Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 
FORM 10-Q

(Mark One)
x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20172021
OR
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 000-54687

 
KBS REAL ESTATE INVESTMENT TRUST III, INC.
(Exact Name of Registrant as Specified in Its Charter)

Maryland27-1627696
(State or Other Jurisdiction of

Incorporation or Organization)
(I.R.S. Employer

Identification No.)
800 Newport Center Drive, Suite 700
Newport Beach, California
92660
Newport Beach,California92660
(Address of Principal Executive Offices)(Zip Code)
(949) 417-6500
(Registrant’s Telephone Number, Including Area Code)
_______________________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassName of Each Exchange on Which Registered
NoneNone
Trading Symbol(s)

None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x☒    No  ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x☒     No  ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer¨☐Accelerated Filer¨☐
Non-Accelerated Filer
x (Do not check if a smaller reporting company)
☒		Smaller reporting company¨☐
Emerging growth company¨☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨☐  No  x☒
As of November 9, 2017,1, 2021, there were 180,420,256156,017,742 outstanding shares of common stock of KBS Real Estate Investment Trust III, Inc.


Table of Contents

KBS REAL ESTATE INVESTMENT TRUST III, INC.
FORM 10-Q
September 30, 20172021
INDEX
2
2
2
3
4
5
Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 20172021 and 20162020
6
7
2835
4355
4456
4557
4557
4557
4557
4761
4761
4761
Exhibits
62
4963


1

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements



KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
 September 30, 2021December 31, 2020
 (unaudited) 
Assets
Real estate:
Land$290,121 $290,121 
Buildings and improvements2,065,264 2,021,380 
Tenant origination and absorption costs72,548 75,664 
Total real estate held for investment, cost2,427,933 2,387,165 
Less accumulated depreciation and amortization(560,616)(490,365)
Total real estate held for investment, net1,867,317 1,896,800 
Real estate held for sale, net55,342 132,143 
Total real estate, net1,922,659 2,028,943 
Cash and cash equivalents38,184 72,523 
Restricted cash792 5,288 
Investment in an unconsolidated entity218,676 233,592 
Rents and other receivables, net90,156 85,539 
Above-market leases, net373 449 
Assets related to real estate held for sale, net7,861 13,091 
Prepaid expenses and other assets71,872 64,900 
Total assets$2,350,573 $2,504,325 
Liabilities and equity
Notes payable:
Notes payable, net$1,556,127 $1,358,468 
Notes payable related to real estate held for sale, net37,695 29,897 
Total notes payable, net1,593,822 1,388,365 
Accounts payable and accrued liabilities50,759 55,814 
Due to affiliate9,012 8,626 
Distributions payable7,921 9,187 
Below-market leases, net4,359 6,116 
Liabilities related to real estate held for sale, net17,502 21,001 
Other liabilities57,435 70,457 
Total liabilities1,740,810 1,559,566 
Commitments and contingencies (Note 11)00
Redeemable common stock87,445 46,723 
Stockholders’ equity:
Preferred stock, $.01 par value per share; 10,000,000 shares authorized, no shares issued and outstanding— — 
Common stock, $.01 par value per share; 1,000,000,000 shares authorized, 157,205,102 and 184,249,076 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively1,572 1,842 
Additional paid-in capital1,319,718 1,641,184 
Cumulative distributions in excess of net income(798,972)(744,990)
Total stockholders’ equity522,318 898,036 
Total liabilities and equity$2,350,573 $2,504,325 
  September 30, 2017 December 31, 2016
  (unaudited)  
Assets    
Real estate:    
Land $395,133
 $395,133
Buildings and improvements 2,695,238
 2,651,690
Construction in progress 56,124
 21,853
Tenant origination and absorption costs 243,102
 264,973
Total real estate, cost 3,389,597
 3,333,649
Less accumulated depreciation and amortization (423,322) (344,794)
Total real estate, net 2,966,275
 2,988,855
Cash and cash equivalents 44,575
 72,068
Investment in unconsolidated joint venture 33,593
 —
Rents and other receivables, net 76,632
 64,654
Above-market leases, net 6,417
 8,191
Prepaid expenses and other assets 65,789
 48,908
Total assets $3,193,281
 $3,182,676
Liabilities and equity    
Notes payable, net $1,891,442
 $1,783,468
Accounts payable and accrued liabilities 71,327
 56,210
Due to affiliate 2,756
 2,397
Distributions payable 9,657
 10,000
Below-market leases, net 26,692
 33,655
Other liabilities 31,526
 41,699
Total liabilities 2,033,400
 1,927,429
Commitments and contingencies (Note 10) 

 

Redeemable common stock 52,300
 61,871
Equity    
KBS Real Estate Investment Trust III, Inc. stockholders’ equity    
Preferred stock, $.01 par value per share; 10,000,000 shares authorized, no shares issued and outstanding —
 —
Common stock, $.01 par value per share; 1,000,000,000 shares authorized, 180,102,670 and 180,890,572 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively 1,801
 1,809
Additional paid-in capital 1,591,659
 1,591,652
Cumulative distributions and net losses (485,971) (398,087)
Accumulated other comprehensive income (loss) 21
 (2,298)
Total KBS Real Estate Investment Trust III, Inc. stockholders’ equity 1,107,510
 1,193,076
Noncontrolling interest 71
 300
Total equity 1,107,581
 1,193,376
Total liabilities and equity $3,193,281
 $3,182,676

See accompanying condensed notes to consolidated financial statements.

2

Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)


KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except share and per share amounts)
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Revenues:
Rental income$68,538 $69,159 $209,396 $211,385 
Interest income from real estate loan receivable— 2,029 — 3,236 
Other operating income4,523 4,315 12,254 14,555 
Total revenues73,061 75,503 221,650 229,176 
Expenses:
Operating, maintenance and management17,313 17,198 49,378 52,553 
Real estate taxes and insurance14,992 14,140 43,371 43,052 
Asset management fees to affiliate5,019 5,311 14,858 15,704 
General and administrative expenses1,621 1,560 5,223 4,756 
Depreciation and amortization28,298 27,879 83,617 82,629 
Interest expense9,658 8,918 25,372 71,460 
Impairment charges on real estate— — — 19,896 
Total expenses76,901 75,006 221,819 290,050 
Other income (loss):
Other interest income10 13 41 60 
Equity in income (loss) of an unconsolidated entity1,595 588 4,945 (1,408)
Loss from extinguishment of debt— — — (188)
Gain on sale of real estate, net— 21 20,459 50,959 
Provision for credit loss on real estate loan receivable— — — (680)
Total other income, net1,605 622 25,445 48,743 
Net (loss) income(2,235)1,119 25,276 (12,131)
Net income attributable to noncontrolling interest— — — (6,145)
Net (loss) income attributable to common stockholders$(2,235)$1,119 $25,276 $(18,276)
Net (loss) income per common share attributable to common stockholders, basic and diluted$(0.01)$0.01 $0.14 $(0.10)
Weighted-average number of common shares outstanding, basic and diluted163,025,885 183,174,688 177,779,472 182,386,530 
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Revenues:       
Rental income$77,798
 $76,998
 $236,200
 $228,783
Tenant reimbursements19,063
 19,258
 57,652
 54,849
Other operating income5,697
 5,549
 17,124
 15,504
Interest income from real estate loan receivable—
 5
 —
 831
Total revenues102,558
 101,810
 310,976
 299,967
Expenses:       
Operating, maintenance and management25,293
 24,009
 70,765
 68,627
Real estate taxes and insurance16,460
 16,359
 48,721
 47,675
Asset management fees to affiliate6,587
 6,286
 19,223
 18,646
Real estate acquisition fees to affiliate—
 —
 —
 1,473
Real estate acquisition fees and expenses—
 5
 —
 306
General and administrative expenses983
 1,289
 3,324
 4,115
Depreciation and amortization41,151
 39,978
 124,370
 120,088
Interest expense15,460
 10,042
 45,257
 53,948
Total expenses105,934
 97,968
 311,660
 314,878
Other income (loss):       
Other income—
 —
 650
 —
Other interest income23
 17
 73
 39
Equity in loss of unconsolidated joint venture—
 —
 (1) —
Total other income, net23
 17
 722
 39
Net (loss) income(3,353) 3,859
 38
 (14,872)
Net loss attributable to noncontrolling interest202
 —
 229
 —
Net (loss) income attributable to common stockholders$(3,151) $3,859
 $267
 $(14,872)
Net (loss) income per common share attributable to common stockholders, basic and diluted$(0.02) $0.02
 $—
 $(0.08)
Weighted-average number of common shares outstanding, basic and diluted180,975,877
 180,433,084
 181,320,425
 179,758,697

See accompanying condensed notes to consolidated financial statements.

3

Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)

KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
(in thousands)
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
Net (loss) income $(3,151) $3,859
 $267
 $(14,872)
Other comprehensive income (loss):        
Unrealized income (losses) on derivative instruments 13
 1,784
 602
 (6,695)
Reclassification adjustment realized in net income (effective portion) 253
 1,363
 1,717
 4,252
Total other comprehensive income (loss) 266
 3,147
 2,319
 (2,443)
Total comprehensive (loss) income (2,885) 7,006
 2,586
 (17,315)
Total comprehensive loss attributable to noncontrolling interest 202
 —
 229
 —
Total comprehensive (loss) income attributable to common stockholders $(2,683) $7,006
 $2,815
 $(17,315)
See accompanying condensed notes to consolidated financial statements.


4
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)


KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONSOLIDATED STATEMENTS OF EQUITY
For the Year Ended December 31, 2016 and the NineThree Months Ended September 30, 20172021 and 2020 (unaudited)
(dollars in thousands)
 Common StockAdditional Paid-in CapitalCumulative Distributions in Excess of Net IncomeTotal Stockholders’ Equity
 SharesAmounts
Balance, June 30, 2021186,256,002 $1,862 $1,291,164 $(772,874)$520,152 
Net loss— — — (2,235)(2,235)
Issuance of common stock636,041 6 6,501 — 6,507 
Transfers from redeemable common stock— — 329,480 — 329,480 
Redemptions of common stock(29,686,941)(296)(307,421)— (307,717)
Distributions declared— — — (23,863)(23,863)
Other offering costs— — (6)— (6)
Balance, September 30, 2021157,205,102 $1,572 $1,319,718 $(798,972)$522,318 
  
 
Common Stock
 Additional Paid-in Capital Cumulative Distributions and Net Losses Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Noncontrolling Interest Total Equity
  Shares Amounts     
Balance, December 31, 2015 177,943,238
 $1,779
 $1,571,107
 $(281,825) $(4,229) $1,286,832
 $—
 $1,286,832
Net income —
 —
 —
 763
 —
 763
 —
 763
Other comprehensive income —
 —
 —
 —
 1,931
 1,931
 —
 1,931
Issuance of common stock 6,485,383
 65
 61,806
 —
 —
 61,871
 —
 61,871
Transfers to redeemable common stock —
 —
 (6,504) —
 —
 (6,504) —
 (6,504)
Redemptions of common stock (3,538,049) (35) (34,732) —
 —
 (34,767) —
 (34,767)
Distributions declared —
 —
 —
 (117,025) —
 (117,025) —
 (117,025)
Other offering costs —
 —
 (25) —
 —
 (25) —
 (25)
Noncontrolling interest contribution —
 —
 —
 —
 —
 —
 300
 300
Balance, December 31, 2016 180,890,572
 $1,809
 $1,591,652
 $(398,087) $(2,298) $1,193,076
 $300
 $1,193,376
Net income (loss) —
 —
 —
 267
 —
 267
 (229) 38
Other comprehensive income —
 —
 —
 —
 2,319
 2,319
 —
 2,319
Issuance of common stock 4,465,177
 45
 45,053
 —
 —
 45,098
 —
 45,098
Transfers from redeemable common stock —
 —
 9,571
 —
 —
 9,571
 —
 9,571
Redemptions of common stock (5,253,079) (53) (54,616) —
 —
 (54,669) —
 (54,669)
Distributions declared —
 —
 —
 (88,151) —
 (88,151) —
 (88,151)
Other offering costs —
 —
 (1) —
 —
 (1) —
 (1)
Balance, September 30, 2017 180,102,670
 $1,801
 $1,591,659
 $(485,971) $21
 $1,107,510
 $71
 $1,107,581

 Common StockAdditional Paid-in CapitalCumulative Distributions in Excess of Net IncomeTotal Stockholders’ Equity
 SharesAmounts
Balance, June 30, 2020182,564,608 $1,826 $1,600,363 $(690,983)$911,206 
Net income— — — 1,119 1,119 
Issuance of common stock1,052,825 11 11,644 — 11,655 
Transfers to redeemable common stock— — (9,311)— (9,311)
Redemptions of common stock(201,155)(3)(2,340)— (2,343)
Distributions declared— — — (27,388)(27,388)
Other offering costs— — (3)— (3)
Balance, September 30, 2020183,416,278 $1,834 $1,600,353 $(717,252)$884,935 

See accompanying condensed notes to consolidated financial statements.

4

5
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)


KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONSOLIDATED STATEMENTS OF EQUITY (CONTINUED)
For the Nine Months Ended September 30, 2021 and 2020 (unaudited)
(dollars in thousands)
 Common StockAdditional Paid-in CapitalCumulative Distributions in Excess of Net IncomeTotal Stockholders’ Equity
 SharesAmounts
Balance, December 31, 2020184,249,076 $1,842 $1,641,184 $(744,990)$898,036 
Net income— — — 25,276 25,276 
Issuance of common stock3,209,068 32 32,760 — 32,792 
Transfers to redeemable common stock— — (40,722)— (40,722)
Redemptions of common stock(30,253,042)(302)(313,498)— (313,800)
Distributions declared— — — (79,258)(79,258)
Other offering costs— — (6)— (6)
Balance, September 30, 2021157,205,102 $1,572 $1,319,718 $(798,972)$522,318 

 Common StockAdditional Paid-in CapitalCumulative Distributions in Excess of
Net Income		Total Stockholders’ EquityNoncontrolling InterestTotal Equity
 SharesAmounts
Balance, December 31, 2019180,970,743 $1,810 $1,600,416 $(617,171)$985,055 $255 $985,310 
Net (loss) income— — — (18,276)(18,276)6,145 (12,131)
Issuance of common stock3,186,782 32 35,245 — 35,277 — 35,277 
Transfers to redeemable common stock— — (26,666)— (26,666)— (26,666)
Redemptions of common stock(741,247)(8)(8,627)— (8,635)— (8,635)
Distributions declared— — — (81,805)(81,805)— (81,805)
Other offering costs— — (15)— (15)— (15)
Distribution to noncontrolling interest— — — — — (6,400)(6,400)
Balance, September 30, 2020183,416,278 $1,834 $1,600,353 $(717,252)$884,935 $— $884,935 

See accompanying condensed notes to consolidated financial statements.
5

Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)

KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Nine Months Ended September 30,
20212020
Cash Flows from Operating Activities:
Net income (loss)$25,276 $(12,131)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization83,617 82,629 
Impairment charges on real estate— 19,896 
Noncash interest income on real estate loan receivable— (1,172)
Provision for credit loss on real estate loan receivable— 680 
Equity in (income) loss of an unconsolidated entity(4,945)1,408 
Distribution of operating cash flow from an unconsolidated entity19,861 19,314 
Deferred rents(4,221)(4,041)
Amortization of above- and below-market leases, net(1,697)(2,137)
Amortization of deferred financing costs2,994 3,184 
Unrealized (gain) loss on derivative instruments(13,740)29,484 
Loss from extinguishment of debt— 188 
Gain on sale of real estate(20,459)(50,959)
Interest rate swap settlements for off-market swap instruments2,209 — 
Changes in operating assets and liabilities:
Rents and other receivables(4,287)(4,532)
Prepaid expenses and other assets(14,616)(11,827)
Accounts payable and accrued liabilities3,033 (4,428)
Other liabilities2,829 5,746 
Due to affiliates386 2,119 
Net cash provided by operating activities76,240 73,421 
Cash Flows from Investing Activities:
Improvements to real estate(50,944)(70,835)
Proceeds from sale of real estate, net98,000 26,592 
Payments for construction in progress— (3,277)
Origination costs on real estate loan receivable— (120)
Net cash provided by (used in) investing activities47,056 (47,640)
Cash Flows from Financing Activities:
Proceeds from notes payable241,240 104,510 
Principal payments on notes payable(38,400)(74,202)
Payments of deferred financing costs(377)(2,811)
Interest rate swap settlements for off-market swap instruments(2,201)— 
Payments to redeem common stock(313,800)(8,635)
Payments of prepaid other offering costs(855)(1,032)
Payments of other offering costs(6)(15)
Distribution to noncontrolling interest— (6,400)
Distributions paid to common stockholders(47,732)(46,778)
Net cash used in financing activities(162,131)(35,363)
Net (decrease) in cash, cash equivalents and restricted cash(38,835)(9,582)
Cash, cash equivalents and restricted cash, beginning of period77,811 49,272 
Cash, cash equivalents and restricted cash, end of period$38,976 $39,690 
Supplemental Disclosure of Cash Flow Information:
Interest paid$33,849 $39,293 
Supplemental Disclosure of Noncash Investing and Financing Activities:
Distributions payable$7,921 $9,142 
Distributions paid to common stockholders through common stock issuances pursuant to the dividend reinvestment plan$32,792 $35,277 
Real estate loan receivable provided to purchaser of real estate$— $147,678 
Accrued prepaid other offering costs$99 $705 
Accrued improvements to real estate$11,452 $14,900 
Accrued interest rate swap settlements related to off-market swap instruments$253 $— 
  Nine Months Ended September 30,
  2017 2016
Cash Flows from Operating Activities:    
Net income (loss) $38
 $(14,872)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Depreciation and amortization 124,370
 120,088
Equity in loss of unconsolidated joint venture 1
 —
Noncash interest income on real estate-related investment —
 15
Deferred rents (8,527) (13,943)
Loss due to property damage 371
 —
Allowance for doubtful accounts 1,065
 1,023
Amortization of above- and below-market leases, net (5,189) (6,869)
Amortization of deferred financing costs 3,537
 3,838
Unrealized (gains) losses on derivative instruments (2,579) 14,813
Changes in operating assets and liabilities:    
Rents and other receivables (4,168) (3,868)
Prepaid expenses and other assets (18,881) (16,391)
Accounts payable and accrued liabilities 5,709
 6,694
Other liabilities (5,145) (477)
Due to affiliates (37) (7,969)
Net cash provided by operating activities 90,565
 82,082
Cash Flows from Investing Activities:    
Acquisitions of real estate —
 (141,760)
Improvements to real estate (54,070) (50,412)
Payments for construction in progress (32,967) (7,793)
Investment in unconsolidated joint venture (33,421) —
Advances on real estate loan receivable —
 (544)
Principal repayments on real estate loan receivable —
 22,526
Escrow deposits for tenant improvements (3,762) —
Net cash used in investing activities (124,220) (177,983)
Cash Flows from Financing Activities:    
Proceeds from notes payable 107,385
 139,071
Principal payments on notes payable (1,893) (31,900)
Payments of deferred financing costs (1,264) (1,339)
Payments to redeem common stock (54,669) (26,146)
Return of contingent consideration related to acquisition of real estate —
 228
Payments of other offering costs (1) (21)
Noncontrolling interest contribution —
 300
Distributions paid to common stockholders (43,396) (41,039)
Net cash provided by financing activities 6,162
 39,154
Net decrease in cash and cash equivalents (27,493) (56,747)
Cash and cash equivalents, beginning of period 72,068
 108,242
Cash and cash equivalents, end of period $44,575
 $51,495
Supplemental Disclosure of Cash Flow Information:    
Interest paid, net of capitalized interest of $1,543 and $64 for the nine months ended September 30, 2017 and 2016, respectively $43,101
 $34,625
Supplemental Disclosure of Noncash Investing and Financing Activities:    
Distributions paid to common stockholders through common stock issuances pursuant to the dividend reinvestment plan $45,098
 $46,543
Increase in accrued improvements to real estate $8,149
 $2,869
Application of escrow deposits to acquisition of real estate $—
 $4,350
Increase in construction in progress payable $856
 $1,865
Increase in acquisition fee related to construction in progress due to affiliate $234
 $87
Increase in acquisition fee on unconsolidated joint venture due to affiliate $173
 $—
Transfer of land to construction in progress $—
 $4,183

See accompanying condensed notes to consolidated financial statements.

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 20172021
(unaudited)

1. ORGANIZATION



1.ORGANIZATION
KBS Real Estate Investment Trust III, Inc. (the “Company”) was formed on December 22, 2009 as a Maryland corporation that elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2011 and it intends to continue to operate in such manner. Substantially all of the Company’s business is conducted through KBS Limited Partnership III (the “Operating Partnership”), a Delaware limited partnership. The Company is the sole general partner of and owns a 0.1% partnership interest in the Operating Partnership. KBS REIT Holdings III LLC (“REIT Holdings III”), the limited partner of the Operating Partnership, owns the remaining 99.9% interest in the Operating Partnership and is its sole limited partner. The Company is the sole member and manager of REIT Holdings III.
Subject to certain restrictions and limitations, the business of the Company is externally managed by KBS Capital Advisors LLC (the “Advisor”), an affiliate of the Company, pursuant to an advisory agreement the Company entered into with the Advisor (the “Advisory Agreement”). On January 26, 2010, the Company issued 20,000 shares of its common stock to the Advisor at a purchase price of $10.00$10.00 per share. As of September 30, 2017,2021, the Advisor owned 20,00020,857 shares of the Company’s common stock.
The Company owns a diverse portfolio of real estate investments. As of September 30, 2017,2021, the Company owned 2817 office properties (1 of which was held for sale and onesubsequently sold on November 2, 2021), 1 mixed-use office/retail property and had madean investment in the equity securities of Prime US REIT, a Singapore real estate investment trust (the “SREIT”), which is accounted for as an investment in an unconsolidated joint venture to develop and subsequently operate an office/retail property, which is currentlyentity under construction. Additionally, asthe equity method of September 30, 2017, the Company had entered into a consolidated joint venture to develop and subsequently operate a multifamily apartment project, which is currently under construction.accounting.
The Company commenced its initial public offering (the “Offering”) on October 26, 2010. Upon commencing the Offering, the Company retained KBS Capital Markets Group LLC (the “Dealer Manager”), an affiliate of the Company, to serve as the dealer manager of the Offering pursuant to a dealer manager agreement, as amended and restated (the “Dealer Manager Agreement”). The Company ceased offering shares of common stock in the primary Offering on May 29, 2015 and terminated the primary Offering on July 28, 2015.
The Company sold 169,006,162 shares of common stock in the primary Offering for gross proceeds of $1.7 billion. As of September 30, 2017,2021, the Company had also sold 21,438,40639,883,754 shares of common stock under its dividend reinvestment plan for gross offering proceeds of $210.1 million.$412.1 million. Also as of September 30, 2017,2021, the Company had redeemed 10,620,360or repurchased 59,684,490 shares sold in the Offering for $107.2$636.1 million.
Additionally, on October 3, 2014, the Company issued 258,462 shares of common stock for $2.4 million in private transactions exempt from the registration requirements pursuant to Section 4(a)(2) of the Securities Act of 1933.
The Company continues to offer shares of common stock under its dividend reinvestment plan. In some states, the Company will need to renew the registration statement annually or file a new registration statement to continue its dividend reinvestment plan offering. The Company may terminate its dividend reinvestment plan offering at any time.
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2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
1. ORGANIZATION (CONTINUED)
COVID-19 Pandemic
One of the most significant risks and uncertainties facing the Company and the real estate industry generally continues to be the effect of the ongoing public health crisis of the novel coronavirus disease (“COVID-19”) pandemic. The Company continues to closely monitor the impact of the COVID-19 pandemic on all aspects of its business, including how the pandemic is affecting its tenants and its investment in the SREIT. From March 2020 through September 30, 2021, the Company did not experience significant disruptions in its operations from the COVID-19 pandemic. During the nine months ended September 30, 2020, the Company did, however, recognize an impairment charge on an office/retail property due to the continued deterioration of retail demand at the property which was further impacted by the COVID-19 pandemic. Many of the Company’s tenants have experienced disruptions in their business, some more severely than others. In general, the Company’s retail and restaurant tenants, which comprise approximately 4% of its annualized base rent, have been more severely impacted by the COVID-19 pandemic than its office tenants. In addition, since April 2020, the Company granted rent relief to a number of tenants as a result of the pandemic, but as the impact of the pandemic continues to be felt, these tenants or additional tenants may request rent relief in future periods or become unable to pay rent and therefore, the Company is unable to predict the ultimate impact the pandemic will have on its financial condition, results of operations and cash flows due to numerous uncertainties. The Company is evaluating each tenant rent relief request on an individual basis, considering a number of factors. Not all tenant requests will ultimately result in modified agreements, nor is the Company forgoing its contractual rights under its lease agreements. Further, significant reductions in rental revenue in the future related to the impact of the COVID-19 pandemic may limit the Company’s ability to draw on its revolving credit facilities or exercise extension options due to covenants described in the Company’s loan agreements.
The extent to which the COVID-19 pandemic impacts the Company’s operations and those of its tenants and the Company’s investment in the SREIT depends on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 2016, except for the addition of an accounting policy with respect to investments in unconsolidated joint ventures under the equity method.2020. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 20162020 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”).

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2017
(unaudited)

Principles of Consolidation and Basis of Presentation
The accompanying unaudited consolidated financial statements and condensed notes thereto have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods. Operating results for the three and nine and months ended September 30, 20172021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.2021.
The consolidated financial statements include the accounts of the Company, REIT Holdings III, the Operating Partnership, their direct and indirect wholly owned subsidiaries, and through May 7, 2020, a joint venture in which the Company hasheld a controlling interest. All significant intercompany balances and transactions are eliminated in consolidation.
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates
The preparation of the consolidated financial statements and condensed notes thereto in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and condensed notes. Actual results could materially differ from those estimates.
Investments in Unconsolidated Joint VenturesDividend Reinvestment Plan
The Company accountshas adopted a dividend reinvestment plan pursuant to which common stockholders may elect to have all or a portion of their dividends and other distributions, exclusive of dividends and other distributions that the Company’s board of directors designates as ineligible for investmentsreinvestment through the dividend reinvestment plan, reinvested in unconsolidated joint ventures over whichadditional shares of the Company’s common stock in lieu of receiving cash distributions. Participants in the dividend reinvestment plan acquire shares of the Company’s common stock at a price equal to 95% of the estimated value per share of the Company’s common stock, as determined by the Advisor or another firm chosen by the Company’s board of directors for that purpose.
On December 4, 2019, the Company’s board of directors approved an estimated value per share of the Company’s common stock of $11.65 (unaudited) based on the estimated value of the Company’s assets less the estimated value of the Company’s liabilities, or net asset value, divided by the number of shares outstanding, all as of September 30, 2019, with the exception of adjustments to the Company’s net asset value to give effect to (i) the October 23, 2019 authorization of a special dividend of $0.80 per share on the outstanding shares of common stock of the Company to the stockholders of record as of the close of business on November 4, 2019 and (ii) the change in the estimated value of the Company’s investment in units of the SREIT (SGX-ST Ticker: “OXMU”) as of December 3, 2019. The change in the dividend reinvestment plan purchase price was effective for the January 2, 2020 dividend reinvestment plan purchase date and was effective until the estimated value per share was updated. Commencing with the January 2, 2020 purchase date and until the estimated value per share was updated, the purchase price per share under the dividend reinvestment plan was $11.07.
On December 7, 2020, the Company’s board of directors approved an estimated value per share of the Company’s common stock of $10.74 (unaudited) based on the estimated value of the Company’s assets less the estimated value of the Company’s liabilities, or net asset value, divided by the number of shares outstanding, all as of September 30, 2020, with the exception of adjustments to the Company’s net asset value to give effect to the change in the estimated value of the Company’s investment in units of the SREIT (SGX-ST Ticker: “OXMU”) as of December 1, 2020. The change in the dividend reinvestment plan purchase price was effective for the January 4, 2021 dividend reinvestment plan purchase date and was effective until the estimated value per share was updated. Commencing with the January 4, 2021 purchase date and until the estimated value per share was updated, the purchase price per share under the dividend reinvestment plan was $10.21.
On May 13, 2021, the Company’s board of directors approved an estimated value per share of the Company’s common stock of $10.77 (unaudited) based on the estimated value of the Company’s assets less the estimated value of the Company’s liabilities, or net asset value, divided by the number of shares outstanding, all as of March 31, 2021, with the exception of adjustments to the Company’s net asset value to give effect to the change in the estimated value of the Company’s investment in units of the SREIT (SGX-ST Ticker: OXMU) as of April 29, 2021. The change in the dividend reinvestment plan purchase price was effective for the June 1, 2021 dividend reinvestment plan purchase date and was effective until the estimated value per share was updated. Commencing with the June 1, 2021 purchase date and until the estimated value per share was updated, the purchase price per share under the dividend reinvestment plan was $10.23.
On November 1, 2021, the Company’s board of directors approved an estimated value per share of the Company’s common stock of $10.78 (unaudited). See Note 12, “Subsequent Events - Updated Estimated Value Per Share .”
No selling commissions or dealer manager fees will be paid on shares sold under the dividend reinvestment plan. The board of directors of the Company may exercise significant influence, but does not control, usingamend or terminate the equity methoddividend reinvestment plan for any reason upon ten days’ notice to participants.
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Table of accounting. UnderContents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Redeemable Common Stock
The Company’s board of directors has adopted a share redemption program that may enable stockholders to sell their shares to the equity method,Company in limited circumstances. The restrictions of the investmentCompany’s share redemption program will limit its stockholders’ ability to sell their shares should they require liquidity and will limit the stockholders’ ability to recover an amount equal to the Company’s estimated value per share. The following is initially recorded at cost and subsequently adjusted to reflect additional contributions or distributionsa description of the Company’s share redemption program from January 1, 2020 through June 30, 2021 and the amendments to the program made by the amended and restated share redemption program (the “Amended Share Redemption Program”), which became effective as of the July 30, 2021 redemption date.
In December 2019, the Company’s proportionateboard of directors determined to temporarily suspend Ordinary Redemptions under the share redemption program, and Ordinary Redemptions remained suspended through June 30, 2021. Ordinary Redemptions are all redemptions other than those that qualify for the special provisions for redemptions sought in connection with a stockholder’s death, “Qualifying Disability” or “Determination of equityIncompetence” (each as defined in the joint venture’s income (loss)share redemption program and, together, “Special Redemptions”). Upon suspension, all Ordinary Redemption requests that had been received were cancelled and no Ordinary Redemption requests were accepted or collected during the suspension of the share redemption program. Further, on June 3, 2021, the Company announced that, in connection with the approval of the Self-Tender (defined below), the Company’s board of directors approved a temporary suspension of all redemptions under the share redemption program, including Special Redemptions. Upon suspension, all outstanding redemption requests under the share redemption program were cancelled, and no requests were accepted or collected under the share redemption program. As such, Special Redemptions under the share redemption program were suspended for the June 30, 2021 redemption date, meaning no Special Redemptions were made under the share redemption program in June 2021. Ordinary Redemptions and Special Redemptions resumed effective for the July 30, 2021 redemption date under the Amended Share Redemption Program.
In order to provide stockholders with additional liquidity that is in excess of that permitted under the Company’s share redemption program, on June 4, 2021, the Company commenced a self-tender offer (the “Self-Tender”) for up to 33,849,130 shares of common stock at a price of $10.34 per share, or approximately $350.0 million of shares. On July 12, 2021, the Company accepted for purchase 26,377,990 shares properly tendered and not properly withdrawn at a purchase price of $10.34 per share, or approximately $272.7 million of shares, excluding fees and expenses relating to the tender offer.
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
There are several limitations on the Company’s ability to redeem shares under the share redemption program:
•Unless the shares are being redeemed in connection with a Special Redemption, the Company may not redeem shares unless the stockholder has held the shares for one year.
•Except as provided otherwise in the Amended Share Redemption Program with respect to calendar year 2021 only, during any calendar year, the share redemption program limits the number of shares the Company may redeem to those that the Company could purchase with the amount of net proceeds from the sale of shares under the dividend reinvestment plan during the prior calendar year, provided that once the Company has received requests for redemptions, whether in connection with Special Redemptions or otherwise, that if honored, and when combined with all prior redemptions made during the calendar year, would result in the amount of remaining funds available for the redemption of additional shares in such calendar year being $10.0 million or less, the last $10.0 million of available funds shall be reserved exclusively for Special Redemptions. Notwithstanding anything contained in the share redemption program to the contrary, the Company may increase or decrease the funding available for the redemption of shares pursuant to the program upon ten business days’ notice to its stockholders.
•Pursuant to the Amended Share Redemption Program, for calendar year 2021 only, the Company may redeem up to 5% of the weighted-average number of shares outstanding during the 2020 calendar year, provided that once the Company has received requests for redemptions, whether in connection with Special Redemptions or otherwise, that if honored, and when combined with all prior redemptions made during the 2021 calendar year, would result in the number of remaining shares available for redemption in the 2021 calendar year being 500,000 or less, the last 500,000 shares available for redemption shall be reserved exclusively for Special Redemptions.
•During any calendar year, the Company may redeem no more than 5% of the weighted-average number of shares outstanding during the prior calendar year.
•The Company recognizes its proportionatehas no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland General Corporation Law, as amended from time to time, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency.
Pursuant to the share redemption program, redemptions made in connection with Special Redemptions are made at a price per share equal to the most recent estimated value per share of the ongoing income or lossCompany’s common stock as of the unconsolidated joint ventureapplicable redemption date.
Through June 30, 2021, Ordinary Redemptions were made at a price per share equal to 95% of the Company’s most recent estimated value per share as equity in income (loss) of unconsolidated joint venturethe applicable redemption date. Under the Amended Share Redemption Program, commencing with the July 30, 2021 redemption date, Ordinary Redemptions are made at a price per share equal to 96% of the Company’s most recent estimated value per share as of the applicable redemption date.
On December 4, 2019, the Company’s board of directors approved an estimated value per share of its common stock of $11.65 (unaudited) as described above under “— Dividend Reinvestment Plan.” This estimated value per share became effective for the December 2019 redemption date, which was December 31, 2019.
On December 7, 2020, the Company’s board of directors approved an estimated value per share of its common stock of $10.74 (unaudited) as described above under “— Dividend Reinvestment Plan.” This estimated value per share became effective for the December 2020 redemption date, which was December 31, 2020.
On May 13, 2021, the Company’s board of directors approved an estimated value per share of its common stock of $10.77 (unaudited) as described above under “— Dividend Reinvestment Plan.” This estimated value per share became effective for the May 2021 redemption date, which was May 28, 2021.
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
On November 1, 2021, the Company’s board of directors approved an estimated value per share of its common stock of $10.78 (unaudited). See Note 12, “Subsequent Events - Updated Estimated Value Per Share.” Effective November 1, 2021 and until the estimated value per share is updated, the redemption price for all shares eligible for redemption will be calculated based on the consolidated statementsNovember 1, 2021 estimated value per share.
For purposes of operations. Ondetermining the time period a quarterly basis,redeeming stockholder has held each share, the time period begins as of the date the stockholder acquired the share; provided, that shares purchased by the redeeming stockholder pursuant to the Company’s dividend reinvestment plan or received as a stock dividend will be deemed to have been acquired on the same date as the initial share to which the dividend reinvestment plan shares or stock dividend shares relate. The date of the share’s original issuance by the Company evaluatesis not determinative.
The Company will classify as liabilities financial instruments that represent a mandatory obligation of the Company to redeem shares. The Company’s redeemable common shares are contingently redeemable at the option of the holder. When the Company determines it has a mandatory obligation to repurchase shares under the share redemption program, it will reclassify such obligations from temporary equity to a liability based upon their respective settlement values.
The Company may (a) amend, suspend or terminate the share redemption program for any reason, or (b) consistent with SEC guidance and interpretations, increase or decrease the funding available for the redemption of shares pursuant to the share redemption program, each upon ten business days’ notice to the Company’s stockholders. The Company may provide notice by including such information in a (i) Current Report on Form 8-K or in its investment in an unconsolidated joint venture for other-than-temporary impairments. annual or quarterly reports, all publicly filed with the SEC or (ii) separate mailing to the stockholders.
As of September 30, 2017,2021, the Company did not identify any indicatorsrecorded $87.4 million of impairment related to its unconsolidated real estate joint venture accountedredeemable common stock consisting of $54.6 million available for underall redemptions for the equity method.remainder of 2021 based on the share redemption program limitations as of September 30, 2021, including Special Redemptions, and $32.8 million available for all redemptions in 2022 based on the share redemption program limitations as of September 30, 2021, including Special Redemptions.
Per Share Data
Basic net income (loss) per share of common stock is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock issued and outstanding during such period. Diluted net income (loss) per share of common stock equals basic net income (loss) per share of common stock as there were no potentially dilutive securities outstanding during the three and nine months ended September 30, 20172021 and 2016,2020, respectively.
Distributions declared per common share were $0.164$0.150 and $0.486$0.448 in the aggregate for the three and nine months ended September 30, 2017,2020, respectively. Distributions declared per common share were $0.164$0.150 and $0.486$0.448 in the aggregate for the three and nine months ended September 30, 2016,2021, respectively. Distributions declared per common share assumes each share was issued and outstanding each day during the three and nine months ended September 30, 2017 and 2016, respectively. For each day that was a record date for distributions and were based on a monthly record date for each month during the threeperiods commencing January 2020 through September 2020 and nine months ended January 2021 through September 2021. For each monthly record date for distributions during the period from January 1, 2020 through September 30, 20172020 and 2016,January 1, 2021 through September 30, 2021, distributions were calculated at a rate of $0.00178082$0.04983333 per share per day. Each day duringshare.
Segments
The Company has invested in core real estate properties and real estate-related investments with the periods from Januarygoal of acquiring a portfolio of income-producing investments. The Company’s real estate properties exhibit similar long-term financial performance and have similar economic characteristics to each other. Accordingly, the Company aggregated its investments in real estate properties into 1 2016 through February 28, 2016, March 1, 2016 through September 30, 2016 and January 1, 2017 through September 30, 2017 was a record date for distributions.

