The following discussion and analysis should be read in conjunction with the accompanying financial statements of KBS Growth & Income REIT, Inc. and the notes thereto. As used herein, the terms "we," "our" and "us" refer to KBS Growth & Income REIT, Inc., a Maryland corporation, and, as required by context, KBS Growth & Income Limited Partnership, a Delaware limited partnership, which we refer to as the "Operating Partnership," and to their subsidiaries.

Forward-Looking Statements



Certain statements included in this Quarterly Report on Form 10-Q are
forward-looking statements. Those statements include statements regarding the
intent, belief or current expectations of KBS Growth & Income REIT, Inc. and
members of our management team, as well as the assumptions on which such
statements are based, and generally are identified by the use of words such as
"may," "will," "seeks," "anticipates," "believes," "estimates," "expects,"
"plans," "intends," "should" or similar expressions. These include statements
about our plans, strategies, prospects and a proposed Plan of Liquidation
(defined herein) and these statements are subject to known and unknown risks and
uncertainties. Readers are cautioned not to place undue reliance on these
forward-looking statements. Actual results may differ materially from those
contemplated by such forward-looking statements. Further, forward-looking
statements speak only as of the date they are made, and we undertake no
obligation to update or revise forward-looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes to future
operating results over time, unless required by law. Moreover, you should
interpret many of the risks identified in this report, as well as the risks set
forth below, as being heightened as a result of the continued disruptions in the
financial markets.

The following are some of the risks and uncertainties, although not all of the risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:



•The COVID-19 pandemic continues to be one of the most significant risks and
uncertainties facing us and the real estate industry generally, and in
particular office REITs like our company. We cannot predict to what extent
economic activity, including the use of and demand for office space, will return
to pre-pandemic levels. Potential changes in customer behavior, such as the
continued social acceptance, desirability and perceived economic benefits of
work-from-home arrangements, resulting from the COVID-19 pandemic, could
materially and negatively impact the demand for office space, resulting in
slower overall leasing and an adverse impact to our operations.

•Although our board of directors expects to approve the sale of all of our
assets and our dissolution pursuant to a Plan of Liquidation and submit such
plan to our stockholders for approval, we can give no assurance that our board
of directors and/or our stockholders will approve a Plan of Liquidation, or if
approved, that we will be able to successfully implement a Plan of Liquidation
and sell our assets, pay our debts and distribute the net proceeds from
liquidation to our stockholders as we intend. Given the uncertainty and current
business disruptions as a result of the outbreak of COVID-19, as well as the
current economic slowdown, the rising interest rate environment and inflation
(or the public perception that any of these events may continue), and continued
social unrest and increased crime in the Portland area where one of our
properties is located, our implementation of a Plan of Liquidation, if approved
by our board of directors and/or stockholders, may be materially and adversely
impacted.

•We owe substantial fees to and expenses of our advisor and its affiliates. To
the extent these fees are paid, the payments will decrease the amount of cash
available for liquidating distribution to our stockholders.

•All of our executive officers, one of our directors and other key real estate
and debt finance professionals are also officers, directors, managers, key
professionals and/or holders of a direct or indirect controlling interest in our
advisor, and/or other KBS-affiliated entities. As a result, they face conflicts
of interest, including significant conflicts created by our advisor's and its
affiliates' compensation arrangements with us and other KBS-sponsored programs
and KBS-advised investors and conflicts in allocating time among us and these
other programs and investors. Although we have adopted corporate governance
measures to ameliorate some of the risks posed by these conflicts, these
conflicts could result in action or inaction that is not in the best interests
of our stockholders.

•As of September 30, 2022, we had a limited portfolio of four real estate
investments, which may cause the value of an investment in us to vary more
widely with the performance of specific assets in our portfolio and cause our
general and administrative expenses to constitute a greater percentage of our
revenue.

•Our advisor waived its asset management fee for the second and third quarters
of 2017 and deferred its asset management fee related to the periods from
October 2017 through September 2022. If our advisor determines to no longer
waive or defer certain fees owed to them, our ability to fund our operations may
be adversely affected.

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PART I. FINANCIAL INFORMATION (CONTINUED)



Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
•Our policies do not limit us from incurring debt until our aggregate borrowings
would exceed 75% of the cost (before deducting depreciation or other non-cash
reserves) of our tangible assets, and we may exceed this limit with the approval
of the conflicts committee of our board of directors. High debt levels could
limit the amount of cash we have available to distribute and could result in a
decline in the value of our stockholders' investment.

•We have debt obligations with variable interest rates. The interest and related
payments will vary with the movement of SOFR or other indexes. Increases in the
indexes will increase the amount of our debt payments and limit our ability to
pay distributions to our stockholders.

•We depend on tenants for the revenue generated by our real estate investments
and, accordingly, the revenue generated by our real estate investments is
dependent upon the success and economic viability of our tenants. Revenues from
our properties could decrease due to a reduction in occupancy (caused by factors
including, but not limited to, tenant defaults, tenant insolvency, early
termination of tenant leases and non-renewal of existing tenant leases), rent
deferrals or abatements, tenants becoming unable to pay their rent and/or lower
rental rates, making it more difficult for us to meet our debt service
obligations and reducing our stockholders' returns. Further, the resale value of
a property depends principally upon the value of the cash flow generated by the
leases associated with that property. Non-renewals, terminations or lease
defaults could reduce any net sales proceeds received upon the sale of the
property and would adversely affect the amount of liquidating distributions our
stockholders would receive if a Plan of Liquidation is approved by our board of
directors and/or our stockholders.

•Our investments in real estate may be affected by unfavorable real estate
market, the rising interest rate environment, and general economic conditions,
which could decrease the value of those assets. Revenues from our properties
could decrease. Such events would make it more difficult for us to meet our debt
service obligations and successfully implement a Plan of Liquidation, which
could in turn reduce our stockholders' returns and the amount of any liquidating
distributions they receive.

