Company: KBSR
Filing Date: 2025-08-14
Form Type: 10-Q
Source: 0001482430-25-000042
Chunk: 34

Company: KBS Real Estate Investment Trust III, Inc.
Filing Date: 2025-08-14
Form: 10-Q
Item: Part I, Item 1
Chunk 34
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 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 assets and liabilities for which it is practicable to estimate the fair value:Cash and cash equivalents, restricted cash, rent and other receivables, and accounts payable and accrued liabilities:  These balances approximate their fair values due to the nature and/or short maturities of these items.Real estate equity securities: At June 30, 2025, the Company’s investment in the units of the SREIT was presented at fair value on the accompanying consolidated balance sheet.  The fair value of the units of the SREIT was based on a quoted price in an active market on a major stock exchange.  The Company classifies these inputs as Level 1 inputs.  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.  

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Table of ContentsPART I. FINANCIAL INFORMATION (CONTINUED)Item 1.  Financial Statements (continued)KBS REAL ESTATE INVESTMENT TRUST III, INC.CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)June 30, 2025(unaudited)10.      FAIR VALUE DISCLOSURES (CONTINUED)

Notes payable: The fair values of the Company’s notes payable are 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