reportable business segment.
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20172021
(unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Square Footage, Occupancy and Other Measures
Segments
The Company has invested in core real estate propertiesSquare footage, occupancy, number of tenants and real estate-related investments with the goal of acquiring a portfolio of income-producing investments.  The Company’sother measures, including annualized base rent and annualized base rent per square foot, used to describe real estate investments exhibit similar long-termincluded in these condensed notes to the consolidated financial performancestatements are unaudited and have similar economic characteristics to each other.  Asoutside the scope of September 30, 2017, the Company’s independent registered public accounting firm’s review of the Company’s financial statements in accordance with the standards of the United States Public Company aggregated its investments in real estate into one reportable business segment. Accounting Oversight Board.
Recently Issued Accounting Standards Update
In May 2014,March 2020, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers2020-04, Reference Rate Reform (Topic 606)848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU No. 2014-09”2020-04”) to provide temporary optional expedients and exceptions to the guidance in GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (SOFR). ASU No. 2014-09 requiresModified contracts that meet the following criteria are eligible for relief from the modification accounting requirements under GAAP: (1) the contract references LIBOR or another rate that is expected to be discontinued due to reference rate reform, (2) the modified terms directly replace or have the potential to replace the reference rate that is expected to be discontinued due to reference rate reform, and (3) any contemporaneous changes to other terms (i.e., those that do not directly replace or have the potential to replace the reference rate) that change or have the potential to change the amount and timing of contractual cash flows must be related to the replacement of the reference rate. For a contract that meets the criteria, the guidance generally allows an entity to recognizeaccount for and present modifications as an event that does not require contract remeasurement at the revenuemodification date or reassessment of a previous accounting determination. That is, the modified contract is accounted for as a continuation of the existing contract. In addition, ASU No. 2020-04 provides various optional expedients for hedging relationships affected by reference rate reform, if certain criteria are met. The amendments in ASU No. 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. An entity may elect to depictapply the transferamendments for contract modifications by Topic or Industry Subtopic as of promised goodsany date from the beginning of an interim period that includes or servicesis subsequent to customers inMarch 12, 2020, or prospectively from a date within an amountinterim period that reflectsincludes or is subsequent to March 12, 2020, up to the consideration to whichdate that the entity expectsfinancial statements are available to be entitledissued. Once elected for a Topic or an Industry Subtopic, the amendments in exchangethis update must be applied prospectively for those goods and services.all eligible contract modifications for that Topic or Industry Subtopic. An entity may elect to apply the amendments in ASU No. 2014-09 supersedes the revenue requirements in Revenue Recognition (Topic 605) and most industry-specific guidance throughout the Industry Topics2020-04 to eligible hedging relationships existing as of the Codification.beginning of the interim period that includes March 12, 2020 and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020.
For the period from January 1, 2020 (the earliest date the Company may elect to apply ASU No. 2014-09 does not apply to lease contracts within the scope of Leases (Topic 840). ASU No. 2014-09 was to be effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and is to be applied retrospectively, with early application not permitted. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU No. 2015-14”), which defers the effective date of ASU No. 2014-09 by one year. Early adoption is permitted but not before the original effective date. The primary source of revenue for2020-04) through September 30, 2021, the Company is generated through leasing arrangements, which are excludeddid not have any contract modifications that meet the criteria described above, specifically contract modifications that have been modified from this standard.LIBOR to an alternative reference rate. The Company’s revenues that may be impacted by this standard primarily include other operating income, sales of real estateloan agreements, derivative instruments, and other ancillary income earned at its properties. In 2016, other operating income and other ancillary income were approximately 7% of consolidated revenue. The Company is in process of evaluating how this standard will impact sales of real estate. The Company continues to evaluatecertain lease agreements use LIBOR as the impact thatcurrent reference rate. For eligible contract modifications, the standard will have on its consolidated financial statements. The Company expects to adopt the standard using the modified retrospective approach, which requires a cumulative effect adjustment as of the date of the adoption.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU No. 2016-01”).  The amendmentstemporary optional expedients described in ASU No. 2016-01 address certain aspects of recognition, measurement, presentation and disclosure of financial instruments.  ASU No. 2016-01 primarily affects accounting2020-04. The optional expedients for equity investments and financial liabilities where the fair value option has been elected.  ASU No. 2016-01 also requires entities to present financial assets and financial liabilities separately, grouped by measurement category and form of financial asset in the balance sheet or in the accompanying notes to the financial statements.  ASU No. 2016-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years.  Early application of certain provisions of the standard is permitted for financial statements that have not been previously issued.  The Company does not expect the adoption of ASU No. 2016-01 to have a significant impact on its financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU No. 2016-02”). The amendmentshedging relationships described in ASU No. 2016-02 change2020-04 are not expected to have an impact to the existing accounting standards for lease accounting, including requiring lesseesCompany as the Company has elected to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU No. 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of ASU No. 2016-02not designate its derivative instruments as of its issuance is permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact of adopting the new leases standard on its consolidated financial statements.

hedge.
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20172021
(unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In June 2016,April 2020, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurementa FASB Staff Q&A related to Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of Credit Lossesthe COVID-19 Pandemic (the “Topic 842 Q&A”). The Company adopted the lease accounting standards of Financial Instruments (“ASU No. 2016-13”).  ASU No. 2016-13 affects entities holding financial assetsTopic 842 beginning January 1, 2019. Under Topic 842, subsequent changes to lease payments that are not stipulated in the original lease contract are generally accounted for as lease modifications. Some contracts may contain explicit or implicit enforceable rights and net investmentsobligations that require lease concessions if certain circumstances arise that are beyond the control of the parties to the contract. If a lease contract provides enforceable rights and obligations for concessions in leasesthe contract and no changes are made to that contract, the concessions are not accounted for at fair value through net income.  The amendmentsunder the lease modification guidance in ASU No. 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented atTopic 842. If concessions granted by lessors are beyond the net amount expected to be collected.  The allowanceenforceable rights and obligations in the contract, entities would generally account for credit losses is a valuation account that is deducted fromthose concessions in accordance with the amortized cost basislease modification guidance in Topic 842. Because of the financial asset(s)unprecedented and global nature of the COVID-19 pandemic, the FASB staff is aware that it may be exceedingly challenging for entities to presentdetermine whether existing contracts provide enforceable rights and obligations for lease concessions and whether those concessions are consistent with the net carrying value atterms of the amount expected to be collected on the financial asset.  ASU No. 2016-13 also amends the impairment model for available-for-sale securities.  An entity will recognize an allowance for credit losses on available-for-sale debt securities as a contra-accountcontract or are modifications to the amortized cost basis rather than as a direct reductioncontract. As such, the FASB staff believes that it would be acceptable for entities to make an election to account for lease concessions related to the effects of the amortized cost basisCOVID-19 pandemic consistent with how those concessions would be accounted for under Topic 842 as though enforceable rights and obligations for those concessions existed (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the contract). Consequently, for concessions related to the effects of the investment, as is currently required.   ASU No. 2016-13 also requires new disclosures.  For financial assets measured at amortized cost,COVID-19 pandemic, an entity will be requirednot have to disclose information about how it developed its allowanceanalyze each contract to determine whether enforceable rights and obligations for credit losses, including changesconcessions exist in the factorscontract and can elect to apply or not apply the lease modification guidance in Topic 842 to those contracts. This election is available for concessions related to the effects of the COVID-19 pandemic that influenced management’s estimatedo not result in a substantial increase in the rights of expected credit losses and the reasonslessor or the obligations of the lessee. For example, this election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract. The FASB staff expects that reasonable judgment will be exercised in making those determinations. Some concessions will provide a deferral of payments with no substantive changes to the consideration in the original contract. A deferral affects the timing, but the amount of the consideration is substantially the same as that required by the original contract. The staff expects that there will be multiple ways to account for those changes.  For financing receivablesdeferrals, none of which the staff believes are more preferable than the others. Two of those methods are: (1) Account for the concessions as if no changes to the lease contract were made. Under that accounting, a lessor would increase its lease receivable, and net investments in leases measured at amortized cost, an entity will be requireda lessee would increase its accounts payable as receivables/payments accrue. In its income statement, a lessor would continue to further disaggregaterecognize income, and a lessee would continue to recognize expense during the information it currently discloses aboutdeferral period and (2) Account for the credit quality of these assets by yeardeferred payments as variable lease payments.
In accordance with the Topic 842 Q&A, the Company made the election to account for lease concessions related to the effects of the asset’s origination for as many as five annual periods. For available for sale securities, an entity will be required to provideCOVID-19 pandemic that do not result in a roll-forwardsubstantial increase in the rights of the allowanceCompany as lessor consistent with how those concessions would be accounted for credit lossesunder Topic 842 as though enforceable rights and an aging analysisobligations for securities that are past due.  ASU No. 2016-13those concessions existed. Accordingly, the Company does not analyze each contract to determine whether enforceable rights and obligations for concessions exist in the contract and elected not to apply the lease modification guidance in Topic 842. For deferrals, the Company accounts for the concessions as if no changes to the lease contract were made and continues to recognize rental income during the deferral period. The amount of deferred rent is effectiveassessed for annual periods beginning after December 15, 2019, including interim periods within those fiscal years.  Early adoption is permittedcollectability at the end of each reporting period. For rental abatements, the Company recognizes negative variable lease income for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  the forgiven rent, thereby reversing the rental income and rent receivable for the abated period.
The Company is still evaluatinghas granted a number of lease concessions related to the impacteffects of adopting ASU No. 2016-13 on its financial statements,the COVID-19 pandemic but doesthese lease concessions did not expect the adoption of ASU No. 2016-13 to have a material impact on its financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU No. 2016-15”).  ASU No. 2016-15 is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows.  The amendments in ASU No. 2016-15 provide guidance on eight specific cash flow issues, including the following that are or may be relevant to the Company: (a) Cash paymentsCompany’s consolidated balance sheet as of September 30, 2021 or consolidated statements of operations for debt prepayment or debt extinguishment costs should be classified as cash outflows for financing activities; (b) Cash payments relating to contingent consideration made soon after an acquisition’s consummation date (i.e., approximatelythe three and nine months or less) should be classified as cash outflows for investing activities. Payments made thereafter should be classified as cash outflows for financing activities upended September 30, 2021. As of September 30, 2021, the Company had entered into lease amendments related to the amounteffects of the original contingent consideration liability. Payments madeCOVID-19 pandemic, granting $4.1 million of rent deferrals for the period from March 2020 through August 2021 and granting $2.4 million in excess of the amount of the original contingent consideration liability should be classified as cash outflows for operating activities; (c) Cash payments received from the settlement of insurance claims should be classified on the basis of the nature of the loss (or each component loss, if an entity receives a lump-sum settlement); (d) Relating to distributions received from equity method investments, ASU No. 2016-15 provides an accounting policy election for classifying distributions received from equity method investments. Such amounts can be classified using a (1) cumulative earnings approach, or (2) nature of distribution approach. Under the cumulative earnings approach, an investor would compare the distributions received to its cumulative equity method earnings since inception.  Any distributions received up to the amount of cumulative equity earnings would be considered a return on investment and classified in operating activities. Any excess distributions would be considered a return of investment and classified in investing activities. Alternatively, an investor can choose to classify the distributions based on the nature of activities of the investee that generated the distribution. If the necessary information is subsequently not available for an investee to determine the nature of the activities, the entity should use the cumulative earnings approach for that investee and report a change in accounting principle on a retrospective basis; and (e) In the absence of specific guidance, an entity should classify each separately identifiable cash source and use on the basis of the nature of the underlying cash flows. For cash flows with aspects of more than one class that cannot be separated, the classification should be based on the activity that is likely to be the predominant source or use of cash flow.  ASU No. 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.  Early adoption is permitted, including adoption in an interim period.  The Company is still evaluating the impact of adopting ASU No. 2016-15 on its financial statements, but does not expect the adoption of ASU No. 2016-15 to have a material impact on its financial statements.

rental abatements.
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20172021
(unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In November 2016,As of September 30, 2021, the FASB issued ASU No. 2016-18, StatementCompany had $1.9 million of Cash Flows (Topic 230): Restricted Cash (“ASU No. 2016-18”). ASU No. 2016-18 requiresreceivables for lease payments that a statementhad been deferred as lease concessions related to the effects of cash flows explain the change during the periodCOVID-19 pandemic, of which $1.5 million was reserved for payments not probable of collection, which were included in the total of cash, cash equivalents, restricted cashrent and restricted cash equivalents. Therefore, amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shownother receivables, net on the statementaccompanying consolidated balance sheet. For the three and nine months ended September 30, 2021, the Company recorded $0.1 million and $0.7 million, respectively, of cash flows. ASU No. 2016-18 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. The Company electedrental abatements granted to early adopt ASU No. 2016-18 for the reporting period ended December 31, 2016 and applied it retrospectively. Astenants as a result of the adoption of ASU No. 2016-18,COVID-19 pandemic. For the three and nine months ended September 30, 2020, the Company no longer presents the changes within restricted cash in the consolidated statementsrecorded $0.3 million and $0.9 million, respectively, of cash flows.
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU No. 2017-01”)rental abatements granted to add guidance to assist entities with evaluating whether transactions should be accounted fortenants as acquisitions (or disposals) of assets or businesses. ASU No. 2017-01 provides a screen to determine when an integrated set of assets and activities (collectively referred to as a “set”) is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. If the screen is not met, ASU No. 2017-01 (1) requires that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) removes the evaluation of whether a market participant could replace missing elements. ASU No. 2017-01 provides a framework to assist entities in evaluating whether both an input and a substantive process are present. The framework includes two sets of criteria to consider that depend on whether a set has outputs. Although outputs are not required for a set to be a business, outputs generally are a key element of a business; therefore, the FASB has developed more stringent criteria for sets without outputs. ASU No. 2017-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The amendments can be applied to transactions occurring before the guidance was issued (January 5, 2017) as long as the applicable financial statements have not been issued. The Company elected to early adopt ASU No. 2017-01 for the reporting period beginning January 1, 2017. As a result of the adoptionCOVID-19 pandemic.
Tenants may request additional lease concessions, in the form of ASU No. 2017-01,rent deferrals or abatements, for future periods, which may have an impact on the Company’s acquisitionsbusiness, financial condition and results of operations, but the ultimate impact will largely depend on future developments with respect to the continued spread and treatment of the virus, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, which the Company cannot accurately predict.

3. REAL ESTATE HELD FOR INVESTMENT
As of September 30, 2021, the Company’s real estate portfolio held for investment was composed of 16 office properties beginning Januaryand 1 2017 could qualifymixed-use office/retail property encompassing in the aggregate approximately 7.3 million rentable square feet. As of September 30, 2021, the Company’s real estate portfolio held for investment was collectively 85% occupied. The following table summarizes the Company’s investments in real estate held for investment as asset acquisitions (as opposed to business combinations). Transaction costs associated with asset acquisitionsof September 30, 2021 (in thousands):
PropertyDate AcquiredCityStateProperty Type
Total Real Estate, at Cost (1)
Accumulated Depreciation and Amortization (1)
Total Real Estate, Net (1)
Town Center03/27/2012PlanoTXOffice$132,992 $(42,243)$90,749 
McEwen Building04/30/2012FranklinTNOffice36,969 (9,075)27,894 
Gateway Tech Center05/09/2012Salt Lake CityUTOffice31,489 (8,289)23,200 
RBC Plaza01/31/2013MinneapolisMNOffice154,899 (56,835)98,064 
Preston Commons06/19/2013DallasTXOffice137,388 (30,838)106,550 
Sterling Plaza06/19/2013DallasTXOffice85,866 (22,960)62,906 
201 Spear Street12/03/2013San FranciscoCAOffice150,807 (29,811)120,996 
Accenture Tower12/16/2013ChicagoILOffice481,906 (115,762)366,144 
Ten Almaden12/05/2014San JoseCAOffice129,961 (30,783)99,178 
Towers at Emeryville12/23/2014EmeryvilleCAOffice211,190 (45,603)165,587 
3003 Washington Boulevard12/30/2014ArlingtonVAOffice151,261 (34,252)117,009 
Park Place Village06/18/2015LeawoodKSOffice/Retail78,721 (5,362)73,359 
201 17th Street06/23/2015AtlantaGAOffice103,788 (27,033)76,755 
515 Congress08/31/2015AustinTXOffice128,272 (23,983)104,289 
The Almaden09/23/2015San JoseCAOffice187,432 (35,285)152,147 
3001 Washington Boulevard11/06/2015ArlingtonVAOffice60,867 (10,385)50,482 
Carillon01/15/2016CharlotteNCOffice164,125 (32,117)132,008 
$2,427,933 $(560,616)$1,867,317 
_____________________
(1) Amounts presented are capitalized, while transaction costs associated with business combinations will continue to be expensed as incurred.


net of impairment charges and write-offs of fully depreciated/amortized assets.
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20172021
(unaudited)

3.REAL ESTATE
As of September 30, 2017, the Company’s real estate portfolio was composed of 28 office properties and one mixed-use office/retail property encompassing in the aggregate approximately 11.1 million rentable square feet. In addition, the Company had entered into a consolidated joint venture to develop and subsequently operate a multifamily apartment project, which is currently under construction. As of September 30, 2017, the Company’s real estate portfolio was collectively 92% occupied. The following table summarizes the Company’s investments in real estate as of September 30, 2017 (in thousands):
Property Date Acquired City State Property Type 
Total Real Estate,
at Cost
 Accumulated Depreciation and Amortization Total Real Estate, Net
Domain Gateway 09/29/2011 Austin TX Office $47,373
 $(12,999) $34,374
Town Center 03/27/2012 Plano TX Office 116,133
 (23,752) 92,381
McEwen Building 04/30/2012 Franklin TN Office 36,873
 (6,868) 30,005
Gateway Tech Center 05/09/2012 Salt Lake City UT Office 24,749
 (5,863) 18,886
Tower on Lake Carolyn 12/21/2012 Irving TX Office 52,625
 (11,679) 40,946
RBC Plaza 01/31/2013 Minneapolis MN Office 151,277
 (29,773) 121,504
One Washingtonian Center 06/19/2013 Gaithersburg MD Office 90,635
 (14,453) 76,182
Preston Commons 06/19/2013 Dallas TX Office 117,959
 (18,774) 99,185
Sterling Plaza 06/19/2013 Dallas TX Office 79,662
 (10,969) 68,693
201 Spear Street 12/03/2013 San Francisco CA Office 140,040
 (11,421) 128,619
500 West Madison 12/16/2013 Chicago IL Office 440,607
 (68,666) 371,941
222 Main 02/27/2014 Salt Lake City UT Office 166,331
 (23,434) 142,897
Anchor Centre 05/22/2014 Phoenix AZ Office 93,901
 (12,582) 81,319
171 17th Street 08/25/2014 Atlanta GA Office 133,176
 (19,638) 113,538
Rocklin Corporate Center 11/06/2014 Rocklin CA Office 33,515
 (5,311) 28,204
Reston Square 12/03/2014 Reston VA Office 46,561
 (6,141) 40,420
Ten Almaden 12/05/2014 San Jose CA Office 120,351
 (12,795) 107,556
Towers at Emeryville 12/23/2014 Emeryville CA Office 262,312
 (26,218) 236,094
101 South Hanley 12/24/2014 St. Louis MO Office 70,692
 (7,859) 62,833
3003 Washington Boulevard 12/30/2014 Arlington VA Office 151,096
 (13,832) 137,264
Village Center Station 05/20/2015 Greenwood Village CO Office 78,259
 (8,630) 69,629
Park Place Village 06/18/2015 Leawood KS Office/Retail 128,857
 (12,607) 116,250
201 17th Street 06/23/2015 Atlanta GA Office 103,379
 (9,587) 93,792
Promenade I & II at Eilan 07/14/2015 San Antonio TX Office 62,643
 (6,076) 56,567
CrossPoint at Valley Forge 08/18/2015 Wayne PA Office 90,252
 (7,469) 82,783
515 Congress 08/31/2015 Austin TX Office 117,420
 (10,444) 106,976
The Almaden 09/23/2015 San Jose CA Office 167,833
 (11,828) 156,005
3001 Washington Boulevard 11/06/2015 Arlington VA Office 56,608
 (2,663) 53,945
Carillon 01/15/2016 Charlotte NC Office 152,354
 (10,991) 141,363
Hardware Village (1)
 08/26/2016 Salt Lake City UT Development/Apartment 56,124
 —
 56,124
          $3,389,597
 $(423,322) $2,966,275
_____________________
(1) On August 26, 2016, the Company, through an indirect wholly-owned subsidiary, entered into a joint venture (the “Hardware Village Joint Venture”) to develop and subsequently operate a multifamily apartment complex located on the developable land at Gateway Tech Center. The Company owns a 99.24% equity interest in the joint venture.


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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE HELD FOR INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2017
(unaudited)

As of September 30, 2017,2021, the following property represented more than 10% of the Company’s total assets:
Property Location Rentable
Square Feet		 Total Real Estate, Net
(in thousands)		 Percentage
of Total Assets		 
Annualized Base Rent
(in thousands) (1)
 Average Annualized Base Rent per sq. ft. Occupancy
500 West Madison Chicago, IL 1,457,724
 $371,941
 11.6% $34,883
 $27.80
 86.1%
_____________________
PropertyLocationRentable Square FeetTotal Real Estate, Net
(in thousands)		Percentage of Total Assets
Annualized Base Rent
(in thousands) (1)
Average Annualized Base Rent per sq. ft.Occupancy
Accenture TowerChicago, IL1,457,724 $366,144 15.6 %$28,204 $26.55 72.9 %
___________________
(1) Annualized base rent represents annualized contractual base rental income as of September 30, 2017,2021, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.
Operating Leases
The Company’s real estateoffice and office/retail properties are leased to tenants under operating leases for which the terms and expirations vary. As of September 30, 2017,2021, the leases, including leases that have been executed but not yet commenced, had remaining terms, excluding options to extend, of up to 14.317.7 years with a weighted-average remaining term of 4.6 years.4.4 years. Some of the leases have provisions to extend the term of the leases, options for early termination for all or a part of the leased premises after paying a specified penalty, rights of first refusal to purchase the property at competitive market rates, and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires a security deposit from the tenant in the form of a cash deposit and/or a letter of credit. The amount required as a security deposit varies depending upon the terms of the respective lease and the creditworthiness of the tenant, but generally is not a significant amount. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in other liabilities in the accompanying consolidated balance sheets and totaled $11.6$8.7 million and $12.7$8.6 million as of September 30, 20172021 and December 31, 2016,2020, respectively.
During the nine months ended September 30, 20172021 and 2016,2020, the Company recognized deferred rent from tenants of $8.5$4.2 million and $13.9$4.0 million,, respectively. As of September 30, 20172021 and December 31, 2016,2020, the cumulative deferred rent balance was $69.8$86.3 million and $58.6$80.7 million,, respectively, and is included in rents and other receivables on the accompanying balance sheets. The cumulative deferred rent balance included $7.6$22.4 million and $5.2$19.1 million of unamortized lease incentives as of September 30, 20172021 and December 31, 2016,2020, respectively.
As of September 30, 2017,2021, the future minimum rental income from the Company’s properties held for investment under its non-cancelable operating leases was as follows (in thousands):
October 1, 2021 through December 31, 2021$54,366 
2022197,746 
2023171,869 
2024158,400 
2025142,000 
Thereafter540,485 
$1,264,866 

16
October 1, 2017 through December 31, 2017$71,113
2018289,600
2019269,676
2020235,674
2021203,589
Thereafter649,360
 $1,719,012


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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20172021
(unaudited)
3. REAL ESTATE HELD FOR INVESTMENT (CONTINUED)

As of September 30, 2017,2021, the Company’s real estateoffice and office/retail properties were leased to approximately 900580 tenants over a diverse range of industries and geographic areas. The Company’s highest tenant industry concentrationconcentrations (greater than 10% of annualized base rent) waswere as follows:
Industry Number of Tenants 
Annualized Base Rent (1)
(in thousands)
 Percentage of Annualized Base Rent
Finance 156 $61,946
 20.5%
_____________________
IndustryNumber of Tenants
Annualized Base Rent (1)
(in thousands)
Percentage of Annualized Base Rent
Finance116$44,382 20.9 %
Real Estate5622,202 10.5 %
$66,584 31.4 %
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of September 30, 2017,2021, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.
As of September 30, 2017,2021, no other tenant industries accounted for more than 10% of annualized base rent and no tenant accounted for more than 10% of annualized base rent. No material tenant credit issues have been identified at this time.
Geographic Concentration Risk
As of September 30, 2017,2021, the Company’s net investments in real estate in California, Illinois and Texas represented 22.9%, 15.6% and Illinois represented 21%, 16% and 12%15.5% of the Company’s total assets, respectively.  As a result, the geographic concentration of the Company’s portfolio makes it particularly susceptible to adverse economic developments in the California, TexasIllinois and IllinoisTexas real estate markets.  Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for office space resulting from the local business climate, could adversely affect the Company’s operating results and its ability to pay distributions to stockholders.

Impairment of Real Estate
The Company did not record any impairment charges on its real estate properties during the nine months ended September 30, 2021. During the nine months ended September 30, 2020, the Company recorded an impairment charge of $19.9 million to write down the carrying value of an office/retail property to its estimated fair value as a result of changes in cash flow estimates, including a change to the anticipated hold period of the property, which triggered the future estimated undiscounted cash flows to be lower than the net carrying value of the property. The decrease in cash flow projections was primarily due to the continued lack of demand for the property’s retail component resulting in longer than estimated lease-up periods and lower projected rental rates, mostly due to the impact of the COVID-19 pandemic. As a result, many retail tenants have requested rent concessions as their businesses have been severely impacted.

