Company: KBSR
Filing Date: 2025-08-14
Form Type: 10-Q
Source: 0001482430-25-000042
Chunk: 31

Company: KBS Real Estate Investment Trust III, Inc.
Filing Date: 2025-08-14
Form: 10-Q
Item: Part I, Item 1
Chunk 31
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illon Borrower, (b) any payment on account of the purchase, redemption, cancellation or termination of any equity interests in the Carillon Borrower or the direct or indirect owners of the Carillon Borrower or any option, warrant or other right to acquire any equity interest in the Carillon Borrower or any direct or indirect owners of the Carillon Borrower, or (c) any other payment by the Carillon Borrower to (i) its direct or indirect owners or (ii) any person that controls the Carillon Borrower including, without limitation, the payment of any asset management fees or general or administrative expenses, provided that asset management fees and REIT-level general and administrative costs and expenses allocable to properties other than Carillon may be paid using sources other than those derived from Carillon.The Carillon Third Modification Agreement requires the Carillon Borrower to maintain a minimum debt service coverage ratio and REIT Properties III, as guarantor, to satisfy the EBITDA to interest charges ratio covenant, commencing with the March 31, 2025 calendar quarter reporting period.Additionally, the Carillon Third Modification Agreement provides that a default will occur under the Carillon Mortgage Loan if a written demand for payment following a default is delivered to REIT Properties III and not paid when due under (i) any loan facility under which REIT Properties III is a guarantor or borrower or (ii) any other indebtedness of REIT Properties III where the demand made is greater than $5.0 million and the required Carillon Lenders elect to call a default.

9.       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