UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

    

FORM 8-K/A
    

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 28, 2011

KBS REAL ESTATE INVESTMENT TRUST III, INC.
(Exact name of registrant specified in its charter)
    

Maryland
333-164703
27-1627696
(State or other jurisdiction of
incorporation or organization)
(Commission File Number)
(IRS Employer
Identification No.)

620 Newport Center Drive, Suite 1300
Newport Beach, California 92660
(Address of principal executive offices)

Registrant's telephone number, including area code: (949) 417-6500

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

£    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
£    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
£    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
£    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))








ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
On October 31, 2011, KBS Real Estate Investment Trust III, Inc. (the “Company”) filed a Current Report on Form 8-K dated October 28, 2011 with regard to the acquisition of a five-story office building containing 138,008 rentable square feet located on approximately 9.7 acres of land located at 900 S. Capital of Texas Highway in Austin, Texas (“Las Cimas IV”). The Company hereby amends the Form 8-K dated October 28, 2011 to provide the required financial information related to its acquisition of Las Cimas IV.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(a)
Financial Statements of Real Estate Acquired
 
 
 
 
 
Las Cimas IV
 
 
 
 
 
 
 
 
 
 
(b)
Pro Forma Financial Information
 
 
 
 
 
KBS Real Estate Investment Trust III, Inc.
 
 
 
 
 
 
F-6
 
F-8
 
F-10



1


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
KBS REAL ESTATE INVESTMENT TRUST III, INC.
 
 
 
Dated: December 23, 2011
 
BY:
 
/s/ David E. Snyder
 
 
 
 
David E. Snyder
 
 
 
 
Chief Financial Officer
 
 
 
 
 






REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of
KBS Real Estate Investment Trust III, Inc.

We have audited the accompanying statement of revenues over certain operating expenses of Las Cimas IV for the year ended December 31, 2010. This statement is the responsibility of Las Cimas IV's management. Our responsibility is to express an opinion on the statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues over certain operating expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of revenues over certain operating expenses. An audit also includes assessing the basis of accounting used and significant estimates made by management, as well as evaluating the overall presentation of the statement of revenues over certain operating expenses. We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues over certain operating expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, as described in Note 2, and is not intended to be a complete presentation of Las Cimas IV's revenues and expenses.
In our opinion, the statement of revenues over certain operating expenses referred to above presents fairly, in all material respects, the revenues and certain operating expenses described in Note 2 of Las Cimas IV for the year ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.



/s/ Ernst & Young LLP


Irvine, California
December 23, 2011


F-1


LAS CIMAS IV
STATEMENTS OF REVENUES OVER CERTAIN OPERATING EXPENSES

 
 
Nine Months Ended
September 30, 2011
 
Year Ended
December 31, 2010
 
 
(unaudited)
 
 
Revenues:
 
 
 
 
Rental income
 
$
1,611,367

 
$
1,926,259

Tenant reimbursements
 
933,348

 
1,151,848

Total revenues
 
2,544,715

 
3,078,107

Expenses:
 
 
 
 
Real estate taxes and insurance
 
410,695

 
502,869

Repairs and maintenance
 
280,368

 
478,747

Utilities
 
198,737

 
280,155

General and administrative
 
139,517

 
159,061

Total expenses
 
1,029,317

 
1,420,832

Revenues over certain operating expenses
 
$
1,515,398

 
$
1,657,275


See accompanying notes.

F-2

LAS CIMAS IV
NOTES TO STATEMENTS OF REVENUES OVER CERTAIN OPERATING EXPENSES
For the Year Ended December 31, 2010
and the Nine Months Ended September 30, 2011 (unaudited)


