Company: KBSR
Filing Date: 2025-11-14
Form Type: 10-Q
Source: 0001482430-25-000054
Chunk: 95

Company: KBS Real Estate Investment Trust III, Inc.
Filing Date: 2025-11-14
Form: 10-Q
Item: Part I, Item 1
Chunk 95
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 number of our interest rate swap agreements mature during the 12 months ending September 30, 2026.  Based on interest rates as of September 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 September 30, 2026, interest expense on our variable rate debt would increase or decrease by $4.7 million.  

The interest rate and weighted-average effective interest rate of our fixed rate debt and variable rate debt as of September 30, 2025 were 7.5% and 6.3%, respectively.  The weighted-average effective interest rate represents the actual interest rate in effect as of September 30, 2025 (consisting of the contractual interest rate and the effect of interest rate swaps, if applicable), using interest rate indices as of September 30, 2025 where applicable.  

Given the challenges affecting the U.S. commercial real estate industry and the challenging interest rate environment, in order to refinance or extend loans, our lenders have required higher interest rate spreads compared to the terms in the loans that have been refinanced or extended.  We utilize interest rate swaps to manage interest rate risk, and in particular fluctuations in the variable rate, namely SOFR, but these interest rate swaps will not mitigate any risk related to higher interest rate spreads.  Additionally, we have entered into various interest rate swap agreements that are currently below market and as those swaps expire, our interest expense will increase and further impact our liquidity position and ongoing cash flows.  As a result, we expect interest expense and our weighted-average effective interest rate to increase in the future as a result of recent extensions and loan modifications.  For a discussion of the interest rate risks related to the current capital and credit markets, see Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Outlook – Real Estate and Real Estate Finance Markets” and the risks discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC.  

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Table of ContentsPART I. FINANCIAL INFORMATION (CONTINUED)Item 3.  Quantitative and Qualitative Disclosures about Market Risk (continued)

We are exposed to financial market risk with respect to our investment in the SREIT (SGX-ST Ticker: OXM