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 SeptemberJune 30, 20172022
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,August 10, 2022, there were 180,420,256147,053,195 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
SeptemberJune 30, 20172022
INDEX
2
2
2
3
4
Consolidated Statements of Equity (unaudited) for the Year Ended December 31, 2016Three and the NineSix Months Ended SeptemberJune 30 2017 (unaudited), 2022 and 2021
54
6
7
2832
4348
4449
4550
4550
4550
4550
4753
4753
4753
Exhibits
54
4955


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)
 June 30, 2022December 31, 2021
 (unaudited) 
Assets
Real estate:
Land$290,121 $290,121 
Buildings and improvements2,167,563 2,090,983 
Tenant origination and absorption costs52,512 60,162 
Total real estate held for investment, cost2,510,196 2,441,266 
Less accumulated depreciation and amortization(613,767)(572,968)
Total real estate, net1,896,429 1,868,298 
Real estate equity securities145,693 180,228 
Total real estate and real estate-related investments, net2,042,122 2,048,526 
Cash and cash equivalents36,774 44,404 
Restricted cash1,765 2,032 
Rents and other receivables, net86,950 88,534 
Above-market leases, net303 348 
Due from affiliate83 343 
Prepaid expenses and other assets93,917 70,014 
Total assets$2,261,914 $2,254,201 
Liabilities and equity
Notes payable, net$1,598,385 $1,465,398 
Accounts payable and accrued liabilities48,189 58,323 
Due to affiliate4,970 8,126 
Distributions payable7,404 7,735 
Below-market leases, net2,445 3,277 
Other liabilities49,910 48,780 
Total liabilities1,711,303 1,591,639 
Commitments and contingencies (Note 11)00
Redeemable common stock28,401 42,369 
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, 147,273,576 and 153,150,766 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively1,473 1,532 
Additional paid-in capital1,275,423 1,322,613 
Cumulative distributions in excess of net income(754,686)(703,952)
Total stockholders’ equity522,210 620,193 
Total liabilities and equity$2,261,914 $2,254,201 
  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 June 30,Six Months Ended June 30,
2022202120222021
Revenues:
Rental income$68,187 $69,774 $137,042 $140,858 
Dividend income from real estate equity securities— — 7,252 — 
Other operating income4,551 4,080 8,744 7,731 
Total revenues72,738 73,854 153,038 148,589 
Expenses:
Operating, maintenance and management17,456 16,202 34,832 32,065 
Real estate taxes and insurance14,114 14,000 28,162 28,379 
Asset management fees to affiliate4,985 4,944 9,861 9,839 
General and administrative expenses2,014 1,880 3,800 3,602 
Depreciation and amortization26,638 27,920 53,858 55,319 
Interest expense11,170 8,345 19,826 16,678 
Net (gain) loss on derivative instruments(7,469)554 (28,938)(964)
Total expenses68,908 73,845 121,401 144,918 
Other (loss) income:
Unrealized loss on real estate equity securities(17,268)— (34,535)— 
Write-off of prepaid offering costs(2,728)— (2,728)— 
Equity in income of an unconsolidated entity— 63 — 3,350 
Gain on sale of real estate, net— — — 20,459 
Other income— — 6 — 
Other interest income9 16 17 31 
Total other (loss) income, net(19,987)79 (37,240)23,840 
Net (loss) income$(16,157)$88 $(5,603)$27,511 
Net (loss) income per common share, basic and diluted$(0.11)$— $(0.04)$0.15 
Weighted-average number of common shares outstanding, basic and diluted149,331,890 185,687,307 150,866,501 185,278,533 
 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 SeptemberJune 30, 20172022 and 2021 (unaudited)
(dollars in thousands)
 Common StockAdditional Paid-in CapitalCumulative Distributions in Excess of Net IncomeTotal Stockholders’ Equity
 SharesAmounts
Balance, March 31, 2022149,941,515 $1,499 $1,322,644 $(716,193)$607,950 
Net loss— — — (16,157)(16,157)
Issuance of common stock892,341 10 9,129 — 9,139 
Transfers to redeemable common stock— — (19,429)— (19,429)
Redemptions of common stock(3,560,280)(36)(36,920)— (36,956)
Distributions declared— — — (22,336)(22,336)
Other offering costs— — (1)— (1)
Balance, June 30, 2022147,273,576 $1,473 $1,275,423 $(754,686)$522,210 
  
 
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, March 31, 2021185,068,595 $1,851 $1,641,175 $(745,207)$897,819 
Net income— — — 88 88 
Issuance of common stock1,463,769 14 14,945 — 14,959 
Transfers to redeemable common stock— — (361,988)— (361,988)
Redemptions of common stock(276,362)(3)(2,968)— (2,971)
Distributions declared— — — (27,755)(27,755)
Balance, June 30, 2021186,256,002 $1,862 $1,291,164 $(772,874)$520,152 

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
For the Six Months Ended June 30, 2022 and 2021 (unaudited)
(dollars in thousands)
 Common StockAdditional Paid-in CapitalCumulative Distributions in Excess of
Net Income		Total Stockholders’ Equity
 SharesAmounts
Balance, December 31, 2021153,150,766 $1,532 $1,322,613 $(703,952)$620,193 
Net loss— — — (5,603)(5,603)
Issuance of common stock1,504,393 15 15,390 — 15,405 
Transfers from redeemable common stock— — 13,968 — 13,968 
Redemptions of common stock(7,381,583)(74)(76,547)— (76,621)
Distributions declared— — — (45,131)(45,131)
Other offering costs— — (1)— (1)
Balance, June 30, 2022147,273,576 $1,473 $1,275,423 $(754,686)$522,210 

 Common StockAdditional Paid-in CapitalCumulative Distributions in Excess of
Net Income		Total Stockholders’ Equity
 SharesAmounts
Balance, December 31, 2020184,249,076 $1,842 $1,641,184 $(744,990)$898,036 
Net income— — — 27,511 27,511 
Issuance of common stock2,573,027 26 26,259 — 26,285 
Transfers to redeemable common stock— — (370,202)— (370,202)
Redemptions of common stock(566,101)(6)(6,077)— (6,083)
Distributions declared— — — (55,395)(55,395)
Balance, June 30, 2021186,256,002 $1,862 $1,291,164 $(772,874)$520,152 

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)
Six Months Ended June 30,
20222021
Cash Flows from Operating Activities:
Net (loss) income$(5,603)$27,511 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization53,858 55,319 
Equity in income of an unconsolidated entity— (3,350)
Unrealized loss on real estate equity securities34,535 — 
Distribution of operating cash flow from an unconsolidated entity— 9,904 
Deferred rents(4,548)(3,577)
Amortization of above- and below-market leases, net(787)(1,139)
Amortization of deferred financing costs1,912 1,978 
Unrealized gain on derivative instruments(35,870)(9,830)
Gain on sale of real estate— (20,459)
Write-off of prepaid offering costs2,728 — 
Interest rate swap settlements for off-market swap instruments1,008 1,438 
Changes in operating assets and liabilities:
Rents and other receivables4,949 (3,033)
Due from affiliate260 — 
Prepaid expenses and other assets(8,801)(6,823)
Accounts payable and accrued liabilities(15,139)(3,451)
Due to affiliate(3,156)982 
Other liabilities(1,817)(1,477)
Net cash provided by operating activities23,529 43,993 
Cash Flows from Investing Activities:
Improvements to real estate(54,445)(33,260)
Proceeds from sale of real estate, net— 98,000 
Net cash (used in) provided by investing activities(54,445)64,740 
Cash Flows from Financing Activities:
Proceeds from notes payable148,218 — 
Principal payments on notes payable(17,143)— 
Payments of deferred financing costs(33)(60)
Interest rate swap settlements for off-market swap instruments(1,234)(1,431)
Payments to redeem common stock(76,621)(6,083)
Payments of prepaid other offering costs(110)(943)
Payments of other offering costs(1)— 
Distributions paid to common stockholders(30,057)(38,298)
Net cash provided by (used in) financing activities23,019 (46,815)
Net (decrease) increase in cash, cash equivalents and restricted cash(7,897)61,918 
Cash, cash equivalents and restricted cash, beginning of period46,436 77,811 
Cash, cash equivalents and restricted cash, end of period$38,539 $139,729 
Supplemental Disclosure of Cash Flow Information:
Interest paid$23,352 $22,250 
Supplemental Disclosure of Noncash Investing and Financing Activities:
Distributions payable$7,404 $— 
Distributions paid to common stockholders through common stock issuances pursuant to the dividend reinvestment plan$15,405 $26,285 
Accrued prepaid other offering costs$3 $464 
Redeemable common stock payable$— $254,737 
Accrued improvements to real estate$23,185 $15,536 
Accrued interest rate swap settlements related to off-market swap instruments$32 $252 
  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.

