Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


 FORM 10-Q

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20202021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission file number 000-54382

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
(Exact Name of Registrant as Specified in Its Charter)

______________________________________________________
Maryland26-3842535
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
11766 Wilshire Blvd., Suite 1670 
Los Angeles,California90025
(Address of Principal Executive Offices) (Zip Code)
(424) 208-8100
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) for the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
NoneN/AN/A

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated FilerAccelerated Filer
Non-Accelerated FilerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   No  
As of November 11, 2020,10, 2021, there were 98,198,92293,896,447 outstanding shares of common stock of Pacific Oak Strategic Opportunity REIT, Inc.


Table of Contents
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
FORM 10-Q
September 30, 20202021
INDEX 
PART I.
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

1


Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
 September 30, 2020December 31, 2019
 (unaudited)
Assets
Real estate held for investment, net$822,498 $759,479 
Real estate equity securities84,365 81,439 
Total real estate and real estate-related investments, net906,863 840,918 
Cash and cash equivalents77,617 76,492 
Restricted cash11,721 12,002 
Investments in unconsolidated entities69,686 78,276 
Rents and other receivables, net19,607 16,593 
Above-market leases, net2,732 2,973 
Prepaid expenses and other assets15,174 13,988 
Total assets$1,103,400 $1,041,242 
Liabilities, mezzanine equity and equity
Notes and bonds payable, net$758,075 $673,663 
Accounts payable and accrued liabilities15,579 21,329 
Due to affiliates6,449 1,635 
Below-market leases, net2,504 3,180 
Other liabilities19,745 19,801 
Redeemable common stock payable262 829 
Restricted stock payable15,506 16,320 
Total liabilities818,120 736,757 
Commitments and contingencies (Note 15)
Mezzanine equity
Restricted stock12,089 12,089 
Noncontrolling Series A Cumulative Convertible Redeemable Preferred Stock15,233 15,008 
Redeemable noncontrolling interest3,001 
Equity
Pacific Oak Strategic Opportunity REIT, Inc. stockholders’ equity
Preferred stock, $.01 par value; 10,000,000 shares authorized, 0 shares issued and outstanding
Common stock, $.01 par value; 1,000,000,000 shares authorized, 69,225,016 and 65,866,765 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively693 659 
Additional paid-in capital553,129 553,170 
Cumulative distributions and net income(299,589)(277,196)
Total Pacific Oak Strategic Opportunity REIT, Inc. stockholders’ equity254,233 276,633 
Noncontrolling interests724 755 
Total equity254,957 277,388 
Total liabilities, mezzanine equity and equity$1,103,400 $1,041,242 
 September 30, 2021December 31, 2020
 (unaudited)
Assets
Real estate held for investment, net$1,219,531 $1,272,784 
Real estate held for sale, net— 140,239 
Real estate equity securities96,403 97,903 
Total real estate and real estate-related investments, net1,315,934 1,510,926 
Cash and cash equivalents138,037 60,335 
Restricted cash28,201 13,984 
Investments in unconsolidated entities83,854 79,666 
Rents and other receivables, net24,730 22,212 
Above-market leases, net2,735 3,157 
Prepaid expenses and other assets22,103 19,363 
Goodwill13,534 16,342 
Assets related to real estate held for sale, net— 5,680 
Total assets$1,629,128 $1,731,665 
Liabilities, mezzanine equity and equity
Notes and bonds payable, net
Notes and bonds payable related to real estate held for investment, net$1,023,778 $1,004,971 
Note payable related to real estate held for sale, net— 94,097 
Notes and bonds payable, net1,023,778 1,099,068 
Accounts payable and accrued liabilities22,054 24,169 
Due to affiliate2,152 2,842 
Below-market leases, net4,436 5,797 
Other liabilities43,994 34,734 
Redeemable common stock payable3,385 864 
Restricted stock payable574 14,600 
Liabilities related to real estate held for sale, net— 669 
Total liabilities1,100,373 1,182,743 
Commitments and contingencies (Note 15)00
Mezzanine equity
Restricted stock— 11,009 
Noncontrolling cumulative convertible redeemable preferred stock15,233 15,233 
Redeemable noncontrolling interest2,855 2,968 
Equity
Pacific Oak Strategic Opportunity REIT, Inc. 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, 94,264,402 and 98,054,582 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively942 979 
Additional paid-in capital820,382 831,295 
Cumulative distributions and net income(322,049)(325,720)
Total Pacific Oak Strategic Opportunity REIT, Inc. stockholders’ equity499,275 506,554 
Noncontrolling interests11,392 13,158 
Total equity510,667 519,712 
Total liabilities, mezzanine equity and equity$1,629,128 $1,731,665 

See accompanying condensed notes to consolidated financial statements.
2


Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except share and per share amounts)
 Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Revenues:
Rental income$23,871 $21,669 $67,808 $59,879 
Other operating income888 1,317 2,722 4,219 
Interest income from real estate debt securities369 
Dividend income from real estate equity securities2,986 2,296 5,339 4,414 
Total revenues27,745 25,282 75,869 68,881 
Expenses:
Operating, maintenance, and management costs7,888 8,156 22,258 21,254 
Real estate taxes and insurance3,791 3,278 10,570 9,556 
Asset management fees to affiliates2,426 2,093 6,867 5,954 
General and administrative expenses1,960 2,038 6,302 5,586 
Foreign currency transaction loss (gain), net445 5,344 (12,338)10,634 
Depreciation and amortization9,470 9,239 27,417 25,276 
Interest expense6,274 7,359 19,055 21,776 
Total expenses32,254 37,507 80,131 100,036 
Other income (loss):
Gain from remeasurement of prior equity interest2,009 2,009 
Income from NIP52 
Equity in income (loss) of unconsolidated entities519 (419)1,512 6,677 
Casualty-related gain51 (506)
Other interest income19 536 297 1,862 
(Loss) gain on real estate equity securities(6,527)3,845 (21,620)19,304 
Change in subordinated performance fee due upon termination to affiliate1,121 814 
Gain on sale of real estate10,559 18,128 
Loss on extinguishment of debt(6)(861)
Total other (loss) income, net(2,859)14,515 (16,885)44,604 
Net (loss) income(7,368)2,290 (21,147)13,449 
Net loss (income) attributable to noncontrolling interests43 (1,518)115 (2,145)
Net loss attributable to redeemable noncontrolling interest23 23 
Preferred stock dividends(191)(788)
Net (loss) income attributable to common stockholders$(7,493)$772 $(21,797)$11,304 
Net (loss) income per common share, basic and diluted$(0.11)$0.01 $(0.32)$0.17 
Weighted-average number of common shares outstanding, basic and diluted69,225,212 66,326,646 68,179,046 66,564,532 
 Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Revenues:
Rental income$29,504 $23,871 $94,812 $67,808 
Hotel revenues12,153 — 24,578 — 
Other operating income923 888 3,118 2,722 
Dividend income from real estate equity securities3,189 2,986 6,693 5,339 
Total revenues45,769 27,745 129,201 75,869 
Expenses:
Operating, maintenance, and management costs10,668 7,888 31,444 22,258 
Real estate taxes and insurance5,262 3,791 15,949 10,570 
Hotel expenses6,483 — 15,715 — 
Asset management fees to affiliate3,422 2,426 10,802 6,867 
General and administrative expenses2,365 1,960 7,120 6,302 
Foreign currency transaction loss (gain), net2,271 445 (568)(12,338)
Depreciation and amortization13,895 9,470 45,969 27,417 
Interest expense10,092 6,274 30,713 19,055 
Impairment charges on real estate10,971 — 10,971 — 
Impairment charges on goodwill2,808 — 2,808 — 
Total expenses68,237 32,254 170,923 80,131 
Other income (loss):
Gain from remeasurement of prior equity interest— 2,009 — 2,009 
Equity in (loss) income of unconsolidated entities(569)519 (144)1,564 
Casualty-related gain27 — 27 51 
Other interest income55 19 148 297 
(Loss) gain on real estate equity securities(2,614)(6,527)12,939 (21,620)
Change in subordinated performance fee due upon termination to affiliate(1,545)1,121 (1,745)814 
Gain on sale of real estate216 — 31,385 — 
Gain on extinguishment of debt1,352 — 1,365 — 
Total other (loss) income, net(3,078)(2,859)43,975 (16,885)
Net (loss) income(25,546)(7,368)2,253 (21,147)
Net loss attributable to noncontrolling interests1,188 43 1,949 115 
Net loss attributable to redeemable noncontrolling interest33 23 113 23 
Preferred stock dividends(191)(191)(644)(788)
Net (loss) income attributable to common stockholders$(24,516)$(7,493)$3,671 $(21,797)
Net (loss) income per common share, basic and diluted$(0.25)$(0.11)$0.04 $(0.32)
Weighted-average number of common shares outstanding, basic and diluted97,659,731 69,225,212 97,879,983 68,179,046 

See accompanying condensed notes to consolidated financial statements.
3


Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONSOLIDATED STATEMENTS OF EQUITY
For the Three Months Ended September 30, 20202021 and 20192020
(unaudited)
(dollars in thousands)
Common StockAdditional
Paid-in Capital
Cumulative Distributions and Net Income (Loss)Total Stockholders' EquityNoncontrolling InterestsTotal Equity
 SharesAmounts
Balance, June 30, 202069,225,617 $693 $553,129 $(292,096)$261,726 $795 $262,521 
Net loss— — — (7,493)(7,493)(43)(7,536)
Transfers from redeemable common stock— — — — 
Redemptions of common stock(601)— (6)— (6)— (6)
Distribution to noncontrolling interest— — — — (28)(28)
Balance, September 30, 202069,225,016 $693 $553,129 $(299,589)$254,233 $724 $254,957 
Common StockAdditional
Paid-in Capital
Cumulative Distributions and Net Income (Loss)Total Stockholders' EquityNoncontrolling InterestsTotal Equity
 SharesAmounts
Balance, June 30, 201966,342,855 $663 $547,767 $(247,603)$300,827 $1,325 $302,152 
Net income— — — 772 772 1,518 2,290 
Issuance of common stock27,434 — 271 — 271 — 271 
Transfers from redeemable common stock— — 2,040 — 2,040 — 2,040 
Redemption of common stock(245,571)(2)(2,324)— (2,326)— (2,326)
Distributions declared— — — (570)(570)— (570)
Other offering costs— — (4)— (4)— (4)
Distributions to noncontrolling interests— — — — (1,969)(1,969)
Balance, September 30, 201966,124,718 $661 $547,750 $(247,401)$301,010 $874 $301,884 
Common StockAdditional
Paid-in Capital
Cumulative Distributions and Net Income (Loss)Total Stockholders' EquityNoncontrolling InterestsTotal Equity
 SharesAmounts
Balance, June 30, 202197,906,268 $979 $829,294 $(297,533)$532,740 $12,560 $545,300 
Net (loss) income— — — (24,516)(24,516)(1,188)(25,704)
Transfers to redeemable common stock— — (1,955)— (1,955)— (1,955)
Redemptions of common stock(3,641,866)(37)(28,080)— (28,117)— (28,117)
Change in classification of restricted stock— — 21,123 — 21,123 — 21,123 
Noncontrolling interest contribution— — — — — 20 20 
Balance, September 30, 202194,264,402 $942 $820,382 $(322,049)$499,275 $11,392 $510,667 
Common StockAdditional
Paid-in Capital
Cumulative Distributions and Net Income (Loss)Total Stockholders' EquityNoncontrolling InterestsTotal Equity
SharesAmounts
Balance, June 30, 202069,225,617 $693 $553,129 $(292,096)$261,726 $795 $262,521 
Net loss— — — (7,493)(7,493)(43)(7,536)
Transfers from redeemable common stock— — — — 
Redemptions of common stock(601)— (6)— (6)— (6)
Distribution of noncontrolling interest— — — — — (28)(28)
Balance, September 30, 202069,225,016 $693 $553,129 $(299,589)$254,233 $724 $254,957 


See accompanying condensed notes to consolidated financial statements.
4


Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONSOLIDATED STATEMENTS OF EQUITY
For the Nine Months Ended September 30, 20202021 and 20192020
(unaudited)
(dollars in thousands)
Common StockAdditional
Paid-in Capital
Cumulative Distributions and Net Income (Loss)Total Stockholders' EquityNoncontrolling InterestsTotal Equity
 SharesAmounts
Balance, December 31, 201965,866,765 $659 $553,170 $(277,196)$276,633 $755 $277,388 
Net loss— — — (21,797)(21,797)(115)(21,912)
Issuance of common stock24,645 — 262 — 262 — 262 
Transfers from redeemable common stock— — 567 — 567 — 567 
Redemptions of common stock(78,131)— (830)— (830)— (830)
Distributions declared— — — (596)(596)— (596)
Other offering costs— — (6)— (6)— (6)
Issuance of restricted stock3,411,737 34 (34)— — 
Noncontrolling interests contributions— — — — 112 112 
Distribution to noncontrolling interest— — — — (28)(28)
Balance, September 30, 202069,225,016 $693 $553,129 $(299,589)$254,233 $724 $254,957 
Common StockAdditional
Paid-in Capital
Cumulative Distributions and Net Income (Loss)Total Stockholders' EquityNoncontrolling InterestsTotal Equity
 SharesAmounts
Balance, December 31, 201866,822,861 $668 $547,770 $(256,984)$291,454 $2,510 $293,964 
Net income— — — 11,304 11,304 2,145 13,449 
Issuance of common stock84,248 834 — 835 — 835 
Transfers from redeemable common stock— — 6,577 — 6,577 — 6,577 
Redemption of common stock(782,391)(8)(7,425)— (7,433)— (7,433)
Distributions declared— — — (1,721)(1,721)— (1,721)
Other offering costs— — (6)— (6)— (6)
Noncontrolling interests contributions— — — — 12 12 
Distributions to noncontrolling interests— — — — (3,793)(3,793)
Balance, September 30, 201966,124,718 $661 $547,750 $(247,401)$301,010 $874 $301,884 
Common StockAdditional
Paid-in Capital
Cumulative Distributions and Net Income (Loss)Total Stockholders' EquityNoncontrolling InterestsTotal Equity
 SharesAmounts
Balance, December 31, 202098,054,582 $979 $831,295 $(325,720)$506,554 $13,158 $519,712 
Net income (loss)— — — 3,671 3,671 (1,949)1,722 
Transfers to redeemable common stock— — (2,521)— (2,521)— (2,521)
Redemptions of common stock(3,790,180)(37)(29,515)— (29,552)— (29,552)
Change in classification of restricted stock— — 21,123 — 21,123 — 21,123 
Noncontrolling interests contributions— — — — — 183 183 
Balance, September 30, 202194,264,402 $942 $820,382 $(322,049)$499,275 $11,392 $510,667 
Common StockAdditional
Paid-in Capital
Cumulative Distributions and Net Income (Loss)Total Stockholders' EquityNoncontrolling InterestsTotal Equity
 SharesAmounts
Balance, December 31, 201965,866,765 $659 $553,170 $(277,196)$276,633 $755 $277,388 
Net loss— — — (21,797)(21,797)(115)(21,912)
Issuance of common stock24,645 — 262 — 262 — 262 
Transfers from redeemable common stock— — 567 — 567 — 567 
Redemptions of common stock(78,131)— (830)— (830)— (830)
Distributions declared— — — (596)(596)— (596)
Other offering costs— — (6)— (6)— (6)
Issuance of restricted stock3,411,737 34 (34)— — — — 
Noncontrolling interests contributions— — — — — 112 112 
Distribution to noncontrolling interest— — — — — (28)(28)
Balance, September 30, 202069,225,016 $693 $553,129 $(299,589)$254,233 $724 $254,957 

See accompanying condensed notes to consolidated financial statements.
5


Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Nine Months Ended September 30,
 20202019
Cash Flows from Operating Activities:
Net (loss) income$(21,147)$13,449 
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Change in subordinated performance fee due upon termination to affiliate(814)
Casualty-related loss506 
Gain from remeasurement of prior equity interest(2,009)
Equity in income of unconsolidated entities(1,151)(6,677)
Depreciation and amortization27,417 25,276 
Loss (gain) on real estate equity securities21,620 (19,304)
Gain on sale of real estate(18,128)
Loss on extinguishment of debt861 
Unrealized loss on interest rate caps10 50 
Deferred rent(2,559)(3,213)
Amortization of above- and below-market leases, net(435)(856)
Amortization of deferred financing costs2,481 2,683 
Accretion of interest income on real estate debt securities(13)
Amortization of premium on bond and notes payable14 (73)
Foreign currency transaction (gain) loss, net(12,338)10,634 
Changes in assets and liabilities:
Rents and other receivables(566)(2,164)
Prepaid expenses and other assets(2,286)(4,527)
Accounts payable and accrued liabilities(3,471)(559)
Due to affiliates182 
Other liabilities(142)(97)
Net cash provided by (used in) operating activities4,806 (2,144)
Cash Flows from Investing Activities:
Acquisitions of real estate, net of cash acquired(19,034)(90,266)
Improvements to real estate(15,946)(25,833)
Proceeds from sales of real estate, net43,164 
Insurance proceeds received for property damages438 
Contributions to unconsolidated entities(1,708)(5,050)
Distributions of capital from unconsolidated entities1,225 8,051 
Purchase of interest rate cap(6)(28)
Investment in real estate equity securities(35,510)(10,015)
Proceeds from the sale of real estate equity securities10,964 24,076 
Proceeds from principal repayment on real estate debt securities7,750 
Proceeds from disposition of foreign currency collars14,125 
Funding of development obligations(134)
Net cash used in investing activities(45,890)(47,847)
Cash Flows from Financing Activities:
Proceeds from notes and bonds payable104,143 84,268 
Principal payments on notes and bonds payable(57,611)(73,250)
Payments of deferred financing costs(2,438)(1,121)
Payments to redeem common stock(830)(7,433)
Payment of prepaid other offering costs(606)(2)
Distributions paid(334)(886)
Preferred dividends paid(563)
Noncontrolling interest contributions112 12 
Distributions to noncontrolling interests(28)(3,793)
Other financing proceeds, net1,822 
Net cash provided by financing activities41,845 (383)
Effect of exchange rate changes on cash, cash equivalents and restricted cash83 2,367 
Net increase (decrease) in cash, cash equivalents and restricted cash844 (48,007)
Cash, cash equivalents and restricted cash, beginning of period88,494 162,727 
Cash, cash equivalents and restricted cash, end of period$89,338 $114,720 
Nine Months Ended September 30,
 20212020
Cash Flows from Operating Activities:
Net income (loss)$2,253 $(21,147)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Change in subordinated performance fee due upon termination to affiliate1,745 (814)
Impairment charges on real estate10,971 — 
Impairment charges on goodwill2,808 — 
Gain from remeasurement of prior equity interest— (2,009)
Equity in loss (income) of unconsolidated entities144 (1,151)
Depreciation and amortization45,969 27,417 
(Gain) loss on real estate equity securities(12,939)21,620 
Gain on sale of real estate(31,385)— 
Unrealized loss on interest rate caps17 10 
Deferred rent(1,529)(2,559)
Gain on extinguishment of debt(1,365)— 
Amortization of above- and below-market leases, net(1,015)(435)
Amortization of deferred financing costs2,470 2,481 
Amortization of discount on bond and notes payable1,906 14 
Foreign currency transaction gain, net(568)(12,338)
Changes in assets and liabilities:
Rents and other receivables(1,898)(566)
Prepaid expenses and other assets(4,371)(2,286)
Accounts payable and accrued liabilities(984)(3,471)
Due to affiliates(726)182 
Other liabilities(190)(142)
Net cash provided by operating activities11,313 4,806 
Cash Flows from Investing Activities:
Acquisitions of real estate, net of cash acquired(4,107)(19,034)
Improvements to real estate(12,923)(15,946)
Proceeds from sales of real estate, net194,528 — 
Contributions to unconsolidated entities(4,769)(1,708)
Distributions of capital from unconsolidated entities— 1,225 
Purchase of interest rate cap(18)(6)
Investment in real estate equity securities— (35,510)
Proceeds from the sale of real estate equity securities14,439 10,964 
Proceeds for future development obligations6,203 — 
Proceeds from disposition of foreign currency collars— 14,125 
Net cash provided by (used in) investing activities193,353 (45,890)
Cash Flows from Financing Activities:
Proceeds from notes and bonds payable157,246 104,143 
Principal payments on notes and bonds payable(233,964)(57,611)
Payments of deferred financing costs(2,745)(2,438)
Payments to redeem common stock(29,552)(830)
Payment to redeem restricted stock(5,656)— 
Payment of prepaid other offering costs(164)(606)
Distributions paid— (334)
Preferred dividends paid(644)(563)
Noncontrolling interests contributions183 112 
Distributions to noncontrolling interests— (28)
Other financing proceeds2,367 — 
Net cash (used in) provided by financing activities(112,929)41,845 
Effect of exchange rate changes on cash, cash equivalents and restricted cash182 83 
Net increase in cash, cash equivalents and restricted cash91,919 844 
Cash, cash equivalents and restricted cash, beginning of period74,319 88,494 
Cash, cash equivalents and restricted cash, end of period$166,238 $89,338 

See accompanying condensed notes to consolidated financial statements.
6


Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 20202021
(unaudited)

1.ORGANIZATION
Pacific Oak Strategic Opportunity REIT, Inc. (the “Company”) was formed on October 8, 2008 as a Maryland corporation and elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2010. The Company conducts its business primarily through Pacific Oak SOR (BVI) Holdings, Ltd. (“Pacific Oak SOR BVI”), a private company limited by shares according to the British Virgin Islands Business Companies Act, 2004, which was incorporated on December 18, 2015 and is authorized to issue a maximum of 50,000 common shares with no par value. Upon incorporation, Pacific Oak SOR BVI issued one certificate containing 10,000 common shares with no par value to Pacific Oak Strategic Opportunity Limited Partnership (the “Operating Partnership”), a Delaware limited partnership formed on December 10, 2008. The Company is the sole general partner of, and owns a 0.1% partnership interest in, the Operating Partnership. Pacific Oak Strategic Opportunity Holdings LLC (“REIT Holdings”), a Delaware limited liability company formed on December 9, 2008, owns the remaining 99.9% interest in the Operating Partnership and is its sole limited partner. The Company is the sole member and manager of REIT Holdings.
Subject to certain restrictions and limitations, the business of the Company wasis externally managed by KBS CapitalPacific Oak Advisors, LLC (“KBS Capital Advisors”(the “Advisor”), an affiliate of the Company, pursuant to an advisory agreement the Company renewed with KBS Capital Advisors on October 7, 2019. KBS Capital Advisors conducted the Company’s operations and managed its portfolio of real estate and other real estate-related investments. On October 31, 2019, KBS Capital Advisors ceased to serve as the Company’s advisor or have any advisory responsibility to the Company immediately following the filing of the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2019 (filed November 8, 2019) with the Securities and Exchange Commission (the “SEC”“Advisory Agreement”). On November 1, 2019, the Company entered into an advisory agreement with Pacific Oak Capital Advisors, LLC (the “Advisor”), which was renewed on November 1, 2020. The advisory agreement is currently effective through November 1, 2021;2022; however the Company or the Advisor may terminate the advisory agreementAdvisory Agreement without cause or penalty upon providing 60 days’ written notice. The termsAdvisor conducts the Company’s operations and manages its portfolio of the advisory agreement are consistent with those of the advisory agreement that was previously in effect with KBS Capital Advisors, except as discussed in Note 10.
On February 19, 2020, the Company, Pacific Oak SOR II, LLC, an indirect subsidiary of the Company (“Merger Sub”),real estate and Pacific Oak Strategic Opportunity REIT II, Inc. (“POSOR II”) entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to the Merger Agreement, on October 5, 2020, POSOR II merged with and into Merger Sub (the “Merger”), with Merger Sub surviving the Merger (the “Surviving Entity”), such that following the Merger, the Surviving Entity continued as an indirect subsidiary of the Company. In accordance with the applicable provisions of the Maryland General Corporation Law, the separate existence of POSOR II ceased. At the effective time of the Merger, each issued and outstanding share of POSOR II’s common stock converted into the right to receive 0.9643 shares of the Company's common stock.other real estate-related investments.
On January 8, 2009, the Company filed a registration statement on Form S-11 with the SEC to offer a minimum of 250,000 shares and a maximum of 140,000,000 shares of common stock for sale to the public (the “Offering”), of which 100,000,000 shares were registered in a primary offering and 40,000,000 shares were registered to be sold under the Company’s dividend reinvestment plan. The SEC declared the Company’s registration statement effective on November 20, 2009. The Company ceased offering shares of common stock in its primary offering on November 14, 2012 and continues to offer shares under its dividend reinvestment plan.
The Company sold 56,584,976 shares of common stock in its primary offering for gross offering proceeds of $561.7 million. As of September 30, 2020,2021, the Company had sold 6,851,969 shares of common stock under its dividend reinvestment plan for gross offering proceeds of $76.5 million. Also, as of September 30, 2020,2021, the Company had redeemed 23,897,20527,247,458 shares for $286.3$317.3 million. As of September 30, 2020,2021, the Company had issued 25,976,746 shares of common stock in connection with special dividends. Additionally, on December 29, 2011 and October 23, 2012, the Company issued 220,994 shares and 55,249 shares of common stock, respectively, for $2.0 million and $0.5 million, respectively, in private transactions exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933. On March 27, 2020, the Company issued 3,411,737 restricted shares of its common stock (the “Restricted Stock”) to its former external advisor, KBS Capital Advisors LLC (“KBS Capital Advisors”) pursuant to a Restricted Stock Agreement, dated as of March 27, 2020 (the “Restricted Stock Agreement”).
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Table On September 1, 2021, the Company repurchased 584,267 shares of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2020
(unaudited)
the Restricted Stock for $5.7 million and 2,254,289 shares of Restricted Stock were transferred to GKP Holding LLC (“GKP”), a company owned by Keith D. Hall and Peter McMillan III. See Note 10 for further details.
On March 2, 2016, Pacific Oak SOR BVI filed a final prospectus with the Israel Securities Authority for a proposed offering of up to 1,000,000,000 Israeli new Shekels of Series A debentures (the “Series A Debentures”) at an annual interest rate not to exceed 4.25%. On March 1, 2016, Pacific Oak SOR BVI commenced the institutional tender of the Series A Debentures and accepted application for 842.5 million Israeli new Shekels. On March 7, 2016, Pacific Oak SOR BVI commenced the public tender of the Series A Debentures and accepted 127.7 million Israeli new Shekels. In the aggregate, Pacific Oak SOR BVI accepted 970.2 million Israeli new Shekels (approximately $249.2 million as of March 8, 2016) in both the institutional and public tenders at an annual interest rate of 4.25%. Pacific Oak SOR BVI issued the Series A Debentures on March 8, 2016.
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Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
In connection with the above-referenced offering, on March 8, 2016, the Operating Partnership assigned to Pacific Oak SOR BVI all of its interests in the subsidiaries through which the Company indirectly owns all of its real estate and real estate-related investments. The Operating Partnership owns all of the issued and outstanding equity of Pacific Oak SOR BVI. As a result of these transactions, the Company now holds all of its real estate and real estate-related investments indirectly through Pacific Oak SOR BVI.
On February 16, 2020, Pacific Oak SOR BVI issued 254.1 million Israeli new Shekels (approximately $74.1 million as of February 16, 2020) of Series B debentures (the “Series B Debentures”) to Israeli investors pursuant to a public offering registered with the Israel Securities Authority. The Series B Debentures bears interest at the rate of 3.93% per year. The Series B Debentures have principal installment payments equal to 33.33% of the face amount of the Series B Debentures on January 31st of each year from 2024 to 2026.
On January 22, 2020, the Company filed a registration statement on Form S-11 with the SEC to offer up to $1 billion in additional shares of its common stock. This new registration statement contemplates a proposed conversion of the Company to a perpetual-life net asset value or “NAV” REIT that offers and sells shares of its common stock continuously through a number of distribution channels in ongoing public offerings, and seeks to provide increased liquidity to current and future stockholders through an expansion of the Company’s current share redemption program. On December 18, 2020, the Company filed Amendment No. 1 to the registration statement on Form S-11 with the SEC.
On February 19, 2020, the Company, Pacific Oak SOR II, LLC, an indirect subsidiary of the Company’s (“Merger Sub”), and Pacific Oak Strategic Opportunity REIT II, Inc. (“POSOR II”) entered into an Agreement and Plan of Merger (the “Merger Agreement”). On October 5, 2020, pursuant to the Merger Agreement, POSOR II merged with and into Merger Sub, with Merger Sub surviving as an indirect subsidiary of the Company’s (the “Merger”). At such time, in accordance with the applicable provisions of the Maryland General Corporation Law and the Maryland Limited Liability Company Act, the separate existence of POSOR II ceased. At the effective time of the Merger, each issued and outstanding share of POSOR II’s common stock (or a fraction thereof), $0.01 par value per share, converted into 0.9643 shares of the Company’s common stock, $0.01 par value per share, or 28,973,905 shares of the Company’s common stock. The combined company after the Merger retained the name “Pacific Oak Strategic Opportunity REIT, Inc.” The Merger was intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended. As a result of the Merger, the Company acquired 2 hotel properties, 3 office properties, 1 apartment building, 1 consolidated joint venture to develop 1 office/retail property, 2 real estate equity securities and 2 investments in unconsolidated entities. Additionally, the Company assumed $331.8 million of loans related to the acquired properties.
On March 4, 2021, Pacific Oak SOR BVI issued additional Series A Debentures in the amount of 250.0 million Israeli new Shekels par value through a private placement. The additional Series A Debentures were issued at a 1.9% discount resulting in total consideration of 245.3 million Israeli new Shekels ($74.2 million as of March 4, 2021). The additional Series A Debentures have an equal level of security, pari passu, amongst themselves and between them and the initial Series A Debentures, which were initially issued, without any right of precedence or preference between any of them.
As of September 30, 2020,2021, the Company consolidated 68 office properties, 1 office portfolio consisting of 4 office buildings and 14 acres of undeveloped land, 2 apartment properties, 2 hotel properties, 1 apartment property,residential home portfolio consisting of 1,806 single-family homes, 3 investments in undeveloped land with approximately 1,000800 developable acres, 1 residential home portfolio consisting of 1,769 single-family homes and owned 64 investments in unconsolidated entities and 3 investments in real estate equity securities. Additionally, as of September 30, 2021, the Company had entered into a consolidated joint venture to develop 1 office/retail property.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 2019.2020. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 20192020 included in the Company’s Annual Report on Form 10-K filed with the SEC.
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Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
Principles of Consolidation and Basis of Presentation
The accompanying unaudited consolidated financial statements and condensed notes thereto have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the FASB Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods. Operating results for the three and nine months ended September 30, 20202021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.2021.
The consolidated financial statements include the accounts of the Company, REIT Holdings, the Operating Partnership, Pacific Oak SOR BVI and their direct and indirect wholly owned subsidiaries, joint ventures in which the Company has a controlling interest and VIEs in which the Company is the primary beneficiary. All significant intercompany balances and transactions are eliminated in consolidation.

