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 March 31, 20212022
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 Filer☐Accelerated Filer☐
Non-Accelerated Filer☒Smaller 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 May 5, 2021,6, 2022, there were 97,949,906104,420,389 outstanding shares of common stock of Pacific Oak Strategic Opportunity REIT, Inc.

Table of Contents
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
FORM 10-Q
March 31, 20212022
INDEX 
PART I.
2
Item 1.
2
2
3
4
5
6
Item 2.
3327
Item 3.
4537
Item 4.
4638
PART II.
4739
Item 1.
4739
Item 1A.
4739
Item 2.
4739
Item 3.
4840
Item 4.
4840
Item 5.
4941
Item 6.
4941
5042

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)
 March 31, 2021December 31, 2020
 (unaudited)
Assets
Real estate held for investment, net$1,404,347 $1,413,023 
Real estate equity securities94,217 97,903 
Total real estate and real estate-related investments, net1,498,564 1,510,926 
Cash and cash equivalents96,740 60,335 
Restricted cash17,371 13,984 
Investments in unconsolidated entities80,889 79,666 
Rents and other receivables, net26,605 25,911 
Above-market leases, net2,923 3,157 
Prepaid expenses and other assets22,619 21,344 
Goodwill16,342 16,342 
Total assets$1,762,053 $1,731,665 
Liabilities, mezzanine equity and equity
Notes and bonds payable, net$1,125,027 $1,099,068 
Accounts payable and accrued liabilities18,895 24,169 
Due to affiliate5,115 2,842 
Below-market leases, net5,902 6,462 
Other liabilities37,283 34,738 
Redeemable common stock payable11 864 
Restricted stock payable15,061 14,600 
Total liabilities1,207,294 1,182,743 
Commitments and contingencies (Note 14)00
Mezzanine equity
Restricted stock11,009 11,009 
Noncontrolling cumulative convertible redeemable preferred stock15,233 15,233 
Redeemable noncontrolling interest2,936 2,968 
Equity
Pacific Oak Strategic Opportunity REIT, Inc. stockholders’ equity
Preferred stock, $.01 par value; 10,000,000 shares authorized, 0 shares issued and outstanding0 0 
Common stock, $.01 par value; 1,000,000,000 shares authorized, 97,966,439 and 98,054,582 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively979 979 
Additional paid-in capital831,295 831,295 
Cumulative distributions and net income(319,208)(325,720)
Total Pacific Oak Strategic Opportunity REIT, Inc. stockholders’ equity513,066 506,554 
Noncontrolling interests12,515 13,158 
Total equity525,581 519,712 
Total liabilities, mezzanine equity and equity$1,762,053 $1,731,665 

