Company: KBSR
Filing Date: 2025-03-14
Form Type: 10-K
Source: 0001482430-25-000021
Chunk: 217

Company: KBS Real Estate Investment Trust III, Inc.
Filing Date: 2025-03-14
Form: 10-K
Item: Item 5
Chunk 217
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 value per share, assuming all other factors remain unchanged.  

Investment in the SREIT

As of September 30, 2024, we owned 237,426,088 units of the SREIT (SGX-ST Ticker: OXMU), a Singapore real estate investment trust listed on the SGX-ST, which represented 18.2% of the outstanding units of the SREIT at that time.  

We engaged Kroll to value our investment in units of the SREIT as of November 14, 2024 based on the SGX-ST trading price of the units of the SREIT as of closing on November 14, 2024 less a discount to account for holding period risk due to the quantity of units held by us relative to the normal level of trading volume in the SREIT units (“blockage”).  Kroll estimated the percentage discount for the holding period risk applicable to our holdings as the quotient of the value of a hypothetical series of at-the-money put options relative to the freely traded market value of our holdings (i.e., the average of the high and low trading prices of the units times the number of units held by us), where each such put option corresponds to one of the expected future sales of such units in the public market over a period of time in which we could reasonably sell such units if desired, given the constraints imposed by blockage.  Ultimately, the discount for the holding period risk may be attributable to blockage, which constrains the rate at which the holder can sell the subject units into a public market without upsetting the market’s equilibrium.  Kroll’s analysis of the discount for the holding period risk applicable to our holdings had three elements: (i) analysis of trading volume in the SREIT’s units and the shares of other listed REITs in order to estimate the quantity of units that might be saleable by us in the public market; (ii) an estimate of the expected future price volatility of the SREIT’s units, which is the key variable in the valuation of the hypothetical series of put options; and (iii) application of the Black-Scholes model in the valuation of the series of put options.  Based on its analysis, the estimated value of the units of the SREIT held by us as of November 14, 2024 was $28.4 million.  We acquired 215,841,899 of our 237,426,088 units of the SREIT on July