8Liquidity


TableThe Company generally finances its real estate investments using notes payable that are typically structured as non-recourse secured mortgages with maturities of Contentsapproximately three
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Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2020
(unaudited)
Liquidity
to five years, with short term extension options available upon the Company meeting certain debt covenants. Each reporting period management evaluates the Company’s ability to continue as a going concern by evaluating conditions and events, including assessing the liquidity needs to satisfy upcoming debt obligations. Asobligations and the ability to satisfy debt covenant requirements. Through the normal course of operations and as further discussed in Note 7, the Company has significant$518.0 million of debt obligations coming due over the next 12-month period. In order to satisfy obligations as they mature, management planswill evaluate its options and may seek to utilize extension options available in the respective loan agreements, may make partial loan paydowns to meet debt covenant requirements, may seek to refinance certain debt instruments, may sell real estate equity securities to convert to cash to make principal payments, may market one or more properties for sale or may negotiate a turnover of one or more secured properties back to the related mortgage lender.lender and remit payment for any associated loan guarantee. Historically, the Company has successfully refinanced debt instruments or utilized extension options in order to satisfy debt obligations as they come due and has not negotiated a turnover of a secured property back to a lender, though the Company may utilize such option if necessary. Based upon these plans, management believes it will have sufficient liquidity to satisfy its obligations as they come due and to continue as a going concern. There can be no assurance as to the certainty or timing of any of management’s plans. Refer to Note 7 for further discussion.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.
Restricted Cash
Restricted cash is comprised of lender impound reserve accounts on the Company’s borrowings for security deposits, property taxes, insurance, debt service obligations and capital improvements and replacements.

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Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
Redeemable Common Stock
The Company limits the dollar value of shares that may be redeemed under the share redemption program. During the nine months ended September 30, 2020,2021, the Company had redeemed $0.8$29.6 million of common stock under the share redemption program. The Company processed all redemption requests received in good order and eligible for redemption through the September 20202021 redemption date, except for 5,938,44313,913,664 shares totaling $60.0$128.0 million due to the limitations under the share redemption program. The Company recorded $0.3$3.4 million and $0.8$0.9 million of redeemable common stock payable on the Company’s balance sheet as of September 30, 20202021 and December 31, 2019,2020, respectively, related to unfulfilled redemption requests received in good order under the share redemption program. Based on the eleventhtwelfth amended and restated share redemption program, the Company has fully exhausted all redemption amounts$3.2 million available for redemptions in the remainder of 2020,2021, including shares that are redeemed in connection with a stockholders’ death, “qualifying disability” or “determination of incompetence”. Effective beginning withincompetence,” subject to the month of February 2020, the Company suspended (a) redemptions requestedlimitations under the share redemption programprogram.
Reclassifications
Certain amounts in connection with a stockholder’s death, “qualifying disability” or “determinationthe Company’s prior period consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of incompetence”, untiloperations of the prior period. During the nine months ended September 30, 2021, the Company sold 1 office property. As a result, certain assets and POSOR II file withliabilities were reclassified as held for sale on the SEC a registration statement on Form S-4 containing a Joint Proxy Statement/Prospectusconsolidated balance sheets for the Merger, and (b) all other redemptions under the share redemption program until after the Merger closes. The Form S-4 was filed on June 15, 2020 with the SEC and the Merger closed on October 5, 2020.prior period.
Segments
The Company has investedoperates in 3 reportable business segments: opportunistic real estate non-performing loans, otherand real estate-related assetsinvestments, single-family homes, and single-family homes.hotels, which is how the Company's management manages the business. In general, the Company intends to hold its investments in opportunistic real estate non-performing loans and other real estate-related assets for capital appreciation. Traditional performance metrics of opportunistic real estate non-performing loans and other real estate-related assets may not be meaningful as these investments are generally non-stabilized and do not provide a consistent stream of interest income or rental revenue. These investments exhibit similar long-term financial performance and have similar economic characteristics. These investments typically involve a higher degree of risk and do not provide a constant stream of ongoing cash flows. As a result, the Company’s management views opportunistic real estate non-performing loans and other real estate-related assets as similar investments. Substantially all of its revenueinvestments and net income (loss) is from opportunistic real estate, non-performing loans and other real estate-related assets, and therefore, the Company currently recognizes 2aggregated into 1 reportable business segment consisting of strategic opportunity properties and related investments and single-family homes.segment. The Company owns single-family homes in 17 markets and are all aggregated into one1 reportable business segment due to the homes being stabilized, having high occupancy rates and have similar economic characteristics.
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Table Additionally, the Company owns 2 hotels and are aggregated into 1 reportable business segment due to the nature of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2020
(unaudited)
the hotel business with short-term stays.
Per Share Data
The Company applies the two-class method when computing its earnings per share. Net income per share for each class of stock is calculated by assuming all of the Company’s net income (loss) is distributed to each class of stock based on their contractual rights.
Unvested restricted stock that contains non-forfeitable rights to distributions (whether paid or unpaid) are considered participating securities and are included in the computation of earnings per share.
Basic earnings (loss) per share of common stock is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock issued and outstanding during such period. Diluted earnings (loss) per share of common stock is computed based on the weighted-average number of shares of common stock outstanding during each period, plus potential common shares considered outstanding during the period, as long as the inclusion of such awards is not anti-dilutive. Potential common shares consist of unvested restricted stock, using the more dilutive of either the two-class method or the treasury stock method.
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Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
The noncontrolling Series A convertible redeemable preferred shares of Pacific Oak Residential Trust, Inc. (“PORT”) Series A convertible redeemable preferred shares are not included as the preferred shares are convertible contingent on the common stock of PORT being publicly traded. If PORT common stock becomes publicly traded, the per-share earnings of PORT will be included in the Company’s EPS computations based on the consolidated holdings of PORT. See Note 14, “PORT Preferred Stock” for more information.
The Company’s unvested Restricted Stock have been included in the calculation of basic and diluted earnings per share for both of the three and nine months ended September 30, 2021 and 2020, as the restriction is not contingent on any conditions except the passage of time.
DistributionsThere were no distributions declared per share were $0.0086 during the nine months ended September 30, 2020 and $0.0086 and $0.0258 duringfor both of the three and nine months ended September 30, 2019. There were 02021 and 2020, with the exception of distributions declared forper share of $0.0086 during the three months ended September 30,March 31, 2020.
Square Footage, Occupancy and Other Measures
Any references to square footage, occupancy or annualized base rent are unaudited and outside the scope of the Company’s independent registered public accounting firm’s review of the Company’s financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board.

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Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2020
(unaudited)
Recently Issued Accounting Standards Updates
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments (“ASU No. 2016-13”). ASU No. 2016-13 affects entities holding financial assets and net investments in leases that are not accounted for at fair value through net income. The amendments in ASU No. 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. ASU No. 2016-13 also amends the impairment model for available-for-sale debt securities. An entity will recognize an allowance for credit losses on available-for-sale debt securities as a contra-account to the amortized cost basis rather than as a direct reduction of the amortized cost basis of the investment, as is currently required. ASU No. 2016-13 also requires new disclosures. For financial assets measured at amortized cost, an entity will be required to disclose information about how it developed its allowance for credit losses, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes. For financing receivables and net investments in leases measured at amortized cost, an entity will be required to further disaggregate the information it currently discloses about the credit quality of these assets by year of the asset’s origination for as many as five annual periods. For available-for-sale debt securities, an entity will be required to provide a roll-forward of the allowance for credit losses and an aging analysis for securities that are past due. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which clarified that receivables from operating leases are not within the scope of Topic 326 and instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842. The Company adopted ASU No. 2016-13 on January 1, 2020 and it did not have a material effect on its financial statements.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848). (“ASU No. 2020-042020-04”) contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU No. 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the sixnine months ended September 30, 2020,2021, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. For the period from January 1, 2020 (the earliest date the Company may elect to apply ASU No. 2020-04) through September 30, 2020,2021, the Company did not have any contract modifications that meet the criteria described above, specifically contract modifications that have been modified from LIBOR to an alternative reference rate. The Company’s loan agreements, derivative instruments, and certain lease agreements use LIBOR as the current reference rate. For eligible contract modifications, the Company expects to adopt the temporary optional expedients described in ASU No. 2020-04. The optional expedients for hedging relationships described in ASU No. 2020-04 are not expected to have an impact to the Company, as the Company has elected to not designate its derivative instruments as a hedge.
In April 2020, the FASB issued a FASB Staff Q&A related to Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic (the “Topic 842 Q&A”) which focused on the application of lease guidance for concessions related to the effects of the COVID-19 pandemic. In this Q&A document, the FASB staff will allow entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how those concessions would be accounted for under Topic 842, Leases, ("Topic 842") as though enforceable rights and obligations for those qualifying concessions existed. The Company adopted this guidance and did not have any material lease concessions related to the effects of the COVID-19 pandemic that had a material impact to the Company’s consolidated balance sheet as of September 30, 2020 or consolidated statement of operations for the nine months ended September 30, 2020.


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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20202021
(unaudited)
3. REAL ESTATE HELD FOR INVESTMENT
As of September 30, 2020,2021, the Company owned 68 office properties, and 1 office portfolio consisting of 4 office buildings and 14 acres of undeveloped land, encompassing, in the aggregate, approximately 3.03.3 million rentable square feet. As of September 30, 2020,2021, these properties were 80%73% occupied. In addition, as of the September 30, 2020, the Company owned 1one residential home portfolio consisting of 1,7691,806 single-family homes and encompassing approximately 1.62.5 million rental square feet and 12 apartment property,properties, containing 317609 units and encompassing approximately 0.30.5 million rentable square feet, which was 91%94% and 87%96% occupied, respectively. Therespectively as of September 30, 2021. As of September 30, 2021, the Company also owned 2 hotel properties with an aggregate of 649 rooms and 3 investments in undeveloped land with approximately 1,000800 developable acres. Additionally, as of September 30, 2021, the Company had entered into a consolidated joint venture to develop 1 office/retail property. The following table summarizes the Company’s real estate held for investment as of September 30, 20202021 and December 31, 2019,2020, respectively (in thousands):
September 30, 2020December 31, 2019
Land$193,602 $175,317 
Buildings and improvements689,202 618,974 
Tenant origination and absorption costs27,984 30,569 
Total real estate, cost910,788 824,860 
Accumulated depreciation and amortization(88,290)(65,381)
Total real estate, net$822,498 $759,479 
September 30, 2021December 31, 2020
Land$275,419 $288,514 
Buildings and improvements1,018,850 1,019,329 
Tenant origination and absorption costs44,527 50,881 
Total real estate, cost1,338,796 1,358,724 
Accumulated depreciation and amortization(119,265)(85,940)
Total real estate, net$1,219,531 $1,272,784 


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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2020
(unaudited)
The following table provides summary information regarding the Company’s real estate held for investment as of September 30, 2020 (in thousands):
PropertyDate Acquired or Foreclosed onCityStateProperty TypeLandBuilding
and Improvements
Tenant Origination and AbsorptionTotal Real Estate, at CostAccumulated Depreciation and AmortizationTotal Real Estate, NetOwnership %
Richardson Portfolio:
Palisades Central I11/23/2011RichardsonTXOffice$1,037 $13,035 $$14,072 $(4,194)$9,878 90.0 %
Palisades Central II11/23/2011RichardsonTXOffice810 22,016 22,826 (6,496)16,330 90.0 %
Greenway I11/23/2011RichardsonTXOffice561 2,456 3,017 (1,176)1,841 90.0 %
Greenway III11/23/2011RichardsonTXOffice702 3,960 4,662 (1,584)3,078 90.0 %
Undeveloped Land11/23/2011RichardsonTXUndeveloped Land3,134 3,134 3,134 90.0 %
Total Richardson Portfolio6,244 41,467 47,711 (13,450)34,261 
Park Highlands (1)
12/30/2011North Las VegasNVUndeveloped Land36,817 36,817 36,817 
100.0%(1)
Park Centre03/28/2013AustinTXOffice3,251 34,766 38,017 (8,066)29,951 100.0 %
1180 Raymond08/20/2013NewarkNJApartment8,292 39,231 47,523 (8,857)38,666 100.0 %
Park Highlands II (1)
12/10/2013North Las VegasNVUndeveloped Land27,854 27,854 27,854 
100.0%(1)
Richardson Land II09/04/2014RichardsonTXUndeveloped Land3,418 3,418 3,418 90.0 %
Crown Pointe02/14/2017DunwoodyGAOffice22,590 69,663 3,618 95,871 (13,987)81,884 100.0 %
The Marq03/01/2018MinneapolisMNOffice10,387 81,976 3,551 95,914 (9,618)86,296 100.0 %
City Tower03/06/2018OrangeCAOffice13,930 137,780 6,713 158,423 (16,780)141,643 100.0 %
Eight & Nine Corporate Centre06/08/2018FranklinTNOffice17,401 58,011 4,518 79,930 (6,639)73,291 100.0 %
Georgia 400 Center05/23/2019AlpharettaGAOffice11,431 73,841 7,368 92,640 (6,426)86,214 100.0 %
Single-Family Homes PortfolioMultipleMultipleMultipleHome31,987 152,467 2,216 186,670 (4,467)182,203 
96.1%(2)
$193,602 $689,202 $27,984 $910,788 $(88,290)$822,498 
_____________________
(1) The Company owns 100% of the common members’ equity of Park Highlands and Park Highlands II. On September 7, 2016 and January 8, 2019, a subsidiary of the Company that owns a portion of Park Highlands and Park Highlands II, sold 820 units of 10% Class A non-voting preferred membership units for $0.8 million and 1,927 units of 10% Class A2 non-voting preferred membership units for $1.9 million, respectively, to accredited investors. The amount of the Class A and A2 non-voting preferred membership units raised, net of offering costs, is included in other liabilities on the accompanying consolidated balance sheets.
(2) As of September 30, 2020, the Company owned 96.1% of the equity of the single-family homes portfolio. All of these single-family homes are held by PORT OP, LP (“PORT OP”). PORT, a wholly owned subsidiary of the Company, owns 96.1% of the equity in PORT OP. PORT OP qualifies as a VIE and the Company is the primary beneficiary. In addition, PORT has authorized and issued preferred stock. See Note 14V, “PORT Preferred Stock” for more information.

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2020
(unaudited)
Operating Leases
Certain of the Company’s real estate properties are leased to tenants under operating leases for which the terms and expirations vary. As of September 30, 2020,2021, the leases, excluding options to extend and apartment leases and single-family homes, which have terms that are generally one year or less, had remaining terms of up to 12.915.5 years with a weighted-average remaining term of 4.44.5 years. Some of the leases have provisions to extend the lease agreements, options for early termination after paying a specified penalty and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires a security deposit from tenants in the form of a cash deposit and/or a letter of credit. The amount required as a security deposit varies depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash and assumed in real estate acquisitions related to tenant leases are included in other liabilities in the accompanying consolidated balance sheets were both $4.3totaled $6.0 million and $5.7 million as of September 30, 20202021 and December 31, 2019.2020, respectively.
During the three and nine months ended September 30, 2021, the Company recognized deferred rent from tenants of $0.4 million and $1.5 million, respectively, net of lease incentive amortization. During the three and nine months ended September 30, 2020, the Company recognized deferred rent from tenants of $2.6$0.9 million and $0.9 million, respectively, net of lease incentive amortization. During the three and nine months ended September 30, 2019, the Company recognized deferred rent from tenants of $3.2 million and $1.0$2.6 million, respectively, net of lease incentive amortization. As of September 30, 20202021 and December 31, 2019,2020, the cumulative deferred rent receivable balance, including unamortized lease incentive receivables, was $16.7were $15.7 million and $13.6$15.5 million, respectively and is included in rents and other receivables on the accompanying consolidated balance sheets. The cumulative deferred rent balance included $3.3$3.1 million and $3.1$4.2 million of unamortized lease incentives as of September 30, 20202021 and December 31, 2019,2020, respectively.
As of September 30, 2020, the future minimum rental income from the Company’s properties, excluding apartment leases and single-family homes, under non-cancelable operating leases was as follows (in thousands):
October 1, 2020 through December 31, 2020$14,056 
202157,171 
202250,817 
202342,545 
202436,856 
Thereafter92,949 
$294,394 
As of September 30, 2020, the Company’s commercial real estate properties were leased to approximately 235 tenants over a diverse range of industries and geographic areas. The Company’s highest tenant industry concentrations (greater than 10% of annualized base rent) were as follows:
IndustryNumber of Tenants
Annualized Base Rent (1)
(in thousands)
Percentage of
Annualized Base Rent
Insurance25$7,256 11.8 %
Computer Systems Design257,088 11.5 %
Health Care and Social Assistance156,769 11.0 %
$21,113 34.3 %
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of September 30, 2020, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20202021
(unaudited)
As of September 30, 2021, the future minimum rental income from the Company’s properties, excluding apartment leases and single-family homes, under non-cancelable operating leases was as follows (in thousands):
October 1, 2021 through December 31, 2021$16,095 
202261,448 
202353,140 
202445,750 
202535,726 
Thereafter86,512 
$298,671 

As of September 30, 2021, the Company’s commercial real estate properties were leased to approximately 300 tenants over a diverse range of industries and geographic areas. The Company’s highest tenant industry concentrations (greater than 10% of annualized base rent) were as follows:
IndustryNumber of Tenants
Annualized Base Rent (1)
(in thousands)
Percentage of
Annualized Base Rent
Computer Systems Design30$7,080 10.9 %
Professional, Scientific, and Technical Services427,078 10.9 %
Public Administration116,959 10.7 %
Insurance Carriers and Related Activities166,801 10.5 %
Health Care and Social Assistance256,799 10.5 %
$34,717 53.5 %
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of September 30, 2021, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.
No other tenant industries accounted for more than 10% of annualized base rent. No material tenant credit issues have been identified at this time. During the three and nine months ended September 30, 2021, the Company recorded adjustments to rental income of $0.8 million and $2.5 million, respectively, for lease payments, including apartments and single-family homes that were deemed not probable of collection. During the three and nine months ended September 30, 2020, the Company recorded adjustments to rental income of $0.4 million and $1.1 million, respectively, for lease payments that were deemed not probable of collection. During

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
Hotel Properties
The following table provides detailed information regarding the Company’s hotel revenues and expenses for its 2 hotel properties during the three and nine months ended September 30, 2019,2021 (in thousands):
Three Months Ended September 30, 2021Nine Months Ended September 30, 2021
Hotel revenues:
Room$9,396 $18,508 
Food, beverage and convention services1,452 2,830 
Campground280 792 
Other1,025 2,448 
Hotel revenues$12,153 $24,578 
Hotel expenses:
Room$1,681 $3,992 
Food, beverage and convention services946 2,063 
General and administrative752 1,955 
Sales and marketing1,018 2,230 
Repairs and maintenance557 1,551 
Utilities333 824 
Property taxes and insurance566 1,600 
Other630 1,500 
Hotel expenses$6,483 $15,715 

Contract Liabilities
The following table summarizes the Company’s contract liabilities, which are comprised of hotel advanced deposits and deferred proceeds received from the buyers of the Park Highlands land sales (discussed below) and another developer for the value of land that was contributed to a master association that is consolidated by the Company, recorded adjustments to rental incomewhich are included in other liabilities in the accompanying consolidated balance sheets, as of $0.2 millionSeptember 30, 2021 and $0.4 million, respectively, for lease payments that were deemed not probable of collection.December 31, 2020 (in thousands):
September 30, 2021December 31, 2020
Contract liability$6,551 $3,369 
Revenue recognized in the period from:
 Amounts included in contract liability at the beginning of the period$142 $— 

Geographic Concentration Risk
As of September 30, 2020,2021, the Company’s real estate investments in Georgia and California represented 15.7% and 12.9%, respectively,21.9% of the Company’s total assets. As a result, the geographic concentration of the Company’s portfolio makes it particularly susceptible to adverse economic developments in the Georgia and California real estate markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for office space resulting from the local business climate, could adversely affect the Company’s operating results and its ability to make distributions to stockholders.

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
Impairment of Real Estate
During the three and nine months ended September 30, 2021, the Company recorded impairment charges on real estate in the aggregate of $11.0 million, to write down the carrying value of 210 West 31st Street by $6.6 million, a development property located in New York, New York and Lincoln Court by $4.4 million, an office property located in Campbell, California, to their estimated fair value due to a change in the projected hold period and related decrease in projected cash flows.
Recent Acquisitions
Battery Point Trust Inc. AcquisitionReal Estate Land Sale
On July 1, 2020,June 3, 2021, the Company acquired, through its subsidiaries, Battery Point Trust Inc., a Maryland corporation (“Battery Point”). Battery Pointsold approximately 193 developable acres of Park Highlands undeveloped land for an aggregate sales price, net of closing credits, of $50.4 million, excluding closing costs. The purchaser is a real estate investment trust that owns 559 single-family rental homes throughoutnot affiliated with the Midwestern and Southeastern United States.Company or the Advisor. The Company recorded this acquisition as an asset acquisition andrecognized a gain on sale of $31.1 million related to the relative fairland sale, which is net of deferred profit of $2.6 million related to proceeds received from the purchaser for the value of Battery Point's real estate assets were recorded as: $11.1 millionland that was contributed to land, $44.6 million to building and improvements and $0.5 million to tenant origination and absorption costs. The Company also assumed a $36.6 million mortgage loan and $16.0 million of A-3 Preferred Units,master association which were eliminated in consolidation.is consolidated by the Company.
All of these assets are held byRecent Real Estate Sale
On July 27, 2021, the Company, through itsan indirect wholly owned subsidiary, PORT OP (formerly knownsold an office building containing 435,177 rentable square feet located on approximately 4.92 acres of land in Orange, California (“City Tower”) to a purchaser unaffiliated with the Company or the Advisor, for $150.5 million, before closing costs and credits. The carrying value of City Tower as Reven Housing REIT OP, L.P.).
of the disposition date was $145.1 million, which was net of $20.5 million of accumulated depreciation and amortization. In connection with the sale of City Tower, the Company repaid $98.1 million of the outstanding principal balance due under the mortgage loan secured by City Tower. The Company acquired Battery Point by acquiring allrecognized a gain on sale of $0.1 million related to the 1,000,000 outstanding sharesdisposition of Battery Point common stock from BPT Holdings, LLC (“BPT Holdings”),City Tower.
Recent Real Estate Asset Acquisitions
On March 17, 2021, the Company, through a wholly owned subsidiary of PORT OP, LP (“PORT OP”), acquired a single-family home portfolio consisting of 21 homes in Chicago, Illinois for $2.1 million.
On April 6, 2021, the Company, through a wholly owned subsidiary of PORT OP, acquired a single-family home portfolio consisting of 23 homes in multiple states for $2.0 million. The portfolio was purchased from DayMark Master Trust, an entity affiliated with the Advisor. The Advisor is

4. TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES
As of September 30, 2021 and December 31, 2020, the Company’s external advisortenant origination and is ownedabsorption costs, above-market lease assets and controlled by Keith D. Hall, the Company’s Chief Executive Officerbelow-market lease liabilities (excluding fully amortized assets and a director,liabilities and Peter M. McMillan, the Company’s President and Chairman of the Board. In exchange, BPT Holdings received 510,816 common equity units in PORT OP, approximately 4.5% of the outstanding common equity units,accumulated amortization) were as of July 1, 2020. The value of the interests exchanged was estimated by the participants at approximately $3.0 million. The common equity units issued to BPT Holdings are redeemable after one year at the request of BPT Holdings for all or a portion of the common equity units at a redemption price equal to and in the form of cash based on the unit price of PORT. The following table summarizes the redeemable non-controlling interest activity related to the BPT Holdings for the nine months ended September 30, 2020follows (in thousands):
Issuance of PORT OP Units$3,024 
Net loss attributable to redeemable noncontrolling interest(23)
September 30, 2020$3,001 
Prior to the acquisition date, the Company accounted for its investment in the Battery Point A-3 Preferred Units as an equity investment without a readily determinable fair value. The acquisition-date carrying value of the previous equity interest was $14.0 million and is included in the measurement of the consideration transferred. The Company recognized a gain of $2.0 million as a result of remeasuring its prior equity interest in the Battery Point A-3 Preferred Units held before the acquisition. The gain is included in the line item “Gain from remeasurement of prior equity interest” in the consolidated statement of operations. As a result of the Battery Point acquisition, the Company’s 640,000 shares of Battery Point Series A-3 Preferred Units were eliminated in consolidation.
 Tenant Origination and
Absorption Costs
Above-Market
Lease Assets
Below-Market
Lease Liabilities
 September 30, 2021December 31, 2020September 30, 2021December 31, 2020September 30, 2021December 31, 2020
Cost$44,527 $50,881 $4,138 $4,159 $(6,718)$(7,679)
Accumulated Amortization(19,107)(13,491)(1,403)(1,002)2,282 1,882 
Net Amount$25,420 $37,390 $2,735 $3,157 $(4,436)$(5,797)

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20202021
(unaudited)
Single-Family Home Acquisitions
On May 28, 2020, the Company acquired a single-family home portfolio consisting of 196 homes in Chicago, Illinois. The seller is not affiliated with the Company or the Advisor. The purchase price was $17.3 million, which includes $0.4 million of capitalized acquisition costs. The Company recorded this acquisition as an asset acquisition and recorded $3.4 million to land, $13.6 million to building and improvements and $0.3 million to tenant origination and absorption costs.
On July 29, 2020, the Company, through a wholly owned subsidiary of PORT OP, acquired a single-family home portfolio consisting of 12 homes in Alabama, Arkansas, and Illinois. The portfolio was purchased from DayMark Financial Acceptance LLC, an entity affiliated with the Advisor. The acquisition fee was waived for this acquisition. The purchase price was $1.0 million, which includes $10,000 of capitalized acquisition costs. The Company recorded this acquisition as an asset acquisition and recorded $0.2 million to land and $0.8 million to building and improvements.
On August 14, 2020, the Company, through a wholly owned subsidiary of PORT OP, acquired a single-family home portfolio consisting of 11 homes in Memphis, Tennessee. The seller is not affiliated with the Company or the Advisor. The purchase price was $1.0 million, which includes $8,000 of capitalized acquisition costs. The Company recorded this acquisition as an asset acquisition and recorded $0.2 million to land, $0.8 million to building and improvements and $11,000 to tenant origination and absorption costs.
Sale of Real Estate
As of September 30, 2020 and December 31, 2019, the Company had recorded contract liabilities of $3.1 million related to deferred proceeds received from the buyers of the Park Highlands prior year land sales and another developer for the value of land that was contributed to a master association that is consolidated by the Company, which was included in other liabilities on the accompanying consolidated balance sheets.

4. TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES
As of September 30, 2020 and December 31, 2019, the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities (excluding fully amortized assets and liabilities and accumulated amortization) were as follows (in thousands):
 Tenant Origination and
Absorption Costs
Above-Market
Lease Assets
Below-Market
Lease Liabilities
 September 30, 2020December 31, 2019September 30, 2020December 31, 2019September 30, 2020December 31, 2019
Cost$27,984 $30,569 $3,499 $3,714 $(4,122)$(4,958)
Accumulated Amortization(11,861)(10,223)(767)(741)1,618 1,778 
Net Amount$16,123 $20,346 $2,732 $2,973 $(2,504)$(3,180)
Increases (decreases) in net income as a result of amortization of the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities for the three and nine months ended September 30, 20202021 and 20192020 were as follows (in thousands):
 Tenant Origination and
Absorption Costs
Above-Market
Lease Assets
Below-Market
Lease Liabilities
 For the Three Months Ended September 30,For the Three Months Ended September 30,For the Three Months Ended September 30,
 202120202021202020212020
Amortization$(3,253)$(1,625)$(94)$(74)$388 $194 
 Tenant Origination and
Absorption Costs
Above-Market
Lease Assets
Below-Market
Lease Liabilities
 For the Three Months Ended September 30,For the Three Months Ended September 30,For the Three Months Ended September 30,
 202020192020201920202019
Amortization$(1,625)$(2,000)$(74)$(101)$194 $421 
 Tenant Origination and
Absorption Costs
Above-Market
Lease Assets
Below-Market
Lease Liabilities
 For the Nine Months Ended September 30,For the Nine Months Ended September 30,For the Nine Months Ended September 30,
 202120202021202020212020
Amortization$(12,397)$(4,965)$(421)$(241)$1,436 $676 
As of September 30, 2021 and December 31, 2020, the Company had recorded a housing subsidy intangible asset, net of amortization, which is included in prepaid expenses and other assets in the accompanying consolidated balance sheets, of $1.9 million and $2.0 million, respectively. As of September 30, 2021, the housing subsidy intangible asset has a remaining amortization period of 27.1 years. During the three and nine months ended September 30, 2021, the Company recorded amortization expense of $18,000 and $54,000, respectively, related to the housing subsidy intangible asset.
Additionally, as of September 30, 2021 and December 31, 2020, the Company had recorded tax abatement intangible assets, net of amortization, which are included in prepaid expenses and other assets in the accompanying balance sheets, of $0.8 million and $1.6 million, respectively. During the three and nine months ended September 30, 2021, the Company recorded amortization expense of $0.2 million and $0.8 million, respectively, related to tax abatement intangible assets. During the three and nine months ended September 30, 2020, the Company recorded amortization expense of $0.1 million and $0.5 million, respectively, related to tax abatement intangible assets. As of September 30, 2021, the tax abatement intangible assets had a remaining amortization period of 1.6 years.

5. REAL ESTATE EQUITY SECURITIES
As of September 30, 2021, the Company owned 3 investments in real estate equity securities. The following table sets forth the number of shares owned by the Company and the related carrying value of the shares as of September 30, 2021 and December 31, 2020 (dollars in thousands):
September 30, 2021December 31, 2020
Real Estate Equity SecurityNumber of Shares OwnedTotal Carrying ValueNumber of Shares OwnedTotal Carrying Value
Keppel Pacific Oak US REIT64,165,352 $50,370 64,165,352 $44,274 
Franklin Street Properties Corp.6,915,089 32,086 6,915,089 30,219 
Plymouth Industrial REIT, Inc.613,085 13,947 1,560,660 23,410 
71,693,526 $96,403 72,641,101 $97,903 

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20202021
(unaudited)
 Tenant Origination and
Absorption Costs
Above-Market
Lease Assets
Below-Market
Lease Liabilities
 For the Nine Months Ended September 30,For the Nine Months Ended September 30,For the Nine Months Ended September 30,
 202020192020201920202019
Amortization$(4,965)$(5,324)$(241)$(303)$676 $1,159 
Additionally, as of September 30, 2020 and December 31, 2019, the Company had recorded tax abatement intangible assets, net of amortization, on real estate held for investment, which are included in prepaid expenses and other assets in the accompanying balance sheets, of $0.5 million and $1.0 million, respectively. During both of the three and nine months ended September 30, 2020 and 2019, the Company recorded amortization expense of $0.1 million and $0.5 million, respectively, related to tax abatement intangible assets. As of September 30, 2020, the tax abatement intangible assets had a remaining amortization period of 0.9 years.

