KBS REIT III Buys Time on $205.5 Million Debt With Fourth Loan Modification
KBS Real Estate Investment Trust III, Inc. – a publicly registered non-traded REIT – entered into a fourth modification earlier this month of its portfolio revolving loan facility, extending its maturity to March 25, with a possible further extension to April 15.
The modification gives the trust additional time to negotiate a long-term resolution for $205.5 million in outstanding debt secured by office properties at 515 Congress in Austin, Gateway Tech Center in Salt Lake City, and 201 17th Street in Atlanta.
The primary lender is U.S. Bank National Association. Other participating banks include Regions Bank, Citizens Bank, City National Bank and Associated Bank.
As part of the modification, KBS REIT III and its external adviser, KBS Capital Advisors LLC, agreed to significant fee limitations. Payments to the adviser are now limited to 90% of the fees associated with the secured properties. The remaining 10% will be deferred until the loan is paid in full. The trust also will not pay any disposition fees for these properties without lender consent, except for a capped payment of 0.65% of the contract sales price, provided no default has occurred.
These concessions follow previous agreements by the adviser to reduce and defer fees in connection with other debt modifications across the REIT’s portfolio.
KBS REIT III said it is working with U.S. Bank to reach a permanent extension. As of the agreement date, $3.3 million remained available for future disbursement under the facility, subject to standard loan conditions.
The REIT carried approximately $1.28 billion in debt, a debt-to-equity ratio of approximately 650.6%.
In October 2025, KBS REIT III sold Park Place Village, a mixed-use office and retail property in the Kansas City submarket of Leawood, Kan. That transaction closed with a gross sales price of $100 million, significantly less than what the REIT purchased it for: $126.5 million in June 2015. After accounting for various deductions – including credits for tenant improvements, prorations, third-party closing costs, and a $0.8 million disposition fee paid to the adviser – the company realized $95.5 million in net sales proceeds.
The sale of Park Place Village followed the summer 2025 disposition of Sterling Plaza amid continued challenges for the REIT. In 2023, the REIT first issued a “going concern” warning, and in 2024, it had to return the keys to an office building in San Francisco.
As of Sept. 30, 2025, the REIT reported total assets of approximately $1.59 billion, a 10.6% decrease from approximately $1.78 billion in June 2025. As of the third quarter of 2025, KBS REIT III held 12 remaining office properties acquired for approximately $2.4 billion and subsequently appraised at $1.6 billion.
Last December, the board approved a new estimated net asset value of $2.70 per share. This was about a 30.6% decline from the $3.89 per share reported in 2024. The REIT’s share redemption program remains suspended.
KBS is a national commercial real estate owner and operator that manages nontraded funds including KBS Strategic Opportunity REIT and KBS Growth & Income REIT.
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