6

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
SeptemberJune 30, 20172022
(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 SeptemberJune 30, 2017,2022, 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 SeptemberJune 30, 2017,2022, the Company owned 2816 office properties, and one1 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. Additionally, asthe equity securities of September 30, 2017, the Company had entered intoPrime US REIT, a consolidated joint venture to develop and subsequently operate a multifamily apartment project, which is currently under construction.Singapore real estate investment trust (the “SREIT”).
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 SeptemberJune 30, 2017,2022, the Company had also sold 21,438,40642,324,144 shares of common stock under its dividend reinvestment plan for gross offering proceeds of $210.1 million.$437.1 million. Also as of SeptemberJune 30, 2017,2022, the Company had redeemed 10,620,360or repurchased 72,056,406 shares sold in the Offering for $107.2$764.5 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.
COVID-19 Pandemic
One of the most significant risks and uncertainties facing the real estate industry generally, and in particular office REITs like the Company, continues to be the effect of the public health crisis of the novel coronavirus disease (“COVID-19”) pandemic. To date, the Company has not experienced significant disruptions in its operations from the COVID-19 pandemic. During the year ended December 31, 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.
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 remain uncertain and cannot be predicted with confidence, including among other developments, potential changes in customer behavior, such as the continued social acceptance, desirability and perceived economic benefits of work-from-home arrangements, resulting from the COVID-19 pandemic, which could materially and negatively impact the future demand for office space, resulting in slower overall leasing and an adverse impact to the Company’s operations.
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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)
June 30, 2022
(unaudited)
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.2021. 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, 20162021 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 andsix months ended SeptemberJune 30, 20172022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.2022.
The consolidated financial statements include the accounts of the Company, REIT Holdings III, the Operating Partnership and their direct and indirect wholly owned subsidiaries, and a joint venture in which the Company has a controlling interest.subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation.
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.
InvestmentsReclassifications
Certain amounts in Unconsolidated Joint Venturesthe Company’s prior period consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of prior periods. During the three and six months ended June 30, 2022, the Company presented gains and losses on derivative instruments separate from interest expense on the Company’s consolidated statement of operations. Accordingly, the Company’s gains and losses on derivative instruments were reclassified for all periods presented.
Dividend 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.
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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)
June 30, 2022
(unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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) 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, 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 one property that was under contract to sell as of November 1, 2021.The change in the dividend reinvestment plan purchase price was effective for the December 1, 2021 dividend reinvestment plan purchase date and is effective until the estimated value per share is updated.Commencing with the December 1, 2021 purchase date and until the estimated value per share is updated, the purchase price per share under the dividend reinvestment plan is $10.24.
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.
Redeemable Common Stock
The Company’s board of accounting. Underdirectors 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, 2021 through June 30, 2021 and the amendments to the program made by (i) the July 2021 amended and restated share redemption program (the “July 2021 Amended Share Redemption Program”), which became effective as of the July 30, 2021 redemption date, (ii) the March 2022 amended and restated share redemption program (the “March 2022 Amended Share Redemption Program”), which became effective as of the March 31, 2022 redemption date, and (iii) the April 2022 amended and restated share redemption program (the “April 2022 Amended Share Redemption Program”), which became effective as of the April 29, 2022 redemption date.
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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)
June 30, 2022
(unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 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, the Company announced that, in connection with the approval of a self-tender offer, 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. On July 14, 2021, the Company’s board of directors approved the July 2021 Amended Share Redemption Program and Ordinary Redemptions and Special Redemptions resumed effective for the July 30, 2021 redemption date.
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 for calendar years 2022 and 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.
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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)
June 30, 2022
(unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
•For calendar year 2022 only,
◦Prior to effectiveness of the March 2022 Amended Share Redemption Program, the Company could redeem only the number of shares that the Company could purchase with the amount of net proceeds from the sale of shares under the Company’s dividend reinvestment plan during the prior calendar year, provided that once the Company had 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 was reserved exclusively for Special Redemptions.
◦Upon effectiveness of the March 2022 Amended Share Redemption Program and prior to effectiveness of the April 2022 Amended Share Redemption Program, the Company could redeem only the number of shares that the Company could purchase with the amount of net proceeds from the sale of shares under the Company’s dividend reinvestment plan during the prior calendar year, provided that once the Company had 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 $2.0 million or less, the last $2.0 million of available funds was reserved exclusively for redemptions sought in connection with Special Redemptions.
◦Upon effectiveness of the April 2022 Amended Share Redemption Program, for calendar year 2022, the Company may redeem up to 5% of the weighted-average number of shares outstanding during the 2021 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 2022 calendar year, would result in the number of remaining shares available for redemption in the 2022 calendar year being 500,000 or less, the last 500,000 shares available for redemption shall be reserved exclusively for redemptions sought in connection with a Special Redemption.
•Pursuant to the July 2021 Amended Share Redemption Program, for calendar year 2021 only, the Company could redeem up to 5% of the weighted-average number of shares outstanding during the 2020 calendar year, provided that if the Company 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 were 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 has 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 Company’s common stock as of the applicable redemption date.
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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)
June 30, 2022
(unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
From January 1, 2021 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 of the applicable redemption date. Upon effectiveness of the July 2021 Amended Share Redemption Program and 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 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.
On November 1, 2021, the Company’s board of directors approved an estimated value per share of its common stock of $10.78 (unaudited) as described above under “— Dividend Reinvestment Plan.” This estimated value per share became effective for the November 2021 redemption date, which was November 30, 2021. The Company currently expects to utilize an independent valuation firm to update its estimated value per share no later than December 2022.
For purposes of determining the time period a 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 is 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 annual or quarterly reports, all publicly filed with the SEC or (ii) separate mailing to the stockholders.
Offering Costs
Direct and incremental costs related to the issuance of stock such as legal fees, printing costs and bankers’ or underwriters’ fees are accounted for as a reduction in the proceeds from the sale of the stock and accordingly, recorded as a reduction of equity in the joint venture’s income (loss). The Company recognizes its proportionate share of the ongoing income or loss of the unconsolidated joint venture as equity in income (loss) of unconsolidated joint venture on theCompany’s consolidated statements of operations. Onequity. Prior to the effective date of an equity offering, these costs are deferred and included in prepaid expenses and other assets on the Company’s consolidated balance sheets. The deferred costs of a quarterly basis,subsequently aborted offering are expensed. During the three and six months ended June 30, 2022, the Company evaluates its investmentwrote-off $2.7 million of prepaid offering costs in connection with the withdrawal of the Company’s Registration Statement on Form S-11 to offer additional shares under a proposed offering, which were included as an unconsolidated joint venture for other-than-temporary impairments. Asexpense in the Company’s consolidated statements of Septemberoperations.
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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)
June 30, 2017, the Company did not identify any indicators of impairment related to its unconsolidated real estate joint venture accounted for under the equity method.2022
(unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively.
Distributions declared per common share were $0.164$0.149 and $0.486$0.298 in the aggregate for the three and ninesix months ended SeptemberJune 30, 2017,2021, respectively. Distributions declared per common share were $0.164$0.149 and $0.486$0.298 in the aggregate for the three and ninesix months ended SeptemberJune 30, 2016,2022, 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 2021 through June 2021 and nine months ended SeptemberJanuary 2022 through June 2022. For each monthly record date for distributions during the period from January 1, 2021 through June 30, 20172021 and 2016,January 1, 2022 through June 30, 2022, distributions were calculated at a rate of $0.00178082$0.04983333 per shareshare.
Segments
The Company has invested in core real estate properties and real estate-related investments with the goal 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 reportable business segment.
Square Footage, Occupancy and Other Measures
Square footage, occupancy, number of tenants and other measures, including annualized base rent and annualized base rent per day. Each day duringsquare foot, used to describe real estate investments included in these condensed notes to the periods from January 1, 2016 through February 28, 2016, March 1, 2016 through September 30, 2016consolidated financial statements are unaudited and January 1, 2017 through September 30, 2017 was a record date for distributions.

outside the scope of 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 Accounting Oversight Board.
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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)
SeptemberJune 30, 20172022
(unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Segments
The Company has invested in core real estate properties and real estate-related investments with the goal of acquiring a portfolio of income-producing investments.  The Company’s real estate investments exhibit similar long-term financial performance and have similar economic characteristics to each other.  As of September 30, 2017, the Company aggregated its investments in real estate into one reportable business segment. 
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 does2020-04) through June 30, 2022, the Company did not applyhave any contract modifications that meet the criteria described above, specifically contract modifications that have been modified from LIBOR 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): Deferralan alternative reference rate. Certain of the Effective Date (“ASU No. 2015-14”), which defersCompany’s loan agreements, derivative instruments, and lease agreements use LIBOR as the effective date of ASU No. 2014-09 by one year. Early adoption is permitted but not beforecurrent reference rate. For eligible contract modifications, the original effective date. The primary source of revenue for the Company is generated through leasing arrangements, which are excluded from this standard. The Company’s revenues that may be impacted by this standard primarily include other operating income, sales of real estate 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 evaluate the impact that 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)
SeptemberJune 30, 20172022
(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 (“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 sheets as of June 30, 2022 and December 31, 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 six 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 June 30, 2022 and 2021. As of June 30, 2022, the Company had entered into lease amendments related to the amounteffects of the original contingent consideration liability. Payments madeCOVID-19 pandemic, granting $4.0 million of rent deferrals for the period from March 2020 through March 2023 and granting $4.3 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)
SeptemberJune 30, 20172022
(unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In November 2016,As of June 30, 2022, the FASB issued ASU No. 2016-18, StatementCompany had $0.7 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 $0.4 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 six months ended June 30, 2022, the Company recorded $0.9 million and $1.3 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 six months ended June 30, 2021, the Company no longer presents the changes within restricted cash in the consolidated statementsrecorded $0.2 million and $0.6 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 investment properties beginning January 1, 2017operations, but the ultimate impact will largely depend on future developments, which remain uncertain and cannot be predicted with confidence, including among other developments, potential changes in customer behavior, such as the continued social acceptance, desirability and perceived economic benefits of work-from-home arrangements, resulting from the COVID-19 pandemic, which could qualify as asset acquisitions (as opposedmaterially and negatively impact the future demand for office space, resulting in slower overall leasing and an adverse impact to business combinations). Transaction costs associated with asset acquisitions are capitalized, while transaction costs associated with business combinations will continue to be expensed as incurred.the Company’s 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)
SeptemberJune 30, 20172022
(unaudited)
3. REAL ESTATE

3.REAL ESTATE
As of SeptemberJune 30, 2017,2022, the Company’s real estate portfolio was composed of 2816 office properties and one1 mixed-use office/retail property encompassing in the aggregate approximately 11.17.3 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 SeptemberJune 30, 2017,2022, the Company’s real estate portfolio was collectively 92%80.0% occupied. The following table summarizes the Company’s investments in real estate as of SeptemberJune 30, 20172022 (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$133,267 $(44,983)$88,284 
McEwen Building04/30/2012FranklinTNOffice38,546 (9,820)28,726 
Gateway Tech Center05/09/2012Salt Lake CityUTOffice33,462 (9,562)23,900 
60 South Sixth (2)
01/31/2013MinneapolisMNOffice150,697 (50,403)100,294 
Preston Commons06/19/2013DallasTXOffice140,465 (34,827)105,638 
Sterling Plaza06/19/2013DallasTXOffice89,452 (25,560)63,892 
201 Spear Street12/03/2013San FranciscoCAOffice151,706 (33,787)117,919 
Accenture Tower12/16/2013ChicagoILOffice533,987 (128,416)405,571 
Ten Almaden12/05/2014San JoseCAOffice130,982 (35,092)95,890 
Towers at Emeryville12/23/2014EmeryvilleCAOffice217,351 (52,329)165,022 
3003 Washington Boulevard12/30/2014ArlingtonVAOffice153,252 (38,298)114,954 
Park Place Village06/18/2015LeawoodKSOffice/Retail81,599 (7,993)73,606 
201 17th Street06/23/2015AtlantaGAOffice102,366 (27,850)74,516 
515 Congress08/31/2015AustinTXOffice131,849 (27,431)104,418 
The Almaden09/23/2015San JoseCAOffice194,862 (40,308)154,554 
3001 Washington Boulevard11/06/2015ArlingtonVAOffice60,941 (11,837)49,104 
Carillon01/15/2016CharlotteNCOffice165,412 (35,271)130,141 
$2,510,196 $(613,767)$1,896,429 
_____________________
(1) Amounts presented are net of impairment charges and write-offs of fully depreciated/amortized assets.
(2) This property was formerly known as RBC Plaza and was re-named 60 South Sixth in connection with the Company’s re-branding strategy for this property.
As of June 30, 2022, the following property represented more than 10% of the Company’s total assets:
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 $405,571 17.9 %$28,737 $27.45 71.8 %
___________________
(1) Annualized base rent represents annualized contractual base rental income as of June 30, 2022, 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.
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
_____________________
17
(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 INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SeptemberJune 30, 20172022
(unaudited)
3. REAL ESTATE (CONTINUED)

As of September 30, 2017, 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%
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of September 30, 2017, 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 SeptemberJune 30, 2017,2022, the leases, including leases that have been executed but not yet commenced, had remaining terms, excluding options to extend, of up to 14.316.9 years with a weighted-average remaining term of 4.6 years.5.5 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$8.7 million as of SeptemberJune 30, 20172022 and December 31, 2016,2021, respectively.
During the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, the Company recognized deferred rent from tenants of $8.5$4.5 million and $13.9$3.6 million,, respectively. As of SeptemberJune 30, 20172022 and December 31, 2016,2021, the cumulative deferred rent balance was $69.8$82.5 million and $58.6$85.2 million,, respectively, and is included in rents and other receivables on the accompanying balance sheets. The cumulative deferred rent balance included $7.6$15.6 million and $5.2$22.8 million of unamortized lease incentives as of SeptemberJune 30, 20172022 and December 31, 2016,2021, respectively.
As of SeptemberJune 30, 2017,2022, the future minimum rental income from the Company’s properties under its non-cancelable operating leases was as follows (in thousands):
July 1, 2022 through December 31, 2022$100,665 
2023190,030 
2024179,698 
2025160,872 
2026141,719 
Thereafter529,616 
$1,302,600 

As of June 30, 2022, the Company’s office and office/retail properties were leased to approximately 560 tenants over a diverse range of industries and geographic areas. The Company’s highest tenant industry concentrations (greater than 10% of annualized base rent) were as follows:
IndustryNumber of Tenants
Annualized Base Rent (1)
(in thousands)
Percentage of
Annualized Base Rent
Finance110$39,297 18.8 %
Real Estate5522,758 10.9 %
$62,055 29.7 %
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of June 30, 2022, 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.
18
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)
SeptemberJune 30, 20172022
(unaudited)
3. REAL ESTATE (CONTINUED)

As of SeptemberJune 30, 2017, the Company’s real estate properties were leased to approximately 900 tenants over a diverse range of industries and geographic areas. The Company’s highest tenant industry concentration (greater than 10% of annualized base rent) was as follows:
Industry Number of Tenants 
Annualized Base Rent (1)
(in thousands)
 Percentage of Annualized Base Rent
Finance 156 $61,946
 20.5%
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of September 30, 2017, 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, 2017,2022, 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 SeptemberJune 30, 2017,2022, the Company’s net investments in real estate in California, Illinois and Texas represented 23.6%, 17.9% and Illinois represented 21%, 16% and 12%16.0% 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.