•Continued disruptions in the financial markets, including the current economic
slowdown, the rising interest rate environment and inflation (or the public
perception that any of these events may continue) as well as changes in the
demand for office properties and uncertain economic conditions could adversely
affect our ability to successfully implement our business strategy and any Plan
of Liquidation approved by our board of directors and/or our stockholders, which
could reduce our stockholders' returns and the amount of any liquidating
distributions they receive.

•Our share redemption program only provides for redemptions sought upon a
stockholder's death, "qualifying disability" or "determination of incompetence"
(each as defined in the share redemption program, and collectively "special
redemptions"). The dollar amounts available for such redemptions are determined
by the board of directors and may be adjusted from time to time. The dollar
amount limitation for such redemptions for the calendar year 2022 was $250,000
in the aggregate, of which $26,000 was used for such special redemptions from
January through October 2022. Our share redemption program does not provide for
ordinary redemptions and we can provide no assurances, when, if ever, we will
provide for redemptions other than special redemptions.

All forward-looking statements should be read in light of the risks identified
herein and in Part I, Item 1A of our Annual Report on Form 10-K for the year
ended December 31, 2021, each as filed with the Securities and Exchange
Commission (the "SEC").

Overview



We were formed on January 12, 2015 as a Maryland corporation that elected to be
taxed as a real estate investment trust ("REIT") beginning with the taxable year
ended December 31, 2015 and we intend to continue to operate in such a manner.
Substantially all of our business is conducted through our Operating
Partnership, of which we are the sole general partner. Subject to certain
restrictions and limitations, our business is externally managed by our advisor
pursuant to an advisory agreement. KBS Capital Advisors manages our operations
and our portfolio of core real estate properties. KBS Capital Advisors also
provides asset-management, marketing, investor-relations and other
administrative services on our behalf. Our advisor acquired 20,000 shares of our
Class A common stock for an initial investment of $200,000. We have no paid
employees.

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PART I. FINANCIAL INFORMATION (CONTINUED)



Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
We commenced a private placement offering of our shares of common stock that was
exempt from registration pursuant to Rule 506(b) of Regulation D of the
Securities Act of 1933, as amended (the "Securities Act"), on June 11, 2015. We
ceased offering shares in the primary portion of our private offering on April
27, 2016. KBS Capital Markets Group LLC, an affiliate of our advisor, served as
the dealer manager of the offering pursuant to a dealer manager agreement.

On April 26, 2016, the SEC declared our registration statement on Form S-11,
pursuant to which we registered shares of our common stock for sale to the
public, effective, and we retained KBS Capital Markets Group LLC to serve as the
dealer manager of the initial public offering. We terminated the primary initial
public offering effective June 30, 2017. We terminated the distribution
reinvestment plan offering effective August 20, 2020.

On October 3, 2017, we launched a second private placement offering of our
shares of common stock that exempt from registration pursuant to Rule 506(c) of
Regulation D of the Securities Act. In connection with the offering, we entered
into a dealer manager agreement with KBS Capital Advisors and an unaffiliated
third party. In December 2019, in connection with its consideration of strategic
alternatives for us, our board of directors determined to suspend the second
private offering and terminated the second private offering on August 5, 2020.

Through our capital raising activities, we raised $94.0 million from the sale of
10,403,922 shares of our common stock, including $8.5 million from the sale of
924,286 shares of common stock under our distribution reinvestment plan. As
of September 30, 2022, we had 9,851,052 and 307,606 Class A and Class T shares
outstanding, respectively.

We have used substantially all of the net proceeds from our offerings to invest
in a portfolio of core real estate properties. We consider core properties to be
existing properties with at least 80% occupancy. As of September 30, 2022, we
owned four office buildings.

Going Concern Considerations



The accompanying consolidated financial statements and notes have been prepared
assuming we will continue as a going concern. We have experienced a decline in
occupancy from 90.4% as of December 31, 2020 to 73.1% as of September 30, 2022
and such occupancy may continue to decrease in the future as tenant leases
expire. The decrease in occupancy has resulted in a decrease in cash flow from
operations and has negatively impacted the market values of our properties in
our portfolio. Additionally, the Commonwealth Building Mortgage Loan with an
outstanding principal balance of $45.7 million is maturing in February 2023 and
the Modified Term Loan with an outstanding balance of $52.3 million is maturing
in November 2023. Due to the decrease in occupancies and a decrease in market
values of the properties securing these two loans, we do not expect to be able
to refinance these loans at current terms and may be required to pay down a
portion of the maturing debt in order to refinance the loans. With our limited
amount of cash on hand, our ability to make any loan paydowns, without the sale
of real estate assets, is severely limited. If we are unable to meet our payment
obligations at maturity of the respective loans because we cannot refinance the
loans, the lenders could foreclose on the assets that are pledged as collateral
to such lender. Additionally, in order to attract or retain tenants needed to
increase occupancy and sustain operations, we will need to spend a substantial
amount on capital leasing costs, however we have limited amounts of liquidity to
make these capital commitments. These conditions raise substantial doubt about
our ability to continue as a going concern. Our ability to continue as a going
concern is dependent upon our ability to refinance our mortgage debt. No
assurances can be given that we will be successful in achieving these
objectives.

Plan of Liquidation



Our board of directors and a special committee composed of all of our
independent directors (the "Special Committee") has undertaken a review of
various strategic alternatives available to us and expects to approve the sale
of all of our assets and our dissolution pursuant to the terms of a plan of
complete liquidation and dissolution (a "Plan of Liquidation"). Once approved by
our board of directors, a Plan of Liquidation will be submitted to our
stockholders for approval. Our advisor has been working diligently to develop a
Plan of Liquidation to present to our board of directors for approval; however,
the impact of the COVID-19 pandemic on a Plan of Liquidation for our portfolio,
as well as the decreased demand for office space as employees continue to work
from home, the rising interest rate environment that is impacting the ability of
buyers to obtain favorable financing and continued social unrest and increased
crime in the Portland area where one of our properties is located, have created
significant headwinds to finalizing a Plan of Liquidation. The principal purpose
of a Plan of Liquidation will be to provide liquidity to our stockholders by
selling our assets, paying our debts and distributing the net proceeds from
liquidation to our stockholders. Although this is the current intention of our
board of directors, we can provide no assurances as to the ultimate approval of
a Plan of Liquidation or the timing of the liquidation of the company.