 March 31, 2022December 31, 2021
 (unaudited)
Assets
Real estate held for investment, net (Note 3)$1,202,234 $1,209,243 
Real estate held for sale, net— 5,556 
Real estate equity securities (Note 5)104,575 112,096 
Total real estate and real estate-related investments, net1,306,809 1,326,895 
Cash and cash equivalents59,304 84,172 
Restricted cash38,123 21,259 
Investments in unconsolidated entities (Note 10)88,934 88,256 
Rents and other receivables, net19,775 21,795 
Above-market leases, net2,548 2,642 
Due from affiliate (Note 9)8,240 7,039 
Prepaid expenses and other assets21,028 18,108 
Goodwill13,534 13,534 
Assets related to real estate held for sale, net— 919 
Total assets$1,558,295 $1,584,619 
Liabilities, mezzanine equity and equity
Notes and bonds payable related to real estate held for investment, net$981,931 $989,879 
Note payable related to real estate held for sale, net— 9,070 
Notes and bonds payable, net (Note 6)981,931 998,949 
Accounts payable and accrued liabilities18,803 23,852 
Due to affiliate (Note 9)3,881 1,903 
Below-market leases, net3,730 4,080 
Other liabilities54,153 43,513 
Redeemable common stock payable3,064 684 
Restricted stock payable508 508 
Dividends payable— 11,016 
Total liabilities1,066,070 1,084,505 
Commitments and contingencies (Note 14)00
Mezzanine equity
Noncontrolling cumulative convertible redeemable preferred stock (Note 13)15,233 15,233 
Redeemable noncontrolling interest5,006 2,822 
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, 104,496,165 and 94,141,251 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively1,045 941 
Additional paid-in capital914,460 818,440 
Cumulative distributions and net income(453,770)(347,691)
Total Pacific Oak Strategic Opportunity REIT, Inc. stockholders’ equity461,735 471,690 
Noncontrolling interests10,251 10,369 
Total equity471,986 482,059 
Total liabilities, mezzanine equity and equity$1,558,295 $1,584,619 
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 March 31,
20212020
Revenues:
Rental income$32,648 $22,151 
Hotel revenues2,575 0 
Other operating income968 971 
Dividend income from real estate equity securities2,753 1,479 
Total revenues38,944 24,601 
Expenses:
Operating, maintenance, and management10,433 7,572 
Real estate taxes and insurance5,289 3,428 
Hotel expenses3,390 0 
Asset management fees to affiliate3,852 2,106 
General and administrative expenses1,869 2,546 
Foreign currency transaction gain, net(8,346)(14,996)
Depreciation and amortization17,001 8,984 
Interest expense9,941 6,796 
Total expenses43,429 16,436 
Other income (loss):
Income from NIP0 52 
Equity in income of unconsolidated entities169 328 
Other interest income45 270 
Gain (loss) on real estate equity securities10,753 (26,454)
Gain on sale of real estate21 0 
Change in subordinated performance fee due upon termination to affiliate(461)0 
Total other income (loss), net10,527 (25,804)
Net income (loss)6,042 (17,639)
Net loss attributable to noncontrolling interests663 32 
Net loss attributable to redeemable noncontrolling interest32 0 
Preferred stock dividends(225)(365)
Net income (loss) attributable to common stockholders$6,512 $(17,972)
Net income (loss) per common share, basic and diluted$0.07 $(0.27)
Weighted-average number of common shares outstanding, basic and diluted98,036,134 66,041,776 

 Three Months Ended March 31,
20222021
Revenues:
Rental income$29,382 $32,648 
Hotel revenues5,917 2,575 
Other operating income841 968 
Dividend income from real estate equity securities2,387 2,753 
Total revenues38,527 38,944 
Expenses:
Operating, maintenance, and management9,875 10,433 
Real estate taxes and insurance5,024 5,289 
Hotel expenses5,113 3,390 
Asset management fees to affiliate3,127 3,852 
General and administrative expenses2,991 1,869 
Foreign currency transaction gain, net(7,266)(8,346)
Depreciation and amortization12,565 17,001 
Interest expense9,563 9,941 
Total expenses40,992 43,429 
Other income (loss):
Equity in (loss) income of unconsolidated entities(679)169 
Other interest income46 45 
(Loss) gain on real estate equity securities(7,521)10,753 
Gain on sale of real estate3,523 21 
Gain on extinguishment of debt2,367 — 
Change in subordinated performance fee due upon termination to affiliate— (461)
Total other (loss) income, net(2,264)10,527 
Net (loss) income(4,729)6,042 
Net loss attributable to noncontrolling interests118 663 
Net loss attributable to redeemable noncontrolling interest47 32 
Preferred stock dividends(191)(225)
Net (loss) income attributable to common stockholders$(4,755)$6,512 
Net (loss) income per common share, basic and diluted$(0.05)$0.07 
Weighted-average number of common shares outstanding, basic and diluted101,419,947 98,036,134 
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 March 31, 20212022 and 20202021
(unaudited)
(dollars in thousands)
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)— — — 6,512 6,512 (663)5,849 
Transfers from redeemable common stock— — 853 — 853 — 853 
Redemptions of common stock(88,143)0 (853)— (853)— (853)
Noncontrolling interests contributions— — — — 0 20 20 
Balance, March 31, 202197,966,439 $979 $831,295 $(319,208)$513,066 $12,515 $525,581 
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— — — (17,972)(17,972)(32)(18,004)
Issuance of common stock24,645 0 262 — 262 — 262 
Transfers from redeemable common stock— — 206 — 206 — 206 
Redemptions of common stock(44,025)— (468)— (468)— (468)
Distributions declared— — — (596)(596)— (596)
Issuance of restricted stock3,411,737 34 (34)— 0 — 0 
Noncontrolling interests contributions— — — — 0 112 112 
Balance, March 31, 202069,259,122 $693 $553,136 $(295,764)$258,065 $835 $258,900 