5. REAL ESTATE EQUITY SECURITIES
As of September 30, 2020, the Company owned 3 investments in real estate equity securities. The following table sets forth the number of shares owned by the Company and the related carrying value of the shares as of September 30, 2020 and December 31, 2019 (dollars in thousands):
September 30, 2020December 31, 2019
Real Estate Equity SecurityNumber of Shares OwnedTotal Carrying ValueNumber of Shares OwnedTotal Carrying Value
Keppel Pacific Oak US REIT64,165,352 $46,520 64,165,352 $50,049 
Franklin Street Properties Corp.5,211,021 19,072 2,773,729 23,743 
Plymouth Industrial REIT, Inc.1,521,276 18,773 415,841 7,647 
70,897,649 $84,365 67,354,922 $81,439 
During the nine months ended September 30, 2020, the Company purchased 1,722,751 shares of common stock of Plymouth Industrial REIT, Inc. (NYSE Ticker: PLYM) for an aggregate purchase price of $21.6 million and also purchased 2,437,292 shares of Franklin Street Properties Corp., (NYSE Ticker: FSP) for an aggregate purchase price of $14.0 million. During the nine months ended September 30, 2020, the Company sold 617,316 shares of common stock of Plymouth Industrial REIT for an aggregate sale price of $11.0 million.
The following summarizes the portion of gain and loss for the period related to real estate equity securities held during the three and nine months ended September 30, 20202021 and 20192020 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Net (loss) gain recognized during the period on real estate equity securities$(6,527)$3,845 $(21,620)$19,304 
Less net gain recognized during the period on real estate equity securities sold during the period(711)(3,397)
Unrealized (loss) gain recognized during the reporting period on real estate equity securities held at the end of the period$(6,527)$3,845 $(22,331)$15,907 
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Net (loss) gain recognized during the period on real estate equity securities$(2,614)$(6,527)$12,939 $(21,620)
Less net gain recognized during the period on real estate equity securities sold during the period— — (225)(711)
Unrealized (loss) gain recognized during the reporting period on real estate equity securities held at the end of the period$(2,614)$(6,527)$12,714 $(22,331)

During the three and nine months ended September 30, 2021, the Company recognized $3.2 million and $6.7 million, respectively, of dividend income from real estate equity securities. During the three and nine months ended September 30, 2020, the Company recognized $2.8 million and $4.4 million, respectively, of dividend income from real estate equity securities.

6. REAL ESTATE HELD FOR SALE
During the three and nine months ended September 30, 2019,2021, the Company disposed of 1 office property. There were no material dispositions during the year ended December 31, 2020.
On July 27, 2021, the Company, through an indirect wholly owned subsidiary, sold an office building containing 435,177 rentable square feet located on approximately 4.92 acres of land in Orange, California (“City Tower”) to a purchaser unaffiliated with the Company or the Advisor, for $150.5 million, before closing costs and credits. The carrying value of City Tower as of the disposition date was $145.1 million, which was net of $20.5 million of accumulated depreciation and amortization. In connection with the sale of City Tower, the Company repaid $98.1 million of the outstanding principal balance due under the mortgage loan secured by City Tower. The Company recognized $2.2a gain on sale of $0.1 million related to disposition of City Tower.
The following summary presents the major components of assets and $4.3 million, respectively, of dividend income fromliabilities related to real estate equity securities.held for sale as of September 30, 2021 and December 31, 2020 (in thousands):
September 30, 2021December 31, 2020
Assets related to real estate held for sale
Real estate, cost$— $158,711 
Accumulated depreciation and amortization— (18,472)
Real estate, net— 140,239 
Other assets— 5,680 
Total assets related to real estate held for sale$— $145,919 
Liabilities related to real estate held for sale
Note payable, net— 94,097 
Other liabilities— 669 
Total liabilities related to real estate held for sale$— $94,766 

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20202021
(unaudited)
6. REAL ESTATE SOLD
DuringThe operations and gain on sale of City Tower is included in continuing operations on the year ended December 31, 2019,accompanying statements of operations. The following table summarizes certain revenue and expenses related to these properties for the Company disposed of 1 office building, 1 retail propertythree and 1 apartment property. There were 0 dispositions during the nine months ended September 30, 2020.2021 and 2020 (in thousands):
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
Revenues
Rental income$1,085 $3,318 $8,660 $9,998 
Other operating income51 265 520 792 
Total revenues$1,136 $3,583 $9,180 $10,790 
Expenses
Operating, maintenance, and management$363 $1,004 $2,096 $2,855 
Real estate taxes and insurance95 389 979 1,258 
Asset management fees to affiliate194 305 807 907 
Depreciation and amortization14 1,769 2,436 5,342 
Interest expense152 518 1,146 1,953 
Total expenses$818 $3,985 $7,464 $12,315 
On November 12, 2013, the Company, through an indirect wholly owned subsidiary, and EE 424 Bedford OM, LLC entered into an agreement to form a joint venture (the “424 Bedford Joint Venture”), and on January 31, 2014, the 424 Bedford Joint Venture acquired an apartment building containing 66 units in Brooklyn, New York (“424 Bedford”). On January 11, 2019, the 424 Bedford Joint Venture sold 424 Bedford to a purchaser unaffiliated with the Company or the Advisor, for $43.8 million before closing costs and credits. The carrying value of 424 Bedford as of the disposition date was $34.0 million, which was net of $5.3 million of accumulated depreciation and amortization. The Company recognized a gain on sale of $7.6 million related to the disposition of 424 Bedford.
On December 12, 2012, the Company, through an indirect wholly owned subsidiary, and Goldstein Planting Partners, LLC and its affiliate entered into a joint venture agreement (the “Burbank Collection Joint Venture”), and on December 12, 2012, the Burbank Collection Joint Venture acquired a Class A retail property containing 39,428 rentable square feet located in Burbank, California (the “Burbank Collection”). On July 19, 2019, the Burbank Collection Joint Venture sold the Burbank Collection to a purchaser unaffiliated with the Company or the Advisor for $25.9 million before closing costs. The carrying value of the Burbank Collection as of the disposition date was $14.7 million, which was net of $2.6 million of accumulated depreciation and amortization. The Company recognized a gain on sale of $10.5 million related to the disposition of the Burbank Collection.
On November 1, 2019, the Company, through an indirect wholly owned subsidiary, sold 125 John Carpenter to KORE 125 John Carpenter, LLC, a wholly owned subsidiary of the Keppel Pacific Oak US REIT, previously known as Keppel-KBS US REIT, a newly formed Singapore real estate investment trust (the “SREIT”). The sale price, net of closing credits, of 125 John Carpenter was $99.8 million, before third-party closing costs of approximately $0.2 million and excluding any disposition fees payable to the Company's then-current external advisor. Prior to the sale of 125 John Carpenter, the Company owned 56,979,352 common units of the SREIT, representing a 6.89% ownership interest. On October 29, 2019, the Company purchased 7,186,000 common units of the SREIT for $5.2 million in connection with a private placement to institutional and other investors, maintaining its 6.89% ownership interest. The Company recognized a gain on sale of $16.0 million related to the disposition of 125 John Carpenter.

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20202021
(unaudited)
The operations7. NOTES AND BONDS PAYABLE
As of these propertiesSeptember 30, 2021 and gain on sales are included in continuing operations onDecember 31, 2020, the accompanying statements of operations. The following table summarizes certain revenueCompany’s notes and expensesbonds payable, including notes payable related to these propertiesreal estate held for sale, consisted of the three and nine months ended September 30, 2020 and 2019 (infollowing (dollars in thousands):
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Revenues
Rental income$$3,443 $138 $10,566 
Other operating income254 40 828 
Total revenues$$3,697 $178 $11,394 
Expenses
Operating, maintenance, and management costs$$1,042 $86 $3,030 
Real estate taxes and insurance710 2,110 
Asset management fees to affiliate250 784 
Depreciation and amortization1,183 3,784 
Interest expense596 2,086 
Total expenses$$3,781 $86 $11,794 
 Book Value as of
September 30, 2021
Book Value as of
December 31, 2020
Contractual Interest Rate as of
September 30, 2021
Effective Interest Rate at
September 30, 2021 (1)
Payment Type (2)
Maturity Date (3)
Richardson Portfolio Mortgage Loan$28,685 $35,832 One-Month LIBOR + 2.50%2.58%Principal & Interest
11/01/2021 (4)
Park Centre Mortgage Loan26,185 26,185 One-Month LIBOR + 1.75%1.83%Interest Only06/27/2022
1180 Raymond Mortgage Loan (5)
29,548 29,848 
One-Month LIBOR + 2.50% (6)
3.50%Principal & Interest12/01/2021
1180 Raymond Bond Payable5,705 5,870 6.50%6.50%Principal & Interest09/01/2036
Pacific Oak SOR (BVI) Holdings, Ltd. Series A Debentures (7)
197,901 181,198 4.25%4.25%(7)03/01/2023
Pacific Oak SOR (BVI) Holdings, Ltd. Series B Debentures (7)
78,794 79,078 3.93%3.93%(7)01/31/2026
Crown Pointe Mortgage Loan (5)
52,508 53,072 One-Month LIBOR + 2.60%2.70%Principal & Interest02/13/2022
City Tower Mortgage Loan— 94,167 (8)(8)(8)(8)
The Marq Mortgage Loan62,066 62,257 One-Month LIBOR + 1.55%1.63%Interest Only06/06/2022
Eight & Nine Corporate Centre Mortgage Loan48,695 47,066 One-Month LIBOR + 1.60%1.68%Principal & Interest06/08/2022
Georgia 400 Center Mortgage Loan61,154 59,690 One-Month LIBOR + 1.55%1.63%Interest Only05/22/2023
PORT Mortgage Loan 151,302 51,362 4.74%4.74%Interest Only10/01/2025
PORT Mortgage Loan 210,523 10,523 4.72%4.72%Interest Only03/01/2026
PORT Mortgage Loan 3 (9)
— 12,000 (9)(8)(8)(8)
Battery Point Trust Mortgage Loan (9)
— 38,608 (8)(8)(8)(8)
MetLife Loan (9)
60,000 — 3.90%3.90%Interest Only04/10/2026
Springmaid Beach Resort Mortgage Loan55,839 57,015 
One-month LIBOR + 2.25% (10)
5.75%Principal & Interest08/12/2022
Q&C Hotel Mortgage Loan25,000 25,000 
One-month LIBOR + 2.50% (11)
4.50%Principal & Interest12/23/2022
Lincoln Court Mortgage Loan (5)
34,723 34,416 One-month LIBOR + 1.75%1.83%Principal & Interest12/01/2021
Lofts at NoHo Commons Mortgage Loan74,536 74,536 
One-month LIBOR + 2.18% (12)
3.93%Interest Only09/09/2022
210 West 31st Street Mortgage Loan (5)
10,275 15,050 One-month LIBOR + 3.00%3.08%Principal & Interest06/16/2022
Oakland City Center Mortgage Loan96,404 96,782 One-month LIBOR + 1.75%1.83%Principal & Interest09/01/2022
Madison Square Mortgage Loan (13)
20,891 16,822 One-month LIBOR + 4.05%5.05%Interest Only10/09/2021
Total Notes and Bonds Payable principal outstanding1,030,734 1,106,377 
Discount on Notes and Bonds Payable, net (14)
(2,249)(2,851)
Deferred financing costs, net(4,707)(4,458)
Total Notes and Bonds Payable, net$1,023,778 $1,099,068 


_____________________
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20202021
(unaudited)
7. NOTES AND BONDS PAYABLE
As of September 30, 2020 and December 31, 2019, the Company’s notes and bonds payable consisted of the following (dollars in thousands):
 Book Value as of
September 30, 2020
Book Value as of
December 31, 2019
Contractual Interest Rate as of
September 30, 2020 (1)
Effective Interest Rate at
September 30, 2020 (1)
Payment Type (3)
Maturity Date (2)
Richardson Portfolio Mortgage Loan$36,000 $36,000 One-Month LIBOR + 2.50%2.65%
Interest Only (3)
11/01/2021
Park Centre Mortgage Loan21,970 21,970 One-Month LIBOR + 1.75%1.90%Interest Only06/27/2022
1180 Raymond Mortgage Loan29,948 30,250 
One-Month LIBOR + 2.50% (7)
3.50%Principal & Interest12/01/2021
1180 Raymond Bond Payable5,930 6,080 6.50%6.50%Principal & Interest09/01/2036
Pacific Oak SOR (BVI) Holdings, Ltd. Series A
Debentures (4)
169,927 224,746 4.25%4.25%(4)03/01/2023
Pacific Oak SOR (BVI) Holdings, Ltd. Series B
Debentures (4)
74,159 3.93%3.93%(4)01/31/2026
Crown Pointe Mortgage Loan53,254 51,171 One-Month LIBOR + 2.60%2.75%Principal & Interest02/13/2021
City Tower Mortgage Loan94,167 89,000 One-Month LIBOR + 1.55%1.70%Interest Only03/05/2021
The Marq Mortgage Loan58,331 53,408 One-Month LIBOR + 1.55%1.70%Interest Only06/06/2021
Eight & Nine Corporate Centre Mortgage Loan47,066 43,880 One-Month LIBOR + 1.60%1.75%Interest Only06/08/2021
Georgia 400 Center Mortgage Loan59,690 59,690 One-Month LIBOR + 1.55%1.70%Interest Only05/22/2023
PORT Mortgage Loan 151,362 51,362 4.74%4.74%Interest Only10/01/2025
PORT Mortgage Loan 210,523 10,523 4.72%4.72%Interest Only03/01/2026
PORT Mortgage Loan 312,000 
5.00% (5)
5.00%Interest Only03/31/2021
Battery Point Trust Mortgage Loan38,743 
One-Month LIBOR + 2.50% (7)
3.50%Interest Only03/20/2022
Total Notes and Bonds Payable principal outstanding763,070 678,080 
Net premium on Notes and Bonds Payable (6)
175 783 
Deferred financing costs, net(5,170)(5,200)
Total Notes and Bonds Payable, net$758,075 $673,663 
_____________________
(1) Contractual interest rate represents the interest rate in effect under the loan as of September 30, 2020.2021. Effective interest rate is calculated as the actual interest rate in effect as of September 30, 20202021 (consisting of the contractual interest rate and contractual floor rates), using interest rate indices at September 30, 2020,2021, where applicable.
(2) Represents the initial maturity date or the maturity date as extended as of September 30, 2020; subject to certain conditions, the maturity dates of certain loans may be extended beyond the date shown.
(3) Represents the payment type required under the loan as of September 30, 2020.2021. Certain future monthly payments due under this loan also include amortizing principal payments. For more information of the Company’s contractual obligations under its notes and bonds payable, see five-year maturity table below.
(3) Represents the initial maturity date or the maturity date as extended as of September 30, 2021; subject to certain conditions, the maturity dates of certain loans may be extended beyond the date shown.
(4)Subsequent to September 30, 2021, the Company extended the maturity of the Richardson Portfolio Mortgage Loan to November 1, 2022.
(5) The Company’s notes and bond’s payable are generally non-recourse. These mortgage loans have guarantees over certain balances whereby the Company would be required to make guaranteed payments in the event that the Company turned the property over to the lender. The guarantees are typically 25% of the outstanding loan balance. As of September 30, 2021, the guaranteed amount in the aggregate was $39.5 million.
(6) This mortgage loan has a LIBOR floor of 1%.
(7) See “ – Israeli Bond Financing”Financings” below.
(5)(8) Contractual interest is 5.0% through November 30, 2020 and 6.5% from December 1, 2020 through March 31, 2021.On July 27, 2021, in connection with the disposition of City Tower, the Company repaid the $98.1 million outstanding principal balance due under the City Tower Mortgage Loan.
(6)(9) On April 6, 2021, the Company refinanced the PORT Mortgage Loan 3 and the Battery Point Trust Mortgage Loan with a mortgage loan from MetLife for borrowings up to $60.0 million.
(10) The interest rate is variable at the higher of one-month LIBOR + 2.25% or 5.77%.
(11) The interest rate is variable at the higher of one-month LIBOR + 2.5% or 4.5%. Principal payments will commence on January 1, 2022.
(12) The LIBOR rate is variable at the higher of one-month LIBOR or 1.75%.
(13) On October 7, 2021, the Company refinanced the Madison Square Mortgage Loan with a mortgage loan from an unaffiliated lender for borrowings up to $27.0 million. The new loan matures on October 7, 2024 and has a fixed interest rate of 4.625%. See Note 17, “Subsequent Events” for a further discussion.
(14) Represents the unamortized premium/discount on notes and bonds payable due to the aboveabove- and below-market interest rates when the debt was assumed. The premium/discountdiscount/premium is amortized over the remaining life of the notes and bonds payable.
(7) The mortgage loans have a LIBOR floor of 1%.

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
During the three and nine months ended September 30, 2020
(unaudited)
2021, the Company incurred $10.1 million and $30.7 million, respectively, of interest expense. Included in interest expense for the three and nine months ended September 30, 2021 was $0.8 million and $2.5 million, respectively, of amortization of deferred financing costs. Included in interest expense for the three and nine months ended September 30, 2021 was $0.5 million and $1.9 million, respectively, of amortization on discount on notes and bonds payable, net. Additionally, during the three and nine months ended September 30, 2021, the Company capitalized $0.5 million and $1.6 million, respectively of interest related to its investments in undeveloped land.
During the three and nine months ended September 30, 2020, the Company incurred $6.3 million and $19.1 million, respectively, of interest expense. Included in interest expense for the three and nine months ended September 30, 2020 was $0.8 million and $2.5 million, respectively, of amortization of deferred financing costs. Included in interest expense for the three and nine months ended September 30, 2020 was $64,000 and $14,000, respectively, of amortization of discount on notes and bonds payable, net. Additionally, during the three and nine months ended September 30, 2020, the Company capitalized $0.7 million and $2.4 million, respectively of interest related to its investments in undeveloped land and an investment in unconsolidated entity.
During the three and nine months ended September 30, 2019, the Company incurred $7.4 million and $21.8 million, respectively, of interest expense. Included in interest expense for the three and nine months ended September 30, 2019 was $0.9 million and $2.6 million, respectively, of amortization of deferred financing costs. Additionally, during the three and nine months ended September 30, 2019, the Company capitalized $0.7 million and $2.1 million, respectively of interest related to its investments in undeveloped land.
As of September 30, 20202021 and December 31, 2019,2020, the Company’s interest payable was $2.3$3.3 million and $4.8$6.2 million, respectively.
The following is a schedule of maturities, including principal amortization payments, for all notes and bonds payable outstanding as of September 30, 20202021 (in thousands):
October 1, 2021 through December 31, 2021$116,538 
2022548,061 
2023160,359 
202426,535 
202577,858 
Thereafter101,383 
$1,030,734 
October 1, 2020 through December 31, 2020$507 
2021387,178 
2022117,595 
2023116,587 
202424,990 
Thereafter116,213 
$763,070 
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)

As of November 13, 2020,12, 2021, the Company had a total of $357.9$518.0 million of debt obligations scheduled to mature over the next 12 months. On October 5, 2020, the Company assumed the debt obligations of POSOR II upon the close of the Merger, of which $155.1 million is scheduled to mature over the next 12 months. The Company and POSOR II havehas extension options with respect to $350.9$239.8 million of the debt obligations outstanding that isare scheduled to mature over the next 12 months; however, the Company cannot exercise these options if not then in compliance with certain financial covenants in the loans without making a cash payment and there is no assurance that we will be able to meet these requirements. All of the Company’s debt obligations are generally non-recourse, subject to certain limited guaranty payments, as outlined in the table above, except for the Company’s Series A Debentures and Series B Debentures. Subsequent to September 30, 2021, the Company issued additional Series B Debentures, with the intent of using the proceeds and available cash on hand to payoff the outstanding Series A Debentures. See Note 17, “Subsequent Events” for a further discussion on the Series B Debentures issuance. The Company plans to utilize available extension options or refinance the notes payable. The Company may also choose to market the properties for sale or may negotiate a turnover of the secured properties back to the related mortgage lender. There can be no assurance as to the certainty or timing of any such transactions.
The Company’s notes payable contain financial debt covenants.covenants, including minimum equity requirements and liquidity ratios. As of September 30, 2020,2021, the Company was in compliance with all of these debt covenants.

21


Tablecovenants except that the Madison Square Mortgage Loan was not in compliance with the debt yield requirement. Such non-compliance does not constitute an event of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2020
(unaudited)
default under the loan agreement. As a result of such non-compliance, the Company is required to maintain an interest shortfall reserve and provide cash sweeps. Additionally, the Company was not compliance with the debt service coverage requirement for the Richardson Portfolio Mortgage Loan and Georgia 400 Center Mortgage Loan. As a result of such non-compliance, the Company is required to partially paydown the loan in the case of the Richardson Portfolio Mortgage Loan and provide a cash sweep in the case of the Georgia 400 Center Mortgage Loan.
Israeli Bond FinancingFinancings
On March 2, 2016, Pacific Oak SOR BVI, a wholly owned subsidiary of the Company, filed a final prospectus with the Israel Securities Authority for a proposed offering of up to 1,000,000,000 Israeli new Shekels of the Series A Debentures at an annual interest rate not to exceed 4.25%. On March 1, 2016, Pacific Oak SOR BVI commenced the institutional tender of the Series A Debentures and accepted application for 842.5 million Israeli new Shekels. On March 7, 2016, Pacific Oak SOR BVI commenced the public tender of the Series A Debentures and accepted 127.7 million Israeli new Shekels.  In the aggregate, Pacific Oak SOR BVI accepted 970.2 million Israeli new Shekels (approximately $249.2 million as of March 8, 2016) in both the institutional and public tenders at an annual interest rate of 4.25%.  Pacific Oak SOR BVI issued the Debentures on March 8, 2016. The terms of the Series A Debentures require five equal annual installment principal payments on March 1st of each year from 2019 to 2023.
On February 16, 2020, Pacific Oak SOR BVI issued 254.1 million Israeli new Shekels (approximately $74.1 million as of February 16, 2020) of Series B Debentures to Israeli investors pursuant to a public offering registered with the Israel Securities Authority. The Series B Debentures will bear interest at the rate of 3.93% per year. The Series B Debentures have principal installment payments equal to 33.33% of the face amount of the Series B Debentures on January 31st of each year from 2024 to 2026.
On March 4, 2021, Pacific Oak SOR BVI issued additional Series A Debentures in the amount of 250.0 million Israeli new Shekels par value through a private placement. The additional Series A Debentures were issued at a 1.9% discount resulting in total consideration of 245.3 million Israeli new Shekels ($74.2 million as of March 4, 2021). The additional Series A Debentures have an equal level of security, pari passu, amongst themselves and between them and the initial Series A Debentures, which were initially issued, without any right of precedence or preference between any of them.
The deeds of trust that govern the Series A Debentures and Series B Debentures contain various financial covenants. As of September 30, 2020,2021, the Company was in compliance with all of these financial debt covenants.
Subsequent to September 30, 2021, the Company issued additional Series B Debentures. See Note 17, “Subsequent Events” for a further discussion on the Series B Debentures issuance.


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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
8. DERIVATIVE INSTRUMENTS
The Company enters into derivative instruments for risk management purposes to hedge its exposure to cash flow variability caused by changing interest rates and foreign currency exchange rate movements. The primary goal of the Company’s risk management practices related to interest rate risk is to prevent changes in interest rates from adversely impacting the Company’s ability to achieve its investment return objectives. The Company does not enter into derivatives for speculative purposes.
The Company enters into foreign currency collars to mitigate its exposure to foreign currency exchange rate movements on its bonds payable outstanding denominated in Israeli new Shekels. A foreign currency collar consists of a purchased call option to buy and a sold put option to sell Israeli new Shekels. A foreign currency collar guarantees that the exchange rate of the currency will not fluctuate beyond the range of the options’ strike prices.
The following table summarizes the notional amount and other information related to the Company’s foreign currency collars as of September 30, 20202021 and December 31, 2019.2020. The notional amount is an indication of the extent of the Company’s involvement in each instrument at that time, but does not represent exposure to credit, interest rate or market risks (currency in thousands):
September 30, 2020December 31, 2019Strike PriceTrade DateMaturity Date
Derivative InstrumentsNumber of InstrumentsNotional AmountNumber of InstrumentsNotional Amount
Derivative instruments not designated as hedging instruments
Foreign currency collar00003.70 - 3.82 ILS - USD03/17/2020
9/16/2020 (1)
Foreign currency collar00003.5875 - 3.725 ILS - USD03/16/2020
9/16/2020 (1)
Foreign currency collar001776,182 ILS3.38 - 3.4991 ILS - USD11/25/201902/26/2020
____________________
(1) On July 29, 2020, the Company terminated the foreign currency collars and as a result received $14.1 million.
22
September 30, 2021December 31, 2020Strike PriceTrade DateMaturity Date
Derivative InstrumentsNumber of InstrumentsNotional AmountNumber of InstrumentsNotional Amount
Derivative instruments not designated as hedging instruments
Foreign currency collar1194,045 ILS3.16 - 3.29 ILS - USD06/14/202111/22/2021


Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2020
(unaudited)
The Company enters into interest rate caps to mitigate its exposure to rising interest rates on its variable rate notes payable. The values of interest rate caps are primarily impacted by interest rates, market expectations about interest rates, and the remaining life of the instrument. In general, increases in interest rates, or anticipated increases in interest rates, will increase the value of interest rate caps. As the remaining life of an interest rate cap decreases, the value of the instrument will generally decrease towards zero.
The Company enters into interest rate caps to mitigate its exposure to rising interest rates on its variable rate notes payable. The values of interest rate caps are primarily impacted by interest rates, market expectations about interest rates, and the remaining life of the instrument. In general, increases in interest rates, or anticipated increases in interest rates, will increase the value of interest rate caps. As the remaining life of an interest rate cap decreases, the value of the instrument will generally decrease towards zero.
As of September 30, 2020,2021, the Company had entered into 34 interest rate caps, which were not designated as a hedging instruments. The following table summarizes the notional amounts and other information related to the Company’s derivative instruments as of September 30, 2020.2021. The notional amount is an indication of the extent of the Company’s involvement in the instrument at that time, but does not represent exposure to credit, interest rate or market risks (dollars in thousands):
Derivative InstrumentEffective DateMaturity DateNotional ValueReference Rate
Interest rate cap04/02/201810/15/202003/05/10/15/2021$77,51326,200 One-month LIBOR at 3.00%
Interest rate cap02/12/202102/14/2022$47,715 One-month LIBOR at 3.00%
Interest rate cap09/15/202109/15/2022$75,950 One-month LIBOR at 3.50%
Interest rate cap06/21/201905/22/2023$51,252 One-month LIBOR at 4.00%
Interest rate cap02/12/202002/16/2021$46,875 One-month LIBOR at 3.00%


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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
The following table sets forth the fair value of the Company’s derivative instruments as well as their classification on the consolidated balance sheets as of September 30, 20202021 and December 31, 20192020 (dollars in thousands):
September 30, 2021December 31, 2020
Derivative InstrumentsBalance Sheet LocationNumber of InstrumentsFair ValueNumber of InstrumentsFair Value
Derivative instruments not designated as hedging instruments
Interest rate capsPrepaid expenses and other assets4$7$
Foreign currency collarOther liabilities1$(44)$— 
September 30, 2020December 31, 2019
Derivative InstrumentsBalance Sheet LocationNumber of InstrumentsFair ValueNumber of InstrumentsFair Value
Derivative instruments not designated as hedging instruments
Interest rate capsPrepaid expenses and other assets3$3$12 
Foreign currency collarsPrepaid expenses and other assets (Other liabilities)0$1$(179)

The change in fair value of foreign currency collars that are not designated as cash flow hedges are recorded as foreign currency transaction gains or losses in the accompanying consolidated statements of operations. During the three months ended September 30, 2021, the Company recognized a $0.3 million gain related to the foreign currency collar, which is shown combined with $2.6 million of foreign currency transaction loss in the accompanying consolidated statements of operations as foreign currency transaction loss. During the nine months ended September 30, 2021, the Company recognized a $44,000 loss related to the foreign currency collar, which is shown combined with $0.6 million of foreign currency transaction gain in the accompanying consolidated statements of operations as foreign currency transaction gain, net.
During the three months ended September 30, 2020, the Company recognized a $2.2 million gain related to the foreign currency collars, which is shown combined with $2.6 million of foreign currency transaction loss in the accompanying consolidated statements of operations as foreign currency transaction loss, net. During the nine months ended September 30, 2020, the Company recognized a $14.3 million gain related to the foreign currency collars, which is shown combined with $2.0 million of foreign currency transaction loss in the accompanying consolidated statements of operations as foreign currency transaction gain, net. On July 29, 2020, the Company terminated the foreign currency collars and as a result received $14.1 million.
During the three months ended September 30, 2019, the Company recognized a $0.4 million gain related to the foreign currency collars, which is shown net against $5.7 million of foreign currency transaction loss in the accompanying consolidated statements of operations as foreign currency transaction loss, net. During the nine months ended September 30, 2019, the Company recognized a $4.6 million gain related to the foreign currency collars, which is shown net against $15.2 million of foreign currency transaction loss in the accompanying consolidated statements of operations as foreign currency transaction loss, net.