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20172021
(unaudited)
4. REAL ESTATE SALES AND REAL ESTATE HELD FOR SALE

4.TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES
As of September 30, 20172021, the Company classified 1 office property as held for sale. During the nine months ended September 30, 2021, the Company sold 1 office property to a purchaser unaffiliated with the Company or the Advisor, for $103.5 million, before third-party closing costs, credits and disposition fees payable to the Advisor. The Company recognized a gain on sale of $20.5 million related to this disposition.
During the year ended December 31, 2020, the Company sold a multifamily apartment complex held through a consolidated joint venture (“Hardware Village”) to a buyer unaffiliated with the joint venture, the Company or the Advisor for a purchase price of $178.0 million, before third-party closing costs, credits and the disposition fee payable to the Advisor. The Company recognized a gain on sale of $49.5 million related to the disposition of Hardware Village.
The following summary presents the components of real estate held for sale, net as of September 30, 2021 and December 31, 2016,2020 (in thousands):
September 30, 2021December 31, 2020
Real estate held for sale, net:
Total real estate, at cost$69,464 $167,407 
Accumulated depreciation and amortization(14,122)(35,264)
Real estate held for sale, net55,342 132,143 
Other assets7,861 13,091 
Total assets related to real estate held for sale$63,203 $145,234 
Liabilities related to real estate held for sale00
Notes payable, net37,695 29,897 
Other liabilities$17,502 $21,001 
Total liabilities related to real estate held for sale$55,197 $50,898 

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
4. REAL ESTATE SALES AND REAL ESTATE HELD FOR SALE (CONTINUED)
The results of operations for the office property classified as held for sale as of September 30, 2021, the office property sold during the nine months ended September 30, 2021 and the multifamily apartment complex held through a consolidated joint venture sold during the year ended December 31, 2020 are included in continuing operations on the Company’s consolidated statements of operations. The following table summarizes certain revenues and expenses related to these properties for the three and nine months ended September 30, 2021 and 2020 (in thousands):
 For the Three Months Ended
September 30,		For the Nine Months Ended
September 30,
2021202020212020
Revenues
Rental income$2,450 $3,179 $7,460 $11,081 
Other operating income— 207 47 942 
Total revenues$2,450 $3,386 $7,507 $12,023 
Expenses
Operating, maintenance, and management$20 $747 $236 $3,323 
Real estate taxes and insurance8 421 130 1,676 
Asset management fees to affiliate113 303 374 1,207 
General and administrative expenses158 14 144 57 
Depreciation and amortization837 1,530 2,429 4,593 
Interest expense248 489 596 2,003 
Total expenses$1,384 $3,504 $3,909 $12,859 

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
5. TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-
MARKET LEASE LIABILITIES
As of September 30, 2021 and December 31, 2020, the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities (excluding fully amortized assets and liabilities and accumulated amortization) were as follows (in thousands):
 Tenant Origination and
Absorption Costs		Above-Market
Lease Assets		Below-Market
Lease Liabilities
 September 30,
2021		December 31, 2020September 30,
2021		December 31, 2020September 30,
2021		December 31, 2020
Cost$72,548 $75,664 $1,112 $1,146 $(20,093)$(20,239)
Accumulated Amortization(51,757)(48,714)(739)(697)15,734 14,123 
Net Amount$20,791 $26,950 $373 $449 $(4,359)$(6,116)
 
Tenant Origination and
Absorption Costs
 
Above-Market
Lease Assets
 
Below-Market
Lease Liabilities
 September 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016
Cost$243,102
 $264,973
 $13,576
 $14,383
 $(49,401) $(55,438)
Accumulated Amortization(110,207) (99,757) (7,159) (6,192) 22,709
 21,783
Net Amount$132,895
 $165,216
 $6,417
 $8,191
 $(26,692) $(33,655)

Increases (decreases) in net income as a result of amortization of the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities for the three and nine months ended September 30, 20172021 and 20162020 were as follows (in thousands):
Tenant Origination and
Absorption Costs		Above-Market
Lease Assets		Below-Market
Lease Liabilities
For the Three Months Ended
September 30,		For the Three Months Ended
September 30,		For the Three Months Ended
September 30,
202120202021202020212020
Amortization$(1,990)$(2,409)$(24)$(26)$582 $726 

Tenant Origination and
Absorption Costs		Above-Market
Lease Assets		Below-Market
Lease Liabilities
For the Nine Months Ended
September 30,		For the Nine Months Ended
September 30,		For the Nine Months Ended
September 30,
202120202021202020212020
Amortization$(6,159)$(7,702)$(76)$(91)$1,773 $2,228 


20

 
Tenant Origination and
Absorption Costs
 
Above-Market
Lease Assets
 
Below-Market
Lease Liabilities
 For the Three Months Ended September 30, For the Three Months Ended September 30, For the Three Months Ended September 30,
 2017 2016 2017 2016 2017 2016
Amortization$(10,202) $(11,208) $(527) $(718) $2,184
 $2,474
 
Tenant Origination and
Absorption Costs
 
Above-Market
Lease Assets
 
Below-Market
Lease Liabilities
 For the Nine Months Ended September 30, For the Nine Months Ended September 30, For the Nine Months Ended September 30,
 2017 2016 2017 2016 2017 2016
Amortization$(32,321) $(35,100) $(1,774) $(2,186) $6,963
 $9,055

15
Table of Contents

PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20172021
(unaudited)
6. INVESTMENT IN AN UNCONSOLIDATED ENTITY

5.INVESTMENT IN UNCONSOLIDATED JOINT VENTURE
Village Center Station II Equity Method Investment in Prime US REIT
On March 3, 2017,In connection with the Company’s sale of 11 properties to the SREIT on July 18, 2019 (the “Singapore Portfolio”), on July 19, 2019, the Company, through an indirect wholly owned subsidiary (“REIT Properties III”), acquired 307,953,999 units in the SREIT at a 75% equityprice of $271.0 million, or $0.88 per unit, representing a 33.3% ownership interest in an existing company and created a joint venture with an unaffiliated developer, Shea Village Center Station II, LLC (the “Developer”the SREIT (such transactions, the “Singapore Transaction”) (the “Village Center Station II Joint Venture”) to develop and subsequently operate a 12-story office building and an adjacent two-story office/retail building. On August 21, 2019, REIT Properties III sold 18,392,100 of its units in the Denver submarket of Greenwood Village, Colorado (together “Village Center Station II”). The total projected costSREIT for $16.2 million pursuant to an over-allotment option granted to the underwriters of the development is approximately $113.1 million andSREIT’s offering, reducing REIT Properties III’s ownership in the Company’s initial capital contributionSREIT to 31.3% of the Village Center Station II Joint Venture was $32.3 million. The Village Center Station II Joint Venture intends to fundoutstanding units of the constructionSREIT as of Village Center Station II with capital contributions from its members and proceeds from a construction loan for borrowings of up to $78.5 million.that date. As of September 30, 2017, $23.1 million has been drawn under the construction loan. The Company has concluded that the Village Center Station II Joint Venture qualifies as a Variable Interest Entity (“VIE”) and determined that it is not the primary beneficiary of this VIE and to account for its investment in the project under the equity method of accounting. Under the agreement, the Company may be required to contribute up to 75% of additional requested contributions to the Village Center Station II Joint Venture. The Developer will fund all cost overruns (excluding certain overruns described in the Charter Communications lease) once the Village Center Station II Joint Venture has used all available funds in the development of Village Center Station II. Upon completion of Village Center Station II, the Company expects to purchase the Developer’s 25% equity interest. The Developer has an option, provided the put conditions have been satisfied, the most significant of which is completion2021, REIT Properties III held 289,561,899 units of the project, to require the Company to purchase its 25% equity interest. If the Developer does not make such request, the Company has the right to purchase the Developer’s 25% equity interest. The expected purchase priceSREIT which represented 24.8% of the Developer’s 25% equity interest is approximately $25.0 million.
outstanding units of the SREIT. As of September 30, 2017,2021, the bookaggregate value of the Company’s investment in the Village Center Station II Joint Ventureunits of the SREIT was $33.6$247.6 million, which includes $1.2 millionwas based on the closing price of acquisition coststhe SREIT units on the SGX-ST of $0.86 per unit as of September 30, 2021.
The Company has concluded that based on its 24.8% ownership interest as of September 30, 2021, it exercises significant influence over the operations, financial policies and capitalizeddecision making with respect to its investment in the SREIT. Accordingly, the Company has accounted for its investment in the SREIT under the equity method of accounting as of September 30, 2021. Income is allocated according to the Company’s ownership interest incurred directly byat each month-end and recorded as equity income (loss) from unconsolidated entity. Any dividends received from the Company. SREIT reduces the carrying amount of the investment.
As of September 30, 2017,2021, the carrying value of the Company’s maximum loss exposureinvestment in the SREIT was $218.7 million. During the three and nine months ended September 30, 2021, the Company recorded equity in income from an unconsolidated entity of $1.6 million and $4.9 million, respectively, related to its investment in the Village Center Station II Joint Venture is equalSREIT. Equity in income from an unconsolidated entity for the three and nine months ended September 30, 2021 included a gain of $1.1 million to reflect the net effect to the Company’s investment as a result of the net proceeds raised by the SREIT in a private offering in July 2021. During the three and nine months ended September 30, 2020, the Company recorded equity in income from an unconsolidated entity of $0.6 million and equity in loss from an unconsolidated entity of $1.4 million, respectively, related to its investment in the SREIT. Equity in loss from an unconsolidated entity for the nine months ended September 30, 2020 included $3.5 million related to the Company’s share of net losses from the SREIT offset by a gain of $2.1 million to reflect the net effect to the Company’s investment as a result of the net proceeds raised by the SREIT in a private offering in February 2020.
During the three and nine months ended September 30, 2021, the Company received $10.0 million and $19.9 million, respectively, of dividends from its investment in the SREIT, which were recorded as a reduction of the Company’s carrying value of the investment. During the three and nine months ended September 30, 2020, the Company received $7.4 million and $19.3 million, respectively, of dividends from its $33.6 millioninvestment in the SREIT, which were recorded as a reduction of the Company’s carrying value of the investment.
Summarized financial The Company has elected to apply the nature of the distribution approach for purposes of presentation of the dividends on the statement of consolidated cash flows and classified the dividends received as operating activities on the statement of consolidated cash flows as of September 30, 2021 and 2020. The nature of the distribution approach requires the Company to classify distributions from equity method investments on the basis of the nature of the activities of the investee that generated the distribution as either a return on investment (classified as a cash inflow of operating activities) or a return of investment (classified as a cash inflow from investing activities) when such information for the Village Center Station II Joint Venture follows (in thousands):is available.
21
   
  September 30, 2017
Assets:  
Construction in progress $73,400
      Cash and cash equivalents 1
      Other assets 2,591
Total assets $75,992
Liabilities and equity:  
Accounts payable $9,615
Notes payable, net 23,004
      Other liabilities 258
      Members’ capital 43,115
Total liabilities and equity $75,992





16
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20172021
(unaudited)
6. INVESTMENT IN AN UNCONSOLIDATED ENTITY (CONTINUED)

6.NOTES PAYABLE
AsThe SREIT reports its financial statements in accordance with the International Financial Reporting Standards and uses the US dollar as its reporting currency, as such, the Company must make certain adjustments to the SREIT’s financial information to reflect U.S. GAAP before applying the equity method of accounting. Summarized financial information for the SREIT in accordance with U.S. GAAP follows (in thousands):
As of
 September 30, 2021December 31, 2020
Real estate, net$1,521,812 $1,318,527 
Total assets1,574,268 1,383,372 
Notes payable, net642,466 480,352 
Total liabilities709,475 546,486 
Total equity864,793 836,886 

For the Three Months Ended
September 30,		For the Nine Months Ended
September 30,
2021202020212020
Total revenues$40,603 $36,623 $114,922 $108,993 
Net income (loss)2,179 2,144 14,446 (12,830)
Company’s share of net income (loss) (1)
$540 $588 $3,890 $(3,504)
_____________________
(1) The Company’s share of net income for the three and nine months ended September 30, 2017 and December 31, 2016,2021 excludes the $1.1 million gain recorded to reflect the net effect to the Company’s notes payable consistedinvestment as a result of the following (dollarsnet proceeds raised by the SREIT in thousands):a private offering in July 2021, which was classified in equity in income from an unconsolidated entity on the consolidated statement of operations. The Company’s share of net loss for the nine months ended September 30, 2020 excludes the $2.1 million gain recorded to reflect the net effect to the Company’s investment as a result of the net proceeds raised by the SREIT in a private offering in February 2020, which was classified in equity in loss from an unconsolidated entity on the consolidated statement of operations.

22

  
Book Value as of
September 30, 2017
 
Book Value as of
December 31, 2016
 
Contractual Interest Rate as of
September 30, 2017 (1)
 
Effective Interest Rate as of
September 30, 2017 (1)
 Payment Type 
Maturity Date (2)
Town Center Mortgage Loan $75,000
 $75,000
 One-month LIBOR + 1.85% 2.87% Interest Only 
03/27/2018 (3)
Portfolio Loan (5)
 163,460
 127,500
 One-month LIBOR + 1.90% 3.14% Interest Only 06/01/2019
RBC Plaza Mortgage Loan 75,434
 75,930
 One-month LIBOR + 1.80% 3.04% Principal & Interest 
02/01/2018 (3)
National Office Portfolio Mortgage Loan (6)
 170,602
 170,602
 One-month LIBOR + 1.50% 2.84% Interest Only 
07/01/2018 (3)
500 West Madison Mortgage Loan (7)
 235,000
 215,000
 One-month LIBOR + 1.65% 3.13% Interest Only 
12/16/2018 (3)
222 Main Mortgage Loan 99,946
 101,343
 3.97% 3.97% Principal & Interest 03/01/2021
Anchor Centre Mortgage Loan 50,000
 50,000
 One-month LIBOR + 1.50% 3.18% Interest Only 06/01/2018
171 17th Street Mortgage Loan 85,479
 83,778
 One-month LIBOR + 1.45% 2.83% 
Interest Only(4)
 09/01/2018
Reston Square Mortgage Loan 29,800
 23,840
 One-month LIBOR + 1.50% 3.63% Interest Only 02/01/2018
Ten Almaden Mortgage Loan 66,555
 65,853
 One-month LIBOR + 1.65% 3.43% Interest Only 
01/01/2018 (3)
Towers at Emeryville Mortgage Loan (8)
 153,524
 145,379
 One-month LIBOR + 1.75% 3.96% Interest Only 
01/15/2018 (3)
101 South Hanley Mortgage Loan 40,557
 37,502
 One-month LIBOR + 1.55% 3.75% 
Interest Only(4)
 01/01/2020
3003 Washington Boulevard Mortgage Loan 90,378
 90,378
 One-month LIBOR + 1.55% 3.54% Interest Only 02/01/2020
Rocklin Corporate Center Mortgage Loan 21,689
 20,868
 One-month LIBOR + 1.50% 2.74% Interest Only 06/05/2018
201 17th Street Mortgage Loan 64,428
 58,063
 One-month LIBOR + 1.40% 3.32% Interest Only 08/01/2018
CrossPoint at Valley Forge Mortgage Loan 51,000
 51,000
 One-month LIBOR + 1.50% 3.33% 
Interest Only(4)
 09/01/2022
The Almaden Mortgage Loan 93,000
 93,000
 4.20% 4.20% Interest Only 01/01/2022
Promenade I & II at Eilan Mortgage Loan 37,300
 37,300
 One-month LIBOR + 1.75% 3.57% Interest Only 10/01/2022
515 Congress Mortgage Loan 68,381
 67,500
 One-month LIBOR + 1.70% 2.94% Interest Only 11/01/2020
201 Spear Street Mortgage Loan 100,000
 100,000
 One-month LIBOR + 1.66% 2.90% Interest Only 01/01/2019
Carillon Mortgage Loan 90,248
 76,440
 One-month LIBOR + 1.65% 3.25% Interest Only 02/01/2020
3001 Washington Boulevard Mortgage Loan 28,404
 27,129
 One-month LIBOR + 1.60% 2.84% Interest Only 02/01/2019
Hardware Village Loan Facility (9)
 8,712
 —
 One-month LIBOR + 3.25% 4.49% Interest Only 02/23/2020
Total notes payable principal outstanding 1,898,897
 1,793,405
        
Deferred financing costs, net (7,455) (9,937)        
Total notes payable, net $1,891,442
 $1,783,468
        

17
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20172021
(unaudited)
7. NOTES PAYABLE

As of September 30, 2021 and December 31, 2020, the Company’s notes payable consisted of the following (dollars in thousands):
 
Book Value as of
September 30, 2021
Book Value as of
December 31, 2020
Contractual Interest Rate as of
September 30, 2021 (1)
Effective Interest Rate as of
September 30, 2021 (1)
Payment Type
Maturity Date (2)
The Almaden Mortgage Loan (3)
$123,000 $123,000 3.65%3.65%Interest Only12/01/2023
201 Spear Street Mortgage Loan125,000 125,000 One-month LIBOR + 1.45%1.53%Interest Only01/05/2024
Carillon Mortgage Loan (4)
105,800 88,800 One-month LIBOR +1.40%1.48%Interest Only04/11/2024
Modified Portfolio Loan Facility (5)
496,950 472,950 One-month LIBOR + 1.80%1.88%Interest Only11/03/2021
Modified Portfolio Revolving Loan Facility (6)
286,840 162,500 One-month LIBOR + 1.50%1.58%Interest Only03/01/2023
3001 & 3003 Washington Mortgage Loan143,245 143,245 One-month LIBOR + 1.45%1.53%
Interest Only (7)
06/01/2024
Accenture Tower Revolving Loan (8)
281,250 281,250 One-month LIBOR + 2.25%2.33%Interest Only11/02/2023
Unsecured Credit Facility (9)
37,500 — One-month LIBOR + 2.10%2.18%Interest only07/30/2023
Total notes payable principal outstanding$1,599,585 $1,396,745 
Deferred financing costs, net(5,763)(8,380)
Total Notes Payable, net$1,593,822 $1,388,365 
_____________________
(1) Contractual interest rate represents the interest rate in effect under the loan as of September 30, 2017.2021. Effective interest rate is calculated as the actual interest rate in effect as of September 30, 2017 (consisting2021, consisting of the contractual interest rate and the effect of interest rate swaps and caps, if applicable), using interest rate indices as of September 30, 2017,2021, where applicable. For further information regarding the Company'sCompany’s derivative instruments, see Note 7,8, “Derivative Instruments.”
(2) Represents the maturity date as of September 30, 2017;2021; subject to certain conditions, the maturity dates of certain loans may be extended beyond the dates shown.
(3)On November 3, 2017, As of September 30, 2021, The Almaden Mortgage Loan has 2 12-month extension options, subject to certain terms, conditions and fees as described in the loan documents. The Almaden Mortgage Loan bears interest at a fixed rate of 3.65% for the initial term of the loan and a floating rate of 350 basis points over one-month LIBOR during the extension options, subject to a minimum interest rate of 3.65%.
(4) As of September 30, 2021, the face amount of the Carillon Mortgage Loan was $111.0 million, of which $88.8 million is term debt and $22.2 million is revolving debt. As of September 30, 2021, the outstanding balance under the loan consisted of $88.8 million of term debt and $17.0 million of revolving debt. As of September 30, 2021, an additional $5.2 million of revolving debt remained available for future disbursements, subject to certain terms and conditions set forth in the loan documents.
(5) As of September 30, 2021, the Modified Portfolio Loan Facility was secured by RBC Plaza, Preston Commons, Sterling Plaza, Towers at Emeryville, Ten Almaden and Town Center. As of September 30, 2021, the face amount of the Modified Portfolio Loan Facility was $630.6 million, of which $472.9 million is term debt and $157.7 million is revolving debt. As of September 30, 2021, the outstanding balance under the loan consisted of $472.9 million of term debt and $24.0 million of revolving debt. As of September 30, 2021, an additional $133.7 million of revolving debt remained available for future disbursements, subject to certain terms and conditions contained in the loan documents. The Modified Portfolio Loan Facility has 1 additional 12-month extension option, subject to certain terms and conditions as described in the loan documents. Subsequent to September 30, 2021, the Company paid offrefinanced the outstanding balances under these loans using proceeds from theModified Portfolio Loan Facility. See Note 11,“Subsequent12, “Subsequent Events - Financing Subsequent toAmended and Restated Portfolio Loan Facility”.
(6) As of September 30, 20172021, the Modified Portfolio Revolving Loan Facility was secured by 515 Congress, Domain Gateway, the McEwen Building, Gateway Tech Center and 201 17th Street. As of September 30, 2021, the face amount of the Modified Portfolio Revolving Loan Facility was $325.0 million, of which $162.5 million is term debt and $162.5 million is revolving debt. As of September 30, 2021, the outstanding balance under the loan consisted of $162.5 million of term debt and $124.3 million of revolving debt. As of September 30, 2021, an additional $38.2 million of revolving debt remained available upon satisfaction of certain loan conditions set forth in the loan documents. The Modified Portfolio Revolving Loan Facility has 2 12-month extension options, subject to certain terms, conditions and fees as described in the loan documents. On November 2, 2021, in connection with the disposition of Domain Gateway, the Company repaid $69.7 million of principal due under this loan and Domain Gateway was released as security from the Modified Portfolio Revolving Loan Facility. See Note 12, “Subsequent Events - Portfolio Loan Facility.”Disposition of Domain Gateway”
(4)(7)Represents the payment type required under the loan as of September 30, 2017.2021. Certain future monthly payments due under these loansthe loan also include amortizing principal payments. For more information on the Company’s contractual obligations under its notes payable, see the five-year maturity table below.
(5)(8) As of September 30, 2017, the Portfolio Loan was secured by Domain Gateway, the McEwen Building, Gateway Tech Center, the Tower on Lake Carolyn, Park Place Village and Village Center Station. The face amount of the Portfolio Loan is $255.0 million, of which $127.5 million is term debt and $127.5 million is revolving debt. As of September 30, 2017,2021, the outstanding balance under the loanAccenture Tower Revolving Loan consisted of $127.5$281.3 million of term debt and $36.0an additional $93.7 million of revolving debt. As of September 30, 2017, an additional $90.5 million of revolving debt remained available for immediate future disbursements, subject to certain conditions set forth in the loan agreement. The remaining $1.0 million of revolving debt is available for future disbursements upon the Company meeting certain financial coverage ratios and subject to certain conditions set forth in the loan agreement. During the remaining term of the Portfolio Loan, the Company has an option, which may be exercised up to two times, to increase the loan amount to a maximum of $350.0 million, of which 50% would be term debt and 50% would be revolving debt, with the addition of one or more properties to secure the Portfolio Loan, subject to certain conditions contained in the loan documents.
(6) The National Office Portfolio Mortgage Loan was secured by One Washingtonian Center, Preston Commons and Sterling Plaza. See footnote 3 above.
(7) As of September 30, 2017, $235.0 million of term debt was outstanding and $20.0 million remained available for future disbursements, subject to certain terms and conditions contained in the loan documents. See footnote 3 above.
(8) As of September 30, 2017, $153.5 million had been disbursed to2021, the Company and $21.5 million remained available for future disbursements,Accenture Tower Revolving Loan has 2 12-month extension options, subject to certain terms and conditions contained in the loan documents.
(9) See footnote 3 above.
(9) As of September 30, 2017, $8.7 million had been disbursed and $65.3 million remained available for future disbursements, subject to certain conditions contained in the loan documents.
As of September 30, 2017, the Company’s deferred financing costs were $7.6 million, net of amortization, of which $7.5 million was included in notes payable, net, and $0.1 million was included in prepaid expenses and other assets on the accompanying consolidated balance sheets. As of December 31, 2016, the Company’s deferred financing costs were $10.0 million, net of amortization, of which $9.9 million was included in notes payable, net, and $0.1 million was included in prepaid expenses and other assets on the accompanying consolidated balance sheets.
During the three and nine months ended September 30, 2017, the Company incurred $15.5 million and $45.3 million of interest expense, respectively. During the three and nine months ended September 30, 2016, the Company incurred $10.0 million and $53.9 million of interest expense, respectively. Included in interest expense was: (i) the amortization of deferred financing costs of $1.3 million and $3.8 million for three and nine months ended September 30, 2017 and $1.3 million and $3.8 million for the three and nine months ended September 30, 2016, respectively, (ii) the capitalization of interest to construction in progress, which decreased interest expense by $0.7 million and $1.5 million for the three and nine months ended September 30, 2017 and $0.1 million and $0.1 million for the three and nine months ended September 30, 2016, respectively, (iii) the interest expense (including gains and losses) incurred as a result of the Company’s derivative instruments, which increased interest expense by $0.4 million and $3.1 million for the three and nine months ended September 30, 2017, respectively, and $20.5 million for the nine months ended September 30, 2016, and decreased interest expense by $1.3 million for the three months ended September 30, 2016. As of September 30, 2017 and December 31, 2016, $5.3 million and $4.3 million of interest expense were payable, respectively.

below, “- Recent Financing Transaction - Unsecured Credit Facility.”
18
23

Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20172021
(unaudited)
7. NOTES PAYABLE (CONTINUED)

During the three and nine months ended September 30, 2021, the Company incurred $9.7 million and $25.4 million of interest expense, respectively. During the three and nine months ended September 30, 2020, the Company incurred $8.9 million and $71.5 million of interest expense, respectively. Included in interest expense was: (i) the amortization of deferred financing costs of $1.0 million and $3.0 million for the three and nine months ended September 30, 2021, respectively, and $1.1 million and $3.2 million for the three and nine months ended September 30, 2020, respectively, and (ii) interest expense (including gains and losses) incurred as a result of the Company’s derivative instruments, which increased interest expense by $0.7 million for the three months ended September 30, 2021 and decreased interest expense by $0.3 million for the nine months ended September 30, 2021, respectively, and increased interest expense by $0.3 million and $38.9 million for the three and nine months ended September 30, 2020, respectively. As of September 30, 2021 and December 31, 2020, $4.1 million and $4.0 million of interest expense were payable, respectively.
The following is a schedule of maturities, including principal amortization payments, for all notes payable outstanding as of September 30, 20172021 (in thousands):
October 1, 2021 through December 31, 2021$496,950 
2022— 
2023728,590 
2024374,045 
2025— 
Thereafter— 
$1,599,585 
October 1, 2017 through December 31, 2017 $874
2018 1,029,540
2019 294,445
2020 299,491
2021 93,957
Thereafter 180,590
  $1,898,897

The Company’s notes payable contain financial debt covenants. As of September 30, 2017,2021, the Company was in compliance with these debt covenants.
Recent Financing Transaction
Unsecured Credit Facility
On July 30, 2021, the Company, through KBS REIT Properties III, an indirect wholly owned subsidiary, entered into a two-year unsecured credit facility with two unaffiliated lenders for a committed amount of up to $75.0 million (the “Unsecured Credit Facility”), of which $37.5 million is term debt and $37.5 million is revolving debt. Subject to certain conditions contained in the loan documents, the Company may on three occasions request an increase of the aggregate committed amount, provided that the aggregate commitment under the Unsecured Credit Facility may not exceed $100.0 million and that the election to fund any such additional amounts shall be in the sole discretion of the lenders. At closing, $37.5 million of term debt was funded. As of September 30, 2021, the outstanding balance under the Unsecured Credit Facility consisted of $37.5 million of term debt and an additional $37.5 million of revolving debt remained available for future disbursements, subject to certain terms and conditions contained in the loan documents.
The Unsecured Credit Facility matures on July 30, 2023, with 1 12-month extension option, subject to certain terms and conditions contained in the loan documents. The Unsecured Credit Facility bears interest at a floating rate of 210 basis points over one-month LIBOR. The Unsecured Credit Facility includes provisions for a “LIBOR Successor Rate” in the event LIBOR is unascertainable or ceases to be available. Monthly payments are interest only with the entire balance and all outstanding interest and fees due at maturity. The Company has the right to prepay the loan, without penalty or premium (other than any break funding or swap breakage fees), in part and in whole subject to certain conditions contained in the loan documents.
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Table of Contents
7.DERIVATIVE INSTRUMENTS
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
7. NOTES PAYABLE (CONTINUED)
In addition, the Unsecured Credit Facility contains customary representations and warranties, financial and other affirmative and negative covenants, events of default and remedies typical for this type of facility, including without limitation: a maximum leverage ratio, a maximum secured recourse indebtedness ratio, a limitation on other unsecured indebtedness, a minimum consolidated net worth requirement, a minimum fixed charge coverage ratio, a minimum liquidity requirement, and a cross default to the borrower’s other material indebtedness and to the borrower’s other agreements with the administrative agent and the lenders (excluding swaps, unless a swap termination fee has not been paid when due). If an event of default exists under the Unsecured Credit Facility, the Company’s ability to pay dividends would be limited to the amount necessary to maintain the Company’s status as a REIT.

8. 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.
TheAs of September 30, 2021, the Company entershas entered into 8 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.