1. DESCRIPTION OF REAL ESTATE PROPERTY
On October 28, 2011, KBS Real Estate Investment Trust III, Inc. ("KBS REIT III"), through an indirect wholly owned subsidiary, acquired from Las Cimas IV Limited Partnership (the “Seller”) a five-story office building containing 138,008 rentable square feet located on approximately 9.7 acres of land located at 900 S. Capital of Texas Highway in Austin, Texas (“Las Cimas IV”). The Seller is not affiliated with KBS REIT III or its external advisor, KBS Capital Advisors LLC. The contractual purchase price of Las Cimas IV was approximately $35.9 million plus closing costs.
KBS REIT III is a Maryland corporation formed to invest in and manage a diverse portfolio of real estate properties located throughout the United States and real estate-related investments.
2. BASIS OF PRESENTATION
The accompanying statements of revenues over certain operating expenses have been prepared to comply with the rules and regulations of the Securities and Exchange Commission (“SEC”).
Las Cimas IV is not a legal entity and the accompanying statements of revenues over certain operating expenses are not representative of the actual operations for the periods presented, as certain revenues and expenses have been excluded that may not be comparable to the revenues and expenses the Company expects to incur in the future operations of Las Cimas IV. Excluded items include interest, depreciation and amortization, and certain general and administrative costs not directly comparable to the future operations of Las Cimas IV.
The accompanying unaudited statement of revenues over certain operating expenses has 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 8-K and Article 3-14 of Regulation S-X. Accordingly, the unaudited statement of revenues over certain operating expenses does not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the statement of revenues over certain operating expenses for the unaudited interim period presented includes all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such period. Operating results for the nine months ended September 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.
An audited statement of revenues over certain operating expenses is being presented for the most recent fiscal year available instead of the three most recent years based on the following factors: (i) Las Cimas IV was acquired from an unaffiliated party and (ii) based on due diligence of Las Cimas IV by KBS REIT III, management is not aware of any material factors relating to Las Cimas IV that would cause this financial information not to be indicative of future operating results.
Square footage, acreage, occupancy and other measures used to describe real estate included in these notes to the statements of revenues over certain operating expenses are presented on an unaudited basis.
3. SIGNIFICANT ACCOUNTING POLICIES
Rental Revenues
Minimum rent, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, is recognized on a straight-line basis over the term of the related lease and amounts expected to be received in later years are recorded as deferred rent. The adjustment to record deferred rent increased rental revenue by $0.3 million and $46,000 for the year ended December 31, 2010 and nine months ended September 30, 2011 (unaudited), respectively.
Use of Estimates
The preparation of financial statements, as described in Note 2 and in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

F-3


LAS CIMAS IV
NOTES TO STATEMENTS OF REVENUES OVER CERTAIN OPERATING EXPENSES (CONTINUED)
For the Year Ended December 31, 2010
and the Nine Months Ended September 30, 2011 (unaudited)

4. DESCRIPTION OF LEASING ARRANGEMENTS
As of December 31, 2010, Las Cimas IV was 81% leased by 10 tenants. For the year ended December 31, 2010, Las Cimas IV earned approximately 77% of its rental income from three tenants: two tenants in the technology industry and one tenant in the legal services industry.
One of the tenants in the technology industry occupies 14,374 rentable square feet, or approximately 10% of the total rentable square feet. This tenant’s lease expires on April 30, 2015, with a three- or five-year extension option. This tenant has a one-time option to terminate its lease in its entirety or up to 50% of the premises, which option becomes effective as of April 30, 2013, subject to a termination fee. For the year ended December 31, 2010, Las Cimas IV earned 13% of its rental income from this tenant.
The other tenant in the technology industry occupies 27,446 rentable square feet, or approximately 20% of the total rentable square feet. This tenant’s lease expires on June 30, 2014 with two five-year extension options. For the year ended December 31, 2010, Las Cimas IV earned 27% of its rental income from this tenant.
The tenant in the legal services industry occupies 35,604 rentable square feet, or approximately 26% of the total rentable square feet. This tenant’s lease expires on June 18, 2018 with two five-year extension options. This tenant has a one-time option to terminate the lease, which option becomes effective as of May 31, 2013, subject to a termination fee. For the year ended December 31, 2010, Las Cimas IV earned 37% of its rental income from this tenant.
No other tenant leases represented more than 10% of rental income for the year ended December 31, 2010.
5. FUTURE MINIMUM RENTAL COMMITMENTS
As of December 31, 2010, the future minimum rental receipts due under non-cancelable operating leases for the years ending December 31 were as follows:
2011
$
2,116,792

2012
2,242,826

2013
2,272,006

2014
1,887,519

2015
1,347,408

Thereafter
3,446,226

 
$
13,312,777

6. COMMITMENTS AND CONTINGENCIES
Tenant Lease Termination Options
Certain tenants have lease termination options built into their leases, which are subject to termination fees. In the event that a tenant does exercise its option to terminate its lease early and the terminated space is not subsequently leased out, the total amount of future minimum rent received by Las Cimas IV will be reduced.
Environmental
Las Cimas IV 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 Las Cimas IV's financial condition and results of operations as of December 31, 2010.
7. SUBSEQUENT EVENTS
KBS REIT III evaluates subsequent events up until the date the statements of revenues over certain operating expenses are issued. The accompanying statements of revenues over certain operating expenses were issued on December 23, 2011.