Common StockAdditional
Paid-in Capital		Cumulative Distributions and Net Income (Loss)Total Stockholders' EquityNoncontrolling InterestsTotal Equity
 SharesAmounts
Balance, December 31, 202194,141,251 $941 $818,440 $(347,691)$471,690 $10,369 $482,059 
Net loss— — — (4,755)(4,755)(118)(4,873)
Transfers to redeemable common stock— — (2,380)— (2,380)— (2,380)
Redemptions of common stock(65,165)— (589)— (589)— (589)
Adjustment to redemption value of mezzanine equity redeemable noncontrolling interest— — — (2,231)(2,231)— (2,231)
Stock distribution issued10,420,079 104 98,989 (99,093)— — — 
Balance, March 31, 2022104,496,165 $1,045 $914,460 $(453,770)$461,735 $10,251 $471,986 
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)— — — 6,512 6,512 (663)5,849 
Transfers from redeemable common stock— — 853 — 853 — 853 
Redemptions of common stock(88,143)— (853)— (853)— (853)
Noncontrolling interests contributions— — — — — 20 20 
Balance, March 31, 202197,966,439 $979 $831,295 $(319,208)$513,066 $12,515 $525,581 
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 CASH FLOWS
(unaudited)
(in thousands)
Three Months Ended March 31,
 20212020
Cash Flows from Operating Activities:
Net income (loss)$6,042 $(17,639)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Change in subordinated performance fee due upon termination to affiliate461 0 
Equity in income of unconsolidated entities(169)(328)
Depreciation and amortization17,001 8,984 
(Gain) loss on real estate equity securities(10,753)26,454 
Gain on sale of real estate(21)0 
Unrealized loss (gain) on interest rate caps13 (14)
Deferred rent(1,085)(1,027)
Amortization of above- and below-market leases, net(326)(177)
Amortization of deferred financing costs813 885 
Amortization of discount (premium) on bond and notes payable482 (25)
Foreign currency transaction gain, net(8,346)(14,996)
Changes in assets and liabilities:
Rents and other receivables349 (430)
Prepaid expenses and other assets(1,857)(2,010)
Accounts payable and accrued liabilities(6,358)(4,738)
Due to affiliates2,223 1,926 
Other liabilities220 1,615 
Net cash used in operating activities(1,311)(1,520)
Cash Flows from Investing Activities:
Acquisitions of real estate(2,037)0 
Improvements to real estate(4,434)(7,779)
Proceed from sales of real estate, net166 0 
Investment in unconsolidated entities(1,180)(231)
Distributions of capital from unconsolidated entities0 1,225 
Purchase of interest rate caps(18)(6)
Investment in real estate equity securities0 (16,789)
Proceeds from the sale of real estate equity securities14,439 7,849 
Net cash provided by (used in) investing activities6,936 (15,731)
Cash Flows from Financing Activities:
Proceeds from notes and bonds payable97,125 89,893 
Principal payments on notes and bonds payable(61,300)(56,820)
Payments of deferred financing costs(1,054)(2,302)
Payments to redeem common stock(853)(468)
Payment of prepaid other offering costs(32)(182)
Distributions paid0 (305)
Preferred dividends paid(225)(140)
Noncontrolling interests contributions20 112 
Other financing proceeds2,367 0 
Net cash provided by financing activities36,048 29,788 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(1,881)(528)
Net increase in cash, cash equivalents and restricted cash39,792 12,009 
Cash, cash equivalents and restricted cash, beginning of period74,319 88,494 
Cash, cash equivalents and restricted cash, end of period$114,111 $100,503 

