Company: KBSR
Filing Date: 2025-11-14
Form Type: 10-Q
Source: 0001482430-25-000054
Chunk: 199

Company: KBS Real Estate Investment Trust III, Inc.
Filing Date: 2025-11-14
Form: 10-Q
Item: Part I, Item 8
Chunk 199
---
 $14.8 million during the nine months ended September 30, 2024 related to the disposition of the McEwen Building in February 2024.  

52

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

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), gains and losses from change in control, impairment losses on real estate assets, depreciation and amortization of real estate assets, and adjustments for unconsolidated partnerships and joint ventures.  In addition, we elected the option to exclude mark-to-market changes in value recognized on real estate equity securities in the calculation of FFO.  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.  MFFO excludes from FFO: acquisition fees and expenses (to the extent that such fees and expenses have