Company: KBSR
Filing Date: 2025-03-14
Form Type: 10-K
Source: 0001482430-25-000021
Chunk: 93

Company: KBS Real Estate Investment Trust III, Inc.
Filing Date: 2025-03-14
Form: 10-K
Item: Item 15
Chunk 93
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, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)December 31, 20249.      DERIVATIVE INSTRUMENTS

The Company enters into derivative instruments for risk management purposes to hedge its exposure to cash flow variability caused by changing interest rates.  The primary goal of the Company’s risk management practices related to interest rate risk is to prevent changes in interest rates from adversely impacting the Company’s ability to achieve its investment return objectives.  The Company does not enter into derivatives for speculative purposes.  The Company enters into interest rate swaps as a fixed rate payer to mitigate its exposure to rising interest rates on its variable rate notes payable.  The value of interest rate swaps is primarily impacted by interest rates, market expectations about interest rates, and the remaining life of the instrument.  In general, increases in interest rates, or anticipated increases in interest rates, will increase the value of the fixed rate payer position and decrease the value of the variable rate payer position.  As the remaining life of the interest rate swap decreases, the value of both positions will generally move towards zero.  The Company enters into interest rate caps to mitigate its exposure to rising interest rates on its variable rate notes payable.  The values of interest rate caps are primarily impacted by interest rates, market expectations about interest rates, and the remaining life of the instrument.  In general, increases in interest rates, or anticipated increases in interest rates, will increase the value of interest rate caps.  As the remaining life of an interest rate cap decreases, the value of the instrument will generally decrease towards zero.  As of December 31, 2024, the Company has entered into 14 interest rate swaps, which were not designated as hedging instruments.  The following table summarizes the notional amount and other information related to the Company’s interest rate swaps as of December 31, 2024 and 2023.  The notional amount is an indication of the extent of the Company’s involvement in each instrument at that time, but does not represent exposure to credit, interest rate or market risks (dollars in thousands):   December 31, 2024December 31, 2023 Weighted-Average Fix Pay RateWeighted-Average Remaining Term in YearsDerivative InstrumentsNumber of InstrumentsNotional AmountNumber of InstrumentsNotional AmountReference Rate as of December 31, 2024Derivative instruments not designated as hedging instrumentsInterest rate swaps (1)14$1,100,000