Company: KBSR
Filing Date: 2025-03-14
Form Type: 10-K
Source: 0001482430-25-000021
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Company: KBS Real Estate Investment Trust III, Inc.
Filing Date: 2025-03-14
Form: 10-K
Item: Item 7A
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Table of Contents

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity and to fund property improvements, repairs and tenant build-outs to properties, to pay for other capital needs, to refinance existing indebtedness and to provide working capital.  We have also funded distributions to stockholders and redemptions of common stock with borrowings.  Our profitability and the value of our real estate investment portfolio may be adversely affected during any period as a result of interest rate changes.  Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs.  We may manage interest rate risk by utilizing a variety of financial instruments, including interest rate caps, floors, and swap agreements, in order to limit the effects of changes in interest rates on our operations.  When we use these types of derivatives to hedge the risk of interest-earning assets or interest-bearing liabilities, we may be subject to certain risks, including the risk that losses on a hedge position will reduce the funds available for other capital needs and that the losses may exceed the amount we invested in the instruments.  

The table below summarizes the outstanding principal balance, interest rate or weighted-average contractual interest rates and fair value for our notes payable for each category; and the notional amounts, average pay rates, average receive rates and fair value of our derivative instruments, based on maturity dates as of December 31, 2024 (dollars in thousands):

Maturity DateTotal Valueor NotionalAmount20252026202720282029Fair ValueAssetsDerivative InstrumentsInterest rate swaps, notional amount$100,000$1,000,000$—$—$—$1,100,000$10,509 Average pay rate (1)1.2 %3.3 %— %— %— %3.1 %Average receive rate (2)4.3 %4.3 %— %— %— %4.3 %LiabilitiesNotes payable, principal outstandingFixed Rate$—$118,440$—$—$—$118,440$118,100Interest rate— %7.5 %— %— %— %7.5 %Variable Rate$525,938(3)$743,