Three Months Ended March 31,
 20222021
Cash Flows from Operating Activities:
Net (loss) income$(4,729)$6,042 
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Change in subordinated performance fee due upon termination to affiliate— 461 
Equity in loss (income) of unconsolidated entities1,560 (169)
Depreciation and amortization12,565 17,001 
Loss (gain) on real estate equity securities7,521 (10,753)
Gain on sale of real estate(3,523)(21)
Gain on extinguishment of debt(2,367)— 
Unrealized (gain) loss on interest rate caps(55)13 
Deferred rent(1,055)(1,085)
Amortization of above- and below-market leases, net(256)(326)
Amortization of deferred financing costs680 813 
Amortization of discount on bond and notes payable1,016 482 
Foreign currency transaction gain, net(7,266)(8,346)
Changes in assets and liabilities:
Rents and other receivables2,937 349 
Prepaid expenses and other assets(3,355)(1,857)
Accounts payable and accrued liabilities(4,983)(6,358)
Due to affiliates1,978 2,223 
Other liabilities(353)220 
Net cash provided by (used in) operating activities315 (1,311)
Cash Flows from Investing Activities:
Acquisitions of real estate— (2,037)
Improvements to real estate(4,888)(4,434)
Proceed from sales of real estate, net398 166 
Investment in unconsolidated entities(1,500)(1,180)
Distributions of capital from unconsolidated entities142 — 
Purchase of interest rate caps(506)(18)
Escrow deposits for future real estate sales13,500 — 
Advance to affiliate(1,201)— 
Proceeds from the sale of real estate equity securities— 14,439 
Net cash provided by investing activities5,945 6,936 
Cash Flows from Financing Activities:
Proceeds from notes payable53,758 97,125 
Principal payments on notes payable(55,066)(61,300)
Payments of deferred financing costs(861)(1,054)
Payments to redeem common stock(589)(853)
Payment of prepaid other offering costs— (32)
Distributions paid(11,016)— 
Preferred dividends paid(191)(225)
Noncontrolling interests contributions— 20 
Other financing proceeds— 2,367 
Net cash (used in) provided by financing activities(13,965)36,048 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(299)(1,881)
Net (decrease) increase in cash, cash equivalents and restricted cash(8,004)39,792 
Cash, cash equivalents and restricted cash, beginning of period105,431 74,319 
Cash, cash equivalents and restricted cash, end of period$97,427 $114,111 
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.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 20212022
(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 is externally managed by Pacific Oak Advisors, LLC (the “Advisor”), an affiliate of the Company, pursuant to an advisory agreement the Company renewed with the Advisor on November 1, 2020 (the “Advisory Agreement”). The Advisory Agreement is currently effective through November 1, 2021; 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.
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 March 31, 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 March 31, 2021, the Company had redeemed 24,129,688 shares for $288.5 million. As of March 31, 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”).
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.
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 (CONTINUED)
March 31, 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, three office properties, one apartment building, one 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 March 31, 2021, the Company consolidated 9 office properties, 1 office portfolio consisting of 4 office buildings and 14 acres of undeveloped land, 2 apartment properties, 2 hotel properties, 1 residential home portfolio consisting of 1,786 single-family homes, 3 investments in undeveloped land with approximately 1,000 developable acres, and owned 4 investments in unconsolidated entities and 3 investments in real estate equity securities. Additionally, as of March 31, 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, 2020.2021. 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, 20202021 included in the Company’s Annual Report on Form 10-K filed with the SEC.
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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)
March 31, 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 months ended March 31, 20212022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.2022.
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.

