Company: KBSR
Filing Date: 2025-08-14
Form Type: 10-Q
Source: 0001482430-25-000042
Chunk: 239

Company: KBS Real Estate Investment Trust III, Inc.
Filing Date: 2025-08-14
Form: 10-Q
Item: Part I, Item 2
Chunk 239
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 position will reduce the funds available for other capital needs and that the losses may exceed the amount we invested in the instruments.  

We borrow funds at a combination of fixed and variable rates.  Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt, unless such instruments mature or are otherwise terminated.  However, interest rate changes will affect the fair value of our fixed rate instruments.  As of June 30, 2025, the fair value of our fixed rate debt was $117.7 million and the outstanding principal balance of our fixed rate debt was $117.7 million.  The fair value estimate of our fixed rate debt is calculated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loan was originated as of June 30, 2025.  As we expect to hold our fixed rate instruments to maturity (unless the property securing the debt is sold and the loan is repaid) and the amounts due under such instruments would be limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that fluctuations in interest rates, and the resulting change in fair value of our fixed rate instruments, would have a significant impact on our operations.  

Conversely, movements in interest rates on our variable rate debt would change our future earnings and cash flows, but not significantly affect the fair value of those instruments.  However, changes in required risk premiums would result in changes in the fair value of variable rate instruments.  As of June 30, 2025, we were exposed to market risks related to fluctuations in interest rates on $357.0 million of variable rate debt outstanding after giving consideration to the impact of interest rate swap agreements on approximately $1.0 billion of our variable rate debt.  Several of our interest rate swap agreements mature during the 12 months ending June 30, 2026.  Based on interest rates as of June 30, 2025, and with the consideration of the maturity dates of our interest rate swap agreements, if interest rates were 100 basis points higher or lower during the 12 months ending June 30, 2026, interest expense on our variable rate debt would increase or decrease by $4.6 million.  

The interest rate and weighted-average effective interest rate of our fixed rate debt and variable rate debt as of June 30, 2025 were 7.5% and 6.4%, respectively.  The weighted-average