F-4


KBS REAL ESTATE INVESTMENT TRUST III, INC.
SUMMARY OF UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following pro forma information should be read in conjunction with the consolidated balance sheets of KBS Real Estate Investment Trust III, Inc. (“KBS REIT III”) as of December 31, 2010 and September 30, 2011, the related consolidated statements of operations, stockholders’ equity, and cash flows for the three and nine months ended September 30, 2011, and the notes thereto. The consolidated financial statement of KBS REIT III as of the year ended December 31, 2010 and the consolidated financial statements as of and for the three and nine months ended September 30, 2011 have been included in KBS REIT III’s prior filings with the SEC. In addition, this pro forma information should be read in conjunction with the statements of revenues over certain operating expenses and the notes thereto of Las Cimas IV, which are included herein.
The unaudited pro forma balance sheet as of September 30, 2011 has been prepared to give effect to the acquisition of Las Cimas IV as if the acquisition occurred on September 30, 2011.
The unaudited pro forma statements of operations for the nine months ended September 30, 2011 and for the year ended December 31, 2010 have been prepared to give effect to the acquisition of Las Cimas IV acquired on October 28, 2011, as if the acquisition occurred on January 1, 2010.
These unaudited pro forma financial statements are prepared for informational purposes only and are not necessarily indicative of future results or of actual results that would have been achieved had the acquisition of Las Cimas IV been consummated as of January 1, 2010. In addition, the pro forma balance sheet includes pro forma preliminary estimates of the fair value of the assets and liabilities acquired in connection with the acquisition. These preliminary estimates may be adjusted in the future upon finalization of the purchase accounting.

F-5


KBS REAL ESTATE INVESTMENT TRUST III, INC.
UNAUDITED PRO FORMA BALANCE SHEET
As of September 30, 2011

 
 
KBS Real Estate Investment Trust III Historical (a)
 
Pro Forma Adjustment
 
 
Pro Forma Total
 
 
 
Las Cimas IV (b)
 
 
Assets
 
 
 
 
 
 
 
Real estate:
 
 
 
 
 
 
 
Land
 
$
2,850,000

 
$
4,650,000

(c)
 
$
7,500,000

Building and improvements
 
37,943,918

 
25,760,931

(c)
 
63,704,849

Tenant origination and absorption costs
 
6,579,529

 
5,500,787

(c)
 
12,080,316

Total real estate, cost
 
47,373,447

 
35,911,718

 
 
83,285,165

Less accumulated depreciation and amortization
 
(89,645
)
 

 
 
(89,645
)
Total real estate, net
 
47,283,802

 
35,911,718

 
 
83,195,520

Real estate loan receivable, net
 
9,881,927

 

 
 
9,881,927

Cash and cash equivalents
 
15,025,677

 

 
 
15,025,677

Accrued interest receivable
 
61,627

 

 
 
61,627

Above-market leases, net
 

 
109,527

(c)
 
109,527

Deferred financing costs, prepaid expenses and other assets
 
1,286,302

 
75,433

(d)
 
1,361,735

Total assets
 
$
73,539,335

 
$
36,096,678

 
 
$
109,636,013

Liabilities and stockholders’ equity
 
 
 
 
 
 
 
Note payable
 
$
18,250,000

 
$
24,000,000

(e)
 
$
42,250,000

Accounts payable and accrued liabilities
 
825,267

 

 
 
825,267

Due to affiliates
 
516,346

 

 
 
516,346

Distributions payable
 
322,485

 

 
 
322,485

Below-market leases, net
 

 
306,971

(c)
 
306,971

Total liabilities
 
19,914,098

 
24,306,971

 
 
44,221,069

Commitments and contingencies
 
 
 
 
 
 
 
Redeemable common stock
 
228,989

 

 
 
228,989

Stockholders’ equity
 
 
 
 
 
 
 
Preferred stock, $.01 par value; 10,000,000 shares authorized, no shares issued and outstanding
 

 

 
 

Common stock, $.01 par value; 1,000,000,000 shares authorized,
6,623,513 shares issued and outstanding, 8,001,663 pro forma shares
 
66,235

 
13,870

 
 
80,105

Additional paid-in capital
 
55,746,055

 
11,775,837

 
 
67,521,892

Cumulative distributions and net losses
 
(2,416,042
)
 

 
 
(2,416,042
)
Total stockholders’ equity
 
53,396,248

 
11,789,707

 
 
65,185,955

Total liabilities and stockholders’ equity
 
$
73,539,335

 
$
36,096,678

 
 