19
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2017
(unaudited)

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 and cap as of September 30, 20172021 and December 31, 2016.2020. 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):
 September 30, 2021December 31, 2020 Weighted-Average Fix Pay RateWeighted-Average Remaining Term in Years
Derivative InstrumentsNumber of InstrumentsNotional AmountNumber of InstrumentsNotional AmountReference Rate as of September 30, 2021
Derivative instruments not designated as hedging instruments
Interest rate swaps8$1,120,690 8$1,121,590 
One-month LIBOR/
Fixed at 0.70% - 2.11%
1.7%1.5
  September 30, 2017 December 31, 2016   
Weighted-Average
 Fix Pay Rate
 
Weighted-Average Remaining
Term in Years
Derivative Instruments Number of Instruments Notional Amount Number of Instruments Notional Amount 
Reference Rate as of
September 30, 2017
  
Derivative instruments designated as hedging instruments        
Interest Rate Swaps 6 $508,400
 7 $625,130
 
One-month LIBOR/
Fixed at 0.86% - 1.68%
 1.42% 0.9
Derivative instruments not designated as hedging instruments        
Interest Rate Swaps (1)
 12 $658,183
 12 $658,183
 One-month LIBOR/
Fixed at 1.39% - 2.37%		 1.99% 2.9
Interest Rate Cap (2)
 — $—
 1 $147,340
 
 (2)
 
 (2)
 
 (2)
_____________________
(1) Included in these amounts are two forward interest rate swaps with an aggregate notional amount of $91.5 million that were not yet in effect as of September 30, 2017. These two interest rate swaps will become effective at various times during the remainder of 2017 through 2018.
(2) The interest rate cap matured on January 1, 2017.
The following table sets forth the fair value of the Company’s derivative instruments as well as their classification on the consolidated balance sheets as of September 30, 20172021 and December 31, 20162020 (dollars in thousands):
September 30, 2021December 31, 2020
Derivative InstrumentsBalance Sheet LocationNumber of InstrumentsFair ValueNumber of InstrumentsFair Value
Derivative instruments not designated as hedging instruments
Interest rate swaps
Other liabilities, at fair value (1)
8$(21,591)8$(35,331)
    September 30, 2017 December 31, 2016
Derivative Instruments Balance Sheet Location 
Number of
Instruments
 Fair Value Number of
Instruments		 Fair Value
Derivative instruments designated as hedging instruments    
Interest Rate Swaps Prepaid expenses and other assets, at fair value 3 $142
 1 $42
Interest Rate Swaps Other liabilities, at fair value 3 $(121) 6 $(2,340)
           
Derivative instruments not designated as hedging instruments    
Interest Rate Swaps Prepaid expenses and other assets, at fair value 4 $1,358
 4 $1,588
Interest Rate Swaps Other liabilities, at fair value 8 $(4,579) 8 $(7,388)
Interest Rate Cap Prepaid expenses and other assets, at fair value — $—
 1 $—
_____________________

(1) As of September 30, 2021 and December 31, 2020, other liabilities included a $4.8 million and $7.8 million liability, respectively, related to the fair value of 2 off-market interest rate swaps determined to be hybrid financial instruments for which the Company elected to apply the fair value option.
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20172021
(unaudited)
8. DERIVATIVE INSTRUMENTS (CONTINUED)

The change in fair value of the effective portion of a derivative instrument that is designated as a cash flow hedge is recorded as other comprehensive income (loss) on the accompanying consolidated statements of comprehensive income (loss) and as other comprehensive income on the accompanying consolidated statements of equity. Amounts in other comprehensive income (loss) will be reclassified into earnings in the periods in which earnings are affected by the hedged cash flows.  The change in fair value of the ineffective portion is recognized directly in earnings. With respect to swap agreements that are terminated for which it remains probable that the original hedged forecasted transactions (i.e., LIBOR-based debt service payments) will occur, the loss related to the termination of these swap agreements is included in accumulated other comprehensive income (loss) and is reclassified into earnings over the period of the original forecasted hedged transaction. The change in fair value of a derivative instrument that is not designated as a cash flow hedge is recorded as interest expense in the accompanying consolidated statements of operations. The following table summarizes the effects of derivative instruments on the Company’s consolidated statements of operations (in thousands):
 For the Three Months Ended
September 30,		For the Nine Months Ended
September 30,
 2021202020212020
Derivatives not designated as hedging instruments
Realized loss recognized on interest rate swaps$4,571 $4,798 $13,437 $9,427 
Unrealized (gain) loss on interest rate swaps (1)
(3,910)(4,532)(13,740)29,484 
Increase (decrease) in interest expense as a result of derivatives$661 $266 $(303)$38,911 
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2017 2016 2017 2016
Income statement related       
Derivatives designated as hedging instruments       
Amount of expense recognized on interest rate swaps (effective portion)$253
 $1,363
 $1,717
 $4,252
 253
 1,363
 1,717
 4,252
        
Derivatives not designated as hedging instruments       
Realized loss recognized on interest rate swaps1,108
 1,040
 3,966
 1,398
Unrealized (gain) loss on interest rate swaps(1,004) (3,745) (2,579) 14,810
Unrealized loss on interest rate cap—
 —
 —
 3
 104
 (2,705) 1,387
 16,211
Increase (decrease) in interest expense as a result of derivatives$357
 $(1,342) $3,104
 $20,463
        
Other comprehensive income related       
Unrealized income (losses) on derivative instruments$13
 $1,784
 $602
 $(6,695)
_____________________
During(1) For the three and nine months ended September 30, 20172021, unrealized gain on interest rate swaps included a $0.6 million and 2016, there was no ineffective portion$3.0 million unrealized gain, respectively, related to the change in fair value of the derivative2 off-market interest rate swaps determined to be hybrid financial instruments designated as cash flow hedges. During the next 12 months,for which the Company expectselected to recognize additional interest expense related to derivative instruments designated as cash flow hedges. The presentapply the fair value of the additional interest expense expected to be recognized over the next 12 months related to derivative instruments designated as cash flow hedges totaled $0.1 million as of September 30, 2017 and was included in accumulated other comprehensive income (loss).option.


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Table of Contents9. FAIR VALUE DISCLOSURES
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2017
(unaudited)

8.FAIR VALUE DISCLOSURES
Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other non-financial and financial assets at fair value on a non-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:
•Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;
•Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and
•Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.
The fair value for certain financial instruments is derived using a combination of market quotes, pricing models and other valuation techniques that involve significant management judgment. The price transparency of financial instruments is a key determinant of the degree of judgment involved in determining the fair value of the Company’s financial instruments. Financial instruments for which actively quoted prices or pricing parameters are available and for which markets contain orderly transactions will generally have a higher degree of price transparency than financial instruments for which markets are inactive or consist of non-orderly trades. The Company evaluates several factors when determining if a market is inactive or when market transactions are not orderly. The following is a summary of the methods and assumptions used by management in estimating the fair value of each class of assets and liabilities for which it is practicable to estimate the fair value:
Cash and cash equivalents, restricted cash, rent and other receivables, and accounts payable and accrued liabilities: These balances approximate their fair values due to the short maturities of these items.
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
9. FAIR VALUE DISCLOSURES (CONTINUED)
Derivative instruments: The Company’s derivative instruments are presented at fair value on the accompanying consolidated balance sheets. The valuation of these instruments is determined using a proprietary 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. The fair value of interest rate caps (floors) are determined using the market standard methodology of discounting the future expected cash payments (receipts) which would occur if variable interest rates rise above (below) the strike rate of the caps (floors). The variable interest rates used in the calculation of projected payments (receipts) on the cap (floors) are based on an expectation of future interest rates derived from observed market interest rate curves and volatilities.
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.

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2017
(unaudited)

The following were the face values, carrying amounts and fair values of the Company’s notes payable as of September 30, 20172021 and December 31, 2016,2020, which carrying amounts generally do not approximate the fair values (in thousands):
 September 30, 2021December 31, 2020
 Face ValueCarrying AmountFair ValueFace ValueCarrying AmountFair Value
Financial liabilities:
Notes payable$1,599,585 $1,593,822 $1,598,284 $1,396,745 $1,388,365 $1,380,143 
  September 30, 2017 December 31, 2016
  Face Value Carrying Amount Fair Value Face Value Carrying Amount Fair Value
Financial liabilities:            
Notes payable $1,898,897
 $1,891,442
 $1,889,296
 $1,793,405
 $1,783,468
 $1,775,953

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 September 30, 2017,2021, the Company measured the following assets and liabilitiesderivative instruments at fair value (in thousands):
  Fair Value Measurements Using
 TotalQuoted Prices in
Active Markets 
for Identical Assets
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable Inputs
(Level 3)
Recurring Basis:
Liability derivatives - interest rate swaps (1)
$(21,591)$— $(21,591)$— 
_____________________
(1) Includes a $4.8 million liability related to the fair value of 2 off-market interest rate swaps determined to be hybrid financial instruments for which the Company elected to apply the fair value option.

27

��   Fair Value Measurements Using
  Total         Quoted Prices in Active Markets 
for Identical Assets
(Level 1)		 Significant Other Observable Inputs
(Level 2)        		 Significant Unobservable Inputs
(Level 3)         
Recurring Basis:        
Asset derivatives - interest rate swaps $1,500
 $—
 $1,500
 $—
Liability derivatives - interest rate swaps (4,700) —
 (4,700) —
Table of Contents

9.RELATED PARTY TRANSACTIONS
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
10. RELATED PARTY TRANSACTIONS
The Company has entered into the Advisory Agreement with the Advisor and the Dealer Manager Agreement with the Dealer Manager. These agreements entitled the Advisor and/or the Dealer Manager to specified fees upon the provision of certain services with regard to the Offering and reimbursement of organization and offering costs incurred by the Advisor and the Dealer Manager on behalf of the Company and entitle the Advisor to specified fees upon the provision of certain services with regard to the investment of funds in real estate investments, the management of those investments, among other services, and the disposition of investments, as well as entitle the Advisor and/or the Dealer Manager to reimbursement of offering costs related to the dividend reinvestment plan incurred by the Advisor and the Dealer Manager on behalf of the Company and certain costs incurred by the Advisor in providing services to the Company. In addition, the Advisor is entitled to certain other fees, including an incentive fee upon achieving certain performance goals, as detailed in the Advisory Agreement. The Company has also entered into a fee reimbursement agreement with the Dealer Manager pursuant to which the Company agreed to reimburse the Dealer Manager for certain fees and expenses it incurs for administering the Company’s participation in the DTCC Alternative Investment Product Platform with respect to certain accounts of the Company’s investors serviced through the platform. The Advisor and Dealer Manager also serve or served as the advisor and dealer manager, respectively, for KBS Real Estate Investment Trust II, Inc. (“KBS REIT I”II”), KBS Real Estate Investment Trust II, Inc., KBS Strategic Opportunity REIT, Inc., KBS Legacy Partners Apartment REIT, Inc., KBS Strategic Opportunity REIT II, Inc. and KBS Growth & Income REIT, Inc. (“KBS Growth & Income REIT”).

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TableAs of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2017
(unaudited)

On January 6, 2014,1, 2020, the Company, together with KBS REIT I,II, KBS Real Estate Investment Trust II, Inc., KBS Strategic OpportunityGrowth & Income REIT, Inc., KBS Legacy Partners Apartment REIT, Inc., KBS Strategic Opportunity REIT II, Inc., the Dealer Manager, the Advisor and other KBS-affiliated entities, had entered into an errors and omissions and directors and officers liability insurance program where the lower tiers of such insurance coverage arewere shared. The cost of these lower tiers is allocated by the Advisor and its insurance broker among each of the various entities covered by the program, and is billed directly to each entity. The allocation of these shared coverage costs is proportionate to the pricing by the insurance marketplace for the first tiers of directors and officers liability coverage purchased individually by each REIT. The Advisor’s and the Dealer Manager’s portion of the shared lower tiers’ cost is proportionate to the respective entities’ prior cost for the errors and omissions insurance. In June 2015, KBS Growth & Income REIT, Inc. was added to the insurance program at terms similar to those described above. In June 2017,2021, the Company renewed its participation in the program, and theprogram. The program is effective through June 30, 2018. As KBS REIT I is implementing its plan of liquidation, at renewal in June 2017, KBS REIT I elected to cease participation in the program and obtain separate insurance coverage.2022.
During the three and nine months ended September 30, 2017 and 2016, no other business transactions occurred between the Company and KBS Real Estate Investment Trust, Inc., KBS Real Estate Investment Trust II, Inc., KBS Strategic Opportunity REIT, Inc., KBS Legacy Partners Apartment REIT, Inc., KBS Strategic Opportunity REIT II, Inc. and KBS Growth & Income REIT, Inc.
Pursuant to the terms of these agreements, summarized below are the related-party costs incurred by the Company for the three and nine months ended September 30, 20172021 and 2016,2020, respectively, and any related amounts payable as of September 30, 20172021 and December 31, 20162020 (in thousands):
 Incurred Payable as of
 Three Months Ended September 30, Nine Months Ended September 30, September 30, December 31,
 2017 2016 2017 2016 2017 2016
Expensed           
Asset management fees$6,587
 $6,286
 $19,223
 $18,646
 $2,158
 $2,126
Reimbursement of operating expenses (1)
59
 68
 255
 261
 70
 139
Real estate acquisition fees—
 —
 —
 1,473
 —
 —
Capitalized           
Acquisition fee on development project64
 28
 234
 87
 355
 121
Acquisition fee on unconsolidated joint venture120
 —
 497
 —
 173
 —
Asset management fee on development project—
 —
 48
 —
 —
 11
Asset management fee on unconsolidated joint venture—
 —
 14
 —
 —
 —
 $6,830
 $6,382
 $20,271
 $20,467
 $2,756
 $2,397
 IncurredPayable as of
For the Three Months Ended
September 30,		For the Nine Months Ended
September 30,		September 30,December 31,
 202120202021202020212020
Expensed
Asset management fees (1)
$5,019 $5,311 $14,858 $15,704 $8,784 $8,529 
Reimbursement of operating expenses (2)
101 105 432 348 228 97 
Disposition fees (3)
— — 1,005 213 — — 
Capitalized
Acquisition fee on development project— — — 34��— — 
$5,120 $5,416 $16,295 $16,299 $9,012 $8,626 
_____________________
(1) See “Deferral of Asset Management Fees” below.
(2) Reimbursable operating expenses primarily consists of internal audit personnel costs, accounting software costs and cybersecurity related expenses incurred by the Advisor under the Advisory Agreement. The Company has reimbursed the Advisor for the Company’s allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to the Company. These amounts totaled $49,000$100,000 and $169,000$332,000 for the three and nine months ended September 30, 2017,2021, respectively, and $51,000$86,000 and $145,000$271,000 for the three and nine months ended September 30, 2016,2020, respectively, and were the only type of employee costs reimbursed under the Advisory Agreement for the three and nine months ended September 30, 20172021 and 2016,2020, respectively. The Company will not reimburse for employee costs in connection with services for which the Advisor earns acquisition or origination fees or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries or benefits the Advisor or its affiliates may pay to the Company’s executive officers. In addition to the amounts above, the Company reimburses the Advisor for certain of the Company's direct costs incurred from third parties that were initially paid by the Advisor on behalf of the Company.

(3) Disposition fees with respect to real estate sold are included in the gain on sale of real estate, net, in the accompanying consolidated statements of operations.
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20172021
(unaudited)
10. RELATED PARTY TRANSACTIONS (CONTINUED)

In connection with the Offering, the Company’s sponsorsMessrs. Bren, Hall, McMillan and Schreiber agreed to provide additional indemnification to one of the participating broker-dealers.  The Company agreed to add supplemental coverage to its directors’ and officers’ insurance coverage to insure the sponsors’Messrs. Bren, Hall, McMillan and Schreiber’s obligations under this indemnification agreement in exchange for reimbursement by the sponsorsMessrs. Bren, Hall, McMillan and Schreiber to the Company for all costs, expenses and premiums related to this supplemental coverage. During the nine months ended September 30, 2017,2021 and 2020, the Advisor incurred $0.1 million$79,000 and $74,000, respectively, for the costs of the supplemental coverage obtained by the Company. During
Deferral of Asset Management Fees
Pursuant to the nine months endedAdvisory Agreement, with respect to asset management fees accruing from March 1, 2014, the Advisor has agreed to defer, without interest, the Company’s obligation to pay asset management fees for any month in which the Company’s modified funds from operations (“MFFO”) for such month, as such term is defined in the practice guideline issued by the Institute for Portfolio Alternatives (formerly known as the Investment Program Association) in November 2010 and interpreted by the Company, excluding asset management fees, does not exceed the amount of distributions declared by the Company for record dates of that month. The Company remains obligated to pay the Advisor an asset management fee in any month in which the Company’s MFFO, excluding asset management fees, for such month exceeds the amount of distributions declared for the record dates of that month (such excess amount, an “MFFO Surplus”); however, any amount of such asset management fee in excess of the MFFO Surplus will also be deferred under the Advisory Agreement. If the MFFO Surplus for any month exceeds the amount of the asset management fee payable for such month, any remaining MFFO Surplus will be applied to pay any asset management fee amounts previously deferred in accordance with the Advisory Agreement.
However, notwithstanding the foregoing, any and all deferred asset management fees that are unpaid will become immediately due and payable at such time as the Company’s stockholders have received, together as a collective group, aggregate distributions (including distributions that may constitute a return of capital for federal income tax purposes) sufficient to provide (i) an 8.0% per year cumulative, noncompounded return on such net invested capital (the “Stockholders’ 8% Return”) and (ii) a return of their net invested capital, or the amount calculated by multiplying the total number of shares purchased by stockholders by the issue price, reduced by any amounts to repurchase shares pursuant to the Company’s share redemption program. The Stockholders’ 8% Return is not based on the return provided to any individual stockholder. Accordingly, it is not necessary for each of the Company’s stockholders to have received any minimum return in order for the Advisor to receive deferred asset management fees.
As of September 30, 2016,2021 and December 31, 2020, the Advisor incurred $0.1Company had accrued $8.8 million for the costsand $8.5 million of the supplemental coverage obtained by the Company.
During the nine months endedasset management fees, respectively, of which $8.0 million and $7.2 million were deferred as of September 30, 2017,2021 and December 31, 2020, respectively, pursuant to the Advisor paidprovision for deferral of asset management fees under the Company a $0.2 million property insurance rebate. During the nine months ended September 30, 2016, the Advisor paid the Company a $0.2 million property insurance rebate and $0.1 million for legal and professional fees due from the Advisor. Advisory Agreement as described above.
Lease to Affiliate
On May 29, 2015, the indirect wholly owned subsidiary (the “Lessor”) of the Company that owns 3003 Washington Boulevard entered into a lease with an affiliate of the Advisor (the “Lessee”) for 5,046 rentable square feet, or approximately 2.3%2.4% of the total rentable square feet, at 3003 Washington Boulevard. The lease commenced on October 1, 2015 and terminateswas to terminate on August 31, 2019.
On March 14, 2019, the Lessor entered into a First Amendment to Deed of Lease with the Lessee to extend the lease period commencing on September 1, 2019 and terminating on August 31, 2024 (the “Amended Lease”) and set the annual base rent during the extension period. The annualized base rent which represents annualized contractual base rental income as of September 30, 2017, adjusted to straight-line any contractual tenant concessions (including free rent) and rent increases from the lease’s inception through the balancecommencement of the lease term, for this leaseAmended Lease is approximately $0.2$0.3 million, and the average annual rental rate (net of rental abatements) over the lease term of the Amended Lease through its termination is $46.38$62.55 per square foot.
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
10. RELATED PARTY TRANSACTIONS (CONTINUED)
During the three and nine months ended September 30, 2017,2021, the Company recognized $61,000$81,000 and $180,000$245,000 of revenue related to this lease, respectively. During the three and nine months ended September 30, 2016,2020, the Company recognized $59,000$80,000 and $176,000$241,000 of revenue related to this lease, respectively.
Prior to their approval of the lease and the Amended Lease, the Company’s conflicts committee and board of directors determined the lease to be fair and reasonable to the Company.
Portfolio Sale
10.COMMITMENTS AND CONTINGENCIES
On July 18, 2019, the Company sold the Singapore Portfolio to the SREIT, which is affiliated with Charles J. Schreiber, Jr., a director and executive officer of the Company. See Note 6, “Investment in an Unconsolidated Entity” for information related to the Company’s investment in the SREIT. The SREIT is externally managed by an entity (the “Manager”) in which Charles J. Schreiber, Jr. currently holds an indirect ownership interest. Mr. Schreiber is also a director of the Manager. The SREIT pays the Manager an annual base fee of 10% of annual distributable income and an annual performance fee of 25% of the increase in distributions per unit of the SREIT from the preceding year. For acquisitions other than the Singapore Portfolio, the SREIT pays the Manager an acquisition fee of 1% of the acquisition price. The SREIT will also pay the Manager a divestment fee of 0.5% of the sale price of any real estate sold and a development management fee of 3% of the total project costs incurred for development projects. A portion of the fees paid to the Manager are paid to KBS Realty Advisors LLC, an entity controlled by Mr. Schreiber, for sub-advisory services. The Schreiber Trust, a trust whose beneficiaries are Charles J. Schreiber, Jr. and his family members, and the Linda Bren 2017 Trust also acquired units in the SREIT. The Schreiber Trust agreed it will not sell any portion of its units in the SREIT unless it has received the consent of the Company’s conflicts committee. The Linda Bren 2017 Trust has agreed it will not sell $5.0 million of its investment in the SREIT unless it has received the consent of the Company’s conflicts committee.
During the nine months ended September 30, 2021 and 2020, no other business transactions occurred between the Company and KBS REIT II, KBS Growth & Income REIT, the Advisor, the Dealer Manager or other KBS-affiliated entities. See Note 11 “Commitments and Contingencies - Participation Fee Liability”.

11. COMMITMENTS AND CONTINGENCIES
Economic Dependency
The Company is dependent on the Advisor for certain services that are essential to the Company, including the identification, evaluation, negotiation, origination, acquisition and disposition of investments; management of the daily operations of the Company’s investment portfolio; and other general and administrative responsibilities. In the event that the Advisor is unable to provide the respective services, the Company will be required to obtain such services from other sources.
Legal Matters
From time to time, the Company may be party to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on the Company’s results of operations or financial condition, which would require accrual or disclosure of the contingency and possible range of loss. Additionally, the Company has not recorded any loss contingencies related to legal proceedings in which the potential loss is deemed to be remote.
Environmental
As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. Compliance with existing environmental laws is not expected to have a material adverse effect on the Company’s financial condition and results of operations as of September 30, 2017.

2021.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20172021
(unaudited)
11. COMMITMENTS AND CONTINGENCIES (CONTINUED)

Participation Fee Liability
11.SUBSEQUENT EVENTS
In accordance with the Advisory Agreement with the Advisor, the Advisor is entitled to receive a participation fee equal to 15.0% of the Company’s net cash flows, whether from continuing operations, net sale proceeds or otherwise, after the Company’s stockholders have received, together as a collective group, aggregate distributions (including distributions that may constitute a return of capital for federal income tax purposes) sufficient to provide (i) a return of their net invested capital, or the amount calculated by multiplying the total number of shares purchased by stockholders by the issue price, reduced by any amounts to repurchase shares pursuant to the share redemption program, and (ii) an 8.0% per year cumulative, noncompounded return on such net invested capital. Net sales proceeds means the net cash proceeds realized by the Company after deduction of all expenses incurred in connection with a sale, including disposition fees paid to the Advisor. The 8.0% per year cumulative, noncompounded return on net invested capital is calculated on a daily basis. In making this calculation, the net invested capital is reduced to the extent distributions in excess of a cumulative, noncompounded, annual return of 8.0% are paid (from whatever source), except to the extent such distributions would be required to supplement prior distributions paid in order to achieve a cumulative, noncompounded, annual return of 8.0% (invested capital is only reduced as described in this sentence; it is not reduced simply because a distribution constitutes a return of capital for federal income tax purposes). The 8.0% per year cumulative, noncompounded return is not based on the return provided to any individual stockholder. Accordingly, it is not necessary for each of the Company’s stockholders to have received any minimum return in order for the Advisor to participate in the Company’s net cash flows. In fact, if the Advisor is entitled to participate in the Company’s net cash flows, the returns of the Company’s stockholders will differ, and some may be less than an 8.0% per year cumulative, noncompounded return. This fee is payable only if the Company is not listed on an exchange.
On January 9, 2020, the Company filed a definitive proxy statement with the SEC seeking approval from its stockholders of, among other proposals, two proposals related to the Company’s pursuit of conversion to a non-listed, perpetual-life “NAV REIT.” On May 7, 2020 at the Company’s annual meeting of stockholders, the Company’s stockholders approved the proposal to accelerate the payment of incentive compensation to the Advisor, upon the Company’s conversion to an NAV REIT. With respect to the incentive fee structure currently in effect with the Advisor, the triggering events for payment of the incentive fee are generally expected to occur, if ever, upon a listing of the Company’s shares of stock on a national securities exchange or a significant distribution of cash in connection with a sale of all or a substantial amount of the Company’s assets. These triggering events are inconsistent with a perpetual-life NAV REIT that intends to provide liquidity to its stockholders through a share redemption program and/or periodic self-tender offers. If the Company converts to an NAV REIT, in order to properly align the Advisor’s and its affiliates’ incentive fee compensation structure with the Company’s proposed perpetual-life strategy, the Company intends to revise its incentive fee structure. With respect to the historical performance period from inception through conversion to an NAV REIT, the Company sought and obtained stockholder approval to accelerate the payment of the incentive compensation upon conversion to a perpetual-life NAV REIT, subject to certain conditions. If the Company converts to an NAV REIT, such accelerated payment is subject to further approval of the conflicts committee of the Company’s board of directors, after the proposed amount of the accelerated payment of the incentive fee has been determined. In connection with the determination of the November 1, 2021 estimated value per share of the Company’s common stock, the Advisor determined that there would be no liability related to the subordinated participation in net cash flows at that time, based on a hypothetical liquidation of the assets and liabilities at their estimated fair values, after considering the impact of any potential closing costs and fees related to the disposition of real estate properties; however, changes to the fair values of assets and liabilities could have a material impact to the incentive fee calculation.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company’s conflicts committee and board of directors continue to evaluate various alternatives available to the Company, including whether or not to convert to an NAV REIT. Based on their assessment of alternatives available to the Company, market conditions and their further assessment of the Company’s capital raising prospects, the Company’s conflicts committee and board of directors may conclude that it would be in the best interest of the Company’s stockholders to (i) convert to an NAV REIT, (ii) continue to operate as a going concern under the Company’s current business plan, or (iii) adopt a plan of liquidation that would involve the sale of the Company’s remaining assets (in which event such plan would be presented to stockholders for approval). The Company can provide no assurances as to whether or when any alternative being considered by the Company’s board of directors will be consummated.

12. SUBSEQUENT EVENTS
The Company evaluates subsequent events up until the date the consolidated financial statements are issued.
Distributions Paid
On October 2, 2017,1, 2021, the Company paid distributions of $9.7$7.9 million,, which related to distributions declared for daily record dates for each day in the period fromamount of $0.04983333 per share of common stock to stockholders of record as of the close of business on September 1, 2017 through September 30, 2017.20, 2021. On November 1, 2017,2021, the Company paid distributions of $10.0$7.8 million,, which related to distributions declared for daily record dates for each day in the period fromamount of $0.04983333 per share of common stock to stockholders of record as of the close of business on October 1, 2017 through October 31, 2017.20, 2021.
Distributions DeclaredAuthorized
On October 9, 2017,November 1, 2021, the Company’s board of directors authorized distributions baseda November 2021 distribution in the amount of $0.04983333 per share of common stock to stockholders of record as of the close of business on daily record dates for the period from November 1, 2017 through November 30, 2017,19, 2021, which the Company expects to pay in December 2017. On November 14, 2017,2021, and a December 2021 distribution in the Company’s boardamount of directors authorized distributions based$0.04983333 per share of common stock to stockholders of record as of the close of business on daily record dates for the period from December 1, 2017 through December 31, 2017,20, 2021, which the Company expects to pay in January 2018, and distributions based on daily record dates for the period from January 1, 2018 through January 31, 2018, which the Company expects to pay in February 2018. 2022.
Investors may choose to receive cash distributions or purchase additional shares through the Company’s dividend reinvestment plan.
DistributionsUpdated Estimated Value Per Share
On November 1, 2021, the Company’s board of directors approved an estimated value per share of the Company’s common stock of $10.78 based on the estimated value of the Company’s assets less the estimated value of the Company’s liabilities divided by the number of shares outstanding, all as of September 30, 2021, with the exception of adjustments to the Company’s net asset value to give effect to (i) the change in the estimated value of the Company’s investment in units of the SREIT (SGX-ST Ticker: OXMU) as of October 22, 2021 and (ii) the contractual sales price less estimated disposition costs and fees of 1 property that was under contract to sell as of November 1, 2021. For a full description of the limitations, methodologies and assumptions used to value the Company’s assets and liabilities in connection with the calculation of the Company’s estimated value per share, see the Company’s Current Report on Form 8-K, filed with the SEC on November 4, 2021.
Updated Dividend Reinvestment Plan Pricing
Pursuant to the Company’s dividend reinvestment plan, participants in the dividend reinvestment plan will acquire shares of the Company’s common stock under the plan at a price equal to 95% of the estimated value per share of the Company’s common stock. As such, commencing on the next dividend reinvestment plan purchase date, which is December 1, 2021, participants will acquire shares of the Company’s common stock under the plan at a price equal to 95% of $10.78, or $10.24 per share.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
12. SUBSEQUENT EVENTS (CONTINUED)
If a participant wishes to terminate participation in the Company’s dividend reinvestment plan effective for these periodsthe December 1, 2021 purchase date, participants must notify the Company in writing of such decision, and the Company must receive the notice by the close of business on November 23, 2021.
Updated Share Redemption Program Pricing
In accordance with the Company’s share redemption program, the redemption price for shares eligible for redemption is calculated based upon the updated estimated value per share. Under the Amended Share Redemption Program, Special Redemptions are made at a price per share equal to the most recent estimated value per share of the Company’s common stock as of the applicable redemption date. Ordinary Redemptions are made at a price per share equal to 96% of the most recent estimated value per share of the Company’s common stock as of the applicable redemption date.
Effective for the November 2021 redemption date, which is November 30, 2021, the redemption price for all stockholders will be calculated based on stockholders of record each day during these periods at a rate of $0.00178082 per share per day and equal a daily amount that, if paid each day for a 365-day period, would equal a 6.11% annualized rate based on the Company's December 9, 2016November 2021 estimated value per shareshare. For a stockholder’s shares to be eligible for redemption in a given month or to withdraw a redemption request, the Company must receive a written notice from the stockholder or from an authorized representative of $10.63.the stockholder in good order and on a form approved by the Company at least five business days before the redemption date.
Financing SubsequentDisposition of Domain Gateway
On September 29, 2011, the Company, through an indirect wholly owned subsidiary, purchased a five-story office building containing 183,911 rentable square feet located on approximately 4.3 acres of land in Austin, Texas (“Domain Gateway”). On November 2, 2021, the Company completed the sale of Domain Gateway to September 30, 2017a purchaser unaffiliated with the Company or the Advisor, for $143.0 million, before third-party closing costs, closing credits and disposition fees payable to the Advisor. The aggregate cost of Domain Gateway, which includes the initial purchase price plus capital expenditures since acquisition and acquisition fees and expenses, but excludes any reductions to the net book value of the property due to historical depreciation and amortization expense, was $69.1 million. In connection with the disposition of Domain Gateway, the Company paid down $69.7 million of principal balance due under the Modified Portfolio Revolving Loan Facility.
Amended and Restated Portfolio Loan Facility
On November 3, 2017,2021, the Company, through indirect wholly owned subsidiaries (each a “Borrower” and together, the “Borrowers”), entered into a three-yeartwo-year loan facilityagreement with Bank of America, N.A., as administrative agent; Merril Lynch Pierce Fenner & Smith Incorporated,BofA Securities, Inc., Wells Fargo Securities, LLC and U.S. Bank, N.A.,Capital One, National Association as joint lead arrangers and joint book runners; Wells Fargo Bank, NA,N.A., as syndication agent, and each of the financial institutions a signatory thereto (the “Lenders”“Amended and Restated Portfolio Loan Facility Lenders”), for an amount of up to $1.01 billion (the “Portfolio Loan Facility”),$613.2 million, of which $757.5$459.9 million is term debt and $252.5$153.3 million is revolving debt. Proceeds from thedebt (the “Amended and Restated Portfolio Loan Facility”). At closing, $459.9 million of term debt and $57.1 million of revolving debt were used to pay off and address the upcoming 2018 loan maturities for the existing Town Center Mortgage Loan, RBC Plaza Mortgage Loan, National Office Portfolio Mortgage Loan, 500 West Madison Mortgage Loan, Ten Almaden Mortgage Loan and Towers at Emeryville Mortgage Loan. At closing, $787.5 million was funded, of which $776.0 million was used to pay off in full the Company’s existing mortgage loans (listed above) and the remaining amount was used to pay origination fees and accrued interest. The $787.5 million funded consisted of $757.5 million of term debt and $30.0 million of revolving debt. TheModified Portfolio Loan Facility, may be used for the repayment of debt, for tenant improvements, leasing commissions and capital improvements, for working capital or liquidity managementan additional $96.2 million of the Company and for other purposes described in the loan agreement. During the term of the Portfolio Loan Facility, the Company has an option to increase the aggregate loan amount by up to an additional $400.0 million in increments of $25.0 million, to a maximum of $1.41 billion, 25% of which would be revolving debt and 75% of which would be term debt, subject to certain conditions contained in the loan agreement.
The Portfolio Loan Facility matures on November 3, 2020, with two 12-month extension options,remains available for future disbursements, subject to certain terms and conditions contained in the loan documents. The Portfolio Loan Facility bears interest at a floating rate of 180 basis points over one-month LIBOR during the initial term of the loan and monthly payments are interest only with the entire balance and all outstanding interest and fees due at maturity, assuming no prior prepayment. The Company will have the right to prepay all of the Portfolio Loan Facility, subjectSubject to certain expenses potentially incurred by the Lenders as a result of the prepaymentterms and subject to certain conditions contained in the loan documents.documents, the Amended and Restated Portfolio Loan Facility may be used for (i) paying closing costs and other expenses related to the loan, (ii) for the return of equity to certain indirect owners of Borrowers, (iii) to pay or reimburse Borrowers for certain other costs and expenses, including tenant improvement costs, leasing commissions, and capital improvement costs at the properties securing the loan, (iv) working capital or liquidity management of the Company, and (v) for any other lawful purpose, provided that $25.0 million of the revolving debt is to be used for tenant improvements, tenant allowances or any other work required pursuant to the terms of a specified lease described in the loan documents, although this restriction is released as the Company completes such projects. In addition, the Amended and Restated Portfolio Loan Facility contains customary representations and warranties, financial and other affirmative and negative covenants (including maintenance of an ongoing debt service coverage ratio), events of default and remedies typical for this type of facility.