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PART I. FINANCIAL INFORMATION (CONTINUED)



Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
If our board of directors and our stockholders approve a Plan of Liquidation, we
intend to pursue an orderly liquidation of our company by selling all of our
remaining assets, paying our debts and our known liabilities, providing for the
payment of unknown or contingent liabilities, distributing the net proceeds from
liquidation to our stockholders and winding up our operations and dissolving our
company. In the interim, we intend to continue to manage our portfolio of assets
to maintain and, if possible, improve the quality and income-producing ability
of our properties to enhance property stability and better position our assets
for a potential sale. A Plan of Liquidation remains subject to approval by our
board of directors and our stockholders and we can give no assurance regarding
the timing of our liquidation. Additional information regarding a Plan of
Liquidation will be provided to our stockholders in a proxy statement to be
distributed to stockholders in connection with a liquidation vote.

In connection with its consideration of a Plan of Liquidation, our board of directors determined to cease regular quarterly distributions. We expect any future distributions to our stockholders will be liquidating distributions.

Market Outlook - Real Estate and Real Estate Finance Markets



Volatility in global financial markets, changing political environments and
civil unrest can cause fluctuations in the performance of the U.S. commercial
real estate markets. Possible future declines in rental rates, slower or
potentially negative net absorption of leased space and expectations of future
rental concessions, including free rent to renew tenants early, to retain
tenants who are up for renewal or to attract new tenants, may result in
decreases in cash flows from investment properties. Further, revenues from our
properties could decrease due to a reduction in occupancy (caused by factors
including, but not limited to, tenant defaults, tenant insolvency, early
termination of tenant leases and non-renewal of existing tenant leases), rent
deferrals or abatements, tenants being unable to pay their rent and/or lower
rental rates. Reductions in revenues from our properties would adversely impact
the timing of any asset sales and/or the sales price we will receive for our
properties if a Plan of Liquidation is approved by our board of directors and/or
our stockholders. To the extent there are increases in the cost of financing due
to higher interest rates, this may cause difficulty in refinancing debt
obligations at terms as favorable as the terms of existing indebtedness. Market
conditions can change quickly, potentially negatively impacting the value of
real estate investments. Management continuously reviews our investment and debt
financing strategies to optimize our portfolio and the cost of our debt
exposure. Most recently, the outbreak of COVID-19 as well as the current
economic slowdown, the rising interest rate environment and inflation (or the
public perception that any of these events may continue) have had a negative
impact on the office real estate market as discussed below.

COVID-19 Pandemic and Portfolio Outlook



One of the most significant risks and uncertainties facing us and the real
estate industry generally, and in particular office REITs like our company,
continues to be the effect of the public health crisis of the novel coronavirus
disease ("COVID-19") pandemic. We recognized impairment charges related to a
projected reduction in cash flows as a result of changes in leasing projections
that were impacted in part by the COVID-19 pandemic at the Institute Property
and 210 W. Chicago during the year ended December 31, 2020, the Commonwealth
Building during the year ended December 31, 2021 and the Commonwealth Building
and the Institute Property during the nine months ended September 30, 2022.

We cannot predict to what extent economic activity, including the use of and
demand for office space, will return to pre-pandemic levels. During 2021 and the
first, second and third quarters of 2022, the usage of our assets remained lower
than pre-pandemic levels. In addition, we experienced a significant reduction in
leasing interest and activity when compared to pre-pandemic levels. Potential
changes in customer behavior, such as the continued social acceptance,
desirability and perceived economic benefits of work-from-home arrangements,
resulting from the COVID-19 pandemic, could materially and negatively impact the
demand for office space, resulting in slower overall leasing and an adverse
impact to our operations.

The current challenging economic circumstances have created a difficult
environment in which to continue to create value in our portfolio consistent
with our core-plus investment strategy. The properties in our portfolio were
acquired to provide an opportunity for us to achieve more significant capital
appreciation by increasing occupancy, negotiating new leases with higher rental
rates and/or executing enhancement projects, all of which have become more
difficult as a result of the impacts of COVID-19 on the demand for office space,
in particular in the Portland area where one of our properties is located which
has been further impacted by the social unrest that continues in the area. In
addition, due to the impact of COVID-19, the leasing environment in the
short-term will be challenging and the time to lease up and stabilize a property
will be extended. More specifically, our office properties in Portland and
Chicago will likely take more time to stabilize than previously anticipated and
our ability to create value for our stockholders through the stabilization and
disposition of these assets will be adversely affected. In addition, the timing
in which we may be able to implement a liquidation strategy will be affected.
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PART I. FINANCIAL INFORMATION (CONTINUED)



Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Liquidity and Capital Resources

As described above under "-Overview - Going Concern Considerations," our
management determined that substantial doubt exists about our ability to
continue as a going concern within one year after the date that the financial
statements are issued. In addition, as described above under "-Overview - Plan
of Liquidation," our board of directors expects to approve the sale of all of
our assets and our dissolution pursuant to the terms of a Plan of Liquidation
and submit such plan to our stockholders for approval. The principal purpose of
a Plan of Liquidation will be to provide liquidity to our stockholders by
selling our assets, paying our debts and distributing the net proceeds from
liquidation to our stockholders. Subject to the approval of our board of
directors and our stockholders of a Plan of Liquidation we expect our principal
demands for funds during the short and long-term are and will be for the payment
of operating expenses, capital expenditures and general and administrative
expenses, including expenses in connection with a Plan of Liquidation; payments
under debt obligations; special redemptions of common stock; capital
commitments; and payments of distributions to stockholders pursuant to a Plan of
Liquidation. If a Plan of Liquidation is approved by our board of directors and
our stockholders, we expect to use our cash on hand and proceeds from the sale
of properties as our primary sources of liquidity. To the extent available, we
also intend to use cash flow generated by our real estate investments and
proceeds from debt financing; however, asset sales will further reduce cash flow
from these sources during the implementation of a Plan of Liquidation, if it is
approved by our board of directors and our stockholders. Although this is the
current intention of our board of directors, we can provide no assurance as to
the ultimate approval of a Plan of Liquidation or the timing of the liquidation
of the company.