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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)
March 31, 2022
(unaudited)
Liquidity
The Company generally finances its real estate investments using notes payable that are typically structured as non-course secured mortgages with maturities of approximately three 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 and the ability to satisfy debt covenant requirements. Through the normal course of operations and as further discussed in Note 6, the Company has $580.0$444.0 million of debt obligations coming due over the next 12-month period. In order to satisfy obligations as they mature, management will 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 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 6 for further discussion.
Reclassifications
Certain prior period amounts have been reclassified to conform to our current period presentation. In that regard, we have reclassified held for sale activity related to dispositions in our consolidated balance sheets as of December 31, 2021.
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 escrow deposits for future real estate sales and 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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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
March 31, 2021
(unaudited)
Redeemable Common Stock
The Company limits the dollar value of shares that may be redeemed under the share redemption program. During the three months ended March 31, 2021, the Company had redeemed $0.9 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 March 2021 redemption date, except for 12,719,485 shares totaling $117.0 million due to the limitations under the share redemption program. The Company recorded $11,000 and $0.9 million of redeemable common stock payable on the Company’s balance sheet as of March 31, 2021 and December 31, 2020, respectively, related to unfulfilled redemption requests received in good order under the share redemption program. Based on the twelfth amended and restated share redemption program, the Company had $11,000 available for redemptions in the remainder of 2021, including shares that are redeemed in connection with a stockholders’ death, “qualifying disability” or “determination of incompetence,” subject to the limitations under the share redemption program.
Segments
The Company operates in three reportable business segments: opportunistic real estate and real estate-related investments, single-family homes, and hotels, which is how the Company's management manages the business. In general, the Company intends to hold its investments in opportunistic real estate and other real estate-related assets for capital appreciation. Traditional performance metrics of opportunistic real estate 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 and other real estate-related assets as similar investments and aggregated into 1 reportable business segment. The Company owns single-family homes in 1718 markets and are all aggregated into 1 reportable business segment due to the homes being stabilized, having high occupancy rates and have similar economic characteristics. Additionally, the Company owns 2 hotels and are aggregated into 1 reportable business segment due to the nature of 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.
The noncontrolling Series A convertible redeemable preferred shares of Pacific Oak Residential Trust, Inc. (“PORT”) 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.
The Company’s unvested Restricted Stock have been included in the calculation of basic and diluted earnings per share for the three months ended March 31, 2021, as the restriction is not contingent on any conditions except the passage of time.
Distributions declared per share were $0.008600 during the three months ended March 31, 2020. There were 0 distributions declared during the three months ended March 31, 2021.
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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)
March 31, 20212022
(unaudited)
Per Share Data
We determine basic earnings per share and basic earnings per unit based on the weighted average number of shares of common stock or units, as applicable, outstanding during the period and we consider any participating securities, including unvested restricted stock, for purposes of applying the two-class method. We determine diluted earnings per share and diluted earnings per unit based on the weighted average number of shares of common stock or units, as applicable, outstanding combined with the incremental weighted average number of shares or units, as applicable, that would have been outstanding assuming all potentially dilutive securities were converted into shares of common stock or units, as applicable, at the earliest date possible. The noncontrolling Series A convertible redeemable preferred shares of Pacific Oak Residential Trust, Inc. (“PORT”) were not included as the shares are contingent on PORT being public.
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.
Recently Issued Accounting Standards Updates
InOn March 12, 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting., and on January 11, 2021, issued ASU No. 2020-04 contains practical2021-01, Reference Rate Reform (Topic 848) – Scope, both of which provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR or other reference rates expected to be discontinued because of reference rate reform related activities that impact debt, leases, derivatives and other contracts.reform. These ASUs are effective through December 31, 2022. The guidance in ASU No. 2020-04 isCompany has not adopted any of the optional and may be elected over time as reference rate reform activities occur. During the three months ended March 31, 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)or exceptions through March 31, 2021,2022, but will continue to evaluate the Company did not havepossible adoption of any contract modifications that meetsuch expedients or exceptions during 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 LIBOReffective period 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.circumstances evolve

