investments.

Real estate taxes and insurance increased from $1.0 million for the six months ended June 30, 2017 to $1.4 million for the six months ended June 30, 2018, primarily as a result of the growth in our real estate portfolio. We expect real estate taxes and insurance to increase in future periods to the extent we make additional acquisitions of real estate investments.

Asset management fees to affiliate increased from $0.2 million for the six months ended June 30, 2017 to $0.9 million for the six months ended June 30, 2018. Asset management fees to affiliate for the three months ended June 30, 2017 was $0.2 million, all of which were waived by our advisor. The overall increase in asset management fees before factoring any fees waived was due to the growth in our real estate portfolio as well as an amendment to our advisory agreement on August 9, 2017, which amended the terms of the asset management fees. We expect asset management fees to increase in future periods to the extent we make additional real estate investments.

Depreciation and amortization increased from $3.5 million for the six months ended June 30, 2017 to $5.1 million for the six months ended June 30, 2018, primarily as a result of the growth in our real estate portfolio. We expect depreciation and amortization to increase in future periods to the extent we make additional acquisitions of real estate investments.

30

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Interest expense increased from $1.5 million for the six months ended June 30, 2017 to $1.8 million for the six months ended June 30, 2018. Included in interest expense is the amortization of deferred financing costs of $0.2 million and $0.3 million for the six months ended June 30, 2018 and 2017, respectively. Included in interest expense during the six months ended June 30, 2018 was $0.8 million of unrealized gains on interest rate swaps and $0.2 million of debt refinancing costs. The increase in interest expense is primarily due to increased borrowings in connection with the acquisition of real estate, resulting in an increase in the average loan balance. We expect interest expense to increase in the future as a result of anticipated borrowings in future periods to the extent we make additional acquisitions of real estate investments.

During the six months ended June 30, 2017, we recognized a loss from extinguishment of debt of $0.2 million related to the write-off of unamortized deferred financing costs as a result of the pay-off of the Von Karman Tech Center Mortgage Loan on May 9, 2017.

Funds from Operations and Modified Funds from Operations

We believe that funds from operations (“FFO”) is a beneficial indicator of the performance of an equity REIT. We compute FFO in accordance with the current National Association of Real Estate Investment Trusts (“NAREIT”) definition. FFO represents net income, excluding gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), impairment losses on real estate assets, depreciation and amortization of real estate assets, and adjustments for unconsolidated partnerships and joint ventures. We believe FFO facilitates comparisons of operating performance between periods and among other REITs. However, our computation of FFO may not be comparable to other REITs that do not define FFO in accordance with the NAREIT definition or that interpret the current NAREIT definition differently than we do. Our management believes that historical cost accounting for real estate assets in accordance with U.S. generally accepted accounting principles (“GAAP”) implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and provides a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities.

Changes in accounting rules have resulted in a substantial increase in the number of non-operating and non-cash items included in the calculation of FFO. As a result, our management also uses MFFO as an indicator of our ongoing performance as well as our dividend sustainability. MFFO excludes from FFO: acquisition fees and expenses (to the extent that such fees and expenses have been recorded as operating expenses); adjustments related to contingent purchase price obligations; amounts relating to straight-line rents and amortization of above and below market intangible lease assets and liabilities; accretion of discounts and amortization of premiums on debt investments; amortization of closing costs relating to debt investments; impairments of real estate-related investments; mark-to-market adjustments included in net income; and gains or losses included in net income for the extinguishment or sale of debt or hedges. We compute MFFO in accordance with the definition of MFFO included in the practice guideline issued by the IPA in November 2010 as interpreted by management. Our computation of MFFO may not be comparable to other REITs that do not compute MFFO in accordance with the current IPA definition or that interpret the current IPA definition differently than we do.

We believe that MFFO is helpful as a measure of ongoing operating performance because it excludes costs that management considers more reflective of investing activities and other non-operating items included in FFO.  Management believes that, by excluding acquisition costs (to the extent such costs have been recorded as operating expenses) as well as non-cash items such as straight line rental revenue, MFFO provides investors with supplemental performance information that is consistent with the performance indicators and analysis used by management, in addition to net income and cash flows from operating activities as defined by GAAP, to evaluate the sustainability of our operating performance.  MFFO provides comparability in evaluating the operating performance of our portfolio with other non-traded REITs which typically have limited lives with short and defined acquisition periods and targeted exit strategies.  MFFO, or an equivalent measure, is routinely reported by non-traded REITs, and we believe often used by analysts and investors for comparison purposes.

31

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

FFO and MFFO are non-GAAP financial measures and do not represent net income as defined by GAAP. Net income as defined by GAAP is the most relevant measure in determining our operating performance because FFO and MFFO include adjustments that investors may deem subjective, such as adding back expenses such as depreciation and amortization and the other items described above. Accordingly, FFO and MFFO should not be considered as alternatives to net income as an indicator of our current and historical operating performance. In addition, FFO and MFFO do not represent cash flows from operating activities determined in accordance with GAAP and should not be considered an indication of our liquidity. We believe FFO and MFFO, in addition to net income and cash flows from operating activities as defined by GAAP, are meaningful supplemental performance measures.

Although MFFO includes other adjustments, the exclusion of adjustments for straight-line rent, the amortization of above- and below-market leases, unrealized gain on derivative instruments and loss from extinguishment of debt are the most significant adjustments for the periods presented.  We have excluded these items based on the following economic considerations:

• Adjustments for straight-line rent.  These are adjustments to rental revenue as required by GAAP to recognize contractual lease payments on a straight-line basis over the life of the respective lease.  We have excluded these adjustments in our calculation of MFFO to more appropriately reflect the current economic impact of our in-place leases, while also providing investors with a useful supplemental metric that addresses core operating performance by removing rent we expect to receive in a future period or rent that was received in a prior period;

• Amortization of above- and below-market leases.  Similar to depreciation and amortization of real estate assets and lease related costs that are excluded from FFO, GAAP implicitly assumes that the value of intangible lease assets and liabilities diminishes predictably over time and requires that these charges be recognized currently in revenue.  Since market lease rates in the aggregate have historically risen or fallen with local market conditions, management believes that by excluding these charges, MFFO provides useful supplemental information on the realized economics of the real estate;

• Unrealized (gains) losses on derivative instruments.  These adjustments include unrealized (gains) losses from mark-to-market adjustments on interest rate swaps. The change in fair value of interest rate swaps not designated as a hedge are non-cash adjustments recognized directly in earnings and are included in interest expense.  We have excluded these adjustments in our calculation of MFFO to more appropriately reflect the economic impact of our interest rate swap agreements; and

• Loss from extinguishment of debt.  A loss from extinguishment of debt represents the difference between the carrying value of any consideration transferred to the lender in return for the extinguishment of a debt and the net carrying value of the debt at the time of settlement.  We have excluded the loss from extinguishment of debt in our calculation of MFFO because these losses do not impact the current operating performance of our investments and do not provide an indication of future operating performance.

Our calculation of FFO, which we believe is consistent with the calculation of FFO as defined by NAREIT, is presented in the following table, along with our calculation of MFFO, for the three and six months ended June 30, 2018 and 2017, respectively (in thousands). No conclusions or comparisons should be made from the presentation of these periods.

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
Net loss	$	(725	)	$	(424	)	$	(930	)	$	(621	)
Depreciation of real estate assets	974			626			1,941			1,247
Amortization of lease-related costs	1,810			1,196			3,152			2,293
FFO	2,059			1,398			4,163			2,919
Straight-line rent and amortization of above- and below-market leases, net	(1,071		)	(544		)	(1,964		)	(1,074		)
Unrealized gain on derivative instruments	(439		)	—			(811		)	—
Loss from extinguishment of debt	—			206			—			206
MFFO	$	549		$	1,060		$	1,388		$	2,051

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

32

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Organization and Offering Costs

Offering costs include all expenses incurred in connection with our offerings of securities. Organization costs include all expenses incurred in connection with our formation, including but not limited to legal fees and other costs to incorporate.

With respect to our public offering, our advisor and dealer manager generally paid our organization and offering expenses incurred in the primary portion of our initial public offering (other than selling commissions, dealer manager fees and stockholder servicing fees) directly.

We reimbursed our advisor, our affiliated dealer manager and their affiliates up to 1.0% of gross primary offering proceeds raised in our initial public offering for commercially reasonable organization and offering expenses. Our advisor, our affiliated dealer manager, and their affiliates were responsible for all organization and other offering expenses (which excludes selling commissions, dealer manager fees and stockholder servicing fees) related to the primary portion of our initial public offering to the extent they exceeded 1.0% of gross proceeds raised in the primary portion of our initial public offering. We did not reimburse our affiliated dealer manager for wholesaling compensation expenses.

During our initial private offering, we were obligated to reimburse our advisor, our affiliated dealer manager or their affiliates, as applicable, for organization and offering costs (excluding wholesaling compensation expenses) paid by them on our behalf. We recorded $1.5 million of offering costs (other than selling commissions and dealer manager fees) related to our initial private offering, all of which have been reimbursed to our advisor or its affiliates.

Our advisor has agreed to pay all offering expenses related to our recently launched second private placement offering directly on our behalf without reimbursement by us.

Through June 30, 2018, our advisor and its affiliates had incurred organization and other offering costs (which exclude selling commissions, dealer manager fees and stockholder servicing fees) on our behalf in connection with the initial public offering of approximately $4.4 million. As of June 30, 2018, we recorded $39,358 of organization and other offering expenses related to the initial public offering, which amounts represent our maximum liability for organization and other offering costs as of the termination of our primary initial public offering based on the limitation described above.

As of June 30, 2018, KBS Capital Advisors had incurred $3.6 million in offering expenses on our behalf related to the second private placement offering. The advisor has agreed to pay these expenses on our behalf without reimbursement by us.

Distributions

During our offering stage, when we may raise capital more quickly than we acquire income producing assets, and from time to time during our operational stage, we may not pay distributions solely from our cash flows from operations, in which case distributions may be paid in whole or in part from debt financing, including advances from our advisor, if necessary. Distributions declared, distributions paid and cash flows from operations were as follows for the first and second quarters of 2018 (in thousands, except per share amounts):

	Cash Distributions Declared (1)		Cash Distribution Declared Per Class A Share (1) (2)		Cash Distribution Declared Per Class T Share (1) (2)		Cash Distributions Paid (3)						Cash Flows (used in) provided by Operations
Period							Cash		Reinvested		Total
First Quarter 2018	$	1,118	$	0.119	$	0.119	$	612	$	511	$	1,123	$	(574	)
Second Quarter 2018	1,200		0.128		0.128		667		503		1,170		1,996
	$	2,318	$	0.247	$	0.247	$	1,279	$	1,014	$	2,293	$	1,422

_____________________

⁽¹⁾ Distributions for the periods from January 1, 2018 through April 30, 2018 and from May 1, 2018 through June 30, 2018 were based on daily record dates and were calculated based on stockholders of record each day during these periods at a rate of $0.00132452 per share per day and $0.00144493 per share per day, respectively.

⁽²⁾ Assumes Class A and Class T shares were issued and outstanding each day that was a record date for distributions during the period presented.

⁽³⁾ Distributions are paid on a monthly basis. In general, distributions for all record dates of a given month are paid on or about the first business day of the following month.

33

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

For the six months ended June 30, 2018, we paid aggregate distributions of $2.3 million, including $1.3 million of distributions paid in cash and $1.0 million of distributions reinvested through our distribution reinvestment plan. Our net loss for the six months ended June 30, 2018 was $0.9 million. FFO for the six months ended June 30, 2018 was $4.2 million and cash flows provided by operations for the six months ended June 30, 2018 was $1.4 million. See the reconciliation of FFO to net loss above. We funded our total distributions paid, which includes net cash distributions and distributions reinvested by stockholders, with $1.2 million of current period cash flows from operations, $0.7 million of cash flows from operations in excess of distributions paid during 2017 and $0.4 million of debt financing. In addition, our advisor waived and deferred certain of its asset management fees which resulted in more cash being available for distribution. To the extent that we pay distributions from sources other than our cash flows from operations, we will have less funds available for the acquisition of real estate investments, the overall return to our stockholders may be reduced and subsequent investors will experience dilution.

Going forward we expect our board of directors to continue to authorize and declare cash distributions based on daily record dates and to pay these distributions on a monthly basis. Cash distributions will be determined by our board of directors based on our financial condition and such other factors as our board of directors deems relevant. Our board of directors has not pre-established a percentage rate of return for cash distributions to stockholders. We have not established a minimum distribution level, and our charter does not require that we make distributions to our stockholders.

Over the long-term, we expect that a greater percentage of our distributions will be paid from cash flow from operations and FFO (except with respect to distributions related to sales of our assets. Our operating performance cannot be accurately predicted and may deteriorate in the future due to numerous factors, including those discussed under “Forward - Looking Statements,” “Market Outlook - Real Estate and Real Estate Finance Markets,” “Liquidity and Capital Resources” and “Results of Operations” herein and the risks discussed herein and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the SEC. Those factors include: our ability to raise capital to make additional investments; the future operating performance of our current and future real estate investments in the existing real estate and financial environment; our advisor’s ability to identify additional real estate investments that are suitable to execute our investment objectives; the success and economic viability of our tenants; our ability to refinance existing indebtedness at comparable terms; changes in interest rates on any variable rate debt obligations we incur; and the level of participation in our distribution reinvestment plan. In the event our FFO and/or cash flow from operations decrease in the future, the level of our distributions may also decrease. In addition, future distributions declared and paid may exceed FFO and/or cash flow from operations.

Critical Accounting Policies

Our consolidated interim financial statements and condensed notes thereto have been prepared in accordance with GAAP and in conjunction with the rules and regulations of the SEC. The preparation of our financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. A discussion of the accounting policies that management considers critical in that they involve significant management judgments, assumptions and estimates is included in our Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC. There have been no significant changes to our policies during 2018, except for our adoption of the revenue recognition standards issued by the Financial Accounting Standards Board effective on January 1, 2018.

Revenue Recognition

Effective January 1, 2018, we adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU No. 2014-09”) using the modified retrospective approach, which requires a cumulative effect adjustment as of the date of our adoption.  Under the modified retrospective approach, an entity may also elect to apply this standard to either (i) all contracts as of January 1, 2018 or (ii) only to contracts that were not completed as of January 1, 2018.  A completed contract is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP that was in effect before the date of initial application. We elected to apply this standard only to contracts that were not completed as of January 1, 2018. 

34

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Based on our evaluation of contracts within the scope of ASU No. 2014-09, revenue that is impacted by ASU No. 2014-09 includes revenue generated by sales of real estate, other operating income and tenant reimbursements for substantial services earned at our properties. The recognition of such revenue will occur when the services are provided and the performance obligations are satisfied. For the three and six months ended June 30, 2018, tenant reimbursements for substantial services accounted for under ASU No. 2014-09 were $28,000 and $64,000, respectively, and were included in tenant reimbursements on the accompanying statements of operations.

Sales of Real Estate

Effective January 1, 2018, we adopted the guidance of ASC 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (“ASC 610-20”), which applies to sales or transfers to noncustomers of nonfinancial assets or in substance nonfinancial assets that do not meet the definition of a business.  Generally, our sales of real estate would be considered a sale of a nonfinancial asset as defined by ASC 610-20.

ASC 610-20 refers to the revenue recognition principles under ASU No. 2014-09.  Under ASC 610-20, if we determine it does not have a controlling financial interest in the entity that holds the asset and the arrangement meets the criteria to be accounted for as a contract, we would derecognize the asset and recognize a gain or loss on the sale of the real estate when control of the underlying asset transfers to the buyer.  As a result of the adoption of ASU 610-20, there was no impact to our consolidated financial statements of operations for the six months ended June 30, 2018 and 2017 since we did not sell any real estate properties for those periods.

Subsequent Events

We evaluate subsequent events up until the date the consolidated financial statements are issued.

Cash Distributions Paid

On July 2, 2018, we paid cash distributions of $0.4 million, which related to distributions on our common stock, declared for daily record dates for each day in the period from June 1, 2018 through June 30, 2018. On August 1, 2018, we paid cash distributions of $0.4 million, which related to distributions on our common stock, declared for daily record dates for each day in the period from July 1, 2018 through July 31, 2018.

Distributions Authorized

On July 16, 2018, our board of directors authorized cash distributions on the outstanding shares of all classes of our common stock based on daily record dates for the period from August 1, 2018 through August 31, 2018, which we expect to pay in September 2018. On August 6, 2018, our board of directors authorized cash distributions on the outstanding shares of all classes of our common stock based on daily record dates for the period from September 1, 2018 through September 30, 2018, which we expect to pay in October 2018, and the period from October 1, 2018 through October 31, 2018, which we expect to pay in November 2018. Investors may choose to receive cash distributions or purchase additional shares through our distribution reinvestment plan. Distributions for these periods will be calculated based on stockholders of record each day during these periods at a rate of $0.00144493 per share per day.

35

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity and to fund the acquisition, expansion and refinancing of our real estate investment portfolio and operations. Our profitability and the value of our real estate investment portfolio may be adversely affected during any period as a result of interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs. We may manage interest rate risk by maintaining a ratio of fixed rate, long-term debt such that variable rate exposure is kept at an acceptable level or we may utilize a variety of financial instruments, including interest rate caps, floors, and swap agreements, in order to limit the effects of changes in interest rates on our operations. When we use these types of derivatives to hedge the risk of interest-earning assets or interest‑bearing liabilities, we may be subject to certain risks, including the risk that losses on a hedge position will reduce the funds available for the payment of distributions to our stockholders and that the losses may exceed the amount we invested in the instruments.

We expect to borrow funds and make investments at a combination of fixed and variable rates. Interest rate fluctuations will generally not affect future earnings or cash flows on fixed rate debt unless such debt mature or is otherwise terminated. However, interest rate changes will affect the fair value of fixed rate instruments. At June 30, 2018, we did not have any fixed rate debt outstanding.

Conversely, movements in interest rates on variable rate debt would change future earnings and cash flows, but not significantly affect the fair value of the debt. However, changes in required risk premiums would result in changes in the fair value of variable rate instruments. At June 30, 2018, we were exposed to market risks related to fluctuations in interest rates on $117.8 million of variable rate debt outstanding. This amount does not take into account the impact of $78.5 million of two forward interest rate swap agreements that were not yet effective as of June 30, 2018. Based on interest rates as of June 30, 2018, if interest rates were 100 basis points higher or lower during the 12 months ending June 30, 2019, interest expense on our variable rate debt would increase or decrease by $1.2 million.

The weighted average interest rate of our variable rate debt at June 30, 2018 was 3.9%.  The interest rate represents the actual interest rate in effect at June 30, 2018 (consisting of the contractual interest rate), using interest rate indices as of June 30, 2018 where applicable.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this report, management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based upon, and as of the date of, the evaluation, our principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

36

PART II. OTHER INFORMATION

Item 1.    Legal Proceedings

None.

Item 1A. Risk Factors

Please see the risks discussed below and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2017.

We have paid distributions from advances from our advisor and debt financing. In the future we may continue to pay distributions from financings, including an advance from our advisor, and we may not pay distributions solely from our cash flow from operations. To the extent we pay distributions from sources other than our cash flows from operations, we will have less funds available for investment in assets, the overall return to our stockholders may be reduced and subsequent investors will experience dilution.

We expect to have little, if any, cash flow from operations available for distribution until we make substantial investments, and we therefore expect that portions of distributions made during our first few years of operations will be considered a return of capital. During our offering stage, when we may raise capital more quickly than we acquire income-producing assets, and for some period after our offering stage, we may not be able to pay distributions solely from our cash flow from operations, in which case distributions may be paid in whole or in part from debt financing, including advances from our advisor. Our distributions paid through June 30, 2018 have been paid from cash flow from operating activities, advances from our advisor and debt financing and we expect that in the future we may not pay distributions solely from our cash flow from operations.

We may fund distributions from any source, including, without limitation, offering proceeds or borrowings (which may constitute a return of capital). We may also fund such distributions from the sale of assets. If we fund distributions from borrowings, our interest expense and other financing costs, as well as the repayment of such borrowings, will reduce our earnings and cash flow from operations available for distribution in future periods. If we fund distributions from the sale of assets, this will affect our ability to generate cash flow from operations in future periods. To the extent that we pay distributions from sources other than our cash flow from operations, we will have fewer funds available with which to make real estate investments, the overall return to our stockholders may be reduced and subsequent investors will experience dilution. In addition, to the extent distributions exceed cash flow from operations, a stockholder’s basis in our stock will be reduced and, to the extent distributions exceed a stockholder’s basis, the stockholder may recognize capital gain. There is no limit on the amount of distributions we may fund from sources other than from cash flow from operations.

For the six months ended June 30, 2018, we paid aggregate distributions of $2.3 million, including $1.3 million of distributions paid in cash and $1.0 million of distributions reinvested through our distribution reinvestment plan. We funded our total distributions paid, which includes net cash distributions and distributions reinvested by stockholders, with $1.2 million of current period cash flows from operations, $0.7 million of cash flows from operations in excess of distributions paid during 2017 and $0.4 million of debt financing. In addition, our advisor waived and deferred certain of its asset management fees which resulted in more cash being available for distribution.

See Part I, Item II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations -Distributions” herein.

If our advisor determines to no longer waive or defer certain fees due to them, our ability to fund our operations and our distributions at the current rate may be adversely affected.

        From time to time, our advisor may agree to waive or defer all or a portion of the asset management or other fees, compensation or incentives due to it, pay general administrative expenses or otherwise supplement stockholder returns in order to increase the amount of cash available to fund our operations or make distributions to stockholders. Specifically, in the second and third quarters of 2017 our advisor waived its asset management fee and in the fourth quarter of 2017 through the second quarter of 2018, the advisor deferred its asset management fee. If our advisor chooses to no longer waive or defer such fees, our ability to fund our operations and our distributions at the current rate may be adversely affected.

37

PART II. OTHER INFORMATION (CONTINUED)

Item 1A. Risk Factors (continued)

In February 2018 we exhausted funds available for all redemptions under our share redemption program for the remainder of 2018. Therefore, our stockholders will be unable to sell their shares under our share redemption program until January 2019 when the dollar limitation resets. However, because of the amount of unfulfilled redemption requests, and limitations on the dollar amount of shares that may be redeemed and the number of shares that may be redeemed, it is likely that we will not be able to redeem all shares when the dollar limitation resets.

During any calendar year, we may redeem (i) only the number of shares that we could purchase with the amount of net proceeds from the sale of shares under our distribution reinvestment plan during the prior calendar year and (ii) no more than 5% of the weighted‑average number of shares outstanding during the prior calendar year. In 2017, our net proceeds from the distribution reinvestment plan were $2.3 million. As of the February 2018 redemption date, we had exhausted this amount, and as of June 30, 2018, we had $4.7 million of outstanding and unfulfilled redemption requests representing 560,487 shares.

The annual limitation on the dollar amount of shares that may be redeemed under our share redemption program will be reset on January 1, 2019. Once we have funds available for redemption, if we cannot redeem all shares presented for redemption in any month because of the dollar limitation on redemptions or the limitation on the number of shares that we may redeem during the calendar year, each set forth in our share redemption program, then we will honor redemption requests on a pro rata basis, except that if a pro rata redemption would result in a stockholder owning less than the minimum purchase requirement described in our most recently effective registration statement, then we would redeem all of such stockholder’s shares. Therefore, even once the annual limitation on the dollar amount of shares that may be redeemed is reset, it is likely that our stockholders will be unable to have all of their shares redeemed under our share redemption program because we will be forced to redeem our stockholders pro rata based on the amount of funds we have available for redemption and the limitation on the number of shares that may be redeemed.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

a) During the period covered by this Form 10-Q, we sold the following equity securities that were not registered under the Securities Act of 1933 (the “Act”).