Our share redemption program only provides for special redemptions. The dollar
amounts available for such redemptions are determined by the board of directors
and may be adjusted from time to time. The dollar amount limitation for such
redemptions for the calendar year 2022 is $250,000 in the aggregate, of which
$26,000 was used for such special redemptions from January through October 2022.
Our share redemption program does not provide for ordinary redemptions and we
can provide no assurances, when, if ever, we will provide for redemptions other
than special redemptions.

Our investments in real estate generate cash flow in the form of rental revenues
and tenant reimbursements, which are reduced by operating expenditures, capital
expenditures, debt service payments, the payment of asset management fees and
corporate general and administrative expenses. Cash flow from operations from
real estate investments is primarily dependent upon the occupancy level of our
portfolio, the net effective rental rates on our leases, the collectibility of
rent and operating recoveries from our tenants and how well we manage our
expenditures, all of which may be adversely affected by the impact of the
COVID-19 pandemic as discussed above and more recently inflation.

Our advisor advanced funds to us, which are non-interest bearing, for distribution record dates through the period ended May 31, 2016. We are only obligated to repay our advisor for its advance if and to the extent that:



(i)Our modified funds from operations ("MFFO"), as such term is defined by the
Institute for Portfolio Alternatives and interpreted by us, for the immediately
preceding quarter exceeds the amount of distributions declared for record dates
of such prior quarter (an "MFFO Surplus"), and we will pay our advisor the
amount of the MFFO Surplus to reduce the principal amount outstanding under the
advance, provided that such payments shall only be made if management in its
sole discretion expects an MFFO Surplus to be recurring for at least the next
two calendar quarters, determined on a quarterly basis;

(ii)Excess proceeds from third-party financings are available ("Excess Proceeds"), provided that the amount of any such Excess Proceeds that may be used to repay the principal amount outstanding under the advance shall be determined by the conflicts committee in its sole discretion; or

(iii)Net sales proceeds from the sale of our real estate portfolio, after the pay down of any related debt and selling costs and expenses, are available.



In determining whether Excess Proceeds are available to repay the advance, our
conflicts committee will consider whether cash on hand could have been used to
reduce the amount of third-party financing provided to us. If such cash could
have been used instead of third-party financing, the third-party financing
proceeds will be available to repay the advance.

Our advisor may defer repayment of the advance notwithstanding that we would otherwise be obligated to repay the advance.


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PART I. FINANCIAL INFORMATION (CONTINUED)



Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
We expect that our debt financing and other liabilities will be between 45% and
65% of the cost of our tangible assets (before deducting depreciation and other
non-cash reserves). Though this is our target leverage, our charter does not
limit us from incurring debt until our aggregate borrowings would exceed 300% of
our net assets (before deducting depreciation and other non-cash reserves),
which is effectively 75% of the cost of our tangible assets (before deducting
depreciation and other non-cash reserves), though we may exceed this limit under
certain circumstances. To the extent financing in excess of this limit is
available at attractive terms, the conflicts committee may approve debt in
excess of this limit. As of September 30, 2022, we had mortgage debt obligations
in the aggregate principal amount of $101.6 million and our aggregate borrowings
were approximately 63% of our net assets before deducting depreciation and other
non-cash reserves. As of September 30, 2022, the Commonwealth Building Mortgage
Loan with an outstanding principal balance of $45.7 million is maturing during
the 12 months ending September 30, 2023 and the Modified Term Loan with an
outstanding balance of $52.3 million is maturing in November 2023. Due to the
decrease in occupancies and a decrease in market values of the properties
securing these two loans, we do not expect to be able to refinance these loans
at current terms and may be required to pay down a portion of the maturing debt
in order to refinance the loans. With our limited amount of cash on hand, our
ability to make any loan paydowns, without the sale of real estate assets, is
severely limited. In particular, with respect to the Commonwealth Building
Mortgage Loan, the indebtedness may exceed the market value of the Commonwealth
Building securing the loan. Given the current disruptions in the market, rising
interest rates and inflation, the cash flow from the property may be
insufficient to cover debt service and other required payments due on the loan
which may result in a payment default. In the event we default on the loan, the
lender would be entitled to foreclose on the property.

In addition to using our capital resources to meet our debt service obligations,
for capital expenditures and for operating costs, we use our capital resources
to make certain payments to our advisor and our affiliated property manager.

We pay our advisor fees in connection with the management of our assets and
costs incurred by our advisor in providing certain services to us. The asset
management fee is a monthly fee payable to our advisor in an amount equal to
one-twelfth of 1.0% of the cost of our investments including the portion of the
investment that is debt financed. The cost of our real property investments is
calculated as the amount paid or allocated to acquire the real property, plus
budgeted capital improvement costs for the development, construction or
improvements to the property once such funds are disbursed pursuant to a final
approved budget and fees and expenses related to the acquisition, but excluding
acquisition fees paid or payable to our advisor. Our advisor waived asset
management fees for the second and third quarters of 2017 and deferred payment
of asset management fees related to the periods from October 2017 through
September 30, 2022. Our advisor's waiver and deferral of its asset management
fees resulted in additional cash being available to fund our operations. If our
advisor chooses to no longer defer such fees, our ability to fund our operations
may be adversely affected. We also continue to reimburse our advisor and our
dealer manager for certain stockholder services.

We also pay fees to KBS Management Group, LLC (the "Co-Manager"), an affiliate
of our advisor, pursuant to property management agreements with the Co-Manager,
for certain property management services at our properties.

We elected to be taxed as a REIT and to operate as a REIT beginning with our
taxable year ended December 31, 2015. To maintain our qualification as a REIT,
we will be required to make aggregate annual distributions to our stockholders
of at least 90% of our REIT taxable income (computed without regard to the
dividends-paid deduction and excluding net capital gain). Our board of directors
may authorize distributions in excess of those required for us to maintain REIT
status depending on our financial condition and such other factors as our board
of directors deems relevant. We do not expect to pay regular quarterly
distributions during the liquidation process. Further, we have not established a
minimum distribution level.