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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2020
(unaudited)
9. FAIR VALUE DISCLOSURES
The following were the face values, carrying amounts and fair values of the Company’s financial instruments as of September 30, 20202021 and December 31, 2019,2020, which carrying amounts do not approximate the fair values (in thousands):
September 30, 2020December 31, 2019
Face ValueCarrying AmountFair ValueFace ValueCarrying AmountFair Value
Financial liabilities (Level 3):
Notes and bond payable$518,984 $517,731 $524,259 $453,334 $451,743 $455,849 
Financial liabilities (Level 1):
Pacific Oak SOR (BVI) Holdings, Ltd. Series A Debentures$169,927 $168,190 $158,620 $224,746 $221,920 $229,877 
Pacific Oak SOR (BVI) Holdings, Ltd. Series B Debentures$74,159 $72,154 $60,325 $$$
September 30, 2021December 31, 2020
Face ValueCarrying AmountFair ValueFace ValueCarrying AmountFair Value
Financial liabilities (Level 3):
Notes and bond payable$754,039 $751,064 $752,417 $846,101 $842,112 $846,608 
Financial liabilities (Level 1):
Pacific Oak SOR (BVI) Holdings, Ltd. Series A Debentures$197,901 $195,428 $197,437 $181,198 $179,786 $178,450 
Pacific Oak SOR (BVI) Holdings, Ltd. Series B Debentures$78,794 $77,286 $76,899 $79,078 $77,170 $69,433 
Disclosure of the fair value of financial instruments is based on pertinent information available to the Company as of the period end and requires a significant amount of judgment. This has made the estimation of fair values difficult and, therefore, both the actual results and the Company’s estimate of value at a future date could be materially different.

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
As of September 30, 2020,2021, the Company measured the following assets at fair value (in thousands):
  Fair Value Measurements Using
TotalQuoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Recurring Basis:
Real estate equity securities$84,365 $84,365 $$
Asset derivative - interest rate caps$$$$
  Fair Value Measurements Using
TotalQuoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Recurring Basis:
Real estate equity securities$96,403 $96,403 $— $— 
Asset derivative - interest rate caps$$— $$— 
Liability derivative - foreign currency collar$(44)$— $(44)$— 

As of December 31, 2019,2020, the Company measured the following assets and liabilities at fair value (in thousands):
Fair Value Measurements Using
TotalQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Recurring Basis:
Real estate equity securities$96,403 $96,403 $— $— 
Asset derivative - interest rate caps$$— $$— 
Fair Value Measurements Using
TotalQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Recurring Basis:
Real estate equity securities$81,439 $81,439 $$
Asset derivative - interest rate caps$12 $$12 $
Liability derivative - foreign currency collar$(179)$$(179)$

As of September 30, 2021, the Company measured the following assets at fair value on a nonrecurring basis (in thousands):
  Fair Value Measurements Using
TotalQuoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Nonrecurring Basis:
Impaired real estate$97,600 $— $— $97,600 
Impaired goodwill$13,534 $— $— $13,534 

As of September 30, 2021, 2 of the Company’s real estate properties were measured at their estimated fair value. 210 West 31st Street was based on a sales comparison approach as of September 30, 2021. Lincoln Court was based on an income approach with the significant unobservable inputs used in measuring the estimated fair value of this property include a discount rate of 7.75% and a terminal cap rate of 6.75%. During the three and nine months ended September 30, 2021, the Company recorded impairment charges on real estate in the aggregate of $11.0 million, to write down the carrying value of 210 West 31st Street and Lincoln Court.
The Company recorded goodwill in connection with the Merger with Pacific Oak Strategic Opportunity REIT II, Inc. ("POSOR II"). Due to a decline in projected cash flows for real estate held in certain reporting units, the Company determined that the carrying value of certain reporting units exceeded the estimated fair value and recognized impairment charges of $2.8 million. The fair value of the Company's reporting units were measured using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2021, which included discounted cash flows, terminal capitalization rates and discount rates.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
Balance as of December 31, 2020$16,342 
Impairment loss(2,808)
Balance as of September 30, 2021$13,534 

10. RELATED PARTY TRANSACTIONS
As described further below, the Company has entered into agreements with certain affiliates pursuant to which they provide services to the Company. Keith D. Hall and Peter McMillan III control and indirectly own Pacific Oak Holding Group, LLC (“Pacific Oak Holding”), the Company’s sponsor since November 1, 2019. Pacific Oak Holding is the sole owner of the Advisor, the Company’s advisor since November 1, 2019. Messrs. Hall and McMillan are also two of the Company’s executive officers and directors.
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TableSubject to certain restrictions and limitations, the business of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2020
(unaudited)
the Company is externally managed by the Advisor pursuant to the Advisory Agreement. The Advisory Agreement is currently effective through November 1, 2022; however the Company or the Advisor may terminate the Advisory Agreement without cause or penalty upon providing 60 days’ written notice. The Advisor conducts the Company’s operations and manages its portfolio of real estate and other real estate-related investments.
In addition, along with Charles J. Schreiber, Jr., Keith D. Hall and Peter McMillan III control and indirectly own KBS Holdings LLC (“KBS Holdings”), the Company’s sponsor prior to November 1, 2019. KBS Holdings is the sole owner of KBS Capital Advisors, LLC (“KBS Capital Advisors”), the Company’s advisor prior to November 1, 2019, and KBS Capital Markets Group LLC, the entity that acted as the dealer manager of the Company’s now-terminated primary initial public offering.
From the Company’s inception through October 31, 2019, KBS Capital Advisors provided day-to-day management of the Company’s business. The advisory agreement with KBS Capital Advisors terminated on October 31, 2019, and2019. On March 27, 2020, the Company hiredissued 3,411,737 shares of Restricted Stock to KBS Capital Advisors pursuant to the Advisor under substantially the same terms on November 1, 2019. The advisory agreement with the Advisor has a one-year term subjectRestricted Stock Agreement. Refer to an unlimited number of successive one-year renewals upon the mutual consent of the parties.paragraph below for further discussion.
Pursuant to the terms of these agreements, summarized below are the related-party costs incurred by the Company for the three and nine months ended September 30, 20202021 and 2019,2020, respectively, and any related amounts payable as of September 30, 20202021 and December 31, 20192020 (in thousands):
IncurredPayable as of
Three Months Ended September 30,Nine Months Ended September 30,September 30, 2020December 31, 2019
Expensed2020201920202019
Asset management fees$2,426 $2,093 $6,867 $5,954 $2,538 $1,498 
Property management fees (1)
114 114 
Reimbursable operating expenses (2)
56 79 148 251 
Disposition fees (3)
233 627 
Change in subordinated performance fee due upon termination to affiliate (4)
(1,121)(814)(3)(3)
Capitalized
Acquisition fees on real estate equity securities122 
Acquisition fee on real estate171 897 
Acquisition fee on investment in unconsolidated entities50 137 
Investment in PORT II (5)
3,911 
$1,475 $2,405 $6,608 $7,779 $6,449 $1,635 
IncurredPayable as of
Three Months Ended September 30,Nine Months Ended September 30,September 30, 2021December 31, 2020
Expensed2021202020212020
Asset management fees$3,422 $2,426 $10,802 $6,867 $2,132 $2,837 
Property management fees (1)
119 114 362 114 — — 
Reimbursable operating expenses (2)
— 56 — 148 — — 
Disposition fees (3)
692 — 1,196 — — — 
Change in subordinated performance fee due upon termination to affiliate (4)
1,545 (1,121)1,745 (814)(3)(3)
Capitalized
Acquisition fees on real estate equity securities— — — 122 — 
Acquisition fees on real estate (5)
— — 20 171 20 — 
Acquisition fee on investment in unconsolidated entities— — 45 — — — 
$5,778 $1,475 $14,170 $6,608 $2,152 $2,842 
_____________________
(1) Property management fees are for single-family homes under Battery PointPORT and paid to DayMark. These fees are included in the line item “Operating, maintenance, and management cost” in the consolidated statement of operations.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
(2) The relevant advisorAdvisor may seek reimbursement for certain employee costs under the relevant advisory agreement. The Company has reimbursed the relevant advisor for the Company’s allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to the Company. These amounts totaled $65,000 and $198,000 for the three and nine months ended September 30, 2019, respectively, and were the only employee costs reimbursed under the advisory agreement during these periods. There were 0 employee cost reimbursements during 2020.Advisory Agreement. The Company will not reimburse for employee costs in connection with services for which the Advisor earns acquisition, origination or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries or benefits the Advisor or its affiliates may pay to the Company’s executive officers. In addition to the amounts above, the Company reimburses the Advisor for certain of the Company’s direct costs incurred from third parties that were initially paid by the Advisor on behalf of the Company.
(3) Disposition fees with respect to real estate sold are included in the gain on sale of real estate in the accompanying consolidated statements of operations.
(4) Change in estimatethe fair value of fees payable to KBS Capital Advisors duethe Restricted Stock related to the termination of the former advisory agreement with KBS Capital Advisors. See “Subordinated Performance Fee Due Upon Termination to KBS Capital Advisors”, below, for more details.
(5) During the nine months ended September 30, 2020, the Company, through a subsidiary of PORT OP, invested $5.0 million in PORT II OP LP (“PORT II OP”), of which $3.9 million was payable. See "PORT II" below for more details.

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2020
(unaudited)
Battery Point Restructuring
On October 28, 2016, the Company, through an indirect wholly owned subsidiary, agreed to invest up to $25,000,000 in Battery Point Trust, LLC (“Battery Point LLC”) through the purchase of Series B Preferred Equity Units (the “Series B Preferred Units”). On May 12, 2017, the Company and Battery Point LLC agreed to limit the Company’s investment to $17,500,000 worth of Series B Preferred Units. The Company invested the full $17,500,000 in stages. During 2018, $4,500,000 was repaid to the Company. On June 29, 2018, Battery Point LLC was converted into Battery Point Trust, Inc. (“Battery Point”) and the Company’s Series B Preferred Units were converted into Series B Preferred Shares (the “Series B Preferred Shares”). The Series B Preferred SharesAcquisition fees associated with asset acquisitions are entitled to the same rights and protectionscapitalized, while costs associated with business combinations expensed as were the Series B Preferred Units. The Series B Preferred Shares pay a quarterly dividend of 12% and had an outside maturity date of October 28, 2019.
On March 20, 2019, the Company, through an indirect wholly owned subsidiary, entered into a redemption agreement for the Battery Point Series B Preferred Shares. The redemption agreement resulted in the redemption of 13,000 Series B Preferred Units with a per-unit price of $1,000. The Company received $8.6 million, of which $0.9 million relates to accrued interest and an exit fee. In addition, the Company received 210,000 Battery Point Series A-3 Preferred Units with a per-unit price of $25.
On March 20, 2019, Pacific Oak Battery Point Holdings, LLC (“Pacific Oak BP”), a wholly owned subsidiary of the Advisor, a real estate asset management company formed in 2019, and its family of companies (collectively, “Pacific Oak”), acquired all the common equity interests in BPT Holdings, LLC (“Battery Point Holdings”). Battery Point Holdings owns (a) the common stock in Battery Point, (b) all the service entities that provide advisory, servicing and property management services to Battery Point Holdings generally named “DayMark”, and (c) 40% of additional DayMark entities that purchase, renovate, lease and sell single-family residential homes to Battery Point. As owner of Battery Point Holdings, Pacific Oak is responsible for funding the ongoing operations of Battery Point Holdings and its subsidiaries. The affiliated DayMark service entities are paid annual asset management fees equal to 1.5% of the gross asset value of Battery Point, annual property management fees equal to 8% of tenants’ rents received by Battery Point, and acquisition fees of 1% of the gross purchase price of properties acquired. The affiliated DayMark service entities also receive fees from tenants upon execution of leases and a 1% commission from sellers of properties into the program, if it acts as the broker for the seller. During the year ended December 31, 2019, the Company purchased additional 430,000 shares of Battery Point Series A-3 Preferred Units for an aggregate amount of $10.8 million.
On July 1, 2020, the Company acquired, through its subsidiaries, Battery Point. The Company acquired Battery Point by acquiring all the 1,000,000 outstanding shares of Battery Point common stock from Battery Point Holdings, a wholly owned subsidiary of the Advisor. In exchange, BPT Holdings received 510,816 common equity units in PORT OP, approximately 4.5% of the outstanding common equity units as of July 1, 2020. The value of the interests exchanged was estimated by the participants at approximately $3.0 million. As a result of the Battery Point acquisition, the Company’s 640,000 shares of Battery Point Series A-3 Preferred Units were eliminated in consolidation.
Prior to the acquisition date, the Company accounted for its investment in the Battery Point A-3 Preferred Units as an equity-method investment. The acquisition-date carrying value of the previous equity interest was $14.0 million and is included in the measurement of the consideration transferred. The Company recognized a gain of $2.0 million as a result of remeasuring its prior equity interest in the Battery Point A-3 Preferred Units held before the acquisition. The gain is included in the line item “Gain from remeasurement of prior equity interest” in the consolidated statement of operations.

incurred.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2020
(unaudited)
Pacific Oak Opportunity Zone Fund I
During the year ended December 31, 2019,As of September 30, 2021, the Company acquired 91owned 124 Class A Units for $20.6 million in the Pacific Oak Opportunity Zone Fund I, LLC (“Pacific Oak Opportunity Zone Fund I”). Pacific Oak Opportunity Zone Fund I is sponsored by Pacific Oak Holding., which are included in investments in unconsolidated entities on the consolidated balance sheets. The Advisor is entitled to certain fees in connection with the fund. The fundPacific Oak Opportunity Zone Fund I will pay an acquisition fee equal to 1.5% of the purchase price of each asset (including any debt incurred or assumed and significant capital improvement costs budgeted as of the date of acquisition) with a purchase price less than or equal to $25.0 million plus 1.0% of the purchase price in excess of $25.0 million; a quarterly asset management fee equal to 0.25% of the total purchase price of all assets (including any debt incurred or assumed and significant capital improvement costs budgeted as of the date of acquisition) as of the end of the applicable quarter; and a financing fee equal to 0.5% of the original principal amount of any indebtedness they incur (reduced by any financing fee previously paid with respect to indebtedness being refinanced). In the case of investments made through joint ventures, the fees above will be determined based on the Company’s proportionate share of the investment. Pacific OakThe Advisor is also entitled to certain distributions paid by the Pacific Oak Opportunity Zone Fund I after the Class A Members have received their preferred return. These fees and distributions have been waived for the Company’s $20.6 million investment. In addition, a side letter agreementagreements between the Advisor and Pacific Oak Opportunity Zone Fund I waswere executed on February 28, 2020 and stipulatesstipulate that any asset management fees allocable to the Company and waived by the AdvisorPacific Oak Capital Advisors for Pacific Oak Opportunity Zone Fund I and shall bewill distributed to the Company. During the three and nine months ended September 30, 2020,2021, the Company recorded $0.2 million and $0.5 million, respectively, of waived asset management fees recorded as equity in income of unconsolidated entities, of which $0.1$0.7 million was a receivable as of September 30, 2020.2021.
PORT II
During the nine months endedAs of September 30, 2020,2021, the Company has contributed $5.0$5.5 million in PORT II OP, LLC (“PORT II OP”), a wholly owned subsidiary of Pacific Oak Residential Trust II, Inc. ("PORT II"). On August 31, 2020, PORT II entered into an advisory agreement (as subsequently amended and restated on October 9, 2020, “PORT II Advisory Agreement”) with Pacific Oak Residential Advisors, LLC (“PORA”), an affiliate of the Advisor. Pursuant to the PORT II Advisory Agreement, PORT II has engaged PORA to act as its external advisor with respect to PORT II’s operations and assets. Because the Company has separately engaged the Advisor to manage its operations and assets, including its interests in PORT II, on November 12, 2020, the Company and the Advisor agreed to amend their advisory agreement to provide that PORT II’s operations and assets will be managed by PORA and not by the Advisor. In addition, the amendment provides that the Advisor will rebate or offset its fees under its advisory agreement with the Company to the extent of the Company’s indirect economic interest in fees paid by PORT II to PORA (which will be based on the Company’s indirect ownership of PORT II OP, which is the operating partnership of PORT II and the entity ultimately responsible for PORT II’s administrative expenses).
On August 31, 2020, PORT II entered into a property management agreement with DMH Realty, LLC (“DMH”), an affiliate of POCAthe Advisor and PORA. Pursuant to the property management agreement, PORT II will pay to DMH a base fee equal to the following: (a) for all rent collections up to $50 million per year, 8%; (b) for all rent collections in excess of $50 million per year, but less than or equal to $75 million per year, 7%; and (c) for all rent collections in excess of $75 million per year, 6%. PORT II will also pay DMH market-based leasing fees that will depend on the type of tenant, shared fees equal to 100% of any application fees collected and 50% of any insufficient funds fees, late fees and certain other fees collected. DMH may also perform additional services at rates that would be payable to unrelated parties.
PORT II is a newly-organized Maryland corporation formed and sponsored by the Advisor to acquire, own and operate single family homes as rental properties as well as to acquire and own other interests, including mortgages on or securities related to single family homes. The Company has contributed $5 million in capital to PORT II OP. The Company made its investment through PORT OP, of which the Company owns 96.1% of the equity as of November 13, 2020.


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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20202021
(unaudited)
PORT II is a Maryland corporation formed and sponsored by the Advisor to acquire, own and operate single-family homes as rental properties as well as to acquire and own other interests, including mortgages on or securities related to single-family homes.
Subordinated Performance Fee Due Upon Termination to KBS Capital Advisors
The Company and KBS Capital Advisors agreed to terminate their advisory agreement effective October 31, 2019. In connection with that agreement, the Company agreed to pay KBS Capital Advisors a subordinated performance fee due upon termination in the form of Restricted Stock, to be paid to KBS Capital Advisors upon the filing of its Annual Report on Form 10-K for the year ended December 31, 2019. At that time, GKP Holding LLC, a Delaware limited liability company (“GKP”), was a manager of KBS Capital Advisors and of KBS Holdings LLC (“KBS Holdings”), which wholly owns KBS Capital Advisors. At that time, GKP owned 1/3 of KBS Holdings. Keith D. Hall, the Company’s Chief Executive Officer and a director, and Peter McMillan III, the Company’s President and Chairman of the Board, are the managers of GKP and each own 50% of GKP. The number of shares of Restricted Stock to be awarded has beenwas set at 3,411,737 shares and was issued on March 27, 2020. This termination payout value to KBS Capital Advisors (the “KBS Termination Fee Value”) was determined based on the Company’s performance from inception through September 30, 2018. In other words, it was based on the Company’s participation fee potential liability to KBS Capital Advisors calculated with respect to the November 12, 2018 estimated value per share. As a result, when the Company hired the Advisor as the Company’s new advisor on November 1, 2019, the Company agreed to a participation fee that was based on the Company’s performance from September 30, 2018. The Restricted Stock vests on November
On September 1, 2021. Within 60 days from vesting2021, GKP ceased to be a manager of the Restricted Stock, the Company will redeem 50% of the Restricted Stock, with the amount of the cash payment per share determined based on the then most recent net asset value of the shares (which shall not be more than six months old). The remaining vested Restricted Stock (the “Remaining Shares”) shall not be eligible for redemption under the Company’s share redemption program unless the Company has satisfied all outstanding redemption requests from other stockholders, provided that (a) this restriction may be waived in certain situations, such as upon a change of control of the Company and (b) notwithstanding the foregoing, within 60 days after November 1, 2024, the Company shall be required to redeem any Remaining Shares, separate and outside of any general stockholder share redemption program, at the then most recent net asset value per share (which shall not be more than six months old), provided that such outstanding shares are owned or controlled by Charles J. Schreiber, Jr. or the estate of Peter M. Bren, and provided further that pursuant to this clause (b) the Company will only be required to redeem that number Remaining Shares which, when added to any previously redeemed Remaining Shares owned or controlled by Charles J. Schreiber, Jr. or the estate of Peter M. Bren, does not exceed two-thirds of the total number of Remaining Shares.
The Company also agreed with KBS Capital Advisors and the Advisor that with respectKBS Holdings and ceased to any fiscal quarter that any matter relatedown an interest in KBS Holdings. Also on September 1, 2021, GKP and KBS Capital Advisors entered into Amendment No. 1 (the “Amendment”) to the awardRestricted Stock Agreement and the Unvested Share Transfer Agreement (the “Unvested Share Agreement”). Pursuant to the Amendment, on September 1, 2021, the Company repurchased 584,267 of the shares of Restricted Stock resultsfrom KBS Capital Advisors for consideration of $5,655,705 in cash, or $9.68 per share. Pursuant to the terms of the Amendment and the Unvested Share Agreement, on September 1, 2021, KBS Capital Advisors transferred 2,254,289 of the shares of Restricted Stock to GKP (the “GKP Restricted Shares”). KBS Capital Advisors transferred the GKP Restricted Shares as partial consideration for and to effectuate the conclusion of the acquisition of GKP’s 1/3 ownership interest in KBS Holdings by its other owners. On September 1, 2021, upon the transfer of GKP’s 1/3 ownership interest in KBS Holdings, GKP ceased to be a company expense that falls withinmanager of KBS Capital Advisors and KBS Holdings and ceased to have an ownership interest in KBS Holdings. Under the definitionAmendment, the GKP Restricted Shares are nonvested and forfeitable until the earliest of: (i) July 1, 2026 or (ii) immediately before and contingent upon the occurrence of Total Operating Expensesa Change in Control (as defined in the Company’s charter), if Total Operating Expenses forRestricted Stock Agreement) of the four consecutive fiscal quarters then ended exceedCompany. Notwithstanding the 2%/25% Guidelines (as definedforegoing, and at the option of either Keith Hall’s estate or Peter McMillan’s estate, in the Company’s charter), thenevent of the death of either Keith Hall or Peter McMillan, such event can trigger the vesting of that number of GKP Restricted Shares corresponding to 100% of the deceased party’s proportional economic interest in GKP Restricted Shares. In addition, unvested GKP Restricted Shares will be forfeited in certain instances if GKP fails to comply with certain requirements set forth in the Amendment, which forfeiture may be waived by the Company’s conflicts committee will determine an Excess Amount (as definedConflict Committee in the Company’s charter) is justified, based on unusual and non-recurring factors that it deems sufficient, in an amount sufficient (a) to allow the portion of Total Operating Expensescertain cases. Non-vested GKP Restricted Shares are not eligible for the four consecutive fiscal quarters then ended comprised of the Restricted Stock expenses to be paid or incurredredemption by the Company without reimbursementunder any circumstances unless approved by the Advisor (as defined in the Company’s charter) and (b) to allow any other portionboard of Total Operating Expenses for the four consecutive fiscal quarters then ended to be paid or incurred by the Company without reimbursement by the Advisor, to the extent such portion alone (i.e., that portion of Total Operating Expenses exclusive of the Restricted Stock expenses) would not have exceeded the 2%/25% Guidelines.


directors.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20202021
(unaudited)
After the vesting of the GKP Restricted Shares, and only upon receiving a request from GKP and the consent of the Company’s Conflicts Committee, within 60 days from the request, the Company will redeem 50% of the vested GKP Restricted Shares, with the amount of the cash payment per share determined based on the then most recent board-approved net asset value per share (which must not be more than six months old). Any vested GKP Restricted Shares that are not required to be redeemed in accordance with the preceding sentence are referred to herein as the “Retained Vested GKP Shares.” The Retained Vested GKP Shares are not eligible for redemption under the Company’s share redemption program unless the Company has satisfied all outstanding redemption requests from other stockholders, provided that this restriction may be waived in certain situations, such as upon a change of control of the Company, as determined by the Conflicts Committee of the Board. The Amendment also provides that an additional 59,714 Restricted Shares held by KBS Capital Advisors and 513,467 Restricted Shares that were transferred to affiliates of KBS Capital Advisors under the Amendment were immediately vested and fully released from all restrictions and requirements of the Restricted Stock Agreement (the “KBS Vested Shares”), provided that the KBS Vested Shares are not eligible for redemption under the Company’s share redemption program unless the Company has satisfied all outstanding redemption requests from other stockholders, provided further that (i) this restriction may be waived in certain situations, such as upon a change of control of the Company, as determined by the Conflicts Committee and (ii) notwithstanding the foregoing, within 60 days after November 1, 2024, the Company will be required to redeem any remaining outstanding KBS Vested Shares, separate and outside of any general stockholder share redemption program, at the then most recent board-approved net asset value per share (which must not be more than six months old).

11. INVESTMENT IN UNCONSOLIDATED JOINT VENTURESENTITIES
As of September 30, 20202021 and December 31, 2019,2020, the Company’s investments in unconsolidated joint venturesentities were composed of the following (dollars in thousands):
Number of Properties as of September 30, 2020Investment Balance at
Joint VentureLocationOwnership %September 30, 2020December 31, 2019
NIP Joint Venture00$$1,225 
110 William Joint Venture1New York, New York60.0%
353 Sacramento Joint Venture1San Francisco, California55.0%43,790 42,214 
Battery Point Series A-3 Preferred UnitsN/AN/AN/A13,991 
Pacific Oak Opportunity Zone Fund I3VariousN/A20,891 20,846 
PORT II OP LP7Southaven, MississippiN/A5,005 
$69,686 $78,276 
Investment in National Industrial Portfolio Joint Venture
On May 18, 2012, the Company, through an indirect wholly owned subsidiary, entered into a joint venture (the “NIP Joint Venture”) with OCM NIP JV Holdings, L.P. and HC KBS NIP JV, LLC (“HC-KBS”). The NIP Joint Venture has invested in a portfolio of industrial properties. The Company made an initial capital contribution of $8.0 million, which represents less than a 5.0% ownership interest in the NIP Joint Venture as of September 30, 2020.
Prior to January 17, 2018, KBS REIT I, an affiliate of KBS Capital Advisors, was a member of HC-KBS and had a participation interest in certain future potential profits generated by the NIP Joint Venture.  However, KBS REIT I did not have any equity interest in the NIP Joint Venture. On January 17, 2018, KBS REIT I assigned its participation interest in the NIP Joint Venture to one of the other joint venture partners in the NIP Joint Venture. None of the other joint venture partners are affiliated with the Company or the Advisor.
During the nine months ended September 30, 2020, the NIP Joint Venture sold the remaining properties. During the nine months ended September 30, 2020, the Company received a distribution of $1.3 million related to its investment in the NIP Joint Venture and the Company recognized $0.1 million as income distribution and $1.2 million as a return of capital from the NIP Joint Venture. During the nine months ended September 30, 2019, the Company received a distribution of $0.3 million related to its investment in the NIP Joint Venture, which is reflected as a return of capital from the NIP Joint Venture.
Number of Properties as of September 30, 2021Investment Balance at
Joint VentureLocationOwnership %September 30, 2021December 31, 2020
110 William Joint Venture1New York, New York60.0%$— — 
353 Sacramento Joint Venture1San Francisco, California55.0%50,769 49,665 
Pacific Oak Opportunity Zone Fund I3VariousN/A27,638 24,996 
PORT II OP LP117Various89.7%5,447 5,005 
$83,854 $79,666 
Investment in 110 William Joint Venture
On December 23, 2013, the Company, through an indirect wholly owned subsidiary, entered into an agreement with SREF III 110 William JV, LLC (the “110 William JV Partner”) to form a joint venture (the “110 William Joint Venture”). On May 2, 2014, the 110 William Joint Venture acquired an office property containing 928,157 rentable square feet located on approximately 0.8 acres of land in New York, New York (“110 William Street”). Each of the Company and the 110 William JV Partner hold a 60% and 40% ownership interest in the 110 William Joint Venture, respectively.
The Company exercises significant influence over the operations, financial policies and decision making with respect to the 110 William Joint Venture but significant decisions require approval from both members. Accordingly, the Company has accounted for its investment in the 110 William Joint Venture under the equity method of accounting. Income, losses, contributions and distributions are generally allocated based on the members’ respective equity interests.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20202021
(unaudited)
As of September 30, 20202021 and December 31, 2019,2020, the book value of the Company’s investment in the 110 William Joint Venture was $0. During the ninethree months ended September 30, 2019, the 110 William Joint Venture made a $7.8 million distribution to the Company and a $5.2 million distribution to the 110 William JV Partner funded with proceeds from the 110 William refinancing (discussed below). The distribution exceeded the book value of the Company’s investment in the 110 William Joint Venture, and the Company recorded the $7.8 million distribution as a gain included in equity in income of unconsolidated joint ventures during the nine months ended September 30, 2019. This gain was recorded because the Company determined that the distribution is not refundable and it does not have an implicit or explicit commitment to fund the 110 William Joint Venture. During the nine months ended September 30,March 31, 2019, the Company suspended the equity method of accounting and the Company will not record the Company's share of losses and will not record the Company's share of any subsequent income for the 110 William Joint Venture until the Company’s share of net income exceeds the gain recorded and the Company’s share of the net losses not recognized during the period the equity method was suspended. During both of the three and nine months ended September 30, 2021 and September 30, 2020, the Company did 0tnot record equity in income from the 110 William Joint venture.
Summarized financial information for the 110 William Joint Venture follows (in thousands):
September 30, 2021December 31, 2020
Assets:
       Real estate assets, net of accumulated depreciation and amortization$232,201 $246,166 
       Other assets34,200 44,004 
       Total assets$266,401 $290,170 
Liabilities and equity:
       Notes payable, net$318,280 $316,421 
       Other liabilities3,003 5,532 
       Partners’ deficit(54,882)(31,783)
Total liabilities and equity$266,401 $290,170 
September 30, 2020December 31, 2019
Assets:
       Real estate assets, net of accumulated depreciation and amortization$247,304 $242,430 
       Other assets43,178 35,747 
       Total assets$290,482 $278,177 
Liabilities and equity:
       Notes payable, net$312,664 $292,221 
       Other liabilities8,257 10,664 
       Partners’ deficit(30,439)(24,708)
Total liabilities and equity$290,482 $278,177 

Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
20202019202020192021202020212020
RevenuesRevenues$10,005 $9,274 $26,604 $26,975 Revenues$5,729 $10,005 $18,721 $26,604 
Expenses:Expenses:Expenses:
Operating, maintenance, and management Operating, maintenance, and management2,096 2,367 5,994 6,818  Operating, maintenance, and management2,359 2,096 6,212 5,994 
Real estate taxes and insurance Real estate taxes and insurance1,935 1,818 5,580 5,248  Real estate taxes and insurance1,698 1,935 5,588 5,580 
Depreciation and amortization Depreciation and amortization3,139 2,946 8,721 8,449  Depreciation and amortization2,962 3,139 19,071 8,721 
Interest expense Interest expense4,125 4,084 12,093 12,816  Interest expense3,548 4,125 10,986 12,093 
Total expensesTotal expenses11,295 11,215 32,388 33,331 Total expenses10,567 11,295 41,857 32,388 
Total other incomeTotal other income12 34 50 105 Total other income11 12 35 50 
Net lossNet loss$(1,278)$(1,907)$(5,734)$(6,251)Net loss$(4,827)$(1,278)$(23,101)$(5,734)
Company’s share of net loss (1)
Company’s share of net loss (1)
$(767)$(1,144)$(3,440)$(3,751)
Company’s share of net loss (1)
$(2,896)$(767)$(13,861)$(3,440)
_____________________
(1) DuringThe Company suspended the equity method of accounting and did not record the Company's share of losses for both of the three and nine months ended September 30, 2019, the Company recorded $02021 and $0.3 million of net losses in equity in income of unconsolidated entities and suspended the recording of the Company’s remaining share of net losses. During the three and nine months ended September 30, 2020, the Company did 0t record equity in income of unconsolidated entities.2020.