Pursuant to Rule 506(c) of Regulation D of the Act, we are currently conducting a private offering for the sale of a maximum of $1,000,000,000 of shares of our Class A common stock to accredited investors through a best efforts private placement offering which commenced on October 3, 2017. The exemption is available to us because the shares are being offered and sold solely to accredited investors and we are verifying accredited investor status. Prior to the launch of the private offering, on September 29, 2017, we engaged North Capital Private Securities Corporation (“NCPS”) to act as dealer manager for the offering. For sales executed by NCPS, our advisor pays NCPS, without reimbursement from us, selling commissions of 0.5% of the gross offering proceeds. Through December 11, 2017, shares were sold in the private offering at $8.75 per share. Effective December 12, 2017, we are offering shares in the private offering at $8.79 per share. Through June 30, 2018, we had raised approximately $2.2 million related to the sale of 253,308 shares of our Class A common stock in the private offering. Through June 30, 2018, our advisor had paid underwriting commissions of approximately $17,000 related to this private offering.

b) Not applicable.

c) We have adopted a share redemption program that may enable stockholders to sell their shares to us in limited circumstances.

38

PART II. OTHER INFORMATION (CONTINUED)

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds (continued)

Pursuant to the share redemption program, as amended to date, there are several limitations on our ability to redeem shares:

• Unless the shares are being redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence” (each as defined under the share redemption program), we may not redeem shares until the stockholder has held his or her shares for one year.

• During any calendar year, we may redeem only the number of shares that we could purchase with the amount of net proceeds from the sale of shares under our distribution reinvestment plan during the prior calendar year. However, we may increase or decrease the funding available for the redemption of shares pursuant to the program upon ten business days’ notice to our stockholders.

• During any calendar year, we may redeem no more than 5% of the weighted‑average number of shares outstanding during the prior calendar year.

• We have no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency.

We redeem shares submitted in connection with an ordinary redemption at 95.0% of our most recent estimated NAV per share as of the applicable redemption date.

For purposes of determining whether a redeeming stockholder has held the share submitted for redemption for at least one year, the time period begins as of the date the stockholder acquired the share; provided, that shares purchased by the redeeming stockholder pursuant to the distribution reinvestment plan or received as a stock dividend will be deemed to have been acquired on the same date as the initial share to which the distribution reinvestment plan shares or stock dividend shares relate.

On December 8, 2017 our board of directors approved an estimated NAV per share of our common stock of $8.79 based on the estimated value of our assets less the estimated value of our liabilities, or NAV, divided by the number of shares outstanding, all as of September 30, 2017, with the exception of a reduction to our net asset value for acquisition and financing costs related to a real estate acquisition subsequent to September 30, 2017. For a full description of the methodologies used to value our assets and liabilities in connection with the calculation of our estimated NAV per share as of September 30, 2017, see the Current Report on Form 8-K filed with the SEC on December 11, 2017, and incorporated herein by reference. We expect to update the estimated NAV annually in December.

In several respects the Company treats redemptions sought upon a stockholder’s death, qualifying disability or determination of incompetence differently from other redemptions:

• there is no one-year holding requirement; and

• the redemption price will be the estimated NAV per share as of the redemption date.

We may amend, suspend or terminate the program upon 30 days’ notice to our stockholders, provided that we may increase or decrease the funding available for the redemption of shares pursuant to the share redemption program upon 10 business days’ notice. We may provide this notice by including such information in a Current Report on Form 8-K or in our annual or quarterly reports, all publicly filed with the SEC, or by a separate mailing to our stockholders.

39

PART II. OTHER INFORMATION (CONTINUED)

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds (continued)

As of June 30, 2018, we had a total of $4.7 million outstanding and unfulfilled redemption requests representing 560,487 shares. During the six months ended June 30, 2018, we funded redemptions under our share redemption program with the net proceeds from our distribution reinvestment plan, and we redeemed shares pursuant to our share redemption program as follows:

Month	Total Number of Shares Redeemed	Average Price Paid Per Share (1)		Approximate Dollar Value of Shares Available That May Yet Be  Redeemed Under the Program
January 2018	36,971	$	8.35	(2)
February 2018	240,101	$	8.35	(2)
March 2018	—	$	—	(2)
April 2018	—	$	—	(2)
May 2018	—	$	—	(2)
June 2018	—	$	—	(2)
Total	277,072

_____________________

⁽¹⁾ The prices at which we redeem shares under the program are as set forth above.

⁽²⁾ We limit the dollar value of shares that may be redeemed under the program as described above. One of these limitations is that during each calendar year, our share redemption program limits the number of shares we may redeem to those that we could purchase with the amount of the net proceeds from the sale of shares under our distribution reinvestment plan during the prior calendar year. However, we may increase or decrease the funding available for the redemption of shares upon ten business days’ notice to our stockholders. Based on the amount of net proceeds raised from the sale of shares under our distribution reinvestment plan during 2017, we had $2.3 million available of shares eligible for redemption in 2018. In February 2018, we exhausted all shares eligible for redemption for 2018. As of June 30, 2018, we had a total of $4.7 million outstanding and unfulfilled redemption requests representing 560,487 shares.  We recorded $1.0 million of redemptions payable in other liabilities on the accompanying consolidated balance sheets, which represents the amount available to be redeemed in 2019 based on net proceeds from the sale of shares under our distribution reinvestment plan as of June 30, 2018.

Item 3.    Defaults upon Senior Securities

None.

Item 4.    Mine Safety Disclosures

None.

Item 5.    Other Information

Renewal of Advisory Agreement

On August 6, 2018, we renewed the advisory agreement with our advisor, KBS Capital Advisors LLC, and ratified the terms of the agreement in effect through April 28, 2018 as the understanding of the parties through August 6, 2018.  The renewed advisory agreement is effective through April 27, 2019.  Its terms are identical to those of the advisory agreement that was previously in effect. 

40

PART II. OTHER INFORMATION (CONTINUED)

Item 6. Exhibits

Ex.	Description
3.1	Second Articles of Amendment and Restatement, incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-11 filed October 16, 2015
3.2	Second Amended and Restated Bylaws, incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-11 filed October 16, 2015
3.3	Articles Supplementary for Class T Shares, incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form S-11 filed April 20, 2016
4.1	Statement regarding restrictions in transferability of shares of common stock issued in a private offering (to be sent upon request and without charge to stockholders), incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, filed November 9, 2017
4.2	Statement regarding restrictions on transferability of shares of common stock issued in a public offering (to be sent upon request and without charge to stockholders), incorporated by reference to Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, filed November 9, 2017
4.3	Third Amended and Restated Distribution Reinvestment Plan, dated August 9, 2017, incorporated by reference to Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed August 10, 2017
4.4	Multiple Class Plan, effective as of April 11, 2016, incorporated by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S-11 filed April 20, 2016
10.1	Advisory Agreement, by and between the Company and KBS Capital Advisors LLC, dated as of August 6, 2018
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1	Amended and Restated Share Redemption Program, incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-11 filed March 25, 2016
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

41

SIGNATURES

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 thereunto duly authorized.

		KBS GROWTH & INCOME REIT, INC.
Date:	August 7, 2018	By:	/S/ CHARLES J. SCHREIBER, JR.
			Charles J. Schreiber, Jr.
			Chairman of the Board, Chief Executive Officer and Director
			(principal executive officer)
Date:	August 7, 2018	By:	/S/ JEFFREY K. WALDVOGEL
			Jeffrey K. Waldvogel
			Chief Financial Officer
			(principal financial officer)

42

EX-10.1

Exhibit 10.1

ADVISORY AGREEMENT

between

KBS GROWTH & INCOME REIT, INC.

and

KBS CAPITAL ADVISORS LLC

August 6, 2018

TABLE OF CONTENTS

		Page
ARTICLE 1 – DEFINITIONS		1
ARTICLE 2 – APPOINTMENT		10
ARTICLE 3 – DUTIES OF THE ADVISOR		10
	3.01 Organizational and Offering Services	10
	3.02 Acquisition Services	10
	3.03 Asset Management Services	11
	3.04 Stockholder Services	13
	3.05 Other Services	14
ARTICLE 4 – AUTHORITY OF ADVISOR		14
	4.01 General	14
	4.02 Powers of the Advisor	14
	4.03 Approval by the Board	14
	4.04 Modification or Revocation of Authority of Advisor	14
ARTICLE 5 – BANK ACCOUNTS		14
ARTICLE 6 – RECORDS AND FINANCIAL STATEMENTS		15
ARTICLE 7 – LIMITATION ON ACTIVITIES		15
ARTICLE 8 – FEES		15
	8.01 Acquisition Fees	15
	8.02 Origination Fees	16
	8.03 Asset Management Fees	16
	8.04 Disposition Fees	16
	8.05 Subordinated Share of Cash Flows	17
	8.06 Subordinated Incentive Fee	17
	8.07 Changes to Fee Structure	18
ARTICLE 9 – EXPENSES		18
	9.01 General	20
	9.02 Timing of and Limitations on Reimbursements	21
ARTICLE 10 – VOTING AGREEMENT		21
ARTICLE 11 – RELATIONSHIP OF ADVISOR AND COMPANY, OTHER ACTIVITIES OF THE ADVISOR		21
	11.01 Relationship	21
	11.02 Time Commitment	21
	11.03 Investment Opportunities and Allocation	21
ARTICLE 12 – THE KBS NAME		22
ARTICLE 13 – TERM AND TERMINATION OF THE AGREEMENT		23
	13.01 Term	23
	13.02 Termination by Either Party	23
	13.03 Payments on Termination and Survival of Certain Rights and Obligations	23
ARTICLE 14 – ASSIGNMENT		24
ARTICLE 15 – INDEMNIFICATION AND LIMITATION OF LIABILITY		24
	15.01 Indemnification	24
	15.02 Limitation on Indemnification	25
	15.03 Limitation on Payment of Expenses	25

i

ARTICLE 16 – MISCELLANEOUS		25
	16.01 Notices	25
	16.02 Modification	26
	16.03 Severability	26
	16.04 Construction	26
	16.05 Entire Agreement	26
	16.06 Waiver	26
	16.07 Gender	26
	16.08 Titles Not to Affect Interpretation	26
	16.09 Counterparts	26
ARTICLE 17 – ADVANCE		26

ii

ADVISORY AGREEMENT

This Advisory Agreement, dated as of August 6, 2018 (the “Agreement”), is between KBS Growth & Income REIT, Inc., a Maryland corporation (the “Company”), and KBS Capital Advisors LLC, a Delaware limited liability company (the “Advisor”).

W I T N E S S E T H

WHEREAS, the Company and the Advisor have previously entered that Advisory Agreement dated as of September 29, 2017 (the “September Advisory Agreement”) and wish to authorize, ratify, and approve the terms of the September Advisory Agreement as the understanding between the parties as of April 28, 2018 through the date of this Agreement;

WHEREAS, the Company desires to renew its agreement with the Advisor on the same terms as the September Advisory Agreement and to continue to avail itself of the knowledge, experience, sources of information, advice, assistance and certain facilities available to the Advisor and to have the Advisor undertake the duties and responsibilities hereinafter set forth, on behalf of, and subject to the supervision of, the board of directors of the Company (the “Board”), all as provided herein;

WHEREAS, the Advisor is willing to continue to undertake to render such services, subject to the supervision of the Board, on the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto agree as follows:

ARTICLE 1
DEFINITIONS

The following defined terms used in this Agreement shall have the meanings specified below:

“Acquiror” shall have the meaning set forth in the definition of “Merger” below.

“Acquisition Expenses” means any and all expenses, excluding the fees payable to the Advisor pursuant to Section 8.01 and Section 8.02, incurred by the Company, the Advisor or any Affiliate of either in connection with the selection, acquisition or development of any property, loan or other potential investment, whether or not acquired or originated, as applicable, including, without limitation, legal fees and expenses, travel and communication expenses, costs of appraisals, nonrefundable option payments on properties or other investments not acquired, accounting fees and expenses, title insurance premiums and miscellaneous expenses related to the selection, acquisition or development of any property, loan or other potential investment.

“Acquisition Fees” means the fee paid to the Advisor pursuant to Section 8.01 plus all other fees and commissions, excluding Acquisition Expenses, paid by any Person to any Person in connection with making or investing in any Property or other Permitted Investment or the purchase, development or construction of any Property by the Company. Included in the computation of such fees or commissions shall be any real estate commission, selection fee,

1

Development Fee, Construction Fee, nonrecurring management fee, loan fees or points or any fee of a similar nature, however designated. Excluded shall be Development Fees and Construction Fees paid to Persons not Affiliated with the Advisor in connection with the actual development and construction of a Property.

“Advance” shall have the meaning set forth in Article 17.

“Advisor” means (i) KBS Capital Advisors LLC, a Delaware limited liability company, or (ii) any successor advisor to the Company.

“Affiliate” or “Affiliated” An Affiliate of another Person includes any of the following: (i) any Person directly or indirectly controlling, controlled by, or under common control with such other Person; (ii) any Person directly or indirectly owning, controlling, or holding with the power to vote 10% or more of the outstanding voting securities of such other Person; (iii) any legal entity for which such Person acts as an executive officer, director, trustee, or general partner; (iv) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held, with power to vote, by such other Person; and (v) any executive officer, director, trustee, or general partner of such other Person. An entity shall not be deemed to control or be under common control with an Advisor-sponsored program unless (i) the entity owns 10% or more of the voting equity interests of such program or (ii) a majority of the board of directors (or equivalent governing body) of such program is composed of Affiliates of the entity.

“Appraised Value” means the value according to an appraisal made by an Independent Appraiser.

“Articles of Incorporation” means the Articles of Incorporation of the Company under Title 2 of the Corporations and Associations Article of the Annotated Code of Maryland, as amended from time to time.

“Asset Management Fee” shall have the meaning set forth in Section 8.03.

“Average Invested Assets” means, for a specified period, the average of the aggregate book value of the assets of the Company invested, directly or indirectly, in Properties, Loans and other Permitted Investments secured by real estate before reserves for depreciation or bad debts or other similar non-cash reserves, computed by taking the average of such values at the end of each month during such period.

“Average Issue Price” means the weighted average price at which shares were purchased in the primary portion of an Offering which shall be calculated as of the end of the month preceding the date upon which the calculation is being made.

“Board of Directors” or “Board” means the persons holding such office, as of any particular time, under the Articles of Incorporation of the Company, whether they be the Directors named therein or additional or successor Directors.

“Bylaws” means the bylaws of the Company, as amended from time to time.

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“Cash from Financings” means the net cash proceeds realized by the Company from the financing of Properties, Loans or other Permitted Investments or from the refinancing of any Company indebtedness (after deduction of all expenses incurred in connection therewith).

“Cash from Sales and Settlements” means the net cash proceeds realized by the Company (i) from the sale, exchange or other disposition of any of its assets or any portion thereof after deduction of all expenses incurred in connection therewith and (ii) from the prepayment,

maturity, workout or other settlement of any Loan or Permitted Investment or portion thereof after deduction of all expenses incurred in connection therewith. In the case of a transaction described in clause (i) (C) of the definition of “Sale” and (i)(B) of the definition of “Settlement,” Cash from Sales and Settlements means the proceeds of any such transaction actually distributed to the Company from the Joint Venture or partnership. Cash from Sales and Settlements shall not include Cash from Financings.

“Cash from Sales, Settlements and Financings” means the total sum of Cash from Sales and Settlements and Cash from Financings.

“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.

“Company” means KBS Growth & Income REIT, Inc., a corporation organized under the laws of the State of Maryland.

“Competitive Real Estate Commission” means a real estate or brokerage commission for the purchase or sale of property that is reasonable, customary, and competitive in light of the size, type, and location of the property.

“Conflicts Committee” shall have the meaning set forth in the Company’s Articles of Incorporation.

“Construction Fee” means a fee or other remuneration for acting as general contractor and/or construction manager to construct improvements, supervise and coordinate projects or to provide major repairs or rehabilitation on a Property.

“Contract Sales Price” means the purchase price to be paid in connection with the sale of a Property, Loan or other Permitted Investment less any concessions agreed to in connection with the sale which may include but are not limited to credits for future building or tenant improvements, credits for future free rent given to tenants, credits for future lease up assumptions, or other future rental concessions; or, in the case of a discounted payoff of a Loan, the total funds received by the Company in connection with the payoff, less any expenses related thereto.

“Cost of Loans and other Permitted Investments” means the sum of the cost of all Loans and Permitted Investments held, directly or indirectly, by the Company or the Partnership, calculated each month on an ongoing basis, and calculated as follows for each investment: the lesser of (i) the amount actually paid or allocated to acquire, originate or fund the Loan or

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Permitted Investment, including the fees and expenses associated with the acquisition, origination or funding of such Loan or Permitted Investment (but excluding any Acquisition Fees or Origination Fees paid to the Advisor or its Affiliates under this Agreement), and (ii) the outstanding principal amount of such Loan or Permitted Investment, including the fees and expenses associated with the acquisition, origination or funding of such Loan or Permitted Investment (but excluding any Acquisition Fees or Origination Fees paid to the Advisor or its Affiliates under this Agreement), as of the time of calculation. With respect to any Loan or Permitted Investment held by the Company or the Partnership through a Joint Venture or partnership of which it is, directly or indirectly, a co-venturer or partner, such amount shall be the Company’s proportionate share thereof.

“Cost of Real Estate Investments” means the sum of (i) with respect to Properties wholly owned, directly or indirectly, by the Company, the amount actually paid or allocated to the purchase of Properties, including the fees and expenses associated with the purchase of such Properties (but excluding any Acquisition Fees paid to the Advisor or its Affiliates under this Agreement), plus budgeted capital improvement costs for the development, construction or improvement of Properties once such funds are disbursed pursuant to a final approved budget and (ii) in the case of Properties owned by any Joint Venture or partnership in which the Company or the Partnership is, directly or indirectly, a co-venturer or a partner, the portion of the amount actually paid or allocated to the purchase of Properties, including the fees and expenses associated with the purchase of such Properties (but excluding any Acquisition Fees paid to the Advisor or its Affiliates under this Agreement), plus budgeted capital improvement costs for the development, construction or improvement of Properties once such funds are disbursed pursuant to a final approved budget, that is attributable to the Company’s investment in the Joint Venture or partnership.

“Dealer Manager” means (i) KBS Capital Markets Group LLC, a Delaware limited liability company, or (ii) any successor dealer manager to the Company.

“Development Fee” means a fee for the packaging of a Property, including negotiating and approving plans, and undertaking to assist in obtaining zoning and necessary variances and necessary financing for the Property, either initially or at a later date.

“Director” means a member of the Board of Directors of the Company.

“Disposition Fee” shall have the meaning set forth in Section 8.04.

“Distributions” means any distributions (which shall not include stock dividends) of money or other property by the Company to owners of Shares, including distributions that may constitute a return of capital for federal income tax purposes.

“Excess Proceeds” shall have the meaning set forth in Article 17.

“GAAP” means accounting principles generally accepted in the United States.

“Gross Investment Amount” means the amount calculated by multiplying the total number of Shares purchased by Stockholders by the issue price, reduced by the total number of shares repurchased by the Company (excluding the number of shares issued as stock dividends and subsequently repurchased by the Company) multiplied by the Average Issue Price.

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“Gross Proceeds” means the aggregate purchase price of all Shares sold for the account of the Company through an Offering, without deduction for Organization and Offering Expenses.

“Independent Appraiser” means a person or entity with no material current or prior business or personal relationship with the Advisor or the Directors, who is engaged to a substantial extent in the business of rendering opinions regarding the value of assets of the type held by the Company, and who is a qualified appraiser of real estate as determined by the Board. Membership in a nationally recognized appraisal society such as the American Institute of Real Estate Appraisers (“M.A.I.”) or the Society of Real Estate Appraisers (“S.R.E.A.”) shall be conclusive evidence of such qualification.

“Joint Venture” means any joint venture, limited liability company or other Affiliate of the Company that owns, in whole or in part, on behalf of the Company any Properties, Loans or other Permitted Investments.

“Listed” or “Listing” shall have the meaning set forth in the Company’s Articles of Incorporation.

“Loans” means mortgage loans and other types of debt financing investments made by the Company or the Partnership, either directly or indirectly, including through ownership interests in a Joint Venture or partnership, and including, without limitation, mezzanine loans, B-notes, bridge loans, convertible mortgages, wraparound mortgage loans, construction mortgage loans, loans on leasehold interests, and participations in such loans.

“Market Value” shall have the meaning set forth in Section 8.06(i).

“Merger” means any business combination, merger, reorganization or share exchange involving the Company or its subsidiaries into or with another corporation or other legal person (the “Acquiror”) and as a result of such transaction, less than 51% of the outstanding voting securities or other capital interests of the surviving, resulting or acquiring corporation or other legal person are owned in the aggregate by those who were Stockholders immediately prior to such transaction (other than the Acquiror or its Affiliates if they owned Shares immediately prior to such transaction).

“Merger Consideration Amount” means (i) in the case of a Merger in which the consideration consists solely of cash, the total consideration to be received by holders of Shares outstanding immediately prior to the closing of the Merger, (ii) in the case of a Merger in which the consideration consists of securities traded on a national securities exchange, the product of (x) the number of shares of such securities received by the Stockholders at the closing of the Merger and (y) the market value of such securities, measured by taking the average closing price or the average of the bid and asked price, as the case may be, over a period of 30 consecutive days during which such securities are traded, with such 30-day period ending on the trading day prior to the closing date of the Merger, (iii) in the case of a Merger in which the consideration consist of securities that are not traded on a national securities exchange, the aggregate the fair market value (as of the most recent practicable date) of the securities to be received by the Stockholders as estimated by an independent expert chosen by the Board of Directors, and (iv) in the case of a Merger in which the consideration is some combination of that described above, the sum of clauses (i) through (iii), as applicable.

“MFFO” shall have the meaning set forth in Article 17.

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“MFFO Surplus” shall have the meaning set forth in Article 17.

“NASAA Guidelines” means the NASAA Statement of Policy Regarding Real Estate Investment Trusts as in effect on the date hereof.

“Net Income” means, for any period, the total revenues applicable to such period, less the total expenses applicable to such period excluding additions to reserves for depreciation, bad debts or other similar non-cash reserves; provided, however, Net Income for purposes of calculating total allowable Operating Expenses (as defined herein) shall exclude the gain from the sale of the Company’s assets.

“Offering” means a Private Offering or Public Offering.

“Operating Cash Flow” means Operating Revenue Cash Flows minus the sum of (i) Operating Expenses, (ii) all principal and interest payments on indebtedness and other sums paid to lenders, (iii) the expenses of raising capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such expenses and tax incurred in connection with the issuance, distribution, transfer, registration and Listing of the Shares, (iv) taxes, (v) incentive fees paid in compliance with Section IV.F. of the NASAA Guidelines and (vi) Acquisition Fees, Origination Fees, Acquisition Expenses, real estate commissions on the resale of real property, and other expenses connected with the acquisition, origination, disposition, and ownership of real estate interests, loans or other property (other than commissions on the sale of assets other than real property), such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property.

“Operating Expenses” means all costs and expenses incurred by the Company, as determined under GAAP, that in any way are related to the operation of the Company or to Company business, including fees paid to the Advisor, but excluding (i) the expenses of raising capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such expenses and tax incurred in connection with the issuance, distribution, transfer, registration and Listing of the Shares, (ii) interest payments, (iii) taxes, (iv) non-cash expenditures such as depreciation, amortization and bad loan reserves, (v) incentive fees paid in compliance with Section IV.F. of the NASAA Guidelines and (vi) Acquisition Fees, Origination Fees, Acquisition Expenses, real estate commissions on the resale of real property, and other expenses connected with the acquisition, origination, disposition, and ownership of real estate interests, loans or other property (other than commissions on the sale of assets other than real property), such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property.

“Operating Revenue Cash Flows” means the Company’s cash flow from ownership and/or operation of (i) Properties, (ii) Loans, (iii) Permitted Investments, (iv) short-term investments, and (v) interests in Properties, Loans and Permitted Investments owned by any Joint Venture or any partnership in which the Company or the Partnership is, directly or indirectly, a co-venturer or partner.