4. REAL ESTATE DISPOSITIONS
During the year ended December 31, 2021, the Company sold 2 office properties to purchasers unaffiliated with the Company or the Advisor. In November 2021, the Company completed the sale of 1 office property for $143.0 million, before third-party closing costs, closing credits and disposition fees payable to the Advisor, and in January 2021, the Company sold 1 office property for $103.5 million, before third-party closing costs, credits and disposition fees payable to the Advisor.
As of June 30, 2022, the Company did not have any real estate properties held for sale.
The results of operations for the office properties sold during the year ended December 31, 2021 are included in continuing operations on the Company’s consolidated statements of operations. The following table summarizes certain revenues and expenses related to these properties for the three and six months ended June 30, 2021 (in thousands).
 For the Three Months Ended
June 30,		For the Six Months Ended
June 30,
2022202120222021
Revenues
Rental income$— $2,418 $— $5,010 
Other operating income— — — 94 
Total revenues$— $2,418 $— $5,104 
Expenses
Operating, maintenance, and management$— $23 $— $216 
Real estate taxes and insurance— 18 — 121 
Asset management fees to affiliate— 112 — 261 
General and administrative expenses— 33 — 33 
Depreciation and amortization— 837 — 1,592 
Interest expense— 174 — 348 
Total expenses$— $1,197 $— $2,571 


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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)
SeptemberJune 30, 20172022
(unaudited)
5. TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-

MARKET LEASE LIABILITIES
4.TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES
As of SeptemberJune 30, 20172022 and December 31, 2016,2021, 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
 June 30,
2022		December 31, 2021June 30,
2022		December 31, 2021June 30,
2022		December 31, 2021
Cost$52,512 $60,162 $983 $1,112 $(10,876)$(15,395)
Accumulated Amortization(36,975)(41,387)(680)(764)8,431 12,118 
Net Amount$15,537 $18,775 $303 $348 $(2,445)$(3,277)
 
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 ninesix months ended SeptemberJune 30, 20172022 and 20162021 were as follows (in thousands):
Tenant Origination and
Absorption Costs		Above-Market
Lease Assets		Below-Market
Lease Liabilities
For the Three Months Ended
June 30,		For the Three Months Ended
June 30,		For the Three Months Ended
June 30,
202220212022202120222021
Amortization$(1,458)$(2,067)$(21)$(26)$391 $587 
Tenant Origination and
Absorption Costs		Above-Market
Lease Assets		Below-Market
Lease Liabilities
For the Six Months Ended
June 30,		For the Six Months Ended
June 30,		For the Six Months Ended
June 30,
202220212022202120222021
Amortization$(3,238)$(4,169)$(45)$(52)$832 $1,191 


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)
SeptemberJune 30, 20172022
(unaudited)
6. REAL ESTATE EQUITY SECURITIES

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 $113.1SREIT’s offering, reducing REIT Properties III’s ownership in the SREIT to 31.3% of the outstanding units of the SREIT as of that date. On November 9, 2021, REIT Properties III sold 73,720,000 of its units in the SREIT for $58.9 million, net of fees and costs, reducing REIT Properties III’s ownership in the Company’s initial capital contributionSREIT to 18.5% 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 SeptemberJune 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 completion2022, REIT Properties III held 215,841,899 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 18.4% of the Developer’s 25% equity interest is approximately $25.0 million.
outstanding units of the SREIT. As of SeptemberJune 30, 2017,2022, the aggregate book value and fair value of the Company’s investment in the Village Center Station II Joint Ventureunits of the SREIT was $33.6$145.7 million, which includes $1.2was based on the closing price of the SREIT units on the SGX-ST of $0.675 per unit as of June 30, 2022.
For the period from July 19, 2019 through November 8, 2021, the Company concluded that based on its ownership interest, it exercised significant influence over the operations, financial policies and decision making with respect to the SREIT. Accordingly, the Company accounted for its investment in the SREIT during this period under the equity method of accounting. Income was allocated according to the Company’s ownership interest at each month-end and recorded as equity income (loss) from unconsolidated entity. Any dividends received from the SREIT reduced the carrying amount of the investment.
On November 9, 2021, upon the Company’s sale of 73,720,000 units in the SREIT, the Company determined that based on its ownership interest of 18.5% of the outstanding units of the SREIT, it no longer had significant influence over the operations, financial policies and decision making with respect to the SREIT. Accordingly, effective November 9, 2021, the Company’s investment in the units of the SREIT represent an investment in marketable securities and is therefore presented at fair value at each reporting date based on the closing price of the SREIT units on the SGX-ST on that date and dividend income is recognized as it is declared based on eligible units as of the ex-dividend date.
During the six months ended June 30, 2022, the Company recognized $7.3 million of acquisition costsdividend income from its investment in the SREIT. During the three and capitalized interest incurred directly bysix months ended June 30, 2022, the Company. AsCompany recorded an unrealized loss on real estate equity securities of September$17.3 million and $34.5 million, respectively. During the three and six months ended June 30, 2017,2021, the Company’s maximum loss exposureCompany recorded equity in income from an unconsolidated entity of $0.1 million and $3.4 million, respectively, related to its investment in the Village Center Station II Joint Venture is equal toSREIT. During the six months ended June 30, 2021, the Company received $9.9 million of dividends from its investment in the SREIT, which was recorded as a reduction of the Company’s carrying value of its $33.6 millionequity method investment.
Summarized financial information The Company 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 during the six months ended June 30, 2021 as operating activities on the statement of consolidated cash flows for the Village Center Station II Joint Venture follows (in thousands):six months ended June 30, 2021. 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 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)
SeptemberJune 30, 20172022
(unaudited)
7. NOTES PAYABLE

6.NOTES PAYABLE
As of SeptemberJune 30, 20172022 and December 31, 2016,2021, the Company’s notes payable consisted of the following (dollars in thousands):
 
Book Value as of
June 30, 2022
Book Value as of
December 31, 2021
Contractual Interest Rate as of
June 30, 2022 (1)
Effective Interest Rate as of
June 30, 2022 (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%3.25%Interest Only01/05/2024
Carillon Mortgage Loan (4)
88,800 105,800 One-month LIBOR +1.40%3.19%Interest Only04/11/2024
Modified Portfolio Revolving Loan Facility (5)
249,145 196,595 One-month LIBOR + 1.50%3.29%Interest Only03/01/2023
3001 & 3003 Washington Mortgage Loan143,102 143,245 One-month LIBOR + 1.45%3.24%Principal & Interest06/01/2024
Accenture Tower Revolving Loan (6)
281,250 281,250 One-month LIBOR + 2.25%4.04%Interest Only11/02/2023
Unsecured Credit Facility (7)
37,500 37,500 One-month LIBOR + 2.10%3.89%Interest only07/30/2023
Amended and Restated Portfolio Loan Facility (8)
555,568 459,900 
One-month BSBY (9)
+1.80%
3.41%Interest only11/03/2023
Total notes payable principal outstanding$1,603,365 $1,472,290 
Deferred financing costs, net(4,980)(6,892)
Total Notes Payable, net$1,598,385 $1,465,398 
_____________________
(1) Contractual interest rate represents the interest rate in effect under the loan as of June 30, 2022. Effective interest rate is calculated as the actual interest rate in effect as of June 30, 2022, consisting of the contractual interest rate and using interest rate indices as of June 30, 2022, where applicable. For information regarding the Company’s derivative instruments, see Note 8, “Derivative Instruments.”
(2) Represents the maturity date as of June 30, 2022; subject to certain conditions, the maturity dates of certain loans may be extended beyond the dates shown.
(3) As of June 30, 2022, 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 June 30, 2022, the borrowing capacity under 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 June 30, 2022, the outstanding balance under the loan consisted of $88.8 million of term debt. As of June 30, 2022, $22.2 million of revolving debt remained available for future disbursements, subject to certain terms and conditions set forth in the loan documents.
(5) As of June 30, 2022, the Modified Portfolio Revolving Loan Facility was secured by 515 Congress, the McEwen Building, Gateway Tech Center and 201 17th Street. As of June 30, 2022, the borrowing capacity under the Modified Portfolio Revolving Loan Facility was $249.2 million, of which $124.6 million is term debt and $124.6 million is revolving debt. As of June 30, 2022, the outstanding balance under the loan consisted of $124.6 million of term debt and $124.6 million of revolving debt. 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.
(6) As of June 30, 2022, the outstanding balance under the Accenture Tower Revolving Loan consisted of $281.3 million of term debt and an additional $93.7 million of revolving debt remained available for future disbursements, subject to certain terms and conditions contained in the loan documents. As of June 30, 2022, the Accenture Tower Revolving Loan has 2 12-month extension options, subject to certain terms and conditions contained in the loan documents.
(7) As of June 30, 2022, the borrowing capacity under the Unsecured Credit Facility was $75.0 million, of which $37.5 million is term debt and $37.5 million is revolving debt. As of June 30, 2022, 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 has 1 12-month extension option, subject to certain terms and conditions contained in the loan documents.
(8) As of June 30, 2022, the Amended and Restated Portfolio Loan Facility was secured by 60 South Sixth, Preston Commons, Sterling Plaza, Towers at Emeryville, Ten Almaden and Town Center. As of June 30, 2022, the borrowing capacity under the Amended and Restated Portfolio Loan Facility was $613.2 million, of which $459.9 million is term debt and $153.3 million is revolving debt. As of June 30, 2022, the outstanding balance under the loan consisted of $459.9 million of term debt and $95.7 million of revolving debt. As of June 30, 2022, an additional $57.6 million of revolving debt remained available for future disbursements, subject to certain terms and conditions contained in the loan documents. The Amended and Restated Portfolio Loan Facility has 1 12-month extension option, subject to certain terms and conditions as described in the loan documents.
(9) Bloomberg Short-Term Bank Yield Index (“BSBY”).
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)
SeptemberJune 30, 20172022
(unaudited)
7. NOTES PAYABLE (CONTINUED)

_____________________
(1) Contractual interest rate represents the interest rate in effect under the loan as of September 30, 2017. Effective interest rate is calculated as the actual interest rate in effect as of September 30, 2017 (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, where applicable. For further information regarding the Company's derivative instruments, see Note 7, “Derivative Instruments.”
(2) Represents the maturity date as of September 30, 2017; subject to certain conditions, the maturity dates of certain loans may be extended beyond the dates shown.
(3)On November 3, 2017, the Company paid off the outstanding balances under these loans using proceeds from the Portfolio Loan Facility. See Note 11,“Subsequent Events - Financing Subsequent to September 30, 2017 - Portfolio Loan Facility.”
(4)Represents the payment type required under the loan as of September 30, 2017. Certain future monthly payments due under these loans 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) 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, the outstanding balance under the loan consisted of $127.5 million of term debt and $36.0 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 to the Company and $21.5 million remained available for future disbursements, subject to certain conditions contained in the loan documents. 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 ninesix months ended SeptemberJune 30, 2017,2022, the Company incurred $15.5Company’s interest expense related to notes payable was $11.2 million and $45.3$19.8 million, of interest expense, respectively. During the three and ninesix months ended SeptemberJune 30, 2016,2021, the Company incurred $10.0Company’s interest expense related to notes payable was $8.3 million and $53.9$16.7 million, of interest expense, respectively. Included in interest expense was: (i)was the amortization of deferred financing costs of $1.3$0.9 million and $3.8 million for three and nine months ended September 30, 2017 and $1.3 million and $3.8$1.9 million for the three and ninesix months ended SeptemberJune 30, 2016,2022, respectively, (ii) the capitalization of interest to construction in progress, which decreased interest expense by $0.7and $1.0 million and $1.5$2.0 million for the three and ninesix months ended SeptemberJune 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, 2016.2021. As of SeptemberJune 30, 20172022 and December 31, 2016, $5.32021, $4.3 million and $4.3$4.0 million of interest expense were payable, respectively.