Under our charter, we are required to limit our total operating expenses to the
greater of 2% of our average invested assets or 25% of our net income for the
four most recently completed fiscal quarters, as these terms are defined in our
charter, unless the conflicts committee has determined that such excess expenses
were justified based on unusual and non-recurring factors. Operating expenses
for the four fiscal quarters ended September 30, 2022 did not exceed the
charter-imposed limitation.

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PART I. FINANCIAL INFORMATION (CONTINUED)



Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Cash Flows from Operating Activities

As of September 30, 2022, we owned four office properties. During the nine
months ended September 30, 2022, net cash used in operating activities was
$0.2 million. During nine months ended September 30, 2021, net cash provided by
operating activities was $0.9 million. Net cash used in operating activities
increased due to a decrease in rental income and the payment of lease incentives
during 2022. We expect cash flows provided by operating activities to decrease
in future periods to the extent a Plan of Liquidation is approved by our board
of directors and our stockholders and we begin selling our assets. In addition,
to the extent the impacts of COVID-19 continue to be felt by our tenants, our
tenants may defer rent payments or be unable to pay rent or we may be unable to
re-lease space vacated by our current tenants which could reduce our cash flow
provided by operating activities. Further, downtown Portland, where one of our
properties is located is experiencing record high vacancies due to the impact of
the disruptions caused by protests and demonstrations and increased crime in the
downtown area, and it is uncertain when the market will fully recover which we
expect to adversely impact our cash flows from operating activities.

Cash Flows from Investing Activities

During the nine months ended September 30, 2022, net cash used in investing activities was $0.8 million due to improvements to real estate.

Cash Flows from Financing Activities

During the nine months ended September 30, 2022, net cash used in financing activities was $0.2 million due to principal payments on notes payable, payments of deferred financing costs and redemption of common stock.

Debt Obligations

The following is a summary of our contractual obligations as of September 30, 2022 (in thousands).



                                                                           Payments Due During the Years Ending December 31,
Debt Obligations                                       Total           Remainder of 2022        2023-2024           2025-2026
Outstanding debt obligations (1)                    $ 101,611          $           19          $ 101,592          $         -
Interest payments on outstanding debt
obligations (2)                                         4,100                   1,288              2,812                    -


_____________________

(1) Amounts include principal payments only.



(2) Projected interest payments are based on the outstanding principal amount,
maturity date and contractual interest rate in effect as of September 30, 2022
(consisting of the contractual interest rate and the effect of interest rate
swaps). We incurred interest expense of $2.8 million, excluding amortization of
deferred financing costs totaling $0.2 million and unrealized gains on
derivative instruments of $0.6 million during the nine months ended
September 30, 2022.


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PART I. FINANCIAL INFORMATION (CONTINUED)



Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Results of Operations

Overview

As of September 30, 2022 and 2021, we owned four office properties. If a Plan of
Liquidation is approved by our board of directors and our stockholders, we will
undertake an orderly liquidation by selling all of our assets, paying our debts,
providing for known and unknown liabilities and distributing the net proceeds
from liquidation to our stockholders. There can be no assurances regarding the
amounts of any liquidating distributions or the timing thereof. In general,
subject to other factors as described below, we expect income and expenses to
decrease in future periods due to disposition activity.

The following table provides summary information about our results of operations
for the three and nine months ended September 30, 2022 and 2021 (dollar amounts
in thousands):

Comparison of the three months ended September 30, 2022 versus the three months
ended September 30, 2021

                                                    For the Three Months Ended
                                                           September 30,                    Increase
                                                      2022                2021             (Decrease)          Percentage Change
Rental income                                    $     3,589          $   4,004          $      (415)                       (10) %
Other operating income                                    35                 63                  (28)                       (44) %
Operating, maintenance and management costs              943              1,063                 (120)                       (11) %
Property management fees and expenses to
affiliate                                                 24                 29                   (5)                       (17) %
Real estate taxes and insurance                          849                780                   69                          9  %
Asset management fees to affiliate                       442                439                    3                          1  %
General and administrative expenses                      372                418                  (46)                       (11) %
Depreciation and amortization                          1,468              1,987                 (519)                       (26) %
Interest expense                                       1,243                620                  623                        100  %
Impairment charges on real estate                      2,490              8,779               (6,289)                       (72) %
Interest and other income                                 14                  -                   14                        100  %



Rental income decreased from $4.0 million for the three months ended
September 30, 2021 to $3.6 million for the three months ended September 30,
2022, primarily due to a decrease in occupancy rate from 80.8% as of
September 30, 2021 to 73.1% as of September 30, 2022 as a result of lease
expirations. Overall, we expect rental income to decrease in future periods due
to anticipated future dispositions of real estate properties and uncertainty and
business disruptions as a result of the outbreak of COVID-19 and social unrest
in the Portland area where one of our properties is located. See "Market Outlook
- Real Estate and Real Estate Finance Markets - COVID-19 Pandemic and Portfolio
Outlook" for a discussion on the impact of the COVID-19 pandemic on our
business.

Operating, maintenance, and management costs decreased from $1.1 million for the
three months ended September 30, 2021 to $0.9 million for the three months ended
September 30, 2022, primarily due to a decrease in operating costs, including
janitorial and repairs and maintenance costs, as a result of a decrease in
physical occupancy at our real estate properties. We expect operating,
maintenance, and management costs to decrease in future periods due to
anticipated future dispositions of real estate properties, offset by general
increase due to inflation and as physical occupancy increases as employees
return to the office.

Real estate taxes and insurance remained consistent at $0.8 million for the
three months ended September 30, 2022 and 2021. We expect real estate taxes and
insurance to decrease in future periods due to anticipated future dispositions
of real estate properties, partially offset by general increase due to
inflation.

Asset management fees to affiliate remained consistent at $0.4 million for the
three months ended September 30, 2022 and 2021. We expect asset management fees
to decrease in future periods due to anticipated future dispositions of real
estate properties, partially offset by increases in capital improvements. As of
September 30, 2022, we had accrued and deferred payment of $8.9 million of asset
management fees related to the periods from October 2017 through September 30,
2022.