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“Organization and Offering Expenses” means all expenses incurred by or on behalf of the Company in connection with or in preparing the Company for an Offering and including, to the extent applicable, the qualification, registration and regulatory filings of the Offering and the marketing and distribution of the Shares, whether incurred before or after the date of this Agreement, which may include but are not limited to, total underwriting and brokerage discounts and commissions (including fees of the underwriters’ attorneys); any expense allowance granted by the Company to the underwriter or any reimbursement of expenses of the underwriter by the Company; expenses for printing, engraving and mailing; compensation of employees while engaged in sales activity; charges of transfer agents, registrars, trustees, escrow holders, depositaries and experts; and expenses of qualification of the sale of the securities under Federal and State laws, including taxes and fees, accountants’ and attorneys’ fees.

“Origination Fees” means the fee payable to the Advisor pursuant to Section 8.02 plus all other fees and commissions, excluding Acquisition Expenses, paid by any Person to any Person in connection with making or investing in any Loan by the Company.

“Partnership” means KBS Growth & Income Limited Partnership, a Delaware limited partnership formed to own and operate Properties, Loans and other Permitted Investments on behalf of the Company.

“Permitted Investments” means all investments (other than Properties, Loans and short-term investments acquired for purposes of cash management) in which the Company may acquire an interest, either directly or indirectly, including through ownership interests in a Joint Venture or partnership, pursuant to its Articles of Incorporation, Bylaws and the investment objectives and policies adopted by the Board from time to time.

“Person” means an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c) (17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, or any government or any agency or political subdivision thereof, and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.

“Private Offering” means an offering of Shares pursuant to an exemption from registration under the Securities Act of 1933, as amended.

“Property” or “Properties” means any real property or properties transferred or conveyed to the Company or the Partnership, either directly or indirectly, and/or any real property or properties transferred or conveyed to a Joint Venture or partnership in which the Company is, directly or indirectly, a co-venturer or partner.

“Property Manager” means an entity that has been retained to perform and carry out, at one or more of the Properties, property-management services, excluding persons, entities or independent contractors retained or hired to perform facility management or other services or tasks at a particular Property, the costs for which are passed through to and ultimately paid by the tenant at such Property.

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“Public Offering” means the public offering of Shares pursuant to the effective Registration Statement filed under the Securities Act of 1933 (file no. 333-207471), as amended.

“REIT” means a “real estate investment trust” under Sections 856 through 860 of the Code.

“Sale” means any transaction or series of related transactions whereby: (A) the Company or the Partnership sells, grants, transfers, conveys, or relinquishes its ownership of any Property, Loan or other Permitted Investment or portion thereof, including the transfer of any Property that is the subject of a ground lease, and including any event with respect to any Property, Loan or other Permitted Investment that gives rise to a significant amount of insurance proceeds or condemnation awards, and including the issuance by one of the Company’s subsidiaries of any asset-backed securities as part of a securitization transaction; (B) the Company or the Partnership sells, grants, transfers, conveys, or relinquishes its ownership of all or substantially all of the interest of the Company or the Partnership in any Joint Venture or partnership in which it is, directly or indirectly, a co-venturer or partner; or (C) any Joint Venture or partnership (in which the Company or the Partnership is, directly or indirectly, a co-venturer or partner) sells, grants, transfers, conveys, or relinquishes its ownership of any Property, Loan or other Permitted Investment or portion thereof, including any event with respect to any Property, Loan or other Permitted Investment that gives rise to insurance claims or condemnation awards, and including the issuance by such Joint Venture or partnership or one of its subsidiaries of any asset-backed securities as part of a securitization transaction.

“SEC” means the United States Securities and Exchange Commission.

“Settlement” means the prepayment, maturity, workout or other settlement of any Loan or other Permitted Investment or portion thereof owned, directly or indirectly, by (A) the Company or the Partnership or (B) any Joint Venture or any partnership in which the Company or the Partnership is, directly or indirectly, a partner.

“Shares” means the shares of common stock of the Company, par value $.01 per share.

“Stockholders” means the registered holders of the Shares.

“Stockholders’ 6% Return” means, as of any date, an aggregate amount equal to a 6% cumulative, non-compounded, annual return on Gross Investment Amount (calculated like simple interest on a daily basis based on a three hundred sixty-five day year). For purposes of calculating the Stockholders’ 6% Return, Gross Investment Amount shall be determined for each day during the period for which the Stockholders’ 6% Return is being calculated, including a daily adjustment to reflect shares repurchased by the Company (excluding shares issued as stock dividends and subsequently repurchased by the Company), and shall be calculated net of (1) Distributions of Cash from Sales and Settlements, (2) Distributions of Operating Cash Flow to the extent such Distributions of Operating Cash Flow provide a cumulative, non-compounded, annual return in excess of 6%, as such amounts are computed on a daily basis based on a three hundred sixty-five day year and (3) Distributions of Cash from Financings, except to the extent such Distributions would be required to supplement Distributions of Operating Cash Flow in order to achieve a cumulative, non-compounded, annual return of 6%, as such amounts are computed on a daily basis based on a three hundred sixty-five day year.

“Subordinated Incentive Fee” means the fee payable to the Advisor under certain circumstances, as calculated in Section 8.06.

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“Subordinated Performance Fee Due Upon Termination” means a fee payable in the form of a promissory note (the “Performance Fee Note”) in a principal amount equal to (1) 15% of the amount, if any, by which (a) the Appraised Value of the Company’s Properties at the Termination Date, less amounts of all third-party indebtedness secured by the Company’s Properties, plus the fair market value of all other Loans and Permitted Investments of the Company at the Termination Date, less amounts of third-party indebtedness related to such Loans and Permitted Investments, plus the fair market value of the Company’s other assets and liabilities, plus total Distributions through the Termination Date exceeds (b) the Gross Investment Amount plus total Distributions required to be made to the stockholders in order to pay the Stockholders’ 6% Return from inception through the Termination Date. After the Termination Date, the Company shall repay the Performance Fee Note at such time as the Company completes the first Sale or Settlement after the date Stockholders have received Distributions in an aggregate amount equal to the sum of the Stockholders’ 6% Return and the Gross Investment Amount (the “Performance Fee Trigger Date”) and which Performance Fee will be paid using Cash from Sales and Settlements. If the Cash from Sales and Settlements from the first Sale or Settlement after the Performance Fee Trigger Date is insufficient to pay the Performance Fee Note in full, then the Performance Fee Note shall be paid in part from the Cash from Sales and Settlement from the first Sale or Settlement, and in part from the Cash from Sales and Settlements from each successive Sale or Settlement until the Performance Fee Note is repaid in full. If the Performance Fee Note has not been paid in full within five years from the Termination Date, then upon the Performance Fee Trigger Date, the Advisor, its successors or assigns, may elect to convert the balance of the fee into Shares at a price per Share equal to the average closing price of the Shares over the ten trading days immediately preceding the date of such election if the Shares are Listed at such time. If the Shares are not Listed at the time of the Performance Fee Trigger Date, the Advisor, its successors or assigns, may elect to convert the balance of the fee into Shares at a price per Share equal to the fair market value for the Shares as determined by the Board of Directors based upon the Appraised Value of Company’s Properties on the date of election plus the fair market value of all other Loans and Permitted Investments of the Company on the date of election.

“Subordinated Share of Cash Flows” has the meaning set forth in Section 8.06.

“Termination Date” means the date of termination of the Agreement determined in accordance with Article 12 hereof.

“2%/25% Guidelines” means the requirement pursuant to the NASAA Guidelines that, in any period of four consecutive fiscal quarters, total Operating Expenses not exceed the greater of 2% of the Company’s Average Invested Assets during such 12-month period or 25% of the Company’s Net Income over the same 12-month period.

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ARTICLE 2
APPOINTMENT

The Company hereby appoints the Advisor to serve as its advisor and asset manager on the terms and conditions set forth in this Agreement, and the Advisor hereby accepts such appointment.

ARTICLE 3
DUTIES OF THE ADVISOR

The Advisor is responsible for managing, operating, directing and supervising the operations and administration of the Company and its assets. The Advisor undertakes to use its best efforts to present to the Company potential investment opportunities, to make investment decisions on behalf of the Company, subject to limitations in the Company’s Articles of Incorporation, the direction and oversight of the Board and Section 4.03 hereof, and to provide the Company with a continuing and suitable investment program consistent with the investment objectives and policies of the Company as determined and adopted from time to time by the Board. Subject to the limitations set forth in this Agreement, including Article 4 hereof, and the continuing and exclusive authority of the Board over the management of the Company, the Advisor shall, either directly or by engaging an Affiliate or third party, perform the following duties:

3.01    Organizational and Offering Services. The Advisor shall perform all services related to the organization of the Company or any Offering, other than services that (i) are to be performed by the dealer manager for any Offering, (ii) the Company elects to perform directly or (iii) would require the Advisor to register as a broker-dealer with the SEC or any state.

3.02    Acquisition Services.

(i)    Serve as the Company’s investment and financial advisor and provide relevant market research and economic and statistical data in connection with the Company’s assets and investment objectives and policies;

(ii)    Subject to Section 4 hereof and the investment objectives and policies of the Company: (a) locate, analyze and select potential investments; (b) structure and negotiate the terms and conditions of transactions pursuant to which investments in Properties, Loans and other Permitted Investments will be made; (c) acquire, originate and dispose of Properties, Loans and other Permitted Investments on behalf of the Company; (d) arrange for financing and refinancing and make other changes in the asset or capital structure of investments in Properties, Loans and other Permitted Investments; and (e) enter into leases, service contracts and other agreements for Properties, Loans and other Permitted Investments;

(iii)    Perform due diligence on prospective investments and create due diligence reports summarizing the results of such work;

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(iv)    Prepare reports regarding prospective investments that include recommendations and supporting documentation necessary for the Directors to evaluate the proposed investments;

(v)    Obtain reports (which may be prepared by the Advisor or its Affiliates), where appropriate, concerning the value of contemplated investments of the Company;

(vi)    Deliver to or maintain on behalf of the Company copies of all appraisals obtained in connection with the Company’s investments; and

(vii)    Negotiate and execute approved investments and other transactions, including prepayments, maturities, workouts and other settlements of Loans and other Permitted Investments.

3.03    Asset Management Services.

(i)    Real Estate and Related Services:

(a)    Investigate, select and, on behalf of the Company, engage and conduct business with (including enter contracts with) such Persons as the Advisor deems necessary to the proper performance of its obligations as set forth in this Agreement, including but not limited to consultants, accountants, lenders, technical advisors, attorneys, brokers, underwriters, corporate fiduciaries, escrow agents, depositaries, custodians, agents for collection, insurers, insurance agents, developers, construction companies, Property Managers and any and all Persons acting in any other capacity deemed by the Advisor necessary or desirable for the performance of any of the foregoing services;

(b)    Negotiate and service the Company’s debt facilities and other financings;

(c)    Monitor applicable markets and obtain reports (which may be prepared by the Advisor or its Affiliates) where appropriate, concerning the value of investments of the Company;

(d)    Monitor and evaluate the performance of each asset of the Company and the Company’s overall portfolio of assets, provide daily management services to the Company and perform and supervise the various management and operational functions related to the Company’s investments;

(e)    Formulate and oversee the implementation of strategies for the administration, promotion, management, operation, maintenance, improvement, financing and refinancing, marketing, leasing and disposition of Properties, Loans and other Permitted Investments on an overall portfolio basis;

(f)    Consult with the Company’s officers and the Board and assist the Board in the formulation and implementation of the Company’s financial policies, and, as necessary, furnish the Board with advice and recommendations with

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respect to the making of investments consistent with the investment objectives and policies of the Company and in connection with any borrowings proposed to be undertaken by the Company;

(g)    Oversee the performance by the Property Managers of their duties, including collection and proper deposits of rental payments and payment of Property expenses and maintenance;

(h)    Conduct periodic on-site property visits to some or all (as the Advisor deems reasonably necessary) of the Properties to inspect the physical condition of the Properties and to evaluate the performance of the Property Managers;

(i)    Review, analyze and comment upon the operating budgets, capital budgets and leasing plans prepared and submitted by each Property Manager and aggregate these property budgets into the Company’s overall budget;

(j)    Coordinate and manage relationships between the Company and any co-venturers or partners; and

(k)    Consult with the Company’s officers and the Board and provide assistance with the evaluation and approval of potential asset dispositions, sales and refinancings.

(ii)    Accounting and Other Administrative Services:

(a)    Provide the day-to-day management of the Company and perform and supervise the various administrative functions reasonably necessary for the management of the Company;

(b)    From time to time, or at any time reasonably requested by the Board, make reports to the Board on the Advisor’s performance of services to the Company under this Agreement;

(c)    Make reports to the Conflicts Committee each quarter of the investments that have been made by other programs sponsored by the Advisor or any of its Affiliates, including KBS Realty Advisors LLC, as well as any investments that have been made by the Advisor or any of its Affiliates directly;

(d)    Provide or arrange for any administrative services and items, legal and other services, office space, office furnishings, personnel and other overhead items necessary and incidental to the Company’s business and operations;

(e)    Provide financial and operational planning services;

(f)    Maintain accounting and other record-keeping functions at the Company and investment levels, including information concerning the activities of the Company as shall be required to prepare and to file all periodic financial

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reports, tax returns and any other information required to be filed with the SEC, the Internal Revenue Service and any other regulatory agency;

(g)    Maintain and preserve all appropriate books and records of the Company;

(h)    Provide tax and compliance services and coordinate with appropriate third parties, including the Company’s independent auditors and other consultants, on related tax matters;

(i)    Provide the Company with all necessary cash management services;

(j)    Manage and coordinate with the transfer agent the distribution process and payments to Stockholders;

(k)    Consult with the Company’s officers and the Board and assist the Board in evaluating and obtaining adequate insurance coverage based upon risk management determinations;

(l)    Provide the Company’s officers and the Board with timely updates related to the overall regulatory environment affecting the Company, as well as managing compliance with such matters, including but not limited to compliance with the Sarbanes-Oxley Act of 2002;

(m)    Consult with the Company’s officers and the Board relating to the corporate governance structure and appropriate policies and procedures related thereto;

(n)    Perform all reporting, record keeping, internal controls and similar matters in a manner to allow the Company to comply with applicable law, including federal and state securities laws and the Sarbanes-Oxley Act of 2002;

(o)    Notify the Board of all proposed material transactions before they are completed; and

(p)    Do all things necessary to assure its ability to render the services described in this Agreement.

3.04    Stockholder Services. Manage services for and communications with Stockholders, including answering phone calls, preparing and sending written and electronic reports and other communications;

(i)    Oversee the performance of the transfer agent and registrar;

(ii)    Establish technology infrastructure to assist in providing Stockholder support and service; and

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(iii)    Consistent with Section 3.01, the Advisor shall perform the various subscription processing services reasonably necessary for the admission of new Stockholders.

3.05    Other Services. Except as provided in Article 7, the Advisor shall perform any other services reasonably requested by the Company (acting through the Conflicts Committee).

ARTICLE 4
AUTHORITY OF ADVISOR

4.01    General. All rights and powers to manage and control the day-to-day business and affairs of the Company shall be vested in the Advisor. The Advisor shall have the power to delegate all or any part of its rights and powers to manage and control the business and affairs of the Company to such officers, employees, Affiliates, agents and representatives of the Advisor or the Company as it may deem appropriate. Any authority delegated by the Advisor to any other Person shall be subject to the limitations on the rights and powers of the Advisor specifically set forth in this Agreement or the Articles of Incorporation.

4.02    Powers of the Advisor. Subject to the express limitations set forth in this Agreement and the continuing and exclusive authority of the Board over the management of the Company, the power to direct the management, operation and policies of the Company, including making, financing and disposing of investments, shall be vested in the Advisor, which shall have the power by itself and shall be authorized and empowered on behalf and in the name of the Company to carry out any and all of the objectives and purposes of the Company and to perform all acts and enter into and perform all contracts and other undertakings that it may in its sole discretion deem necessary, advisable or incidental thereto to perform its obligations under this Agreement.

4.03    Approval by the Board. Notwithstanding the foregoing, the Advisor may not take any action on behalf of the Company without the prior approval of the Board or duly authorized committees thereof if the Articles of Incorporation or Maryland General Corporation Law require the prior approval of the Board. If the Board or a committee of the Board must approve a proposed investment, financing or disposition or chooses to do so, the Advisor will deliver to the Board or committee, as applicable, all documents required by it to evaluate such investment, financing or disposition.

4.04    Modification or Revocation of Authority of Advisor. The Board may, at any time upon the giving of notice to the Advisor, modify or revoke the authority or approvals set forth in Article 3 and this Article 4 hereof; provided, however, that such modification or revocation shall be effective upon receipt by the Advisor and shall not be applicable to investment transactions to which the Advisor has committed the Company prior to the date of receipt by the Advisor of such notification.

ARTICLE 5
BANK ACCOUNTS

The Advisor may establish and maintain one or more bank accounts in the name of the Company and may collect and deposit into any

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such account or accounts, and disburse from any such account or accounts, any money on behalf of the Company, under such terms and conditions as the Board may approve, provided that no funds shall be commingled with the funds of the Advisor. The Advisor shall from time to time render appropriate accountings of such collections and payments to the Board and the independent auditors of the Company.

ARTICLE 6
RECORDS AND FINANCIAL STATEMENTS

The Advisor, in the conduct of its responsibilities to the Company, shall maintain adequate and separate books and records for the Company’s operations in accordance with GAAP, which shall be supported by sufficient documentation to ascertain that such books and records are properly and accurately recorded. Such books and records shall be the property of the Company and shall be available for inspection by the Board and by counsel, auditors and other authorized agents of the Company, at any time or from time to time during normal business hours. Such books and records shall include all information necessary to calculate and audit the fees or reimbursements paid under this Agreement. The Advisor shall utilize procedures to attempt to ensure such control over accounting and financial transactions as is reasonably required to protect the Company’s assets from theft, error or fraudulent activity. All financial statements that the Advisor delivers to the Company shall be prepared on an accrual basis in accordance with GAAP, except for special financial reports that by their nature require a deviation from GAAP. The Advisor shall liaise with the Company’s officers and independent auditors and shall provide such officers and auditors with the reports and other information that the Company so requests.

ARTICLE 7
LIMITATION ON ACTIVITIES

Notwithstanding any provision in this Agreement to the contrary, the Advisor shall not take any action that, in its sole judgment made in good faith, would (i) adversely affect the ability of the Company to qualify or continue to qualify as a REIT under the Code, (ii) subject the Company to regulation under the Investment Company Act of 1940, as amended, (iii) violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over the Company, its Shares or its other securities, (iv) require the Advisor to register as a broker-dealer with the SEC or any state, or (v) violate the Articles of Incorporation or Bylaws. In the event an action that would violate (i) through (v) of the preceding sentence but such action has been ordered by the Board, the Advisor shall notify the Board of the Advisor’s judgment of the potential impact of such action and shall refrain from taking such action until it receives further clarification or instructions from the Board. In such event, the Advisor shall have no liability for acting in accordance with the specific instructions of the Board so given.

ARTICLE 8
FEES

8.01    Acquisition Fees. Prior to execution of this Agreement, as compensation for the investigation, selection and acquisition (by purchase, investment or exchange) of Properties and other Permitted Investments, the Company paid an Acquisition Fee to the Advisor for each such investment. No Acquisition Fee shall be paid to the Advisor following execution of this Agreement.

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8.02    Origination Fees. Prior to the execution of this Agreement, as compensation for the investigation, selection, sourcing and acquisition or origination of Loans, the Company paid an Origination Fee to the Advisor for each such acquisition or origination. No Origination Fee shall be paid to the Advisor following execution of this Agreement.

8.03    Asset Management Fees.

(i)    Except as provided in Section 8.03(ii) hereof, the Company shall pay the Advisor as compensation for the services described in Section 3.03 hereof a monthly fee (the “Asset Management Fee”) in an amount equal to one-twelfth of 1.6% of the sum of the Cost of Real Estate Investments and the Cost of Loans and other Permitted Investments. The Advisor shall submit a monthly invoice to the Company, accompanied by a computation of the Asset Management Fee for the applicable period. The Asset Management Fee shall be payable on the last day of such month, or the first business day following the last day of such month. The Asset Management Fee may not be taken, in whole or in part, as to any period in the sole discretion of the Advisor. All or any portion of the Asset Management Fees not taken as to any period shall be deferred without interest and may be paid in such other fiscal period as the Advisor shall determine.

(ii)    Notwithstanding anything contained in Section 8.03(i) to the contrary, a Property, Loan or other Permitted Investment that has suffered an impairment in value, reduction in cash flow or other negative circumstances may either be excluded from the calculation of the Cost of Real Estate Investments or the Cost of Loans and other Permitted Investments or included in such calculation at a reduced value that is recommended by the Advisor and the Company’s management and then approved by a majority of the members of the Conflicts Committee, and the resulting change in the Asset Management Fee with respect to such investment will be applicable upon the earlier to occur of the date on which (i) such investment is sold, (ii) such investment is surrendered to a Person other than the Company, its direct or indirect wholly owned subsidiary or a Joint Venture or partnership in which the Company has an interest, (iii) the Advisor determines that it will no longer pursue collection or other remedies related to such investment, or (iv) the Advisor recommends a revised fee arrangement with respect to such investment.

8.04    Disposition Fees. If the Advisor or any of its Affiliates provide a substantial amount of services (as determined by the Conflicts Committee) in connection with a Sale, which includes the sale of a single asset or the sale of all or a portion of the Company’s assets through a portfolio sale, merger, or other business combination transaction, the Advisor or such Affiliate shall receive a fee at the closing (the “Disposition Fee”) equal to 1.5% of the Contract Sales Price. The payment of any Disposition Fee by the Company shall be subject to the limitations contained in the Company’s Charter. Any Disposition Fee payable under this Section 8.03 may be paid in addition to commissions paid to non-Affiliates, provided that the total commissions (including such Disposition Fee) paid to all Persons by the Company for each Sale shall not exceed an amount equal to the lesser of (i) 6.0% of the aggregate Contract Sales Price of each Property, Loan or other Permitted Investment or (ii) the Competitive Real Estate Commission for each Property, Loan or other Permitted Investment. Substantial assistance in connection with the Sale of a Property includes the Advisor’s preparation of an investment package for the Property (including a new investment analysis, rent rolls, tenant information regarding credit, a property

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title report, an environmental report, a structural report and exhibits) or such other substantial services performed by the Advisor in connection with a Sale. The Advisor shall submit an invoice to the Company on or about the closing or closings of each disposition, accompanied by a computation of the Disposition Fee. Generally, the Disposition Fee payable to the Advisor shall be paid at the closing of the transaction upon receipt of the invoice by the Company. However, the Disposition Fee may not be taken, in whole or in part, as to any period in the sole discretion of the Advisor. All or any portion of the Disposition Fees not taken as to any period shall be deferred without interest and may be paid in such other period as the Advisor shall determine.

8.05    Subordinated Share of Cash Flows. The Subordinated Share of Cash Flows shall be payable to the Advisor in an amount equal to 15% of Operating Cash Flow and Cash from Sales, Settlements and Financings remaining after the Stockholders have received Distributions in an aggregate amount equal to the sum of:

a.    the Stockholders’ 6% Return and

b.    Gross Investment Amount.

Following Listing, no Subordinated Share of Cash Flows will be paid to the Advisor.

If the Subordinated Share of Cash Flows is payable to the Advisor, the Advisor shall submit a monthly invoice to the Company, accompanied by a computation of the total amount of the Subordinated Share of Cash Flows for the applicable period. Generally, the Subordinated Share of Cash Flows payable to the Advisor shall be paid on the last day of such month, or the first business day following the last day of such month. For the avoidance of doubt, to the extent the payment of the Subordinated Share of Cash Flows is funded other than from Cash From Sales and Settlements, such amounts shall be included in Operating Expenses and subject to the 2%/25% Guidelines.