$
109,636,013



F-6

KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
As of September 30, 2011

(a)
Historical financial information derived from KBS REIT III’s Quarterly Report on Form 10-Q as of September 30, 2011.
(b)
Represents the acquisition of Las Cimas IV. The contractual purchase price of Las Cimas IV was $35.9 million. This amount was funded from financing of $24.0 million, which is part of a one-year secured bridge loan, and proceeds, net of offering costs, received from KBS REIT III’s initial public offering through the acquisition date. The pro forma adjustments assume the proceeds were raised as of September 30, 2011 and KBS REIT III received a gross offering price of $10 per share.
(c)
KBS REIT III determined the cost of tangible assets, identifiable intangibles and assumed liabilities (consisting of above and below-market leases and tenant origination and absorption costs) acquired in the business combination based on their estimated fair values. The purchase accounting for these acquisitions is preliminary and subject to change.
(d)
Represents loan fees incurred in conjunction with the financing of Las Cimas IV.
(e)
Represents the portion used from a $42.3 million secured bridge loan to finance the acquisition of Las Cimas IV. Domain Gateway and Las Cimas IV secure the bridge loan.

F-7


KBS REAL ESTATE INVESTMENT TRUST III, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2011

 
 
KBS Real Estate Investment Trust III Historical (a)
 
Pro Forma Adjustment
 
 
Pro Forma Total
 
 
 
Las Cimas IV
 
 
Revenues:
 
 
 
 
 
 
 
Rental income
 
$
15,951

 
$
1,715,623

(b)
 
$
1,731,574

Tenant reimbursements
 
9,679

 
933,348

(c)
 
943,027

Interest income from real estate loan receivable
 
202,426

 

 
 
202,426

Total revenues
 
228,056

 
2,648,971

 
 
2,877,027

Expenses:
 
 
 
 
 
 
 
Operating, maintenance, and management
 
2,212

 
618,622

(d)
 
620,834

Real estate taxes and insurance
 
4,596

 
410,695

(e)
 
415,291

Asset management fees to affiliate
 
21,302

 
201,760

(f)
 
223,062

Real estate acquisition fees to affiliates
 
476,381

 

 
 
476,381

Real estate acquisition fees and expenses
 
265,627

 

 
 
265,627

General and administrative expenses
 
972,120

 

 
 
972,120

Depreciation and amortization
 
89,645

 
1,207,720

(g)
 
1,297,365

Interest expense
 
2,523

 
445,238

(h)
 
447,761

Total expenses
 
1,834,406

 
2,884,035

 
 
4,718,441

Other income:
 
 
 
 
 
 
 
Other interest income
 
10,107

 

 
 
10,107

Net loss
 
$
(1,596,243
)
 
$
(235,064
)
 
 
$
(1,831,307
)
Net loss per common share, basic and diluted
 
$
(0.74
)
 
 
 
 
$
(0.52
)
Weighted-average number of common shares outstanding, basic and diluted
 
2,152,211

 
 
 
 
3,530,361



F-8

KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2011

(a)
Historical financial information derived from KBS REIT III’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2011.
(b)
Represents base rental income (not reflected in the historical statement of operations of KBS REIT III), including amortization of above-market lease assets and below-market lease liabilities, for the nine months ended September 30, 2011. Base rent is recognized on a straight-line basis beginning on the pro forma acquisition date of January 1, 2010. Above-market lease assets and below-market lease liabilities are amortized over the remaining non‑cancelable terms of the respective lease, including any below-market renewal periods.
(c)
Represents operating cost reimbursements from tenants (not reflected in the historical statement of operations of KBS REIT III) for the nine months ended September 30, 2011, based on historical operations of the previous owners.
(d)
Represents operating expenses (not reflected in the historical statement of operations of KBS REIT III) for the nine months ended September 30, 2011, based on historical operations of the previous owners.
(e)
Represents real estate taxes and insurance expense incurred by Las Cimas IV (not reflected in the historical statement of operations of KBS REIT III) for the nine months ended September 30, 2011 based on historical operations of the previous owners.
(f)
Represents asset management fees (not reflected in the historical statement of operations of KBS REIT III) for the nine months ended September 30, 2011 that would be due to affiliates of KBS REIT III had the assets been acquired on January 1, 2010. With respect to investments in real property, the asset management fee is a monthly fee paid to KBS REIT III's advisor equal to one‑twelfth of 0.75% of the amount paid to acquire the investment. This amount includes any portion of the investment that was debt financed and is inclusive of acquisition expenses related thereto, but excludes acquisition fees payable to KBS REIT III's advisor.
(g)
Represents depreciation expense (not reflected in the historical statement of operations of KBS REIT III) for the nine months ended September 30, 2011. Depreciation expense on the purchase price of buildings is recognized using the straight-line method and a 39-year life. Depreciation expense on the purchase price of tenant improvements is recognized using the straight-line method over the life of the lease. Amortization expense on lease intangible costs is recognized using the straight-line method over the life of the lease.
(h)
Represents interest expense incurred on the $24.0 million portion of a $42.3 million bridge loan used to finance Las Cimas IV, which bears interest at a variable rate of 225 basis points over one-month LIBOR, maturing September 29, 2012.