3. REAL ESTATE HELD FOR INVESTMENT
As of March 31, 2021,2022, the Company owned 98 office properties, 1 office portfolio consisting of 42 office buildings and 14 acres of undeveloped land, encompassing, in the aggregate, approximately 3.83.2 million rentable square feet. As of March 31, 2021,2022, these properties were 76%73% occupied. In addition, the Company owned 1 residential home portfolio consisting of 1,7861,814 single-family homes and encompassing approximately 2.5 million rental square feet and 2 apartment properties, containing 609 units and encompassing approximately 0.5 million rentable square feet, which was 94%92% and 89%96% occupied, respectively as of March 31, 2021.2022. As of March 31, 2021,2022, 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 March 31, 2021, the Company had entered into a consolidated joint venture to developacres and 1 office/retail development property. The following table summarizes the Company’s real estate held for investment as of March 31, 20212022 and December 31, 2020,2021, respectively (in thousands):
March 31, 2021December 31, 2020March 31, 2022December 31, 2021
LandLand$303,645 $302,444 Land$276,608 $275,683 
Buildings and improvementsBuildings and improvements1,163,659 1,157,397 Buildings and improvements1,021,399 1,017,465 
Tenant origination and absorption costsTenant origination and absorption costs56,243 57,594 Tenant origination and absorption costs42,159 43,375 
Total real estate, costTotal real estate, cost1,523,547 1,517,435 Total real estate, cost1,340,166 1,336,523 
Accumulated depreciation and amortizationAccumulated depreciation and amortization(119,200)(104,412)Accumulated depreciation and amortization(137,932)(127,280)
Total real estate, netTotal real estate, net$1,404,347 $1,413,023 Total real estate, net$1,202,234 $1,209,243 


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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)
March 31, 20212022
(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 March 31, 2021,2022, the leases, excluding options to extend, apartment leases and single-family home leases, which have terms that are generally one year or less, had remaining terms of up to 14.413.3 years with a weighted-average remaining term of 4.13.8 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 totaled $5.8$6.8 million and $5.7$6.0 million as of March 31, 20212022 and December 31, 2020,2021, respectively.
During both of the three months ended March 31, 20212022 and 2020,2021, the Company recognized deferred rent from tenants of $1.1 million, and $1.0 million, respectively, net of lease incentive amortization. As of March 31, 20212022 and December 31, 2020,2021, the cumulative deferred rent receivable balance, including unamortized lease incentive receivables, was $20.9$16.7 million and $19.2$16.3 million, respectively, and is included in rents and other receivables on the accompanying consolidated balance sheets. The cumulative deferred rent balance included $5.1$3.0 million and $4.7$3.3 million of unamortized lease incentives as of March 31, 20212022 and December 31, 2020,2021, respectively.
As of March 31, 2021,2022, the future minimum rental income from the Company’s properties, excluding apartment leases, under non-cancelable operating leases was as follows (in thousands):
April 1, 2021 through December 31, 2021$59,224 
202269,001 
April 1, 2022 through December 31, 2022April 1, 2022 through December 31, 2022$46,626 
2023202357,401 202355,716 
2024202449,699 202449,067 
2025202539,294 202538,581 
2026202626,872 
ThereafterThereafter90,444 Thereafter62,406 
$365,063 $279,268 

As of March 31, 2021,2022, 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
Insurance28$8,456 12.3 %
Computer Systems317,689 11.2 %
$16,145 23.5 %
IndustryNumber of Tenants
Annualized Base Rent (1)
(in thousands)
Percentage of
Annualized Base Rent
Professional, Scientific, and Technical Services44$8,375 12.8 %
Public Administration127,592 11.6 %
Computer Systems Design286,971 10.6 %
$22,938 35.0 %
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of March 31, 2021,2022, 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 months ended March 31, 2021 and 2020, the Company recorded adjustments to rental income of $0.7 million and $0.2 million, respectively, for lease payments that were deemed not probable of collection.
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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)
March 31, 20212022
(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 months ended March 31, 2022 and 2021 (in thousands):
Hotel revenues:
Room$1,673 
Food, beverage and convention services296 
Campground243 
Other363 
Hotel revenues$2,575 
Hotel expenses:
Room$723 
Food, beverage and convention services320 
General and administrative502 
Sales and marketing369 
Repairs and maintenance445 
Utilities243 
Property taxes and insurance565 
Other223 
Hotel expenses$3,390 
Three Months Ended March 31,
20222021
Hotel revenues:
Room$4,295 $1,673 
Food, beverage and convention services280 296 
Campground793 243 
Other549 363 
Hotel revenues$5,917 $2,575 