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PART I. FINANCIAL INFORMATION (CONTINUED)



Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
General and administrative expenses remained consistent at $0.4 million for the
three months ended September 30, 2022 and 2021. General and administrative costs
consisted primarily of legal fees, internal audit compensation expense, errors
and omissions insurance, board of directors fees and audit cost.

Depreciation and amortization decreased from $2.0 million for the three months
ended September 30, 2021 to $1.5 million for the three months ended
September 30, 2022, primarily due to lease expirations, early lease terminations
and reduced depreciable asset basis for the Commonwealth Building as a result of
non-cash impairment charges recorded subsequent to September 30, 2021. We expect
depreciation and amortization to decrease in future periods due to anticipated
future dispositions of real estate properties and fully amortized tenant
origination and absorption costs related to lease expirations, partially offset
by increases in capital improvements.

Interest expense increased from $0.6 million for the three months ended
September 30, 2021 to $1.2 million for the three months ended September 30,
2022. Included in interest expense is the amortization of deferred financing
costs of $0.1 million for the three months ended September 30, 2022 and 2021.
Interest expense (including gains and losses) incurred as a result of our
derivative instruments, decreased interest expense by $7,000 for the three
months ended September 30, 2022 and increased interest expense by $23,000 for
the three months ended September 30, 2021. The increase in interest expense is
primarily due to an increase in one-month LIBOR and one-month Term SOFR and its
impact on interest expense related to our variable rate debt. In general, we
expect interest expense to decrease in future periods due to debt repayments
related to anticipated future asset sales, which may be offset by certain fees
and costs that may be incurred due to the prepayment of certain loans. Our
interest expense in future periods will also vary based on fluctuations in
one-month LIBOR and one-month Term SOFR and our level of future borrowings,
which will depend on the availability and cost of debt financing, draws on our
debts and any debt repayments we make.

During the three months ended September 30, 2022, we recorded non-cash
impairment charges of $2.5 million to write down the carrying value of the
Institute Property to its estimated fair value as a result of changes in cash
flow estimates including a change in leasing projections and an increase in the
capitalization rate, which triggered the future estimated undiscounted cash
flows to be lower than the net carrying value of the property. During the three
months ended September 30, 2021, we recorded $8.8 million to write down the
carrying value of the Commonwealth Building to its estimated fair value as a
result of a continued decrease in occupancy and changes in cash flow estimates
including a change in leasing projections, which triggered the future estimated
undiscounted cash flows to be lower than the net carrying value of the property.
The decrease in cash flow projections during the three months ended
September 30, 2022 and 2021 was primarily due to reduced demand for the office
space at both properties resulting in longer lease-up periods and a decrease in
projected rental rates due to the COVID-19 pandemic which resulted in additional
challenges to re-lease the vacant space. Moreover, the decrease in cash flow
projections during the three months ended September 30, 2021 for the
Commonwealth building was also affected by the disruptions caused by protests
and demonstrations and increased crime in the downtown area of Portland, Oregon,
where the property is located. Further, tenants at the Institute Property have
been adversely impacted by the measures put in place to control the spread of
COVID-19 and certain tenants at the Institute Property were granted rent
concessions as their businesses have been severely impacted.

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PART I. FINANCIAL INFORMATION (CONTINUED)



Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Comparison of the nine months ended September 30, 2022 versus the nine months
ended September 30, 2021

                                                     For the Nine Months Ended
                                                           September 30,                    Increase
                                                      2022                2021             (Decrease)          Percentage Change
Rental income                                    $    10,906          $  12,379          $    (1,473)                       (12) %
Other operating income                                   111                132                  (21)                       (16) %
Operating, maintenance and management costs            2,768              2,828                  (60)                        (2) %
Property management fees and expenses to
affiliate                                                 70                 88                  (18)                       (20) %
Real estate taxes and insurance                        2,405              2,274                  131                          6  %
Asset management fees to affiliate                     1,308              1,301                    7                          1  %
General and administrative expenses                    1,405              1,340                   65                          5  %
Depreciation and amortization                          4,520              5,865               (1,345)                       (23) %
Interest expense                                       2,384              1,801                  583                         32  %
Impairment charges on real estate                     14,223              8,779                5,444                         62  %
Interest and other income                                 19                  -                   19                        100  %



Rental income decreased from $12.4 million for the nine months ended
September 30, 2021 to $10.9 million for the nine months ended September 30,
2022, primarily due to a decrease in occupancy rate from 80.8% as of
September 30, 2021 to 73.1% as of September 30, 2022 as a result of lease
expirations. Overall, we expect rental income to decrease in future periods due
to anticipated future dispositions of real estate properties and uncertainty and
business disruptions as a result of the outbreak of COVID-19 and social unrest
in the Portland area where one of our properties is located. See "Market Outlook
- Real Estate and Real Estate Finance Markets - COVID-19 Pandemic and Portfolio
Outlook" for a discussion on the impact of the COVID-19 pandemic on our
business.

Operating, maintenance, and management costs remained consistent at $2.8 million
for the nine months ended September 30, 2022 and 2021. We expect operating,
maintenance, and management costs to decrease in future periods due to
anticipated future dispositions of real estate properties, offset by general
increase due to inflation and as physical occupancy increases as employees
return to the office.

Real estate taxes and insurance increased from $2.3 million for the nine months
ended September 30, 2021 to $2.4 million for the nine months ended September 30,
2022, primarily due to a net increase in property taxes due to increased
property values and rates. We expect real estate taxes and insurance to decrease
in future periods due to anticipated future dispositions of real estate
properties, partially offset by general increase due to inflation.

Asset management fees to affiliate remained consistent at $1.3 million for the
nine months ended September 30, 2022 and 2021. We expect asset management fees
to decrease in future periods due to anticipated future dispositions of real
estate properties, partially offset by increases in capital improvements. As of
September 30, 2022, we had accrued and deferred payment of $8.9 million of asset
management fees related to the periods from October 2017 through September 30,
2022.