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2020
(unaudited)
Investment in 353 Sacramento Joint Venture
On July 6, 2017, the Company, through an indirect wholly owned subsidiary, entered into an agreement with the Migdal Members to form a joint venture (the “353 Sacramento Joint Venture”). On July 6, 2017, the Company sold a 45% equity interest in an entity that owns an office building containing 284,751 rentable square feet located on approximately 0.35 acres of land in San Francisco, California (“353 Sacramento”) to the Migdal Members. The sale resulted in 353 Sacramento being owned by the 353 Sacramento Joint Venture, in which the Company indirectly owns 55% of the equity interests and the Migdal Members indirectly own 45% in the aggregate of the equity interests. During the nine months ended September 30, 2021, the Company contributed an additional $1.1 million into the 353 Sacramento Joint Venture.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
The Company exercises significant influence over the operations, financial policies and decision making with respect to the 353 Sacramento Joint Venture but significant decisions require approval from both members. Accordingly, the Company has accounted for its investment in the 353 Sacramento Joint Venture under the equity method of accounting. Income, losses, contributions and distributions are generally allocated based on the members’ respective equity interests.
Summarized financial information for the 353 Sacramento Joint Venture follows (in thousands):
September 30, 2021December 31, 2020
Assets:
       Real estate assets, net of accumulated depreciation and amortization$178,874 $182,318 
       Other assets27,539 19,810 
       Total assets$206,413 $202,128 
Liabilities and equity:
       Notes payable, net$110,000 $109,783 
       Other liabilities6,335 7,639 
       Partners’ capital90,078 84,706 
Total liabilities and equity$206,413 $202,128 
September 30, 2020December 31, 2019
Assets:
       Real estate assets, net of accumulated depreciation and amortization$183,176 $180,592 
       Other assets18,434 21,822 
       Total assets$201,610 $202,414 
Liabilities and equity:
       Notes payable, net$115,500 $115,280 
       Other liabilities7,507 11,193 
       Partners’ capital78,603 75,941 
Total liabilities and equity$201,610 $202,414 
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Revenues$3,373 $5,520 $13,252 $15,771 
Expenses:
       Operating, maintenance, and management862 932 2,490 2,450 
       Real estate taxes and insurance848 755 2,768 2,235 
       Depreciation and amortization1,850 1,894 5,574 5,135 
       Interest expense960 948 2,700 3,290 
Total expenses4,520 4,529 13,532 13,110 
Net income$(1,147)$991 (280)$2,661 
Company’s equity in (loss) income of unconsolidated joint venture$(592)$583 $(40)$1,576 

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Revenues$5,520 $3,933 $15,771 $12,278 
Expenses:
       Operating, maintenance, and management932 923 2,450 2,693 
       Real estate taxes and insurance755 700 2,235 2,095 
       Depreciation and amortization1,894 1,718 5,135 4,849 
       Interest expense948 1,420 3,290 4,286 
Total expenses4,529 4,761 13,110 13,923 
Net income (loss)$991 $(828)$2,661 $(1,645)
Company’s equity in income (loss) of unconsolidated joint venture$583 $(419)$1,576 $(798)
Investment in Pacific Oak Opportunity Zone Fund I

During the year ended December 31, 2019, the Company acquired 91 Class A Units for $20.6 million in Pacific Oak Opportunity Zone Fund I. Additionally, with the POSOR II Merger, the Company acquired an additional 13 Class A Units with a fair value of $3.0 million and also acquired 7 Class A Units for $1.5 million during the year ended December 31, 2020. During the nine months ended September 30, 2021, the Company acquired additional 13 Class A Units for $3.1 million.

As of September 30, 2021, the book value of the Company’s investment in Pacific Oak Opportunity Zone Fund I was $27.6 million, which includes $0.2 million of acquisition fees. As of September 30, 2021, Pacific Oak Opportunity Zone Fund I consolidated 3 joint ventures with real estate under development. As of September 30, 2021, the Company has concluded that Pacific Oak Opportunity Zone Fund I qualifies as a Variable Interest Entity (“VIE”) because there is insufficient equity at risk to finance the entity’s activities and the entity is structured with non-substantive voting rights. The Company concluded it is not the primary beneficiary of this VIE since it does not have the power to direct the activities that most significantly impact the entity’s economic performance and will account for its investment under the equity method of accounting.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20202021
(unaudited)
Battery Point Series A-3 Preferred Units
Beginning October 28, 2016, the Company invested in Battery Point Series B Preferred Units and on March 20, 2019, the Company, through an indirect wholly owned subsidiary, entered into a redemption agreement for the Battery Point Series B Preferred Units. The redemption agreement resulted in the redemption of the Company’s entire investment of 13,000 Series B Preferred Units with a per-unit price of $1,000 with an aggregate outstanding principal balance of $13.0 million. The Company received a principal paydown of $7.7 million plus accrued interest and an exit fee.  In addition, the Company received 210,000 shares of Battery Point Series A-3 Preferred Units with a per-unit price of $25 with an aggregate face amount of $5.3 million. The Battery Point Series A-3 Preferred Units are entitled to a monthly dividend based on an annual rate of 7.5%. The annual dividend rate increases to 10% for the Battery Point Series A-3 Preferred Units not redeemed by February 28, 2020 and to 11% for the Battery Point Series A-3 Preferred Units not redeemed by February 28, 2021. On each monthly dividend payment date, Battery Point has the obligation to use 20% of the net proceeds of any and all future equity capital raising to redeem the Series A-3 Preferred Units. The Battery Point Series A-3 Preferred Units are redeemable at any time by Battery Point and holders of Series A-3 Preferred Shares may elect to redeem their units beginning on February 28, 2021, subject to Battery Point’s board of directors’ determination that the company has sufficient cash.
During the year ended December 31, 2019, the Company purchased additional 430,000 shares of Battery Point Series A-3 Preferred Units for an aggregate amount of $10.8 million.
On July 1, 2020, the Company acquired, through its subsidiaries, Battery Point. As a result of the Battery Point acquisition, the Company’s 640,000 shares of Battery Point Series A-3 Preferred Units were eliminated in consolidation. During thethree and nine months ended September 30, 2020 and 2019,2021, the Company received distributions of $0.9recognized $0.1 million and $0.2$0.5 million, respectively, which were recognized as dividend income from real estate equity securities.
Priorof losses related to the acquisition of Battery Point, the Company accounted for its investment in the Battery Point A-3 Preferred Units as an equity-methodthis investment. The acquisition-dateCompany’s maximum exposure to loss as a result of its involvement with this VIE is limited to the carrying value of the previous equity interest was $14.0 million and is included in the measurement of the consideration transferred. The Company recognized a gain of $2.0 million as a result of remeasuring its prior equity interest in the Battery Point A-3 Preferred Units held before the acquisition. The gain is included in the line item “Gain from remeasurement of prior equity interest” in the consolidated statement of operations.
Investment in Pacific Oak Opportunity Zone Fund I
During the year ended December 31, 2019, the Company acquired 91 Class A Units for $20.6 million in Pacific Oak Opportunity Zone Fund I. As of December 31, 2019, the book value of the Company’s investment in Pacific Oak Opportunity Zone Fund I was $20.8which totaled $27.6 million which includes $0.2 millionas of acquisition fees.September 30, 2021.
PORT II
PORT II is a Maryland corporation formed and sponsored by the Advisor to acquire, own and operate single-family homes as rental properties as well as to acquire and own other interests, including mortgages on or securities related to single-family homes. As of September 30, 2020, Pacific Oak Opportunity Zone Fund I consolidated 3 joint ventures2021, the Company owns 600 shares of common stock of PORT II, of which the Company exercises significant influence over the operations, financial policies and decision making with real estate under development.respect to PORT II, but does not control. In addition, as of September 30, 2021, the Company had contributed $5.5 million in capital to PORT II OP, of which the Company owns 89.7%. The remaining ownership percentage is owned by PORT II. As of September 30, 2020,2021, the Company has concluded that Pacific Oak Opportunity Zone Fund IPORT II OP qualifies as a VIE because there is insufficient equity at risk to finance the entity’s activities and the entity is structured with non-substantive voting rights. The Company concluded it is not the primary beneficiary of this VIE since it does not have the power to direct the activities that most significantly impact the entity’s economic performance and will account for its investment under the equity method of accounting.
The Company’s maximum exposure to loss as a result of its involvement with this VIE is limited to the carrying value of the investment in Pacific Oak Opportunity Zone Fund I which totaled $20.9 million as of September 30, 2020. During both of the three and nine months ended September 30, 2020,2021, the Company recorded $0.6recognized $47,000 and $0.1 million of net loss in equity in income of unconsolidated entities.losses related to this investment, respectively.

12. SUPPLEMENTAL CASH FLOW AND SIGNIFICANT NONCASH TRANSACTION DISCLOSURES
Supplemental cash flow and significant noncash transaction disclosures were as follows (in thousands):
Nine Months Ended September 30,
20212020
Supplemental Disclosure of Cash Flow Information:
Interest paid, net of capitalized interest of $1,579 and $2,368 for the nine months ended September 30, 2021 and 2020, respectively$29,220 $18,945 
Supplemental Disclosure of Significant Noncash Transactions:
Accrued improvements to real estate1,721 2,393 
Redeemable common stock payable3,385 262 
Distributions paid to common stockholders through common stock issuances pursuant to the dividend reinvestment plan— 262 
Accrued preferred dividends225 226 
PPP notes forgiveness1,500 — 
Assets and liabilities assumed in connection with Battery Point acquisition:
Real estate— 56,148 
Notes payable— 36,003 
Other assets— 21 
Other liabilities— 355 
Redeemable non-controlling interest— 3,024 
Series A-3 preferred units payable— 16,000 


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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
13. REPORTING SEGMENTS
The Company recognizes 3 reporting segments for the three and nine months ended September 30, 2021 and consists of strategic opportunistic properties, single-family homes and hotels. All corporate related costs are included in the strategic opportunistic properties segment to align with how financial information is presented to the chief operating decision maker. The Company recognized two reporting segments for the three and nine months ended September 30, 2020. The selected financial information for reporting segments for the three and nine months ended September 30, 2021 and 2020 are as follows (in thousands):
Three Months Ended September 30, 2021
Strategic Opportunistic PropertiesSingle-Family HomesHotelsTotal
Total revenues$28,050 $5,566 $12,153 $45,769 
Total expenses(52,891)(6,398)(8,948)(68,237)
Total other (loss) income(4,435)81 1,276 (3,078)
Net (loss) income$(29,276)$(751)$4,481 $(25,546)
Nine Months Ended September 30, 2021
Strategic Opportunistic PropertiesSingle-Family HomesHotelsTotal
Total revenues$88,187 $16,436 $24,578 $129,201 
Total expenses(128,418)(19,581)(22,924)(170,923)
Total other income42,527 159 1,289 43,975 
Net income (loss)$2,296 $(2,986)$2,943 $2,253 
Three Months Ended September 30, 2020
Strategic Opportunistic PropertiesSingle-Family HomesHotelsTotal
Total revenues$22,548 $5,197 $— $27,745 
Total expenses(26,285)(5,969)— (32,254)
Total other (loss) income(2,863)— (2,859)
Net loss$(6,600)$(768)$— $(7,368)
Nine Months Ended September 30, 2020
Strategic Opportunistic PropertiesSingle-Family HomesHotelsTotal
Total revenues$64,752 $11,117 $— $75,869 
Total expenses(66,928)(13,203)— (80,131)
Total other (loss) income(16,939)54 — (16,885)
Net loss$(19,115)$(2,032)$— $(21,147)

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20202021
(unaudited)
12. SUPPLEMENTAL CASH FLOW AND SIGNIFICANT NONCASH TRANSACTION DISCLOSURES
Supplemental cash flowTotal assets and significant noncash transaction disclosures weregoodwill related to the reporting segments as of September 30, 2021 and December 31, 2020 are as follows (in thousands):
September 30, 2021
Strategic Opportunistic PropertiesSingle-Family HomesHotelsTotal
Total assets$1,274,093 $202,349 $152,686 $1,629,128 
Goodwill (1)
9,489 — 4,045 13,534 
Nine Months Ended September 30,
20202019
Supplemental Disclosure of Cash Flow Information:
Interest paid, net of capitalized interest of $2,368 and $2,079 for the nine months ended September 30, 2020 and 2019, respectively$18,945 $21,981 
Supplemental Disclosure of Significant Noncash Transactions:
Accrued improvements to real estate2,393 3,414 
Mortgage loan assumed by buyer in connection with sale of real estate23,663 
Redeemable common stock payable262 3,423 
Distributions paid to common stockholders through common stock issuances pursuant to the dividend reinvestment plan262 835 
Redemption of Series B Preferred Units in exchange for Series A-3 Preferred Units2,992 
Accrued preferred dividends226 
Assets and liabilities assumed in connection with Battery Point acquisition:— 
          Real estate56,148 — 
          Notes payable36,003 — 
          Other assets21 — 
          Other liabilities355 — 
          Redeemable non-controlling interest3,024 — 
          Series A-3 preferred units payable16,000 — 
December 31, 2020
Strategic Opportunistic PropertiesSingle-Family HomesHotelsTotal
Total assets$1,404,509 $182,486 $144,670 $1,731,665 
Goodwill12,297 — 4,045 16,342 
_____________________

(1)
13. REPORTING SEGMENTS
The Company recognizes 2 reporting segments for During the three and nine months ended September 30, 2020 and consists2021, the Company recorded impairment charges on goodwill of strategic opportunistic properties and related investments and single-family homes. Corporate related costs are allocated to each respective segment. The selected financial information for the 2 reporting segments for the three months ended September 30, 2020 is as follows (in thousands):
Three Months Ended September 30, 2020
Strategic Opportunistic PropertiesSingle-Family HomesTotal
Total revenues$22,548 $5,197 $27,745 
Total expenses(26,285)(5,969)(32,254)
Total other (loss) income(2,863)(2,859)
Net loss$(6,600)$(768)$(7,368)

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2020
(unaudited)
Nine Months Ended September 30, 2020
Strategic Opportunistic PropertiesSingle-Family HomesTotal
Total revenues$64,752 $11,117 $75,869 
Total expenses(66,928)(13,203)(80,131)
Total other (loss) income(16,939)54 (16,885)
Net loss$(19,115)$(2,032)$(21,147)

Total assets$2.8 million related to the two reporting segments as of September 30, 2020 and December 31, 2019 are as follows (in thousands):
September 30, 2020
Strategic Opportunistic PropertiesSingle-Family HomesTotal
Total assets$915,931 $187,469 $1,103,400 
December 31, 2019
Strategic Opportunistic PropertiesSingle-Family HomesTotal
Total assets$921,917 $119,325 $1,041,242 
Strategic Opportunistic Properties segment.

14. PORT PREFERRED STOCKMEZZANINE EQUITY
A wholly owned subsidiary of theThe Company PORT, has authorized and issued preferred stock.stock from a subsidiary. The Company has elected to use the measurement method described under ASC 480-10-S99-3A, paragraph 15(b), resulting in the common and preferred stock being classified in mezzanine equity and measured based on the estimated future redemption value as of September 30, 2020.2021.
On November 6, 2019, PORT issued 15,000 shares out of its available 25,000,000 shares of Series A Cumulative Convertible Redeemable Preferred Stock for gross proceeds of $1,000 per share resulting in net proceeds of $15.0 million before issuance costs. The shares provide for an annual dividend of 6% payable quarterly, which increases to 12% if all shares are not redeemed by the Company immediately following the redemption date. However, the 12% dividend rate does not apply until the aggregate number of shares selected for redemption do not constitute 10% or more of all outstanding shares. The shares may be redeemed by the holders beginning on November 4, 2021 for $1,000 per share plus all accrued but unpaid dividends through the redemption date, or after November 4, 2022 for $1,120 per share plus all accrued but unpaid dividends through the redemption date. In addition, after November 4, 2020, the shares are redeemable at the Company’s option, at any time or from time to time, at a redemption price of $1,120 per share plus unpaid accrued dividends. Additionally, if the common shares of PORT are publicly traded, the holder may elect to convert its preferred shares into PORT common shares based on a value of the preferred shares of $1,120 per share plus unpaid accrued dividends, and a conversion price of the common shares as stated in the agreement.
On November 22, 2019, PORT issued 125 shares of its Series B Cumulative Redeemable Preferred Stock for gross proceeds of $1,000 per share resulting in net proceeds of $0.1 million after issuance costs. The shares provide for an annual dividend of 12.5% payable semiannually. The shares may be redeemed by the holders for $1,050 per share until December 31, 2021 and for $1,000 per share thereafter.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
The following is a reconciliation of PORT’s noncontrolling cumulative convertible redeemable preferred stock for the nine months ended September 30, 2021 and 2020 (dollars in thousands):
Series A Preferred StockSeries B Preferred Stock
SharesAmountsSharesAmounts
Balance, December 31, 202015,000 15,134 125 $99 
Dividends Available Upon Redemption— 636 — 
Dividends Paid— (636)— (8)
Balance, September 30, 202115,000 $15,134 125 $99 
Series A Preferred StockSeries B Preferred Stock
SharesAmountsSharesAmounts
Balance, December 31, 201915,000 $14,909 125 $99 
Dividends Available Upon Redemption— 781 — 
Dividends Paid— (556)— (7)
Balance, September 30, 202015,000 $15,134 125 $99 

On July 1, 2020, the Company acquired, through its subsidiaries, Battery Point Trust Inc., a Maryland corporation (“Battery Point”). Battery Point is a real estate investment trust that owned, at the time of acquisition, 559 single-family rental homes throughout the Midwestern and Southeastern United States. All of these assets are held by the Company through its subsidiary, PORT OP.
The Company acquired Battery Point by acquiring all the 1,000,000 outstanding shares of Battery Point common stock from BPT Holdings, LLC (“BPT Holdings”), a partially owned subsidiary of the Advisor. The Advisor is the Company’s external advisor and is owned and controlled by Keith D. Hall, the Company’s Chief Executive Officer and a director, and Peter M. McMillan, the Company’s President and Chairman of the Board. In exchange, BPT Holdings received 510,816 common equity units in PORT OP, approximately 4.5% of the outstanding common equity units, as of July 1, 2020. The value of the interests exchanged was estimated by the participants at approximately $3.0 million. The common equity units issued to BPT Holdings are redeemable after one year at the request of BPT Holdings for all or a portion of the common equity units at a redemption price equal to and in the form of cash based on the unit price of PORT OP. The following table summarizes the redeemable non-controlling interest activity related to the PORT OP equity units held by BPT Holdings for the nine months ended September 30, 2021 (in thousands):
December 31, 2020$2,968 
Net loss attributable to redeemable noncontrolling interest(113)
September 30, 2021$2,855 

15. RESTRICTED STOCK
On March 27, 2020, the Company issued 3,411,737 restricted shares to KBS Capital Advisors in connection with the subordinated performance fee due upon termination (the “Restricted Stock”), which were expected to vest on November 1, 2021. These shares are subject to non-compete provisions, which are treated as clawback contingent features and will be accounted for if and when the Restricted Stock is required to be returned.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20202021
(unaudited)
On September 1, 2021, the Company, KBS Capital Advisors, and GKP entered into amendment no. 1 to the Restricted Stock Agreement (the "Amendment"). Pursuant to the Amendment, 1,157,448 shares of Restricted Stock ("Released Shares") were immediately vested and fully released from all restrictions and requirements of the Restricted Stock Agreement. Of the Released Shares, the Company repurchased 584,267 shares from KBS Capital Advisors for consideration of $5,655,705 in cash, or $9.68 per share. After a one year period, 513,467 of the Released Shares are eligible for redemption under the Company's share redemption program. Within a 60 day period following November 1, 2024, 59,714 of the Released Shares are to be redeemed by the Company, though prior to this date, the shares are eligible for redemption under the Company's share redemption program if all outstanding redemption requests from other stockholders have been satisfied.
Additionally, KBS Capital Advisors transferred 2,254,289 shares of Restricted Stock to GKP ("GKP Restricted Shares"). The following isGKP Restricted Shares vest on the earlier of the following: (i) July 1, 2026 or (ii) a reconciliationchange of PORT’s noncontrolling cumulative convertible redeemable preferredcontrol. Upon vesting, 50% of the GKP Restricted Shares are eligible for redemption based on the most recent board approved NAV per share, but requires approval of the Company's conflicts committee of the board of directors. The remaining 50% of the GKP Restricted Shares are eligible for redemption under the Company's share redemption program if all outstanding redemption requests from other stockholders have been satisfied.
The 59,714 of the Released Shares are classified as a liability instrument, accounted for as restricted stock forpayable on the accompanying consolidated balance sheets, and are recorded at the fair value of the shares at each reporting period until settled. The remaining Released Shares and GKP Restricted Shares are classified as an equity instrument and recorded in additional paid-in-capital on the accompanying balance sheet.
For the three and nine months ended September 30, 2020:
Series A Preferred StockSeries B Preferred Stock
SharesAmountsSharesAmounts
Balance, December 31, 201915,000 $14,909 125 $99 
Dividends Available Upon Redemption— 781 — 
Dividends Paid— (556)— (7)
Balance, September 30, 202015,000 $15,134 125 $99 
2021, the Company recorded $1.5 million subordinated performance fee due upon termination to affiliate expense to record the Restricted Stock at fair value. The fair value of the Restricted Stock was estimated based on the Company's NAV, adjusted for a lack of marketability discount. As of September 1, 2021, the Company measured the Restricted Stock at its fair value of $9.61 per share.

15.16. COMMITMENTS AND CONTINGENCIES
The Company owns 2 hotels, Springmaid Beach Resort and Q&C Hotel. The operation for both hotels are externally managed by third-party hotel operators, in which the Company have contractual obligations under the management agreements.
Management Agreement
Springmaid Beach Resort
The consolidated joint venture entity through which the Company leases the operations for Springmaid Beach Resort has entered into a management agreement with Doubletree Management LLC, an independent third-party hotel operator (the “Operator”) pursuant to which the Operator will manage and operate the Springmaid Beach Resort. The hotel was branded a DoubleTree by Hilton in September 2016 (the “Brand Commencement Date”).
The management agreement expires on December 31 of the 20th full year following the Brand Commencement Date. Upon mutual agreement, the parties may extend the term of the agreement for two successive periods of five years each. If an event of default occurs and continues beyond any applicable notice and cure periods set forth in the management agreement, the non-defaulting party generally has, among other remedies, the option of terminating the management agreement upon written notice to the defaulting party with no termination fee payable to Doubletree. In addition, the Company has the right to terminate the management agreement without the payment of a termination fee if Doubletree fails to achieve certain criteria relating to the performance of the hotel for any two consecutive years following the Brand Commencement Date. Under certain circumstances following a casualty or condemnation event, either party may terminate the management agreement provided Doubletree receives a termination fee an amount equal to two years of the base fee. The Company is permitted to terminate the management agreement upon a sale, lease or other transfer of the Springmaid Beach Resort any time so long as the buyer is approved for, and enters into a DoubleTree by Hilton franchise agreement for the balance of the agreement’s term. Finally, the Company is restricted in its ability to assign the management agreement upon a sale, lease or other transfer the Springmaid Beach Resort unless the transferee is approved by Doubletree to assume the management agreement.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
Pursuant to the management agreement the Operator receives the following fees:
a base fee, which is a percentage of total operating revenue that starts at 2.5% and increases to 2.75% in the second year following the Brand Commencement Date and further increases in the third year following the Brand Commencement Date and thereafter to 3.0%;
a campground area management fee, which is 2% of any campground revenue;
an incentive fee, which is 15% of operating cash flow (after deduction for capital renewals reserve and the joint venture owner’s priority, which is 12% of the joint venture owner’s total investment);
an additional services fee in the amount reasonably determined by the Operator from time to time; and
a brand services fee in the amount of 4% of total rooms revenue, and an other brand services fee in an amount determined by the Operator from time to time.
The management agreement contains specific standards for the operation and maintenance of the hotel, which allows the Operator to maintain uniformity in the system created by the Operator’s franchise. Such standards generally regulate the appearance of the hotel, quality and type of goods and services offered, signage and protection of trademarks. Compliance with the management agreement will require the Company to make significant expenditures for capital improvements.     
During the three and nine months ended September 30, 2021, the Company incurred $0.3 million and $0.6 million, respectively, of fees related to the management agreement, which are included in hotel expenses on the accompanying consolidated statements of operations.
Q&C Hotel
A wholly owned subsidiary of the joint venture through which the Company leases the operations of the Q&C Hotel (“Q&C Hotel Operations”) has entered into a management agreement with Encore Hospitality, LLC (“Encore Hospitality”), an affiliate of the joint venture partner, pursuant to which Encore Hospitality will manage and operate the Q&C Hotel. The management agreement expires on December 17, 2035. Subject to certain conditions, Encore Hospitality may extend the term of the agreement for a period of five years. Pursuant to the management agreement Encore Hospitality will receive a base fee, which is 4.0% of gross revenue (as defined in the management agreement). During both of the three and nine months ended September 30, 2021, the Company incurred $0.1 million of fees related to the management agreement, which are included in hotel expenses on the accompanying consolidated statements of operations.
Q&C Hotel Operations has also entered into a franchise agreement with Marriott International (“Marriott”) pursuant to which Marriott has granted Q&C Hotel Operations a limited, non-exclusive license to establish and operate the Q&C Hotel using certain of Marriott’s proprietary marks and systems and the hotel was branded as a Marriott Autograph Collection hotel on May 25, 2016. The franchise agreement will expire on May 25, 2041. Pursuant to the franchise agreement, Q&C Hotel Operations pays Marriott a monthly franchise fee equal to a percent of gross room sales on a sliding scale that is initially 2% and increases to 5% on May 25, 2019 and a monthly marketing fund contribution fee equal to 1.5% of the Q&C Hotel’s gross room sales. In addition, the franchise agreement requires the maintenance of a reserve account to fund all renovations at the hotel based on a percentage of gross revenues which starts at 2% of gross revenues and increases to 5% of gross revenues on May 25, 2019. Q&C Hotel Operations is also responsible for the payment of certain other fees, charges and costs as set forth in the agreement. During the three and nine months ended September 30, 2021, the Company incurred $0.1 million and $0.3 million, respectively, of fees related to the Marriott franchise agreement, which are included in hotel expenses on the accompanying consolidated statement of operations.
In addition, in connection with the execution of the franchise agreement, SOR US Properties II is providing an unconditional guarantee that all Q&C Hotel Operations’ obligations under the franchise agreement will be punctually paid and performed. Finally, certain transfers of the Q&C Hotel or an ownership interest therein are subject to a notice and consent requirement, and the franchise agreement further provides Marriott with a right of first refusal with respect to a sale of the hotel to a competitor of Marriott.

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
Lease Obligations
As of September 30, 2021, the Company’s lease and rights to a leasehold interest with respect to 210 West 31st Street, an office/retail building in New York, NY, which was accounted for as a finance lease, are included in the consolidated balance sheet as follows:
Right-of-use asset (included in real estate held for investment, net) (1)
$8,074 
Lease obligation (included in other liabilities)9,339 
Remaining lease term92.5
Discount rate4.8 %
The components of lease expense were as follows:
Interest on lease obligation for the nine months ended September 30, 2021441 
_____________________
(1) During the three and nine months ended September 30, 2021, the Company wrote down its right-of-use asset and recorded an impairment charge of $1.2 million on 210 West 31st Street.
As of September 30, 2021, the Company had a leasehold interest expiring on 2114. Future minimum lease payments owed by the Company under the finance lease as of September 30, 2021 are as follows (in thousands):
October 1, 2021 through December 31, 2021$90 
2022360 
2023360 
2024360 
2025393 
Thereafter52,563 
Total expected minimum lease obligations54,126 
Less: Amount representing interest (1)
(44,787)
Present value of net minimum lease payments (2)
$9,339 
_____________________
(1) Interest includes the amount necessary to reduce the total expected minimum lease obligations to present value calculated at the Company’s incremental borrowing rate at acquisition.
(2) The present value of net minimum lease payments are presented in other liabilities in the accompanying consolidated balance sheets.
Paycheck Protection Program
On February 10, 2021 and March 13, 2021, the Company, through wholly owned subsidiaries of joint ventures, entered into Paycheck Protection Program Promissory (“PPP”) notes for the Q&C Hotel and Springmaid Beach Resort and received funding of $0.6 million and $1.8 million, respectively. The PPP notes are supplementing payroll costs for the third-party managers of the joint ventures. In accordance with the requirements of the CARES Act, at least 60% of the proceeds used to date have been used to pay eligible payroll costs. Under the requirements of the CARES Act, the loan may be fully forgiven if (i) proceeds are used to pay eligible payroll costs, rent, mortgage interest and utilities and (ii) full-time employee headcount and salaries are either maintained during the applicable twenty-four-week period after loan origination. Any forgiveness of the loan will be subject to approval by the U.S. Small Business Administration (the “SBA”) and will require the Company to apply for such treatment in the future. While the Company may apply for forgiveness of the PPP notes in accordance with the requirements and limitations under the CARES Act and the SBA regulations and requirements, no assurance can be given that any portion of the PPP notes will be forgiven. On July 6, 2021, the SBA approved the Company’s application for forgiveness of the Springmaid Beach Resort PPP note of $1.3 million. As of September 30, 2021 and December 31, 2020, the PPP notes balance was $2.4 million and $1.5 million and recorded in other liabilities in the accompanying consolidated balance sheets, respectively.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
Economic Dependency
The Company is dependent on the Advisor for certain services that are essential to the Company, including the identification, evaluation, negotiation, origination, acquisition and disposition of investments; management of the daily operations of the Company’s investment portfolio; and other general and administrative responsibilities. In the event that the Advisor is unable to provide these services, the Company will be required to obtain such services from other sources.
Environmental
As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. Although there can be no assurance, the Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations as of September 30, 2020.2021. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s properties, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the properties could result in future environmental liabilities.
COVID-19
During the nine months ended September 30,first quarter of 2020 and subsequent periods, efforts to slow the spread of the COVID-19 virus have had a significant impact on the U.S. economy. The Company continues to follow the policies described in Note 2 to the Consolidated Financial Statements contained in our 20192020 Annual Report on Form 10-K, including those related to impairments of real estate assets and investments in unconsolidated affiliates and collectability assessments on operating lease receivables. While our current analyses did not result in any material adjustments to amounts as of and during the nine months ended September 30, 2020,2021, circumstances related to the COVID-19 pandemic may result in recording impairments, lease modifications and changes to collectability assessments in future periods.
Legal Matters
From time to time, the Company is a party to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on the Company’s results of operations or financial condition, which would require accrual or disclosure of the contingency and the possible range of loss. Additionally, the Company has not recorded any loss contingencies related to legal proceedings in which the potential loss is deemed to be remote.


