Company: KBSR
Filing Date: 2025-03-14
Form Type: 10-K
Source: 0001482430-25-000021
Chunk: 138

Company: KBS Real Estate Investment Trust III, Inc.
Filing Date: 2025-03-14
Form: 10-K
Item: Item 1A
Chunk 138
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 of the relevant pledged equity. We have directly and/or indirectly pledged the equity of subsidiaries owning the following properties: Gateway Tech Center, 201 17th Street, 515 Congress, Carillon, Park Place Village and Accenture Tower.  Additionally, we are required to pledge approximately half of the units of the SREIT that we own.  If we are unable to satisfy the terms and conditions contained in our loan agreements, we anticipate we will make efforts to further refinance or restructure certain of our debt instruments or make additional asset sales to pay off the debt, though there can be no certainty that we will be able to complete such refinancing, restructuring or asset sales.  In such event, our stockholders would likely suffer a loss to their investment.

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We have interest rate swaps outstanding with several bank counterparties.  An event of default under our debt facilities that triggers an acceleration of our debt could result in an event of default under our swap agreements with bank counterparties.  If such an event of default is continuing, the swap counterparty would have the right to designate an early termination date in respect of all outstanding interest rate swaps and determine a net amount payable by one of the parties using standard ISDA close-out methodology.  Prior to any such early termination, subject to applicable insolvency law, the swap counterparty would have the right to suspend payments to us under all outstanding interest rate swaps for as long as such event of default is continuing.  Currently, the majority of our swaps are an asset to us; however, there is no certainty that will remain the case as this will depend on future changes in interest rates.

In addition, as of March 14, 2025, five of our debt facilities (representing $1.3 billion of our outstanding debt that are secured by 12 of our properties) are subject to cash sweep arrangements, whereby each month the excess cash flow from the properties securing the loan is deposited into a cash management account held for the benefit of our lenders. In certain cases, we may request disbursements from the cash management accounts to fund capital or operating shortfalls at the underlying assets. However, such cash management accounts place limits on our access to cash flows from these properties and restrict our operating flexibility.

Despite the substantial amount of refinancing activity since February 2024 (over $1.3 billion of debt refinanced or extended), there can be no assurances as to the certainty or timing of management’s future plans in regards to