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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20172021
(unaudited)
12. SUBSEQUENT EVENTS (CONTINUED)

On November 3, 2017, KBS REIT Properties III, LLC (“REIT Properties III”), an indirect wholly owned subsidiary of the Company, entered into three interest rate swap agreements with a current aggregate notional amount of $451.5 million. As of November 3, 2017, the Company had three existing interest rate swaps related to the paid off loans with a current notional amount in the aggregate of $306.0 million. As the existing interest rate swaps expire at various times from January 1, 2018 through January 1, 2020, the notional amount of the new interest rate swaps in the aggregate will increase to maintain a notional amount of $757.5 million. The newAmended and existing interest rate swaps, in the aggregate, effectively fix the interest rate on the term portion of theRestated Portfolio Loan Facility at a blended rate of 3.861%, effective frommatures on November 3, 2017 through November2023, with 1 2022.additional 12-month extension option, subject to certain terms and conditions as described in the loan documents. The Amended and Restated Portfolio Loan Facility bears interest at the Bloomberg Short-Term Bank Yield Index rate plus 180 basis points per annum. Monthly payments are interest only with the entire balance and all outstanding interest and fees due at maturity. The Company will have the right to prepay the loan in part and in whole, without fee, premium or penalty, subject to certain conditions contained in the loan documents.
The Amended and Restated Portfolio Loan Facility is secured by RBC Plaza, Preston Commons, Sterling Plaza, One Washingtonian Center, Towers at Emeryville, Ten Almaden and Town Center and 500 West Madison.Center. The Company has the right to substitute properties securing the Amended and Restated Portfolio Loan Facility at any time, subject to approval of the Amended and Restated Portfolio Loan Facility Lenders and compliance with the terms and conditions described in the loan agreement.
Under the guaranty agreement related to the Portfolio Loan Facility (the “Guaranty”),KBS REIT Properties III, (i) providesLLC (“REIT Properties III”), the Company’s indirect wholly owned subsidiary, is providing a guaranty of among other sums described in the Guaranty, all principal and interest outstanding under the Portfolio Loan Facility in the event of certain bankruptcy or insolvency proceedings involving REIT Properties III, any Borrower or any of their affiliates and (ii) guarantees(i) payment of, and agrees to protect, defend, indemnify and hold harmless each Amended and Restated Portfolio Loan Facility Lender for, from and against, any liability, obligation, deficiency, loss, damage, costs and expenses (including reasonable attorney’s fees), and any litigation which may at any time be imposed upon, incurred or damage suffered by anythe Amended and Restated Portfolio Loan Facility Lender because of (a) certain intentional acts committed by any Borrowerthe Borrowers, (b) fraud or (b)intentional misrepresentations by the Borrowers or REIT Properties III in connection with the loan documents as described in the guaranty agreement, and (c) certain bankruptcy or insolvencyliquidation proceedings involvingunder state or federal law, and (ii) payment for liability that is incurred and related to certain environmental matters. In addition, REIT Properties III is providing a principal guaranty for up to 10% of the outstanding balance of the Amended and Restated Portfolio Loan Facility, but in no event exceeding $61.3 million, which may be reduced from time to time in connection with any Borrower or anyrepayment of their affiliates,principal that results in a mutually agreed upon reduction to the commitment of the Amended and Restated Portfolio Loan Facility as such acts are describedset forth in the Guaranty.

guaranty agreement.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the accompanying financial statements of KBS Real Estate Investment Trust III, Inc. and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to KBS Real Estate Investment Trust III, Inc., a Maryland corporation, and, as required by context, KBS Limited Partnership III, a Delaware limited partnership, which we refer to as the “Operating Partnership,” and to their subsidiaries.

Forward-Looking Statements
Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of KBS Real Estate Investment Trust III, Inc. and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law. Moreover, you should interpret many of the risks identified in this report, as well as the risks set forth below, as being heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic.
The following are some of the risks and uncertainties, although not all of the risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:
•The COVID-19 pandemic, together with the resulting measures imposed to help control the spread of the virus, has had a negative impact on the economy and business activity globally. The extent to which the COVID-19 pandemic impacts our operations and those of our tenants and our investment in Prime US REIT (the “SREIT”) depends on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others.
•We are dependent on KBS Capital Advisors LLC (“KBS Capital Advisors”), our advisor, to manageconduct our investments and for the disposition of our investments.operations.
•All of our executive officers, our affiliated directorsdirector and other key real estate and debt finance professionals are also officers, affiliated directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor our dealer manager and/or other KBS-affiliated entities. As a result, our executive officers, our affiliated directors, some of our key real estate and debt finance professionals,these individuals, our advisor and its affiliates face conflicts of interest, including significant conflicts created by our advisor’s and its affiliates’ compensation arrangements with us and other KBS-sponsoredKBS programs and KBS-advised investors and conflicts in allocating time among us and these other programs and investors. Furthermore, these individuals may become employees of another KBS-sponsored program in an internalization transaction or, if we internalize our advisor, may not become our employees as a result of their relationship with other KBS-sponsored programs. These conflicts could result in action or inaction that is not in the best interests of our stockholders.
•Our advisor and its affiliates currently receive fees in connection with transactions involving the purchase or origination, management and managementdisposition of our investments. TheseAcquisition and asset management fees are based on the cost of the investment, and not based on the quality of the investment or the quality of the services rendered to us. This may influence our advisor to recommend riskier transactions to us and increases our stockholders’ risk of loss. In addition, we have paid substantial fees to and expenses of our advisor, its affiliates and participating broker-dealers in connection with our now-terminated primary initial public offering, which payments increase the risk that our stockholders will not earn a profit on their investment. We may also pay significant fees during our listing/liquidation stage. Although most of the fees payable during our listing/liquidation stage are contingent on our stockholders first enjoying agreed-upon investment returns, the investment return thresholds may be reduced subject to approval by our conflicts committee and our charter limitations. These payments increase the risk that our stockholders will not earn a profit on their investment in us and increase the risk of loss to other limitations in our charter.
stockholders. Our charter permits us to pay distributions from any source, including offering proceeds or borrowings (which may constitute a return of capital),conflicts committee and our charter doesboard of directors continue to evaluate various alternatives available to us, including whether or not limit the amount of funds we may use from any source to pay such distributions. As of September 30, 2017, we had usedconvert to a combination of cash flow from operations, proceeds from debt financing and proceeds from an advance from our advisor to fund distributions. From time to time during our operational stage, we expect to use proceeds from third party financings to fund at least a portion of distributions in anticipation of cash flow to be received in later periods. We may also fund such distributions from the sale of assets or from the maturity, payoff or settlement of debt investments, to the extent we make any such additional investments.perpetual-life net asset value “NAV” REIT. If we convert to an NAV REIT, we would implement a revised advisory fee structure.
•We cannot guarantee that we will pay distributions. We have and may in the future fund distributions from sources other than our cash flow from operations, including, without limitation, the overallsale of assets, borrowings, return to our stockholdersof capital or offering proceeds. We have no limits on the amounts we may be reduced.
pay from such sources.
•We may incur debt until our total liabilities would exceed 75% of the cost of our tangible assets (before deducting depreciation and other non-cash reserves), and we may exceed this limit with the approval of the conflicts committee of our board of directors. To the extent financing in excess of this limit is available on attractive terms, our conflicts committee may approve debt such that our total liabilities would exceed this limit. High debt levels could limit the amount of cash we have available to distribute and could result in a decline in the value of an investment in us.

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

•We depend on tenants for the revenue generated by our real estate investments and, accordingly, the revenue generated by our real estate investments is dependent upon the success and economic viability of our tenants.investments. Revenues from our properties could decrease due to a reduction in occupancy (caused by factors including, but not limited to, tenant defaults, tenant insolvency, early termination of tenant leases and non-renewal of existing tenant leases), rent deferrals or abatements, tenants becoming unable to pay their rent and/or lower rental rates, making it more difficult for us to meet our debt service obligations and limiting our ability to pay distributions to our stockholders. Since March 2020, we have granted rent relief to a number of tenants as a result of the pandemic, and these tenants or additional tenants may request rent relief in future periods or become unable to pay rent.
•Our significant investment in the equity securities of the SREIT, a traded Singapore real estate investment trust, is subject to the risks associated with real estate investments as well as the risks inherent in investing in traded securities, including, in this instance, risks related to the quantity of units held by us relative to the trading volume of the units. The COVID-19 pandemic has caused significant negative pressure in the financial markets. Since March 2020, the trading price of the common units of the SREIT has experienced substantial volatility; however, the units have recovered a substantial portion of their losses since the low in March 2020.
•Because investment opportunities that are suitable for us may also be suitable for other KBS programs or investors, our advisor and its affiliates face conflicts of interest relating to the purchase of investments.
•We cannot predict with any certainty how much, if any, of our dividend reinvestment plan proceeds will be available for general corporate purposes including, but not limited to: the repurchase of shares under our share redemption program; capital expenditures, tenant improvement costs and leasing costs related to our real estate properties; reserves required by any financings of our real estate investments; the acquisition or origination of real estate investments, which include payment of acquisition or origination fees to our advisor; and the repayment of debt.purposes. If such funds are not available, from our dividend reinvestment plan offering, then we may have to use a greater proportion of our cash flow from operations to meet these cash requirements, which would reduce cash available for distributions and could limit our ability to redeem shares under our share redemption program.
Disruptions•Continued disruptions in the financial markets, changes in the demand for office properties and uncertain economic conditions could adversely affect our ability to implement our business strategy and generate returns to stockholders. In addition,
•Our conflicts committee and our real estate investments may be affectedboard of directors continue to evaluate various alternatives available to us. There is no assurance that any alternative being considered by unfavorable real estate market and general economic conditions, which could decrease the valueour board of those assets and reduce the investmentdirectors will provide a return to stockholders that equals or exceeds the Company’s estimated value per share as of November 1, 2021, and although we remain focused on providing enhanced liquidity to stockholders while maximizing returns to stockholders, we can provide no assurances in this regard. We also can provide no assurances as to whether or when any alternative being considered by our stockholders.board of directors will be consummated.
•Our charter does not require us to liquidate our assets and dissolve by a specified date, nor does our charter require our directors to list our shares for trading by a specified date. No public market currently exists for our shares of common stock, and we have no plans at this time to list our sharesstock. There are limits on a national securities exchange. Until our shares are listed, if ever, our stockholders may not sell their shares unless the buyer meets the applicable suitability and minimum purchase standards. Any sale must comply with applicable state and federal securities laws. In addition, our charter prohibits the ownership and transferability of more than 9.8% of our stock, unless exempted by our board of directors, which may inhibit large investors from purchasing our shares. Our shares cannot be readily sold and, if our stockholders are able to sell their shares, they would likely have to sell them at a substantial discount fromdiscount.
•In December 2019, our board of directors determined to temporarily suspend Ordinary Redemptions under the priceshare redemption program, and Ordinary Redemptions remained suspended through June 30, 2021. Ordinary Redemptions are all redemptions other than those that qualify for the special provisions for redemptions sought in connection with a stockholder’s death, “Qualifying Disability” or “Determination of Incompetence” (each as defined in the share redemption program and, together, “Special Redemptions”). Upon suspension, all Ordinary Redemption requests that had been received were cancelled and no Ordinary Redemption requests were accepted or collected during the suspension of the share redemption program. Further, on June 3, 2021, we announced that, in connection with the approval of the Self-Tender (defined below), our stockholders paidboard of directors had approved a temporary suspension of all redemptions under the share redemption program, including Special Redemptions. Upon suspension, all outstanding redemption requests under the share redemption program were cancelled, and no requests were accepted or collected under the share redemption program. As such, Special Redemptions under the share redemption program were suspended for the June 30, 2021 redemption date, meaning no Special Redemptions were made under the share redemption program in June 2021. On July 14, 2021, our board of directors approved an amended and restated share redemption program (the “Amended Share Redemption Program”) and Ordinary Redemptions and Special Redemptions under the Amended Share Redemption Program resumed effective for the July 30, 2021 redemption date. As of November 1, 2021, we had approximately 3.4 million shares available for redemption for the remainder of 2021 under the Amended Share Redemption Program, including the reserve for Special Redemptions. We cannot predict future redemption demand with any certainty. Moreover, our share redemption program includes numerous restrictions that limit our stockholders’ ability to acquiresell their shares to us. If future redemption requests exceed the sharesamount of funding available under our share redemption program, the number of rejected redemption requests will increase over time.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and from our estimated value per share.Analysis of Financial Condition and Results of Operations (continued)
All forward-looking statements should be read in light of the risks identified in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 20162020 and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the period ended March 31, 2021, each as filed with the Securities and Exchange Commission (the “SEC”) and in Part II, Item 1A herein..

Overview
We were formed on December 22, 2009 as a Maryland corporation that elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2011 and we intend to continue to operate in such a manner. We conduct our business primarily through our Operating Partnership, of which we are the sole general partner. Subject to certain restrictions and limitations, our business is managed by our advisor pursuant to an advisory agreement and our advisor conducts our operations and manages our portfolio of real estate investments. Our advisor owns 20,00020,857 shares of our common stock. We have no paid employees.
We have invested in a diverse portfolio of real estate investments. As of September 30, 2017,2021, we owned 2817 office properties (one of which was held for sale and subsequently sold on November 2, 2021), one mixed-use office/retail property and had madean investment in the equity securities of the SREIT, which is accounted for as an investment in an unconsolidated joint venture to develop and subsequently operate an office/retail property, which is currentlyentity under construction. Additionally, asthe equity method of September 30, 2017, we had entered into a consolidated joint venture to develop and subsequently operate a multifamily apartment project, which is currently under construction.accounting.
On February 4, 2010, we filed a registration statement on Form S-11 with the SEC to offer a minimum of 250,000 shares and a maximum of up to 280,000,000 shares, or up to $2,760,000,000 of shares, of common stock for sale to the public, of which up to 200,000,000 shares, or up to $2,000,000,000 of shares, were registered in our primary offering and up to 80,000,000 shares, or up to $760,000,000 of shares, were registered under our dividend reinvestment plan. We ceased offering shares of common stock in our primary offering on May 29, 2015 and terminated the primary offering on July 28, 2015 upon the completion of review of subscriptions submitted in accordance with our processing procedures. 2015.
We sold 169,006,162 shares of common stock in our now-terminated primary initial public offering for gross offering proceeds of $1.7 billion. As of September 30, 2017,2021, we had also sold 21,438,40639,883,754 shares of common stock under our dividend reinvestment plan for gross offering proceeds of $210.1 million.$412.1 million. Also as of September 30, 2017,2021, we had redeemed 10,620,360or repurchased 59,684,490 shares sold in our initial public offering for $107.2$636.1 million.

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Additionally, on October 3, 2014, we issued 258,462 shares of common stock, for $2.4 million, in private transactions exempt from the registration requirements pursuant to Section 4(a)(2) of the Securities Act of 1933.
We continue to offer shares of common stock under our dividend reinvestment plan. In some states, we will need to renew the registration statement annually or file a new registration statement to continue the dividend reinvestment plan offering. We may terminate our dividend reinvestment plan offering at any time.
Market Outlook – Real EstateOur conflicts committee and Real Estate Finance Markets
The following discussion is basedour board of directors continue to evaluate various alternatives available to us, including whether or not to convert to an “NAV REIT.” Our conflicts committee and board of directors remain focused on management’s beliefs, observationsproviding stable distributions and expectations with respectenhanced liquidity to stockholders. In the real estatenear term, while our conflicts committee and real estate finance markets.
The global economy is broadly improving albeit atboard of directors explore alternatives available to us, we may market certain of our assets for sale. Based on our assessment of alternatives available to us, market conditions and our further assessment of our capital raising prospects, our conflicts committee and board of directors may conclude that it would be in the best interest of our stockholders to (i) convert to an uneven pace. European economic growth has recently picked up, with improving employment data in most of the European Union countries. The U.K. and China remain areas of concern. The U.K. is working through its BREXIT process, whereas the Chinese economy has shown signs of stabilization, but is still struggling with uncertainty in its banking system in relation“NAV REIT,” (ii) continue to bad loans. Against this backdrop, the central banks of the world’s major industrialized economies are beginning to back away from their strong monetary accommodation. Quantitative easing (“QE”) in Japan and Europe is slowing, but the liquidity generated from these programs continues to impact the global capital markets.
Atoperate as a duration of 100 months (as of the end of third quarter 2017), thegoing concern under our current business cycle,plan, or (iii) adopt a plan of liquidation that would involve the sale of our remaining assets (in which commencedevent such plan would be presented to stockholders for approval). There is no assurance that any alternative being considered by our board of directors will provide a return to stockholders that equals or exceeds the Company’s estimated value per share as of November 1, 2021, and although we remain focused on providing enhanced liquidity to stockholders while maximizing returns to stockholders, we can provide no assurances in June 2009, is the third longest in U.S. history, behind only the periods between 1961 - 1969 and 1991 - 2001. In June 2017, the U.S. Federal Reserve (the “Fed”) increased interest rates for the fourth time in three years. Expectations are that the Fedthis regard. We also can provide no assurances as to whether or when any alternative being considered by our board of directors will increase rates again in December, citing low unemployment and strong economic growth. The Fed is still attempting to normalize the level of interest rates in the United States. U.S. interest rates are relatively high when compared to Europe, where the European Central Bank is still engaging in QE. Global inflation is starting to show signs of life as U.S. inflation has grown to approximately 1.9% versus 2.9% in the U.K. and 1.5% in the Eurozone. Real gross domestic product (“GDP”) in the United States has had two consecutive quarters of 3.0% or greater growth, and the U.S. unemployment rate is currently a relatively low 4.2%. Personal income growth has started to pick up and unemployment statistics indicate that labor market conditions are finally showing real improvements. Political uncertainty surrounding the current administration’s budget, tax reform plans, and the continued weakness in retailers, all may adversely impact business and consumer confidence.
In 2017 the U.S. commercial real estate market has seen a decline in transaction volume and a slowing of price increases. In the aggregate, property level operating income growth has begun to slow, while lending standards have tightened. The United States continues to benefit from inflows of foreign capital, albeit at a slowing rate. The capital flows from China have dropped as the Chinese government has successfully imposed constraints on capital leaving the country. The industrial property sector is a standout for investors, as internet sales volumes continue to increase the demand for warehouses and logistics-related assets. Traditional sources of capital are favoring a “risk-off” approach, as capital flows have shifted equity towards debt, or secured, investing. Commercial real estate returns are increasingly being driven by property income (yield), as opposed to price appreciation through cap rate compression.
Lenders with long memories remain disciplined in their underwriting of investments. For balance sheet lenders, such as banks and insurance companies, underwriting standards for commercial real estate have tightened. This has resulted in lower loan-to-value and higher debt coverage ratios. CMBS originations rebounded in the third quarter as banks and insurance companies tightened loan terms. CMBS volumes are on pace to beat 2016 issuance volumes. This is a positive for the U.S. commercial real estate markets as it illustrates the virtues of having a diversified set of funding sources.


be consummated.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Section 5.11 of our charter requires that we seek stockholder approval of our liquidation if our shares of common stock are not listed on a national securities exchange by September 30, 2020, unless a majority of the conflicts committee of our board of directors, composed solely of all of our independent directors, determines that liquidation is not then in the best interest of our stockholders. Pursuant to our charter requirement, the conflicts committee assessed our portfolio of investments, and with consideration of the then current market conditions, including the uncertainty as a result of the COVID-19 pandemic and lack of liquidity in the marketplace, as well as our conflicts committee’s and board of directors’ continuing review and evaluation of various alternatives available to us, on August 30, 2021, our conflicts committee unanimously determined to postpone approval of our liquidation. Section 5.11 of our charter requires that the conflicts committee revisit the issue of liquidation at least annually. At our annual meeting of stockholders held on May 7, 2020, our stockholders approved the removal of Section 5.11 of our charter. As set forth in the proxy statement for our annual meeting of stockholders, implementation of this amendment to our charter and our conversion to an NAV REIT remain subject to further approval of our conflicts committee.
Impact on Our
Market Outlook – Real Estate Investmentsand Real Estate Finance Markets
The volatilityVolatility in the global financial markets and changing political environment continues toenvironments can cause a level of uncertaintyfluctuations in our outlook for the performance of the U.S. commercial real estate markets. Both the investing and leasing environments are highly competitive. While foreign capital continues to flow into U.S. real estate markets, albeit at a slower rate, concerns regarding the political, regulatory and economic environments have introduced uncertainty into the markets.  Possible future declines in rental rates, slower or potentially negative net absorption of leased space and expectations of future rental concessions, including free rent to renew tenants early, to retain tenants who are up for renewal or to attract new tenants, may result in decreases in cash flows. Historically low interest rates could help offset some of the impact of these potential decreases in operating cash flow for properties financed with variable rate mortgages; however, interest rates in the United States have started to increase. The Fed raised interest rates four times between the period December 2015 and June 2017. The real estate and finance markets anticipate further rate increases if the economy remains strong, but a flattening U.S. treasury yield curve is signaling a weakening in economic conditions, and highlights the degree of uncertainty surrounding the near-term U.S. economic prospects. Management continuously reviews our debt financing strategies to optimize the cost of our debt exposure.
Impact on Our Financing Activities
In light of the risks associated with potentially volatile operating cash flows from someinvestment properties. Further, revenues from our properties could decrease due to a reduction in occupancy (caused by factors including, but not limited to, tenant defaults, tenant insolvency, early termination of our real estate properties,tenant leases and non-renewal of existing tenant leases), rent deferrals or abatements, tenants being unable to pay their rent and/or lower rental rates. To the increaseextent there are increases in the cost of financing due to higher interest rates, wethis may havecause difficulty in refinancing some of our debt obligations prior to or at maturity or we may not be able to refinance these obligations at terms as favorable as the terms of our existing indebtedness.  Short-termFurther, increases in interest rates inwould increase the United States have increased, andamount of our debt payments on our variable rate debt to the extent the interest rates on such debt are expected to increase againnot fixed through interest rate swap agreements or limited by the end of the year.interest rate caps. Market conditions can change quickly, potentially negatively impacting the value of real estate investments. Management continuously reviews our investments.investment and debt financing strategies to optimize our portfolio and the cost of our debt exposure. Most recently, the COVID-19 pandemic has had a negative impact on the real estate market as discussed below.
COVID-19 Pandemic and Portfolio Outlook
As of September 30, 2017,2021, the novel coronavirus, or COVID-19, pandemic is ongoing. During 2020, the COVID-19 pandemic created disruption in the U.S. and global economies, adversely impacting many industries, including the U.S. office real estate industry and the industries of our tenants, directly or indirectly. In 2021, the global economy has, with certain setbacks, begun reopening and wider distribution of vaccines will likely encourage greater economic activity. Nonetheless, the recovery could remain uneven, particularly given uncertainty with respect to the distribution and acceptance of the vaccines and their effectiveness with respect to new variants of the virus.
The outbreak of COVID-19 and its impact on the current financial, economic, capital markets and real estate market environment, and future developments in these and other areas present uncertainty and risk with respect to our financial condition, results of operations, liquidity, and ability to pay distributions. Although a recovery is partially underway, it continues to be gradual, uneven and characterized by meaningful dispersion across sectors and regions, and could be hindered by persistent or resurgent infection rates. The most recent round of U.S. fiscal stimulus could provide meaningful support, along with continued accommodative monetary policy and wider distribution of vaccines. Issues with respect to the distribution and acceptance of vaccines or the spread of new variants of the virus could adversely impact the recovery. Overall, there remains significant uncertainty regarding the timing and duration of the economic recovery, which precludes any prediction as to the ultimate adverse impact COVID-19 may have on our business.
During the year ended December 31, 2020 and the nine months ended September 30, 2021, we did not experience significant disruptions in our operations from the COVID-19 pandemic. Many of our tenants have suffered reductions in revenue since March 2020. Rent collections for the quarter ended September 30, 2021 were approximately 98%. We have granted a number of lease concessions related to the effects of the COVID-19 pandemic but these lease concessions did not have a material impact to our consolidated balance sheet as of September 30, 2021 or consolidated statements of operations for the three and nine months ended September 30, 2021. As of September 30, 2021, we had debt obligationsentered into lease amendments related to the effects of the COVID-19 pandemic, granting $4.1 million of rent deferrals for the period from March 2020 through August 2021 and granting $2.4 million in rental abatements.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
As of September 30, 2021, 81 tenants were granted rental deferrals, rental abatements and/or rent restructures, of which 47 of these tenants have begun to pay rent in accordance with their lease agreements subsequent to the deferral and/or abatement period, five of these tenants early terminated their leases and eight of these tenant leases were modified at lower rental rates and/or based on a percentage of the tenant’s gross receipts. As of September 30, 2021, two of the 81 tenants continue to be in the aggregate principal amountrental deferral and/or rental abatement periods as granted in accordance with their agreements. Through September 30, 2021, $2.3 million of rent previously deferred has been billed to the tenants, of which $2.0 million was collected.
As of September 30, 2021, we had $1.9 billion,million of receivables for lease payments that had been deferred as lease concessions related to the effects of the COVID-19 pandemic, of which $1.5 million was reserved for payments not probable of collection, which were included in rent and other receivables, net on the accompanying consolidated balance sheet. For the three and nine months ended September 30, 2021, we recorded $0.1 million and $0.7 million, respectively, of rental abatements granted to tenants as a result of the COVID-19 pandemic. For the three and nine months ended September 30, 2020, we recorded $0.3 million and $0.9 million of rental abatements granted to tenants as a result of the COVID-19 pandemic. Subsequent to September 30, 2021, we have not seen a material impact on our rent collections. We are in discussions with several retail tenants to extend additional short-term deferrals. We will continue to evaluate any additional short-term rent relief requests from tenants on an individual basis. Not all tenant requests will ultimately result in modified agreements, nor are we forgoing our contractual rights under our lease agreements. In most cases, it is in our best interest to help our tenants remain in business and reopen when restrictions are lifted. Current collections and rent relief requests to date may not be indicative of collections or requests in any future period.
During the nine months ended September 30, 2020, we recognized an impairment charge of $19.9 million for an office/retail property due to the continued deterioration of retail demand at the property which was further impacted by the COVID-19 pandemic.
We have also made a weighted-average remaining term of 1.6 years. The maturity dates of certain loans may be extended beyond their current maturity date, subject to certain terms and conditions containedsignificant investment in the loan documents. Our debt obligations consistedcommon units of $192.9the SREIT. Since early March 2020, the trading price of the common units of the SREIT has experienced substantial volatility; however, the units have recovered a substantial portion of their losses since the low in March 2020. For purposes of the November 1, 2021 estimated value per share, we valued our investment in units of the SREIT at $227.3 million, based on the Singapore Exchange Securities Traded Limited (the “SGX-ST”) trading price of fixed rate notes payablethe units of the SREIT as of closing on October 22, 2021 less a discount for the holding period risk due to the quantity of units held by us relative to the normal level of trading volume in the SREIT units. As of November 3, 2021, the aggregate value of our investment in the units of the SREIT was $250.5 million, which was based solely on the closing price of the units on the SGX-ST of $0.87 per unit as of November 3, 2021 and $1.7 billiondid not take into account any potential discount for the holding period risk due to the quantity of variable rate notes payable. We planunits we hold.
Should we experience significant reductions in rental revenue in the future related to the impact of the COVID-19 pandemic, this may limit our ability to draw on our revolving credit facilities or exercise our extension options available underdue to covenants described in our loan agreements or pay down or refinance the related notes payable prior to their maturity dates. As of September 30, 2017, the interest ratesagreements. However, we believe that our cash flow from operations, cash on $1.1 billion of our variable rate notes payable were effectively fixed through interest rate swap agreements. In addition, we entered into two interest rate swaps with an aggregate notional amount of $91.5 million, which will become effective at various times during the remainder of 2017 through 2018. On November 3, 2017, we entered into a three-year $1.01 billion loan facility to pay off the upcoming 2018 loan maturities for six of our existing loans which had an aggregate outstanding balance of $776.0 million, see “Subsequent Events - Financing Subsequent to September 30, 2017 - Portfolio Loan Facility.”
Liquidity and Capital Resources
We sold 169,006,162 shares of common stock in our now-terminated primary initial public offering for gross offering proceeds of $1.7 billion. As of September 30, 2017, we had also sold 21,438,406 shares of common stock under our dividend reinvestment plan for gross offering proceeds of $210.1 million. Also as of September 30, 2017, we had redeemed 10,620,360 shares sold in our initial public offering for $107.2 million. We ceased offering shares of common stock in our primary offering on May 29, 2015 and terminated our primary offering on July 28, 2015.
We continue to offer shares under our dividend reinvestment plan. In some states, we will need to renew the registration statement annually or file a new registration statement to continue the dividend reinvestment plan offering. We may terminate our dividend reinvestment plan offering at any time.
We have invested all of the proceeds from our now-terminated primary initial public offering, net of selling commissions and dealer manager fees and other organization and offering costs, and proceeds from debt financing in a diverse portfolio of real estate investments. To date,hand, proceeds from our dividend reinvestment plan, have been used primarilyproceeds from asset sales and current and anticipated financing activities are sufficient to fund redemptionsmeet our liquidity needs for the foreseeable future.
Our business, like all businesses, is being impacted by the uncertainty regarding the COVID-19 pandemic, the effectiveness of shares underpolicies introduced to neutralize the disease, and the impact of those policies on economic activity. While there are weakening macroeconomic conditions and some negative impact to our share redemption programtenants, we believe with our diverse portfolio of core real estate properties with tenants across various industries, and for capital expenditures onwith creditworthy tenants and limited retail exposure in our real estate investments.portfolio, we are positioned to navigate this unprecedented period.

Liquidity and Capital Resources
Our principal demands for funds during the short and long-term are and will be for operating expenses, capital expenditures and general and administrative expenses; payments under debt obligations; redemptions of common stock; capital commitments and development expenses under our joint venture agreements; and payments of distributions to stockholders. Our primary sources of capital for meeting our cash requirements are as follows:
•Cash flow generated by our real estate and real estate-related investments;
•Debt financings (including amounts currently available under existing loan facilities);
•Proceeds from the sale of our real estate properties and real estate-related investments; and
•Proceeds from common stock issued under our dividend reinvestment plan.