F-9


KBS REAL ESTATE INVESTMENT TRUST III, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Year Ended December 31, 2010

 
 
KBS Real Estate Investment Trust III Historical (a)
 
Pro Forma Adjustment
 
 
Pro Forma Total
 
 
 
Las Cimas IV
 
 
Revenues:
 
 
 
 
 
 
 
Rental income
 
$

 
$
2,063,196

(b)
 
$
2,063,196

Tenant reimbursements
 

 
1,151,848

(c)
 
1,151,848

Interest income from real estate loan receivable
 

 

 
 

Total revenues
 

 
3,215,044

 
 
3,215,044

Expenses:
 
 
 
 
 
 
 
Operating, maintenance, and management
 

 
917,963

(d)
 
917,963

Real estate taxes and insurance
 

 
502,869

(e)
 
502,869

Asset management fees to affiliate
 

 
269,014

(f)
 
269,014

Real estate acquisition fees to affiliates
 

 

 
 

Real estate acquisition fees and expenses
 

 

 
 

General and administrative expenses
 

 

 
 

Depreciation and amortization
 

 
1,518,641

(g)
 
1,518,641

Interest expense
 

 
733,549

(h)
 
733,549

Total expenses
 

 
3,942,036

 
 
3,942,036

Other income:
 
 
 
 
 
 
 
Other interest income
 

 

 
 

Net loss
 
$

 
$
(726,992
)
 
 
$
(726,992
)
Net loss per common share, basic and diluted
 
$

 
 
 
 
$
(0.52
)
Weighted-average number of common shares outstanding, basic and diluted
 
20,000

 
 
 
 
1,398,150




F-10

KBS REAL ESTATE INVESTMENT TRUST III, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Year Ended December 31, 2010

(a)
Historical financial information derived from KBS REIT III’s Annual Report on Form 10-K for the year ended December 31, 2010. As noted in the Form 10-K for the year ended December 31, 2010, KBS REIT III had been formed but had not yet commenced real estate operations. As such, no statement of operations for the year ended December 31, 2010 was disclosed since results of operations were not material.
(b)
Represents base rental income (not reflected in the historical statement of operations of KBS REIT III), including amortization of above-market lease assets and below-market lease liabilities, for the year ended December 31, 2010. Base rent is recognized on a straight-line basis beginning on the pro forma acquisition date of January 1, 2010. Above-market lease assets and below-market lease liabilities are amortized over the remaining non-cancelable terms of the respective lease, including any below-market renewal periods.
(c)
Represents operating cost reimbursements from tenants (not reflected in the historical statement of operations of KBS REIT III) for the year ended December 31, 2010, based on historical operations of the previous owners.
(d)
Represents operating expenses (not reflected in the historical statement of operations of KBS REIT III) for the year ended December 31, 2010, based on historical operations of the previous owners.
(e)
Represents real estate taxes and insurance expense incurred by Las Cimas IV (not reflected in the historical statement of operations of KBS REIT III) for the year ended December 31, 2010 based on historical operations of the previous owners.
(f)
Represents asset management fees (not reflected in the historical statement of operations of KBS REIT III) for the year ended December 31, 2010 that would be due to affiliates of KBS REIT III had the assets been acquired on January 1, 2010. With respect to investments in real property, the asset management fee is a monthly fee paid to KBS REIT III's advisor equal to one-twelfth of 0.75% of the amount paid to acquire the investment. This amount includes any portion of the investment that was debt financed and is inclusive of acquisition expenses related thereto, but excludes acquisition fees payable to KBS REIT III's advisor.
(g)
Represents depreciation expense (not reflected in the historical statement of operations of KBS REIT III) for the year ended December 31, 2010. Depreciation expense on the purchase price of buildings is recognized using the straight-line method and a 39-year life. Depreciation expense on the purchase price of tenant improvements is recognized using the straight-line method over the life of the lease. Amortization expense on lease intangible costs is recognized using the straight-line method over the life of the lease.
(h)
Represents loan fee amortization and interest expense incurred on the $24.0 million portion of a $42.3 million bridge loan used to finance Las Cimas IV, which bears interest at a variable rate of 225 basis points over one-month LIBOR, maturing September 29, 2012. Amortization of loan fees is recognized using the interest method over the life of the loan.


F-11