17. SUBSEQUENT EVENTS

The Company evaluates subsequent events up until the date the consolidated financial statements are issued.
Richardson Acquisition
On November 22, 2011, the Company, through an indirect wholly owned subsidiary, and JP-Richardson, LLC, an affiliate of JP Realty Partners, LTD., entered into an agreement to form a joint venture (the “Richardson Joint Venture”), and on November 23, 2011, the Richardson Joint Venture acquired a portfolio of office buildings and undeveloped land in Richardson, Texas (the “Richardson Portfolio”).
On October 18, 2021, the Company purchased the 10% minority interest in the Richardson Joint Venture, for $4.0 million from JP-Richardson, LLC. As of the date of purchase, the Richardson Portfolio consisted of four office buildings and 14 acres of undeveloped land. Subsequent to the purchase, the Company owned 100% of the Richardson Joint Venture.

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20202021
(unaudited)
16. SUBSEQUENT EVENTSBond Offerings
Subsequent to September 30, 2021, the Company issued additional Series B Debentures in the amount of 536.4 million Israeli new Shekels par value through a public offering. The public offering Series B Debentures were issued at a 2.6% discount resulting in a total consideration of 522.4 million Israeli new Shekels ($166.8 million as of November 1, 2021). Additionally, the Company evaluates subsequent events up untilalso issued 53.6 million Israeli new Shekels par value through a private offering. The private offering Series B Debentures were issued at a 3.1% discount resulting in a total consideration of 52.0 million Israeli new Shekels ($16.6 million as of November 1, 2021). The additional Series B Debentures have an equal level of security, pari passu, amongst themselves and between them and the dateinitial Series B Debentures, which were initially issued, without any right of precedence or preference between any of them. The Series B Debentures were issued with the consolidated financial statements are issued.intent of using the proceeds and available cash on hand to payoff the outstanding Series A Debentures.
MergerNotes Payable Refinancing
On October 5, 2020, pursuant7, 2021, the Company refinanced the Madison Square Mortgage Loan with a mortgage loan from an unaffiliated lender (the “Refinancing”) for borrowings up to the Merger Agreement, POSOR II merged with and into Merger Sub, with Merger Sub surviving as an indirect subsidiary$27.0 million. At closing, $17.5 million of the Company (the “Merger”). At such time,loan was funded and the remaining $9.5 million was available for future disbursements, subject to certain terms and conditions contained in accordancethe loan documents. The Refinancing is interest only with a fixed interest rate of 4.625% and has a maturity date of October 7, 2024. In connection with the applicable provisionsexecution of the Maryland General Corporation Law (the “MGCL”)Refinancing, Pacific Oak SOR Properties, LLC, a wholly owned subsidiary, is providing an unconditional guarantee and the Maryland Limited Liability Company Act, the separate existence of POSOR II ceased. At the effective time of the Merger, each issued and outstanding share of POSOR II’s common stock (or a fraction thereof), $0.01 par value per share, converted into 0.9643 shares of the Company’s common stock, $0.01 par value per share, or 28,973,906 shares of the Company’s common stock. The combined company after the Merger retains the name “Pacific Oak Strategic Opportunity REIT, Inc.” The Merger is intended to qualifywill be held liable, as a “reorganization”primary obligor for our obligations under and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended. The Company acquired 2 hotel properties, 3 office properties, 1 apartment building, 1 consolidated joint venture to develop 1 office/retail property, 2 real estate equity securities and 2 investments in unconsolidated entities. Additionally, the Company assumed $331.8 million of loans related to the acquired properties. Pro forma revenues and earnings have not been presented as the initial accounting for the transaction is incomplete as of the date of the consolidated financial statements are issued. The Company is in process of assessing the fair value of the acquired tangible assets, liabilities assumed and any applicable intangible assets and liabilities for this business combination.Refinancing.


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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the accompanying financial statements of Pacific Oak Strategic Opportunity REIT, Inc. and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to Pacific Oak Strategic Opportunity REIT, Inc., a Maryland corporation, and, as required by context, Pacific Oak Strategic Opportunity 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 Pacific Oak Strategic Opportunity 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. 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.
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:
We depend on our advisor to conduct our operations and eventually dispose of our investments.
Because our new advisor, Pacific Oak Capital Advisors, LLC was recently formed, it could face challenges with employee hiring and retention, information technology, vendor relationships, and funding; if Pacific Oak Capital Advisors faces challenges in performing its obligations to us, it could negatively impact our ability to achieve our investment objectives.
We depend on tenants for our revenue and, accordingly, our revenue is dependent upon the success and economic viability of our tenants. Revenues from our property investments could decrease due to a reduction in tenants (caused by factors including, but not limited to, tenant defaults, tenant insolvency, early termination of tenant leases and non-renewal of existing tenant leases) and/or lower rental rates, limiting our ability to pay distributions to our stockholders.
We face potential business disruptions due to the recent global outbreak of COVID-19 (Coronavirus). The virus has significantly disrupted economic markets and impacted commercial activity worldwide, including the US, and the prolonged economic impact is uncertain. Our tenants and potential tenants of the properties we own could be adversely affected by the disruption to business caused by the virus.
Our opportunistic investment strategy involves a higher risk of loss than would a strategy of investing in some other types of real estate and real estate-related investments.
We have paid distributions from financings and in the future we may not pay distributions solely from our cash flow from operations or gains from asset sales. To the extent that we pay distributions from sources other than our cash flow from operations or gains from asset sales, we will have less funds available for investment in loans, properties and other assets, the overall return to our stockholders may be reduced and subsequent investors may experience dilution.
All of our executive officers and some 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 former or current advisor, our dealer manager and other Pacific Oak-affiliated entities. As a result, they face conflicts of interest, including significant conflicts created by our former or current advisor’s compensation arrangements with us and other Pacific Oak-advised programs and investors and conflicts in allocating time among us and these other programs and investors. These conflicts could result in unanticipated actions. Fees paid to our former or current advisor in connection with transactions involving the origination, acquisition and management of our investments are based on the cost of the investment, not on the quality of the investment or services rendered to us. This arrangement could influence our former or current advisor to recommend riskier transactions to us.
We pay substantial fees to and expenses of our advisor and its affiliates. These payments increase the risk that our stockholders will not earn a profit on their investment in us and increase our stockholders’ risk of loss.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
We cannot predict with any certainty how much, if any, of our dividend reinvestment plan proceeds will be available for general corporate purposes, including, but not limited to, the redemption of shares under our share redemption program, future funding obligations under any real estate loans receivable we acquire, the funding of capital expenditures on our real estate investments or the repayment of debt. If such funds are not available from the dividend reinvestment plan offering, then we may have to use a greater proportion of our cash flow from operations to meet these cash requirements, which would reduce cash available for distributions and could limit our ability to redeem shares under our share redemption program.
We have focused, and may continue to focus, our investments in non-performing real estate and real estate-related loans, real estate-related loans secured by non-stabilized assets and real estate-related securities, which involve more risk than investments in performing real estate and real estate-related assets
All forward-looking statements should be read in light of the risks identified in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019 and Part II, Item 1A of this Quarterly Report on Form 10-Q and our Quarterly Report on Form 10-Q for the three months ended March 31, 2020, each as filed with the Securities and Exchange Commission (the “SEC”).

Overview
We were formed on October 8, 2008 as a Maryland corporation, elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2010 and intend to operate in such manner. KBS Capital Advisors LLC (“KBS Capital Advisors”) was our advisor.advisor from inception through October 31, 2019. On October 31, 2019, KBS Capital Advisors ceased to serve as our advisor or have any advisory responsibility to us immediately following the filing of our Quarterly Report on Form 10-Q for the period ending September 30, 2019 (filedwith the SEC, which was filed on November 8, 2019) with the SEC.2019. On November 1, 2019, we entered into a new advisory agreement with Pacific Oak Capital Advisors, LLC (“Pacific Oak Capital Advisors”), which washas since been renewed on November 1, 2020. The advisory agreementand is currently effective through November 1, 2021;2022; however, we or the AdvisorPacific Oak Capital Advisors may terminate the advisory agreement without cause or penalty upon providing 60 days'days’ written notice. The terms of the advisory agreement are consistent with those of the advisory agreement that was previously in effect with KBS Capital Advisors, except as described in Note 10.
As our advisor, Pacific Oak Capital Advisors manages our day-to-day operations and our portfolio of investments. Pacific Oak Capital Advisors also has the authority to make all of the decisions regarding our investments, subject to the limitations in our charter and the direction and oversight of our board of directors. Pacific Oak Capital Advisors also provides asset-management, marketing, investor-relations and other administrative services on our behalf. We have sought to invest in and manage a diverse portfolio of real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments. We conduct our business primarily through our operating partnership, of which we are the sole general partner.
On January 8, 2009, we filed a registration statement on Form S-11 with the SEC to offer a minimum of 250,000 shares and a maximum of 140,000,000 shares of common stock for sale to the public, of which 100,000,000 shares were registered in our primary offering and 40,000,000 shares were registered under our dividend reinvestment plan. We ceased offering shares of common stock in our primary offering on November 14, 2012. We sold 56,584,976 shares of common stock in the primary offering for gross offering proceeds of $561.7 million. We continue to offer shares of common stock under the dividend reinvestment plan. As of September 30, 2020,2021, we had sold 6,851,969 shares of common stock under the dividend reinvestment plan for gross offering proceeds of $76.5 million. Also as of September 30, 2020,2021, we had redeemed 23,897,20527,247,458 of the shares sold in our offering for $286.3$317.3 million. As of September 30, 2020,2021, we had issued 25,976,746 shares of common stock in connection with special dividends. Additionally, on December 29, 2011 and October 23, 2012, we issued 220,994 shares and 55,249 shares of common stock, respectively, for $2.0 million and $0.5 million, respectively, in private transactions exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933, as amended.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
On March 2, 2016, Pacific Oak SOR (BVI) Holdings, Ltd. (“Pacific Oak SOR BVI”), our wholly owned subsidiary, filed a final prospectus with the Israel Securities Authority for a proposed offering of up to 1,000,000,000 Israeli new Shekels of Series A debentures (the “Series A Debentures”) at an annual interest rate not to exceed 4.25%. On March 1, 2016, Pacific Oak SOR BVI commenced the institutional tender of the Series A Debentures and accepted application for 842.5 million Israeli new Shekels. On March 7, 2016, Pacific Oak SOR BVI commenced the public tender of the Series A Debentures and accepted 127.7 million Israeli new Shekels.  In the aggregate, Pacific Oak SOR BVI accepted 970.2 million Israeli new Shekels (approximately $249.2 million as of March 8, 2016) in both the institutional and public tenders at an annual interest rate of 4.25%.  Pacific Oak SOR BVI issued the Series A Debentures on March 8, 2016. The terms of the Series A Debentures require five equal principal installment payments annually on March 1st of each year from 2019 to 2023.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
On January 22, 2020, we filed a registration statement on Form S-11 with the SEC to offer up to $1 billion in additional shares of our common stock. This new registration statement contemplates a proposed conversion of our company to a perpetual-life net asset value or “NAV” REIT that offers and sells shares of our common stock continuously through a number of distribution channels in ongoing public offerings, and seeks to provide increased liquidity to current and future stockholders through an expansion of our current share redemption program.
On February 16, 2020, Pacific Oak SOR BVI issued 254.1 million Israeli new Shekels (approximately $74.1 million as of February 16, 2020) of Series B debentures (the “Series B Debentures”) to Israeli investors pursuant to a public offering registered with the Israel Securities Authority. The Series B Debentures will bear interest at the rate of 3.93% per year. The Series B Debentures have principal installment payments equal to 33.33% of the face amount of the Series B Debentures on January 31st of each year from 2024 to 2026.
On February 19, 2020, we, Pacific Oak SOR II, LLC, an indirect subsidiary of ours (“Merger Sub”), and Pacific Oak Strategic Opportunity REIT II, Inc. (“POSOR II”) entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant
On October 5, 2020, pursuant to the Merger Agreement, on October 5, 2020, POSOR II merged with and into Merger Sub, (the “Merger”), with Merger Sub surviving the Merger (the “Surviving Entity”), such that following the Merger, the Surviving Entity continued as an indirect subsidiary of ours. Inours (the “Merger”). At such time, in accordance with the applicable provisions of the Maryland General Corporation Law (the “MGCL”) and the Maryland Limited Liability Company Act, the separate existence of POSOR II ceased. At the effective time of the Merger, each issued and outstanding share of POSOR II’s common stock (or a fraction thereof), $0.01 par value per share, converted into 0.9643 shares of the right to receive 0.9643Company’s common stock, $0.01 par value per share, or 28,973,906 shares of our common stock. The combined company after the Merger retains the name “Pacific Oak Strategic Opportunity REIT, Inc.” The Merger was intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended. As a result of the Merger, we acquired two hotel properties, three office properties, one apartment building, one consolidated joint venture to develop one office/retail property, two real estate equity securities and two investments in unconsolidated entities. Additionally, we assumed $331.8 million of loans related to the acquired properties.
On March 4, 2021, we issued debentures (series A) in the amount of 250.0 million Israeli new Shekels par value through a private placement. The debentures were issued at a 1.9% discount resulting in total consideration of 245.3 million Israeli new Shekels ($74.2 million as of March 4, 2021). The additional debentures shall have an equal level of security, pari passu, amongst themselves and between them and the Series A Debentures, which were initially issued, without any right of precedence or preference between any of them.
As of September 30, 2020,2021, we consolidated sixeight office properties, one office portfolio consisting of four office buildings and 14 acres of undeveloped land, two apartment properties, two hotel properties, one apartment property andresidential home portfolio consisting of 1,806 single-family homes, three investments in undeveloped land with approximately 1,000800 developable acres, one residential home portfolio consisting of 1,769 single-family homes and owned sixfour investments in unconsolidated joint venturesentities and three investments in real estate equity securities.

Additionally, as of September 30, 2021, the Company had entered into a consolidated joint venture to develop one office/retail property.
Market Outlook – Real Estate and Real Estate Finance Markets
Volatility in global financial markets and changing political environments 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. 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. Further, increases in interest rates would increase the amount of our debt payments on our variable rate debt to the extent the interest rates on such debt are not limited by interest rate caps. 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.
During the first second, and third quarter of 2020 and subsequent periods, efforts to slow the spread of the COVID-19 virus have had a significant impact on the U.S. economy. While our current analyses did not result in any material adjustments to amounts as of and during the nine months ended September 30, 2020,2021, circumstances related to the COVID-19 pandemic may result in recording impairments, lease modifications and changes to collectability assessments in future periods. The extent to which COVID-19 impacts our business, operations and financial results will depend on numerous evolving factors, many of which are not within management’s control, and that we are unable to predict at this time, including but not limited to: the duration and scope of the pandemic; the pandemic’s impact on current and future economic activity; and the actions of governments, businesses and individuals in response to the COVID-19 pandemic.


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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Liquidity and Capital Resources
Our principal demand for funds during the short and long-term is and will be for the acquisition of real estate and real estate-related investments, payment of operating expenses, capital expenditures and general and administrative expenses, payments under debt obligations, redemptions and purchases of our common stock and payments of distributions to stockholders. While we expect to have sufficient liquidity to meet our obligations for the foreseeable future, the COVID-19 pandemic and associated responses could adversely impact our future cash flows and financial condition. To date, we have had six primary sources of capital for meeting our cash requirements:
Proceeds from the primary portion of our initial public offering; 
Proceeds from our dividend reinvestment plan;
Proceeds from our public bond offering in Israel;
Debt financing;
Proceeds from the sale of real estate and the repayment of real estate-related investments; and
Cash flow generated by our real estate and real estate-related investments. 
We sold 56,584,976 shares of common stock in the primary portion of our initial public offering for gross offering proceeds of $561.7 million. We ceased offering shares in the primary portion of our initial public offering on November 14, 2012. We continue to offer shares of common stock under the dividend reinvestment plan. As of September 30, 2020,2021, we had sold 6,851,969 shares of common stock under the dividend reinvestment plan for gross offering proceeds of $76.5 million. To date, we have invested all of the net proceeds from our initial public offering in real estate and real estate-related investments. We intend to use our cash on hand, proceeds from asset sales, proceeds from debt financing, cash flow generated by our real estate operations and real estate-related investments and proceeds from our dividend reinvestment plan as our primary sources of immediate and long-term liquidity.
On February 10, 2021 and March 13, 2021, we, through our wholly owned subsidiaries of joint ventures, entered into Paycheck Protection Program Promissory (“PPP”) notes for the Q&C Hotel and Springmaid Beach Resort and received funding of $0.6 million and $1.8 million, respectively. The PPP notes are supplementing payroll costs for the third-party managers of the joint ventures. In accordance with the requirements of the CARES Act, at least 60% of the proceeds used to date have been used to pay eligible payroll costs. Under the requirements of the CARES Act, the loan may be fully forgiven if (i) proceeds are used to pay eligible payroll costs, rent, mortgage interest and utilities and (ii) full-time employee headcount and salaries are either maintained during the applicable twenty-four-week period after loan origination. Any forgiveness of the loan will be subject to approval by the U.S. Small Business Administration (the “SBA”) and will require the Company to apply for such treatment in the future. While we may apply for forgiveness of the PPP notes in accordance with the requirements and limitations under the CARES Act and the SBA regulations and requirements, no assurance can be given that any portion of the PPP notes will be forgiven. On July 6, 2021, the SBA approved our application for forgiveness of the Springmaid Beach Resort PPP note of $1.3 million. As of September 30, 2021 and December 31, 2020, the PPP notes balance was $2.4 million and $1.5 million and recorded in other liabilities in the accompanying consolidated balance sheets, respectively.
Our investments in real estate generate cash flow in the form of rental revenues and tenant reimbursements, which are reduced by operating expenditures and corporate general and administrative expenses.  Cash flow from operations from our real estate investments is primarily dependent upon the occupancy levels of our properties, 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. As of September 30, 2020,2021, our office properties were collectively 80%73% occupied, our residential home portfolio was 91%94% occupied and our apartment property was 87%properties were 96% occupied. As of October 2020,2021, we collected 97.3%95.1% of total charged rent for the month of September.September 2021.
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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 investments in hotel properties generate cash flow in the form of room, food, beverage and convention services, campground and other revenues, which are reduced by hotel expenses, capital expenditures, debt service payments, the payment of asset management fees and corporate general and administrative expenses. Cash flow from operations from our hotel properties are primarily dependent upon the occupancy levels of our hotels, the average daily rates and how well we manage our expenditures. The following table provides summary information regarding our hotel properties for the nine months ended September 30, 2021:
PropertyNumber of RoomsPercentage Occupied for the Nine Months Ended September 30, 2021Average Daily Rate for the Nine Months Ended September 30, 2021Average Revenue per Available Room for the Nine Months Ended September 30, 2021
Springmaid Beach Resort45358.4%$218.28$127.49
Q&C Hotel19642.3%$121.24$51.24
Investments in real estate equity securities generate cash flow in the form of dividend income, which is reduced by asset management fees. As of September 30, 2020,2021, we had three investments in real estate equity securities outstanding with a total carrying value of $84.4$96.4 million.
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 of our board of directors has determined that such excess expenses were justified based on unusual and non-recurring factors. Operating expense reimbursementsexpenses for the four fiscal quarters ended September 30, 2020 exceeded2021 did not exceed the charter imposed limitation; however, the conflicts committee determined that the relationship of our operating expenses to our average invested assets was justified given that we chose to terminate our advisory agreement with our prior external advisor and were contractually obligated to pay them a performance fee due upon termination.charter-imposed limitation.
For the nine months ended September 30, 2020,2021, our cash needs for capital expenditures, redemptions of common stock and debt servicing were met with proceeds from dispositions of real estate, real estate equity securities and undeveloped land, proceeds from debt financing, proceeds from our dividend reinvestment plan and cash on hand. Operating cash needs during the same period were met through cash flow generated by our real estate and real estate-related investments and cash on hand. As of September 30, 2020,2021, we had outstanding debt obligations in the aggregate principal amount of $763.1 million,$1.0 billion, with a weighted-average remaining term of 1.91.5 years.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
As of November 13, 2020,September 30, 2021, we had a total of $357.9$640.0 million of debt obligations scheduled to mature over the nextwithin 12 months. On October 5, 2020, we assumed the debt obligationsmonths of POSOR II upon the close of the Merger, of which $155.1 million is scheduled to mature over the next 12 months. We and POSOR II have extension options with respect to $350.9 million of the debt obligations outstanding that is scheduled to mature over the next 12 months; however, we cannot exercise these options if not then in compliance with certain financial covenants in the loans without making a cash payment and there is no assurance that we will be able to meet these requirements. All of our debt obligations are generally non-recourse, subject to certain limited guaranty payments, except for our Series A Debentures and Series B Debentures.date. We plan to utilizeexercise our extension options available extension optionsunder our loan agreements or pay down or refinance the related notes payable. We may also choosepayable prior to market the properties for sale or may negotiate a turnover of the secured properties back to the related mortgage lender. There can be no assurance as to the certainty or timing of any such transactions.their maturity dates.
We have elected to be taxed as a REIT and intend to operate as a REIT. To maintain our qualification as a REIT, we are 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 have not established a minimum distribution level.
Cash Flows from Operating Activities
As of September 30, 2020,2021, we consolidated sixeight office properties, one office portfolio consisting of four office buildings and 14 acres of undeveloped land, onetwo apartment property,properties, two hotel properties, one residential home portfolio consisting of 1,7691,806 single-family homes, and three investments in undeveloped land with approximately 1,000800 developable acres, and owned sixfour investments in unconsolidated joint venturesentities and three investments in real estate equity securities. Additionally, as of September 30, 2021, the Company had entered into a consolidated joint venture to develop one office/retail property. During the nine months ended September 30, 2020,2021, net cash provided by operating activities was $4.8$11.3 million. We expect that our cash flows from operating activities will increase in future periods as a result of leasing additional space that is currently unoccupied and anticipated future acquisitions of real estate and real estate-related investments. However, our cash flows from operating activities may decrease to the extent that we dispose of additional assets.
Cash Flows from Investing Activities
Net cash used inprovided by investing activities was $45.9$193.4 million for the nine months ended September 30, 20202021 and primarily consisted of the following:
Investment in real estate equity securities of $35.5 million;
AcquisitionProceeds from the sale of real estate of $19.0 million;
Improvements to real estate of $15.9 million;
Proceeds from the disposition of foreign currency collars of $14.1$194.5 million;
Proceeds from the sale of real estate equity securities of $11.0$14.4 million;
ContributionImprovements to unconsolidated entitiesreal estate of $1.7 million; and
Distribution of capital from unconsolidated entities of $1.2 million.
Cash Flows from Financing Activities
Net cash provided by financing activities was $41.8 million for the nine months ended September 30, 2020 and consisted primarily of the following:
$44.1 million of net cash provided by debt and other financings as a result of proceeds from notes payable of $104.1 million, partially offset by principal payments on notes and bonds payable of $57.6 million and payments of deferred financing costs of $2.4$12.9 million;
$0.8 millionProceeds for future development obligations of cash used for redemptions of common stock;
$0.6 million of offering costs paid in connection with a potential offering;
$0.6 million of cash used for preferred dividends;
$0.3 million of net cash distributions to stockholders, after giving effect to distributions reinvested by stockholders of $0.3$6.2 million; and
$0.1 million of proceeds from noncontrolling interest contributions.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Contribution of capital to unconsolidated entities of $4.8 million; and
Acquisition of real estate of $4.1 million.
Cash Flows from Financing Activities
Net cash used in financing activities was $112.9 million for the nine months ended September 30, 2021 and consisted primarily of the following:
$79.5 million of net cash used in debt and other financings as a result of principal payments on notes and bonds payable of $234.0 million, payments of deferred financing costs of $2.7 million and partially offset by proceeds from notes payable of $157.2 million;
$29.6 million of cash used for redemptions of common stock;
$5.7 million of cash used for redemption of restricted stock;
$2.4 million of cash provided by PPP Notes; and
$0.6 million of cash used for preferred dividends.
In order to execute our investment strategy, we utilize secured debt and we may, to the extent available, utilize unsecured debt, to finance a portion of our investment portfolio. Management remains vigilant in monitoring the risks inherent with the use of debt in our portfolio and is taking actions to ensure that these risks, including refinancing and interest risks, are properly balanced with the benefit of using leverage. There is no limitation on the amount we may borrow for any single investment. Our charter limits our total liabilities such that our total liabilities may not exceed 75% of the cost of our tangible assets; however, we may exceed that limit if a majority of the conflicts committee approves each borrowing in excess of our charter limitation and we disclose such borrowing to our common stockholders in our next quarterly report with an explanation from the conflicts committee of the justification for the excess borrowing. As of September 30, 2020,2021, our borrowings and other liabilities were both approximately 70%65% of the cost (before depreciation and other noncash reserves) and the book value (before depreciation) of our tangible assets.
In March 2016, we, through a wholly-owned subsidiary, issued 970.2 million Israeli new Shekels (approximately $249.2 million as of March 8, 2016) in 4.25% bonds to investors in Israel pursuant to a public offering registered in Israel. The bondsSeries A Debentures have a seven year term, with principal payable in five equal annual installments from 2019 to 2023.
February 16, 2020, Pacific Oak SOR BVI issued 254.1 million Israeli new Shekels (approximately $74.1 million as of February 16, 2020) of the Series B Debentures to Israeli investors pursuant to a public offering registered with the Israel Securities Authority. The Series B Debentures will bear interest at the rate of 3.93% per year. The Series B Debentures have principal installment payments equal to 33.33% of the face amount of the Series B Debentures on January 31st of each year from 2024 to 2026.
On March 4, 2021, we issued additional Series A Debentures in the amount of 250.0 million Israeli new Shekels par value through a private placement. The additional Series A Debentures were issued at a 1.9% discount resulting in total consideration of 245.3 million Israeli new Shekels ($74.2 million as of March 4, 2021). The additional Series A Debentures have an equal level of security, pari passu, amongst themselves and between them and the initial Series A Debentures, which were initially issued, without any right of precedence or preference between any of them.
In addition to making investments in accordance with our investment objectives, we use or have used our capital resources to make certain payments to our advisor and our dealer manager. During our offering stage, these payments included payments to our dealer manager for selling commissions and dealer manager fees related to sales in our primary offering and payments to our dealer manager and our advisor for reimbursement of certain organization and other offering expenses related both to the primary offering and the dividend reinvestment plan. During our acquisition and development stage, we expect to continue to make payments to our advisor in connection with the selection and origination or purchase of investments, the management of our assets and costs incurred by our advisor in providing services to us as well as for any dispositions of assets (including the discounted payoff of non-performing loans).
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Among the fees payable to our advisor is an asset management fee. With respect to investments in loans and any investments other than real property, the asset management fee is a monthly fee calculated, each month, as one-twelfth of 0.75% of the lesser of (i) the amount actually paid or allocated to acquire or fund the loan or other investment, inclusive of fees and expenses related thereto and the amount of any debt associated with or used to acquire or fund such investment and (ii) the outstanding principal amount of such loan or other investment, plus the fees and expenses related to the acquisition or funding of such investment, as of the time of calculation. With respect to investments in real property, the asset management fee is a monthly fee equal to one-twelfth of 0.75% of the sum of the amount paid or allocated to acquire the investment, plus the cost of any subsequent development, construction or improvements to the property, and inclusive of fees and expenses related thereto and the amount of any debt associated with or used to acquire such investment. In the case of investments made through joint ventures, the asset management fee will be determined based on our proportionate share of the underlying investment, inclusive of our proportionate share of any fees and expenses related thereto.

Contractual Commitments and Contingencies
The following is a summary of our contractual obligations as of September 30, 20202021 (in thousands):
Payments Due During the Years Ending December 31,
Contractual ObligationsTotalRemainder of 20202021-20222023-2024Thereafter
Outstanding debt obligations (1)
$763,070 $507 $504,772 $141,577 $116,214 
Interest payments on outstanding debt obligations (2)
51,847 5,999 27,882 12,293 5,673 
Payments Due During the Years Ending December 31,
Contractual ObligationsTotalRemainder of 20212022-20232024-2025Thereafter
Outstanding debt obligations (1)
$1,030,734 $116,538 $708,421 $104,393 $101,382 
Interest payments on outstanding debt obligations (2)
58,720 9,112 33,077 13,920 2,611 
Finance lease obligation54,126 90 720 753 52,563 
_____________________
(1) Amounts include principal payments only.
(2) Projected interest payments are based on the outstanding principal amounts, maturity dates, foreign currency rates and interest rates in effect at September 30, 2020.2021. We incurred interest expense of $18.9$29.9 million, excluding amortization of deferred financing costs of $2.5$2.4 million and including interest capitalized of $2.4$1.6 million, for the nine months ended September 30, 2020.2021.