8.06    Subordinated Incentive Fee.

(i)    Upon Listing, the Advisor shall be entitled to the Subordinated Incentive Fee in an amount equal to 15.0% of the amount by which (i) the market value of the outstanding Shares of the Company, measured by taking the average closing price or the average of the bid and asked price, as the case may be, over a period of 30 days during which the Shares are traded, with such period beginning 180 days after Listing (the “Market Value”), plus the total of all Distributions paid to Stockholders from the Company’s inception until the date that Market Value is determined, exceeds (ii) the sum of (A) Gross Investment Amount and (B) the total Distributions required to be paid to the Stockholders in order to pay the Stockholders’ 6% Return from inception through the date Market Value is determined. The Company shall have the option to pay such fee in the form of cash, Shares, a promissory note or any combination of the foregoing. In the event the Subordinated Incentive Fee is paid to the Advisor following Listing, no other performance fee will be paid to the Advisor.

(ii)    Upon a Merger, the Advisor shall be entitled to the Subordinated Incentive Fee in an amount equal to 15.0% of the amount by which (i) the Merger Consideration Amount, plus the total of all Distributions paid to Stockholders from the Company’s inception until the date of the closing of the Merger, plus all Distributions declared prior

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to the Merger but to be paid after the Merger, exceeds (ii) the sum of (A) Gross Investment Amount and (B) the total Distributions required to be paid to the Stockholders in order to pay the Stockholders’ 6% Return from inception through the date of the closing of the Merger. The Company shall have the option to pay such fee in the form of cash or Shares or any combination thereof. In the event the Subordinated Incentive Fee is paid to the Advisor in connection with a Merger, no other performance fee will be paid to the Advisor.

8.07    Changes to Fee Structure. In the event of Listing, the Company and the Advisor shall negotiate in good faith to establish a fee structure appropriate for a perpetual-life entity.

ARTICLE 9

EXPENSES

9.01    General. In general, the Company shall directly pay expenses related to its operations. Any expenses paid by the Advisor or its Affiliates on behalf of the Company shall be reimbursed to the Advisor; provided, however, upon execution of this Agreement, other than as specifically set forth below with respect to the allocable portion of expenses related to internal audit department personnel providing services to the Company and promotional costs and expenses related to the leasing of properties, the Company shall not reimburse the Advisor or its Affiliates for expenses incurred by the Advisor or its Affiliates in connection with providing services pursuant to this Agreement. Expense reimbursement obligations of the Company prior to execution of this Agreement are as set forth in the Advisory Agreement dated August 9, 2017. Reimburseable expenses include, but are not limited to:

(i)    Organization and Offering Expenses related to the Private Offering that commenced on June 11, 2015, provided that no reimbursement shall be made for wholesaling compensation expense;

(ii)    Organization and Offering Expenses related to the Public Offering provided that:

(a)    the Company shall not make any reimbursements for wholesaling compensation expense;

(b)    the Company shall not reimburse the Advisor to the extent such reimbursement would cause the total amount spent by the Company on Organization and Offering Expenses in the Public Offering to exceed 15% of the Gross Proceeds raised in the Public Offering as of the date of the reimbursement;

(c)    the Company will directly pay selling commissions, the dealer manager fees and the stockholder servicing fee related to Shares sold in the primary portion of the Public Offering;

(d)    except as provided in Section 9.01(c), the Advisor and its Affiliates will pay Organization and Offering Expenses in the primary portion of the Public Offering directly, and in addition to amounts paid by the Company pursuant to Section 9.01(c), the Company will reimburse the Advisor and its Affiliates for additional Organization and Offering Expenses in the primary portion of the

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Public Offering up to 1% of the Gross Proceeds raised in the primary portion of the Public Offering; and

(e)    with respect to Organization and Offering Expenses related to the preparation of an online distribution channel in the primary portion of the Public Offering, the Advisor and its Affiliates shall be responsible for all such Organization and Offering Expenses;

(iii)    For the avoidance of doubt, Organization and Offering Expenses related to the Private Offering (which is to be exempt from registration pursuant to Rule 506(c) of the Securities Act) that the Company expects to launch in the fourth quarter of 2017 shall not be reimburseable expenses and the Advisor and its Affiliates shall be responsible for all such expenses;

(iv)    Acquisition Fees, Origination Fees and Acquisition Expenses incurred in connection with the selection and acquisition of Properties, Loans and other Permitted Investments, including such expenses incurred related to assets pursued or considered but not ultimately acquired by the Company, provided that, notwithstanding anything herein to the contrary, the payment of Acquisition Fees, Origination Fees and Acquisition Expenses by the Company shall be subject to the limitations contained in the Company’s Articles of Incorporation;

(v)    The actual out-of-pocket cost of goods and services used by the Company and obtained from entities not Affiliated with the Advisor;

(vii)    Interest and other costs for borrowed money, including discounts, points and other similar fees;

(viii)    Taxes and assessments on income or Properties, taxes as an expense of doing business and any other taxes otherwise imposed on the Company and its business, assets or income;

(ix)    Out-of-pocket costs associated with insurance required in connection with the business of the Company or by its officers and Directors;

(x)    Expenses of managing, improving, developing, operating and selling Properties, Loans and other Permitted Investments owned, directly or indirectly, by the Company, as well as expenses of other transactions relating to such Properties, Loans and other Permitted Investments, including but not limited to prepayments, maturities, workouts and other settlements of Loans and other Permitted Investments;

(xi)    All out-of-pocket expenses in connection with payments to the Board and meetings of the Board and Stockholders;

(xii)    The allocable portion of expenses related to internal audit department personnel providing services to the Company;

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(xiii)    Promotional costs and expenses related to the leasing of properties;

(xiv)    Out-of-pocket expenses of providing services for and maintaining communications with Stockholders, including the cost of preparation, printing, and mailing annual reports and other Stockholder reports, proxy statements and other reports required by governmental entities;

(xiv)    Audit, accounting and legal fees, and other fees for professional services relating to the operations of the Company and all such fees incurred at the request, or on behalf of, the Board, the Conflicts Committee or any other committee of the Board;

(xv)    Out-of-pocket costs for the Company to comply with all applicable laws, regulations and ordinances;

(xvi)    Expenses connected with payments of Distributions and stock dividends made or caused to be made by the Company to the Stockholders;

(xvii)    Expenses of organizing, redomesticating, merging, liquidating or dissolving the Company or of amending the Articles of Incorporation or the Bylaws; and

(xviii)    All other out-of-pocket costs incurred by the Advisor in performing its duties hereunder.

9.02    Timing of and Additional Limitations on Reimbursements.

(i)    Expenses incurred by the Advisor on behalf of the Company and reimbursable pursuant to this Article 9 shall be reimbursed no less than monthly to the Advisor. The Advisor shall prepare a statement documenting the expenses of the

Company during each quarter and shall deliver such statement to the Company within 45 days after the end of each quarter.

(ii)    Commencing with the quarter ending December 31, 2016, the following limitation on Operating Expenses shall apply: The Company shall not reimburse the Advisor at the end of any fiscal quarter for Operating Expenses that in the four consecutive fiscal quarters then ended (the “Expense Year”) exceed (the “Excess Amount”) the greater of 2% of Average Invested Assets or 25% of Net Income (the “2%/25% Guidelines”) for such year unless the Conflicts Committee determines that such excess was justified, based on unusual and nonrecurring factors that the Conflicts Committee deems sufficient. If the Conflicts Committee does not approve such excess as being so justified, any Excess Amount paid to the Advisor during a fiscal quarter shall be repaid to the Company. If the Conflicts Committee determines such excess was justified, then, within 60 days after the end of any fiscal quarter of the Company for which total reimbursed Operating Expenses for the Expense Year exceed the 2%/25% Guidelines, the Advisor, at the direction of the Conflicts Committee, shall cause such fact to be disclosed to the Stockholders in writing (or the Company shall disclose such fact to the Stockholders in the next quarterly report of the Company or by filing a Current Report on Form 8-K with the SEC within 60 days of such quarter end), together with an explanation of the factors the Conflicts Committee considered in determining that such excess expenses were justified. The Company will ensure that such determination will be

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reflected in the minutes of the meetings of the Board. All figures used in the foregoing computation shall be determined in accordance with GAAP applied on a consistent basis.

ARTICLE 10
VOTING AGREEMENT

The Advisor agrees that, with respect to any Shares now or hereinafter owned by it, the Advisor will not vote or consent on matters submitted to the stockholders of the Company regarding (i) the removal of the Advisor or any Affiliate of the Advisor, and (ii) any transaction between the Company and the Advisor or any of its Affiliates. This voting restriction shall survive until such time that the Advisor is both no longer serving as such and is no longer an Affiliate of the Company.

ARTICLE 11
RELATIONSHIP OF ADVISOR AND COMPANY;
OTHER ACTIVITIES OF THE ADVISOR

11.01    Relationship. The Company and the Advisor are not partners or joint venturers with each other, and nothing in this Agreement shall be construed to make them such partners or joint venturers. Nothing herein contained shall prevent the Advisor from engaging in other activities, including, without limitation, the rendering of advice to other Persons (including other REITs) and the management of other programs advised, sponsored or organized by the Advisor or its Affiliates. Nor shall this Agreement limit or restrict the right of any manager, director, officer, employee or equityholder of the Advisor or its Affiliates to engage in any other business or to render services of any kind to any other Person. The Advisor may, with respect to any investment in which the Company is a participant, also render advice and service to each and every other participant therein. The Advisor shall promptly disclose to the Board the existence of

any condition or circumstance, existing or anticipated, of which it has knowledge, that creates or could create a conflict of interest between the Advisor’s obligations to the Company and its obligations to or its interest in any other Person.

11.02    Time Commitment. The Advisor shall, and shall cause its Affiliates and their respective employees, officers and agents to, devote to the Company such time as shall be reasonably necessary to conduct the business and affairs of the Company in an appropriate manner consistent with the terms of this Agreement. The Company acknowledges that the Advisor and its Affiliates and their respective employees, officers and agents may also engage in activities unrelated to the Company and may provide services to Persons other than the Company or any of its Affiliates.

11.03    Investment Opportunities and Allocation. The Advisor shall be required to use commercially reasonable efforts to present a continuing and suitable investment program to the Company that is consistent with the investment policies and objectives of the Company, but neither the Advisor nor any Affiliate of the Advisor shall be obligated generally to present any particular investment opportunity to the Company even if the opportunity is of character that, if presented to the Company, could be taken by the Company. In the event an investment opportunity is located that may be suitable for the Company and other programs advised by the Advisor or any of its Affiliates, including KBS Realty Advisors, the Advisor, in its sole discretion, will have to determine the program or investor for which the investment opportunity

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is most suitable based on the investment objectives, portfolio and criteria of each program or investor. This determination must be made in a manner that is fair without favoring any other program or investor. The factors that the Advisor shall consider when determining the program or investor for which an investment opportunity would be the most suitable are the following:

• the investment objectives and criteria of each program or investor;

• the cash requirements of each program or investor;

• the effect of the investment on the diversification of each program’s or investor’s portfolio by type of investment, risk of investment, type of commercial property, geographic location of properties, and tenants of properties and, in the case of debt-related investments, the characteristics of the underlying property;

• the policy of each program or investor relating to leverage;

• the anticipated cash flow of the property or asset to be acquired;

• the income tax effects of the purchase on each program or investor;

• the size of the investment; and

• the amount of funds available to each program or investor and the length of time such funds have been available for investment.

If a subsequent event or development, such as a delay in the closing of a property or investment or a delay in the construction of a property, causes any investment, in the opinion of the Advisor, to be more appropriate for another program or investor, they may offer the investment to another program or investor. It shall be the duty of the Board to ensure that the allocation method described above is applied fairly to the Company.

ARTICLE 12

THE KBS NAME

The Advisor and its Affiliates have a proprietary interest in the name “KBS.” The Advisor hereby grants to the Company a non-transferable, non-assignable, non-exclusive royalty-free right and license to use the name “KBS” during the term of this Agreement. Accordingly, and in recognition of this right, if at any time the Company ceases to retain the Advisor or one of its Affiliates to perform advisory services for the Company, the Company will, promptly after receipt of written request from the Advisor, cease to conduct business under or use the name “KBS” or any derivative thereof and the Company shall change its name and the names of any of its subsidiaries to a name that does not contain the name “KBS” or any other word or words that might, in the reasonable discretion of the Advisor, be susceptible of indication of some form of relationship between the Company and the Advisor or any of its Affiliates. At such time, the Company will also make any changes to any trademarks, servicemarks or other marks necessary to remove any references to the word “KBS.” Consistent with the foregoing, it is specifically recognized that the Advisor or one or more of its Affiliates has in the past and may in the future organize, sponsor or otherwise permit to exist other investment vehicles (including vehicles for investment in real estate) and financial and service organizations having “KBS” as a part of their name, all without the need for any consent (and without the right to object thereto) by the Company.

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ARTICLE 13
TERM AND TERMINATION OF THE AGREEMENT

13.01    Term. This Agreement shall terminate April 27, 2019 and may be renewed for an unlimited number of successive one-year terms upon mutual consent of the parties. The Company (acting through the Conflicts Committee) will evaluate the performance of the Advisor annually before renewing this Agreement, and each such renewal shall be for a term of no more than one year. Any such renewal must be approved by the Conflicts Committee.

13.02    Termination by Either Party. This Agreement may be terminated upon 60 days written notice without cause or penalty by either the Company (acting through the Conflicts Committee) or the Advisor. The provisions of Articles 1, 10, 12, 13, 15, 16 and 17 shall survive termination of this Agreement.

13.03    Payments on Termination and Survival of Certain Rights and Obligations. Payments to the Advisor pursuant to this Section 13.03 shall be subject to the 2%/25% Guidelines to the extent applicable.

(i)    After the Termination Date, the Advisor shall not be entitled to compensation for further services hereunder except it shall be entitled to receive from the Company within 30 days after the effective date of such termination (A) all unpaid reimbursements of expenses and all earned but unpaid fees payable to the Advisor prior to termination of this Agreement and (B) the Subordinated Performance Fee Upon Termination, provided that no Subordinated Performance Fee Upon Termination will be paid if the Company has paid or is obligated to pay the Subordinated Incentive Fee. If at the Termination Date, the Advisor will be entitled to the Subordinated Performance Fee Upon Termination upon the Performance Fee Trigger Date, then the Company agrees that until the Subordinated Performance Fee

Upon Termination is paid, if ever, the Company will not pay to any subsequent external advisor that is not affiliated with KBS Capital Advisors LLC (1) any fee or other compensation based on a participation in the Company’s cash flow from operation activities, cash flows from investing activities and cash flows from financing activities (each as defined by GAAP) or any fee or compensation based on an increase in the value of the Company or its assets or (2) any fee or compensation upon a Merger or Listing.

(ii)    The Advisor shall promptly upon termination:

(a)    pay over to the Company all money collected pursuant to this Agreement, if any, after deducting any accrued compensation and reimbursement for its expenses to which it is then entitled;

(b)    deliver to the Board a full accounting, including a statement showing all payments collected by it and a statement of all money held by it, covering the period following the date of the last accounting furnished to the Board;

(c)    deliver to the Board all assets and documents of the Company then in the custody of the Advisor; and

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(d)    cooperate with the Company to provide an orderly transition of advisory functions.

(iii)    Notwithstanding anything contained in this Section 13.03 to the contrary, the obligations of the Company and the Advisor set forth in Article 17 of this Agreement shall survive the termination of this Agreement.

ARTICLE 14

ASSIGNMENT

This Agreement may be assigned by the Advisor to an Affiliate with the consent of the Conflicts Committee. The Advisor may assign any rights to receive fees or other payments under this Agreement without obtaining the approval of the Board or the Conflicts Committee. This Agreement shall not be assigned by the Company without the consent of the Advisor, except in the case of an assignment by the Company to a corporation or other organization that is a successor to all of the assets, rights and obligations of the Company, in which case such successor organization shall be bound hereunder and by the terms of said assignment in the same manner as the Company is bound by this Agreement.

ARTICLE 15

INDEMNIFICATION AND LIMITATION OF LIABILITY

15.01    Indemnification. Except as prohibited by the restrictions provided in this Section 15.01, Section 15.02 and Section 15.03, the Company shall indemnify, defend and hold harmless the Advisor and its Affiliates, including their respective officers, directors, equity holders, partners and employees, from all liability, claims, damages or losses arising in the performance of their duties hereunder, and related expenses, including reasonable attorneys’ fees, to the extent such liability, claims, damages or losses and related expenses are not fully reimbursed by insurance. Any indemnification of the Advisor may be made only out of the net assets of the Company and not from Stockholders.

Notwithstanding the foregoing, the Company shall not indemnify the Advisor or its Affiliates for any loss, liability or expense arising from or out of an alleged violation of federal or state securities laws by such party unless one or more of the following conditions are met: (i) there has been a successful adjudication on the merits of each count involving alleged material securities law violations as to the particular indemnitee; (ii) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee; or (iii) a court of competent jurisdiction approves a settlement of the claims against a particular indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the SEC and of the published position of any state securities regulatory authority in which securities of the Company were offered or sold as to indemnification for violations of securities laws.

15.02    Limitation on Indemnification. Notwithstanding the foregoing, the Company shall not provide for indemnification of the Advisor or its Affiliates for any liability or loss suffered by any of them, nor shall any of them be held harmless for any loss or liability suffered by the Company, unless all of the following conditions are met:

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(i)    The Advisor or its Affiliates have determined, in good faith, that the course of conduct that caused the loss or liability was in the best interests of the Company.

(ii)    The Advisor or its Affiliates were acting on behalf of or performing services for the Company.

(iii)    Such liability or loss was not the result of negligence or misconduct by the Advisor or its Affiliates.

15.03    Limitation on Payment of Expenses. The Company shall pay or reimburse reasonable legal expenses and other costs incurred by the Advisor or its Affiliates in advance of the final disposition of a proceeding only if (in addition to the procedures required by the Maryland General Corporation Law, as amended from time to time) all of the following are satisfied: (i) the proceeding relates to acts or omissions with respect to the performance of duties or services on behalf of the Company, (ii) the legal proceeding was initiated by a third party who is not a stockholder or, if by a stockholder acting in his or her capacity as such, a court of competent jurisdiction approves such advancement and (iii) the Advisor or its Affiliates undertake to repay the amount paid or reimbursed by the Company, together with the applicable legal rate of interest thereon, if it is ultimately determined that the particular indemnitee is not entitled to indemnification.

ARTICLE 16

MISCELLANEOUS

16.01    Notices. Any notice, report or other communication required or permitted to be given hereunder shall be in writing unless some other method of giving such notice, report or other communication is required by the Articles of Incorporation, the Bylaws or is accepted by the party to whom it is given, and shall be given by being delivered by hand or by overnight mail or other overnight delivery service to the addresses set forth herein:

To the Company or the Board:

KBS Growth & Income REIT, Inc.

800 Newport Center Drive, Suite 700

Newport Beach, California 92660

To the Advisor:

KBS Capital Advisors LLC

800 Newport Center Drive, Suite 700

Newport Beach, California 92660

Either party may at any time give notice in writing to the other party of a change in its address for the purposes of this Section 16.01.

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16.02    Modification. This Agreement shall not be changed, modified, terminated or discharged, in whole or in part, except by an instrument in writing signed by both parties hereto, or their respective successors or permitted assigns.

16.03    Severability. The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.

16.04    Construction. The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware.

16.05    Entire Agreement. This Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing.

16.06    Waiver. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

16.07    Gender. Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.

16.08    Titles Not to Affect Interpretation. The titles of Articles and Sections contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof.

16.09    Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.

ARTICLE 17

ADVANCE

Notwithstanding anything contained in Article 9 of the Agreement to the contrary, the Advisor hereby agrees to advance funds to the Company equal to the cumulative amount of cash

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distributions declared by the Company for distribution record dates through the period ended May 31, 2016 and to advance funds to the Company, to the extent and in the amount requested by the Company, equal to an amount up to the cumulative amount of cash distributions declared by the Company for distribution record dates for the period from June 1, 2016 to June 30, 2016 (such amounts advanced, the “Advance”).

The Advisor further agrees that the Company will only be obligated to repay the Advisor for the Advance if and to the extent that:

(i) the Company’s modified funds from operations (“MFFO”), as such term is defined by the Investment Program Association and interpreted by the Company, for the immediately preceding month exceeds the amount of cash distributions declared for record dates of such prior month (an “MFFO Surplus”), and the Company shall pay the Advisor the amount of the MFFO Surplus to reduce the principal amount outstanding under the Advance, provided that such payments shall only be made if management in its sole discretion expects an MFFO Surplus to be recurring for at least the next two calendar quarters, determined on a quarterly basis; or

(ii) the Advance may be repaid from excess proceeds (“Excess Proceeds”) from the Company’s third-party financings, provided that the amount of any such Excess Proceeds that may be used to repay the principal amount outstanding under the Advance shall be determined by the Conflicts Committee of the Company in its sole discretion.

The Advisor understands and agrees that no interest shall accrue on the Advance. To the extent payment of any amount is due to the Advisor hereunder, the Company shall pay the Advisor no later than the last business day of the month in which the amount of such payment is determined, or the first business day of the following month.

[The remainder of this page is intentionally left blank.

Signature page follows.]

27

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of

the date and year first above written.

KBS GROWTH & INCOME REIT, INC.

By: /s/ Charles J. Schreiber, Jr.

Charles J. Schreiber, Jr., Chief Executive Officer

KBS CAPITAL ADVISORS LLC

By: PBren Investments, L.P., a Manager

By: PBren Investments, LLC, as general partner

By: /s/ Peter M. Bren

Peter M. Bren, Manager

By: Schreiber Real Estate Investments, L.P., a Manager

By: Schreiber Investments, LLC, as general partner

By: /s/ Charles J. Schreiber, Jr.

