Company: KBSR
Filing Date: 2025-05-12
Form Type: 10-Q
Source: 0001482430-25-000036
Chunk: 171

Company: KBS Real Estate Investment Trust III, Inc.
Filing Date: 2025-05-12
Form: 10-Q
Item: Part I, Item 8
Chunk 171
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.  MFFO provides comparability in evaluating the operating performance of our portfolio with other non-traded REITs.  MFFO, or an equivalent measure, is routinely reported by non-traded REITs, and we believe often used by analysts and investors for comparison purposes.  

FFO and MFFO are non-GAAP financial measures and do not represent net income as defined by GAAP.  Net income as defined by GAAP is the most relevant measure in determining our operating performance because FFO and MFFO include adjustments that investors may deem subjective, such as adding back expenses such as depreciation and amortization and the other items described above.  Accordingly, FFO and MFFO should not be considered as alternatives to net income as an indicator of our current and historical operating performance.  In addition, FFO and MFFO do not represent cash flows from operating activities determined in accordance with GAAP and should not be considered an indication of our liquidity.  We believe FFO and MFFO, in addition to net income and cash flows from operating activities as defined by GAAP, are meaningful supplemental performance measures.  See also “—Going Concern Considerations,” “—Market Outlook – Real Estate and Real Estate Finance Markets” and “—Liquidity and Capital Resources.”  

During periods of significant disposition activity, FFO and MFFO are much more limited measures of future performance as neither FFO nor MFFO reflects adjustments for the operations of properties sold or under contract to sale during the periods presented.  

Although MFFO includes other adjustments, the exclusion of adjustments for straight-line rent, the amortization of above- and below-market leases, gain from extinguishment of debt, unrealized losses (gains) on derivative instruments and gains related to swap terminations are the most significant adjustments for the periods presented.  We have excluded these items based on the following economic considerations:

•Adjustments for straight-line rent.  These are adjustments to rental revenue as required by GAAP to recognize contractual lease payments on a straight-line basis over the life of the respective lease.  We have excluded these adjustments in our calculation of MFFO to more appropriately reflect the current economic impact of our in-place leases, while also providing investors with a useful supplemental metric that addresses core operating performance by removing rent we expect to receive in a future period or rent that was received in a prior period; 

•Amortization of above- and below-market leases.  Similar to depreciation and amortization of real estate