KBS Real Estate Investment Trust III, Inc. Annual Report: A Summary

I’ve put together this guide to help you understand how KBS Real Estate Investment Trust III (KBS REIT III) performed this year. My goal is to explain these financial filings in plain English so you can decide if this investment still fits your goals.

1. The Big Picture

KBS REIT III owns and manages high-quality office buildings across the U.S. As of December 31, 2025, the company held 13 properties totaling about 4.2 million square feet. The company is currently in a "liquidation" phase. Since 2022, the board has been selling off properties to pay down debt and return the remaining cash to stockholders. This process has shrunk the portfolio from over 20 properties.

2. The Numbers: A Significant Drop in Value

The most important update is the change in the company’s "Net Asset Value" (NAV). This is the estimated value of the company’s assets minus its debts, divided by the number of shares.

• Last Year: In December 2024, the board estimated your shares were worth $3.89.
• This Year: As of December 2025, that estimate dropped to $2.70.

This is a 30.6% decline in your investment’s estimated value. This drop occurred because the appraised value of the office buildings fell, interest costs on debt rose, and the company spent more to keep tenants in their buildings.

3. Highs and Lows

• The Highs: The company sold several properties in 2025, bringing in about $215 million. They used this cash to pay down debt, reducing their total outstanding loans by roughly 18% compared to last year.
• The Lows: The office market remains difficult. Occupancy dropped to 78%, down from 82% last year. Because the company had to offer rent discounts to keep tenants, the profit generated by the buildings fell by 12%. This directly lowered the share price.

4. Financial Health

The company is not buying new buildings; it is focused on an orderly exit. Its health depends on selling the remaining 13 buildings for more than the debt owed on them. The company holds about $850 million in total debt. They must meet strict bank requirements, such as keeping debt levels below 65% of the property values. If they fail to meet these rules, they may be forced to sell buildings at lower prices, which would further impact the value of your investment.

5. The Risks

The biggest risk is the ongoing office market slump. With fewer buildings, the company has less rent coming in to cover its bills. If they cannot sell the remaining properties for enough to cover the mortgages, there will be no cash left for shareholders. Also, because these shares are not traded on a stock exchange, you cannot sell them easily. The company has suspended its share buyback program, meaning you have no way to cash out until the final liquidation is finished.

6. Looking Ahead

The plan is to continue selling the remaining 13 properties, pay off the $850 million in debt, and manage the buildings to save cash. The board aims to distribute any remaining money to stockholders. There is no set end date, as it depends on the unpredictable commercial real estate market.

Final Thoughts for Your Decision: When considering your next steps, remember that this is a long-term liquidation process. Since you cannot easily sell your shares, your investment is tied directly to the board's ability to sell the remaining office buildings in a challenging market. You may want to weigh the potential for future cash distributions against the current decline in share value and the lack of liquidity.