Charles J. Schreiber, Jr., Manager

28

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Charles J. Schreiber, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Q of KBS Growth & Income REIT, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [language omitted in accordance with SEC transition instructions contained in SEC Release No. 34-47986] and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) [Paragraph omitted in accordance with SEC transition instructions contained in SEC Release No. 34‑47986];

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 7, 2018	By:	/S/ CHARLES J. SCHREIBER, JR.
			Charles J. Schreiber, Jr.
			Chairman of the Board, Chief Executive Officer and Director
			(principal executive officer)

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Jeffrey K. Waldvogel, certify that:

1. I have reviewed this quarterly report on Form 10-Q of KBS Growth & Income REIT, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [language omitted in accordance with SEC transition instructions contained in SEC Release No. 34-47986] and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) [Paragraph omitted in accordance with SEC transition instructions contained in SEC Release No. 34‑47986];

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 7, 2018	By:	/S/ JEFFREY K. WALDVOGEL
			Jeffrey K. Waldvogel
			Chief Financial Officer
			(principal financial officer)

EX-32.1

Exhibit 32.1

Certification pursuant to 18 U.S.C. Section 1350,

as Adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of KBS Growth & Income REIT, Inc. (the “Registrant”) for the quarter ended June 30, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Charles J. Schreiber Jr., Chief Executive Officer and Director of the Registrant, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge and belief:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date:	August 7, 2018	By:	/S/ CHARLES J. SCHREIBER, JR.
			Charles J. Schreiber, Jr.
			Chairman of the Board, Chief Executive Officer and Director
			(principal executive officer)

EX-32.2

Exhibit 32.2

Certification pursuant to 18 U.S.C. Section 1350,

as Adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of KBS Growth & Income REIT, Inc. (the “Registrant”) for the quarter ended June 30, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Jeffrey K. Waldvogel, the Chief Financial Officer of the Registrant, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge and belief:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date:	August 7, 2018	By:	/S/ JEFFREY K. WALDVOGEL
			Jeffrey K. Waldvogel
			Chief Financial Officer
			(principal financial officer)

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Aug. 03, 2018
Entity Listings [Line Items]
Entity Registrant Name	KBS Growth & Income REIT, Inc.
Entity Central Index Key	0001631256
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Document Type	10-Q
Document Period End Date	Jun. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2
Amendment Flag	false
Class A
Entity Listings [Line Items]
Entity Common Stock, Shares Outstanding		9,274,484
Class T
Entity Listings [Line Items]
Entity Common Stock, Shares Outstanding		290,216

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Real estate:
Land	$ 31,309	$ 31,309
Building and improvements	142,813	142,400
Tenant origination and absorption costs	16,400	17,047
Total real estate, cost	190,522	190,756
Less accumulated depreciation and amortization	(13,626)	(9,627)
Total real estate, net	176,896	181,129
Cash and cash equivalents	5,219	2,523
Rent and other receivables	2,643	1,920
Above-market leases, net	165	180
Prepaid expenses and other assets, net	2,413	1,388
Total assets	187,336	187,140
Liabilities and stockholders’ equity
Notes payable, net	116,682	112,780
Accounts payable and accrued liabilities	2,278	2,717
Due to affiliates	2,703	1,787
Distributions payable	410	385
Below-market leases, net	4,652	5,910
Other liabilities	2,559	1,828
Total liabilities	129,284	125,407
Commitments and contingencies (Note 9)
Redeemable common stock	0	2,314
Stockholders’ equity
Preferred stock, $.01 par value; 10,000,000 shares authorized, no shares issued and outstanding	0	0
Additional paid-in capital	78,145	76,265
Cumulative distributions and net losses	(20,188)	(16,940)
Total stockholders’ equity	58,052	59,419
Total liabilities and stockholders’ equity	187,336	187,140
Class A
Stockholders’ equity
Common stock	92	91
Class T
Stockholders’ equity
Common stock	$ 3	$ 3

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2018	Dec. 31, 2017
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Class A
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	500,000,000	500,000,000
Common stock, shares issued (in shares)	9,194,944	9,149,100
Common stock, shares outstanding (in shares)	9,194,944	9,149,100
Class T
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	500,000,000	500,000,000
Common stock, shares issued (in shares)	287,878	281,537
Common stock, shares outstanding (in shares)	287,878	281,537

XML

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Revenues:
Rental income	$ 4,825	$ 3,290	$ 9,239	$ 6,526
Tenant reimbursements	867	877	1,995	1,656
Other operating income	37	20	76	38
Total revenues	5,729	4,187	11,310	8,220
Expenses:
Operating, maintenance, and management	1,336	878	2,205	1,623
Property management fees and expenses to affiliate	42	31	84	60
Real estate taxes and insurance	679	513	1,430	970
Asset management fees to affiliate	462	0	918	214
General and administrative expenses	362	422	755	763
Depreciation and amortization	2,784	1,822	5,093	3,540
Interest expense	797	757	1,768	1,500
Total expenses	6,462	4,423	12,253	8,670
Other income (loss):
Interest and other income	8	18	13	35
Loss from extinguishment of debt	0	(206)	0	(206)
Total other income (loss)	8	(188)	13	(171)
Net loss	(725)	(424)	(930)	(621)
Common Stock:
Net loss	(725)	(424)	(930)	(621)
Class A
Other income (loss):
Net loss	(703)	(406)	(902)	(596)
Common Stock:
Net loss	$ (703)	$ (406)	$ (902)	$ (596)
Net loss per common share, basic and diluted (in dollars per share)	$ (0.08)	$ (0.04)	$ (0.10)	$ (0.07)
Weighted-average number of common shares outstanding, basic and diluted (in shares)	9,096,617	9,076,034	9,095,895	9,020,742
Class T
Other income (loss):
Net loss	$ (22)	$ (18)	$ (28)	$ (25)
Common Stock:
Net loss	$ (22)	$ (18)	$ (28)	$ (25)
Net loss per common share, basic and diluted (in dollars per share)	$ (0.08)	$ (0.07)	$ (0.10)	$ (0.11)
Weighted-average number of common shares outstanding, basic and diluted (in shares)	286,721	261,613	285,165	214,044

XML

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - USD ($) $ in Thousands	Total	Class A	Class T	Common Stock Class A	Common Stock Class T	Additional Paid-in Capital	Cumulative Distributions and Net Losses
Balance (in shares) at Dec. 31, 2016				8,846,164	94,018
Balance at Dec. 31, 2016	$ 62,630			$ 88	$ 1	$ 71,992	$ (9,451)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(2,199)						(2,199)
Issuance of common stock (in shares)				380,538	185,845
Issuance of common stock	5,421			$ 2	$ 2	5,417
Transfers to redeemable common stock	(523)					(523)
Redemptions of common stock (in shares)				(145,214)
Redemptions of common stock	(1,210)					(1,210)
Stock dividends issued (in shares)				67,612	1,674
Stock dividends issued	0			$ 1		706	(707)
Distributions declared	(4,583)						(4,583)
Commissions on stock sales, related dealer manager fees and stockholder servicing fees to affiliate	(103)					(103)
Other offering costs to affiliate	(14)					(14)
Balance (in shares) at Dec. 31, 2017		9,149,100	281,537	9,149,100	281,537
Balance at Dec. 31, 2017	59,419			$ 91	$ 3	76,265	(16,940)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(930)	$ (902)	$ (28)				(930)
Issuance of common stock (in shares)				322,916	6,341
Issuance of common stock	2,895			$ 4	$ 0	2,891
Redemptions of common stock (in shares)				(277,072)
Redemptions of common stock	(2,314)			$ (3)		(2,311)
Distributions declared	(2,318)						(2,318)
Transfers from redeemable common stock	1,300					1,300
Balance (in shares) at Jun. 30, 2018		9,194,944	287,878	9,194,944	287,878
Balance at Jun. 30, 2018	$ 58,052			$ 92	$ 3	$ 78,145	$ (20,188)

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Cash Flows from Operating Activities:
Net loss	$ (930)	$ (621)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	5,093	3,540
Deferred rents	(721)	(315)
Allowance for doubtful accounts	90	(13)
Amortization of above and below-market leases, net	(1,243)	(759)
Amortization of deferred financing costs	169	253
Unrealized gain on derivative instrument	(811)	0
Loss from extinguishment of debt	0	206
Changes in operating assets and liabilities:
Rents and other receivables	(112)	(90)
Prepaid expenses and other assets	(543)	62
Accounts payable and accrued liabilities	(203)	(656)
Due to affiliates	916	(11)
Other liabilities	(283)	8
Net cash provided by operating activities	1,422	1,604
Cash Flows from Investing Activities:
Improvements to real estate	(1,008)	(310)
Net cash used in investing activities	(1,008)	(310)
Cash Flows from Financing Activities:
Proceeds from notes payable	45,000	1,950
Principal payments on notes payable	(41,000)	(11,260)
Payments of deferred financing costs	(6)	(103)
Proceeds from issuance of common stock	1,881	2,522
Payments to redeem common stock	(2,314)	(64)
Payments of commissions on stock sales, related dealer manager fees to affiliate and other offering costs	0	(137)
Distributions paid to common stockholders	(1,279)	(1,065)
Net cash provided by (used in) financing activities	2,282	(8,157)
Net increase (decrease) in cash and cash equivalents	2,696	(6,863)
Cash and cash equivalents, beginning of period	2,523	15,666
Cash and cash equivalents, end of period	5,219	8,803
Supplemental Disclosure of Cash Flow Information
Interest paid	2,362	1,245
Supplemental Disclosure of Noncash Investing and Financing Activities:
Stock dividends issued	0	476
Increase in cash distributions payable	25	5
Dividends paid to common stockholders through common stock issuances pursuant to the distribution reinvestment plan	1,014	1,199
Increase in redemptions payable	1,014	0
Increase in accrued improvements to real estate	0	914
Write-off of deferred financing costs	$ 0	$ (206)

XML

ORGANIZATION

6 Months Ended

Jun. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

ORGANIZATION

ORGANIZATION

KBS Growth & Income REIT, Inc. (the “Company”) was formed on January 12, 2015 as a Maryland corporation that elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2015. Substantially all of the Company’s business is conducted through KBS Growth & Income Limited Partnership (the “Operating Partnership”), a Delaware limited partnership formed on January 14, 2015. The Company is the sole general partner of, and owns a 0.1% partnership interest in, the Operating Partnership. KBS Growth & Income REIT Holdings LLC (“REIT Holdings”), a Delaware limited liability company formed on January 14, 2015, owns the remaining 99.9% partnership interest in the Operating Partnership and is the sole limited partner. The Company is the sole member and manager of REIT Holdings.

Subject to certain restrictions and limitations, the business of the Company is externally managed by KBS Capital Advisors LLC (the “Advisor”), an affiliate of the Company, pursuant to an advisory agreement between the Company and the Advisor initially entered into on June 11, 2015, and amended at various times thereafter (the “Advisory Agreement”). The Advisor conducts the Company’s operations and manages its portfolio of core real estate properties. On January 27, 2015, the Company issued 20,000 shares of its common stock to the Advisor at a purchase price of $10.00 per share. On June 11, 2015, these outstanding shares of common stock were designated Class A shares of common stock.

As of June 30, 2018, the Company had invested in four office properties. The Company intends to invest in a diverse portfolio of core real estate properties. The Company considers core properties to be existing properties with at least 80% occupancy. Based on the current market outlook, the Company expects its core focus in the U.S. office sector to reflect a value-creating core strategy, which is also known as a core-plus strategy.

The Company commenced a private placement offering exempt from registration pursuant to Rule 506(b) of Regulation D of the Securities Act of 1933, as amended, on June 11, 2015, pursuant to which the Company offered a maximum of $105,000,000 in shares of its Class A common stock for sale to accredited investors (the “Initial Private Offering”), of which $5,000,000 of Class A shares were offered pursuant to the Company’s distribution reinvestment plan. The Company ceased offering shares in the primary portion of the Initial Private Offering on April 27, 2016 and processed subscriptions for the primary Initial Private Offering dated on or prior to April 27, 2016 through May 30, 2016. KBS Capital Markets Group LLC (the “Dealer Manager”), an affiliate of the Advisor, served as the dealer manager of the Initial Private Offering pursuant to a dealer manager agreement dated June 11, 2015 (the “Initial Private Offering Dealer Manager Agreement”).

On February 4, 2015, the Company filed a registration statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) to register an initial public offering of its common stock to offer a maximum of $1,500,000,000 in shares of common stock for sale to the public in a primary offering, consisting of two classes of shares: Class A and Class T (the “Primary Offering”) and a maximum of $800,000,000 in both classes of shares of its common stock pursuant to the Company’s distribution reinvestment plan (the “DRP Offering” and, together with the Primary Offering, the “Public Offering”). The SEC declared the Company’s registration statement effective on April 28, 2016 and the Company retained the Dealer Manager to serve as the dealer manager of the Public Offering pursuant to a dealer manager agreement dated April 28, 2016 (the “Public Offering Dealer Manager Agreement”). The Company terminated the Primary Offering effective June 30, 2017.

The Company continues to offer shares of common stock pursuant to the DRP Offering. In some states, the Company will need to renew the registration statement annually to continue the DRP Offering. The Company may terminate the DRP Offering at any time.

On October 3, 2017, the Company launched a private placement offering exempt from registration pursuant to Rule 506(c) of Regulation D of the Securities Act pursuant to which the Company is currently offering a maximum of $1,000,000,000 in shares of its Class A common stock to accredited investors (the “Second Private Offering”). Prior to the launch of the Second Private Offering, on September 29, 2017, the Company entered into a dealer manager agreement (the “NCPS Dealer Agreement”) with the Advisor and North Capital Private Securities Corporation (“NCPS”) in connection with the Second Private Offering.

The Company sold 8,548,972 shares of Class A common stock for gross offering proceeds of $76.8 million in the Initial Private Offering, including 74,744 shares of Class A common stock under its distribution reinvestment plan for gross offering proceeds of $0.7 million.

The Company sold 122,721 and 270,415 shares of Class A and Class T common stock in the Primary Offering for aggregate gross offering proceeds of $3.9 million. As of June 30, 2018, the Company had sold 464,125 and 15,689 shares of Class A and Class T common stock in the DRP Offering for aggregate gross offering proceeds of $4.5 million.

As of June 30, 2018, the Company had sold 253,308 shares of Class A common stock in the Second Private Offering for aggregate gross offering proceeds of $2.2 million.

As of June 30, 2018, the Company had redeemed 422,286 Class A shares for $3.5 million.

On August 11, 2015, two of the individuals who own and control the Company’s sponsor, Charles J. Schreiber, Jr. (who also acts as chief executive officer, the chairman of the board and a director of the Company) and Peter M. Bren (who also acts as president and director of the Company), purchased 21,181.2380 and 21,181.2390 shares of Class A common stock, respectively, each for an aggregate purchase price of $172,500 or $8.144 per share. The per share purchase price reflects an 8.5% discount to the $8.90 offering price in the Private Offering in effect on the date of their purchase because selling commissions and dealer manager fees were not paid in connection with the sales. Mr. Bren’s investment was made on behalf of and for the account of three of his children, and he has disclaimed beneficial ownership of the shares. The Company issued these shares in private transactions exempt from the registration requirements pursuant to Section 4(a)(2) of the Securities Act of 1933.

As described above, the Company intends to use substantially all of the net proceeds from its private and public offerings to invest in a diverse portfolio of core real estate properties.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 2017, except for the Company’s adoption of the revenue recognition standards issued by the Financial Accounting Standards Board (“FASB”) effective on January 1, 2018. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2017 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”).

Principles of Consolidation and Basis of Presentation

The accompanying unaudited consolidated financial statements and condensed notes thereto have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the FASB Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements.  In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods.  Operating results for the six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.

The consolidated financial statements include the accounts of the Company, REIT Holdings, the Operating Partnership, and their direct and indirect wholly owned subsidiaries.  All significant intercompany balances and transactions are eliminated in consolidation. 

Use of Estimates

The preparation of the consolidated financial statements and the accompanying notes thereto in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

Segments

The Company had invested in four office properties as of June 30, 2018. Substantially all of the Company’s revenue and net loss is from real estate, and therefore, the Company currently operates in one reportable segment.

Revenue Recognition

Effective January 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU No. 2014-09”) using the modified retrospective approach, which requires a cumulative effect adjustment as of the date of the Company’s adoption.  Under the modified retrospective approach, an entity may also elect to apply this standard to either (i) all contracts as of January 1, 2018 or (ii) only to contracts that were not completed as of January 1, 2018.  A completed contract is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP that was in effect before the date of initial application. The Company elected to apply this standard only to contracts that were not completed as of January 1, 2018. 

Based on the Company’s evaluation of contracts within the scope of ASU No. 2014-09, revenue that is impacted by ASU No. 2014-09 includes revenue generated by sales of real estate, other operating income and tenant reimbursements for substantial services earned at the Company’s properties. The recognition of such revenue will occur when the services are provided and the performance obligations are satisfied. For the three and six months ended June 30, 2018, tenant reimbursements for substantial services accounted for under ASU No. 2014-09 were $28,000 and $64,000, respectively, and were included in tenant reimbursements on the accompanying statements of operations. 

Sales of Real Estate

Effective January 1, 2018, the Company adopted the guidance of ASC 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (“ASC 610-20”), which applies to sales or transfers to noncustomers of nonfinancial assets or in substance nonfinancial assets that do not meet the definition of a business.  Generally, the Company’s sales of real estate would be considered a sale of a nonfinancial asset as defined by ASC 610-20.

ASC 610-20 refers to the revenue recognition principles under ASU No. 2014-09.  Under ASC 610-20, if the Company determines it does not have a controlling financial interest in the entity that holds the asset and the arrangement meets the criteria to be accounted for as a contract, the Company would derecognize the asset and recognize a gain or loss on the sale of the real estate when control of the underlying asset transfers to the buyer.  As a result of the adoption of ASU 610-20, there was no impact to the Company’s consolidated financial statements of operations for the three and six months ended June 30, 2018 and 2017 since the Company did not sell any real estate properties for those periods.

Per Share Data

Basic net income (loss) per share of common stock is calculated by dividing net income (loss) by the weighted-average number of shares of common stock issued and outstanding during such period. Diluted net income (loss) per share of common stock equals basic net income (loss) per share of common stock as there were no potentially dilutive securities outstanding for the three and six months ended June 30, 2018 and 2017, respectively. For the purpose of determining the weighted average number of shares outstanding, stock dividends issued during the period presented are adjusted retroactively and treated as if they were issued and outstanding for all periods presented. 

During the three and six months ended June 30, 2017, the Company declared stock distributions of 0.00249999 and 0.00499998 shares per share outstanding, respectively, and issued a total of 23,160 and 45,846 shares. The Company ceased issuing stock dividends to all stockholders on September 5, 2017.  Stock dividends had been declared on a monthly basis and the amount declared per share outstanding assumed the share was issued and outstanding each date that was a record date for stock dividends during the periods presented. Stock dividends were issued in the same class of shares as the shares for which such stockholder received the stock dividend.

During the three and six months ended June 30, 2018, aggregate cash distributions declared per share of Class A common stock were $0.12787633 and $0.24708313, assuming the share was issued and outstanding each date that was a record date for distributions during the period. During the three and six months ended June 30, 2018, aggregate cash distributions declared per share of Class T common stock were $0.12787633 and $0.24708313, assuming the share was issued and outstanding each date that was a record date for distributions during the period. During the three and six months ended June 30, 2017, aggregate cash distributions declared per share of Class A common stock were $0.12465726 and $0.24794466, assuming the share was issued and outstanding each date that was a record date for distributions during the period. During the three and six months ended June 30, 2017, aggregate cash distributions declared per share of Class T common stock were $0.10005293 and $0.19885548, assuming the share was issued and outstanding each date that was a record date for distributions during the period. Distributions for the period from January 1, 2017 through June 30, 2017 were calculated at a rate of (i) $0.00136986 per share per day, less (ii) the applicable daily class-specific stockholder servicing fees accrued for and allocable to any class of common stock, divided by the number of shares of common stock of such class outstanding as of the close of business on each respective record date. Distributions for the period from January 1, 2018 through April 30, 2018 and from May 1, 2018 through June 30, 2018 were calculated at a rate of $0.00132452 per share per day and $0.00144493 per share per day, respectively. Each day during the six months ended June 30, 2018 and 2017 was a record date for distributions.

In accordance with FASB ASC Topic 260-10-45, Earnings Per Share, the Company uses the two-class method to calculate earnings per share. Basic earnings per share is calculated based on dividends declared (“distributed earnings”) and the rights of common shares and participating securities in any undistributed earnings, which represents net income remaining after deduction of dividends declared during the period. The undistributed earnings are allocated to all outstanding common shares based on the relative percentage of each class of shares to the total number of outstanding shares. The Company does not have any participating securities outstanding other than Class A Common Stock and Class T Common Stock during the periods presented.

The Company’s calculated earnings per share for the three and six months ended June 30, 2018 and 2017 were as follows (in thousands, except share and per share amounts):

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
Net loss	$	(725	)	$	(424	)	$	(930	)	$	(621	)
Less: Class A Common Stock cash distributions declared	1,163			1,128			2,248			2,226
Less: Class T Common Stock cash distributions declared	37			26			70			42
Undistributed net loss	$	(1,925	)	$	(1,578	)	$	(3,248	)	$	(2,889	)
Class A Common Stock:
Undistributed net loss	$	(1,866	)	$	(1,534	)	$	(3,150	)	$	(2,822	)
Class A Common Stock cash distributions declared	1,163			1,128			2,248			2,226
Net loss	$	(703	)	$	(406	)	$	(902	)	$	(596	)
Net loss per common share, basic and diluted	$	(0.08	)	$	(0.04	)	$	(0.10	)	$	(0.07	)
Weighted-average number of common shares outstanding, basic and diluted	9,096,617			9,076,034			9,095,895			9,020,742
Class T Common Stock:
Undistributed net loss	$	(59	)	$	(44	)	$	(98	)	$	(67	)
Class T Common Stock cash distributions declared	37			26			70			42
Net loss	$	(22	)	$	(18	)	$	(28	)	$	(25	)
Net loss per common share, basic and diluted	$	(0.08	)	$	(0.07	)	$	(0.10	)	$	(0.11	)
Weighted-average number of common shares outstanding, basic and diluted	286,721			261,613			285,165			214,044

Square Footage, Occupancy and Other Measures

 Square footage, occupancy, number of tenants and other measures, including annualized base rent and annualized base rent per square foot, or amounts derived from such measures, used to describe real estate investments included in these condensed notes to consolidated financial statements are presented on an unaudited basis and outside the scope of the Company’s independent registered public accounting firm’s review of the Company’s financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board.

Recently Issued Accounting Standards Update

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU No. 2016-02”). The amendments in ASU No. 2016-02 change the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU No. 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of ASU No. 2016-02 as of its issuance is permitted. ASU No. 2016-02 requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact of adopting the new lease accounting standard on its consolidated financial statements. Upon adoption of ASU No. 2016-02, the Company expects to adopt the package of practical expedients for all leases that commenced before the effective date of January 1, 2019. Accordingly, the Company will 1) not reassess whether any expired or existing contracts are or contain leases, 2) not reassess the lease classification for any expired or existing lease, and 3) not reassess initial direct costs for any existing leases. The Company does not expect to elect the practical expedient related to using hindsight to reevaluate the lease term. In addition, the Company expects to adopt the practical expedient for land easements to not assess whether existing or expired land easements that were not previously accounted for as leases under the current lease accounting standards of Topic 840 are or contain a lease under Topic 842.

In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842), Targeted Improvements (“ASU No. 2018-11”), which provides lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component and, instead to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue recognition standard (Topic 606) and if certain conditions are met. Upon adoption of the lease accounting standard under Topic 842, the Company expects to adopt this practical expedient, specifically related to its tenant reimbursements which would otherwise be accounted for under the new revenue recognition standard. The Company believes the two conditions have been met for tenant reimbursements as 1) the timing and pattern of transfer of the nonlease components and associated lease components are the same and 2) the lease component would be classified as an operating lease. In addition. ASU No. 2018-11, provides an additional optional transition method to allow entities to apply the new lease accounting standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. An entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new lease accounting standard will continue to be reported under the current lease accounting standards of Topic 840. The Company expects to adopt this transition method upon adoption of the lease accounting standard of Topic 842 on January 1, 2019.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments (“ASU No. 2016-13”).  ASU No. 2016-13 affects entities holding financial assets and net investments in leases that are not accounted for at fair value through net income.  The amendments in ASU No. 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected.  The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset.  ASU No. 2016-13 also amends the impairment model for available-for-sale securities.  An entity will recognize an allowance for credit losses on available-for-sale debt securities as a contra-account to the amortized cost basis rather than as a direct reduction of the amortized cost basis of the investment, as is currently required.  ASU No. 2016-13 also requires new disclosures.  For financial assets measured at amortized cost, an entity will be required to disclose information about how it developed its allowance for credit losses, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes.  For financing receivables and net investments in leases measured at amortized cost, an entity will be required to further disaggregate the information it currently discloses about the credit quality of these assets by year of the asset’s origination for as many as five annual periods. For available for sale securities, an entity will be required to provide a roll-forward of the allowance for credit losses and an aging analysis for securities that are past due.  ASU No. 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years.  Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  The Company is still evaluating the impact of adopting ASU No. 2016-13 on its financial statements, but does not expect the adoption of ASU No. 2016-13 to have a material impact on its financial statements.

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REAL ESTATE

6 Months Ended

Jun. 30, 2018

Real Estate [Abstract]

REAL ESTATE

REAL ESTATE

As of June 30, 2018, the Company owned four office properties containing 683,952 rentable square feet, which were collectively 97% occupied. The following table provides summary information regarding the properties owned by the Company as of June 30, 2018 (in thousands):

Property	Date Acquired	City	State	Property Type	Total Real Estate at Cost		Accumulated Depreciation and Amortization			Total Real Estate, Net
Von Karman Tech Center	08/12/2015	Irvine	CA	Office	$	20,829	$	(1,933	)	$	18,896
Commonwealth Building	06/30/2016	Portland	OR	Office	76,718		(6,378		)	70,340
The Offices at Greenhouse	11/14/2016	Houston	TX	Office	47,242		(3,930		)	43,312
Institute Property	11/09/2017	Chicago	IL	Office	45,733		(1,385		)	44,348
					$	190,522	$	(13,626	)	$	176,896

As of June 30, 2018, the following properties represented more than 10% of the Company’s total assets:

Property	Location	Rentable Square Feet	Total Real Estate, Net (in thousands)		Percentage of Total Assets		Annualized Base Rent (in thousands)(1)		Average Annualized Base Rent per sq. ft.		Occupancy
Von Karman Tech Center	Irvine, CA	101,161	$	18,896	10.1	%	$	2,249	$	22.90	97.1	%
Commonwealth Building	Portland, OR	224,122	70,340		37.5	%	5,727		26.79		95.4	%
The Offices at Greenhouse	Houston, TX	203,284	43,312		23.1	%	4,201		20.66		100.0	%
Institute Property	Chicago, IL	155,385	44,348		23.7	%	3,385		23.37		93.2	%

_____________________

⁽¹⁾ Annualized base rent represents annualized contractual base rental income as of June 30, 2018, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.