18
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 is a schedule of maturities, including principal amortization payments, for all notes payable outstanding as of SeptemberJune 30, 20172022 (in thousands):
July 1, 2022 through December 31, 2022$871 
20231,248,284 
2024354,210 
2025— 
2026— 
Thereafter— 
$1,603,365 
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 SeptemberJune 30, 2017,2022, the Company was in compliance with these debt covenants.

7.DERIVATIVE INSTRUMENTS
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.
The Company enters into interest rate caps to mitigate its exposure to rising interest rates on its variable rate notes payable. The values of interest rate caps are primarily impacted by interest rates, market expectations about interest rates, and the remaining life of the instrument. In general, increases in interest rates, or anticipated increases in interest rates, will increase the value of interest rate caps. As the remaining life of an interest rate cap decreases, the value of the instrument will generally decrease towards zero.
23


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)
SeptemberJune 30, 20172022
(unaudited)
8. DERIVATIVE INSTRUMENTS (CONTINUED)

As of June 30, 2022, the Company has entered into 12 interest rate swaps, which were not designated as hedging instruments. The following table summarizes the notional amount and other information related to the Company’s interest rate swaps and cap as of SeptemberJune 30, 20172022 and December 31, 2016.2021. 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, 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)
 June 30, 2022December 31, 2021 Weighted-Average Fix Pay RateWeighted-Average Remaining Term in Years
Derivative InstrumentsNumber of InstrumentsNotional AmountNumber of InstrumentsNotional AmountReference Rate as of June 30, 2022
Derivative instruments not designated as hedging instruments
Interest rate swaps (1)
12$1,419,790 12$1,420,390 
One-month LIBOR/
Fixed at 0.70% - 2.11%
1.6%1.0
_____________________
(1) Included in these amounts are two Includes 4 forward interest rate swaps with an aggregate notionalin the total amount of $91.5$300.0 million, that were not yet in effect as of September 30, 2017. These two interest rate swapswhich will become effective at various times during the remainder of 2017 through 2018.
(2) The interest rate cap maturedon November 1, 2022 and mature on January 1, 2017.2025.
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 SeptemberJune 30, 20172022 and December 31, 20162021 (dollars in thousands):
June 30, 2022December 31, 2021
Derivative InstrumentsBalance Sheet LocationNumber of InstrumentsFair ValueNumber of InstrumentsFair Value
Derivative instruments not designated as hedging instruments
Interest rate swaps
Prepaid expenses and other assets, at fair value (1)
12$23,822 5$757 
Interest rate swaps
Other liabilities, at fair value (2)
—$— 7$(12,805)
    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) Includes 4 forward interest rate swaps which will become effective on November 1, 2022 and mature on January 1, 2025. As of June 30, 2022, prepaid expenses and other assets included a $7.4 million asset 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. As of December 31, 2021, prepaid expenses and other assets included a $0.1 million asset related to the fair value of an off-market interest rate swap determined to be a hybrid financial instrument for which the Company elected to apply the fair value option.
(2) As of December 31, 2021, other liabilities included a $2.1 million liability related to the fair value of an off-market interest rate swap determined to be a hybrid financial instrument 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)
SeptemberJune 30, 20172022
(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
June 30,		For the Six Months Ended
June 30,
 2022202120222021
Derivatives not designated as hedging instruments
Realized loss recognized on interest rate swaps$2,649 $4,487 $6,968 $8,866 
Realized gain recognized on interest rate swaps(36)— (36)— 
Unrealized gain on interest rate swaps (1)
(10,082)(3,933)(35,870)(9,830)
Net (gain) loss on derivative instruments$(7,469)$554 $(28,938)$(964)
 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 ninesix months ended SeptemberJune 30, 20172022, unrealized gain on interest rate swaps included a $2.7 million and 2016, there was no ineffective portion$9.4 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 additionalapply the fair value option. For the three and six months ended June 30, 2021, unrealized gain on interest expenserate swaps included a $0.7 million and $2.4 million unrealized gain, respectively, related to derivative instruments designated as cash flow hedges. The presentthe change in fair value of the additional2 off-market interest expense expectedrate swaps determined to be recognized overhybrid financial instruments for which the next 12 months relatedCompany elected 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).apply the fair value 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)
June 30, 2022
(unaudited)
9. FAIR VALUE DISCLOSURES (CONTINUED)
Real estate equity securities: At June 30, 2022, the Company’s investment in the units of the SREIT was presented at fair value on the accompanying consolidated balance sheet. The fair value of the units of the SREIT was based on a quoted price in an active market on a major stock exchange. The Company classifies these inputs as Level 1 inputs.
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 SeptemberJune 30, 20172022 and December 31, 2016,2021, which carrying amounts generally do not approximate the fair values (in thousands):
 June 30, 2022December 31, 2021
 Face ValueCarrying AmountFair ValueFace ValueCarrying AmountFair Value
Financial liabilities:
Notes payable$1,603,365 $1,598,385 $1,591,110 $1,472,290 $1,465,398 $1,469,580 
  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.
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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)
June 30, 2022
(unaudited)
9. FAIR VALUE DISCLOSURES (CONTINUED)
As of SeptemberJune 30, 2017,2022, 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:
Real estate equity securities$145,693 $145,693 $— $— 
Asset derivatives - interest rate swaps (1)
$23,822 $— $23,822 $— 
_____________________
(1) Includes 4 forward interest rate swaps which will become effective on November 1, 2022 and mature on January 1, 2025. Also includes a $7.4 million asset 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.

10. RELATED PARTY TRANSACTIONS
��   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) —
9.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, 2021, 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 2017,2022, the Company renewed its participation in the program, and the program is effective through June 30, 2018. As2023. At renewal on June 30, 2022, due to its liquidation, KBS REIT I is implementing its plan of liquidation, at renewal in June 2017, KBS REIT III elected to cease participation in the program and obtainobtained separate insurance coverage.
During the three and nine months ended September
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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)
June 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.2022
(unaudited)
10. RELATED PARTY TRANSACTIONS (CONTINUED)
Pursuant to the terms of these agreements, summarized below are the related-party costs incurred by the Company for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively, and any related amounts receivable and payable as of SeptemberJune 30, 20172022 and December 31, 20162021 (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
 IncurredReceivable as ofPayable as of
Three Months Ended June 30,Six Months Ended June 30,June 30,December 31,June 30,December 31,
 20222021202220212022202120222021
Expensed
Asset management fees (1)
$4,985 $4,944 $9,861 $9,839 $— $— $4,934 $8,065 
Reimbursement of operating expenses (2)
60 116 192 331 83 343 36 61 
Disposition fees (3)
— — — 1,005 — — — — 
$5,045 $5,060 $10,053 $11,175 $83 $343 $4,970 $8,126 
_____________________
(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$56,000 and $169,000$102,000 for the three and ninesix months ended SeptemberJune 30, 2017,2022, respectively, and $51,000$102,000 and $145,000$232,000 for the three and ninesix months ended SeptemberJune 30, 2016,2021, respectively, and were the only type of employee costs reimbursed under the Advisory Agreement for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively. The Company willcurrently does 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'sCompany’s direct costs incurred from third parties that were initially paid by the Advisor on behalf of the Company. The receivable as of December 31, 2021 includes $0.3 million of estimated amounts charged to the Company by certain vendors for services for which the Company believes it was either overcharged or which were never performed. During the six months ended June 30, 2022, the Company incurred $1.5 million of legal and accounting costs related to the investigation of this matter. The Advisor agreed to reimburse the Company for any amounts inappropriately charged to the Company and for legal and accounting costs incurred related to the investigation of this matter. The reimbursement of these overpayments was partially credited against asset management fees that were deferred in prior periods of $0.5 million that would have been due by the Company to the Advisor in those periods as a result of the increase in the Company’s net income and MFFO for such periods, and corresponding decrease in expenses, related to the charges that the Company should not have incurred. As of June 30, 2022, the Advisor reimbursed the Company $1.8 million in cash for amounts inappropriately charged to the Company and for legal and accounting costs related to the investigation of this matter.

(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.
In connection with the Offering, Messrs. 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 Messrs. Bren, Hall, McMillan and Schreiber’s obligations under this indemnification agreement in exchange for reimbursement by Messrs. Bren, Hall, McMillan and Schreiber to the Company for all costs, expenses and premiums related to this supplemental coverage. During the six months ended June 30, 2022 and 2021, the Advisor did not incur any costs of the supplemental coverage obtained by the Company.
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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)
SeptemberJune 30, 20172022
(unaudited)
10. RELATED PARTY TRANSACTIONS (CONTINUED)

Deferral of Asset Management Fees
InPursuant to the Advisory 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 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 June 30, 2022 and December 31, 2021, the Company had accrued $4.9 million and $8.1 million of asset management fees, respectively, of which $4.3 million and $6.4 million were deferred as of June 30, 2022 and December 31, 2021, respectively, pursuant to the provision for deferral of asset management fees under the Advisory Agreement as described above. For the three and six months ended June 30, 2022, the Company and the Advisor agreed to adjust MFFO for the purpose of the calculation above to add back the following non-operating expenses: a one-time write-off of prepaid offering costs of $2.7 million and a $0.5 million fee to the conflicts committee’s financial advisor in connection with the Offering, the Company’s sponsors agreed to provide additional indemnification to oneconflicts committee’s review of the participating broker-dealers.  The Company agreed to add supplemental coverage to its directors’ and officers’ insurance coverage to insure the sponsors’ obligations under this indemnification agreement in exchange for reimbursement by the sponsorsalternatives available to the Company for all costs, expenses and premiums related to this supplemental coverage. During the nine months ended September 30, 2017, the Advisor incurred $0.1 million for the costs of the supplemental coverage obtained by the Company. During the nine months ended September 30, 2016, the Advisor incurred $0.1 million for the costs of the supplemental coverage obtained by the Company.
During the nine months ended September 30, 2017, the Advisor paid 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. 
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 amended on March 14, 2019 (the “Amended Lease”) to extend the lease period commencing on September 1, 2019 and terminating on August 31, 2019.2024 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.
During the three and ninesix months ended SeptemberJune 30, 2017,2022, the Company recognized $61,000$82,000 and $180,000$165,000 of revenue related to this lease, respectively. During the three and ninesix months ended SeptemberJune 30, 2016,2021, the Company recognized $59,000$81,000 and $176,000$164,000 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.
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Table of Contents
10.COMMITMENTS AND CONTINGENCIES
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST III, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 2022
(unaudited)
10. RELATED PARTY TRANSACTIONS (CONTINUED)
Portfolio Sale
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, “Real Estate Equity Securities” 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 former 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 six months ended June 30, 2022 and 2021, 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.

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 SeptemberJune 30, 2017.2022.


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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)
SeptemberJune 30, 20172022
(unaudited)
12. SUBSEQUENT EVENTS

11.SUBSEQUENT EVENTS
The Company evaluates subsequent events up until the date the consolidated financial statements are issued.
Distributions Paid
On October 2, 2017,July 1, 2022, the Company paid distributions of $9.7$7.4 million,, which related to distributions declared for daily record dates for each day in the period from Septemberamount of $0.04983333 per share of common stock to stockholders of record as of the close of business on June 27, 2022. On August 1, 2017 through September 30, 2017. On November 1, 2017,2022, the Company paid distributions of $10.0$7.4 million,, which related to distributions declared for daily record dates for each day in the period from October 1, 2017 through October 31, 2017.amount of $0.04983333 per share of common stock to stockholders of record as of the close of business on July 26, 2022.
Distributions DeclaredAuthorized
On October 9, 2017,August 11, 2022, the Company’s board of directors authorized distributions basedan August 2022 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,August 19, 2022, which the Company expects to pay in December 2017. On November 14, 2017, the Company’s board of directors authorized distributions based on daily record dates for the period from December 1, 2017 through December 31, 2017, 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. September 2022.
Investors may choose to receive cash distributions or purchase additional shares through the Company’s dividend reinvestment plan.
Distributions for these periods 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, 2016 estimated value per share of $10.63.
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Financing Subsequent to September 30, 2017
Portfolio Loan Facility
On November 3, 2017, the Company, through indirect wholly owned subsidiaries (each a “Borrower”), entered into a three-year loan facility with Bank of America, N.A., as administrative agent; Merril Lynch Pierce Fenner & Smith Incorporated, Wells Fargo Securities, LLC  and U.S. Bank, N.A., as joint lead arrangers and joint book runners; Wells Fargo Bank, NA, 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”), of which $757.5 million is term debt and $252.5 million is revolving debt. Proceeds from the term 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 the 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. The Portfolio Loan Facility may be used for the repayment of debt, for tenant improvements, leasing commissions and capital improvements, for working capital or liquidity management 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, 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, 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.

