KBS REIT Lawsuit: Defendants, Legal Claims, and Investor Losses

Investors who lost money in KBS Real Estate Investment Trust III are pursuing recovery primarily through FINRA arbitration claims and individual lawsuits against the brokerage firms and financial advisors who sold the product, not against KBS itself. A KBS REIT III lawsuit or arbitration typically alleges that the non-traded REIT was unsuitably recommended and that its risks—illiquidity, heavy concentration in commercial office real estate, and high upfront fees—were downplayed or not disclosed. The shares were sold at $10.00 in the initial offering and carried an estimated value of just $2.70 as of December 2025, with secondary market prices reported as low as $1.00.¹²

What Happened to KBS REIT III

KBS REIT III closed its initial public offering on May 29, 2015, at $10.00 per share, and used the proceeds to build a portfolio of Class A office properties worth roughly $2.4 billion at purchase.³¹ The board’s estimated per-share value peaked at $11.73 in December 2017. Then the slide began. The pandemic-driven shift to remote work and rising interest rates hit the office-heavy portfolio hard.

The 12 remaining office properties—purchased and improved for around $2.4 billion—were appraised by Kroll at just $1.6 billion as of September 30, 2025.⁷ On the secondary market, shares have traded as low as $1.00, and CTT Auctions pricing between November 2024 and February 2025 ranged from $0.65 to $0.93 per share.²

Meanwhile, the door to getting money out has closed. KBS REIT III stopped paying monthly distributions in June 2023 to preserve liquidity, and terminated its share redemption program in March 2024. Loan covenants now prevent the company from paying dividends or redeeming shares until certain debts are repaid or refinanced, and the REIT has warned stockholders they “may have to hold their shares for an indefinite period of time.”⁸⁹

Management first disclosed “substantial doubt” about the company’s ability to continue as a going concern in late 2023 SEC filings, and that warning has been repeated in every disclosure since.¹⁰ The annual report filed in March 2026 identified asset sales, property relinquishments, and Chapter 11 bankruptcy among the potential paths forward.¹¹

Who Investors Are Suing, and Where

Almost every active KBS REIT III claim runs against the brokerage firm and financial advisor who sold the shares, not against KBS Capital Markets Group or the REIT itself. When investors opened brokerage accounts, most signed pre-dispute arbitration agreements that route these disputes to FINRA’s arbitration forum rather than the courts.¹² FINRA arbitration is where most non-traded REIT recovery efforts play out.

The one publicly identified case is a lawsuit filed by Shepherd Smith Edwards & Kantas on behalf of a Texas retiree against LPL Financial and its Houston-based registered representative, Bradley Alan Bowman. The firm has described it as a “six-figure” case seeking to recover losses from KBS REIT III and other alternative investments, and has said it has filed additional investor lawsuits over KBS REIT III on behalf of other claimants.¹³¹⁴ Several other law firms have announced investigations and are actively soliciting KBS REIT III investors for potential FINRA claims.

One timing point matters. To be eligible for FINRA arbitration, the alleged misconduct must have occurred within the past six years.¹² For investors who bought during KBS REIT III’s initial offering, which closed in 2015, that window is a real constraint on when a claim must be filed.

Suing KBS directly is a harder path. Back in May 2012, a group of investors led by plaintiff George Stewart filed a class-action suit against KBS REIT I in U.S. District Court in Fort Myers, Florida, alleging misrepresentations about investment objectives, dividend policy, and asset values. The suit was voluntarily dismissed two months later. Chuck Schreiber, CEO of KBS Capital Advisors, attributed the withdrawal to “the strength of KBS’ motion to dismiss establishing the lack of merit in the case” and the firm’s refusal to enter settlement talks.¹⁵ That history is part of why recovery efforts for KBS REIT III losses focus on the sales side.

The Legal Arguments Being Made

KBS REIT III claims are built on broker conduct rules. Brokers and their firms are required to follow Regulation Best Interest and FINRA suitability rules when recommending investments. The question in each claim is whether those obligations were met at the point of sale, given what was known or should have been known about the risks of a concentrated, illiquid, office-focused real estate product. The core allegations follow a pattern.

Unsuitability. Attorneys argue KBS REIT III was inappropriate for many of the investors it was sold to, particularly retirees and others who needed access to their money. Non-traded REITs are inherently illiquid, and shares cannot be readily sold on a public exchange.¹⁶

Failure to disclose risks. Claims allege that advisors minimized or failed to disclose illiquidity, the portfolio’s concentration in commercial office real estate, and the fees involved. Front-end fees on non-traded REITs can run 10 to 15 percent of the total investment.¹⁷

Overconcentration. Some investors were placed into an outsized position in a single illiquid alternative investment, violating basic diversification principles.¹⁶

Misleading marketing. The product may have been positioned as a stable income investment despite the structural risks that have since materialized.¹⁶

Calculating Your Loss

Total distributions paid to KBS REIT III shareholders since inception amount to $8.40 per share for the earliest investors and $5.74 per share for those who bought in latest.⁵ Even factoring those payments in, investors who paid $10.00 per share and continue to hold face substantial losses at the current $2.70 estimated value, and larger losses still measured against reported secondary market prices below $1.00. Because distributions are suspended and the redemption program is closed, an investor’s realistic exit options are limited to selling on the thin secondary market at a steep discount, holding through whatever restructuring or bankruptcy outcome unfolds, or pursuing a claim against the selling broker.

KBS REIT III’s remaining 12 office properties total roughly 5.6 million square feet at 80 percent leased occupancy, spread across markets including San Jose, Emeryville, Chicago, Austin, Charlotte, Atlanta, and Arlington, Virginia.⁹ The REIT’s loan agreements require additional asset sales in 2026 and 2027, and management has acknowledged that selling in the current environment may mean lower prices than would otherwise be obtained.⁵ For investors weighing a claim, the practical reality is that no distributions, dividends, or redemptions are expected until the debt situation resolves, and bankruptcy remains one of the outcomes management has put on the table.¹¹ The FINRA six-year eligibility window makes waiting to see how the restructuring plays out a decision with a deadline attached.

1
Stock Titan. KBS Real Estate Investment Trust III Reports Material Event
2
KBS-CMG. Comrit KBS III Tender Offering Materials
3
KBS-CMG. KBS Real Estate Investment Trust III
4
KBS. KBS REIT III Raises Net Asset Value to $11.73 Per Share
5
KBS-CMG. KBS REIT III Portfolio Snapshot
6
KBS-CMG. Comrit Tender Offer BOD Response
7
OTC Markets. KBS REIT III Investor Presentation
8
KBS-CMG. KBS Real Estate Investment Trust III Distribution History
9
KBS-CMG. KBS REIT III Portfolio Update
10
The White Law Group. KBS REIT III Lawsuits Investigation Update
11
Stock Titan. KBS Real Estate Investment Trust III Annual Report
12
FINRA. Legitimate Avenues for Recovery of Investment Losses
13
Shepherd Smith Edwards & Kantas, LLP. REIT Fraud Lawyers
14
Shepherd Smith Edwards & Kantas, LLP. REIT Investor Loss Lawyers
15
InvestmentNews. Lawsuit Against KBS REIT Dropped
16
Sonn Law Group. Investor Alert: KBS REIT III Losses, Redemption Suspension, and Financial Distress Raise Serious Concerns
17
The White Law Group. Non-Traded REITs