Company: KBSR
Filing Date: 2025-05-12
Form Type: 10-Q
Source: 0001482430-25-000036
Chunk: 212

Company: KBS Real Estate Investment Trust III, Inc.
Filing Date: 2025-05-12
Form: 10-Q
Item: Part I, Item 2
Chunk 212
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 (gains) on derivative instruments and gains related to swap terminations 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; 

•Gain from extinguishment of debt.  A gain 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 gain from extinguishment of debt in our calculation of MFFO because these gains do not impact the current operating performance of our investments and do not provide an indication of future operating performance; 

•Unrealized loss (gain) on derivative instruments.  These adjustments include unrealized losses (gains) 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

•Gains related to swap terminations.  Gains related to swap terminations represent the difference between the settlement fees received and the value of interest rate swaps terminated, which are included in net (gain) loss on derivative instruments.  Although these amounts increase net income, we exclude them from MFFO to more appropriately reflect the ongoing impact of our interest rate swap agreements.