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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)

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 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. The Company has 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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Table of Contents
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. These include statements about our plans, strategies and prospects and these statements are subject to known and unknown risks and uncertainties. Readers are cautioned not to place undue reliance on these forward-looking statements. 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 continues to be one of the most significant risks and uncertainties facing the real estate industry generally, and in particular office REITs like our company. We cannot predict to what extent economic activity, including the use of and demand for office space, will return to pre-pandemic levels. Even after the pandemic has ceased to be active, potential changes in customer behavior, such as the continued social acceptance, desirability and perceived economic benefits of work-from-home arrangements, resulting from the COVID-19 pandemic, could materially and negatively impact the future demand for office space, resulting in slower overall leasing and an adverse impact to our operations.
•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 to other limitations in our charter.
Our charter permits us to pay distributions from any source, including offering proceeds or borrowings (which may constitute a return of capital), and our charter doeslimitations. These payments increase the risk that our stockholders will not limitearn a profit on their investment in us and increase the amountrisk of fundsloss to our stockholders.
•We cannot guarantee that we will pay distributions. We have and may use from any source to pay such distributions. As of September 30, 2017, we had used a combination of cash flow from operations, proceeds from debt financing and proceeds from an advance from our advisor toin the future 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. If we pay 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.
•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, including the current economic slowdown, the rising interest rate environment and inflation (or the public perception that any of these events may continue) as well as 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 mayboard of directors continue to evaluate various alternatives available to us. 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 affected by unfavorable real estate market and general economic conditions, which could decrease the value of those assets and reduce the investment return to our stockholders.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 (defined below) 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”). Further, on June 3, 2021, we announced that, in connection with the approval of a self-tender offer, our stockholders paidboard of directors had approved a temporary suspension of all redemptions under the share redemption program, including Special Redemptions. On July 14, 2021, our board of directors approved an amended and restated share redemption program and Ordinary Redemptions and Special Redemptions resumed effective for the July 30, 2021 redemption date. As of August 1, 2022, we had exhausted the funds available under the share redemption program for Ordinary Redemptions for calendar year 2022, and we had approximately 428,000 shares available for Special Redemptions for the remainder of 2022. As of August 1, 2022, we had a total of $4.7 million of outstanding and unfulfilled Ordinary Redemption requests, representing approximately 457,000 shares. We will not be able to acquireredeem shares submitted as Ordinary Redemptions for the remainder of 2022. We cannot predict future redemption demand with any certainty. Moreover, our share redemption program includes numerous restrictions that limit our stockholders’ ability to sell their shares and fromto us. If future redemption requests exceed the amount of funding available under our estimated value per share.share redemption program, the number of rejected redemption requests will increase over time.
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, 20162021 and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the period ended March 31, 2022, each as filed with the Securities and Exchange Commission (the “SEC”).
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and in Part II, Item 1A herein.Analysis of Financial Condition and Results of Operations (continued)
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 SeptemberJune 30, 2017,2022, we owned 2816 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. Additionally, asthe equity securities 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.the SREIT.
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 SeptemberJune 30, 2017,2022, we had also sold 21,438,40642,324,144 shares of common stock under our dividend reinvestment plan for gross offering proceeds of $210.1 million.$437.1 million. Also as of SeptemberJune 30, 2017,2022, we had redeemed 10,620,360or repurchased 72,056,406 shares sold in our initial public offering for $107.2$764.5 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 Estate and Real Estate Finance Markets
The following discussion is basedBased on management’s beliefs, observations and expectations with respectour assessment of alternatives available to the real estate and real estate finance markets.
The global economy is broadly improving albeit at an uneven pace. European economic growth has recently picked up, with improving employment data in mostus, market conditions, our further assessment of our capital raising prospects, uncertainty as a result of the European Union countries. The U.K.COVID-19 pandemic’s impact on work-from-home arrangements and China remain areasthe impact of concern. The U.K. is working through its BREXIT process, whereassuch arrangements on the Chinese economy has shown signs of stabilization, but is still struggling with uncertainty in its banking system in relation to bad loans. Against this backdrop,U.S. office market, and the central bankscurrent state of the world’s major industrialized economiesdebt capital markets, our conflicts committee and board of directors may conclude that it would be in the best interest of our stockholders to (i) continue to operate as a going concern under our current business plan, or (ii) 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), although we would not anticipate adopting a plan of liquidation in the immediate future. In addition, at this time it is not likely we will pursue a conversion to an “NAV REIT”. However, our conflicts committee and board of directors continue to evaluate all alternatives available to us. 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. Although we remain focused on providing stable distributions and 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.
Section 5.11 of our charter requires that we seek stockholder approval of our liquidation if our shares of common stock 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.
Atnot listed on a duration of 100 months (asnational securities exchange by September 30, 2020, unless a majority of the endconflicts committee of third quarter 2017),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 business cycle, which commencedmarket conditions, including the uncertainty as a result of the COVID-19 pandemic and lack of liquidity in June 2009, is the third longest in U.S. history, behind only the periods between 1961 - 1969marketplace, as well as our conflicts committee’s and 1991 - 2001. In June 2017, the U.S. Federal Reserve (the “Fed”) increased interest rates for the fourth time in three years. Expectations areboard 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 Fed will increase rates again in December, citing low unemployment and strong economic growth. The Fed is still attempting to normalizeconflicts committee revisit the levelissue 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.liquidation at least annually.
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.



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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)

Impact on OurMarket 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 the increasenon-renewal of existing tenant leases), rent deferrals or abatements, tenants being unable to pay their rent and/or lower rental rates. Increases in the cost of financing due to higher interest rates we may have difficultywill prevent us from 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 as well as the current economic slowdown, the rising interest rate environment and inflation (or the public perception that any of these events may continue) have had a negative impact on the office real estate market as discussed below.
COVID-19 Pandemic and Portfolio Outlook
One of the most significant risks and uncertainties facing the real estate industry generally, and in particular office REITs like our company, continues to be the effect of the public health crisis of the COVID-19 pandemic. To date, we have not experienced significant disruptions in our operations from the COVID-19 pandemic. During the year ended December 31, 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 significant investment in the common units of the SREIT. Since early March 2020, the trading price of the common units of the SREIT has experienced substantial volatility. As of September 30, 2017, we had debt obligationsAugust 12, 2022, the aggregate value of our investment in the aggregate principal amountunits of $1.9 billion, with a weighted-average remaining termthe SREIT was $143.5 million, which was based solely on the closing price of 1.6 years. The maturity datesthe units on the SGX-ST of certain loans may be extended beyond their current maturity date, subject$0.665 per unit as of August 12, 2022, and did not take into account any potential discount for the holding period risk due to certain termsthe quantity of units we hold.
We cannot predict to what extent economic activity, including the use of and conditions contained indemand for office space, will return to pre-pandemic levels. During 2021 and for the loan documents. Our debt obligations consistedfirst and second quarters of $192.9 million of fixed rate notes payable and $1.7 billion of variable rate notes payable. We plan to exercise our extension options available under our loan agreements or pay down or refinance2022, the related notes payable prior to their maturity dates. As of September 30, 2017, the interest rates on $1.1 billionusage of our variable rate notes payable were effectively fixed through interest rate swap agreements.assets remained lower than pre-pandemic levels. In addition, we entered into twoexperienced a significant reduction in leasing interest rate swaps withand activity when compared to pre-pandemic levels. Even after the pandemic has ceased to be active, potential changes in customer behavior, such as the continued social acceptance, desirability and perceived economic benefits of work-from-home arrangements, resulting from the COVID-19 pandemic, could materially and negatively impact the future demand for office space, resulting in slower overall leasing and 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 facilityadverse impact 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.”operations.

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, proceeds from our dividend reinvestment plan have been used primarily to fund redemptions of shares under our share redemption program and for capital expenditures on our real estate investments.
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 equity securities of the SREIT generates cash flow in the form of dividend income, and dividends are typically declared and paid on a semi-annual basis, though dividends are not guaranteed. As of SeptemberJune 30, 2017,2022, we held 215,841,899 units of the SREIT which represented 18.4% of the outstanding units of the SREIT as of that date.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
As of June 30, 2022, we had mortgage debt obligations in the aggregate principal amount of $1.9$1.6 billion, with a weighted-average remaining term of 1.61.3 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 June 30, 2022, we had $249.1 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 Revolving Loan Facility maturing during the 12 months ending SeptemberJune 30, 2018.2023. The Modified Portfolio Revolving Loan Facility has two 12-month extension options, subject to certain terms, conditions and fees as described in the loan documents. 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 SeptemberJune 30, 2017,2022, our debt obligations consisted of $123.0 million of fixed rate notes payable and $1.5 billion of variable rate notes payable. As of June 30, 2022, the interest rates on $1.1 billion of our variable rate notes payable were effectively fixed through interest rate swap agreements. As of June 30, 2022, we had $90.5$181.1 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, 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. 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.”agreements.
We paid cash distributions to our stockholders during the ninesix months ended SeptemberJune 30, 20172022 using cash flow from operations from current and prior periods.periods and proceeds from debt financing. 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 SeptemberJune 30, 20172022 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 ninesix months ended SeptemberJune 30, 2017,2022 and 2021, net cash provided by operating activities was $90.6$23.5 million compared to net cash provided by operating activities of $82.1and $44.0 million, during the nine months ended September 30, 2016.respectively. Net cash provided by operating activities increased in 2017was lower during the six months ended June 30, 2022 primarily as a result of an increasea decrease in dividends received from our investment in the SREIT in 2022 due to our sale of 73,720,000 units in the SREIT in November 2021, the timing of payments of lease terminationcommissions and deferred asset management fees rental rates, operating expense recoveries and property tax recoveries.the disposition of Domain Gateway in November 2021.
Cash Flows from Investing Activities
Net cash used in investing activities was $124.2$54.4 million for the ninesix months ended SeptemberJune 30, 2017 and primarily consisted of the following:
$54.0 million used for2022 due to 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.estate.
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 ninesix months ended SeptemberJune 30, 2017,2022, net cash provided by financing activities was $6.2$23.0 million and primarily consisted of the following:
•$104.2131.0 million of net cash provided by debt financing as a result of proceeds from notes payable of $107.4$148.2 million, partially offset by principal payments on notes payable of $1.9$17.1 million and payments of deferred financing costs of $1.3$0.1 million; offset by
•$54.776.6 million of cash used for redemptions of common stock; and
•$43.430.1 million of net cash distributions, after giving effect to distributions reinvested by stockholders of $45.1 million.$15.4 million; and

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

•$1.2 million used for interest rate swap settlements for off-market swap instruments.
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 SeptemberJune 30, 2017,2022, our borrowings and other liabilities were approximately 57% 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, we
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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 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.
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.


