Company: KBSR
Filing Date: 2025-05-12
Form Type: 10-Q
Source: 0001482430-25-000036
Chunk: 127

Company: KBS Real Estate Investment Trust III, Inc.
Filing Date: 2025-05-12
Form: 10-Q
Item: Part I, Item 8
Chunk 127
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 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.  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-to-value ratio, type of collateral and other credit enhancements.  Additionally, when determining the fair value of a liability in circumstances in which a quoted price in an active market for an identical liability is not available, the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach.  The Company classifies these inputs as Level 3 inputs.  The following were the face values, carrying amounts and fair values of the Company’s notes payable as of March 31, 2025 and December 31, 2024, which carrying amounts generally do not approximate the fair values (in thousands): March 31, 2025December 31, 2024 Face ValueCarrying AmountFair ValueFace ValueCarrying AmountFair ValueFinancial liabilities:Notes payable$1,468,122 $1,447,912 $1,456,682 $1,451,063 $1,442,661 $1,442,777 Disclosure of the fair values of financial instruments is based on pertinent information available to the Company as of the period end and requires a significant amount of judgment.  Low levels of transaction volume for certain financial instruments have made the estimation of fair values difficult and, therefore, both the actual results and the Company’s estimate of value at a future date could be materially different.  As of