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Our real estate properties generate cash flow in the form of rental revenues and tenant reimbursements, which are reduced by operating expenditures, capital expenditures, debt service payments, the payment of asset management fees and corporate general and administrative expenses. Cash flow from operations from our real estate properties is primarily dependent upon the occupancy level of our portfolio, the net effective rental rates on our leases, the collectability of rent and operating recoveries from our tenants and how well we manage our expenditures.
Our investment in the SREIT units generates cash flow in the form of dividend income. As of September 30, 2017,2021, the aggregate value of our investment in the SREIT units, which was based solely on the closing price of the units on the SGX-ST of $0.86 per unit as of September 30, 2021 and did not take into account any potential discount for the holding period risk due to the quantity of units we hold, was $247.6 million and the carrying value was $218.7 million.
As of September 30, 2021, we had mortgage debt obligations in the aggregate principal amount of $1.9$1.6 billion, with a weighted-average remaining term of 1.61.4 years. The maturity dates of certain loans may be extended beyond their current maturity date, subject to certain terms and conditions contained in the loan documents. Assuming ourAs of September 30, 2021, we had $497.0 million of notes payable are fully extended underrelated to the terms of the respective loan agreements and other loan documents, we have $171.8 million of debt obligationsModified Portfolio Loan Facility maturing during the 12 months ending September 30, 2018.2022. Subsequent to September 30, 2021, we refinanced the Modified Portfolio Loan Facility, see Part II, Item 5 “Other Information,” for more information about our Amended and Restated Portfolio Loan Facility. We plan to exercise our extension options available under our loan agreements, or pay down or refinance the related notes payable prior to their maturity dates. As of September 30, 2017,2021, our debt obligations consisted of $123.0 million of fixed rate notes payable and $1.5 billion of variable rate notes payable. As of September 30, 2021, the interest rates on $1.1 billion of our variable rate notes payable were effectively fixed through interest rate swap agreements. As of September 30, 2021, we had $90.5$278.3 million of revolving debt available for immediate future disbursement under a portfolio loan,various loans, subject to certain conditions set forth in the loan agreement. On November 3, 2017,agreements.
In order to provide stockholders with additional liquidity that is in excess of that permitted under our share redemption program, on June 4, 2021, we entered intocommenced a three-year $1.01 billion loan facilityself-tender offer (the “Self-Tender”) for up to pay off the upcoming 2018 loan maturities for six33,849,130 shares of our common stock at a price of $10.34 per share, or approximately $350.0 million of shares. On July 12, 2021, we accepted for purchase 26,377,990 shares properly tendered and not properly withdrawn at a purchase price of $10.34 per share, or approximately $272.7 million of shares, excluding fees and expenses relating to the tender offer. We funded the purchase of shares in the offer with approximately $100.0 million of available cash on hand and by drawing on our existing loans which hadcredit facilities in an aggregate outstanding balanceamount of $776.0approximately $172.7 million. As of November 3, 2017, the loan facility had $222.5 million of revolving debt available for immediate disbursement, see “Subsequent Events - Financing Subsequent to September 30, 2017 - Portfolio Loan Facility.”
We paid cash distributions to our stockholders during the nine months ended September 30, 20172021 using cash flow from operations from current and prior periods.periods and proceeds from the sale of real estate. We believe that our cash flow from operations, cash on hand, proceeds from our dividend reinvestment plan, proceeds from the sale of real estateasset sales and current and anticipated financing activities are sufficient to meet our liquidity needs for the foreseeable future.
Under our charter, we are required to limit our total operating expenses to the greater of 2% of our average invested assets or 25% of our net income for the four most recently completed fiscal quarters, as these terms are defined in our charter, unless the conflicts committee has determined that such excess expenses were justified based on unusual and non-recurring factors. Operating expenses for the four fiscal quarters ended September 30, 20172021 did not exceed the charter-imposed limitation.
Cash Flows from Operating Activities
We commenced operations in connection with our first investment on June 24, 2011. As of September 30, 2017, we owned 28 office properties and one mixed-use office/retail property and had made an investment in an unconsolidated joint venture to develop and subsequently operate an office/retail property, which is currently under construction. In addition, we had entered into a consolidated joint venture to develop and subsequently operate a multifamily apartment project, which is currently under construction. During the nine months ended September 30, 2017,2021 and 2020, net cash provided by operating activities was $90.6$76.2 million compared to netand $73.4 million, respectively. Net cash provided by operating activities of $82.1 millionwas higher in 2021 primarily due to a decrease in interest payments during the nine months ended September 30, 2016. Net cash provided by operating activities increased in 2017 primarily as a result of an increase in lease termination fees, rental rates, operating expense recoveries and property tax recoveries.2021.
Cash Flows from Investing Activities
Net cash used inprovided by investing activities was $124.2$47.1 million for the nine months ended September 30, 20172021 and primarily consisted of the following:
•$54.098.0 million of net proceeds from the sale of Anchor Centre; offset by
•$50.9 million used for improvements to real estate;
$33.4 million to make an investment in an unconsolidated joint venture;
$33.0 million used for construction in progress related to Hardware Village (defined below); and
$3.8 million of escrow deposits for tenant improvements.
Cash Flows from Financing Activities
Our cash flows from financing activities consist primarily of debt financings, redemptions and distributions paid to our stockholders. During the nine months ended September 30, 2017, net cash provided by financing activities was $6.2 million and primarily consisted of the following:
$104.2 million of net cash provided by debt financing as a result of proceeds from notes payable of $107.4 million, partially offset by principal payments on notes payable of $1.9 million and payments of deferred financing costs of $1.3 million;
$54.7 million of cash used for redemptions of common stock; and
$43.4 million of net cash distributions, after giving effect to distributions reinvested by stockholders of $45.1 million.

estate.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Cash Flows from Financing Activities
During the nine months ended September 30, 2021, net cash used in financing activities was $162.1 million and primarily consisted of the following:
•$313.8 millionof cash used for redemptions and repurchases of common stock, including $272.7 million of shares repurchased pursuant to the Self-Tender;
•$202.4 million of net cash provided by debt financing as a result of proceeds from notes payable of $241.2 million, partially offset by principal payments on notes payable of $38.4 million and payments of deferred financing costs of $0.4 million;
•$47.7 million of net cash distributions, after giving effect to distributions reinvested by stockholders of $32.8 million;
•$2.2 million used for interest rate swap settlements for off-market swap instruments; and
•Payment of other organization and offering costs of $0.9 million related to our pursuit of conversion to an NAV REIT.
We expect that our debt financing and other liabilities will be between 35%45% and 65% of the cost of our tangible assets (before deducting depreciation and other non-cash reserves). We expect our debt financing related to the acquisition of core real estate properties to be between 45% and 65% of the aggregate cost of all such assets. We expect our debt financing related to the acquisition or origination of real estate-related investments to be between 0% and 65% of the aggregate cost of all such assets, depending upon the availability of such financings in the marketplace. There is no limitation on the amount we may borrow for the purchase of any single asset. We limit our total liabilities to 75% of the cost of our tangible assets (before deducting depreciation and other non-cash reserves), meaning that our borrowings and other liabilities may exceed our maximum target leverage of 65% of the cost of our tangible assets without violating these borrowing restrictions. We may exceed the 75% limit only if a majority of the conflicts committee approves each borrowing in excess of this limitation and we disclose such borrowings to our stockholders in our next quarterly report with an explanation from the conflicts committee of the justification for the excess borrowing. To the extent financing in excess of this limit is available on attractive terms, our conflicts committee may approve debt in excess of this limit. From time to time, our total liabilities could also be below 35%45% of the cost of our tangible assets due to the lack of availability of debt financing. As of September 30, 2017,2021, our borrowings and other liabilities were approximately 57%56% of both the cost (before deducting depreciation and other noncash reserves) and book value (before deducting depreciation) of our tangible assets, respectively.assets.
In addition to making investments in accordance with our investment objectives, weWe also expect to use our capital resources to make certain payments to our advisor and we have made certain payments to our dealer manager. During our operational stage, we expect toadvisor. We currently make payments to our advisor in connection with the acquisition of investments, the management of our investments and costs incurred by our advisor in providing services to us. We also pay fees to our advisor in connection with the disposition of investments. We reimburse our advisor and dealer manager for certain stockholder services. In addition, our advisor is entitled to an incentive fee upon achieving certain performance goals.
Among the fees payable to our advisor is an asset management fee. With respect to investments in real property, the asset management fee is a monthly fee equal to one-twelfth of 0.75% of the amount paid or allocated to acquire the investment, plus the cost of any subsequent development, construction or improvements to the property. This amount includes any portion of the investment that was debt financed and is inclusive of acquisition expenses related thereto (but excludes acquisition fees paid or payable to our advisor). In the case of investments made through joint ventures, the asset management fee is determined based on our proportionate share of the underlying investment (but excluding acquisition fees paid to our advisor). With respect to investments in loans and any investments other than real property, the asset management fee is a monthly fee calculated, each month, as one-twelfth of 0.75% of the lesser of (i) the amount actually paid or allocated to acquire or fund the loan or other investment (which amount includes any portion of the investment that was debt financed and is inclusive of acquisition or origination expenses related thereto but is exclusive of acquisition or origination fees paid or payable to our advisor) and (ii) the outstanding principal amount of such loan or other investment, plus the acquisition or origination expenses related to the acquisition or funding of such investment (excluding acquisition or origination fees paid or payable to our advisor), as of the time of calculation. We currently do not pay asset management fees to our advisor on our investment in units of the SREIT.
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Pursuant to the advisory agreement, with respect to asset management fees accruing from March 1, 2014, our advisor agreed to defer, without interest, our obligation to pay asset management fees for any month in which our modified funds from operations (“MFFO”) for such month, as such term is defined in the practice guideline issued by the Investment Program AssociationInstitute for Portfolio Alternatives (“IPA”) in November 2010 and interpreted by us, excluding asset management fees, does not exceed the amount of distributions declared by us for record dates of that month. We remain obligated to pay our advisor an asset management fee in any month in which our MFFO, excluding asset management fees, for such month exceeds the amount of distributions declared for the record dates of that month (such excess amount, an “MFFO Surplus”); however, any amount of such asset management fee in excess of the MFFO Surplus will also be deferred under the advisory agreement. If the MFFO Surplus for any month exceeds the amount of the asset management fee payable for such month, any remaining MFFO Surplus will be applied to pay any asset management fee amounts previously deferred in accordance with the advisory agreement.
As of September 30, 2017, we had reimbursed our advisor for all accrued and deferred asset management fees in accordance with the terms noted above.  The amount of asset management fees deferred, if any, will vary on a month-to-month basis and the total amount of asset management fees deferred as well as the timing of the deferrals and repayments are difficult to predict as they will depend on the amount of and terms of the debt we use to acquire assets, the level of operating cash flow generated by our real estate investments and other factors. In addition, deferrals and repayments may occur in the same period, and it is possible that there could be additional deferrals in the future. As of September 30, 2017, we had $2.2 million of asset management fees payable related to asset management fees incurred for the month of September 2017, which were subsequently paid in November 2017.


33
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

However, notwithstanding the foregoing, any and all deferred asset management fees that are unpaid will become immediately due and payable at such time as our stockholders have received, together as a collective group, aggregate distributions (including distributions that may constitute a return of capital for federal income tax purposes) sufficient to provide (i) an 8% per year cumulative, noncompounded return on net invested capital (the “Stockholders’ 8% Return”) and (ii) a return of their net invested capital, or the amount calculated by multiplying the total number of shares purchased by stockholders by the issue price, reduced by any amounts to repurchase shares pursuant to our share redemption program. The Stockholders’ 8% Return is not based on the return provided to any individual stockholder. Accordingly, it is not necessary for each of our stockholders to have received any minimum return in order for our advisor to receive deferred asset management fees.
As of September 30, 2021, we had accrued $8.8 million of asset management fees, of which $8.0 million was deferred as of September 30, 2021, pursuant to the provision for deferral of asset management fees under the Advisory Agreement.  The amount of asset management fees deferred, if any, will vary on a month-to-month basis and the total amount of asset management fees deferred as well as the timing of the deferrals and repayments are difficult to predict as they will depend on the amount of and terms of the debt we use to acquire assets, the level of operating cash flow generated by our real estate investments and other factors. In addition, deferrals and repayments may occur in the same period, and it is possible that there could be additional deferrals in the future.
On September 27, 2017,2021, we and our advisor renewed the advisory agreement. The advisory agreement has a one-year term but may be renewed for an unlimited number of successive one-year periods upon the mutual consent of our advisor and our conflicts committee.
Participation Fee Liability and Potential Change in Fee Structure
Pursuant to our advisory agreement currently in effect with our advisor, our advisor is due a subordinated participation in our net cash flows (the “Subordinated Participation in Net Cash Flows”) upon meeting certain performance goals. After our stockholders have received, together as a collective group, aggregate distributions (including distributions that may constitute a return of capital for federal income tax purposes) sufficient to provide (i) a return of their net invested capital, or the amount calculated by multiplying the total number of shares purchased by stockholders by the issue price, reduced by any amounts to repurchase shares pursuant to our share redemption program, and (ii) an 8.0% per year cumulative, noncompounded return on such net invested capital, our advisor is entitled to receive 15.0% of our net cash flows, whether from continuing operations, net sale proceeds or otherwise. Net sales proceeds means the net cash proceeds realized by us after deduction of all expenses incurred in connection with a sale, including disposition fees paid to our advisor. The 8.0% per year cumulative, noncompounded return on net invested capital is calculated on a daily basis. In making this calculation, the net invested capital is reduced to the extent distributions in excess of a cumulative, noncompounded, annual return of 8.0% are paid (from whatever source), except to the extent such distributions would be required to supplement prior distributions paid in order to achieve a cumulative, noncompounded, annual return of 8.0% (invested capital is only reduced as described in this sentence; it is not reduced simply because a distribution constitutes a return of capital for federal income tax purposes). The 8.0% per year cumulative, noncompounded return is not based on the return provided to any individual stockholder. Accordingly, it is not necessary for each of our stockholders to have received any minimum return in order for our advisor to participate in our net cash flows. In fact, if our advisor is entitled to participate in our net cash flows, the returns of our stockholders will differ, and some may be less than an 8.0% per year cumulative, noncompounded return. This fee is payable only if we are not listed on an exchange.
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
On January 9, 2020, we filed a definitive proxy statement with the SEC in connection with the annual meeting of stockholders to vote on, among other proposals, two proposals related to our pursuit of conversion to an NAV REIT. On May 7, 2020 at our annual meeting of stockholders, our stockholders approved the proposal to accelerate the payment of incentive compensation to our advisor, upon our conversion to an NAV REIT. If we convert to an NAV REIT, the proposed acceleration of the payment of incentive compensation to our advisor remains subject to further approval of the conflicts committee, after the proposed amount of the accelerated payment of the incentive fee has been determined. In connection with the determination of the November 1, 2021 estimated value per share of our common stock, our advisor determined that there would be no liability related to the Subordinated Participation in Net Cash Flows at that time, based on a hypothetical liquidation of the assets and liabilities at their estimated fair values, after considering the impact of any potential closing costs and fees related to the disposition of real estate properties; however, changes to the fair values of assets and liabilities could have a material impact to the incentive fee calculation.
Our conflicts committee and our board of directors continue to evaluate various alternatives available to us, including whether or not to convert to an “NAV REIT.” Our conflicts committee and board of directors remain focused on providing stable distributions and enhanced liquidity to stockholders. In the near term, while our conflicts committee and board of directors explore alternatives available to us, we may market certain of our assets for sale. Based on our assessment of alternatives available to us, market conditions and our further assessment of our capital raising prospects, our conflicts committee and board of directors may conclude that it would be in the best interest of our stockholders to (i) convert to an “NAV REIT,” (ii) continue to operate as a going concern under our current business plan, or (iii) adopt a plan of liquidation that would involve the sale of our remaining assets (in which event such plan would be presented to stockholders for approval). There is no assurance that any alternative being considered by our board of directors will provide a return to stockholders that equals or exceeds the Company’s estimated value per share as of November 1, 2021, and although we remain focused on providing enhanced liquidity to stockholders while maximizing returns to stockholders, we can provide no assurances in this regard. We also can provide no assurances as to whether or when any alternative being considered by our board of directors will be consummated.

Contractual Commitments and ContingenciesObligations
The following is a summary of our contractual obligations as of September 30, 20172021 (in thousands):
   Payments Due During the Years Ended December 31,Payments Due During the Years Ended December 31,
Contractual Obligations Total Remainder of 2017 2018-2019 2020-2021 ThereafterContractual ObligationsTotalRemainder of 20212022-20232024-2025Thereafter
Outstanding debt obligations (1)
 $1,898,897
 $874
 $1,323,985
 $393,448
 $180,590
Outstanding debt obligations (1)
$1,599,585 $496,950 $728,590 $374,045 $— 
Interest payments on outstanding debt obligations (2)
 110,066
 16,772
 67,684
 23,407
 2,203
Development obligations 51,935
 
(3) 
 
(3) 
 —
 —
Interest payments on outstanding debt obligations (2) (4)
Interest payments on outstanding debt obligations (2) (4)
46,379 6,432 38,568 1,379 — 
Interest payments on interest rate swaps (3) (4)
Interest payments on interest rate swaps (3) (4)
24,239 4,558 19,681 — — 
_____________________
(1) Amounts include principal payments only.only based on maturity dates as of September 30, 2021; subject to certain conditions, the maturity dates of certain loans may be extended beyond what is shown above.
(2) Projected interest payments are based on the outstanding principal amounts, maturity dates and interest rates in effect as of September 30, 2017 (consisting2021, consisting of the contractual interest rate and the effectusing interest rate indices as of September 30, 2021, where applicable.
(3) Projected interest payments on interest rate swaps if applicable).are calculated based on the notional amount, effective term of the swap contract, and fixed rate net of the swapped floating rate in effect as of September 30, 2021.
(4) We incurred interest expense of $45.6$36.1 million, excluding amortization of deferred financing costs totaling $3.8$3.0 million and unrealized gaingains on derivativesderivative instruments of $2.6 million and including interest capitalized of $1.5$13.7 million during the nine months ended September 30, 2017.2021.
(3) We have entered into a consolidated joint venture to develop a two building multi-family apartment complex consisting of 466 units and expect to incur an additional $51.9 million in development obligations through 2018. As of September 30, 2017, $8.7 million had been disbursed under the Hardware Village Loan Facility and $65.3 million remained available for future disbursements, subject to certain conditions contained in the Hardware Village Loan Facility documents.
As of September 30, 2017, we expect to acquire the developer’s 25% equity interest upon completion of Village Center Station II (defined below) in 2018 for approximately $25.0 million.
Results of Operations
Overview
As of September 30, 2016, we owned 28 office properties, one mixed-use office/retail property and had entered into a consolidated joint venture to develop and subsequently operate a multifamily apartment project (“Hardware Village”), which is currently under construction. During the three months ended September 30, 2016, the Aberdeen First Mortgage Origination was paid off. As of September 30, 2017, we owned 28 office properties and one mixed-use office/retail property and had made an investment in an unconsolidated joint venture to develop and subsequently operate an office/retail property (“Village Center Station II”), which is currently under construction. In addition, we had entered into a consolidated joint venture to develop and subsequently operate Hardware Village, which is currently under construction. As a result, the results of operations presented for the nine months ended September 30, 2017 and 2016 are not directly comparable due to our acquisition and development activity and the payoff of our investment in a real estate loan receivable.


34
43

Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Results of Operations
Overview
As of September 30, 2020, we owned 18 office properties, one mixed-use office/retail property, one real estate loan receivable and an investment in the equity securities of the SREIT, which is accounted for as an investment in an unconsolidated entity under the equity method of accounting. Subsequent to September 30, 2020, we sold one office property and received the repayment on the real estate loan receivable. As a result, as of September 30, 2021, we owned 17 office properties (one of which was held for sale and subsequently sold on November 2, 2021), one mixed-use office/retail property and an investment in the equity securities of the SREIT. Therefore, the results of operations presented for the three and nine months ended September 30, 2021 and 2020 are not directly comparable.

Comparison of the three months ended September 30, 20172021 versus the three months ended September 30, 20162020
The following table provides summary information about our results of operations for the three months ended September 30, 20172021 and 20162020 (dollar amounts in thousands):
 Three Months Ended
September 30,		Increase
(Decrease)		Percentage Change
$ Changes Due to Dispositions
and Loan Pay-off (1)
$ Change Due to Properties Held
Throughout Both Periods (2)
 20212020
Rental income$68,538 $69,159 $(621)(1)%$(2,554)$1,933 
Interest income from real estate loan receivable— 2,029 (2,029)(100)%(2,029)— 
Other operating income4,523 4,315 208 5 %(207)415 
Operating, maintenance and management17,313 17,198 115 1 %(740)855 
Real estate taxes and insurance14,992 14,140 852 6 %(407)1,259 
Asset management fees to affiliate5,019 5,311 (292)(5)%(421)129 
General and administrative expenses1,621 1,560 61 4 %n/an/a
Depreciation and amortization28,298 27,879 419 2 %(1,185)1,604 
Interest expense9,658 8,918 740 8 %(222)962 
Other interest income10 13 (3)(23)%n/an/a
Equity in income of an unconsolidated entity1,595 588 1,007 171 %— 1,007 
Gain on sale of real estate, net— 21 (21)(100)%(21)— 
_____________________
  Three Months Ended September 30, Increase (Decrease) Percentage Change 
$ Change Due to Acquisitions
and Payoffs (1)
 
$ Change Due to Properties Held
Throughout Both Periods (2)
  2017 2016    
Rental income $77,798
 $76,998
 $800
 1 % $—
 $800
Tenant reimbursements 19,063
 19,258
 (195) (1)% —
 (195)
Other operating income 5,697
 5,549
 148
 3 % —
 148
Operating, maintenance and management costs 25,293
 24,009
 1,284
 5 % —
 1,284
Real estate taxes and insurance 16,460
 16,359
 101
 1 % —
 101
Asset management fees to affiliate 6,587
 6,286
 301
 5 % 164
 137
General and administrative expenses 983
 1,289
 (306) (24)% n/a
 n/a
Depreciation and amortization 41,151
 39,978
 1,173
 3 % —
 1,173
Interest expense 15,460
 10,042
 5,418
 54 % n/a
 n/a
_____________________
(1) Represents the dollar amount increase (decrease) for the three months ended September 30, 20172021 compared to the three months ended September 30, 20162020 related to a real estate investments acquired or repaiddisposition and a real estate loan paid off on or after July 1, 2016.2020.
(2) Represents the dollar amount increase (decrease) for the three months ended September 30, 20172021 compared to the three months ended September 30, 2016 with respect2020 related to real estate investments owned by us throughout both periods presented.
Rental income and tenant reimbursements from our real estate properties increaseddecreased from $96.3$69.2 million for the three months ended September 30, 20162020 to $96.9$68.5 million for the three months ended September 30, 2017.2021. The decrease in rental income was primarily due to the disposition of Anchor Centre in January 2021, partially offset by an increase in rental income and tenant reimbursements for properties held throughout both periods was primarily duerelated to an increasethe commencement of a lease at Domain Gateway in lease termination fees and rental rates, partially offset by a decrease in property tax recoveries.January 2021. We expect rental income and tenant reimbursements to varydecrease in future periods to the extent we dispose of properties, to vary based on occupancy rates and rental rates of our real estate investments and uncertainty and business disruptions or recoveries as a result of the COVID-19 pandemic and to increase baseddue to tenant reimbursements related to operating expenses as physical occupancy increases as employees return to the office. See “Market Outlook – Real Estate and Real Estate Finance Markets – COVID-19 Pandemic and Portfolio Outlook” for a discussion on the development and subsequent operationimpact of the COVID-19 pandemic on our business.
Interest income from our real estate loan receivable, recognized using the interest method, was $2.0 million for the three months ended September 30, 2020. On May 7, 2020, in connection with the sale of Hardware Village, we, through an indirect wholly owned subsidiary, provided seller financing and uponentered into a promissory note with the acquisitionbuyer. The promissory note was paid off in full on December 11, 2020. We did not own any real estate loans receivable during the three months ended September 30, 2021.
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Table of the developer's 25% equity interestContents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and subsequent operationAnalysis of Village Center Station II.Financial Condition and Results of Operations (continued)
Other operating income increased slightly from $5.5$4.3 million during the three months ended September 30, 20162020 to $5.7$4.5 million for the three months ended September 30, 2017.2021. The increase in other operating income for properties held throughout both periods was primarily due to an increase in parking revenues.revenues for properties held throughout both periods, partially offset by the disposition of Anchor Centre in January 2021. We expect other operating income to vary in future periods based on occupancy rates and parking rates at our real estate properties, and increase upon the acquisitionbusiness disruptions or recoveries as a result of the developer's 25% equity interestCOVID-19 pandemic and subsequent operationto decrease to the extent we dispose of Village Center Station II.properties.
Operating, maintenance and management costs increased slightly from $24.0$17.2 million for the three months ended September 30, 20162020 to $25.3$17.3 million for the three months ended September 30, 2017.2021. The increase in operating, maintenance and management costs for properties held throughout both periods was primarily due to an increase in repairsmarketing and maintenance, management feesadvertising costs and an overall increase in operating costs as a result of an increase in bad debt expense related to a tenant bankruptcyphysical occupancy at a property.properties held throughout both periods, partially offset by the disposition of Anchor Centre in January 2021.  We expect operating, maintenance and management costs to increase in future periods as a result of general inflation and as physical occupancy increases as employees return to the developmentoffice and subsequent operationto decrease to the extent we dispose of Hardware Village and upon the acquisition of the developer's 25% equity interest and subsequent operation of Village Center Station II and general inflation.properties.
Real estate taxes and insurance increased slightly from $16.4$14.1 million for the three months ended September 30, 20162020 to $16.5$15.0 million for the three months ended September 30, 2017.2021. The increase in real estate taxes and insurance was primarily due to a higher property tax assessment for a real estate property held throughout both periods, partially offset by the disposition of Anchor Centre in January 2021. We expect real estate taxes and insurance to increase in future periods as a result of the development and subsequent operation of Hardware Village and upon the acquisition of the developer's 25% equity interest and subsequent operation of Village Center Station IIgeneral inflation and general increases due to future property tax reassessments.reassessments for properties that we continue to own and to decrease to the extent we dispose of properties.
Asset management fees with respect to our real estate investments increaseddecreased from $6.3$5.3 million for the three months ended September 30, 20162020 to $6.6$5.0 million for the three months ended September 30, 2017.2021, primarily due to the disposition of Anchor Centre in January 2021, partially offset by an increase in capital improvements at real estate properties held throughout both periods. We expect asset management fees to increase in future periods as a result of the continued development of Hardware Village and Village Center Station II and as a result of any improvements we make to our properties and to decrease to the extent we dispose of properties. As of September 30, 2017, $2.22021, there were $8.8 million of accrued asset management fees, were payable,of which were subsequently paid in November 2017.$8.0 million was deferred as of September 30, 2021. For a discussion of accrued and deferred asset management fees, see “– Liquidity and Capital Resources” herein.


35
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s DiscussionGeneral and Analysis of Financial Condition and Results of Operations (continued)

Depreciation and amortization increased from $40.0administrative expenses remained consistent at $1.6 million for the three months ended September 30, 20162020 and 2021. General and administrative costs consisted primarily of portfolio legal fees, board of directors fees, audit costs and third party transfer agent fees. We expect general and administrative expenses to $41.2vary in future periods.
Depreciation and amortization increased from $27.9 million for the three months ended September 30, 2017.2020 to $28.3 million for the three months ended September 30, 2021, primarily due to an increase in capital improvements at properties held throughout both periods, offset by a decrease as a result of the sale of Anchor Centre in January 2021. We expect depreciation and amortization to varyincrease in future periods as a result of additional capital improvements, offset by a decrease in amortization related to fully amortized tenant origination and absorption costs and increase as a resultto the extent we dispose of the development and subsequent operation of Hardware Village and upon the acquisition of the developer's 25% equity interest and subsequent operation of Village Center Station II.properties.
Interest expense increased from $10.0$8.9 million for the three months ended September 30, 20162020 to $15.5$9.7 million for the three months ended September 30, 2017.2021. Included in interest expense iswas (i) $7.5 million and $8.0 million of interest expense payments for the three months ended September 30, 2020 and 2021, respectively, (ii) the amortization of deferred financing costs of $1.3$1.1 million and $1.3$1.0 million for the three months ended September 30, 2016 and 2017, respectively. Additionally, during the three months ended September 30, 2016 and 2017, we capitalized $0.1 million and $0.7 million of interest to construction-in-progress related to Hardware Village and Village Center Station II, respectively. As a result of $3.7 million of unrealized gains on derivative instruments for the three months ended September 30, 2016,2020 and 2021, respectively, and (iii) interest expense decreased by $1.3 million. Interest expense(including gains and losses) incurred as a result of our derivative instruments, which increased interest expense by $0.3 million and $0.7 million for the three months ended September 30, 2017 was $0.4 million, which includes $1.0 million of unrealized gains on derivative instruments for the three months ended September 30, 2017.2020 and 2021, respectively. The overall increase in interest expense iswas primarily due to the increased level ofadditional borrowings and increased interest rates on our variable rate debt,existing credit facilities, which was used to partially offset byfund the Self-Tender, and an increase in unrealized gains on derivative instruments. We expect interest expense due to increasechanges in future periodsfair values with respect to our interest rate swaps that are not accounted for as cash flow hedges, offset by a decrease in interest expense as a result of additional borrowings for capital expenditures and development activity.the sale of Anchor Centre in January 2021. In addition, ourgeneral, we expect interest expense in future periods willto vary based on fair value changes with respect to our interest rate swaps that are not accounted for as cash flow hedges, and fluctuations in one-month LIBOR (for our variable rate debt). 
Comparison and our level of the nine months ended September 30, 2017 versus the nine months ended September 30, 2016
The following table provides summary information about our results of operations for the nine months ended September 30, 2017 and 2016 (dollar amounts in thousands):future borrowings.
45
  Nine Months Ended September 30, Increase (Decrease) Percentage Change 
$ Change Due to Acquisitions
and Payoffs (1)
 
$ Change Due to Properties Held
Throughout Both Periods (2)
  2017 2016    
Rental income $236,200
 $228,783
 $7,417
 3 % $558
 $6,859
Tenant reimbursements 57,652
 54,849
 2,803
 5 % (96) 2,899
Other operating income 17,124
 15,504
 1,620
 10 % 186
 1,434
Interest income from real estate loan receivable —
 831
 (831) (100)% (831) —
Operating, maintenance and management costs 70,765
 68,627
 2,138
 3 % (36) 2,174
Real estate taxes and insurance 48,721
 47,675
 1,046
 2 % 24
 1,022
Asset management fees to affiliate 19,223
 18,646
 577
 3 % 252
 325
Real estate acquisition fees to affiliate —
 1,473
 (1,473) (100)% (1,473) n/a
Real estate acquisition fees and expenses —
 306
 (306) (100)% (306) n/a
General and administrative expenses 3,324
 4,115
 (791) (19)% n/a
 n/a
Depreciation and amortization 124,370
 120,088
 4,282
 4 % 246
 4,036
Interest expense 45,257
 53,948
 (8,691) (16)% n/a
 n/a
Other income 650
 —
 650
 100 % —
 650

_____________________
(1) Represents the dollar amount increase (decrease) for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 related to real estate investments acquired or repaid on or after January 1, 2016.
(2) Represents the dollar amount increase (decrease) for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 with respect to real estate investments owned by us throughout both periods presented.
Rental income and tenant reimbursements from our real estate properties increased from $283.6 million for the nine months ended September 30, 2016 to $293.9 million for the nine months ended September 30, 2017. The increase in rental income and tenant reimbursements for properties held throughout both periods was primarily due to an increase in lease termination fees, rental rates, operating expense recoveries and property tax recoveries. We expect rental income and tenant reimbursements to vary in future periods based on occupancy rates and rental rates of our real estate investments and increase based on the development and subsequent operation of Hardware Village and upon the acquisition of the developer's 25% equity interest and subsequent operation of Village Center Station II.

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Equity in income (loss) of an unconsolidated entity relates to our investment in the SREIT. During the three months ended September 30, 2020 and 2021, we recorded equity in income of an unconsolidated entity of $0.6 million and $1.6 million, respectively. Equity in income of an unconsolidated entity for the three months ended September 30, 2021 included a gain of $1.1 million to reflect the net effect to our investment of the net proceeds raised by the SREIT in a private offering in July 2021. Based on our 24.8% ownership interest in the SREIT as of September 30, 2021, we exercise significant influence over the operations, financial policies and decision making with respect to this investment. Accordingly, we accounted for the investment in the SREIT under the equity method of accounting as of September 30, 2021. We expect our equity in income (loss) of an unconsolidated entity related to our investment in the SREIT to vary based on occupancy rates and rental rates of the SREIT’s real estate investments, due to fair value changes with respect to the SREIT’s interest rate swaps that are not accounted for as cash flow hedges and uncertainty and business disruptions or recoveries as a result of the COVID-19 pandemic.