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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 June 30, 2022, we had accrued $4.9 million of asset management fees, of which $4.3 million was deferred as of June 30, 2022, pursuant to the provision for deferral of asset management fees under the Advisory Agreement. For the three and six months ended June 30, 2022, we and our advisor agreed to adjust MFFO for the purpose of the calculation above to add back the following non-operating expenses: a one-time write-off of prepaid offering costs of $2.7 million and a $0.5 million fee to the conflicts committee’s financial advisor in connection with the conflicts committee’s review of alternatives available to us. 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.
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Contractual Commitments and Contingencies
The following is a summary of our contractual obligations as of September 30, 2017 (in thousands):
    Payments Due During the Years Ended December 31,
Contractual Obligations Total Remainder of 2017 2018-2019 2020-2021 Thereafter
Outstanding debt obligations (1)
 $1,898,897
 $874
 $1,323,985
 $393,448
 $180,590
Interest payments on outstanding debt obligations (2)
 110,066
 16,772
 67,684
 23,407
 2,203
Development obligations 51,935
 
(3) 
 
(3) 
 —
 —
_____________________
(1) Amounts include principal payments only.
(2) Projected interest payments are based on the outstanding principal amounts, maturity dates and interest rates in effect as of September 30, 2017 (consisting of the contractual interest rate and the effect of interest rate swaps, if applicable). We incurred interest expense of $45.6 million, excluding amortization of deferred financing costs totaling $3.8 million and unrealized gain on derivatives of $2.6 million and including interest capitalized of $1.5 million during the nine months ended September 30, 2017.
(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.

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

Debt Obligations
The following is a summary of our debt obligations as of June 30, 2022 (in thousands):
Payments Due During the Years Ended December 31,
Debt ObligationsTotalRemainder of 20222023-20242025-2026Thereafter
Outstanding debt obligations (1)
$1,603,365 $871 $1,602,494 $— $— 
Interest payments on outstanding debt obligations (2) (3)
74,167 28,191 45,976 — — 
Interest payments on interest rate swaps (4) (5)
574 574 — — — 
_____________________
(1) Amounts include principal payments only based on maturity dates as of June 30, 2022; 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 June 30, 2022 (consisting of the contractual interest rate and using interest rate indices as of June 30, 2022, where applicable).
(3) We incurred interest expense related to notes payable of $17.9 million, excluding amortization of deferred financing costs totaling $1.9 million during the six months ended June 30, 2022.
(4) Projected interest payments on interest rate swaps 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 June 30, 2022. In the case where the swapped floating rate (one-month LIBOR) at June 30, 2022 is higher than the fixed rate in the swap agreement, interest payments on interest rate swaps in the above debt obligations table would reflect zero as we would not be obligated to make any interest payments on those swaps and instead expect to receive payments from our swap counter-parties.
(5) We incurred realized losses related to interest rate swaps of $7.0 million, excluding unrealized gains on derivative instruments of $35.9 million, during the six months ended June 30, 2022.

Results of Operations
Overview
As of June 30, 2021, we owned 17 office properties, one mixed-use office/retail property and an investment in the equity securities of the SREIT, which was accounted for as an investment in an unconsolidated entity under the equity method of accounting at that time. Subsequent to June 30, 2021, we sold one office property and, through our indirect wholly owned subsidiary (“REIT Properties III”), we sold 73,720,000 of our units in the SREIT, reducing REIT Properties III’s ownership in the SREIT to 18.5% as of the transaction date. As a result, as of June 30, 2022, we owned 16 office properties, one mixed-use office/retail property and an investment in the equity securities of the SREIT. As a result of our reduced ownership in the SREIT, our investment in the equity securities of the SREIT is now presented at fair value at each reporting date based on the closing price of the SREIT units on the SGX-ST on that date. Therefore, the results of operations presented for the three and six months ended June 30, 2022 and 2021 are not directly comparable.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Comparison of the three months ended SeptemberJune 30, 20172022 versus the three months ended SeptemberJune 30, 20162021
The following table provides summary information about our results of operations for the three months ended SeptemberJune 30, 20172022 and 20162021 (dollar amounts in thousands):
 Three Months Ended
June 30,		Increase
(Decrease)		Percentage Change
$ Changes
Due to Dispositions of Properties and Ceasing of Equity Method of Accounting (1)
$ Change Due to Properties Held
Throughout Both Periods (2)
 20222021
Rental income$68,187 $69,774 $(1,587)(2)%$(2,418)$831 
Other operating income4,551 4,080 471 12 %— 471 
Operating, maintenance and management17,456 16,202 1,254 8 %(23)1,277 
Real estate taxes and insurance14,114 14,000 114 1 %(18)132 
Asset management fees to affiliate4,985 4,944 41 1 %(112)153 
General and administrative expenses2,014 1,880 134 7 %n/an/a
Depreciation and amortization26,638 27,920 (1,282)(5)%(837)(445)
Interest expense11,170 8,345 2,825 34 %(174)2,999 
Net (gain) loss on derivative instruments(7,469)554 (8,023)(1,448)%— (8,023)
Unrealized loss on real estate equity securities(17,268)— (17,268)(100)%— (17,268)
Write-off of prepaid offering costs(2,728)— (2,728)(100)%n/an/a
Equity in income of an unconsolidated entity— 63 (63)(100)%(63)— 
Other interest income9 16 (7)(44)%n/an/a
_____________________
  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 SeptemberJune 30, 20172022 compared to the three months ended SeptemberJune 30, 20162021 related to real estate investments acquired or repaid on ordispositions of properties after JulyApril 1, 2016.2021 and ceasing of equity method of accounting related to our investment in the units of the SREIT for periods after November 9, 2021.
(2) Represents the dollar amount increase (decrease) for the three months ended SeptemberJune 30, 20172022 compared to the three months ended SeptemberJune 30, 2016 with respect2021 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$69.8 million for the three months ended SeptemberJune 30, 20162021 to $96.9$68.2 million for the three months ended SeptemberJune 30, 2017.2022. The decrease in rental income was primarily due to the disposition of Domain Gateway in November 2021, partially offset by an increase in rental income and tenant reimbursements for propertiesrelated to a lease termination fee received during the three months ended June 30, 2022 with respect a property held throughout both periods was primarily due to an increase in lease termination fees and rental rates, partially offset by a decrease in property tax recoveries.periods. 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 developmentuncertainty and subsequent operation of Hardware Village and upon the acquisitionbusiness disruptions or recoveries as a result of the developer's 25% equity interestCOVID-19 pandemic and subsequent operation of Village Center Station II.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.”
Other operating income increased from $5.5 million during the three months ended September 30, 2016 to $5.7$4.1 million for the three months ended SeptemberJune 30, 2017. The increase in other operating income2021 to $4.6 million for properties held throughout both periods wasthe three months ended June 30, 2022, primarily due to an increase in parking revenues.revenues for properties held throughout both periods. 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 interest and subsequent operation of Village Center Station II.COVID-19 pandemic.
Operating, maintenance and management costs increased from $24.0$16.2 million for the three months ended SeptemberJune 30, 20162021 to $25.3$17.5 million for the three months ended SeptemberJune 30, 2017.2022. The increase in operating, maintenance and management costs for properties held throughout both periods was primarily due to an overall increase in repairsoperating costs, including utilities, janitorial and maintenance, management feessecurity costs, as a result of general inflation and an increase in bad debt expense related to a tenant bankruptcyphysical occupancy at a property.properties held throughout both periods. We expect operating, maintenance and management costs 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 II and general inflation.
Real estate taxes and insurance increased slightly from $16.4 million for the three months ended September 30, 2016 to $16.5 million for the three months ended September 30, 2017. 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 II and general increases due to future property tax reassessments.
Asset management fees with respect to our real estate investments increased from $6.3 million for the three months ended September 30, 2016 to $6.6 million for the three months ended September 30, 2017. We expect asset management fees to increase in future periods as a result of the continued development of Hardware Village and Village Center Station IIinflation and as a result of any improvements we makephysical occupancy increases as employees return to our properties. As of September 30, 2017, $2.2 million of asset management fees were payable, which were subsequently paid in November 2017.


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

DepreciationReal estate taxes and amortizationinsurance increased from $40.0$14.0 million for the three months ended SeptemberJune 30, 20162021 to $41.2$14.1 million for the three months ended SeptemberJune 30, 2017.2022, primarily due to a net increase in real estate taxes as a result of higher property tax assessments for real estate properties held throughout both periods and an overall increase in insurance expense, offset by property tax refunds received during the three months ended June 30, 2022.We expect real estate taxes and insurance to increase in future periods as a result of general inflation and general increases due to future property tax reassessments for properties that we continue to own.
Asset management fees with respect to our real estate investments increased from $4.9 million for the three months ended June 30, 2021 to $5.0 million for the three months ended June 30, 2022, primarily due to capital improvements at properties held throughout both periods, offset by the disposition of Domain Gateway in November 2021. We expect asset management fees to increase in future periods as a result of any improvements we make to our properties and to decrease to the extent we dispose of properties. As of June 30, 2022, there were $4.9 million of accrued asset management fees, of which $4.3 million was deferred as of June 30, 2022. For a discussion of accrued and deferred asset management fees, see “– Liquidity and Capital Resources” herein.
General and administrative expenses increased from $1.9 million for the three months ended June 30, 2021 to $2.0 million for the three months ended June 30, 2022, primarily due to professional fees incurred related to our conflicts committee’s and board of directors’ evaluation of various alternatives available to us, offset by a decrease in appraisal fees related to the update of our estimated value per share in May 2021 and a decrease in legal fees and proxy costs. General and administrative costs consisted primarily of portfolio legal fees, board of directors fees, and third party transfer agent fees. We expect general and administrative expenses to vary in future periods.
Depreciation and amortization decreased from $27.9 million for the three months ended June 30, 2021 to $26.6 million for the three months ended June 30, 2022, primarily as a result of the disposition of Domain Gateway in November 2021 and a decrease in depreciation and amortization due to a lease expiration at a property held throughout both periods. 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 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 II.costs.
Interest expense increased from $10.0$8.3 million for the three months ended SeptemberJune 30, 20162021 to $15.5$11.2 million for the three months ended SeptemberJune 30, 2017.2022. Included in interest expense iswas (i) $7.3 million and $10.3 million of interest expense payments for the three months ended June 30, 2021 and 2022, respectively, and (ii) the amortization of deferred financing costs of $1.3$1.0 million and $1.3$0.9 million for the three months ended SeptemberJune 30, 20162021 and 2017,2022, respectively. Additionally,The increase in interest expense was due to draws on our revolving debt and higher one-month LIBOR and one-month Bloomberg Short-Term Bank Yield Index (“BSBY”) during the three months ended SeptemberJune 30, 20162022, and 2017,its impact on interest expense related to the portion of our unhedged variable rate debt. In general, we capitalized $0.1expect interest expense to vary based on fluctuations in interest rates (for our variable rate debt) and our level of future borrowings.
We recorded net loss on derivative instruments of $0.6 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 gainsnet gain on derivative instruments of $7.5 million for the three months ended SeptemberJune 30, 2016,2021 and 2022, respectively. Included in net (gain) loss on derivative instruments was (i) unrealized gain on interest expense decreased by $1.3 million. Interest expense incurred as a resultrate swaps of our derivative instruments$3.9 million and $10.1 million for the three months ended SeptemberJune 30, 2017 was $0.42021 and 2022, respectively, offset by (ii) $4.5 million which includes $1.0and $2.6 million of unrealized gainsrealized loss on derivative instrumentsinterest rate swaps for the three months ended SeptemberJune 30, 2017.2021 and 2022, respectively. The overall increase in interest expense isnet gain on derivative instruments was primarily due to changes in fair values with respect to our interest rate swaps that are not accounted for as cash flow hedges during the increased level of borrowings and increased interest rates on our variable rate debt, partially offset by an increase in unrealizedthree months ended June 30, 2022. In general, we expect net gains or losses on derivative instruments. We expect interest expenseinstruments 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). hedges.
ComparisonDuring the three months ended June 30, 2022, we recorded an unrealized loss on real estate equity securities of $17.3 million as a result of the ninedecrease in the closing price of the units of the SREIT on the SGX-ST.
During the three months ended SeptemberJune 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):
  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 compared2022, we recorded $2.7 million related to the nine months ended September 30, 2016 relatedwrite-off of prepaid offering costs. Given changing market conditions, we continue to real estate investments acquired or repaidevaluate various alternatives available to us. See “–Overview.” In order to avoid additional legal, accounting and other offering costs while we make this determination, we withdrew our registration statement on or after January 1, 2016.
(2) RepresentsForm S-11 to register a public offering as an NAV REIT, which had been filed with 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 dueSEC, as at this time it is not likely we will pursue a conversion 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.