Operating Leases

The Company’s real estate properties are leased to tenants under operating leases for which the terms and expirations vary. As of June 30, 2018, the leases had remaining terms, excluding options to extend, of up to 8.9 years with a weighted-average remaining term of 4.3 years. Some of the leases have provisions to extend the term of the leases, options for early termination for all or a part of the leased premises after paying a specified penalty, and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires a security deposit from the tenant in the form of a cash deposit and/or a letter of credit. The amount required as a security deposit varies depending upon the terms of the respective lease and the creditworthiness of the tenant, but generally is not a significant amount. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in other liabilities in the accompanying consolidated balance sheets and totaled $1.1 million and $1.2 million as of June 30, 2018 and December 31, 2017, respectively.

During the six months ended June 30, 2018 and 2017, the Company recognized deferred rent from tenants, net of lease incentive amortization, of $0.7 million and $0.3 million, respectively. As of June 30, 2018 and December 31, 2017, the cumulative deferred rent balance was $2.5 million and $1.8 million, respectively, and is included in rents and other receivables on the accompanying balance sheets. The cumulative deferred rent balance included $0.2 million and $0.2 million of unamortized lease incentives as of June 30, 2018 and December 31, 2017, respectively.

As of June 30, 2018, the future minimum rental income from the Company’s properties under its non-cancelable operating leases was as follows (in thousands):

July 1, 2018 through December 31, 2018	$	7,375
2019	14,314
2020	14,308
2021	12,902
2022	11,131
Thereafter	16,483
	$	76,513

As of June 30, 2018, the Company had a concentration of credit risk related to AECOM, one of the tenants in The Offices at Greenhouse in the engineering industry, which represented 19% of the Company’s annualized base rent. The tenant individually occupied 140,922 rentable square feet or approximately 21% of the total rentable square feet of the Company’s real estate portfolio. Of the 140,922 rentable square feet, 5,195 rentable square feet expires on July 24, 2019, with twothree-year extension options, and 135,727 rentable square feet expires on December 31, 2024, with twofive-year extension options. As of June 30, 2018, the annualized base rent for this tenant was approximately $3.0 million or $21.39 per square foot. No other tenant represented more than 10% of the Company’s annualized base rent.

As of June 30, 2018, the Company’s real estate properties were leased to approximately 80 tenants over a diverse range of industries. The Company’s highest tenant industry concentration (greater than 10% of annualized base rent) was as follows:

Industry	Number of Tenants	Annualized Base Rent (1) (in thousands)		Percentage of Annualized Base Rent
Professional, scientific and technical	14	$	5,910	38.0	%
Information technology	9	1,849		11.9	%

_____________________

⁽¹⁾ Annualized base rent represents annualized contractual base rental income as of June 30, 2018, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.

As of June 30, 2018, no other tenant industries accounted for more than 10% of annualized base rent. No material tenant credit issues have been identified at this time.

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TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES

6 Months Ended

Jun. 30, 2018

Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities [Abstract]

TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES

TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES

As of June 30, 2018 and December 31, 2017, the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities (excluding fully amortized assets and liabilities and accumulated amortization) were as follows (in thousands):

	Tenant Origination and Absorption Costs						Above-Market Lease Assets						Below-Market Lease Liabilities
	June 30, 2018			December 31, 2017			June 30, 2018			December 31, 2017			June 30, 2018			December 31, 2017
Cost	$	16,400		$	17,047		$	213		$	213		$	(7,226	)	$	(7,838	)
Accumulated Amortization	(4,781		)	(3,480		)	(48		)	(33		)	2,574			1,928
Net Amount	$	11,619		$	13,567		$	165		$	180		$	(4,652	)	$	(5,910	)

Increases (decreases) in net income as a result of amortization of the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities for the three and six months ended June 30, 2018 and 2017 were as follows (in thousands):

	Tenant Origination and Absorption Costs						Above-Market Lease Assets						Below-Market Lease Liabilities
	For the Three Months Ended June 30,						For the Three Months Ended June 30,						For the Three Months Ended June 30,
	2018			2017			2018			2017			2018		2017
Amortization	$	(1,130	)	$	(703	)	$	(7	)	$	(7	)	$	803	$	423

	Tenant Origination and Absorption Costs						Above-Market Lease Assets						Below-Market Lease Liabilities
	For the Six Months Ended June 30,						For the Six Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017			2018		2017
Amortization	$	(1,948	)	$	(1,336	)	$	(15	)	$	(15	)	$	1,258	$	774

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NOTES PAYABLE

6 Months Ended

Jun. 30, 2018

Notes Payable [Abstract]

NOTES PAYABLE

NOTES PAYABLE

As of June 30, 2018, the Company’s notes payable consisted of the following (dollars in thousands):

	Book Value as of June 30, 2018			Book Value as of December 31, 2017			Contractual Interest Rate as of June 30, 2018 (1)	Effective Interest Rate at June 30, 2018 (1)	Payment Type	Maturity Date (2)
Commonwealth Building Mortgage Loan (3)	$	45,000		$	41,000		One-month LIBOR + 1.80%	3.79%	Interest Only	02/01/2023
Term Loan (4)	72,800			72,800			One-month LIBOR + 2.00%	3.99%	Interest Only	11/09/2020
Notes payable principal outstanding	$	117,800		$	113,800
Deferred financing costs, net	(1,118		)	(1,020		)
Notes payable, net	$	116,682		$	112,780

_____________________

⁽¹⁾Contractual interest rate represents the interest rate in effect under the loan as of June 30, 2018. Effective interest rate is calculated as the actual interest rate in effect as of June 30, 2018 (consisting of the contractual interest rate), using interest rate indices as of June 30, 2018, where applicable.

⁽²⁾Represents the maturity date as of June 30, 2018; subject to certain conditions, the maturity dates of certain loans may be extended beyond the dates shown.

⁽³⁾ On January 18, 2018, the Company, through an indirect wholly owned subsidiary, closed the refinancing of the initial Commonwealth Building mortgage loan with an unaffiliated lender (the “Refinancing”) for a maximum loan amount of up to $51.4 million. With the proceeds from the Refinancing, the Company repaid $41.0 million of principal in satisfaction of the initial Commonwealth Building mortgage loan. Under the current Commonwealth Building Mortgage Loan under the Refinancing, monthly payments are interest-only with the remaining principal balance, all accrued and unpaid interest and all other sums due under the loan documents payable at maturity. If the LIBOR rate is equal to or greater than 2.90% for five consecutive business days, the Company has 30 days to enter into an interest rate cap agreement with a LIBOR strike rate of 3.90% or less. The Company has the right to prepay all or a portion of the loan under the Refinancing commencing on February 1, 2019, subject to certain fees and conditions contained in the loan documents. As of June 30, 2018, $45.0 million of the Commonwealth Building Mortgage Loan was outstanding and $6.4 million remained available for future disbursements, subject to certain terms and conditions set forth in the loan documents.

⁽⁴⁾ As of June 30, 2018, the outstanding balance under the Term Loan consisted of $48.5 million of term commitment and $24.3 million of revolving commitment, which bears interest at a rate per annum equal to 2.0% over one-month LIBOR. The Term Loan is secured by The Offices at Greenhouse, Von Karman Tech Center and Institute Property.

During the three and six months ended June 30, 2018, the Company incurred $0.8 million and $1.8 million of interest expense, respectively. During the three and six months ended June 30, 2017, the Company incurred $0.8 million and $1.5 million of interest expense, respectively. As of June 30, 2018 and December 31, 2017, $0.4 million and $0.3 million of interest expense were payable, respectively. Included in interest expense during the three and six months ended June 30, 2018 were $0.1 million and $0.2 million of amortization of deferred financing costs, respectively. Also included in interest expense during the six months ended June 30, 2018 was $0.2 million of debt refinancing costs. Included in interest expense during the three and six months ended June 30, 2017 were $0.1 million and $0.3 million of amortization of deferred financing costs, respectively. Interest expense was reduced by $0.4 million and $0.8 million as a result of a change in fair value of the Company’s derivative instruments for the three and six months ended June 30, 2018, respectively.

The following is a schedule of maturities, including principal amortization payments, for all notes payable outstanding as of June 30, 2018 (in thousands):

July 1, 2018 through December 31, 2018	$	—
2019	—
2020	72,800
2021	—
2022	—
Thereafter	45,000
	$	117,800

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DERIVATIVE INSTRUMENTS

6 Months Ended

Jun. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS

DERIVATIVE INSTRUMENTS

The Company enters into derivative instruments for risk management purposes to hedge its exposure to cash flow variability caused by changing interest rates. The primary goal of the Company’s risk management practices related to interest rate risk is to prevent changes in interest rates from adversely impacting the Company’s ability to achieve its investment return objectives. The Company does not enter into derivatives for speculative purposes.

The Company enters into interest rate swaps as a fixed rate payer to mitigate its exposure to rising interest rates on its variable rate notes payable. The value of interest rate swaps is primarily impacted by interest rates, market expectations about interest rates, and the remaining life of the instrument. In general, increases in interest rates, or anticipated increases in interest rates, will increase the value of the fixed rate payer position and decrease the value of the variable rate payer position. As the remaining life of the interest rate swap decreases, the value of both positions will generally move towards zero.

The following table summarizes the notional amount and other information related to the Company’s interest rate swaps as of June 30, 2018 and December 31, 2017. The notional amount is an indication of the extent of the Company’s involvement in each instrument at that time, but does not represent exposure to credit, interest rate or market risks (dollars in thousands):

	June 30, 2018			December 31, 2017				Weighted-Average  Fix Pay Rate	Weighted-Average Remaining Term in Years
Derivative Instruments	Number of Instruments	Notional Amount		Number of Instruments	Notional Amount		Reference Rate as of June 30, 2018
Derivative instruments not designated as hedging instruments
Interest Rate Swaps (1)	2	$	78,533	1	$	48,533	One-month LIBOR/ Fixed at 2.07% - 2.82%	2.36%	3.23

_____________________

⁽¹⁾ Includes a forward interest rate swap in the amount of $48.5 million, which will become effective on November 1, 2018 and maturing on November 1, 2021 and a forward interest rate swap in the amount of $30.0 million, which will become effective on April 1, 2019 and maturing on November 1, 2022.

The following table sets forth the fair value of the Company’s derivative instruments as well as their classification on the consolidated balance sheets as of June 30, 2018 and December 31, 2017 (dollars in thousands):

		June 30, 2018			December 31, 2017
Derivative Instruments	Balance Sheet Location	Number of Instruments	Fair Value		Number of Instruments	Fair Value
Derivative instruments not designated as hedging instruments
Interest Rate Swaps	Prepaid expenses and other assets, at fair value	2	$	989	1	$	178

The change in fair value of a derivative instrument that is not designated as a cash flow hedge is recorded as interest expense in the accompanying consolidated statements of operations. The following table summarizes the effects of derivative instruments on the Company’s consolidated statements of operations (in thousands):

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2018			2017		2018			2017
Income statement related
Derivatives not designated as hedging instruments
Unrealized gain on interest rate swaps	$	(439	)	$	—	$	(811	)	$	—
Decrease in interest expense as a result of derivatives	$	(439	)	$	—	$	(811	)	$	—

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FAIR VALUE DISCLOSURES

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

FAIR VALUE DISCLOSURES

FAIR VALUE DISCLOSURES

Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other non-financial and financial assets at fair value on a non-recurring basis (e.g., carrying value of long-lived assets). Fair value, as defined under GAAP, is the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:

• Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

• Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

• Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

The fair value for certain financial instruments is derived using a combination of market quotes, pricing models and other valuation techniques that involve significant management judgment. The price transparency of financial instruments is a key determinant of the degree of judgment involved in determining the fair value of the Company’s financial instruments. Financial instruments for which actively quoted prices or pricing parameters are available and for which markets contain orderly transactions will generally have a higher degree of price transparency than financial instruments for which markets are inactive or consist of non-orderly trades. The Company evaluates several factors when determining if a market is inactive or when market transactions are not orderly. The following is a summary of the methods and assumptions used by management in estimating the fair value of each class of financial instrument for which it is practicable to estimate the fair value:

Cash and cash equivalents, rent and other receivables, and accounts payable and accrued liabilities: These balances approximate their fair values due to the short maturities of these items.

Derivative instruments:The Company’s derivative instruments are presented at fair value on the accompanying consolidated balance sheets. The valuation of these instruments is determined using a proprietary model that utilizes observable inputs. As such, the Company classifies these inputs as Level 2 inputs. The proprietary model uses the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and volatility. The fair values of interest rate swaps are estimated using the market standard methodology of netting the discounted fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of interest rates (forward curves) derived from observable market interest rate curves. In addition, credit valuation adjustments, which consider the impact of any credit risks to the contracts, are incorporated in the fair values to account for potential nonperformance risk.

Notes payable: The fair value of the Company’s notes payable is estimated using a discounted cash flow analysis based on management’s estimates of current market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio, type of collateral and other credit enhancements. Additionally, when determining the fair value of liabilities in circumstances in which a quoted price in an active market for an identical liability is not available, the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach. The Company classifies these inputs as Level 3 inputs.

The following were the face values, carrying amounts and fair values of the Company’s notes payable as of June 30, 2018 and December 31, 2017, which carrying amounts generally do not approximate the fair values (in thousands):

	June 30, 2018						December 31, 2017
	Face Value		Carrying Amount		Fair Value		Face Value		Carrying Amount		Fair Value
Financial liabilities:
Notes payable	$	117,800	$	116,682	$	119,250	$	113,800	$	112,780	$	114,327

Disclosure of the fair values of financial instruments is based on pertinent information available to the Company as of the period end and requires a significant amount of judgment. The actual value could be materially different from the Company’s estimate of value.

As of June 30, 2018, the Company measured the following assets at fair value (in thousands):

			Fair Value Measurements Using
	Total		Quoted Prices in Active Markets  for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring Basis:
Asset derivatives - interest rate swaps	$	989	$	—	$	989	$	—

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RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2018

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

RELATED-PARTY TRANSACTIONS

Pursuant to the Advisory Agreement, the Initial Private Offering Dealer Manager Agreement and the Public Offering Dealer Manager Agreement, the Company is or was obligated to pay the Advisor and the Dealer Manager specified fees upon the provision of certain services related to the Initial Private Offering and the Public Offering, the investment of funds in real estate, management of the Company’s investments and for other services (including, but not limited to, the disposition of investments). The Company was also obligated to reimburse the Advisor and Dealer Manager for certain organization and offering costs incurred by the Advisor and the Dealer Manager on behalf of the Company, and the Company is obligated to reimburse the Advisor for acquisition and origination expenses and certain operating expenses incurred on behalf of the Company or incurred in connection with providing services to the Company. The Advisor is entitled to certain other fees, including an incentive fee upon achieving certain performance goals, as detailed in the Advisory Agreement. In addition, the Advisor will pay all offering expenses related to the Second Private Offering without reimbursement by the Company.

In addition, in connection with certain property acquisitions, the Company, through indirect wholly owned subsidiaries, has entered into separate Property Management Agreements (defined below) with KBS Management Group, LLC, an affiliate of the Advisor (the “Co-Manager”).

The Company has also entered into a fee reimbursement agreement with the Dealer Manager pursuant to which the Company agreed to reimburse the Dealer Manager for certain fees and expenses it incurs for administering the Company’s participation in the DTCC Alternative Investment Product Platform with respect to certain accounts of the Company’s investors serviced through the platform.

The Advisor also serves as the advisor for KBS Real Estate Investment Trust, Inc. (“KBS REIT I”), KBS Real Estate Investment Trust II, Inc. (“KBS REIT II”), KBS Real Estate Investment Trust III, Inc. (“KBS REIT III”), KBS Strategic Opportunity REIT, Inc. (“KBS Strategic Opportunity REIT”), KBS Legacy Partners Apartment REIT, Inc. (“KBS Legacy Partners Apartment REIT”) and KBS Strategic Opportunity REIT II, Inc. (“KBS Strategic Opportunity REIT II”). The Dealer Manager also serves as the dealer manager for KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT and KBS Strategic Opportunity REIT II.

The Company, together with KBS REIT I, KBS REIT II, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, KBS REIT III, KBS Strategic Opportunity REIT II, the Dealer Manager, the Advisor and other KBS affiliated entities, entered into an errors and omissions and directors and officers liability insurance program where the lower tiers of such insurance coverage are shared. The cost of these lower tiers is allocated by the Advisor and its insurance broker among each of the various entities covered by the program and is billed directly to each entity. The allocation of these shared coverage costs is proportionate to the pricing by the insurance marketplace for the first tiers of directors and officers liability coverage purchased individually by each REIT. The Advisor’s and the Dealer Manager’s portion of the shared lower tiers’ cost is proportionate to the respective entities’ prior cost for the errors and omissions insurance. In June 2018, the Company renewed its participation in the program. At renewal, KBS Strategic Opportunity REIT, KBS Strategic Opportunity REIT II and Legacy Partners Apartment REIT elected to cease participation in the program and obtain separate insurance coverage. The program is effective through June 30, 2019. KBS REIT I elected to cease participation in the program at the June 2017 renewal and obtained separate insurance coverage.

During the six months ended June 30, 2018 and 2017, no other business transactions occurred between the Company and KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT and KBS Strategic Opportunity REIT II.

Pursuant to the terms of these agreements, summarized below are the related-party costs incurred by the Company for the three and six months ended June 30, 2018 and 2017, respectively, and any related amounts payable as of June 30, 2018 and December 31, 2017 (in thousands).

	Incurred										Payable as of
	Three Months Ended June 30,					Six Months Ended June 30,
	2018		2017			2018		2017			June 30, 2018		December 31, 2017
Expensed
Asset management fees (1)	$	462	$	—		$	918	$	214		$	1,336	$	418
Reimbursement of operating expenses (2)	53		50			106		104			19		18
Property management fees (3)	42		31			84		60			10		13
Other Arrangement
Advisor advance for cash distributions (4)	—		—			—		—			1,338		1,338
Additional Paid-in Capital
Selling commissions	—		17			—		78			—		—
Dealer manager fees	—		15			—		50			—		—
Stockholder servicing fees (5)	—		(77		)	—		(26		)	—		—
Reimbursable other offering costs (6)	—		(9		)	—		14			—		—
	$	557	$	27		$	1,108	$	494		$	2,703	$	1,787

_____________________

⁽¹⁾ Through August 8, 2017, the asset management fee payable to the Advisor was a monthly fee equal to one-twelfth of 1.6% of the cost of the Company’s investments, less any debt secured by or attributable to the investments. Beginning on August 9, 2017, the asset management fee is a monthly fee payable to the Advisor in an amount equal to one-twelfth of 1.0% of the cost of the Company’s investments including the portion of the investment that is debt financed. As of June 30, 2018, the Company had accrued and deferred payment of $1.3 million of asset management fees related to the fourth quarter of 2017 through the second quarter of 2018.

⁽²⁾ See “Reimbursable Operating Expenses” below.

⁽³⁾ See “Real Estate Property Co-Management Agreements” below.

⁽⁴⁾ See “Advance from the Advisor” below.

⁽⁵⁾ The Public Offering was terminated effective June 30, 2017. Pursuant to the terms of the Class T shares as set forth in the Articles Supplementary and Multiple Class Plan of the Company, the Company ceased accruing for stockholder servicing fees after June 30, 2017 and reversed the amounts previously accrued.

⁽⁶⁾ See “Organization and Offering Costs” below.

During the six months ended June 30, 2018, the Advisor paid the Company a $10,655 property insurance rebate.

Reimbursable Operating Expenses

Reimbursable operating expenses primarily related to directors and officers liability insurance, legal fees, state and local taxes, accounting software and cybersecurity related expenses incurred by the Advisor under the Advisory Agreement. The Company has reimbursed the Advisor for the Company’s allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to the Company. These amounts totaled $50,213 and $103,212 for the three and six months ended June 30, 2018, respectively, and $49,399 and $101,741 for the three and six months ended June 30, 2017, respectively, and were the only type of employee costs reimbursed under the Advisory Agreement for the three and six months ended June 30, 2018 and 2017, respectively. The Company does not reimburse for employee costs in connection with services for which the Advisor earned or earns acquisition, origination or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries or benefits the Advisor or its affiliates may pay to the Company’s executive officers. In addition to the amounts above, the Company reimburses the Advisor for certain of the Company’s direct costs incurred from third parties that were initially paid by the Advisor on behalf of the Company.

Effective September 29, 2017, the Company eliminated its obligation to reimburse expenses incurred by the Advisor in connection with providing services pursuant to the Advisory Agreement, other than (i) the allocable portion of the costs of the internal audit department and (ii) promotional costs and expenses related to the leasing of properties.

Commencing with the quarter ended December 31, 2016, the Advisor must reimburse the Company the amount by which the Company’s aggregate total operating expenses for the four fiscal quarters then ended exceed the greater of 2% of the Company’s average invested assets or 25% of the Company’s net income, unless the conflicts committee has determined that such excess expenses were justified based on unusual and non-recurring factors. Operating expenses for the four fiscal quarters ended June 30, 2018 did not exceed the charter-imposed limitation.

Advance from the Advisor

The Advisor advanced funds to the Company, which are non-interest bearing, for distribution record dates through the period ended May 31, 2016. As of June 30, 2018, the total advanced funds due to the Advisor from the Company was approximately $1.3 million. The Company is only obligated to repay the Advisor for its advance if and to the extent that:

(i) the Company’s modified funds from operations (“MFFO”), as such term is defined by the Institute for Portfolio Alternatives and interpreted by the Company, for the immediately preceding month exceeds the amount of cash distributions declared for record dates of such prior month (an “MFFO Surplus”), and the Company will pay the Advisor the amount of the MFFO Surplus to reduce the principal amount outstanding under the advance, provided that such payments shall only be made if management in its sole discretion expects an MFFO Surplus to be recurring for at least the next two calendar quarters, determined on a quarterly basis; or

(ii) Excess proceeds from third-party financings are available (“Excess Proceeds”), provided that the amount of any such Excess Proceeds that may be used to repay the principal amount outstanding under the advance shall be determined by the conflicts committee in its sole discretion.

In determining whether Excess Proceeds are available to repay the advance, the Company’s conflicts committee will consider whether cash on hand could have been used to reduce the amount of third-party financing provided to us. If such cash could have been used instead of third-party financing, the third-party financing proceeds will be available to repay the advance.

Real Estate Property Co-Management Agreements

In connection with its property acquisitions, the Company, through separate, indirect, wholly-owned subsidiaries, entered into separate property management agreements (each, a “Property Management Agreement”) with the Co-Manager for each of its properties. Under each Property Management Agreement, the Co-Manager will provide certain management services related to these properties in addition to those provided by the third-party property managers. In exchange for these services, the Company will pay the Co-Manager a monthly fee equal to a percentage of the rent, payable and actually collected for the month from each of the properties. Each Property Management Agreement has an initial term of one year and will be deemed renewed for successive one-year periods provided it is not terminated. Each party may terminate the Property Management Agreement without cause on 30 days’ written notice to the other party and may terminate each Property Management Agreement for cause on 5 days’ written notice to the other party upon the occurrence of certain events as detailed in each Property Management Agreement.

Property Name	Effective Date	Annual Fee Percentage
Von Karman Tech Center	07/31/2015	1.50%
Commonwealth Building	07/01/2016	1.25%
The Offices at Greenhouse	11/14/2016	0.25%
Institute Property	11/09/2017	1.00%

Organization and Offering Costs

Offering costs include all expenses incurred in connection with the offerings of securities by the Company. Organization costs include all expenses incurred in connection with the formation of the Company, including but not limited to legal fees and other costs to incorporate the Company.