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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, 2019, we consolidated seven office properties, one office portfolio consisting of four office buildings and 14 acres of undeveloped land, one retail property, one apartment property and three investments in undeveloped land with approximately 1,000 developable acres and owned five investments in unconsolidated joint ventures and three investments in real estate equity securities. As of September 30, 2020, we consolidated six office properties, one office portfolio consisting of four office buildings and 14 acres of undeveloped land, one apartment property and three investments in undeveloped land with approximately 1,000 developable acres, one residential home portfolio consisting of 1,769 single-family homes and owned six investments in unconsolidated joint ventures and three investments in real estate equity securities. As of September 30, 2021, we consolidated eight office properties, one office portfolio consisting of four office buildings and 14 acres of undeveloped land, two apartment properties, two hotel properties, one residential home portfolio consisting of 1,806 single-family homes, three investments in undeveloped land with approximately 800 developable acres, and owned four investments in unconsolidated entities and three investments in real estate equity securities. Additionally, as of September 30, 2021, the Company had entered into a consolidated joint venture to develop one office/retail property. Our results of operations for the three and nine months ended September 30, 20202021 may not be indicative of those in future periods due to acquisition and disposition activities and COVID-19 related impacts. Additionally, the occupancy in our properties, excluding our residential home portfolio, has not been stabilized. As of September 30, 2020,2021, our office properties were collectively 80%73% occupied, our residential home portfolio was 91%94% occupied and our apartment property was 87%properties were 96% occupied. However, due to the amount of near-term lease expirations, we do not put significant emphasis on quarterly changes in occupancy (positive or negative) in the short run. Our underwriting and valuations are generally more sensitive to “terminal values” that may be realized upon the disposition of the assets in the portfolio and less sensitive to ongoing cash flows generated by the portfolio in the years leading up to an eventual sale. There are no guarantees that occupancies of our assets will increase, or that we will recognize a gain on the sale of our assets. In general, we expect that our income and expenses related to our portfolio will increase in future periods as a result of leasing additional space and acquiring additional assets but decrease due to disposition activity.
Comparison of the three months ended September 30, 2020 versus the three months ended September 30, 2019
The following table provides summary information about our results of operations for the three months ended September 30, 2020 and 2019 (dollar amounts in thousands):
 Three Months Ended September 30,Increase (Decrease)Percentage Change
$ Change Due to Acquisitions/ Dispositions (1)
$ Change Due to 
Investments Held Throughout
Both Periods (2)
20202019
Rental income$23,871 $21,669 $2,202 10 %$1,662 $540 
Other operating income888 1,317 (429)(33)%(254)(175)
Dividend income from real estate equity securities2,986 2,296 690 30 %690 — 
Operating, maintenance, and management costs7,888 8,156 (268)(3)%367 (635)
Real estate taxes and insurance3,791 3,278 513 16 %435 78 
Asset management fees to affiliates2,426 2,093 333 16 %280 53 
General and administrative expenses1,960 2,038 (78)(4)%n/an/a
Foreign currency transaction loss, net445 5,344 (4,899)(92)%n/an/a
Depreciation and amortization9,470 9,239 231 %410 (179)
Interest expense6,274 7,359 (1,085)(15)%427 (1,512)
Gain from remeasurement of prior equity interest2,009 — 2,009 100 %n/a2,009 
Equity in income (loss) of unconsolidated entities519 (419)938 (224)%— 938 
Other interest income19 536 (517)(96)%n/an/a
(Loss) gain on real estate equity securities(6,527)3,845 (10,372)(270)%n/an/a
Gain on sale of real estate— 10,559 (10,559)(100)%(10,559)— 
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(1) Represents the dollar amount increase (decrease) for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 related to real estate and real estate-related investments acquired or disposed on or after October 1, 2019.
(2) Represents the dollar amount increase (decrease) for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 with respect to real estate and real estate-related investments owned by us during the entirety of both periods presented.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Rental income increased from $21.7 millionComparison of the three months ended September 30, 2021 versus the three months ended September 30, 2020
The following table provides summary information about our results of operations for the three months ended September 30, 20192021 and 2020 (dollar amounts in thousands):
 Three Months Ended September 30,Increase (Decrease)Percentage Change
$ Change Due to Acquisitions/ Dispositions (1)
$ Change Due to 
Investments Held Throughout
Both Periods (2)
20212020
Rental income$29,504 $23,871 $5,633 24 %$5,730 $(97)
Hotel revenues12,153 — 12,153 100 %12,153 — 
Other operating income923 888 35 %(39)74 
Dividend income from real estate equity securities3,189 2,986 203 %203 — 
Operating, maintenance, and management costs10,668 7,888 2,780 35 %2,228 552 
Real estate taxes and insurance5,262 3,791 1,471 39 %1,270 201 
Hotel expenses6,483 — 6,483 100 %6,483 — 
Asset management fees to affiliate3,422 2,426 996 41 %932 45 
General and administrative expenses2,365 1,960 405 21 %n/an/a
Foreign currency transaction loss, net2,271 445 1,826 410 %n/an/a
Depreciation and amortization13,895 9,470 4,425 47 %4,284 141 
Interest expense10,092 6,274 3,818 61 %2,146 1,672 
Impairment charges on real estate10,971 — 10,971 100 %10,971 — 
Impairment charges on goodwill2,808 — 2,808 100 %2,808 — 
Gain from remeasurement of prior equity interest— 2,009 (2,009)(100)%n/an/a
Equity in (loss) income of unconsolidated entities(569)519 (1,088)(210)%— (1,088)
Casualty-related gain27 — 27 100 %n/an/a
Other interest income55 19 36 189 %n/an/a
Loss on real estate equity securities(2,614)(6,527)3,913 (60)%n/an/a
Change in subordinated performance fee due upon termination to affiliate(1,545)1,121 (2,666)(238)%n/an/a
Gain on sale of real estate216 — 216 100 %216 — 
Gain on extinguishment of debt1,352 — 1,352 100 %n/an/a
_____________________
(1) Represents the dollar amount increase (decrease) for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 related to real estate and real estate-related investments acquired or disposed on or after July 1, 2020.
(2) Represents the dollar amount increase (decrease) for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 with respect to real estate and real estate-related investments owned by us during the entirety of both periods presented.
Rental income increased from $23.9 million for the three months ended September 30, 2020 to $29.5 million for the three months ended September 30, 2021, primarily as a result of properties acquired subsequent to September 30, 2020 and partially offset by overall decrease in 2019rental and 2020, increase in occupancy rates for properties held throughout both periods and partially offset by a decrease in rental rates and dispositions in 2019.periods. The occupancy of our office properties, held throughout both periods increaseddecreased from 79% as of September 30, 20192020 to 80%76% as of September 30, 2020.2021. Annualized base rent per square foot increaseddecreased from $24.91$23.07 as of September 30, 20192020 to $25.68$22.83 as of September 30, 20202021 related to properties (excluding apartments and single-family homes) held throughout both periods. We expect rental income to increase in future periods as a result of leasing additional space and to the extent we acquire additional properties, but to decrease to the extent we dispose of properties.
Other operating income decreased from $1.3remained consistent at $0.9 million for both of the three months ended September 30, 2019 to $0.9 million for the three months ended September 30, 2020, primarily due to the sale of real estate assets subsequent to September 30, 2019.2021 and 2020. We expect other operating income to increase in future periods as a result of leasing additional space, increases in parking income as we stabilize properties and to the extent we acquire additional properties, but to decrease to the extent we dispose of properties.
Dividend income from real estate equity securities increased from $2.3 million for the three months ended September 30, 2019 to $3.0 million for the three months ended September 30, 2020 to $3.2 million for the three months ended September 30, 2021, primarily as a result of the acquisitiondispositions and acquisitions of real estate equity securities subsequent to September 30, 2019.2020. We expect dividend income from real estate equity securities to vary in future periods as a result of the timing of dividends declared and investment activity.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Property operating costs decreasedincreased from $8.2 million for the three months ended September 30, 2019 to $7.9 million for the three months ended September 30, 2020 and real estate taxes and insurance increased from $3.3to $10.7 million for the three months ended September 30, 2019 to2021 and real estate taxes and insurance increased from $3.8 million for the three months ended September 30, 2020 to $5.3 million for the three months ended September 30, 2021, primarily as a result of properties acquired in 2019 and 2020 and partially offset with properties disposed in 2019.subsequent to September 30, 2020. We expect property operating costs and real estate taxes and insurance to increase in future periods to the extent we acquire additional properties, increasing occupancy of our real estate assets and general inflation, but to decrease to the extent we dispose of properties.
Asset management fees increased from $2.1 million for the three months ended September 30, 2019 to $2.4 million for the three months ended September 30, 2020 to $3.4 million for the three months ended September 30, 2021, primarily as a result of properties acquired in 2019 and 2020, partially offset by properties disposed in 2019.subsequent to September 30, 2020. We expect asset management fees to increase in future periods to the extent we acquire additional properties, but to decrease to the extent we dispose of properties.
General and administrative expenses remained consistent atincreased from $2.0 million for both of the three months ended September 30, 20192020 to $2.4 million for the three months ended September 30, 2021, primarily due to increased accounting and 2020.advisory expenses. We expect general and administrative expenses to fluctuate in future periods based on investment and disposition activity as well as costs incurred to evaluate strategic transactions.
We recognized a $0.4$2.3 million foreign currency transaction loss, net for the three months ended September 30, 20202021 and $5.3$0.4 million of foreign currency transaction loss, net, for the three months ended September 30, 2019,2020, related to the debentures in Israel. These debentures are denominated in Israeli new Shekels and we expect to recognize foreign transaction gains and losses based on changes in foreign currency exchange rates.rates, but expect our exposure to be limited to the extent that we have entered into foreign currency options and foreign currency collars. As of September 30, 2021, we had entered into one foreign currency collar to hedge against a change in the exchange rate of the Israeli new Shekel versus the U.S. Dollar. The foreign currency collar expire in November 2021 and has an aggregate Israeli new Shekels notional amount of 194.0 million. During the three months ended September 30, 2021, we recognized a $0.3 million gain related to the foreign currency collar and a $2.6 million foreign currency transaction loss. During the three months ended September 30, 2020, we recognized a $2.2 million gain related to the foreign currency collars and a $2.6 million foreign currency transaction loss in the accompanying consolidated statements of operations as foreign currency transaction loss, net. On July 29, 2020, we terminated the foreign currency collars and as a result received $14.1 million. During the three months ended September 30, 2019, we recognized a $0.4 million gain related to the foreign currency collar, which is shown net against $5.7 million of foreign currency transaction loss in the accompanying consolidated statements of operations as foreign currency transaction loss, net.
Depreciation and amortization increased from $9.2 million for the three months ended September 30, 2019 to $9.5 million for the three months ended September 30, 2020 to $13.9 million for the three months ended September 30, 2021, primarily as a result of properties acquired in 2019 andsubsequent to September 30, 2020 and capital expenditures. We expect depreciation and amortization to increase in future periods as a result of owning the property acquired during 20192020 for an entire period and to the extent we acquire additional properties, but to decrease as a result of amortization of tenant origination costs related to lease expirations and disposition of properties.
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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 decreasedincreased from $7.4 million for the three months ended September 30, 2019 to $6.3 million for the three months ended September 30, 2020 to $10.1 million for the three months ended September 30, 2021, primarily as a result of the paydownincreased borrowings related to properties acquired subsequent to September 30, 2020, additional Series A Debentures issued on March 4, 2021 of debt on properties disposed in 2019250.0 million Israeli new Shekels (approximately $74.2 million as of March 4, 2021) and thepartially offset by March 31, 20192020 and 20202021 Series A Debentures principal installment payments of 194.0 million Israeli new Shekels (approximately $53.6 million as of March 1, 2019 and $56.6 million as of March 1, 2020)2020 and decreased one-month LIBOR rates during the three months ended September 30, 2020, partially offset by increased borrowings related to properties acquired in 2019 and 2020, issuance of Israel Series B Debentures of 254.1 million Israeli new Shekels on February 16, 2020 (approximately $74.1$58.9 million as of February 16, 2020)March 1, 2021). Excluded from interest expense was $0.5 million and $0.7 million of interest capitalized to our investments in undeveloped land and an unconsolidated entity during both of the three months ended September 30, 2021 and 2020, and 2019.respectively. Our interest expense in future periods will vary based on interest rate fluctuations, the amount of interest capitalized and our level of future borrowings, which will depend on the availability and cost of debt financing and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives and will decrease to the extent we dispose of properties and paydown debt, including annual principal installment payments on the Series A and Series B Debentures.
During the three months ended September 30, 2021, we recognized impairment charges of $6.6 million on 210 West 31st Street and $4.4 million on Lincoln Court. No impairment charges were recorded in 2020.
During the three months ended September 30, 2021, we recognized impairment charges on goodwill of $1.6 million on Lincoln Court and $1.2 million on 210 West 31st Street. No impairment charges on goodwill were recorded in 2020.
During the three months ended September 30, 2020, we recognized a $2.0 million gain from remeasurement of prior equity interest due to our acquisition of Battery Point.
Equity in income of unconsolidated joint ventures increased from loss of $0.4 million for the three months ended September 30, 2019 to income of $0.5 million for the three months ended September 30, 2020, primarily as a result of an increase in revenue due to new tenants for the 353 Sacramento joint venture and partially offset with a $0.3 million loss related to the Pacific Oak Opportunity Zone Fund I investment for the three months ended September 30, 2020.
Other interest incomeentities decreased from $0.5 million for the three months ended September 30, 20192020 to $19,000 for the three months ended September 30, 2020, primarily as a result of decreased dividends from money market mutual funds due to our decreased investment balance in these funds.
Gain on real estate equity securities decreased from $3.8 million for the three months ended September 30, 2019 to $6.5$0.6 million loss for the three months ended September 30, 2020.2021, primarily as a result of bad debt expense for the 353 Sacramento joint venture for the three months ended September 30, 2021.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Loss on real estate equity securities decreased from $6.5 million for the three months ended September 30, 2020 to $2.6 million for the three months ended September 30, 2021. We expect gains and losses on real estate equity securities to fluctuate in future periods as a result of changes in share prices of our investments in real estate equity securities.
During the three months ended September 30, 2019,2021, we sold one retail property, which resulted inrecognized a gain on saleextinguishment of $10.5debt of $1.4 million and this is primarily due to the SBA approving our application for forgiveness of the Springmaid Beach Resort PPP note of $1.3 million. There were no material dispositions during the three months ended September 30, 2020.

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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, 20202021 versus the nine months ended September 30, 20192020
The following table provides summary information about our results of operations for the nine months ended September 30, 20202021 and 20192020 (dollar amounts in thousands):
 Nine Months Ended September 30,Increase (Decrease)Percentage Change
$ Change Due to Acquisitions/ Dispositions (1)
$ Change Due to 
Investments Held Throughout
Both Periods (2)
20202019
Rental income$67,808 $59,879 $7,929 13 %$4,389 $3,540 
Other operating income2,722 4,219 (1,497)(35)%(763)(734)
Interest income from real estate debt securities— 369 (369)(100)%(369)— 
Dividend income from real estate equity securities5,339 4,414 925 21 %925 — 
Operating, maintenance, and management costs22,258 21,254 1,004 %1,232 (228)
Real estate taxes and insurance10,570 9,556 1,014 11 %860 154 
Asset management fees to affiliates6,867 5,954 913 15 %486 427 
General and administrative expenses6,302 5,586 716 13 %n/an/a
Foreign currency transaction (gain) loss, net(12,338)10,634 (22,972)(216)%n/an/a
Depreciation and amortization27,417 25,276 2,141 %1,698 443 
Interest expense19,055 21,776 (2,721)(12)%827 (3,548)
Gain from remeasurement of prior equity interest2,009 — 2,009 100 %n/an/a
Equity in income (loss) of unconsolidated entities1,512 6,677 (5,165)(77)%— (5,165)
Casualty-related gain51 (506)557 (110)%n/an/a
Other interest income297 1,862 (1,565)(84)%n/an/a
(Loss) gain on real estate equity securities(21,620)19,304 (40,924)(212)%n/an/a
Gain on sale of real estate— 18,128 (18,128)(100)%(18,128)— 
Loss on extinguishment of debt— (861)861 (100)%861 — 
 Nine Months Ended September 30,Increase (Decrease)Percentage Change
$ Change Due to Acquisitions/ Dispositions (1)
$ Change Due to 
Investments Held Throughout
Both Periods (2)
20212020
Rental income$94,812 $67,808 $27,004 40 %$24,329 $2,675 
Hotel revenues24,578 — 24,578 100 %24,578 — 
Other operating income3,118 2,722 396 15 %755 (359)
Dividend income from real estate equity securities6,693 5,339 1,354 25 %1,354 — 
Operating, maintenance, and management costs31,444 22,258 9,186 41 %7,996 1,190 
Real estate taxes and insurance15,949 10,570 5,379 51 %4,587 792 
Hotel expenses15,715 — 15,715 100 %15,715 — 
Asset management fees to affiliate10,802 6,867 3,935 57 %3,480 455 
General and administrative expenses7,120 6,302 818 13 %n/an/a
Foreign currency transaction gain, net(568)(12,338)11,770 (95)%n/an/a
Depreciation and amortization45,969 27,417 18,552 68 %17,209 1,343 
Interest expense30,713 19,055 11,658 61 %9,629 2,029 
Impairment charges on real estate10,971 — 10,971 100 %10,971 — 
Impairment charges on goodwill2,808 — 2,808 100 %2,808 — 
Gain from remeasurement of prior equity interest— 2,009 (2,009)100 %n/an/a
Equity in (loss) income of unconsolidated entities(144)1,564 (1,708)(109)%— (1,708)
Casualty-related gain27 51 (24)(47)%n/an/a
Other interest income148 297 (149)(50)%n/an/a
Gain (loss) on real estate equity securities12,939 (21,620)34,559 (160)%n/an/a
Change in subordinated performance fee due upon termination to affiliate(1,745)814 (2,559)(314)%n/an/a
Gain on sale of real estate31,385 — 31,385 100 %31,385 — 
Gain on extinguishment of debt1,365 — 1,365 100 %1,365 — 
_____________________
(1) Represents the dollar amount increase (decrease) for the nine months ended September 30, 20202021 compared to the nine months ended September 30, 20192020 related to real estate and real estate-related investments acquired or disposed on or after January 1, 2019.2020.
(2) Represents the dollar amount increase (decrease) for the nine months ended September 30, 20202021 compared to the nine months ended September 30, 20192020 with respect to real estate and real estate-related investments owned by us during the entirety of both periods presented.
Rental income increased from $59.9 million for the nine months ended September 30, 2019 to $67.8 million for the nine months ended September 30, 2020 to $94.8 million for the nine months ended September 30, 2021, primarily as a result of properties acquired in 2019subsequent to September 30, 2020 and 2020, anpartially offset by overall increasedecrease in rental rates and occupancy rates for properties held throughout both periods and partially offset by dispositions in 2019.periods. The occupancy of our office properties, held throughout both periods increaseddecreased from 79% as of September 30, 20192020 to 80%76% as of September 30, 2020.2021. Annualized base rent per square foot decreased from $24.91$23.07 as of September 30, 20192020 to $25.68$22.83 as of September 30, 20202021 related to properties (excluding apartments and single-family homes) held throughout both periods. We expect rental income to increase in future periods as a result of leasing additional space and to the extent we acquire additional properties, but to decrease to the extent we dispose of properties.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Other operating income decreasedincreased from $4.2 million for the nine months ended September 30, 2019 to $2.7 million for the nine months ended September 30, 2020 to $3.1 million for the nine months ended September 30, 2021, primarily as a result of properties disposed in 2019, decrease in overall parking revenue of $0.3 million and partially offset bydue to properties acquired in 2019 andsubsequent to September 30, 2020. We expect other operating income to increase in future periods as a result of leasing additional space, increases in parking income as we stabilize properties and to the extent we acquire additional properties, but to decrease to the extent we dispose of properties.
Interest income from real estate debt securities was $0.4 million for the nine months ended September 30, 2019 and was redeemed on March 20, 2019.
Dividend income from real estate equity securities increased from $4.4 million for the nine months ended September 30, 2019 to $5.3 million for the nine months ended September 30, 2020 to $6.7 million for the nine months ended September 30, 2021, primarily as a result of the acquisitiondispositions and acquisitions of real estate equity securities subsequent to September 30, 2019.2020. We expect dividend income from real estate equity securities to vary in future periods as a result of the timing of dividends declared and investment activity.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Property operating costs increased from $21.3 million for the nine months ended September 30, 2019 to $22.3 million for the nine months ended September 30, 2020 and real estate taxes and insurance increased from $9.6to $31.4 million for the nine months ended September 30, 2019 to2021 and real estate taxes and insurance increased from $10.6 million for the nine months ended September 30, 2020 to $15.9 million for the nine months ended September 30, 2021, primarily as a result of properties acquired in 2019 and 2020 and partially offset with properties disposed in 2019.subsequent to September 30, 2020. We expect property operating costs and real estate taxes and insurance to increase in future periods to the extent we acquire additional properties, increasing occupancy of our real estate assets and general inflation, but to decrease to the extent we dispose of properties.
Asset management fees increased from $6.0 million for the nine months ended September 30, 2019 to $6.9 million for the nine months ended September 30, 2020 to $10.8 million for the nine months ended September 30, 2021, primarily as a result of properties acquired in 2019 and 2020, partially offset by properties disposed in 2019.subsequent to September 30, 2020. We expect asset management fees to increase in future periods to the extent we acquire additional properties, but to decrease to the extent we dispose of properties.
General and administrative expenses increased from $5.6 million for the nine months ended September 30, 2019 to $6.3 million for the nine months ended September 30, 2020 to $7.1 million for the nine months ended September 30, 2021, primarily due to increased legalaccounting and advisory expenses related to the merger with Pacific Oak Strategic Opportunity REIT II.expenses. We expect general and administrative expenses to fluctuate in future periods based on investment and disposition activity as well as costs incurred to evaluate strategic transactions.
We recognized a $0.6 million foreign currency transaction gain, net for the nine months ended September 30, 2021 and $12.3 million foreign currency transaction gain, net, for the nine months ended September 30, 2020, and $10.6 million of foreign currency transaction loss, net, for the nine months ended September 30, 2019, related to the debentures in Israel. These debentures are denominated in Israeli new Shekels and we expect to recognize foreign transaction gains and losses based on changes in foreign currency exchange rates.rates, but expect our exposure to be limited to the extent that we have entered into foreign currency options and foreign currency collars. As of September 30, 2021, we had entered into one foreign currency collar to hedge against a change in the exchange rate of the Israeli new Shekel versus the U.S. Dollar. The foreign currency collar expire in November 2021 and has an aggregate Israeli new Shekels notional amount of 194.0 million. During the nine months ended September 30, 2021, we recognized a $0.6 million gain related to the foreign currency collar and a $44,000 foreign currency transaction loss. During the nine months ended September 30, 2020, we recognized a $14.3 million gain related to the foreign currency collars and a $2.0 million foreign currency transaction loss in the accompanying consolidated statements of operations as a foreign currency transaction gain, net. On July 29, 2020, we terminated the foreign currency collars and as a result received $14.1 million. During the nine months ended September 30, 2019, we recognized a $4.6 million gain related to the foreign currency collar, which is shown net against $15.2 million of foreign currency transaction loss in the accompanying consolidated statements of operations as foreign currency transaction loss, net.loss.
Depreciation and amortization increased from $25.3 million for the nine months ended September 30, 2019 to $27.4 million for the nine months ended September 30, 2020 to $46.0 million for the nine months ended September 30, 2021, primarily as a result of properties acquired in 2019 and 2020 and capital expenditures. We expect depreciation and amortization to increase in future periods as a result of owning the property acquired during 20192020 for an entire period and to the extent we acquire additional properties, but to decrease as a result of amortization of tenant origination costs related to lease expirations and disposition of properties.
Interest expense decreasedincreased from $21.8 million for the nine months ended September 30, 2019 to $19.1 million for the nine months ended September 30, 2020 to $30.7 million for the nine months ended September 30, 2021, primarily as a result of the paydownincreased borrowings related to properties acquired subsequent to September 30, 2020, additional Series A Debentures issued on March 4, 2021 of debt on properties disposed in 2019250.0 million Israeli new Shekels (approximately $74.2 million as of March 4, 2021) and partially offset by the March 31, 20192020 and 20202021 Series A Debentures principal installment payments of 194.0 million Israeli new Shekels (approximately $53.6 million as of March 1, 2019 and $56.6 million as of March 1, 2020)2020 and decreased one-month LIBOR rates during the nine months ended September 30, 2020, partially offset by increased borrowings related to properties acquired in 2019 and 2020, issuance of Israel Series B Debentures of 254.1 million Israeli new Shekels on February 16, 2020 (approximately $74.1$58.9 million as of February 16, 2020)March 1, 2021). Excluded from interest expense was $2.4$1.6 million and $2.1$2.4 million of interest capitalized to our investments in undeveloped land and an unconsolidated entity during the nine months ended September 30, 20202021 and 2019,2020, respectively. Our interest expense in future periods will vary based on interest rate fluctuations, the amount of interest capitalized and our level of future borrowings, which will depend on the availability and cost of debt financing and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives and will decrease to the extent we dispose of properties and paydown debt, including annual principal installment payments on the Series A and Series B Debentures.
During the nine months ended September 30, 2020,2021, we recognized a $2.0impairment charges of $6.6 million gain from remeasurement of prior equity interest due to our acquisition of Battery Point.
Equityon 210 West 31st Street and $4.4 million on Lincoln Court. No impairment charges were recorded in income of unconsolidated joint ventures decreased from income of $6.7 million for the nine months ended September 30, 2019 to income of $1.5 million for the nine months ended September 30, 2020, primarily as a result of the $7.8 million distribution from the 110 William Joint Venture during the nine months ended September 30, 2019 and a $0.3 million loss related to the Pacific Oak Opportunity Zone Fund I investment during the nine months ended September 30, 2020. During the nine months ended September 30, 2019, we recorded $7.5 million equity in income from the 110 William Joint Venture, which includes a $7.8 million gain related to a distribution received, net of our share of net losses of $0.3 million. We ceased to record the 110 William Joint Venture under the equity method of accounting due to distributions received during the nine months ended September 30, 2019 exceeding our investment balance.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Other interest income decreased from $1.9 million forDuring the nine months ended September 30, 2019 to $0.32021, we recognized impairment charges on goodwill of $1.6 million on Lincoln Court and $1.2 million on 210 West 31st Street. No impairment charges on goodwill were recorded in 2020.
Equity in income of unconsolidated entities decreased from income of $1.6 million for the nine months ended September 30, 2020 primarily asto a result of decreased dividends from money market mutual funds due to our decreased investment balance in these funds.
Gain on real estate equity securities was $19.3$0.1 million loss for the nine months ended September 30, 2019, which was made up2021, primarily as a result of a $15.9 million unrealized gain on real estate securities held at September 30, 2019 and a $3.4 million realized gain on real estate securities sold duringbad debt expense for the 353 Sacramento joint venture for the nine months ended September 30, 2019. 2021.
Loss on real estate equity securities was $21.6 million for the nine months ended September 30, 2020, which was made up of a $22.3 million unrealized gainloss on real estate securities held at September 30, 2020 and a $0.7 million realized loss on real estate securities sold during the nine months ended September 30, 2020. Gain on real estate equity securities was $12.9 million for the nine months ended September 30, 2021, which was made up of a $9.9 million unrealized gain on real estate securities held at September 30, 2021 and a $3.0 million realized gain on real estate securities sold during the nine months ended September 30, 2021. We expect gains and losses on real estate equity securities to fluctuate in future periods as a result of changes in share prices of our investments in real estate equity securities.
During the nine months ended September 30, 2019,2021, we sold one apartment propertyapproximately 193 developable acres of Park Highlands undeveloped land that resulted in a gain on sale of $18.1$31.1 million. There were no material dispositions during the nine months ended September 30, 2020.
During the nine months ended September 30, 2019,2021, we recognized lossa gain on extinguishment of debt of $0.9$1.4 million relatedand this is primarily due to debt repayments in connection with a real estate disposition.

the SBA approving our application for forgiveness of the Springmaid Beach Resort PPP note of $1.3 million.
Funds from Operations, Modified Funds from Operations and Adjusted 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 real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), impairment losses on real estate assets, depreciation and amortization of real estate assets, and adjustments for unconsolidated partnerships and joint ventures. In addition, we elected the option to exclude mark-to-market changes in value recognized on equity securities in the calculation of FFO. 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 modified funds from operations (“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 Institute for Portfolio Alternatives (“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.
In addition, our management uses an adjusted MFFO (“Adjusted MFFO”) as an indicator of our ongoing performance, as well as our dividend sustainability. Adjusted MFFO provides adjustments to reduce MFFO related to operating expenses that are capitalized with respect to certain of our investments in undeveloped land. 
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
We believe that MFFO and Adjusted MFFO are helpful as measures of ongoing operating performance because they exclude costs that management considers more reflective of investing activities and other non-operating items included in FFO. Management believes that excluding acquisition costs, prior to our early adoption of ASU No. 2017-01 on January 1, 2017, from MFFO and Adjusted MFFO provides investors with supplemental performance information that is consistent with management’s analysis of the operating performance of the portfolio over time, including periods after our acquisition stage. MFFO and Adjusted MFFO also exclude non-cash items such as straight-line rental revenue. Additionally, we believe that MFFO and Adjusted MFFO provide 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, MFFO and Adjusted 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, MFFO and Adjusted 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, MFFO and Adjusted MFFO should not be considered as alternatives to net income as an indicator of our current and historical operating performance. In addition, FFO, MFFO and Adjusted 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, MFFO and Adjusted MFFO, in addition to net income and cash flows from operating activities as defined by GAAP, are meaningful supplemental performance measures.
Although MFFO includes other adjustments, the exclusion of straight-line rent, the amortization of above- and below-market leases, mark to market foreign currency transaction adjustments and extinguishment of debt 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;
Mark-to-market foreign currency transaction adjustments. The U.S. Dollar is our functional currency. Transactions denominated in currency other than our functional currency are recorded upon initial recognition at the exchange rate on the date of the transaction. After initial recognition, monetary assets and liabilities denominated in foreign currency are remeasured at each reporting date into the foreign currency at the exchange rate on that date. In addition, we have entered into foreign currency collars and foreign currency options that results in a foreign currency transaction adjustment. These amounts can increase or reduce net income. We exclude them from MFFO to more appropriately present the ongoing operating performance of our real estate investments on a comparative basis; and
Loss on extinguishment of debt. A loss on extinguishment of debt, which includes prepayment fees related to the extinguishment of debt, represents the difference between the carrying value of any consideration transferred to the lender in return for the extinguishment of a debt and the net carrying value of the debt at the time of settlement. We have excluded the loss from extinguishment of debt in our calculation of MFFO because these losses do not impact the current operating performance of our investments and do not provide an indication of future operating performance.
Gain from measurement of prior equity interest. A gain from measurement of prior equity interest, represents a fair value gain on our previous investment in Battery Point Series A-3 Preferred Units that were eliminated during the acquisition of BPT Holdings. We have excluded the gain from measurement of prior equity interest in our calculation of MFFO because these gains do not impact the current operating performance of our investments and do not provide an indication of future operating performance.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Adjusted MFFO includes adjustments to reduce MFFO related to real estate taxes, property insurance and financing costs which are capitalized with respect to certain of our investments in undeveloped land.  We have included adjustments for the costs incurred necessary to bring these investments to their intended use, as these costs are recurring operating costs that are capitalized in accordance with GAAP and not reflected in our net (loss) income, FFO and MFFO. In addition, adjusted MFFO includes an adjustment for casualty loss and fair value change of restricted stock payable. We believe excluding these items appropriately presents the ongoing operating performance of our real estate investments on a comparative basis.
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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 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 calculations of MFFO and Adjusted MFFO, for the three and nine months ended September 30, 20202021 and 20192020 (in thousands). No conclusions or comparisons should be made from the presentation of these periods.
For the Three Months Ended September 30,For the Nine Months Ended September 30,
2020201920202019
Net (loss) income attributable to common stockholders$(7,493)$772 $(21,797)$11,304 
Depreciation of real estate assets6,233 5,121 17,601 14,403 
Amortization of lease-related costs3,237 4,118 9,816 10,873 
Gain on sale of real estate (1)
— (10,559)— (18,128)
Loss (gain) on real estate equity securities6,527 (3,845)21,620 (19,304)
Adjustments for noncontrolling interests - consolidated entities (2)
(141)1,487 (286)2,112 
Adjustments for investments in unconsolidated entities (3)
2,158 1,569 4,618 (3,489)
FFO attributable to common stockholders10,521 (1,337)31,572 (2,229)
Straight-line rent and amortization of above- and below-market leases(1,021)(1,303)(2,994)(4,069)
Accretion of interest income on real estate debt securities— — — (13)
Amortization of net premium/discount on bond and notes payable64 (27)14 (73)
Loss on extinguishment of debt— — 861 
Unrealized loss on interest rate caps31 13 10 50 
Mark-to-market foreign currency transaction loss (gain), net445 5,344 (12,338)10,634 
Gain from remeasurement of prior equity interest(2,009)— (2,009)— 
Adjustments for noncontrolling interests - consolidated entities (2)
(2)19 (73)
Adjustments for investments in unconsolidated entities (3)
(892)(1,344)(3,044)(4,350)
MFFO attributable to common stockholders7,137 1,371 11,220 738 
Other capitalized operating expenses (4)
(828)(802)(2,704)(2,338)
Casualty-related (gain) loss— — (51)506 
Adjustments for noncontrolling interests - consolidated entities (2)
— — — (51)
Change in subordinated performance fee due upon termination to affiliate(1,121)— (814)— 
Adjusted MFFO attributable to common stockholders$5,188 $569 $7,651 $(1,145)
For the Three Months Ended September 30,For the Nine Months Ended September 30,
2021202020212020
Net income (loss) attributable to common stockholders$(24,516)$(7,493)$3,671 $(21,797)
Depreciation of real estate assets8,569 6,233 26,689 17,601 
Amortization of lease-related costs5,326 3,237 19,279 9,816 
Gain on sale of real estate (1)
(216)— (31,385)— 
Impairment charges on real estate10,971 — 10,971 — 
Impairment charges on goodwill2,808 — 2,808 — 
Loss (gain) on real estate equity securities2,614 6,527 (12,939)21,620 
Gain on extinguishment of debt(1,352)— (1,365)— 
Adjustments for noncontrolling interests - consolidated entities (2)
(400)(141)(1,238)(286)
Adjustments for investments in unconsolidated entities (3)
(25)2,158 747 4,618 
FFO attributable to common stockholders3,779 10,521 17,238 31,572 
Straight-line rent and amortization of above- and below-market leases(711)(1,021)(2,544)(2,994)
Amortization of net premium/discount on bond and notes payable461 64 1,906 14 
Unrealized loss on interest rate caps31 17 10 
Mark-to-market foreign currency transaction loss (gain), net2,271 445 (568)(12,338)
Gain from remeasurement of prior equity interest— (2,009)— (2,009)
Adjustments for noncontrolling interests - consolidated entities (2)
(24)(2)(122)
Adjustments for investments in unconsolidated entities (3)
15 (892)1,662 (3,044)
MFFO attributable to common stockholders5,792 7,137 17,589 11,220 
Other capitalized operating expenses (4)
(597)(828)(1,926)(2,704)
Casualty-related gain(27)— (27)(51)
Change in subordinated performance fee due upon termination to affiliate1,545 (1,121)1,745 (814)
Adjusted MFFO attributable to common stockholders$6,713 $5,188 $17,381 $7,651 
_____________________
(1) Reflects an adjustment to eliminate gain on sale of real estate.
(2) Reflects adjustments to eliminate the noncontrolling interest holders’ share of the adjustments to convert our net (loss) income attributable to common stockholders to FFO, MFFO and Adjusted MFFO.
(3) Reflects adjustments to add back our noncontrolling interest share of the adjustments to convert our net (loss) income attributable to common stockholders to FFO, MFFO and Adjusted MFFO for our equity investments in unconsolidated joint ventures.
(4) Reflects real estate taxes, property insurance and financing costs that are capitalized with respect to certain of our investments in undeveloped land and unconsolidated entity.  During the periods in which we are incurring costs necessary to bring these investments to their intended use, certain normal recurring operating costs are capitalized in accordance with GAAP and not reflected in our net (loss) income, FFO and MFFO.
FFO, MFFO and Adjusted MFFO may also be used to fund all or a portion of certain capitalizable items that are excluded from FFO, MFFO and Adjusted MFFO, such as tenant improvements, building improvements and deferred leasing costs. We expect FFO, MFFO and Adjusted MFFO to improve in future periods to the extent that we continue to lease up vacant space and acquire additional assets. We expect FFO, MFFO and Adjusted MFFO to decrease as a result of dispositions.