“NAV REIT.”
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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)

Comparison of the six months ended June 30, 2022 versus the six months ended June 30, 2021
The following table provides summary information about our results of operations for the six months ended June 30, 2022 and 2021 (dollar amounts in thousands):
 Six Months Ended
June 30,		Increase
(Decrease)		Percentage Change
$ Changes
Due to Dispositions of Properties and Ceasing of Equity Method of Accounting (1)
$ Change Due to Properties Held
Throughout Both Periods (2)
 20222021
Rental income$137,042 $140,858 $(3,816)(3)%$(5,010)$1,194 
Dividend income from real estate equity securities7,252 — 7,252 100 %— 7,252 
Other operating income8,744 7,731 1,013 13 %(94)1,107 
Operating, maintenance and management34,832 32,065 2,767 9 %(216)2,983 
Real estate taxes and insurance28,162 28,379 (217)(1)%(121)(96)
Asset management fees to affiliate9,861 9,839 22 — %(261)283 
General and administrative expenses3,800 3,602 198 5 %n/an/a
Depreciation and amortization53,858 55,319 (1,461)(3)%(1,592)131 
Interest expense19,826 16,678 3,148 19 %(348)3,496 
Net gain on derivative instruments(28,938)(964)(27,974)2,902 %— (27,974)
Unrealized loss on real estate equity securities(34,535)— (34,535)(100)%— (34,535)
Write-off of prepaid offering costs(2,728)— (2,728)(100)%n/an/a
Equity in income of an unconsolidated entity— 3,350 (3,350)(100)%(3,350)— 
Gain on sale of real estate, net— 20,459 (20,459)(100)%(20,459)— 
Other income6 — 6 100 %n/an/a
Other interest income17 31 (14)(45)%n/an/a
_____________________
(1) Represents the dollar amount increase (decrease) for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 related to dispositions of properties after January 1, 2021 and ceasing of equity method of accounting related to our investment in the units of the SREIT for periods after November 9, 2021.
(2) Represents the dollar amount increase (decrease) for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 related to real estate investments owned by us throughout both periods presented.
Rental income from our real estate properties decreased from $140.9 million for the six months ended June 30, 2021 to $137.0 million for the six months ended June 30, 2022. The decrease in rental income was primarily due to the dispositions of real estate properties subsequent to January 1, 2021, partially offset by a net increase in rental income related to lease commencements subsequent to June 30, 2021 and an increase in operating recoveries with respect to properties held throughout both periods. We expect rental income 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.”
Dividend income from our real estate equity securities was $7.3 million for the six months ended June 30, 2022. On November 9, 2021, upon our sale of 73,720,000 units in the SREIT, we determined that based on our ownership interest of 18.5% of the outstanding units of the SREIT as of that date, we no longer had significant influence over the operations, financial policies and decision making with respect to the SREIT. Accordingly, effective November 9, 2021, our investment in the units of the SREIT represents an investment in marketable securities and is therefore presented at fair value at each reporting date based on the closing price of the SREIT units on the SGX-ST on that date and dividend income is recognized as it is declared based on eligible units as of the ex-dividend date. Prior to November 9, 2021, our investment in the SREIT was accounted for under the equity method of accounting.
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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)
Other operating income increased from $15.5 million during the nine months ended September 30, 2016 to $17.1$7.7 million for the ninesix months ended SeptemberJune 30, 2017.2021 to $8.7 million for the six months ended June 30, 2022. 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, 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 acquisition of the developer's 25% equity interest and subsequent operation of Village Center Station II.
Interest income from our real estate loan receivable, recognized using the interest method, decreased from $0.8 million for the nine months ended September 30, 2016 to $0 for the nine months ended September 30, 2017business disruptions or recoveries as a result of the payoff of the real estate loan receivable on July 1, 2016.COVID-19 pandemic.
Operating, maintenance and management costs increased from $68.6$32.1 million for the ninesix months ended SeptemberJune 30, 20162021 to $70.8$34.8 million for the ninesix months ended SeptemberJune 30, 2017.2022. The increase in operating, maintenance and management costs forwas primarily due to an overall increase in operating costs, including utilities, janitorial and security costs, as a result of general inflation, an increase in physical occupancy at properties held throughout both periods was primarily dueand higher legal fees and space planning costs related to an increase in repairs and maintenance and management fees.leasing activities, offset by the dispositions of real estate properties subsequent to January 1, 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 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 and general inflation.office.
Real estate taxes and insurance increaseddecreased from $47.7$28.4 million for the ninesix months ended SeptemberJune 30, 20162021 to $48.7$28.2 million for the ninesix months ended SeptemberJune 30, 2017. The2022, primarily due to an insurance credit and property tax refunds received during the six months ended June 30, 2022 and the disposition of Anchor Centre in January 2021, offset by a net increase in real estate taxes and insuranceas a result of higher property tax assessments for real estate properties held throughout both periods was primarily due to higher property taxes as a result of reassessments for 500 West Madison.periods. 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.
Asset management fees with respect to our real estate investments increased from $18.6$9.8 million for the ninesix months ended SeptemberJune 30, 20162021 to $19.2$9.9 million for the ninesix months ended SeptemberJune 30, 2017.2022, primarily due to capital improvements at properties held throughout both periods, offset by the dispositions of real estate properties subsequent to January 1, 2021. 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 offset to the extent we dispose of any of our assets.properties. As of SeptemberJune 30, 2017, $2.22022, there were $4.9 million of accrued asset management fees, were payable,of which were subsequently paid in November 2017.$4.3 million was deferred as of June 30, 2022. 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$3.6 million for the ninesix months ended SeptemberJune 30, 20162021 to $0$3.8 million for the ninesix months ended SeptemberJune 30, 20172022, primarily due to professional fees incurred related to our conflicts committee’s and board of directors’ evaluation of various alternatives available to us, offset by a decrease in acquisition activity. 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 aggregateproxy costs. General and administrative costs consisted primarily of $0.7 million in acquisitionportfolio legal fees, board of directors fees, 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 increaseddecreased from $120.1$55.3 million for the ninesix months ended SeptemberJune 30, 20162021 to $124.4$53.9 million for the ninesix months ended SeptemberJune 30, 2017,2022, primarily as a result of the accelerationdisposition of amortization of intangible assets related to a tenant relocation and lease termination at a property held throughout both periods.Domain Gateway in November 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 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 II.costs.
Interest expense decreasedincreased from $53.9$16.7 million for the ninesix months ended SeptemberJune 30, 20162021 to $45.3$19.8 million for the ninesix months ended SeptemberJune 30, 2017.2022. Included in interest expense iswas (i) $14.7 million and $17.9 million of interest expense payments for the six months ended June 30, 2021 and 2022, respectively, and (ii) the amortization of deferred financing costs of $3.8$2.0 million and $3.8$1.9 million for the ninesix months ended SeptemberJune 30, 20162021 and 2017,2022, respectively. Additionally,The increase in interest expense was due to draws on our revolving debt and higher one-month LIBOR and one-month BSBY during the ninesix months ended SeptemberJune 30, 2017, we capitalized $0.1 million2022, and $1.5 million ofits impact on interest to construction-in-progressexpense related to Hardware Village and Village Center Station II, respectively. Interest expense incurred as a resultthe portion of our derivative instruments for the nine months ended September 30, 2016unhedged variable rate debt. In general, we expect interest expense to vary based on fluctuations in interest rates (for our variable rate debt) and 2017 was $20.5 million and $3.1 million, respectively, which includes $14.8 millionour level of unrealized losses and $2.6 million of unrealized gainsfuture borrowings.
Net gain on derivative instruments increased from $1.0 million for the ninesix months ended SeptemberJune 30, 20162021 to $28.9 million for the six months ended June 30, 2022. Included in net gain on derivative instruments was (i) unrealized gain on interest rate swaps of $9.9 million and 2017,$35.9 million for the six months ended June 30, 2021 and 2022, respectively, offset by (ii) $8.9 million and $7.0 million of realized loss on interest rate swaps for the six months ended June 30, 2021 and 2022, respectively. The decreaseincrease in interest expense isnet gain on derivative instruments was primarily 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 duecash flow hedges during the six months ended June 30, 2022. In general, we expect net gains or losses on derivative instruments to the increased level of borrowings. 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 fluctuationshedges.
During the six months ended June 30, 2022, we recorded an unrealized loss on real estate equity securities of $34.5 million as a result of the decrease in one-month LIBOR (for our variable rate debt). 

the closing price of the units of the SREIT on the SGX-ST.
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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 six months ended June 30, 2022, we recorded $2.7 million related to the write-off of prepaid offering costs. Given changing market conditions, we continue to evaluate various alternatives available to us. See “–Overview.” In order to avoid additional legal, accounting and other offering costs while we make this determination, we withdrew our registration statement on Form S-11 to register a public offering as an NAV REIT, which had been filed with the SEC, as at this time it is not likely we will pursue a conversion to an “NAV REIT.”
During the ninesix months ended SeptemberJune 30, 2017,2021, we received $0.7recorded equity in income of an unconsolidated entity of $3.4 million in proceeds from a one-time easement agreement, which is included in other incomerelated to our investment in the accompanying consolidated statementsSREIT. As discussed above, effective November 9, 2021, based on our 18.5% ownership interest in the SREIT as of operations.that date, we do not exercise significant influence over the operations, financial policies and decision making with respect to the SREIT. Accordingly, our investment in the units of the SREIT represents an investment in marketable securities and therefore is presented at fair value as of June 30, 2022, based on the closing price of the SREIT units on the SGX-ST on that date.
We recognized a gain on sale of real estate of $20.5 million related to the disposition of Anchor Centre during the six months ended June 30, 2021. We did not dispose of any real estate during the six months ended June 30, 2022.

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. In addition, we elected the option to exclude mark-to-market changes in value recognized on real estate equity securities in the calculation of FFO. 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.
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.
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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)
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.

38
Tablemeasures; however, neither FFO nor MFFO reflects adjustments for the operations of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussionproperties sold or under contract to sale during the periods presented. During periods of significant disposition activity, FFO and AnalysisMFFO are much more limited measures of Financial Conditionfuture performance and Resultsdividend sustainability. In connection with our presentation of Operations (continued)