With respect to the Public Offering, the Advisor and the Dealer Manager generally paid the organization and offering expenses of the Company incurred in the Primary Offering (other than selling commissions, dealer manager fees and stockholder servicing fees) directly.

The Company reimbursed the Advisor, the Dealer Manager and its affiliates up to 1% of gross proceeds raised in the Primary Offering for commercially reasonable organization and offering expenses (other than selling commissions, dealer manager fees and stockholder servicing fees). The Advisor, the Dealer Manager and their affiliates were responsible for all organization and other offering expenses (which excludes selling commissions, dealer manager fees and stockholder servicing fees) paid related to the Primary Offering to the extent they exceeded 1% of gross proceeds raised in the Primary Offering. The Company did not reimburse the Dealer Manager for wholesaling compensation expenses.

During the Initial Private Offering, the Company was obligated to reimburse the Advisor and its affiliates for all organization and offering costs (excluding wholesaling compensation expenses) paid by them on behalf of the Company.

The Advisor has agreed to pay directly all offering expenses related to the Second Private Offering without reimbursement by the Company.

Through June 30, 2018, the Advisor and its affiliates had incurred organization and other offering costs (which exclude selling commissions, dealer manager fees and stockholder servicing fees) on the Company’s behalf in connection with the Public Offering of approximately $4.4 million. As of June 30, 2018, the Company had recorded $39,358 of organization and other offering expenses related to the Public Offering, which amounts represent the Company’s maximum liability for organization and other offering costs as of June 30, 2018 based on the limitations described above. As of June 30, 2018, the Company had recorded $1.5 million of organization and other offering costs related to the Initial Private Offering. Organization costs were expensed as incurred and offering costs are deferred and charged to stockholders’ equity as such amounts were reimbursed to the Advisor, the Dealer Manager or their affiliates from the gross proceeds of the applicable offering.

As of June 30, 2018, the Advisor had incurred $3.6 million in offering expenses related to the Second Private Offering.

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Economic Dependency

The Company depends on the Advisor for certain services that are essential to the Company, including the identification, evaluation, negotiation, acquisition and disposition of investments; management of the daily operations of the Company’s investment portfolio; and other general and administrative responsibilities. In the event that the Advisor is unable to provide such services, the Company will be required to obtain such services from other sources.

Legal Matters

From time to time, the Company may become party to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on the Company’s results of operations or financial condition, which would require accrual or disclosure of the contingency and possible range of loss. Additionally, the Company has not recorded any loss contingencies related to legal proceedings in which the potential loss is deemed to be remote.

Environmental

As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. Although there can be no assurance, the Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s property, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the property could result in future environmental liabilities.

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2018

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

The Company evaluates subsequent events up until the date the consolidated financial statements are issued.

Cash Distributions Paid

On July 2, 2018, the Company paid cash distributions of $0.4 million, which related to distributions on the Company’s common stock, declared for daily record dates for each day in the period from June 1, 2018 through June 30, 2018. On August 1, 2018, the Company paid cash distributions of $0.4 million, which related to distributions on the Company’s common stock, declared for daily record dates for each day in the period from July 1, 2018 through July 31, 2018.

Distributions Authorized

On July 16, 2018, the Company’s board of directors authorized cash distributions on the outstanding shares of all classes of the Company’s common stock based on daily record dates for the period from August 1, 2018 through August 31, 2018, which the Company expects to pay in September 2018. On August 6, 2018, the Company’s board of directors authorized cash distributions on the outstanding shares of all classes of the Company’s common stock based on daily record dates for the period from September 1, 2018 through September 30, 2018, which the Company expects to pay in October 2018, and the period from October 1, 2018 through October 31, 2018, which the Company expects to pay in November 2018. Investors may choose to receive cash distributions or purchase additional shares through the Company’s distribution reinvestment plan. Distributions for these periods will be calculated based on stockholders of record each day during these periods at a rate of $0.00144493 per share per day.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Basis of Presentation

The accompanying unaudited consolidated financial statements and condensed notes thereto have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the FASB Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements.  In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods.  Operating results for the six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, REIT Holdings, the Operating Partnership, and their direct and indirect wholly owned subsidiaries.  All significant intercompany balances and transactions are eliminated in consolidation. 

Use of Estimates

The preparation of the consolidated financial statements and the accompanying notes thereto in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

Segments

The Company had invested in four office properties as of June 30, 2018. Substantially all of the Company’s revenue and net loss is from real estate, and therefore, the Company currently operates in one reportable segment.

Revenue Recognition

Effective January 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU No. 2014-09”) using the modified retrospective approach, which requires a cumulative effect adjustment as of the date of the Company’s adoption.  Under the modified retrospective approach, an entity may also elect to apply this standard to either (i) all contracts as of January 1, 2018 or (ii) only to contracts that were not completed as of January 1, 2018.  A completed contract is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP that was in effect before the date of initial application. The Company elected to apply this standard only to contracts that were not completed as of January 1, 2018. 

Based on the Company’s evaluation of contracts within the scope of ASU No. 2014-09, revenue that is impacted by ASU No. 2014-09 includes revenue generated by sales of real estate, other operating income and tenant reimbursements for substantial services earned at the Company’s properties. The recognition of such revenue will occur when the services are provided and the performance obligations are satisfied. For the three and six months ended June 30, 2018, tenant reimbursements for substantial services accounted for under ASU No. 2014-09 were $28,000 and $64,000, respectively, and were included in tenant reimbursements on the accompanying statements of operations. 

Sales of Real Estate

Effective January 1, 2018, the Company adopted the guidance of ASC 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (“ASC 610-20”), which applies to sales or transfers to noncustomers of nonfinancial assets or in substance nonfinancial assets that do not meet the definition of a business.  Generally, the Company’s sales of real estate would be considered a sale of a nonfinancial asset as defined by ASC 610-20.

ASC 610-20 refers to the revenue recognition principles under ASU No. 2014-09.  Under ASC 610-20, if the Company determines it does not have a controlling financial interest in the entity that holds the asset and the arrangement meets the criteria to be accounted for as a contract, the Company would derecognize the asset and recognize a gain or loss on the sale of the real estate when control of the underlying asset transfers to the buyer.  As a result of the adoption of ASU 610-20, there was no impact to the Company’s consolidated financial statements of operations for the three and six months ended June 30, 2018 and 2017 since the Company did not sell any real estate properties for those periods.

Per Share Data

Basic net income (loss) per share of common stock is calculated by dividing net income (loss) by the weighted-average number of shares of common stock issued and outstanding during such period. Diluted net income (loss) per share of common stock equals basic net income (loss) per share of common stock as there were no potentially dilutive securities outstanding for the three and six months ended June 30, 2018 and 2017, respectively. For the purpose of determining the weighted average number of shares outstanding, stock dividends issued during the period presented are adjusted retroactively and treated as if they were issued and outstanding for all periods presented. 

In accordance with FASB ASC Topic 260-10-45, Earnings Per Share, the Company uses the two-class method to calculate earnings per share. Basic earnings per share is calculated based on dividends declared (“distributed earnings”) and the rights of common shares and participating securities in any undistributed earnings, which represents net income remaining after deduction of dividends declared during the period. The undistributed earnings are allocated to all outstanding common shares based on the relative percentage of each class of shares to the total number of outstanding shares. The Company does not have any participating securities outstanding other than Class A Common Stock and Class T Common Stock during the periods presented.

Square Footage, Occupancy and Other Measures

 Square footage, occupancy, number of tenants and other measures, including annualized base rent and annualized base rent per square foot, or amounts derived from such measures, used to describe real estate investments included in these condensed notes to consolidated financial statements are presented on an unaudited basis and outside the scope of the Company’s independent registered public accounting firm’s review of the Company’s financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board.

Recently Issued Accounting Standards Updates

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU No. 2016-02”). The amendments in ASU No. 2016-02 change the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU No. 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of ASU No. 2016-02 as of its issuance is permitted. ASU No. 2016-02 requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact of adopting the new lease accounting standard on its consolidated financial statements. Upon adoption of ASU No. 2016-02, the Company expects to adopt the package of practical expedients for all leases that commenced before the effective date of January 1, 2019. Accordingly, the Company will 1) not reassess whether any expired or existing contracts are or contain leases, 2) not reassess the lease classification for any expired or existing lease, and 3) not reassess initial direct costs for any existing leases. The Company does not expect to elect the practical expedient related to using hindsight to reevaluate the lease term. In addition, the Company expects to adopt the practical expedient for land easements to not assess whether existing or expired land easements that were not previously accounted for as leases under the current lease accounting standards of Topic 840 are or contain a lease under Topic 842.

In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842), Targeted Improvements (“ASU No. 2018-11”), which provides lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component and, instead to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue recognition standard (Topic 606) and if certain conditions are met. Upon adoption of the lease accounting standard under Topic 842, the Company expects to adopt this practical expedient, specifically related to its tenant reimbursements which would otherwise be accounted for under the new revenue recognition standard. The Company believes the two conditions have been met for tenant reimbursements as 1) the timing and pattern of transfer of the nonlease components and associated lease components are the same and 2) the lease component would be classified as an operating lease. In addition. ASU No. 2018-11, provides an additional optional transition method to allow entities to apply the new lease accounting standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. An entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new lease accounting standard will continue to be reported under the current lease accounting standards of Topic 840. The Company expects to adopt this transition method upon adoption of the lease accounting standard of Topic 842 on January 1, 2019.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments (“ASU No. 2016-13”).  ASU No. 2016-13 affects entities holding financial assets and net investments in leases that are not accounted for at fair value through net income.  The amendments in ASU No. 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected.  The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset.  ASU No. 2016-13 also amends the impairment model for available-for-sale securities.  An entity will recognize an allowance for credit losses on available-for-sale debt securities as a contra-account to the amortized cost basis rather than as a direct reduction of the amortized cost basis of the investment, as is currently required.  ASU No. 2016-13 also requires new disclosures.  For financial assets measured at amortized cost, an entity will be required to disclose information about how it developed its allowance for credit losses, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes.  For financing receivables and net investments in leases measured at amortized cost, an entity will be required to further disaggregate the information it currently discloses about the credit quality of these assets by year of the asset’s origination for as many as five annual periods. For available for sale securities, an entity will be required to provide a roll-forward of the allowance for credit losses and an aging analysis for securities that are past due.  ASU No. 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years.  Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  The Company is still evaluating the impact of adopting ASU No. 2016-13 on its financial statements, but does not expect the adoption of ASU No. 2016-13 to have a material impact on its financial statements.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Schedule of Earnings Per Share, Including Two Class Method

The Company’s calculated earnings per share for the three and six months ended June 30, 2018 and 2017 were as follows (in thousands, except share and per share amounts):

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
Net loss	$	(725	)	$	(424	)	$	(930	)	$	(621	)
Less: Class A Common Stock cash distributions declared	1,163			1,128			2,248			2,226
Less: Class T Common Stock cash distributions declared	37			26			70			42
Undistributed net loss	$	(1,925	)	$	(1,578	)	$	(3,248	)	$	(2,889	)
Class A Common Stock:
Undistributed net loss	$	(1,866	)	$	(1,534	)	$	(3,150	)	$	(2,822	)
Class A Common Stock cash distributions declared	1,163			1,128			2,248			2,226
Net loss	$	(703	)	$	(406	)	$	(902	)	$	(596	)
Net loss per common share, basic and diluted	$	(0.08	)	$	(0.04	)	$	(0.10	)	$	(0.07	)
Weighted-average number of common shares outstanding, basic and diluted	9,096,617			9,076,034			9,095,895			9,020,742
Class T Common Stock:
Undistributed net loss	$	(59	)	$	(44	)	$	(98	)	$	(67	)
Class T Common Stock cash distributions declared	37			26			70			42
Net loss	$	(22	)	$	(18	)	$	(28	)	$	(25	)
Net loss per common share, basic and diluted	$	(0.08	)	$	(0.07	)	$	(0.10	)	$	(0.11	)
Weighted-average number of common shares outstanding, basic and diluted	286,721			261,613			285,165			214,044

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REAL ESTATE (Tables)

6 Months Ended

Jun. 30, 2018

Real Estate [Abstract]

Schedule of Real Estate

The following table provides summary information regarding the properties owned by the Company as of June 30, 2018 (in thousands):

Property	Date Acquired	City	State	Property Type	Total Real Estate at Cost		Accumulated Depreciation and Amortization			Total Real Estate, Net
Von Karman Tech Center	08/12/2015	Irvine	CA	Office	$	20,829	$	(1,933	)	$	18,896
Commonwealth Building	06/30/2016	Portland	OR	Office	76,718		(6,378		)	70,340
The Offices at Greenhouse	11/14/2016	Houston	TX	Office	47,242		(3,930		)	43,312
Institute Property	11/09/2017	Chicago	IL	Office	45,733		(1,385		)	44,348
					$	190,522	$	(13,626	)	$	176,896

Schedules of Concentration of Risk, by Risk Factor

As of June 30, 2018, the Company’s real estate properties were leased to approximately 80 tenants over a diverse range of industries. The Company’s highest tenant industry concentration (greater than 10% of annualized base rent) was as follows:

Industry	Number of Tenants	Annualized Base Rent (1) (in thousands)		Percentage of Annualized Base Rent
Professional, scientific and technical	14	$	5,910	38.0	%
Information technology	9	1,849		11.9	%

_____________________

⁽¹⁾ Annualized base rent represents annualized contractual base rental income as of June 30, 2018, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.

As of June 30, 2018, the following properties represented more than 10% of the Company’s total assets:

Property	Location	Rentable Square Feet	Total Real Estate, Net (in thousands)		Percentage of Total Assets		Annualized Base Rent (in thousands)(1)		Average Annualized Base Rent per sq. ft.		Occupancy
Von Karman Tech Center	Irvine, CA	101,161	$	18,896	10.1	%	$	2,249	$	22.90	97.1	%
Commonwealth Building	Portland, OR	224,122	70,340		37.5	%	5,727		26.79		95.4	%
The Offices at Greenhouse	Houston, TX	203,284	43,312		23.1	%	4,201		20.66		100.0	%
Institute Property	Chicago, IL	155,385	44,348		23.7	%	3,385		23.37		93.2	%

_____________________

⁽¹⁾ Annualized base rent represents annualized contractual base rental income as of June 30, 2018, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.

Schedule of Future Minimum Rental Income for Company's Properties

As of June 30, 2018, the future minimum rental income from the Company’s properties under its non-cancelable operating leases was as follows (in thousands):

July 1, 2018 through December 31, 2018	$	7,375
2019	14,314
2020	14,308
2021	12,902
2022	11,131
Thereafter	16,483
	$	76,513

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TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES (Tables)

6 Months Ended

Jun. 30, 2018

Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities [Abstract]

Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities

As of June 30, 2018 and December 31, 2017, the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities (excluding fully amortized assets and liabilities and accumulated amortization) were as follows (in thousands):

	Tenant Origination and Absorption Costs						Above-Market Lease Assets						Below-Market Lease Liabilities
	June 30, 2018			December 31, 2017			June 30, 2018			December 31, 2017			June 30, 2018			December 31, 2017
Cost	$	16,400		$	17,047		$	213		$	213		$	(7,226	)	$	(7,838	)
Accumulated Amortization	(4,781		)	(3,480		)	(48		)	(33		)	2,574			1,928
Net Amount	$	11,619		$	13,567		$	165		$	180		$	(4,652	)	$	(5,910	)

Amortization of Tenant Origination and Absorption Costs, Above-Market Leases and Below-Market Lease Liabilities

Increases (decreases) in net income as a result of amortization of the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities for the three and six months ended June 30, 2018 and 2017 were as follows (in thousands):

	Tenant Origination and Absorption Costs						Above-Market Lease Assets						Below-Market Lease Liabilities
	For the Three Months Ended June 30,						For the Three Months Ended June 30,						For the Three Months Ended June 30,
	2018			2017			2018			2017			2018		2017
Amortization	$	(1,130	)	$	(703	)	$	(7	)	$	(7	)	$	803	$	423

	Tenant Origination and Absorption Costs						Above-Market Lease Assets						Below-Market Lease Liabilities
	For the Six Months Ended June 30,						For the Six Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017			2018		2017
Amortization	$	(1,948	)	$	(1,336	)	$	(15	)	$	(15	)	$	1,258	$	774

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NOTES PAYABLE (Tables)

6 Months Ended

Jun. 30, 2018

Notes Payable [Abstract]

Schedule of Long-term Debt Instruments

As of June 30, 2018, the Company’s notes payable consisted of the following (dollars in thousands):

	Book Value as of June 30, 2018			Book Value as of December 31, 2017			Contractual Interest Rate as of June 30, 2018 (1)	Effective Interest Rate at June 30, 2018 (1)	Payment Type	Maturity Date (2)
Commonwealth Building Mortgage Loan (3)	$	45,000		$	41,000		One-month LIBOR + 1.80%	3.79%	Interest Only	02/01/2023
Term Loan (4)	72,800			72,800			One-month LIBOR + 2.00%	3.99%	Interest Only	11/09/2020
Notes payable principal outstanding	$	117,800		$	113,800
Deferred financing costs, net	(1,118		)	(1,020		)
Notes payable, net	$	116,682		$	112,780

_____________________

⁽¹⁾Contractual interest rate represents the interest rate in effect under the loan as of June 30, 2018. Effective interest rate is calculated as the actual interest rate in effect as of June 30, 2018 (consisting of the contractual interest rate), using interest rate indices as of June 30, 2018, where applicable.

⁽²⁾Represents the maturity date as of June 30, 2018; subject to certain conditions, the maturity dates of certain loans may be extended beyond the dates shown.

⁽³⁾ On January 18, 2018, the Company, through an indirect wholly owned subsidiary, closed the refinancing of the initial Commonwealth Building mortgage loan with an unaffiliated lender (the “Refinancing”) for a maximum loan amount of up to $51.4 million. With the proceeds from the Refinancing, the Company repaid $41.0 million of principal in satisfaction of the initial Commonwealth Building mortgage loan. Under the current Commonwealth Building Mortgage Loan under the Refinancing, monthly payments are interest-only with the remaining principal balance, all accrued and unpaid interest and all other sums due under the loan documents payable at maturity. If the LIBOR rate is equal to or greater than 2.90% for five consecutive business days, the Company has 30 days to enter into an interest rate cap agreement with a LIBOR strike rate of 3.90% or less. The Company has the right to prepay all or a portion of the loan under the Refinancing commencing on February 1, 2019, subject to certain fees and conditions contained in the loan documents. As of June 30, 2018, $45.0 million of the Commonwealth Building Mortgage Loan was outstanding and $6.4 million remained available for future disbursements, subject to certain terms and conditions set forth in the loan documents.

⁽⁴⁾ As of June 30, 2018, the outstanding balance under the Term Loan consisted of $48.5 million of term commitment and $24.3 million of revolving commitment, which bears interest at a rate per annum equal to 2.0% over one-month LIBOR. The Term Loan is secured by The Offices at Greenhouse, Von Karman Tech Center and Institute Property.

Schedule of Maturities of Long-term Debt

The following is a schedule of maturities, including principal amortization payments, for all notes payable outstanding as of June 30, 2018 (in thousands):

July 1, 2018 through December 31, 2018	$	—
2019	—
2020	72,800
2021	—
2022	—
Thereafter	45,000
	$	117,800

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DERIVATIVE INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Notional and Fair Value of Interest Rate Swaps

The following table summarizes the notional amount and other information related to the Company’s interest rate swaps as of June 30, 2018 and December 31, 2017. The notional amount is an indication of the extent of the Company’s involvement in each instrument at that time, but does not represent exposure to credit, interest rate or market risks (dollars in thousands):

	June 30, 2018			December 31, 2017				Weighted-Average  Fix Pay Rate	Weighted-Average Remaining Term in Years
Derivative Instruments	Number of Instruments	Notional Amount		Number of Instruments	Notional Amount		Reference Rate as of June 30, 2018
Derivative instruments not designated as hedging instruments
Interest Rate Swaps (1)	2	$	78,533	1	$	48,533	One-month LIBOR/ Fixed at 2.07% - 2.82%	2.36%	3.23

_____________________

⁽¹⁾ Includes a forward interest rate swap in the amount of $48.5 million, which will become effective on November 1, 2018 and maturing on November 1, 2021 and a forward interest rate swap in the amount of $30.0 million, which will become effective on April 1, 2019 and maturing on November 1, 2022.

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

The following table sets forth the fair value of the Company’s derivative instruments as well as their classification on the consolidated balance sheets as of June 30, 2018 and December 31, 2017 (dollars in thousands):

		June 30, 2018			December 31, 2017
Derivative Instruments	Balance Sheet Location	Number of Instruments	Fair Value		Number of Instruments	Fair Value
Derivative instruments not designated as hedging instruments
Interest Rate Swaps	Prepaid expenses and other assets, at fair value	2	$	989	1	$	178

Schedule of Derivative Instruments in Statement of Operations

The following table summarizes the effects of derivative instruments on the Company’s consolidated statements of operations (in thousands):

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2018			2017		2018			2017
Income statement related
Derivatives not designated as hedging instruments
Unrealized gain on interest rate swaps	$	(439	)	$	—	$	(811	)	$	—
Decrease in interest expense as a result of derivatives	$	(439	)	$	—	$	(811	)	$	—

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FAIR VALUE DISCLOSURES (Tables)

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Schedule of Face Value, Carrying Amounts and Fair Value

The following were the face values, carrying amounts and fair values of the Company’s notes payable as of June 30, 2018 and December 31, 2017, which carrying amounts generally do not approximate the fair values (in thousands):

	June 30, 2018						December 31, 2017
	Face Value		Carrying Amount		Fair Value		Face Value		Carrying Amount		Fair Value
Financial liabilities:
Notes payable	$	117,800	$	116,682	$	119,250	$	113,800	$	112,780	$	114,327

Schedule of Fair Value Measurements

As of June 30, 2018, the Company measured the following assets at fair value (in thousands):

			Fair Value Measurements Using
	Total		Quoted Prices in Active Markets  for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring Basis:
Asset derivatives - interest rate swaps	$	989	$	—	$	989	$	—

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RELATED PARTY TRANSACTIONS (Tables)

6 Months Ended

Jun. 30, 2018

Related Party Transactions [Abstract]

Schedule of Related Party Costs

Pursuant to the terms of these agreements, summarized below are the related-party costs incurred by the Company for the three and six months ended June 30, 2018 and 2017, respectively, and any related amounts payable as of June 30, 2018 and December 31, 2017 (in thousands).

	Incurred										Payable as of
	Three Months Ended June 30,					Six Months Ended June 30,
	2018		2017			2018		2017			June 30, 2018		December 31, 2017
Expensed
Asset management fees (1)	$	462	$	—		$	918	$	214		$	1,336	$	418
Reimbursement of operating expenses (2)	53		50			106		104			19		18
Property management fees (3)	42		31			84		60			10		13
Other Arrangement
Advisor advance for cash distributions (4)	—		—			—		—			1,338		1,338
Additional Paid-in Capital
Selling commissions	—		17			—		78			—		—
Dealer manager fees	—		15			—		50			—		—
Stockholder servicing fees (5)	—		(77		)	—		(26		)	—		—
Reimbursable other offering costs (6)	—		(9		)	—		14			—		—
	$	557	$	27		$	1,108	$	494		$	2,703	$	1,787

_____________________

⁽¹⁾ Through August 8, 2017, the asset management fee payable to the Advisor was a monthly fee equal to one-twelfth of 1.6% of the cost of the Company’s investments, less any debt secured by or attributable to the investments. Beginning on August 9, 2017, the asset management fee is a monthly fee payable to the Advisor in an amount equal to one-twelfth of 1.0% of the cost of the Company’s investments including the portion of the investment that is debt financed. As of June 30, 2018, the Company had accrued and deferred payment of $1.3 million of asset management fees related to the fourth quarter of 2017 through the second quarter of 2018.