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Distributions
CommonThere were no distributions declared distributions paid and cash flows provided by operations were as follows for the first, second and third quarters of 2020 (in thousands, except per share amounts):
 Distribution DeclaredDistributions Declared Per Share
Distributions Paid (1)
Cash Flows (Used In) Provided By Operations
PeriodCashReinvestedTotal
First Quarter 2020$596 $0.0086 $305 $262 $567 $(1,520)
Second Quarter 2020— — 29 — 29 5,616 
Third Quarter 2020— — — — — 710 
$596 $0.0086 $334 $262 $596 $4,806 
On January 23, 2020, our board of directors authorized a distribution in the amount of $0.0086 per share of common stock to stockholders of record as of the close of business on January 29, 2020. We paid this distribution on January 29, 2020 and this was the only distribution declared during the first quarter of 2020.
For the nine months ended September 30, 2020, we paid aggregate distributions of $0.6 million, including $0.3 million of distributions paid in cash and $0.3 million of distributions reinvested through our dividend reinvestment plan.2021. Our net lossincome attributable to common stockholders for the nine months ended September 30, 20202021 was $22.3$3.7 million and our cash flows provided by operations were $4.8$11.3 million. Our cumulative distributions paid and net income attributable to common stockholders from inception through September 30, 20202021 were $195.4 million and $147.5$126.1 million, respectively. We have funded our cumulative distributions paid, which includes net cash distributions and distributions reinvested by stockholders, with proceeds from debt financing of $18.7 million, gainsproceeds from the dispositions of property of $83.4 million and cash provided by operations of $106.9$93.3 million. To the extent that we pay distributions from sources other than our cash flow from operations or gains from asset sales, we will have fewer funds available for investment in real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments, the overall return to our stockholders may be reduced and subsequent investors may experience dilution.

Critical Accounting Policies
Our consolidated interim financial statements 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 and assumptions, require estimates about matters that are inherently uncertain and because they are important for understanding and evaluating our reported financial results. These judgments will affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at 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, 20192020 filed with the SEC. There have been no significant changes to our policies during 2020.2021.

Subsequent Events
We evaluate subsequent events up until the date the consolidated financial statements are issued.
Richardson Acquisition
On November 22, 2011, we, through an indirect wholly owned subsidiary, and JP-Richardson, LLC, an affiliate of JP Realty Partners, LTD., entered into an agreement to form a joint venture (the “Richardson Joint Venture”), and on November 23, 2011, the Richardson Joint Venture acquired a portfolio of office buildings and undeveloped land in Richardson, Texas (the “Richardson Portfolio”).
On October 18, 2021, we purchased the 10% minority interest in the Richardson Joint Venture, for $4.0 million from JP-Richardson, LLC. As of the date of purchase, the Richardson Portfolio consisted of four office buildings and 14 acres of undeveloped land. Subsequent to the purchase, we owned 100% of the Richardson Joint Venture.
Bond Offerings
Subsequent to September 30, 2021, we issued additional Series B Debentures in the amount of 536.4 million Israeli new Shekels par value through a public offering. The public offering Series B Debentures were issued at a 2.6% discount resulting in a total consideration of 522.4 million Israeli new Shekels ($166.8 million as of November 1, 2021). Additionally, we also issued 53.6 million Israeli new Shekels par value through a private offering. The private offering Series B Debentures were issued at a 3.1% discount resulting in a total consideration of 52.0 million Israeli new Shekels ($16.6 million as of November 1, 2021). The additional Series B Debentures have an equal level of security, pari passu, amongst themselves and between them and the initial Series B Debentures, which were initially issued, without any right of precedence or preference between any of them. The Series B Debentures were issued with the intent of using the proceeds and available cash on hand to payoff the outstanding Series A Debentures.

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Subsequent Events
We evaluate subsequent events up until the date the consolidated financial statements are issued.
MergerNotes Payable Refinancing
On October 5, 2020, pursuant7, 2021, the Company refinanced the Madison Square Mortgage Loan with a mortgage loan from an unaffiliated lender (the “Refinancing”) for borrowings up to $27.0 million. At closing, $17.5 million of the Merger Agreement, POSOR II mergedloan was funded and the remaining $9.5 million was available for future disbursements, subject to certain terms and conditions contained in the loan documents. The Refinancing is interest only with a fixed interest rate of 4.625% and into Merger Sub, with Merger Sub surviving as an indirect subsidiaryhas a maturity date of ours (the “Merger”). At such time, in accordanceOctober 7, 2024. In connection with the applicable provisionsexecution of the Maryland General Corporation Law (the “MGCL”)Refinancing, Pacific Oak SOR Properties, LLC, a wholly owned subsidiary, is providing an unconditional guarantee and the Maryland Limited Liability Company Act, the separate existence of POSOR II ceased. At the effective time of the Merger, each issued and outstanding share of POSOR II’s common stock (or a fraction thereof), $0.01 par value per share, converted into 0.9643 shares of our common stock, $0.01 par value per share, or 28,973,906 shares of the our common stock. The combined company after the Merger retains the name “Pacific Oak Strategic Opportunity REIT, Inc.” The Merger is intended to qualifywill be held liable, as a “reorganization”primary obligor for our obligations under and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended. We acquired two hotel properties, three office properties, one apartment building, one consolidated joint venture to develop one office/retail property, two real estate equity securities and two investments in unconsolidated entities. Additionally, we assumed $331.8 million of loans related to the acquired properties. Pro forma revenues and earnings have not been presented as the initial accounting for the transaction is incomplete as of the date of the consolidated financial statements are issued. We are in process of assessing the fair value of the acquired tangible assets, liabilities assumed and any applicable intangible assets and liabilities for this business combination.

Refinancing.
Item 3.     Quantitative and Qualitative Disclosures about Market Risk
We are exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity, fund distributions and to fund the refinancing of our real estate investment portfolio and operations. We may also be exposed to the effects of changes in interest rates as a result of the acquisition and origination of mortgage, mezzanine, bridge and other loans and the acquisition of real estate securities. We are also exposed to the effects of foreign currency changes in Israel with respect to the 4.25% and 3.93% bonds issued to investors in Israel in March 2016 and February 2020, respectively. Our profitability and the value of our investment portfolio may be adversely affected during any period as a result of interest rate changes and foreign currency changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs. We may manage interest rate risk by maintaining a ratio of fixed rate, long-term debt such that floating rate exposure is kept at an acceptable level. In addition, we may utilize a variety of financial instruments, including interest rate caps, floors, and swap agreements, in order to limit the effects of changes in interest rates on our operations. In order to limit the effects of changes in foreign currency on our operations, we may utilize a variety of foreign currency hedging strategies such as cross currency swaps, forward contracts, puts or calls. When we use these types of derivatives to hedge the risk of interest-earning assets or interest-bearing liabilities, we may be subject to certain risks, including the risk that losses on a hedge position will reduce the funds available for payments to holders of our common stock and the risk that the losses may exceed the amount we invested in the instruments. Additionally, certain of these strategies may cause us to fund a margin account periodically to offset changes in foreign currency rates which may also reduce the funds available for payments to holders of our common stock.
As of September 30, 2020,2021, we had entered into one foreign currency collar to hedge against a change in the exchange rate of the Israeli new Shekel versus the U.S. Dollar. The foreign currency collar expire in November 2021 and has Israeli new Shekels notional amounts of 194.0 million. The 194.0 million Israeli new Shekels foreign currency collar consists of a purchased call option to buy Israeli new Shekels at 3.16 and a sold put option to sell the Israeli new Shekels at 3.29. The foreign currency collar is intended to permit us to exchange, on the settlement date of the collar, 194.0 million Israeli new Shekels for an amount ranging from $59.0 million to $61.4 million.
As of September 30, 2021, we held 37.8114.6 million Israeli new Shekels and 20.121.3 million Israeli new Shekels in cash and restricted cash, respectively. In addition, as of September 30, 2020,2021, we had bonds outstanding and the related interest payable in the amounts of 836.2892.1 million Israeli new Shekels and 3.73.9 million Israeli new Shekels, respectively. Foreign currency exchange rate risk is the possibility that our financial results could be better or worse than planned because of changes in foreign currency exchange rates. Based solely on the remeasurement for the nine months ended September 30, 2020,2021, if foreign currency exchange rates were to increase or decrease by 10%, our net income would increase or decrease by approximately $20.8$21.4 million and $25.4$26.2 million, respectively, for the same period. The foreign currency transaction income or loss as a result of the change in foreign currency exchange rates does not take into account any gains or losses on our foreign currency collar as a result of such change, which would reduce our foreign currency exposure.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 3.     Quantitative and Qualitative Disclosures about Market Risk (continued)

We borrow funds at a combination of fixed and variable rates. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. As of September 30, 2020,2021, the fair value of our Pacific Oak SOR (BVI) Holdings, Ltd. Series A and Series B Debentures was $158.6$197.4 million and $60.3$76.9 million, respectively, and the outstanding principal balance was $169.9$197.9 million and $74.2$78.8 million, respectively. As of September 30, 2020,2021, excluding the Pacific Oak SOR (BVI) Holdings, Ltd. Series A and Series B Debentures, the fair value of our fixed rate debt was $88.3$132.3 million and the outstanding principal balance of our fixed rate debt was $79.8$127.5 million. The fair value estimate of our Pacific Oak SOR (BVI) Holdings, Ltd. Series A and Series B Debentures were calculated using the quoted bond price as of September 30, 20202021 on the Tel Aviv Stock Exchange of 93.7100.12 and 8298.25 Israeli new Shekels, respectively. The fair value estimate of our fixed rate debt was calculated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loans were originated as of September 30, 2020.2021. As we expect to hold our fixed rate instruments to maturity and the amounts due under such instruments would be limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that fluctuations in interest rates, and the resulting changes in fair value of our fixed rate instruments, would have a significant impact on our operations.
Conversely, movements in interest rates on variable rate debt would change our future earnings and cash flows, but would not significantly affect the fair value of those instruments. However, changes in required risk premiums would result in changes in the fair value of floating rate instruments. As of September 30, 2020,2021, we had entered into threefour separate interest rate caps with an aggregate notional of $175.6$201.1 million which effectively limits our exposure to increases in one-month LIBOR above certain thresholds. Based on interest rates as of September 30, 2020,2021, if interest rates were 100 basis points higher or lower during the 12 months ending September 30, 2021,2022, interest expense on our variable rate debt would increase by $4.3 million or decrease by $0.5 million.$4.2 million and $0.3 million, respectively.
The weighted-average interest rates of our fixed rate debt and variable rate debt as of September 30, 20202021 were 4.3%4.2% and 2.2%2.8%, respectively. The interest rate and weighted-average interest rate represent the actual interest rate in effect as of September 30, 20202021 (consisting of the contractual interest rate and the effect of contractual floor rates, if applicable), using interest rate indices as of September 30, 20202021 where applicable.
We are exposed to financial market risk with respect to our real estate equity securities. Financial market risk is the risk that we will incur economic losses due to adverse changes in our real estate equity security prices. Our exposure to changes in real estate equity security prices is a result of our investment in these types of securities. Market prices are subject to fluctuation and, therefore, the amount realized in the subsequent sale of an investment may significantly differ from the reported market value. Fluctuation in the market prices of a real estate equity security may result from any number of factors, including perceived changes in the underlying fundamental characteristics of the issuer, the relative price of alternative investments, interest rates, default rates and general market conditions. In addition, amounts realized in the sale of a particular security may be affected by the relative quantity of the real estate equity security being sold. We do not currently engage in derivative or other hedging transactions to manage our real estate equity security price risk. As of September 30, 2020,2021, we owned real estate equity securities with a book value of $84.4$96.4 million. Based solely on the prices of real estate equity securities as of September 30, 2020,2021, if prices were to increase or decrease by 10%, our net income would increase or decrease by approximately $8.4$9.6 million.

Item 4. Controls and Procedures
Disclosure Controls and Procedures
As of the end of the period covered by this report, management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based upon, and as of the date of, the evaluation, our principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in the reports we file and submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported as and when required. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION

Item 1. Legal Proceedings
None.

Item 1A. Risk Factors
We are dependent onThere have been no material changes from the third-party managersrisk factors previously disclosed in Part I, Item 1A of our hotels.
We currently own two hotel properties. In order to qualify as a REIT, we are not able to operate any hotel properties or participate inAnnual Report on Form 10-K for the decisions affecting the daily operationsyear ended December 31, 2020 and Part II, Item 1A of our hotels. We will lease any hotels we acquire to a “taxable REIT subsidiary” or “TRS” in which we may own up to a 100% interest. Our TRS will enter into management agreements with eligible independent contractors that are not our subsidiaries or otherwise controlled by us to manageQuarterly Report on Form 10-Q for the hotels. Thus, independent hotel operators, under management agreements with our TRS, will control the daily operations of our hotels.
We depend on these independent management companies to adequately operate our hotelssix months ended June 30, 2021, each as provided in the management agreements. We will not have the authority to require any hotel to be operated in a particular manner or to govern any particular aspect of the daily operations of any hotel (for instance, setting room rates). Thus, even if we believe our hotels are being operated inefficiently or in a manner that does not result in satisfactory occupancy rates, revenue per available room and average daily rates, we may not be able to force the management company to change its method of operation of our hotels. We can only seek redress if a management company violates the terms of the applicable management agreementfiled with the TRS, and then only to the extent of the remedies provided for under the terms of the management agreement. In the event that we need to replace our management company, we may be required by the terms of the management agreement to pay substantial termination fees and may experience significant disruptions at the affected hotel.SEC.
If any hotel managers that we may engage do not qualify as “eligible independent contractors,” or if our hotels are not “qualified lodging facilities,” we will fail to qualify as a REIT.
Rent paid by a lessee that is a “related party tenant” of ours generally will not be qualifying income for purposes of the two gross income tests applicable to REITs, but an exception is provided for leases of “qualified lodging facilities” to a TRS so long as the hotels are managed by an “eligible independent contractor” and certain other requirements are satisfied. We expect to lease all or substantially all of our hotels to the TRS lessee, which is a disregarded subsidiary that is intended to qualify as a TRS. We expect that the TRS lessee will engage hotel managers, including our affiliated property manager and third-party property managers that are intended to qualify as “eligible independent contractors.” Among other requirements, in order to qualify as an eligible independent contractor, the hotel manager must not own, directly or through its equity owners, more than 35% of our outstanding stock, and no person or group of persons can own more than 35% of our outstanding stock and the equity interests of the hotel manager, taking into account certain ownership attribution rules. The ownership attribution rules that apply for purposes of these 35% thresholds are complex and monitoring actual and constructive ownership of our stock by our hotel managers and their owners may not be practical. Accordingly, there can be no assurance that these ownership levels will not be exceeded.
In addition, for a hotel management company to qualify as an eligible independent contractor, such company or a related person must be actively engaged in the trade or business of operating “qualified lodging facilities” (as defined below) for one or more persons not related to the REIT or its TRS at each time that such company enters into a hotel management contract with a TRS or its TRS lessee. No assurances can be provided that any hotel managers that we may engage will in fact comply with this requirement in the future. Failure to comply with this requirement would require us to find other managers for future contracts, and if we hired a management company without knowledge of the failure, it could jeopardize our status as a REIT.
Finally, each property that we lease to our TRS lessee must be a “qualified lodging facility.” A “qualified lodging facility” is a hotel, motel, or other establishment more than one-half of the dwelling units in which are used on a transient basis, including customary amenities and facilities, provided that no wagering activities are conducted at or in connection with such facility by any person who is engaged in the business of accepting wagers and who is legally authorized to engage in such business at or in connection with such facility. The REIT provisions of the Code provide only limited guidance for making determinations under the requirements for qualified lodging facilities, and there can be no assurance that these requirements will be satisfied.

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
a)During the period covered by this Form 10-Q, we did not sell any equity securities that were not registered under the Securities Act of 1933, as amended.
b)Not applicable.
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PART II. OTHER INFORMATION (CONTINUED)
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds (Continued)
c)We have adopted a share redemption program that may enable stockholders to sell their shares to us in limited circumstances.
Pursuant to the share redemption program there are several limitations on our ability to redeem shares:
Unless the shares are being redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence” (each as defined under the share redemption program), we may not redeem shares until the stockholder has held the shares for one year.
During any calendar year, we may redeem no more than 5% of the weighted-average number of shares outstanding during the prior calendar year.
We have no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency.
During any calendar year, we may redeem only the number of shares that we can purchase with the amount of net proceeds from the sale of shares under the our dividend reinvestment plan during the prior calendar year; provided, however, that this limit may be increased or decreased by us upon ten business days’ notice to our stockholders. To the extent that we redeem less than the number of shares that we can purchase in any calendar year with the amount of net proceeds from the sale of shares under our dividend reinvestment plan during the prior calendar year plus any additional funds approved by us, such excess capacity to redeem shares during any calendar year shall be added to our capacity to otherwise redeem shares during the subsequent calendar year. Furthermore, during any calendar year, once we have received requests for redemptions, whether in connection with a stockholder’s death, “qualifying disability or “determination of incompetence”, or otherwise, that if honored, and when combined with all prior redemptions made during the calendar year, would result in the amount of remaining funds available for the redemption of additional shares in such calendar year being $1.0 million or less, the last $1.0 million of available funds shall be reserved exclusively for shares being redeemed in connection with a stockholder’s death, “qualifying disability or “determination of incompetence.” To the extent that, in the last month of any calendar year, the amount of redemption requests in connection with a stockholder’s death, “qualifying disability or “determination of incompetence” is less than the amount of available funds reserved for such redemptions in accordance with the previous sentence, any excess funds may be used to redeem shares not in connection with a stockholder’s death, “qualifying disability or “determination of incompetence” during such month.
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PART II. OTHER INFORMATION (CONTINUED)
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds (Continued)
We may not redeem more than $3.0 million of shares in a given quarter (excluding shares redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence”). To the extent that, in a given fiscal quarter, we redeem less than the sum of (a) $3.0 million of shares (excluding shares redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence”) and (b) any excess capacity carried over to such fiscal quarter from a prior fiscal quarter as described below, any remaining excess capacity to redeem shares in such fiscal quarter will be added to our capacity to otherwise redeem shares (excluding shares redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence”) during succeeding fiscal quarter. We may increase or decrease this limit upon ten business days’ notice to stockholders.
We may amend, suspend or terminate the program upon ten business days’ notice to our stockholders. We may provide notice to our stockholders by including such information in a Current Report on Form 8-K or in our annual or quarterly reports, all publicly filed with the SEC, or by a separate mailing to our stockholders.
Effective beginningSeparate from the funding described in the first bullet above, in December 2020, our board of directors has made available a total of $2.0 million for redemptions in connection with a stockholder's death, “qualifying disability”, or “determination of incompetence” and that will carry forward until depleted. Additionally, on April 12, 2021, our board of directors made available an additional $2.0 million for redemptions in connection with a stockholder's death, “qualifying disability”, or “determination of incompetence” that will carry forward until depleted.
On August 5, 2021 our board of directors approved Amendment 1 (the “Amendment”) to the monthTwelfth Amended and Restated Share Redemption Program (the “SRP”). The Amendment was effective as of February 2020, we have suspended (a)August 20, 2021 and provides, that, pursuant to Section 4(b) of the SRP, an additional $30 million in funding was authorized for redemptions requested under the share redemption program(excluding those submitted in connection with a stockholder’s death, “qualifying disability”qualifying disability or “determinationdetermination of incompetence”, until we andincompetence). The Amendment also provided that the funding limitations set forth in Section 4(d) of the SRP shall not apply for the remainder of 2021. Finally, the Amendment provides that, for the avoidance of doubt, for purposes of Section 4(a) of the SRP, our stockholders who received their shares in connection with the POSOR II file with the SECMerger shall be deemed to have held such shares in us for over a registration statement on Form S-4 containing a Joint Proxy Statement/Prospectusyear. The Amendment will was effective for the Merger, and (b) all otherSeptember 2021 redemption date, which was September 30, 2021.
On October 26, 2021, the board of directors approved the temporary suspension of processing redemptions under the share redemption program until afterprogram. The temporary suspension will be in effect for October and November 2021 redemptions and will resume at the Merger closes. The Form S-4 was filedend of December 2021. This will impact redemption requests made in connection with a stockholder’s death, disability or determination of incompetence, but has no impact on June 15, 2020 with the SEC and the Merger closed on October 5, 2020.ordinary redemption requests, which are typically made only at quarter end.

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PART II. OTHER INFORMATION (CONTINUED)
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds (Continued)

During the nine months ended September 30, 2020,2021, we fulfilled redemption requests eligible for redemption under our share redemption program and received in good order and funded redemptions under our share redemption program with the net proceeds from our dividend reinvestment plan and cash on hand. We redeemed shares pursuant to our share redemption program as follows:
Month
Total Number
of Shares Redeemed
Average Price Paid
Per Share (1)
Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program
January 202044,025 $10.63 (2)
February 2020— $— (2)
March 2020— $— (2)
April 2020— $— (2)
May 2020— $— (2)
June 202033,505 $10.63 (2)
July 2020600 $10.63 (2)
August 2020— $— (2)
September 2020— $— (2)
Total78,130 
Month
Total Number
of Shares Redeemed
Average Price Paid
Per Share (1)
Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program
January 202124,076 $9.68 (2)
February 20213,138 $9.68 (2)
March 202160,929 $9.68 (2)
April 202116,532 $9.68 (2)
May 202119,645 $9.68 (2)
June 202123,994 $9.68 (2)
July 202137,086 $9.68 (2)
August 202112,691 $9.68 (2)
September 20213,007,822 $9.22 (2)
Total3,205,913 
_____________________
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PART II. OTHER INFORMATION (CONTINUED)
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds (Continued)
(1) On December 17, 2019,4, 2020, our board of directors approved an estimated value per share of our common stock of $10.63.$9.68. The change in the redemption price became effective for the December 20192020 redemption date and is effective until the estimated value per share is updated. We expect to update our estimated value per share no later than December 2020.2021.
(2) We limit the dollar value of shares that may be redeemed under the program as described above. During the nine months ended September 30, 2020,2021, we redeemed $0.8$29.6 million of common stock under the program, which represented all redemption requests received in good order and eligible for redemption through the September 20202021 redemption date, except for the $60.0$128.0 million of shares in connection with redemption requests not made upon a stockholder’s death, “qualifying disability” or “determination of incompetence,” which redemption requests will be fulfilled subject to the limitations described above. Based on the EleventhTwelfth SRP, we have exhausted all$3.2 million available funds for redemptions in the remainder of 2020, including shares that are redeemed in connection with a stockholders’ death, “qualifying disability” or “determination of incompetence,” subject to the limitations described above.2021.

Item 3. Defaults upon Senior Securities
None.

Item 4. Mine Safety Disclosures
None.
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PART II. OTHER INFORMATION (CONTINUED)
Item 5. Other Information
PORT II
On August 31, 2020, Pacific Oak Residential Trust II, Inc. (“PORT II”), entered into an advisory agreement (as subsequently amended and restated on October 9, 2020, “PORT II Advisory Agreement”) with Pacific Oak Residential Advisors, LLC (“PORA”), an affiliate ofNovember 11, 2021, we renewed the Advisor. Pursuant to the PORT II Advisory Agreement, PORT II has engaged PORA to act as its external advisor with respect to PORT II’s operations and assets.
Because the Company has separately engaged the Advisor to manage its operations and assets, including its interests in PORT II, on November 12, 2020, the Company and the Advisor agreed to amend their advisory agreement to provide that PORT II’s operations and assets will be managed by PORA and not by the Advisor. In addition, the amendment provides that the Advisor will rebate or offset its fees under its advisory agreement with the Company to the extentAdvisor. The renewed advisory agreement is effective through November 1, 2022. The terms of the Company’s indirect economic interest in fees paid by PORT II to PORA (which will be based on the Company’s indirect ownership of PORT II OP LP (“PORT II OP”), which is the operating partnership of PORT II and the entity ultimately responsible for PORT II’s administrative expenses).
Previously, on August 31, 2020, PORT II entered into a property managementrenewed advisory agreement are consistent with DMH Realty, LLC (“DMH”), an affiliate of POCA and PORA. Pursuant to the property management agreement, PORT II will pay to DMH a base fee equal to the following: (a) for all rent collections up to $50 million per year, 8%; (b) for all rent collections in excess of $50 million per year, but less than or equal to $75 million per year, 7%; and (c) for all rent collections in excess of $75 million per year, 6%. PORT II will also pay DMH market-based leasing fees that will depend on the type of tenant, shared fees equal to 100% of any application fees collected and 50% of any insufficient funds fees, late fees and certain other fees collected. DMH may also perform additional services at rates that would be payable to unrelated parties.
PORT II is a newly-organized Maryland corporation formed and sponsored by the Advisor to acquire, own and operate single family homes as rental properties as well as to acquire and own other interests, including mortgages on or securities related to single family homes. The Company has contributed $5 million in capital to PORT II OP. The Company made its investment through PORT OP, of which the Company owns 96.1%those of the equity as of November 13, 2020.advisory agreement that was previously in effect.

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PART II. OTHER INFORMATION (CONTINUED)


Item 6. Exhibits
Ex.Description
2.1
3.1
3.2
3.3
3.4
3.5
4.1
4.2
10.1
10.2
10.3
10.4
10.5
10.6
31.1
31.2
32.1
32.2
99.1
99.2




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PART II. OTHER INFORMATION (CONTINUED)


Item 6. Exhibits (Continued)
Ex.Description
101.INSInline XBRL Instance Document
101.SCHInline XBRL Taxonomy Extension Schema
101.CALInline XBRL Taxonomy Extension Calculation Linkbase
101.DEFInline XBRL Taxonomy Extension Definition Linkbase
101.LABInline XBRL Taxonomy Extension Label Linkbase
101.PREInline XBRL Taxonomy Extension Presentation Linkbase
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
Date:November 13, 202012, 2021By:
/S/ KEITH D. HALL        
Keith D. Hall
Chief Executive Officer and Director
(principal executive officer)
Date:November 13, 202012, 2021By:/S/ MICHAEL A. BENDER   
 Michael A. Bender
 Chief Financial Officer
(principal financial officer)

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