Company: KBSR
Filing Date: 2025-11-14
Form Type: 10-Q
Source: 0001482430-25-000054
Chunk: 240

Company: KBS Real Estate Investment Trust III, Inc.
Filing Date: 2025-11-14
Form: 10-Q
Item: Part I, Item 2
Chunk 240
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 cap and discount rates, lower occupancy levels at the building, and an increase in general vacancy assumptions within the discounted cash flow model.  The appraisal also reflected lower projected revenue due to reduced effective rents and higher projected vacancy levels, consistent with broader trends in the East Bay office market, where vacancy rates have continued to rise amid slower leasing activity and elevated tenant turnover.

•60 South Sixth:  During the three months ended September 30, 2025, we recorded non-cash impairment charges of $20.7 million for 60 South Sixth, reflecting a decline in the estimated fair value of the property below its carrying value.  The decrease was primarily attributable to changes in valuation assumptions.  Key factors contributing to the decline included an increase in the terminal cap and discount rates, reflecting a more cautious investment outlook and higher required returns for office assets in the Minneapolis central business district.  The valuation also utilized an increased stabilized vacancy assumption and reflected a modest decrease in in-place occupancy, consistent with the current occupancy at the building and broader market trends indicating softening demand and rising availability in the downtown Minneapolis office market.

During the three months ended September 30, 2024, we recorded non-cash impairment charges of $6.8 million to write down the carrying value of 60 South Sixth to its estimated fair value as a result of changes in cash flow estimates which resulted in the future estimated undiscounted cash flows being lower than the net carrying value of the property.  The decrease in cash flow projections was primarily due to the continued challenges in the leasing environment. 

During the three months ended September 30, 2025, we recorded an unrealized gain on real estate equity securities of $8.5 million, and during the three months ended September 30, 2024, we recorded an unrealized gain on real estate equity securities of $16.6 million, as a result of the change in the closing price of the units of the SREIT on the SGX-ST.   

We recognized a gain on sale of real estate of $77.4 million during the three months ended September 30, 2025 related to the dispositions of Sterling Plaza in July 2025 and Park Place Village in September 2025.  We did not dispose of any real estate during the three months ended September 30, 2024.

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Table of ContentsPART I. FINANCIAL INFORMATION (CONTINUED)Item 2.  Management’s Discussion and Analysis of Financial Condition and Results