KBS REIT III Slashes Estimated Share Value

The sharp decline reflects property sales, weakened office valuations, and heightened refinancing risks.

December 22, 2025

KBS REIT III Reduces Share Valuation to $2.70 as Real Estate Headwinds Intensify

KBS Real Estate Investment Trust III has updated the estimated value of its common stock to $2.70 per share, a move approved by its board on December 18, 2025. This figure represents a $1.19 drop from the previous estimate of $3.89, and continues a multi-year trend driven by shifts in the commercial office real estate market.

The new valuation is based on the net asset value of the company as of September 30, 2025, with one key adjustment: the value of KBS’s investment in Prime US REIT, updated as of November 14. An independent third-party firm, Kroll, appraised the company’s 12 office properties and Prime US REIT units, and also reviewed inputs provided by KBS’s external advisor, KBS Capital Advisors. The final share value reflects this combined analysis, approved by KBS’s conflicts committee and board.

Three property sales during the reporting period contributed to the overall decrease, alongside a broader pullback in office building valuations. The current interest rate environment, ongoing leasing challenges, and reduced demand for office space in key markets—especially in the San Francisco Bay Area—have all played a role. On the debt side, paydowns tied to property sales brought down the value of notes payable, though this was partially offset by new loan draws.

KBS also saw an increase in restricted cash due to cash sweep arrangements tied to several loan facilities. These facilities now require excess property-level cash flow to be deposited into lender-controlled accounts. While this added to the company’s liquidity, it also reflects tighter oversight from lenders.

The company’s estimated value per share doesn’t include premiums or discounts for external management, nor does it account for disposition costs on properties not yet under contract. It’s also not intended to represent a trading price or liquidation value, and wasn’t prepared according to GAAP. Instead, it’s designed to support broker-dealer reporting obligations under FINRA rules.

Valuation Sensitivity and Debt Outlook

Valuation sensitivity remains high. Small shifts in discount or capitalization rates can materially move the share estimate. For instance, a 25-basis-point change in the terminal cap rate or discount rate could add or subtract more than $0.20 per share. KBS notes that even a 1% swing in property values can translate to an $0.11 shift in the share price.

KBS has refinanced or extended over $1.3 billion in debt since February 2024, but substantial upcoming maturities remain. The company is under pressure to meet lender requirements—including paydowns, asset sales, and portfolio actions—many of which are not fully under its control. If it fails to meet these terms, lenders could move to enforce their rights, including taking control of pledged equity interests.

Despite the refinancing activity, the company acknowledges that its ability to meet future obligations is uncertain. Given the limited transaction volume in the U.S. office sector and broader volatility in financial markets, KBS states that it cannot confirm its ability to continue as a going concern for at least 12 months from mid-November.

The current valuation will appear on client account statements dated December 31, 2025. KBS expects to update the estimate again by the end of 2026.