General and administrative expenses increased from $1.3 million for the nine
months ended September 30, 2021 to $1.4 million for the nine months ended
September 30, 2022, primarily due to legal fees related to our plan of
liquidation incurred during the nine months ended September 30, 2022, offset by
a decrease in internal audit compensation expense. General and administrative
costs consisted primarily of legal fees, internal audit compensation expense,
errors and omissions insurance, board of directors fees and audit cost.

Depreciation and amortization decreased from $5.9 million for the nine months
ended September 30, 2021 to $4.5 million for the nine months ended September 30,
2022, primarily due to lease expirations, early lease terminations and reduced
depreciable asset basis for the Commonwealth Building as a result of non-cash
impairment charges recorded subsequent to September 30, 2021. We expect
depreciation and amortization to decrease in future periods due to anticipated
future dispositions of real estate properties and fully amortized tenant
origination and absorption costs related to lease expirations, partially offset
by increases in capital improvements.

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PART I. FINANCIAL INFORMATION (CONTINUED)



Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Interest expense increased from $1.8 million for the nine months ended
September 30, 2021 to $2.4 million for the nine months ended September 30, 2022.
Included in interest expense is the amortization of deferred financing costs of
$0.2 million for the nine months ended September 30, 2022 and 2021. Interest
expense (including gains and losses) incurred as a result of our derivative
instruments, decreased interest expense by $0.2 million for the nine months
ended September 30, 2022 and increased interest expense by $54,000 for the nine
months ended September 30, 2021. The increase in interest expense is primarily
due to an increase in one-month LIBOR and one-month Term SOFR and its impact on
interest expense related to our variable rate debt, offset by a decrease in
interest expense due to the expiration of an interest rate swap in November 2021
that was not accounted for as a cash flow hedge. In general, we expect interest
expense to decrease in future periods due to debt repayments related to
anticipated future asset sales, which may be offset by certain fees and costs
that may be incurred due to the prepayment of certain loans. Our interest
expense in future periods will also vary based on fluctuations in one-month
LIBOR and one-month Term SOFR and our level of future borrowings, which will
depend on the availability and cost of debt financing, draws on our debts and
any debt repayments we make.

During the nine months ended September 30, 2022, we recorded non-cash impairment
charges of $14.2 million to write down the carrying value of the Commonwealth
Building and the Institute Property to their estimated fair values as a result
of changes in cash flow estimates including a change in leasing projections,
which triggered the future estimated undiscounted cash flows to be lower than
the net carrying value of the properties. In addition, the Commonwealth Building
has experienced a continued decrease in occupancy. As of September 30, 2022, the
Commonwealth Building was 51.8% occupied. During the nine months ended
September 30, 2021, we recorded non-cash impairment charges of $8.8 million to
write down the carrying value of the Commonwealth Building to its estimated fair
value as a result of a continued decrease in occupancy and changes in cash flow
estimates including a change in leasing projections, which triggered the future
estimated undiscounted cash flows to be lower than the net carrying value of the
property. The decrease in cash flow projections during the nine months ended
September 30, 2022 and 2021 was primarily due to reduced demand for the office
space at both properties resulting in longer lease-up periods and a decrease in
projected rental rates due to the COVID-19 pandemic which resulted in additional
challenges to re-lease the vacant space. Moreover, the decrease in cash flow
projections during the nine months ended September 30, 2022 and 2021 for the
Commonwealth building was also affected by the disruptions caused by protests
and demonstrations and increased crime in the downtown area of Portland, Oregon,
where the property is located. Further, tenants at the Institute Property have
been adversely impacted by the measures put in place to control the spread of
COVID-19 and certain tenants at the Institute Property were granted rent
concessions as their businesses have been severely impacted.

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PART I. FINANCIAL INFORMATION (CONTINUED)



Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Funds from Operations and Modified Funds from Operations

We believe that funds from operations ("FFO") is a beneficial indicator of the
performance of an equity REIT. We compute FFO in accordance with the current
National Association of Real Estate Investment Trusts ("NAREIT") definition. FFO
represents net income, excluding gains and losses from sales of operating real
estate assets (which can vary among owners of identical assets in similar
conditions based on historical cost accounting and useful-life estimates), gains
and losses from change in control, impairment losses on real estate assets,
depreciation and amortization of real estate assets, and adjustments for
unconsolidated partnerships and joint ventures. We believe FFO facilitates
comparisons of operating performance between periods and among other REITs.
However, our computation of FFO may not be comparable to other REITs that do not
define FFO in accordance with the NAREIT definition or that interpret the
current NAREIT definition differently than we do. Our management believes that
historical cost accounting for real estate assets in accordance with U.S.
generally accepted accounting principles ("GAAP") implicitly assumes that the
value of real estate assets diminishes predictably over time. Since real estate
values have historically risen or fallen with market conditions, many industry
investors and analysts have considered the presentation of operating results for
real estate companies that use historical cost accounting to be insufficient by
themselves. As a result, we believe that the use of FFO, together with the
required GAAP presentations, provides a more complete understanding of our
performance relative to our competitors and provides a more informed and
appropriate basis on which to make decisions involving operating, financing, and
investing activities.

Changes in accounting rules have resulted in a substantial increase in the
number of non-operating and non-cash items included in the calculation of FFO.
As a result, our management also uses MFFO as an indicator of our ongoing
performance as well as our dividend sustainability. MFFO excludes from FFO:
acquisition fees and expenses (to the extent that such fees and expenses have
been recorded as operating expenses); adjustments related to contingent purchase
price obligations; amounts relating to straight-line rents and amortization of
above and below market intangible lease assets and liabilities; accretion of
discounts and amortization of premiums on debt investments; amortization of
closing costs relating to debt investments; impairments of real estate-related
investments; mark-to-market adjustments included in net income; and gains or
losses included in net income for the extinguishment or sale of debt or hedges.
We compute MFFO in accordance with the definition of MFFO included in the
practice guideline issued by the IPA in November 2010 as interpreted by
management. Our computation of MFFO may not be comparable to other REITs that do
not compute MFFO in accordance with the current IPA definition or that interpret
the current IPA definition differently than we do.