⁽²⁾ See “Reimbursable Operating Expenses” below.

⁽³⁾ See “Real Estate Property Co-Management Agreements” below.

⁽⁴⁾ See “Advance from the Advisor” below.

⁽⁵⁾ The Public Offering was terminated effective June 30, 2017. Pursuant to the terms of the Class T shares as set forth in the Articles Supplementary and Multiple Class Plan of the Company, the Company ceased accruing for stockholder servicing fees after June 30, 2017 and reversed the amounts previously accrued.

⁽⁶⁾ See “Organization and Offering Costs” below.

Schedule of Annual Fee Percentage

Property Name	Effective Date	Annual Fee Percentage
Von Karman Tech Center	07/31/2015	1.50%
Commonwealth Building	07/01/2016	1.25%
The Offices at Greenhouse	11/14/2016	0.25%
Institute Property	11/09/2017	1.00%

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ORGANIZATION (Details)		6 Months Ended	12 Months Ended	26 Months Ended	41 Months Ended
	Aug. 11, 2015 USD ($) individual $ / shares shares	Jun. 30, 2018 USD ($) shares	Dec. 31, 2017 USD ($) shares	Jun. 30, 2018 USD ($) shares	Jun. 30, 2018 USD ($) shares	Oct. 03, 2017 shares	Jun. 11, 2015 shares	Feb. 04, 2015 USD ($)	Jan. 27, 2015 $ / shares shares
Organizational Structure [Line Items]
Managing member or general partner, ownership interest		0.10%
Members or limited partners, ownership interest		99.90%
Core property, minimum percent of occupancy		80.00%		80.00%	80.00%
Issuance of common stock | $		$ 2,895,000	$ 5,421,000
Redemptions of common stock | $		$ 2,314,000	$ 1,210,000
Number of individuals who own and control company's sponsor | individual	2
Class A
Organizational Structure [Line Items]
Common stock, shares issued (in shares)		9,194,944	9,149,100	9,194,944	9,194,944
Class T
Organizational Structure [Line Items]
Common stock, shares issued (in shares)		287,878	281,537	287,878	287,878
Maximum | Class A | Second Private Placement
Organizational Structure [Line Items]
Shares authorized for issuance						1,000,000,000
Common Stock | Public Offering
Organizational Structure [Line Items]
Issuance of common stock | $					$ 3,900,000
Stock issued during period, dividend reinvestment plan | $					$ 4,500,000
Common Stock | Class A
Organizational Structure [Line Items]
Shares authorized for dividend reinvestment plan							5,000,000
Issuance of common stock (in shares)		322,916	380,538
Issuance of common stock | $		$ 4,000	$ 2,000
Redemptions of common stock (in shares)		277,072	145,214		422,286
Redemptions of common stock | $		$ 3,000			$ 3,500,000
Common Stock | Class A | Private Placement
Organizational Structure [Line Items]
Issuance of common stock (in shares)				8,548,972
Issuance of common stock | $	$ 172,500			$ 76,800,000
Stock issued during period, dividend reinvestment plan (in shares)				74,744
Stock issued during period, dividend reinvestment plan | $				$ 700,000
Shares issued, price per share | $ / shares	$ 8.144
Shares issued, discount to offering price	8.50%
Offering, share price (in usd per share) | $ / shares	$ 8.90
Common Stock | Class A | Private Placement | CEO
Organizational Structure [Line Items]
Issuance of common stock (in shares)	21,181.2380
Common Stock | Class A | Private Placement | President
Organizational Structure [Line Items]
Issuance of common stock (in shares)	21,181.2390
Common Stock | Class A | Public Offering
Organizational Structure [Line Items]
Issuance of common stock (in shares)					122,721
Stock issued during period, dividend reinvestment plan (in shares)					464,125
Common Stock | Class A | Second Private Offering
Organizational Structure [Line Items]
Issuance of common stock (in shares)				253,308
Issuance of common stock | $				$ 2,200,000
Common Stock | Class T
Organizational Structure [Line Items]
Issuance of common stock (in shares)		6,341	185,845
Issuance of common stock | $		$ 0	$ 2,000
Common Stock | Class T | Public Offering
Organizational Structure [Line Items]
Issuance of common stock (in shares)					270,415
Stock issued during period, dividend reinvestment plan (in shares)					15,689
Common Stock | Maximum
Organizational Structure [Line Items]
Shares authorized for issuance, value | $								$ 1,500,000,000
Shares authorized for dividend reinvestment plan | $								$ 800,000,000
Common Stock | Maximum | Class A
Organizational Structure [Line Items]
Shares authorized for issuance							105,000,000
KBS Capital Advisors LLC
Organizational Structure [Line Items]
Common stock, shares issued (in shares)									20,000
Purchase price per share (in usd per share) | $ / shares									$ 10.00

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Segments and Revenue) (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018 USD ($) property	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($) segment property	Jun. 30, 2017 USD ($)
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Tenant reimbursements	$ 867	$ 877	$ 1,995	$ 1,656
Number of reportable segments | segment			1
Office Building
Real Estate Properties [Line Items]
Number of real estate properties | property	4		4
Accounting Standards Update 2014-09 | Difference between Revenue Guidance in Effect before and after Topic 606
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Tenant reimbursements	$ 28		$ 64

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Stock Dividends) (Details)	3 Months Ended	6 Months Ended
	Jun. 30, 2017 shares	Jun. 30, 2017 shares
Accounting Policies [Abstract]
Common stock dividends, shares, ratio	0.00249999	0.00499998
Stock dividends issued (in shares)	23,160	45,846

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Per Share Data) (Details) - $ / shares	2 Months Ended	3 Months Ended		4 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2018	Jun. 30, 2017	Apr. 30, 2018	Jun. 30, 2018	Jun. 30, 2017
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Distribution rate per share per day, declared (in dollars per share)	$ 0.00144493			$ 0.00132452		$ 0.00136986
Class A
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Distributions declared per share (in dollars per share)		$ 0.12787633	$ 0.12465726		$ 0.24708313	0.24794466
Class T
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Distributions declared per share (in dollars per share)		$ 0.12787633	$ 0.10005293		$ 0.24708313	$ 0.19885548

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (EPS Two-class Method) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Net loss	$ (725)	$ (424)	$ (930)	$ (621)	$ (2,199)
Undistributed net loss	(1,925)	(1,578)	(3,248)	(2,889)
Class A
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Net loss	(703)	(406)	(902)	(596)
Less: Common Stock cash distributions declared	1,163	1,128	2,248	2,226
Undistributed net loss	$ (1,866)	$ (1,534)	$ (3,150)	$ (2,822)
Net loss per common share, basic and diluted (in dollars per share)	$ (0.08)	$ (0.04)	$ (0.10)	$ (0.07)
Weighted-average number of common shares outstanding, basic and diluted (in shares)	9,096,617	9,076,034	9,095,895	9,020,742
Class T
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Net loss	$ (22)	$ (18)	$ (28)	$ (25)
Less: Common Stock cash distributions declared	37	26	70	42
Undistributed net loss	$ (59)	$ (44)	$ (98)	$ (67)
Net loss per common share, basic and diluted (in dollars per share)	$ (0.08)	$ (0.07)	$ (0.10)	$ (0.11)
Weighted-average number of common shares outstanding, basic and diluted (in shares)	286,721	261,613	285,165	214,044

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REAL ESTATE (Narrative) (Details) - Office Building	Jun. 30, 2018 ft² property
Real Estate Properties [Line Items]
Number of real estate properties | property	4
Rentable Square Feet | ft²	683,952
Occupancy	97.00%

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REAL ESTATE (Schedule of Real Estate Investments) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Real Estate Properties [Line Items]
Total real estate, cost	$ 190,522	$ 190,756
Less accumulated depreciation and amortization	(13,626)	(9,627)
Total real estate, net	$ 176,896	$ 181,129
Von Karman Tech Center | Office Building
Real Estate Properties [Line Items]
Date Acquired or Foreclosed on	Aug. 12, 2015
Total real estate, cost	$ 20,829
Less accumulated depreciation and amortization	(1,933)
Total real estate, net	$ 18,896
Commonwealth Building | Office Building
Real Estate Properties [Line Items]
Date Acquired or Foreclosed on	Jun. 30, 2016
Total real estate, cost	$ 76,718
Less accumulated depreciation and amortization	(6,378)
Total real estate, net	$ 70,340
The Offices at Greenhouse | Office Building
Real Estate Properties [Line Items]
Date Acquired or Foreclosed on	Nov. 14, 2016
Total real estate, cost	$ 47,242
Less accumulated depreciation and amortization	(3,930)
Total real estate, net	$ 43,312
Institute Property | Office Building
Real Estate Properties [Line Items]
Date Acquired or Foreclosed on	Nov. 09, 2017
Total real estate, cost	$ 45,733
Less accumulated depreciation and amortization	(1,385)
Total real estate, net	$ 44,348

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REAL ESTATE (Assets Concentration Risk) (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2018 USD ($) ft² $ / ft²	Dec. 31, 2017 USD ($)
Concentration Risk [Line Items]
Total Real Estate, Net (in thousands)	$ 176,896	$ 181,129
Von Karman Tech Center | Assets, Total
Concentration Risk [Line Items]
Rentable Square Feet | ft²	101,161
Total Real Estate, Net (in thousands)	$ 18,896
Percentage of Total Assets	10.10%
Annualized Base Rent	$ 2,249
Average Annualized Base Rent per sq. ft. | $ / ft²	22.90
Occupancy	97.10%
Commonwealth Building | Assets, Total
Concentration Risk [Line Items]
Rentable Square Feet | ft²	224,122
Total Real Estate, Net (in thousands)	$ 70,340
Percentage of Total Assets	37.50%
Annualized Base Rent	$ 5,727
Average Annualized Base Rent per sq. ft. | $ / ft²	26.79
Occupancy	95.40%
The Offices at Greenhouse | Assets, Total
Concentration Risk [Line Items]
Rentable Square Feet | ft²	203,284
Total Real Estate, Net (in thousands)	$ 43,312
Percentage of Total Assets	23.10%
Annualized Base Rent	$ 4,201
Average Annualized Base Rent per sq. ft. | $ / ft²	20.66
Occupancy	100.00%
Institute Property | Assets, Total
Concentration Risk [Line Items]
Rentable Square Feet | ft²	155,385
Total Real Estate, Net (in thousands)	$ 44,348
Percentage of Total Assets	23.70%
Annualized Base Rent	$ 3,385
Average Annualized Base Rent per sq. ft. | $ / ft²	23.37
Occupancy	93.20%

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REAL ESTATE (Operating Leases) (Narrative) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Operating Leased Assets [Line Items]
Recognition of Deferred Revenue	$ 721	$ 315
Deferred rent receivables	2,500		$ 1,800
Unamortized lease incentives	200		200
Other Liabilities
Operating Leased Assets [Line Items]
Security deposit liability	$ 1,100		$ 1,200
Maximum
Operating Leased Assets [Line Items]
Remaining terms	8 years 10 months 24 days
Weighted Average
Operating Leased Assets [Line Items]
Remaining terms	4 years 3 months 18 days

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REAL ESTATE (Future Minimum Rental Income) (Details) $ in Thousands	Jun. 30, 2018 USD ($)
Real Estate [Abstract]
July 1, 2018 through December 31, 2018	$ 7,375
2019	14,314
2020	14,308
2021	12,902
2022	11,131
Thereafter	16,483
Future minimum rental income	$ 76,513

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REAL ESTATE (Concentration Risk) (Details) $ in Millions	6 Months Ended
	Jun. 30, 2018 USD ($) ft² tenant extension $ / ft²
Concentration Risk [Line Items]
Number of tenants | tenant	80
Customer Concentration Risk
Concentration Risk [Line Items]
Annualized base rent | $	$ 3.0
Average Annualized Base Rent per sq. ft. | $ / ft²	21.39
Customer Concentration Risk | Expires on July 24, 2019
Concentration Risk [Line Items]
Extension options | extension	2
Extension period	3 years
Customer Concentration Risk | Expires on December 31, 2024
Concentration Risk [Line Items]
Extension options | extension	2
Extension period	5 years
Customer Concentration Risk | Annualized Rent
Concentration Risk [Line Items]
Number of tenants | tenant	1
Concentration risk, percentage	19.00%
Customer Concentration Risk | Rentable Square Feet
Concentration Risk [Line Items]
Concentration risk, percentage	21.00%
Net rentable area	140,922
Customer Concentration Risk | Rentable Square Feet | Expires on July 24, 2019
Concentration Risk [Line Items]
Net rentable area	5,195
Customer Concentration Risk | Rentable Square Feet | Expires on December 31, 2024
Concentration Risk [Line Items]
Net rentable area	135,727

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REAL ESTATE (Highest Tenant Industry Concentrations- Grater than 10% of Annual Base Rent) (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2018 USD ($) tenant
Concentration Risk [Line Items]
Number of Tenants	80
Professional, scientific and technical
Concentration Risk [Line Items]
Number of Tenants	14
Annualized Base Rent | $	$ 5,910
Percentage of Annualized Base Rent	38.00%
Information technology
Concentration Risk [Line Items]
Number of Tenants	9
Annualized Base Rent | $	$ 1,849
Percentage of Annualized Base Rent	11.90%

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TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities [Abstract]
Tenant Origination And Absorption Costs, Cost	$ 16,400		$ 16,400		$ 17,047
Tenant Origination and Absorption Costs, Accumulated Amortization	(4,781)		(4,781)		(3,480)
Tenant Origination and Absorption Costs, Net Amount	11,619		11,619		13,567
Tenant Origination and Absorption Costs, Amortization	(1,130)	$ (703)	(1,948)	$ (1,336)
Above-Market Lease Assets, Cost	213		213		213
Above-Market Lease Assets, Accumulated Amortization	(48)		(48)		(33)
Above-Market Lease Assets, Net Amount	165		165		180
Above-Market Lease Assets, Amortization	(7)	(7)	(15)	(15)
Below-Market Lease Liabilities, Cost	(7,226)		(7,226)		(7,838)
Below-Market Lease Liabilities, Accumulated Amortization	2,574		2,574		1,928
Below-Market Lease Liabilities, Net Amount	(4,652)		(4,652)		$ (5,910)
Below-Market Lease Liabilities, Amortization	$ 803	$ 423	$ 1,258	$ 774

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NOTES PAYABLE (Schedule of Long-term Debt Instruments) (Details) - USD ($)		6 Months Ended
	Jan. 18, 2018	Jun. 30, 2018	Dec. 31, 2017
Debt Instrument [Line Items]
Notes payable principal outstanding		$ 117,800,000	$ 113,800,000
Deferred financing costs, net		(1,118,000)	(1,020,000)
Notes payable, net		116,682,000	112,780,000
Face amount of debt		117,800,000	113,800,000
Term Loan
Debt Instrument [Line Items]
Notes payable principal outstanding		$ 72,800,000	72,800,000
Effective Interest Rate		3.99%
Maturity Date		Nov. 09, 2020
Mortgage | Commonwealth Building Mortgage Loan
Debt Instrument [Line Items]
Notes payable principal outstanding		$ 45,000,000	$ 41,000,000
Effective Interest Rate		3.79%
Maturity Date		Feb. 01, 2023
Face amount of debt	$ 51,400,000
Extinguishment of debt, amount	$ 41,000,000
LIBOR benchmark to enter into derivative contract	2.90%
Period to enter into derivative contract	30 days
LIBOR strike rate for derivative contract	3.90%
Amount outstanding		$ 45,000,000
Unused borrowing capacity, amount		$ 6,400,000
Mortgage | Commonwealth Building Mortgage Loan | One-month LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate	1.80%	1.80%
Secured Debt | Term Loan
Debt Instrument [Line Items]
Amount outstanding		$ 48,500,000
Secured Debt | Term Loan | One-month LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate		2.00%
Secured Debt | Term Loan | Revolving Credit Facility
Debt Instrument [Line Items]
Amount outstanding		$ 24,300,000

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NOTES PAYABLE (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Notes Payable [Abstract]
Interest expense	$ 797	$ 757	$ 1,768	$ 1,500
Interest payable, current	400		400		$ 300
Amortization of deferred financing costs	100	$ 100	169	$ 253
Debt refinancing costs			200
Interest Rate Swaps
Derivative [Line Items]
Unrealized gain (loss) on derivatives	$ 400		$ 800

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NOTES PAYABLE (Schedule of Maturities of Long-Term Debt) (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Notes Payable [Abstract]
July 1, 2018 through December 31, 2018	$ 0
2019	0
2020	72,800
2021	0
2022	0
Thereafter	45,000
Total notes payable, net	$ 117,800	$ 113,800

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DERIVATIVE INSTRUMENTS (Notional Amount) (Details) - Derivative instruments not designated as hedging instruments - Interest Rate Swaps $ in Thousands	6 Months Ended
	Jun. 30, 2018 USD ($) investment	Dec. 31, 2017 USD ($) investment
Derivative [Line Items]
Number of Instruments | investment	2	1
Notional Amount	$ 78,533	$ 48,533
Weighted-Average Fix Pay Rate	2.36%
Weighted-Average Remaining Term in Years	3 years 2 months 23 days
Will become effective on November 1, 2018
Derivative [Line Items]
Notional Amount	$ 48,500
Will become effective on April 1, 2019
Derivative [Line Items]
Notional Amount	$ 30,000
Minimum | One-month LIBOR
Derivative [Line Items]
Reference Rate	2.07%
Maximum | One-month LIBOR
Derivative [Line Items]
Reference Rate	2.82%

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DERIVATIVE INSTRUMENTS (Balance Sheet) (Details) - Derivative instruments not designated as hedging instruments - Interest Rate Swaps $ in Thousands	Jun. 30, 2018 USD ($) Investments investment	Dec. 31, 2017 USD ($) Investments investment
Derivative [Line Items]
Number of Instruments | investment	2	1
Prepaid Expenses and Other Current Assets
Derivative [Line Items]
Number of Instruments | Investments	2	1
Asset, Fair Value | $	$ 989	$ 178

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DERIVATIVE INSTRUMENTS (Statement of Operations) (Details) - Derivative instruments not designated as hedging instruments - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Derivative [Line Items]
Decrease in interest expense as a result of derivatives	$ (439)	$ 0	$ (811)	$ 0
Interest Rate Swaps
Derivative [Line Items]
Unrealized gains on interest rate swaps	$ (439)	$ 0	$ (811)	$ 0

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FAIR VALUE DISCLOSURES (Carrying Amounts of Notes Payable) (Details) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Notes payable, Face Value	$ 117,800,000	$ 113,800,000
Carrying Amount
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Notes payable, Value	116,682,000	112,780,000
Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Notes payable, Value	$ 119,250,000	$ 114,327,000

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FAIR VALUE DISCLOSURES (Schedule of Assets and Liabilities at Fair Value) (Details) - Recurring Basis - Interest Rate Swaps $ in Thousands	Jun. 30, 2018 USD ($)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset derivatives	$ 989
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset derivatives	0
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset derivatives	989
Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset derivatives	$ 0

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RELATED PARTY TRANSACTIONS (Related-party Costs) (Details) - USD ($) $ in Thousands			3 Months Ended		6 Months Ended		9 Months Ended
	Aug. 09, 2017	Aug. 08, 2017	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Dec. 31, 2017
Related Party Transaction [Line Items]
Payable as of			$ 2,703		$ 2,703		$ 2,703	$ 1,787
Advisor and Dealer Manager
Related Party Transaction [Line Items]
Incurred			557	$ 27	1,108	$ 494
Payable as of			2,703		2,703		2,703	1,787
Advisor and Dealer Manager | Asset management fees
Related Party Transaction [Line Items]
Expenses			462	0	918	214
Payable as of			1,336		1,336		1,336	418
Advisor and Dealer Manager | Reimbursement of operating expenses
Related Party Transaction [Line Items]
Expenses			53	50	106	104
Payable as of			19		19		19	18
Advisor and Dealer Manager | Property management fees
Related Party Transaction [Line Items]
Expenses			42	31	84	60
Payable as of			10		10		10	13
Advisor and Dealer Manager | Advisor advance for cash distributions
Related Party Transaction [Line Items]
Incurred			0	0	0	0
Payable as of			1,338		1,338		1,338	1,338
Advisor and Dealer Manager | Selling commissions
Related Party Transaction [Line Items]
Incurred			0	17	0	78
Payable as of			0		0		0	0
Advisor and Dealer Manager | Dealer manager fees
Related Party Transaction [Line Items]
Incurred			0	15	0	50
Payable as of			0		0		0	0
Advisor and Dealer Manager | Stockholder servicing fees
Related Party Transaction [Line Items]
Incurred			0	(77)	0	(26)
Payable as of			0		0		0	0
Advisor and Dealer Manager | Reimbursable other offering costs
Related Party Transaction [Line Items]
Incurred			0	$ (9)	0	$ 14
Payable as of			0		0		0	$ 0
KBS Capital Advisors LLC
Related Party Transaction [Line Items]
Payable as of			$ 1,300		$ 1,300		1,300
Deferred payment							$ 1,300
KBS Capital Advisors LLC | Cost of Investments
Related Party Transaction [Line Items]
Property management fee, percent fee	1.00%	1.60%

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RELATED PARTY TRANSACTIONS (Narrative) (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017	Aug. 09, 2017	Aug. 08, 2017
Related Party Transaction [Line Items]
Payment for administrative fees	$ 50,213	$ 49,399	$ 103,212	$ 101,741
Limit of total operating expenses as a percent of net income for the four most recently completed fiscal quarters					2.00%
Limit of total operating expenses as a percent of average invested assets					25.00%
Due to affiliates	2,703,000		2,703,000		$ 1,787,000
Private Placement
Related Party Transaction [Line Items]
Other organization and offering costs	1,500,000		1,500,000
KBS Capital Advisors LLC
Related Party Transaction [Line Items]
Due to affiliates	1,300,000		1,300,000
Acquisition advisory fee, percent						0.083%	0.133%
KBS Capital Advisors LLC | Public Offering
Related Party Transaction [Line Items]
Offering costs, other than selling commissions and dealer manager fees	4,400,000		4,400,000
Organization and offering costs	$ 39,358		$ 39,358
KBS Capital Advisors LLC | Public Offering | Minimum
Related Party Transaction [Line Items]
Reimbursable offering costs determination, gross offering costs, percentage	1.00%		1.00%
KBS Capital Advisors LLC | Second Private Placement
Related Party Transaction [Line Items]
Amounts of transaction			$ 3,600,000
Property Insurance Rebate | KBS Capital Advisors LLC
Related Party Transaction [Line Items]
Amounts of transaction			$ 10,655

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RELATED PARTY TRANSACTIONS (Real Estate Property Co-Management Agreement) (Details) - KBS Management Group, LLC	6 Months Ended
	Jun. 30, 2018
Related Party Transaction [Line Items]
Initial term of management agreements	1 year
Successive periods, renewal	1 year
Period of termination notice	30 days
Period of termination notice with cause	5 days
Von Karman Tech Center
Related Party Transaction [Line Items]
Annual Fee Percentage	1.50%
Commonwealth Building
Related Party Transaction [Line Items]
Annual Fee Percentage	1.25%
The Offices at Greenhouse
Related Party Transaction [Line Items]
Annual Fee Percentage	0.25%
Institute Property
Related Party Transaction [Line Items]
Annual Fee Percentage	1.00%

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SUBSEQUENT EVENTS (Details) - USD ($) $ / shares in Units, $ in Thousands				2 Months Ended	4 Months Ended	6 Months Ended		12 Months Ended
	Aug. 06, 2018	Aug. 01, 2018	Jul. 02, 2018	Jun. 30, 2018	Apr. 30, 2018	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Subsequent Event [Line Items]
Distributions declared						$ 2,318		$ 4,583
Distribution rate per share per day, declared (in dollars per share)				$ 0.00144493	$ 0.00132452		$ 0.00136986
Subsequent Event | Dividend Paid
Subsequent Event [Line Items]
Distributions declared		$ 400	$ 400
Subsequent Event | Dividend Declared
Subsequent Event [Line Items]
Distribution rate per share per day, declared (in dollars per share)	$ 0.00144493