Comparison of the nine months ended September 30, 2021 versus the nine months ended September 30, 2020
The following table provides summary information about our results of operations for the nine months ended September 30, 2021 and 2020 (dollar amounts in thousands):
 Nine Months Ended
September 30,		Increase
(Decrease)		Percentage Change
$ Changes Due to Dispositions
and Loan Pay-off (1)
$ Change Due to Properties Held
Throughout Both Periods (2)
 20212020
Rental income$209,396 $211,385 $(1,989)(1)%$(9,002)$7,013 
Interest income from real estate loan receivable— 3,236 (3,236)(100)%(3,236)— 
Other operating income12,254 14,555 (2,301)(16)%(894)(1,407)
Operating, maintenance and management49,378 52,553 (3,175)(6)%(3,160)(15)
Real estate taxes and insurance43,371 43,052 319 1 %(1,356)1,675 
Asset management fees to affiliate14,858 15,704 (846)(5)%(1,210)364 
General and administrative expenses5,223 4,756 467 10 %n/an/a
Depreciation and amortization83,617 82,629 988 1 %(3,563)4,551 
Interest expense25,372 71,460 (46,088)(64)%(920)(45,168)
Impairment charges on real estate— 19,896 (19,896)(100)%— (19,896)
Other interest income41 60 (19)(32)%n/an/a
Equity in income (loss) of an unconsolidated entity4,945 (1,408)6,353 (451)%— 6,353 
Loss from extinguishment of debt— (188)188 (100)%— 188 
Gain on sale of real estate, net20,459 50,959 (30,500)(60)%(30,500)— 
Provision for credit loss on real estate loan receivable— (680)680 (100)%680 — 
_____________________
(1) Represents the dollar amount increase (decrease) for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 related to real estate dispositions and a real estate loan paid off on or after on or after January 1, 2020.
(2) Represents the dollar amount increase (decrease) for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 related to real estate investments owned by us throughout both periods presented.
Rental income from our real estate properties decreased from $211.4 million for the nine months ended September 30, 2020 to $209.4 million for the nine months ended September 30, 2021. The decrease in rental income was primarily due to the dispositions of Hardware Village in May 2020 and Anchor Centre in January 2021, partially offset by an increase in rental income related to the commencement of a lease at Domain Gateway in January 2021 and lease termination income received during the nine months ended September 30, 2021. We expect rental income to decrease in future periods to the extent we dispose of properties, to vary based on occupancy rates and rental rates of our real estate investments and uncertainty and business disruptions or recoveries as a result of the COVID-19 pandemic and to increase due to tenant reimbursements related to operating expenses as physical occupancy increases as employees return to the office. See “Market Outlook – Real Estate and Real Estate Finance Markets – COVID-19 Pandemic and Portfolio Outlook” for a discussion on the impact of the COVID-19 pandemic on our business.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Interest income from our real estate loan receivable, recognized using the interest method, was $3.2 million for the nine months ended September 30, 2020. On May 7, 2020, in connection with the sale of Hardware Village, we, through an indirect wholly owned subsidiary, provided seller financing and entered into a promissory note with the buyer. The promissory note was paid off in full on December 11, 2020. We did not own any real estate loans receivable during the nine months ended September 30, 2021.
Other operating income increaseddecreased from $15.5$14.6 million during the nine months ended September 30, 20162020 to $17.1$12.3 million for the nine months ended September 30, 2017.2021. The increasedecrease in other operating income was primarily due to a decrease in parking revenues for properties held throughout both periods was primarily due to an increasea decrease in parking revenues.physical occupancy as a result of the COVID-19 pandemic and the disposition of Anchor Centre in January 2021. We expect other operating income to vary in future periods based on occupancy rates and parking rates at our real estate properties, and increase upon the acquisitionbusiness disruptions or recoveries as a result of the developer's 25% equity interestCOVID-19 pandemic and subsequent operationto decrease to the extent we dispose of Village Center Station II.properties.
Interest income from our real estate loan receivable, recognized using the interest method,Operating, maintenance and management costs decreased from $0.8$52.6 million for the nine months ended September 30, 20162020 to $0 for the nine months ended September 30, 2017 as a result of the payoff of the real estate loan receivable on July 1, 2016.
Operating, maintenance and management costs increased from $68.6$49.4 million for the nine months ended September 30, 2016 to $70.8 million for the nine months ended September 30, 2017.2021. The increasedecrease in operating, maintenance and management costs for properties held throughout both periods was primarily due to an increasethe dispositions of Hardware Village in repairsMay 2020 and maintenance and management fees.Anchor Centre in January 2021.  We expect operating, maintenance and management costs to increase in future periods as a result of general inflation and as physical occupancy increases as employees return to the developmentoffice and subsequent operationto decrease to the extent we dispose of Hardware Village and upon the acquisition of the developer's 25% equity interest and subsequent operation of Village Center Station II and general inflation.additional properties.
Real estate taxes and insurance increased slightly from $47.7$43.1 million for the nine months ended September 30, 20162020 to $48.7$43.4 million for the nine months ended September 30, 2017.2021. The increase in real estate taxes and insurance was primarily due to a net increase in real estate taxes due to higher property tax assessments for real estate properties held throughout both periods, was primarily due to higher property taxes as a resultoffset by the dispositions of reassessments for 500 West Madison.Hardware Village in May 2020 and Anchor Centre in January 2021. We expect real estate taxes and insurance to increase in future periods as a result of the development and subsequent operation of Hardware Village and upon the acquisition of the developer's 25% equity interest and subsequent operation of Village Center Station IIgeneral inflation and general increases due to future property tax reassessments.reassessments for properties that we continue to own and to decrease to the extent we dispose of properties.
Asset management fees with respect to our real estate investments increaseddecreased from $18.6$15.7 million for the nine months ended September 30, 20162020 to $19.2$14.9 million for the nine months ended September 30, 2017.2021, primarily due to the dispositions of Hardware Village in May 2020 and Anchor Centre in January 2021 and the payoff of our real estate loan receivable in December 2020, offset by an increase in capital improvements at real estate properties held throughout both periods. We expect asset management fees to increase in future periods as a result of the development and subsequent operation of Hardware Village, upon the acquisition of the developer's 25% equity interest and subsequent operation of Village Center Station II and as a result of any improvements we make to our properties which increase would be offsetand to decrease to the extent we dispose of any of our assets.additional properties. As of September 30, 2017, $2.22021, there were $8.8 million of accrued asset management fees, were payable,of which were subsequently paid in November 2017.$8.0 million was deferred as of September 30, 2021. For a discussion of accrued and deferred asset management fees, see “– Liquidity and Capital Resources” herein.
Real estate acquisition feesGeneral and administrative expenses to affiliate and non-affiliates decreasedincreased from $1.8$4.8 million for the nine months ended September 30, 20162020 to $0$5.2 million for the nine months ended September 30, 20172021, primarily due to a decreaseappraisal fees related to the update of our estimated value per share in acquisition activity. DuringMay 2021 and an increase in legal fees and proxy costs incurred during the nine months ended September 30, 2017, we did not acquire any investments accounted for as a business combination, but we did make an investment in an unconsolidated joint venture. During the nine months ended September 30, 2017, we capitalized an aggregate2021. General and administrative costs consisted primarily of $0.7 million in acquisitionportfolio legal fees, board of directors fees, audit costs and third party transfer agent fees. We expect general and administrative expenses related to the development of Hardware Village and the investment in the unconsolidated joint venture investment, the Village Center Station II Joint Venture. During the nine months ended September 30, 2016, we acquired one real estate property accounted for as a business combination for $146.1 million. We do not expect to incur any significant real estate acquisition fees and expensesvary in future periods.
Depreciation and amortization increased from $120.1$82.6 million for the nine months ended September 30, 20162020 to $124.4$83.6 million for the nine months ended September 30, 2017,2021, primarily due to an increase in capital improvements at properties held throughout both periods, offset by a decrease as a result of the accelerationsale of amortization of intangible assets related to a tenant relocation and lease termination at a property held throughout both periods.Anchor Centre in January 2021. We expect depreciation and amortization to varyincrease in future periods as a result of additional capital improvements, offset by a decrease in amortization related to fully amortized tenant origination and absorption costs and increase as a resultto the extent we dispose of the development and subsequent operation of Hardware Village and upon the acquisition of the developer's 25% equity interest and subsequent operation of Village Center Station II.properties.
Interest expense decreased from $53.9$71.5 million for the nine months ended September 30, 20162020 to $45.3$25.4 million for the nine months ended September 30, 2017.2021. Included in interest expense iswas (i) $29.4 million and $22.7 million of interest expense payments for the nine months ended September 30, 2020 and 2021, respectively, (ii) the amortization of deferred financing costs of $3.8$3.2 million and $3.8$3.0 million for the nine months ended September 30, 20162020 and 2017, respectively. Additionally, during the nine months ended September 30, 2017, we capitalized $0.1 million2021, respectively, and $1.5 million of(iii) interest to construction-in-progress related to Hardware Villageexpense (including gains and Village Center Station II, respectively. Interest expenselosses) incurred as a result of our derivative instruments, which increased interest expense by $38.9 million for the nine months ended September 30, 20162020 and 2017 was $20.5decreased interest expense by $0.3 million and $3.1 million, respectively, which includes $14.8 million of unrealized losses and $2.6 million of unrealized gains on derivative instruments for the nine months ended September 30, 2016 and 2017, respectively.2021. The decrease in interest expense iswas primarily due to a decrease in average outstanding balances on our loans, a lower 30-day LIBOR during the nine months ended September 30, 2021 and its impact on interest expense related to our variable rate debt and a decrease in interest expense due to changes in the value offair values with respect to our interest rate swaps that are not accounted for as otherwise interest expense would have increased due to the increased level of borrowings. Wecash flow hedges. In general, we expect interest expense to increase in future periods as a result of additional borrowings for capital expenditures and development activity. In addition, our interest expense in future periods will vary based on fair value changes with respect to our interest rate swaps that are not accounted for as cash flow hedges, and fluctuations in one-month LIBOR (for our variable rate debt). 

and our level of future borrowings.
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

During the nine months ended September 30, 2020, we recorded non-cash impairment charges of $19.9 million to write down the carrying value of an office/retail property to its estimated fair value as a result of changes in cash flow estimates, including a change to the anticipated hold period of the property, which triggered the future estimated undiscounted cash flows to be lower than the net carrying value of the property. The decrease in cash flow projections was primarily due to the continued lack of demand for the property’s retail component resulting in longer than estimated lease-up periods and lower projected rental rates, mostly due to the impact of the COVID-19 pandemic. We did not record any impairment charges on our real estate properties during the nine months ended September 30, 2021.
Equity in income (loss) of an unconsolidated entity relates to our investment in the SREIT. We recorded equity in loss of an unconsolidated entity of $1.4 million and equity in income of an unconsolidated entity of $4.9 million related to our investment in the SREIT during the nine months ended September 30, 2020 and 2021, respectively. Equity in loss of an unconsolidated entity during the nine months ended September 30, 2020 included $3.5 million related to our share of the net losses from the SREIT offset by a gain of $2.1 million to reflect the net effect to our investment as a result of the net proceeds raised by the SREIT in a private offering in February 2020. Equity in income of an unconsolidated entity during the nine months ended September 30, 2021 included a gain of $1.1 million to reflect the net effect to our investment as a result of the net proceeds raised by the SREIT in a private offering in July 2021. Based on our 24.8% ownership interest in the SREIT as of September 30, 2021, we exercise significant influence over the operations, financial policies and decision making with respect to this investment. Accordingly, we accounted for the investment in the SREIT under the equity method of accounting as of September 30, 2021. We expect our equity in income (loss) of an unconsolidated entity related to our investment in the SREIT to vary based on occupancy rates and rental rates of the SREIT’s real estate investments, due to fair value changes with respect to the SREIT’s interest rate swaps that are not accounted for as cash flow hedges and uncertainty and business disruptions or recoveries as a result of the COVID-19 pandemic.
During the nine months ended September 30, 2017,2021, we receivedrecognized a gain on sale of real estate of $20.5 million related to the disposition of Anchor Centre and during the nine months ended September 30, 2020, we recognized a gain on sale of real estate of $50.9 million related to disposition of Hardware Village.
We recognized a provision for credit loss of $0.7 million related to our investment in proceeds from a one-time easement agreement,real estate loan receivable during the nine months ended September 30, 2020. Under the current expected credit loss (CECL) model, we were required to measure and record an allowance for credit losses upon the initial recognition of a real estate loan receivable to present the net amount expected to be collected, which is includedwas re-measured at each balance sheet date based on changes in other income infacts and circumstances. The allowance was adjusted through the accompanyingprovision for credit loss on our consolidated statements of operations.operations and was increased or decreased based on the re-measurement of the allowance for credit loss at each balance sheet date through the date of repayment of the loan in December 2020. We did not own any real estate loans receivable during the nine months ended September 30, 2021.

Funds from Operations and Modified Funds from Operations
We believe that funds from operations (“FFO”) is a beneficial indicator of the performance of an equity REIT. We compute FFO in accordance with the current National Association of Real Estate Investment Trusts (“NAREIT”) definition. FFO represents net income, excluding gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), gains and losses from change in control, impairment losses on real estate assets, depreciation and amortization of real estate assets, and adjustments for unconsolidated partnerships and joint ventures. We believe FFO facilitates comparisons of operating performance between periods and among other REITs. However, our computation of FFO may not be comparable to other REITs that do not define FFO in accordance with the NAREIT definition or that interpret the current NAREIT definition differently than we do. Our management believes that historical cost accounting for real estate assets in accordance with U.S. generally accepted accounting principles (“GAAP”) implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and provides a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities.
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Changes in accounting rules have resulted in a substantial increase in the number of non-operating and non-cash items included in the calculation of FFO. As a result, our management also uses MFFO as an indicator of our ongoing performance as well as our dividend sustainability. MFFO excludes from FFO: acquisition fees and expenses (to the extent that such fees and expenses have been recorded as operating expenses); adjustments related to contingent purchase price obligations; amounts relating to straight-line rents and amortization of above and below market intangible lease assets and liabilities; accretion of discounts and amortization of premiums on debt investments; amortization of closing costs relating to debt investments; impairments of real estate-related investments; mark-to-market adjustments included in net income; and gains or losses included in net income for the extinguishment or sale of debt or hedges. We compute MFFO in accordance with the definition of MFFO included in the practice guideline issued by the IPA in November 2010 as interpreted by management. Our computation of MFFO may not be comparable to other REITs that do not compute MFFO in accordance with the current IPA definition or that interpret the current IPA definition differently than we do.
We believe that MFFO is helpful as a measure of ongoing operating performance because it excludes costs that management considers more reflective of investing activities and other non-operating items included in FFO.  Management believes that excluding acquisition fees and expenses (to the extent that such fees and expenses have been recorded as operating expenses) from MFFO provides investors with supplemental performance information that is consistent with management’s analysis of the operating performance of the portfolio over time, including periods after our acquisition stage.time. MFFO also excludes non-cash items such as straight-line rental revenue. Additionally, we believe that MFFO provides investors with supplemental performance information that is consistent with the performance indicators and analysis used by management, in addition to net income and cash flows from operating activities as defined by GAAP, to evaluate the sustainability of our operating performance. MFFO provides comparability in evaluating the operating performance of our portfolio with other non-traded REITs which typically have limited lives with short and defined acquisition periods and targeted exit strategies.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.

measures; however, neither FFO nor MFFO reflects adjustments for the operations of properties sold or under contract to sale during the periods presented. During periods of significant disposition activity, FFO and MFFO are much more limited measures of future performance and dividend sustainability. In connection with our presentation of FFO, MFFO and Adjusted MFFO, we are providing information related to the proportion of Adjusted MFFO related to properties sold in 2020 and during the nine months ended September 30, 2021, the property held for sale as of September 30, 2021 and a real estate loan receivable paid off in full on December 11, 2020.
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Although MFFO includes other adjustments, the exclusion of adjustments for straight-line rent, the amortization of above- and below-market leases, amortization of discounts and closing costs, unrealized (gains) losses on derivative instruments, loss from extinguishment of debt and acquisition fees and expenses (as applicable)provision for credit loss 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 assets and lease related costs that are excluded from FFO, GAAP implicitly assumes that the value of intangible lease assets and liabilities diminishes predictably over time and requires that these charges be recognized currently in revenue.  Since market lease rates in the aggregate have historically risen or fallen with local market conditions, management believes that by excluding these charges, MFFO provides useful supplemental information on the realized economics of the real estate;
•Amortization of discounts and closing costs. Discounts and closing costs related to debt investments are amortized over the term of the loan as an adjustment to interest income. This application results in income recognition that is different than the underlying contractual terms of the debt investments. We have excluded the amortization of discounts and closing costs related to our debt investments in our calculation of MFFO to more appropriately reflect the economic impact of our debt investments, as discounts will not be economically recognized until the loan is repaid and closing costs are essentially the same as acquisition fees and expenses on real estate. We believe excluding these items provides investors with a useful supplemental metric that directly addresses core operating performance;
•Unrealized (gains) losseslosses on derivative instruments.  These adjustments include unrealized (gains) losses from mark-to-market adjustments on interest rate swaps. The change in fair value of interest rate swaps not designated as a hedge are non-cash adjustments recognized directly in earnings and are included in interest expense.  We have excluded these adjustments in our calculation of MFFO to more appropriately reflect the economic impact of our interest rate swap agreements; and
Acquisition•Loss from extinguishment of debt. A loss from extinguishment of debt, which includes prepayment fees and expenses. Prior to our early adoption of ASU No. 2017-01 on January 1, 2017, acquisition fees and expenses related to the acquisitionextinguishment of real estate were generally expensed.  Althoughdebt, represents the difference between the carrying value of any consideration transferred to the lender in return for the extinguishment of a debt and the net carrying value of the debt at the time of settlement. We have excluded the loss from extinguishment of debt in our calculation of MFFO because these amounts reduce net income, we exclude them from MFFO to more appropriately presentlosses do not impact the ongoingcurrent operating performance of our investments and do not provide an indication of future operating performance; and
•Provision for credit loss on real estate investmentsloan receivable. A provision for credit loss on a comparative basis.  Additionally, acquisition feesreal estate loan receivable represents a write-down of the carrying value of a real estate loan to reflect the net amount expected to be collected. Although these losses are included in the calculation of net income (loss), we have excluded the provision for credit loss in our calculation of MFFO because the provision for credit loss does not impact the current operating performance of our investment, and expenses have been funded from the proceeds from our now-terminated initial public offering and debt financings andmay or may not from our operations.provide an indication of future operating performance. We believe this exclusionit is useful to investors to have a supplemental metric that addresses core operating performance directly and therefore excludes such things as it allows investors to more accurately evaluate the sustainabilityprovision for credit loss on real estate loans receivable.
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Table of our operating performance.Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Our calculation of FFO, which we believe is consistent with the calculation of FFO as defined by NAREIT, is presented in the following table, along with our calculation of MFFO and Adjusted MFFO, for the three and nine months ended September 30, 20172021 and 2016,2020, respectively (in thousands). No conclusions or comparisons should be made from the presentation of these periods.
  For the Three Months Ended September 30, For the Nine Months Ended September 30,
  2017 2016 2017 2016
Net (loss) income attributable to common stockholders $(3,151) $3,859
 $267
 $(14,872)
Depreciation of real estate assets 21,729
 19,652
 63,793
 57,291
Amortization of lease-related costs 19,422
 20,326
 60,577
 62,797
FFO attributable to common stockholders (1)
 38,000
 43,837
 124,637
 105,216
      Straight-line rent and amortization of above- and below-market leases, net (4,140) (5,655) (13,176) (20,812)
      Amortization of discounts and closing costs —
 —
 —
 15
      Unrealized (gains) losses on derivative instruments (1,004) (3,745) (2,579) 14,813
      Real estate acquisition fees to affiliate —
 —
 —
 1,473
      Real estate acquisition fees and expenses —
 5
 —
 306
MFFO attributable to common stockholders (1)
 $32,856
 $34,442
 $108,882
 $101,011
_____________________
For the Three Months Ended
September 30,		For the Nine Months Ended
September 30,
2021202020212020
Net (loss) income attributable to common stockholders$(2,235)$1,119 $25,276 $(18,276)
Depreciation of real estate assets22,132 21,027 64,890 61,834 
Amortization of lease-related costs6,166 6,852 18,727 20,795 
Impairment charges on real estate— — — 19,896 
Gain on sale of real estate, net— (21)(20,459)(50,959)
Adjustments for noncontrolling interests - consolidated entity (1)
— — — 6,144 
Adjustment for investment in an unconsolidated entity (2)
3,804 4,515 12,833 11,496 
FFO attributable to common stockholders (3)
29,867 33,492 101,267 50,930 
Straight-line rent and amortization of above- and below-market leases, net(1,202)(1,755)(5,918)(6,178)
Amortization of discount and closing costs— (642)— (1,172)
Loss from extinguishment of debt— — — 188 
Unrealized (gains) losses on derivative instruments(3,910)(4,532)(13,740)29,484 
Provision for credit loss on real estate loan receivable— — — 680 
Adjustment for investment in an unconsolidated entity (2)
(428)(170)(3,141)4,928 
MFFO attributable to common stockholders (3)
24,327 26,393 78,468 78,860 
Adjustment for a contractual rent payment received but deferred (4)
— 1,142 — 2,666 
Adjusted MFFO attributable to common stockholders (3)
$24,327 $27,535 $78,468 $81,526 
_____________________
(1) Reflects adjustments to eliminate the noncontrolling interest holder’s share of the adjustments to convert our net income (loss) attributable to common stockholders to FFO.
(2) Reflects our noncontrolling interest share of adjustments to convert our net income (loss) attributable to common stockholders to FFO and MFFO includes $1.0for our equity investment in an unconsolidated entity.
(3) FFO, MFFO and Adjusted MFFO include $0.2 million and $7.0$1.2 million of lease termination income for the three and nine months ended September 30, 2017, respectively. FFO2021, respectively, and MFFO includes $0.3$0.4 million and $0.7$0.5 million of lease termination income for the three and nine months ended September 30, 2016,2020, respectively.
(4) Adjustment for rent contractually due and collected per the terms of a lease agreement, but deferred and not recognized into rental income for purposes of GAAP as the tenant improvements were under construction. We began recognizing this deferred revenue over the term of the lease beginning January 1, 2021.
Our calculation of Adjusted MFFO above includes amounts related to the operations of an office property sold on January 19, 2021, the operations of the multifamily apartment complex held by the Hardware Village joint venture that was sold on May 7, 2020, interest income from our real estate loan receivable paid off in full on December 11, 2020 and the operations of a property that was held for sale as of September 30, 2021. Please refer to the table below with respect to the proportion of Adjusted MFFO related to the real estate properties sold, the property held for sale as of September 30, 2021 and the real estate loan receivable paid off (in thousands).
 For the Three Months Ended
September 30,		For the Nine Months Ended
September 30,
2021202020212020
Adjusted MFFO by component:
Assets held for investment$23,153 $25,143 $74,604 $76,683 
Real estate properties sold30 1,138 16 3,261 
Real estate property held for sale1,144 98 3,848 (113)
Real estate loan receivable paid off— 1,156 — 1,695 
Adjusted MFFO$24,327 $27,535 $78,468 $81,526 

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
FFO and MFFO may also be used to fund all or a portion of certain capitalizable items that are excluded from FFO and MFFO, such as tenant improvements, building improvements and deferred leasing costs.


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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Distributions
From time to time during our operational stage, we may not pay distributions solely from our cash flow from operating activities or FFO, in which case distributions may be paid in whole or in part from debt financing. Distributions declared, distributions paid and cash flow from operating activities were as follows for the first, second and third quarters of 20172021 (in thousands, except per share amounts):
  
Distributions Declared (1)
 
Distributions Declared
Per Share (1) (2)
 
Distributions Paid (3)
 
Cash Flow from
Operating Activities
Period   Cash Reinvested Total 
First Quarter 2017 $29,080
 $0.160
 $14,067
 $14,987
 $29,054
 $19,097
Second Quarter 2017 29,421
 0.162
 14,640
 15,110
 29,750
 39,521
Third Quarter 2017 29,650
 0.164
 14,689
 15,001
 29,690
 31,947
  $88,151
 $0.486
 $43,396
 $45,098
 $88,494
 $90,565
PeriodDistributions Declared
Distributions Declared Per Share (1)
Distributions Paid (2)
Cash Flow from Operating Activities
CashReinvestedTotal
First Quarter 2021$27,640 $0.149 $16,274 $11,326 $27,600 $16,295 
Second Quarter 202127,755 0.149 22,024 14,959 36,983 27,698 
Third Quarter 202123,863 0.150 9,434 6,507 15,941 32,247 
$79,258 $0.448 $47,732 $32,792 $80,524 $76,240 
_____________________
(1) Assumes share was issued and outstanding on each monthly record date for distributions during the period presented. For each monthly record date for distributions during the period from January 1, 2021 through September 30, 2021, distributions were calculated at a rate of $0.04983333 per share.
(2) Distributions are generally paid on a monthly basis. Distributions for the monthly record date of a given month are paid on or about the first business day of the following month; however, we accelerated the payment of the June 2021 distributions due to the timing of the Self-Tender.
(1)
Distributions for the period from January 1, 2017 through September 30, 2017 were based on daily record dates and were calculated at a rate of $0.00178082 per share per day.
(2)
Assumes share was issued and outstanding each day during the period presented.
(3)
Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid on or about the first business day of the following month.
For the nine months ended September 30, 2017,2021, we paid aggregate distributions of $88.5$80.5 million, including $43.4$47.7 million of distributions paid in cash and $45.1$32.8 million of distributions reinvested through our dividend reinvestment plan. Our net income attributable to common stockholders for the nine months ended September 30, 20172021 was $0.3$25.3 million. FFO for the nine months ended September 30, 20172021 was $124.6$101.3 million and cash flow from operating activities was $90.6$76.2 million. See the reconciliation of FFO to net (loss) income attributable to common stockholders above. We funded our total distributions paid, which includes net cash distributions and dividends reinvested by stockholders, with $78.5$59.9 million of cash flow from current operating activities, and $10.0$4.2 million of cash flow from operating activities in excess of distributions paid during 2016.prior periods and $16.4 million of proceeds from the sale of real estate. For purposes of determining the source of our distributions paid, we assume first that we use cash flow from operating activities from the relevant or prior periods to fund distribution payments.
Over the long-term, we generally expect that a greater percentage of our distributions will be paid from current cash flow from operating activities from current periods or prior periods (except with respect to distributions related to sales of our assets and distributions related to the sales or repayment of principal under any real estate-related investments we make)investments). From time to time during our operational stage, we may not pay distributions solely from our cash flow from operating activities.activities, in which case distributions may be paid in whole or in part from debt financing. To the extent that we pay distributions from sources other than our cash flow from operating activities, the overall return to our stockholders may be reduced. Further, our operating performance cannot be accurately predicted and may deteriorate in the future due to numerous factors, including those discussed under “Forward-Looking Statements” and “Market, “-Market Outlook - Real Estate and Real Estate Finance Markets”Markets,” “-Liquidity and Capital Resources,” and “-Results of Operations” herein, and the risks discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016,2020 and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the period ended March 31, 2021, each as filed with the SEC. Those factors include: the future operating performance of our real estate investments in the existing real estate and financial environment; the success and economic viability of our tenants; our ability to refinance existing indebtedness at comparable terms; changes in interest rates on any variable rate debt obligations we incur; and the level of participation in our dividend reinvestment plan.plan; and the extent to which the COVID-19 pandemic impacts our operations and those of our tenants and our investment in the SREIT. In the event our FFO and/or cash flow from operating activities decrease in the future, the level of our distributions may also decrease.  In addition, future distributions declared and paid may exceed FFO and/or cash flow from operating activities.

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Critical Accounting Policies
Our consolidated interim financial statements have been prepared in accordance with GAAP and in conjunction with the rules and regulations of the SEC. The preparation of our financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. A discussion of the accounting policies that management considers critical in that they involve significant management judgments, assumptions and estimates is included in our Annual Report on Form 10-K for the year ended December 31, 20162020 filed with the SEC. There have been no significant changes to our policies during 2017 except2021.