FFO and MFFO, we are providing information related to the proportion of MFFO related to properties sold in 2021.
Although MFFO includes other adjustments, the exclusion of adjustments for straight-line rent, the amortization of above- and below-market leases, and unrealized (gains) lossesgains on derivative instruments and acquisition fees and expenses (as applicable) 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;
and
•Unrealized (gains) lossesgains on derivative instruments.These adjustments include unrealized (gains) lossesgains 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;agreements.
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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)
Acquisition fees and expenses. Prior to our early adoption of ASU No. 2017-01 on January 1, 2017, acquisition fees and expenses related to the acquisition of real estate were generally expensed.  Although these amounts reduce net income, we exclude them from MFFO to more appropriately present the ongoing operating performance of our real estate investments on a comparative basis.  Additionally, acquisition fees and expenses have been funded from the proceeds from our now-terminated initial public offering and debt financings and not from our operations.  We believe this exclusion is useful to investors as it allows investors to more accurately evaluate the sustainability of our operating performance.
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, for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, 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
 $101,011
_____________________
For the Three Months Ended
June 30,		For the Six Months Ended
June 30,
2022202120222021
Net (loss) income$(16,157)$88 $(5,603)$27,511 
Depreciation of real estate assets21,616 21,596 42,950 42,758 
Amortization of lease-related costs5,022 6,324 10,908 12,561 
Unrealized loss on real estate equity securities17,268 — 34,535 — 
Gain on sale of real estate, net— — — (20,459)
Adjustment for investment in an unconsolidated entity (1)
— 4,513 — 9,029 
FFO (2) (3)
27,749 32,521 82,790 71,400 
Straight-line rent and amortization of above- and below-market leases, net(2,931)(1,905)(5,335)(4,716)
Unrealized gains on derivative instruments(10,082)(3,933)(35,870)(9,830)
Adjustment for investment in an unconsolidated entity (1)
— 293 — (2,713)
MFFO (2) (3)
$14,736 $26,976 $41,585 $54,141 
_____________________
(1)Reflects our noncontrolling interest share of adjustments to convert our net income (loss) to FFO and MFFO includes $1.0 millionfor our equity investment in an unconsolidated entity.
(2) FFO and $7.0 millionMFFO exclude our share of lease termination incomethe SREIT’s FFO and MFFO, respectively, for the period from January 1, 2022 through June 30, 2022. On November 9, 2021, upon our sale of 73,720,000 units in the SREIT, we determined that based on our ownership interest of 18.5% of the outstanding units of the SREIT as of that date, we no longer have significant influence over the operations, financial policies and decision making with respect to the SREIT and therefore, ceased accounting for our investment in the SREIT as an equity method investment on that date. Accordingly, effective November 9, 2021, our investment in the units of the SREIT represents an investment in marketable securities and is therefore presented at fair value at each reporting date based on the closing price of the SREIT units on the SGX-ST on that date. As a result, FFO and MFFO related to our investment in the SREIT will be recognized based on dividends declared. FFO and MFFO for the three and ninesix months ended SeptemberJune 30, 2017, respectively. FFO2022 reflect the aggregate dividends declared and MFFO includes $0.3 million and $0.7 million of lease termination incomereceived from the SREIT for the three and ninesix months ended SeptemberJune 30, 2016,2022.
(3) FFO and MFFO for the three and six months ended June 30, 2022 includes a one-time write-off of prepaid offering costs of $2.7 million and a $0.5 million fee to the conflicts committee’s financial advisor in connection with the conflicts committee’s review of alternatives available to us. Given changing market conditions, we continue to evaluate various alternatives available to us. See “–Overview.” In order to avoid additional legal, accounting and other offering costs while we make this determination, we withdrew our registration statement on Form S-11 to register a public offering as an NAV REIT, which had been filed with the SEC, as at this time it is not likely we will pursue a conversion to an “NAV REIT.”
Our calculation of MFFO above includes amounts related to the operations of two office properties sold on January 19, 2021 and November 2, 2021, respectively. Please refer to the table below with respect to the proportion of MFFO related to the real estate properties sold during 2021 (in thousands).
 For the Three Months Ended
June 30,		For the Six Months Ended
June 30,
2022202120222021
MFFO by component:
Assets held for investment$14,736 $25,648 $41,585 $51,452 
Real estate properties sold— 1,328 — 2,689 
MFFO$14,736 $26,976 $41,585 $54,141 

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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Table of Contents
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 thirdsecond quarters of 20172022 (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 2022$22,795 $0.149 $16,721 $6,266 $22,987 $7,533 
Second Quarter 202222,336 0.149 13,336 9,139 22,475 15,996 
$45,131 $0.298 $30,057 $15,405 $45,462 $23,529 
_____________________
(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, 2022 through June 30, 2022, 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 generally paid on or about the first business day of the following month.
(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 ninesix months ended SeptemberJune 30, 2017,2022, we paid aggregate distributions of $88.5$45.5 million, including $43.4$30.1 million of distributions paid in cash and $45.1$15.4 million of distributions reinvested through our dividend reinvestment plan. Our net income attributable to common stockholdersloss for the ninesix months ended SeptemberJune 30, 20172022 was $0.3$5.6 million. FFO for the ninesix months ended SeptemberJune 30, 20172022 was $124.6$82.8 million and cash flow from operating activities was $90.6$23.5 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$23.5 million of cash flow from current operating activities, and $10.0$17.3 million of cash flow from operating activities in excess of distributions paid during 2016.prior periods and $4.7 million of proceeds from debt financing. 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 “MarketStatements,” “– 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, 2016,2021 and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the period ended March 31, 2022, 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.

Critical Accounting Policies and Estimates
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, 20162021 filed with the SEC. There have been no significant changes to our policies during 2017 except for the addition of an accounting policy with respect to investments in unconsolidated joint ventures under the equity method.

2022.
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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)

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,July 1, 2022, 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$7.4 million, which related to distributions declared for daily record dates for each day in the period from Octoberamount of $0.04983333 per share of common stock to stockholders of record as of the close of business on June 27, 2022. On August 1, 2017 through October 31, 2017.2022, we paid distributions of $7.4 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 July 26, 2022.
Distributions DeclaredAuthorized
On October 9, 2017,August 11, 2022, our board of directors authorized distributions basedan August 2022 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,August 19, 2022, which we expect to pay in December 2017. On November 14, 2017, our board of directors authorized distributions based on daily record dates 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. September 2022.
Investors may choose to receive cash distributions or purchase additional shares through our dividend reinvestment plan.
Distributions for these periods 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, 2016 estimated value per share of $10.63.
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Financing Subsequent to September 30, 2017
Portfolio Loan Facility
On November 3, 2017, we, through indirect wholly owned subsidiaries (each a “Borrower”), entered into a three-year loan facility with Bank of America, N.A., as administrative agent; Merril Lynch Pierce Fenner & Smith Incorporated, Wells Fargo Securities, LLC  and U.S. Bank, N.A., as joint lead arrangers and joint book runners; Wells Fargo Bank, NA, 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”), of which $757.5 million is term debt and $252.5 million is revolving debt. Proceeds from the term 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 the 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. The Portfolio Loan Facility may be used for the repayment of debt, for tenant improvements, leasing commissions and capital improvements, for working capital or liquidity management 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, 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. 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.

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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 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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Table of Contents
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 SeptemberJune 30, 2017,2022, the fair value of our fixed rate debt was $193.5$120.1 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 SeptemberJune 30, 2017.2022. 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 SeptemberJune 30, 2017,2022, we were exposed to market risks related to fluctuations in interest rates on $630.9$360.6 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 SeptemberJune 30, 2017,2022, if interest rates were 100 basis points higher or lower during the 12 months ending SeptemberJune 30, 2018,2023, 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 SeptemberJune 30, 20172022 were 4.1%3.7% and 3.2%3.4%, respectively. The weighted-average effective interest rates representrate represents the actual interest rate in effect as of SeptemberJune 30, 20172022 (consisting of the contractual interest rate and the effect of interest rate swaps, if applicable), using interest rate indices as of SeptemberJune 30, 20172022 where applicable.
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Table of Contents
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 former director of the external manager of the SREIT, and Mr. Schreiber currently holds an indirect ownership interest in the external manager of the SREIT. An affiliate of our advisor serves 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 June 30, 2022, we held 215,841,899 units of the SREIT which represented 18.4% of the outstanding units of the SREIT as of that date. As of June 30, 2022, the aggregate value of our investment in the units of the SREIT was $145.7 million, which was based solely on the closing price of the SREIT units on the SGX-ST of $0.675 per unit as of June 30, 2022, 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 June 30, 2022, if prices were to increase or decrease by 10%, our net income would increase or decrease by approximately $14.6 million.
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, 2016,2021, as filed with the SEC.


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Table of Contents
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 SeptemberJune 30, 20172022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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Table of Contents
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, 2016,2021 and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the period ended March 31, 2022, 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, 2022 through March 30, 2022 and the amendments to the program made by (i) the March 2022 amended and restated share redemption program (the “March 2022 Amended Share Redemption Program”), which became effective for the March 31, 2022 redemption date, and (ii) the April 2022 amended and restated share redemption program (the “April 2022 Amended Share Redemption Program”), which became effective for the April 29, 2022 redemption date.
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Table of Contents
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”“Qualifying Disability” or “determination“Determination of incompetence”Incompetence” (each as defined in the share redemption program, document and together with redemptions sought in connection with a stockholder'sstockholder’s death, “Special Redemptions;” all redemptions that do not meet the requirements for a Special Redemption are “Ordinary Redemptions”), we may not redeem shares unless the stockholder has held the shares for one year.
During•Except as provided otherwise for calendar year 2022 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 may provide notice by including such information (a) in a Current Report on Form 8-K or in our annual or quarterly reports, all publicly filed
•For calendar year 2022 only,
◦Prior to effectiveness of the March 2022 Amended Share Redemption Program, we could redeem only the number of shares that we could purchase with the Securitiesamount of net proceeds from the sale of shares under our dividend reinvestment plan during the prior calendar year, provided that once we had received requests for redemptions, whether in connection with Special Redemptions or otherwise, that if honored, and Exchange Commissionwhen 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 (b)less, the last $10.0 million of available funds was reserved exclusively for Special Redemptions.
◦Upon effectiveness of the March 2022 Amended Share Redemption Program and prior to effectiveness of the April 2022 Amended Share Redemption Program, we could 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, provided that once we had 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 $2.0 million or less, the last $2.0 million of available funds was reserved exclusively for redemptions sought in connection with Special Redemptions.
◦Upon effectiveness of the April 2022 Amended Share Redemption Program, for calendar year 2022, we may redeem up to 5% of the weighted-average number of shares outstanding during the 2021 calendar 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 2022 calendar year, would result in the number of remaining shares available for redemption in the 2022 calendar year being 500,000 or less, the last 500,000 shares available for redemption shall be reserved exclusively for redemptions sought in connection with a separate mailing to our stockholders.Special Redemption.
•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.

For purposes of determining the time period a 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 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 the share’s original issuance by us is not determinative.
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Table of Contents
PART II. OTHER INFORMATION (CONTINUED)
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (continued)

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. 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.
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
Ordinary Redemptions are 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% of our most recent estimated value per share as of the applicable redemption date;
For those shares held by the redeeming stockholder for at least two years, 95.0% of our most recent estimated value 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,November 1, 2021, our board of directors approved an estimated value per share of our common stock of $10.63$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, 2016. This2021, 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 November 2021 redemption date, which was November 30, 2021, and until the estimated value per share became effectiveis updated, the redemption price for the December 2016all shares eligible for redemption date, which was December 30, 2016.
For purposes of determining the time period a 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 our dividend reinvestment plan 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.
We may provide notice by including such information (a) in a Current Report on Form 8-K or in our annual or quarterly reports, all publicly filed with the SEC or (b) in a separate mailing to our stockholders. The complete share redemption program document is filed as an exhibit to our AnnualCurrent Report on Form 10-K for8-K filed with the year ended December 31, 2013SEC on April 14, 2022 and is available at the SEC’s website, at http://www.sec.gov.

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PART II. OTHER INFORMATION (CONTINUED)
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (continued)

During the ninesix months ended SeptemberJune 30, 2017,2022, 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 20221,153,542 $10.37 (3)
February 20221,250,047 $10.39 (3)
March 20221,417,714 $10.38 (3)
April 20221,147,723 $10.37 (3)
May 20221,108,578 $10.39 (3)
June 20221,303,979 $10.38 (3)
Total7,381,583 
_____________________
(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), on July 16, 2021 (which amendment became effective on July 30, 2021), on March 18, 2022 (which amendment became effective on March 31, 2022) and on April 14, 2022 (which amendment became effective on April 27, 2022).
(2) The prices at which we redeem shares under the program are as set forth above.
(3) We limit As of August 1, 2022, we had exhausted the dollar value of shares that may be redeemedfunds available under the share redemption program as described above. One of these limitations is that during eachfor Ordinary Redemptions for calendar year 2022, and we had approximately 428,000 shares available for Special Redemptions for the remainder of 2022. As of August 1, 2022, we had a total of $4.7 million of outstanding and unfulfilled Ordinary Redemption requests, representing approximately 457,000 shares. We will not be able to redeem shares submitted as Ordinary Redemptions for the remainder of 2022.
For the months of January 2022 through June 2022, we fulfilled all Ordinary Redemption and Special Redemption requests eligible for redemption under 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.received in good order. See note (3) above.

Item 3. Defaults uponUpon Senior Securities
None.

Item 4. Mine Safety Disclosures
None.

Item 5. Other Information
None.

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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
10.131.1
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
32.1
32.2
99.1
99.2
101.INS99.3
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, 2017August 12, 2022By:
/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, 2017August 12, 2022By:
/S/ JEFFREY K. WALDVOGEL    
Jeffrey K. Waldvogel
Chief Financial Officer, Treasurer and Secretary
(principal financial officer)


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