We believe that MFFO is helpful as a measure of ongoing operating performance
because it excludes costs that management considers more reflective of investing
activities and other non-operating items included in FFO. Management believes
that, by excluding acquisition costs (to the extent such costs have been
recorded as operating expenses) as well as non-cash items such as straight line
rental revenue, MFFO provides investors with supplemental performance
information that is consistent with the performance indicators and analysis used
by management, in addition to net income and cash flows from operating
activities as defined by GAAP, to evaluate the sustainability of our operating
performance. MFFO provides comparability in evaluating the operating performance
of our portfolio with other non-traded REITs which typically have limited lives
with short and defined acquisition periods and targeted exit strategies. MFFO,
or an equivalent measure, is routinely reported by non-traded REITs, and we
believe often used by analysts and investors for comparison purposes.

FFO and MFFO are non-GAAP financial measures and do not represent net income as
defined by GAAP. Net income as defined by GAAP is the most relevant measure in
determining our operating performance because FFO and MFFO include adjustments
that investors may deem subjective, such as adding back expenses such as
depreciation and amortization and the other items described above. Accordingly,
FFO and MFFO should not be considered as alternatives to net income as an
indicator of our current and historical operating performance. In addition, FFO
and MFFO do not represent cash flows from operating activities determined in
accordance with GAAP and should not be considered an indication of our
liquidity. We believe FFO and MFFO, in addition to net income and cash flows
from operating activities as defined by GAAP, are meaningful supplemental
performance measures.

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PART I. FINANCIAL INFORMATION (CONTINUED)



Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Although MFFO includes other adjustments, the exclusion of adjustments for
straight-line rent, the amortization of above- and below-market leases and
unrealized (gains) losses on derivative instruments are the most significant
adjustments for the periods presented. We have excluded these items based on the
following economic considerations:

•Adjustments for straight-line rent. These are adjustments to rental revenue as
required by GAAP to recognize contractual lease payments on a straight-line
basis over the life of the respective lease. We have excluded these adjustments
in our calculation of MFFO to more appropriately reflect the current economic
impact of our in-place leases, while also providing investors with a useful
supplemental metric that addresses core operating performance by removing rent
we expect to receive in a future period or rent that was received in a prior
period;

•Amortization of above- and below-market leases. Similar to depreciation and
amortization of real estate assets and lease related costs that are excluded
from FFO, GAAP implicitly assumes that the value of intangible lease assets and
liabilities diminishes predictably over time and requires that these charges be
recognized currently in revenue. Since market lease rates in the aggregate have
historically risen or fallen with local market conditions, management believes
that by excluding these charges, MFFO provides useful supplemental information
on the realized economics of the real estate; and

•Unrealized (gains) losses on derivative instruments. These adjustments include
unrealized (gains) losses from mark-to-market adjustments on interest rate
swaps. The change in fair value of interest rate swaps not designated as a hedge
are non-cash adjustments recognized directly in earnings and are included in
interest expense. We have excluded these adjustments in our calculation of MFFO
to more appropriately reflect the economic impact of our interest rate swap
agreements.

Our calculation of FFO, which we believe is consistent with the calculation of
FFO as defined by NAREIT, is presented in the following table, along with our
calculation of MFFO, for the three and nine months ended September 30, 2022 and
2021, respectively (in thousands). No conclusions or comparisons should be made
from the presentation of these periods.

                                                For the Three Months Ended                  For the Nine Months Ended
                                                      September 30,                               September 30,
                                                 2022                 2021                  2022                  2021
Net loss                                   $      (4,193)         $

(10,048) $ (18,047) $ (11,765) Depreciation of real estate assets

                   908               1,142                   2,767               3,451
Amortization of lease-related costs                  560                 845                   1,753               2,414
Impairment charges on real estate                  2,490               8,779                  14,223               8,779

FFO                                                 (235)                718                     696               2,879
Straight-line rent and amortization
of above- and below-market leases,
net                                                 (228)                (89)                   (885)               (305)
Unrealized gain on derivative
instruments                                          (53)               (430)                   (617)             (1,280)

MFFO                                       $        (516)         $      199          $         (806)         $    1,294




FFO and MFFO may also be used to fund all or a portion of certain capitalizable
items that are excluded from FFO and MFFO, such as tenant improvements, building
improvements and deferred leasing costs.

Distributions



Cash distributions will be determined by our board of directors based on our
financial condition and such other factors as our board of directors deems
relevant. Our board of directors has not pre-established a percentage rate of
return for cash distributions to stockholders. We have not established a minimum
distribution level, and our charter does not require that we make distributions
to our stockholders. In connection with its consideration of a Plan of
Liquidation, our board of directors determined to cease paying regular quarterly
distributions with the expectation that any future distributions to our
stockholders would be liquidating distributions from the sale of our remaining
assets.

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PART I. FINANCIAL INFORMATION (CONTINUED)



Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Critical Accounting Policies

Our consolidated interim financial statements and condensed notes thereto have
been prepared in accordance with GAAP and in conjunction with the rules and
regulations of the SEC. The preparation of our financial statements requires
significant management judgments, assumptions and estimates about matters that
are inherently uncertain. These judgments affect the reported amounts of assets
and liabilities and our disclosure of contingent assets and liabilities as of
the dates of the financial statements and the reported amounts of revenue and
expenses during the reporting periods. With different estimates or assumptions,
materially different amounts could be reported in our financial statements.
Additionally, other companies may utilize different estimates that may impact
the comparability of our results of operations to those of companies in similar
businesses. A discussion of the accounting policies that management considers
critical in that they involve significant management judgments, assumptions and
estimates is included in our Annual Report on Form 10-K for the year ended
December 31, 2021 filed with the SEC. There have been no significant changes to
our accounting policies during 2022.

Subsequent Events

We evaluate subsequent events up until the date the consolidated financial statements are issued.

Commonwealth Building Mortgage Loan Modification



On November 9, 2022, we, through an indirect wholly owned subsidiary, entered
into a letter modification agreement with the lender under the Commonwealth
Building Mortgage Loan. See Part II, Item 5 "Other Information - Commonwealth
Building Mortgage Loan Modification."


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PART I. FINANCIAL INFORMATION (CONTINUED)

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