Subsequent Events
We evaluate subsequent events up until the date the consolidated financial statements are issued.
Distributions Paid
On October 1, 2021, we paid distributions of $7.9 million, which related to distributions in the amount of $0.04983333 per share of common stock to stockholders of record as of the close of business on September 20, 2021. On November 1, 2021, we paid distributions of $7.8 million, which related to distributions in the amount of $0.04983333 per share of common stock to stockholders of record as of the close of business on October 20, 2021.
Distributions Authorized
On November 1, 2021, our board of directors authorized a November 2021 distribution in the amount of $0.04983333 per share of common stock to stockholders of record as of the close of business on November 19, 2021, which we expect to pay in December 2021, and a December 2021 distribution in the amount of $0.04983333 per share of common stock to stockholders of record as of the close of business on December 20, 2021, which we expect to pay in January 2022.
Investors may choose to receive cash distributions or purchase additional shares through our dividend reinvestment plan.
Updated Estimated Value Per Share
On November 1, 2021, our board of directors approved an estimated value per share of our common stock of $10.78 based on the estimated value of our assets less the estimated value of our liabilities divided by the number of shares outstanding, all as of September 30, 2021, with the exception of adjustments to our net asset value to give effect to (i) the change in the estimated value of our investment in units of the SREIT (SGX-ST Ticker: OXMU) as of October 22, 2021 and (ii) the contractual sales price less estimated disposition costs and fees of one property that was under contract to sell as of November 1, 2021. For a full description of the limitations, methodologies and assumptions used to value our assets and liabilities in connection with the calculation of our estimated value per share, see our Current Report on Form 8-K, filed with the SEC on November 4, 2021.
Updated Dividend Reinvestment Plan Pricing
Pursuant to our dividend reinvestment plan, participants in the dividend reinvestment plan will acquire shares of our common stock under the plan at a price equal to 95% of the estimated value per share of our common stock. As such, commencing on the next dividend reinvestment plan purchase date, which is December 1, 2021, participants will acquire shares of our common stock under the plan at a price equal to 95% of $10.78, or $10.24 per share.
If a participant wishes to terminate participation in our dividend reinvestment plan effective for the additionDecember 1, 2021 purchase date, participants must notify us in writing of an accounting policysuch decision, and we must receive the notice by the close of business on November 23, 2021.
Updated Share Redemption Program Pricing
In accordance with respectour share redemption program, our redemption price for shares eligible for redemption is calculated based upon the updated estimated value per share. Under the Amended Share Redemption Program, Special Redemptions are made at a price per share equal to investments in unconsolidated joint ventures under the equity method.

most recent estimated value per share of our common stock as of the applicable redemption date. Ordinary Redemptions are made at a price per share equal to 96% of the most recent estimated value per share of our common stock as of the applicable redemption date.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Investments in Unconsolidated Joint Ventures
We account for investments in unconsolidated joint ventures over which we may exercise significant influence, but do not control, using the equity method of accounting. Under the equity method, the investment is initially recorded at cost and subsequently adjusted to reflect additional contributions or distributions and our proportionate share of equity in the joint venture’s income (loss). We recognize our proportionate share of the ongoing income or loss of the unconsolidated joint venture as equity in income (loss) of unconsolidated joint venture on the consolidated statements of operations. On a quarterly basis, we evaluate our investment in an unconsolidated joint venture for other-than-temporary impairments.
Subsequent Events
We evaluate subsequent events up until the date the consolidated financial statements are issued.
Distributions Paid
On October 2, 2017, we paid distributions of $9.7 million, which related to distributions declared for daily record dates for each day in the period from September 1, 2017 through September 30, 2017. On November 1, 2017, we paid distributions of $10.0 million, which related to distributions declared for daily record dates for each day in the period from October 1, 2017 through October 31, 2017.
Distributions Declared
On October 9, 2017, our board of directors authorized distributions based on daily record datesEffective for the period from November 1, 2017 through2021 redemption date, which is November 30, 2017, which we expect to pay in December 2017. On November 14, 2017, our board of directors authorized distributions based on daily record dates2021, the redemption price for the period from December 1, 2017 through December 31, 2017, which we expect to pay in January 2018, and distributions based on daily record dates for the period from January 1, 2018 through January 31, 2018, which we expect to pay in February 2018. Investors may choose to receive cash distributions or purchase additional shares through our dividend reinvestment plan.
Distributions for these periodsall stockholders will be calculated based on stockholders of record each day during these periods at a rate of $0.00178082 per share per day and equal a daily amount that, if paid each day for a 365-day period, would equal a 6.11% annualized rate based on our December 9, 2016the November 2021 estimated value per shareshare. For a stockholder’s shares to be eligible for redemption in a given month or to withdraw a redemption request, we must receive a written notice from the stockholder or from an authorized representative of $10.63.the stockholder in good order and on a form approved by us at least five business days before the redemption date.
Financing SubsequentDisposition of Domain Gateway
On September 29, 2011, we, through an indirect wholly owned subsidiary, purchased a five-story office building containing 183,911 rentable square feet located on approximately 4.3 acres of land in Austin, Texas (“Domain Gateway”). On November 2, 2021, we completed the sale of Domain Gateway to September 30, 2017a purchaser unaffiliated with us or our advisor, for $143.0 million, before third-party closing costs, closing credits and disposition fees payable to our advisor. The aggregate cost of Domain Gateway, which includes the initial purchase price plus capital expenditures since acquisition and acquisition fees and expenses, but excludes any reductions to the net book value of the property due to historical depreciation and amortization expense, was $69.1 million. In connection with the disposition of Domain Gateway, we paid down $69.7 million of principal balance due under the Modified Portfolio Revolving Loan Facility.
Amended and Restated Portfolio Loan Facility
On November 3, 2017,2021, we, through indirect wholly owned subsidiaries, (each a “Borrower”), entered into a three-yeartwo-year loan facilityagreement with Bank of America, N.A., as administrative agent; Merril Lynch Pierce Fenner & Smith Incorporated,BofA Securities, Inc., Wells Fargo Securities, LLC and U.S. Bank, N.A.,Capital One, National Association as joint lead arrangers and joint book runners; Wells Fargo Bank, NA,N.A., as syndication agent, and each of the financial institutions a signatory thereto, (the “Lenders”), for an amount of up to $1.01 billion (the “Portfolio Loan Facility”),$613.2 million, of which $757.5$459.9 million is term debt and $252.5$153.3 million is revolving debt. Proceeds from theAt closing, $459.9 million of term debt and $57.1 million of revolving debt were used to pay off and address the upcoming 2018 loan maturities for the existing Town Center Mortgage Loan, RBC Plaza Mortgage Loan, National Office Portfolio Mortgage Loan, 500 West Madison Mortgage Loan, Ten Almaden Mortgage Loan and Towers at Emeryville Mortgage Loan. At closing, $787.5 million was funded, of which $776.0 million was used to pay off thein full our existing mortgage loans (listed above) and the remaining amount was used to pay origination fees and accrued interest. The $787.5 million funded consisted of $757.5 million of term debt and $30.0 million of revolving debt. TheModified Portfolio Loan Facility, may be used for the repayment of debt, for tenant improvements, leasing commissions and capital improvements, for working capital or liquidity managementan additional $96.2 million of the company and for other purposes described in the loan agreement. During the term of the Portfolio Loan Facility, we have an option to increase the aggregate loan amount by up to an additional $400.0 million in increments of $25.0 million, to a maximum of $1.41 billion, 25% of which would be revolving debt and 75% of which would be term debt, subject to certain conditions contained in the loan agreement.
The Portfolio Loan Facility matures on November 3, 2020, with two 12-month extension options,remains available for future disbursements, subject to certain terms and conditions contained in the loan documents. TheSee Part II, Item 5 “Other Information,” for more information about our Amended and Restated Portfolio Loan Facility bears interest at a floating rate of 180 basis points over one-month LIBOR during the initial term of the loan and monthly payments are interest only with the entire balance and all outstanding interest and fees due at maturity, assuming no prior prepayment. We will have the right to prepay all of the Portfolio Loan Facility, subject to certain expenses potentially incurred by the Lenders as a result of the prepayment and subject to certain conditions contained in the loan documents. In addition, the Portfolio Loan Facility contains customary representations and warranties, financial and other affirmative and negative covenants (including maintenance of an ongoing debt service coverage ratio), events of default and remedies typical for this type of facility.Facility.


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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

On November 3, 2017, KBS REIT Properties III, LLC (“REIT Properties III”), an indirect wholly owned subsidiary of us, entered into three interest rate swap agreements with a current aggregate notional amount of $451.5 million. As of November 3, 2017, we had three existing interest rate swaps related to the paid off loans with a current notional amount in the aggregate of $306.0 million. As the existing interest rate swaps expire at various times from January 1, 2018 through January 1, 2020, the notional amount of the new interest rate swaps in the aggregate will increase to maintain a notional amount of $757.5 million. The new and existing interest rate swaps, in the aggregate, effectively fix the interest rate on the term portion of the Portfolio Loan Facility at a blended rate of 3.861%, effective from November 3, 2017 through November 1, 2022.
The Portfolio Loan Facility is secured by RBC Plaza, Preston Commons, Sterling Plaza, One Washingtonian Center, Towers at Emeryville, Ten Almaden, Town Center and 500 West Madison. We have the right to substitute properties securing the Portfolio Loan Facility at any time, subject to approval of the Lenders and compliance with the terms and conditions described in the loan agreement.
Under the guaranty agreement related to the Portfolio Loan Facility (the “Guaranty”), REIT Properties III (i) provides a guaranty of, among other sums described in the Guaranty, all principal and interest outstanding under the Portfolio Loan Facility in the event of certain bankruptcy or insolvency proceedings involving REIT Properties III, any Borrower or any of their affiliates and (ii) guarantees payment of, and agrees to protect, defend, indemnify and hold harmless each Lender for, from and against, any deficiency, loss or damage suffered by any Lender because of (a) certain intentional acts committed by any Borrower or (b) certain bankruptcy or insolvency proceedings involving REIT Properties III, any Borrower or any of their affiliates, as such acts are described in the Guaranty.


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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity and to fund the acquisition, expansion and refinancing of our real estate investment portfolio and operations. We may also be exposed to the effects of changes in interest rates as a result of the future acquisition and origination of mortgage and other loans. Our profitability and the value of our real estate investment portfolio may be adversely affected during any period as a result of interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs. We may manage interest rate risk by maintaining a ratio of fixed rate, long-term debt such that variable rate exposure is kept at an acceptable level or we may utilizeby utilizing a variety of financial instruments, including interest rate caps, floors, and swap agreements, in order to limit the effects of changes in interest rates on our operations. When we use these types of derivatives to hedge the risk of interest-earning assets or interest-bearing liabilities, we may be subject to certain risks, including the risk that losses on a hedge position will reduce the funds available for the payment of distributions to our stockholders and that the losses may exceed the amount we invested in the instruments.
We borrow funds and make investments at a combination of fixed and variable rates. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt, or fixed rate real estate loans receivable, if any, unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. As of September 30, 2017,2021, the fair value of our fixed rate debt was $193.5$126.5 million and the outstanding principal balance of our fixed rate debt was $192.9$123.0 million.  The fair value estimate of our fixed rate debt is calculated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loan was originated as of September 30, 2017.2021.  As we expect to hold our fixed rate instruments to maturity (unless the property securing the debt is sold and the loan is repaid) and the amounts due under such instruments would be limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that fluctuations in interest rates, and the resulting change in fair value of our fixed rate instruments, would have a significant impact on our operations.  As of September 30, 2017, we did not own any fixed rate loans receivable.
Conversely, movements in interest rates on our variable rate debt would change our future earnings and cash flows, but not significantly affect the fair value of those instruments. However, changes in required risk premiums would result in changes in the fair value of variable rate instruments. As of September 30, 2017,2021, we were exposed to market risks related to fluctuations in interest rates on $630.9$355.9 million of variable rate debt outstanding after giving consideration to the impact of interest rate swap agreements on approximately $1.1 billion of our variable rate debt. This amount does not take into account the impact of $91.5 million of forward interest rate swap agreements that were not yet effective as of September 30, 2017. Based on interest rates as of September 30, 2017,2021, if interest rates were 100 basis points higher or lower during the 12 months ending September 30, 2018,2022, interest expense on our variable rate debt would increase or decrease by $6.3$3.6 million. As of September 30, 2017, we did not own any variable
The interest rate loans receivable.
Theand weighted-average effective interest ratesrate of our fixed rate debt and variable rate debt as of September 30, 20172021 were 4.1%3.7% and 3.2%3.0%, respectively.  The weighted-average effective interest rates representrate represents the actual interest rate in effect as of September 30, 20172021 (consisting of the contractual interest rate and the effect of interest rate swaps, if applicable), using interest rate indices as of September 30, 20172021 where applicable.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 3. Quantitative and Qualitative Disclosures about Market Risk (continued)
We are exposed to financial market risk with respect to our investment in the SREIT (SGX-ST Ticker: OXMU). Financial market risk is the risk that we will incur economic losses due to adverse changes in our investment’s security price. Our exposure to changes in security prices is a result of our investment in these types of securities. Market prices are subject to fluctuation and, therefore, the amount realized in the subsequent sale of an investment may significantly differ from our carrying value. Fluctuation in the market prices of a security may result from any number of factors, including perceived changes in the underlying fundamental characteristics of the issuer, the relative price of alternative investments, interest rates, default rates and general market conditions. The SREIT’s units were first listed for trading on the SGX-ST on July 19, 2019. If an active trading market for the units does not develop or is not sustained, it may be difficult to sell our units. The market for Singapore REITs may trade a small number of securities and may be unable to respond effectively to increases in trading volume, potentially making prompt liquidation of our investment in the SREIT difficult. Even if an active trading market develops or we are able to negotiate block trades, if we or other significant investors sell or are perceived as intending to sell a substantial amount of units in a short period of time, the market price of our remaining units could be adversely affected. In addition, as a foreign equity investment, the trading price of units of the SREIT may be affected by political, economic, financial and social factors in the Singapore and Asian markets, including changes in government, economic and fiscal policies. Furthermore, we may be limited in our ability to sell our investment in the SREIT if our advisor and/or its affiliates are deemed to have material, non-public information regarding the SREIT. Charles J. Schreiber, Jr., the Chairman of our Board, our Chief Executive Officer, our President and our affiliated director, is a director of the external manager of the SREIT, and an affiliate of our advisor services as the U.S. asset manager to the SREIT. We do not currently engage in derivative or other hedging transactions to manage our investment’s security price risk. As of September 30, 2021, we held 289,561,899 units of the SREIT which represented 24.8% of the outstanding units of the SREIT. As of September 30, 2021, the aggregate value of our investment in the units of the SREIT was $247.6 million, which was based solely on the closing price of the SREIT units on the SGX-ST of $0.86 per unit as of September 30, 2021, and did not take into account any potential discount for the holding period risk due to the quantity of units held by us relative to the normal level of trading volume in the units. Based solely on the closing price per unit of the SREIT units as of September 30, 2021, if prices were to increase or decrease by 10% upon sale of all of our 289,561,899 units of the SREIT, our net income would increase by $53.7 million or increase by $4.1 million, respectively.
For a discussion of the interest rate risks related to the current capital and credit markets, see Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Market Outlook -– Real Estate and Real Estate Finance Markets” herein and the risks discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016,2020, as filed with the SEC.


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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 4. Controls and Procedures

Disclosure Controls and Procedures
As of the end of the period covered by this report, management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based upon, and as of the date of, the evaluation, our principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 20172021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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PART II. OTHER INFORMATION



Item 1. Legal Proceedings
None.

Item 1A. Risk Factors
In addition to the risk discussed below, pleasePlease see the risks discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016,2020 and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the period ended March 31, 2021, each as filed with the SEC.
Because of certain limitations on the dollar value of shares that may be redeemed under our share redemption program, as of November 1, 2017, we will only able to process an additional $0.3 million of redemptions for the remainder of 2017.
During any calendar year, we may redeem only the number of shares that we could purchase with the amount of net proceeds from the sale of shares under our dividend reinvestment plan during the prior calendar year. In 2016, our net proceeds from the dividend reinvestment plan were $61.9 million. As of October 31, 2017, we had redeemed $61.6 million of shares of common stock. Thus, because of this limitation, we are only able to process an additional $0.3 million of redemptions for the remainder of 2017 and we anticipate exhausting this amount on the November 30, 2017 redemption date. If we cannot redeem all shares presented for redemption in any month because of the limitations on redemptions set forth in our share redemption program, then we will honor redemption requests on a pro rata basis, except that if a pro rata redemption would result in a stockholder owning less than the minimum purchase requirement described in our currently effective, or the most recently effective, registration statement, as such registration statement has been amended or supplemented, then we would redeem all of such stockholder’s shares.
The annual limitation on the dollar amount of shares that may be redeemed under our share redemption program will be reset on January 1, 2018. For more information on our share redemption program, see Part 2, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds.”
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
a)During the period covered by this Form 10-Q, we did not sell any equity securities that were not registered under the Securities Act of 1933.
b)Not applicable.
c)We have a share redemption program that may enable stockholders to sell their shares to us in limited circumstances. The restrictions of our share redemption program will severely limit our stockholders’ ability to sell their shares should they require liquidity and will limit our stockholders’ ability to recover the value they invested in our common stock or recover an amount equal to or greater than our estimated value per share.
a).During the period covered by this Form 10-Q, we did not sell any equity securities that were not registered under the Securities Act of 1933.
b).Not applicable.
c).We have a share redemption program that may enable stockholders to sell their shares to us in limited circumstances. The restrictions of our share redemption program will limit our stockholders’ ability to sell their shares should they require liquidity and will limit our stockholders’ ability to recover an amount equal to our estimated value per share.
The following is a description of our share redemption program from January 1, 2021 through June 30, 2021 and the amendments to the program made by the amended and restated share redemption program (the “Amended Share Redemption Program”), which became effective as of the July 30, 2021 redemption date.
In December 2019, our board of directors determined to temporarily suspend Ordinary Redemptions under the share redemption program, and Ordinary Redemptions remained suspended through June 30, 2021. Ordinary Redemptions are all redemptions other than those that qualify for the special provisions for redemptions sought in connection with a stockholder’s death, “Qualifying Disability” or “Determination of Incompetence” (each as defined in the share redemption program and, together, “Special Redemptions”). Upon suspension, all Ordinary Redemption requests that had been received were cancelled and no Ordinary Redemption requests were accepted or collected during the suspension of the share redemption program. Further, on June 3, 2021, we announced that, in connection with the approval of the Self-Tender (defined below), our board of directors approved a temporary suspension of all redemptions under the share redemption program, including Special Redemptions. Upon suspension, all outstanding redemption requests under the share redemption program were cancelled, and no requests were accepted or collected under the share redemption program. As such, Special Redemptions under the share redemption program were suspended for the June 30, 2021 redemption date, meaning no Special Redemptions were made under the share redemption program in June 2021. Ordinary Redemptions and Special Redemptions resumed effective for the July 30, 2021 redemption date under the Amended Share Redemption Program.
In order to provide stockholders with additional liquidity that is in excess of that permitted under our share redemption program, on June 4, 2021, we commenced a self-tender offer (the “Self-Tender”) for up to 33,849,130 shares of common stock at a price of $10.34 per share, or approximately $350.0 million of shares. On July 12, 2021, we accepted for purchase 26,377,990 shares properly tendered and not properly withdrawn at a purchase price of $10.34 per share, or approximately $272.7 million of shares, excluding fees and expenses relating to the tender offer.
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PART II. OTHER INFORMATION (CONTINUED)
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (continued)
There are several limitations on our ability to redeem shares under our share redemption program:
•Unless the shares are being redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence” (each as defined in the share redemption program document and, together with redemptions sought in connection with a stockholder's death, “Special Redemptions”),Special Redemption, we may not redeem shares unless the stockholder has held the shares for one year.
During•Except as provided otherwise in the Amended Share Redemption Program with respect to calendar year 2021 only, during any calendar year, we may redeem only the number of shares that we could purchase with the amount of net proceeds from the sale of shares under our dividend reinvestment plan during the prior calendar year.year, provided that once we have received requests for redemptions, whether in connection with Special Redemptions or otherwise, that if honored, and when combined with all prior redemptions made during the calendar year, would result in the amount of remaining funds available for the redemption of additional shares in such calendar year being $10.0 million or less, the last $10.0 million of available funds shall be reserved exclusively for Special Redemptions. Notwithstanding anything contained in our share redemption program to the contrary, we may increase or decrease the funding available for the redemption of shares pursuant to the program upon ten business days’ notice to our stockholders. We
•Pursuant to the Amended Share Redemption Program, for calendar year 2021 only, we may provide notice by including such information (a)redeem up to 5% of the weighted-average number of shares outstanding during the 2020 calendar year, provided that once we have received requests for redemptions, whether in a Current Report on Form 8-Kconnection with Special Redemptions or otherwise, that if honored, and when combined with all prior redemptions made during the 2021 calendar year, would result in our annualthe number of remaining shares available for redemption in the 2021 calendar year being 500,000 or quarterly reports, all publicly filed withless, the Securities and Exchange Commission or (b) in a separate mailing to our stockholders.last 500,000 shares available for redemption shall be reserved exclusively for Special Redemptions.
•During any calendar year, we may redeem no more than 5% of the weighted-average number of shares outstanding during the prior calendar year.
•We have no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland General Corporation Law, as amended from time to time, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency.

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PART II. OTHER INFORMATION (CONTINUED)
Item 2.    Unregistered Salesdetermining the time period a redeeming stockholder has held each share, the time period begins as of Equity Securities and Usethe date the stockholder acquired the share; provided, that shares purchased by the redeeming stockholder pursuant to our dividend reinvestment plan or received as a stock dividend will be deemed to have been acquired on the same date as the initial share to which the dividend reinvestment plan shares or stock dividend shares relate. The date of Proceeds (continued)

the share’s original issuance by us is not determinative.
For a stockholder’s shares to be eligible for redemption in a given month, the administrator must receive a written redemption request from the stockholder or from an authorized representative of the stockholder setting forth the number of shares requested to be redeemed at least five business days before the redemption date. We redeem shares on the last business day of each month, except that the first redemption date following our establishment of an estimated value per share shall be no less than ten business days after our announcement of such estimated value per share in a filing with the SEC and the redemption date shall be set forth in such filing. If we cannot redeem all shares presented for redemption in any month because of the limitations on redemptions set forth in our share redemption program, then we will honor redemption requests on a pro rata basis, except that if a pro rata redemption would result in a stockholder owning less than the minimum purchase requirement described in our currently effective, or the most recently effective, registration statement, as such registration statement has been amended or supplemented, then we would redeem all of such stockholder’s shares.
If we do not completely satisfy a redemption request on a redemption date because the program administrator did not receive the request in time, because of the limitations on redemptions set forth in our share redemption program or because of a suspension of our share redemption program, then we will treat the unsatisfied portion of the redemption request as a request for redemption at the next redemption date funds are available for redemption, unless the redemption request is withdrawn.withdrawn; provided that during the suspension of Ordinary Redemptions and Special Redemptions described above, all redemption requests that had been received were cancelled and no redemption requests were accepted or collected during the suspension. Any stockholder can withdraw a redemption request by sending written notice to the program administrator, provided such notice is received at least five business days before the redemption date.
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PART II. OTHER INFORMATION (CONTINUED)
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (continued)
Upon a transfer of shares, any pending redemption requests with respect to such transferred shares will be canceled as of the date we accept the transfer. Stockholders wishing us to continue to consider a redemption request related to any transferred shares must resubmit their redemption request.
Pursuant to our share redemption program, redemptions made in connection with Special Redemptions are made at a price per share equal to the most recent estimated value per share of our common stock as of the applicable redemption date. The
Through June 30, 2021, Ordinary Redemptions were made at a price at which we will redeem all other shares eligible for redemption is as follows:
For those shares held by the redeeming stockholder for at least one year, 92.5%per share equal to 95% of our most recent estimated value per share as of the applicable redemption date;
For those shares held bydate. Under the redeeming stockholder forAmended Share Redemption Program, commencing with the July 30, 2021 redemption date, Ordinary Redemptions are made at least two years, 95.0% of our most recent estimated valuea price per share as of the applicable redemption date;
For those shares held by the redeeming stockholder for at least three years, 97.5% of our most recent estimated value per share as of the applicable redemption date; and
For those shares held by the redeeming stockholder for at least four years, 100%equal to 96% of our most recent estimated value per share as of the applicable redemption date.
On December 9, 2016,7, 2020, our board of directors approved an estimated value per share of our common stock of $10.63$10.74 based on the estimated value of our assets less the estimated value of our liabilities divided by the number of shares outstanding, all as of September 30, 2016. This2020, with the exception of adjustments to our net asset value to give effect to the change in the estimated value of our investment in units of the SREIT (SGX-ST Ticker: OXMU) as of December 1, 2020. Effective December 7, 2020 and through May 13, 2021, the redemption price for all shares eligible for redemption was calculated based on the December 7, 2020 estimated value per share.
On May 13, 2021, our board of directors approved an estimated value per share became effectiveof our common stock of $10.77 based on the estimated value of our assets less the estimated value of our liabilities divided by the number of shares outstanding, all as of March 31, 2021, with the exception of adjustments to our net asset value to give effect to the change in the estimated value of our investment in units of the SREIT (SGX-ST Ticker: OXMU) as of April 29, 2021. Effective May 13, 2021 and through November 1, 2021, the redemption price for all shares eligible for redemption was calculated based on the May 13, 2021 estimated value per share.
On November 1, 2021, our board of directors approved an estimated value per share of our common stock of $10.78 based on the estimated value of our assets less the estimated value of our liabilities divided by the number of shares outstanding, all as of September 30, 2021, with the exception of adjustments to our net asset value to give effect to (i) the change in the estimated value of our investment in units of the SREIT (SGX-ST Ticker: OXMU) as of October 22, 2021 and (ii) the contractual sales price less estimated disposition costs and fees of one property that was under contract to sell as of November 1, 2021. Effective for the December 2016November 2021 redemption date, which was Decemberis November 30, 2016.
For purposes of determining2021, and until the time period a redeeming stockholder has held eachestimated value per share is updated, the time period begins as of the date the stockholder acquired the share; provided, thatredemption price for all shares purchased by the redeeming stockholder pursuant to our dividend reinvestment planeligible for redemption will be deemed to have been acquiredcalculated based on the same date as the initial share to which the dividend reinvestment plan shares relate. The date of the share’s original issuance by us is not determinative. In addition, as described above, the shares owned by a stockholder may be redeemed at different prices depending on how long the stockholder has held each share submitted for redemption.November 1, 2021 estimated value per share.
We currently expect to utilize an independent valuation firm to update our estimated value per share inno later than December 2017.2022. We will report the estimated value per share of our common stock in a Current Report on Form 8-K or in our annual or quarterly reports, all publicly filed with the SEC. We will also provide information about our estimated value per share on our website, www.kbsreitiii.com (such information may be provided by means of a link to our public filings on the SEC’s website, http://www.sec.gov).
Our board of directors may amend, suspend or terminate our share redemption program upon 30ten business days’ notice to stockholders, provided thatand consistent with SEC guidance and interpretations, we may increase or decrease the funding available for the redemption of shares pursuant to our share redemption program upon 10ten business days’ notice.
The complete share redemption program document is filed as an exhibit to our Annual We may provide notice by including such information (a) in a Current Report on Form 10-K for8-K or in our annual or quarterly reports, all publicly filed with the year ended December 31, 2013 and is available at the SEC’s website at http://www.sec.gov.

SEC or (b) in a separate mailing to our stockholders.
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PART II. OTHER INFORMATION (CONTINUED)
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (continued)

During the nine months ended September 30, 2017,2021, we fulfilled all redemption requests eligible for redemption under our share redemption program and received in good order. We funded redemptions under our share redemption program with the net proceeds from our dividend reinvestment plan and wefrom debt financing. We redeemed shares pursuant to our share redemption program as follows:
Month 
Total Number of
Shares Redeemed (1)
 
Average Price Paid
Per Share (2)
 Approximate Dollar Value of Shares Available That May Yet Be  Redeemed Under the Program
January 2017 536,160
 $10.46
 
(3) 
February 2017 206,012
 $10.51
 
(3) 
March 2017 458,763
 $10.37
 
(3) 
April 2017 579,233
 $10.40
 
(3) 
May 2017 563,933
 $10.46
 
(3) 
June 2017 675,243
 $10.39
 
(3) 
July 2017 899,951
 $10.36
 
(3) 
August 2017 632,696
 $10.43
 
(3) 
September 2017 701,088
 $10.38
 
(3) 
Total 5,253,079
    
_____________________
Month
Total Number
of Shares Redeemed (1)
Average Price Paid
Per Share (2)
Approximate Dollar Value of Shares
Available That May Yet Be  Redeemed
Under the Program
January 2021101,887 $10.74 (3)
February 2021107,443 $10.74 (3)
March 202180,409 $10.74 (3)
April 2021179,398 $10.74 (3)
May 202196,964 $10.77 (3)
June 2021— $— (3)
July 2021159,922 $10.50 (3)
August 20211,412,169 $10.39 (3)
September 20211,736,860 $10.38 (3)
Total3,875,052 
_____________________
(1) We announced the adoption and commencement of the program on October 14, 2010. We announced amendments to the program on March 8, 2013 (which amendment became effective on April 7, 2013) and, on March 7, 2014 (which amendment became effective on April 6, 2014), on May 9, 2018 (which amendment became effective on June 8, 2018), and on July 16, 2021 (which amendment became effective on July 30, 2021).
(2) The prices at which we redeem shares under the program are as set forth above.
(3) We limit the dollar value As of November 1, 2021, we had approximately 3.4 million shares that may be redeemed under the program as described above. One of these limitations is that during each calendar year, our share redemption program limits the number of shares we may redeem to those that we could purchase with the amount of the net proceeds from the sale of shares under our dividend reinvestment plan during the prior calendar year. However, we may increase or decrease the funding available for the redemption of shares upon ten business days’ notice to our stockholders. In 2016, our net proceeds from the dividend reinvestment plan were $61.9 million. During the nine months ended September 30, 2017, we redeemed $54.7 million of shares of common stock and $7.2 million was available for redemptions of shares eligible for redemption for the remainder of 2017.2021 under the Amended Share Redemption Program described above, including the reserve for Special Redemptions.
For the months of January 2021 through May 2021, we fulfilled all Special Redemption requests eligible for redemption under our share redemption program and received in good order. For the months of July 2021 through September 2021, we fulfilled all Ordinary Redemption and Special Redemption requests eligible for redemption under our share redemption program and received in good order.
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PART II. OTHER INFORMATION (CONTINUED)
Item 3. Defaults uponUpon Senior Securities
None.

Item 4. Mine Safety Disclosures
None.

Item 5.5 Other Information
None.Amended and Restated Portfolio Loan Facility

On November 3, 2021, we, through indirect wholly owned subsidiaries (each a “Borrower” and together, the “Borrowers”), entered into a two-year loan agreement with Bank of America, N.A., as administrative agent; BofA Securities, Inc., Wells Fargo Securities, LLC and Capital One, National Association as joint lead arrangers and joint book runners; Wells Fargo Bank, N.A., as syndication agent, and each of the financial institutions a signatory thereto (the “Amended and Restated Portfolio Loan Facility Lenders”), for an amount up to $613.2 million, of which $459.9 million is term debt and $153.3 million is revolving debt (the “Amended and Restated Portfolio Loan Facility”). At closing, $459.9 million of term debt and $57.1 million of revolving debt were funded, which was used to pay off in full our existing Modified Portfolio Loan Facility, and an additional $96.2 million of the revolving debt remains available for future disbursements, subject to certain terms and conditions contained in the loan documents. Subject to certain terms and conditions contained in the loan documents, the Amended and Restated Portfolio Loan Facility may be used for (i) paying closing costs and other expenses related to the loan, (ii) for the return of equity to certain indirect owners of Borrowers, (iii) to pay or reimburse Borrowers for certain other costs and expenses, including tenant improvement costs, leasing commissions, and capital improvement costs at the properties securing the loan, (iv) working capital or liquidity management of our company, and (v) for any other lawful purpose, provided that $25.0 million of the revolving debt is to be used for tenant improvements, tenant allowances or any other work required pursuant to the terms of a specified lease described in the loan documents, although this restriction is released as we complete such projects. In addition, the Amended and Restated Portfolio Loan Facility contains customary representations and warranties, financial and other affirmative and negative covenants (including maintenance of an ongoing debt service coverage ratio), events of default and remedies typical for this type of facility.
The Amended and Restated Portfolio Loan Facility matures on November 3, 2023, with one additional 12-month extension option, subject to certain terms and conditions as described in the loan documents. The Amended and Restated Portfolio Loan Facility bears interest at the Bloomberg Short-Term Bank Yield Index rate plus 180 basis points per annum. Monthly payments are interest only with the entire balance and all outstanding interest and fees due at maturity. We will have the right to prepay the loan in part and in whole, without fee, premium or penalty, subject to certain conditions contained in the loan documents.
The Amended and Restated Portfolio Loan Facility is secured by RBC Plaza, Preston Commons, Sterling Plaza, Towers at Emeryville, Ten Almaden and Town Center. We have the right to substitute properties securing the Amended and Restated Portfolio Loan Facility at any time, subject to approval of the Amended and Restated Portfolio Loan Facility Lenders and compliance with the terms and conditions described in the loan agreement.
KBS REIT Properties III, LLC (“REIT Properties III”), our indirect wholly owned subsidiary, is providing a guaranty of (i) payment of, and agrees to protect, defend, indemnify and hold harmless each Amended and Restated Portfolio Loan Facility Lender for, from and against, any liability, obligation, deficiency, loss, damage, costs and expenses (including reasonable attorney’s fees), and any litigation which may at any time be imposed upon, incurred or suffered by the Amended and Restated Portfolio Loan Facility Lender because of (a) certain intentional acts committed by the Borrowers, (b) fraud or intentional misrepresentations by the Borrowers or REIT Properties III in connection with the loan documents as described in the guaranty agreement, and (c) certain bankruptcy or liquidation proceedings under state or federal law, and (ii) payment for liability that is incurred and related to certain environmental matters. In addition, REIT Properties III is providing a principal guaranty for up to 10% of the outstanding balance of the Amended and Restated Portfolio Loan Facility, but in no event exceeding $61.3 million, which may be reduced from time to time in connection with any repayment of principal that results in a mutually agreed upon reduction to the commitment of the Amended and Restated Portfolio Loan Facility as set forth in the guaranty agreement.

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PART II. OTHER INFORMATION (CONTINUED)


Item 6. Exhibits

Ex.Description
Ex.3.1Description
3.1
3.2
4.1
4.2
10.1
31.1
31.2
32.1
32.2
99.1
101.INS99.2
101.INSInline XBRL Instance Document
101.SCHInline XBRL Taxonomy Extension Schema
101.CALInline XBRL Taxonomy Extension Calculation Linkbase
101.DEFInline XBRL Taxonomy Extension Definition Linkbase
101.LABInline XBRL Taxonomy Extension Label Linkbase
101.PREInline XBRL Taxonomy Extension Presentation Linkbase
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
KBS REAL ESTATE INVESTMENT TRUST III, INC.
Date:November 14, 20174, 2021By:
/S/ CHARLES J. SCHREIBER, JR. 
Charles J. Schreiber, Jr.
Chairman of the Board,

Chief Executive Officer, President and Director
(principal executive officer)
Date:November 14, 20174, 2021By:
/S/ JEFFREY K. WALDVOGEL    
Jeffrey K. Waldvogel
Chief Financial Officer, Treasurer and Secretary
(principal financial officer)


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