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 and another developer for the value of land that was contributed to a master association that is consolidated by the Company, which are included in other liabilities in the accompanying consolidated balance sheets, as of March 31, 20212022 and December 31, 20202021 (in thousands):
March 31, 2021December 31, 2020March 31, 2022December 31, 2021
Contract liabilityContract liability$3,526 $3,369 Contract liability$20,946 $7,313 
Revenue recognized in the period from:Revenue recognized in the period from:Revenue recognized in the period from:
Amounts included in contract liability at the beginning of the period Amounts included in contract liability at the beginning of the period$70 $0  Amounts included in contract liability at the beginning of the period$134 $159 

Geographic Concentration Risk
As of March 31, 2021,2022, the Company’s real estate investments in California and Georgia represented 29.0%23.0% and 10.4%, respectively, 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 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.
Recent Real Estate Asset AcquisitionSale
On March 17, 2021,January 24, 2022, the Company, through aan indirect wholly owned subsidiary, sold 2 office buildings related to the Richardson Portfolio and containing 141,950 rentable square feet in Richardson, Texas (“Greenway Buildings”) to a purchaser unaffiliated with the Company or the Advisor (as defined in Note 9), for $11.0 million, before closing costs and credits. The carrying value of PORT OP, LP (“PORT OP”), acquired a single-family home portfolio consistingthe Greenway Buildings as of 21 homes in Chicago, Illinois for $2.0 million.the disposition date was $5.6 million, which was net of $3.2 million of accumulated depreciation and amortization. In connection with the sale of the Greenway Buildings, the Company repaid $9.1 million of the outstanding principal balance due under the mortgage loan secured by the Greenway Buildings. The Company owns 96.1%recognized a gain on sale of $3.6 million related to the disposition of the equityGreenway Buildings, net of PORT OPclosing costs and adjustments. As a result of the sale of the Greenway Buildings, certain assets and liabilities were reclassified to held for sale on the consolidated balance sheets as of MarchDecember 31, 2021.

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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)
March 31, 20212022
(unaudited)
Park Highlands Land Purchase and Sale Contract
The Company enters into land purchase and sale contracts to dispose of Park Highlands developed and undeveloped land. Under these contracts, the Company will receive a stated deposit from the buyer, held in escrow, in consideration for the right, but not the obligation, to purchase the land at a future point in time with predetermined terms. After a contractually specified date, the deposits are not refundable even in the event the contract terminates, at which point the Company records restricted cash and other liabilities on the consolidated balance sheets.
On November 11, 2021, the Company, through an indirect wholly owned subsidiary, entered into a purchase and sale agreement, as amended, to sell 234 (previously 238 and amended to reduce by 4 acres) developable acres of undeveloped land located in North Las Vegas, Nevada (“Park Highlands”) for gross sales proceeds of approximately $124.5 million, before closing costs and credits. The due diligence period expired on February 23, 2022 and the buyer’s deposit of $13.5 million is no longer refundable. This deposit is held in an escrow account and will become available once the sale is completed. Following the sale, the Company is expected to own approximately 526 developable acres of Park Highlands. Of the 234 acres, 163 acres are scheduled to sell in 2022 and the remainder in 2023. Actions are required by the Company to complete the planned sale.

4. TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES
As of March 31, 20212022 and December 31, 2020,2021, 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		 Tenant Origination and
Absorption Costs		Above-Market
Lease Assets		Below-Market
Lease Liabilities
March 31, 2021December 31, 2020March 31, 2021December 31, 2020March 31, 2021December 31, 2020 March 31, 2022December 31, 2021March 31, 2022December 31, 2021March 31, 2022December 31, 2021
CostCost$56,243 $57,594 $4,159 $4,159 $(8,142)$(8,732)Cost$42,159 $43,375 $4,138 $4,138 $(6,622)$(6,719)
Accumulated AmortizationAccumulated Amortization(20,927)(17,088)(1,236)(1,002)2,240 2,270 Accumulated Amortization(21,976)(20,738)(1,590)(1,496)2,892 2,639 
Net AmountNet Amount$35,316 $40,506 $2,923 $3,157 $(5,902)$(6,462)Net Amount$20,183 $22,637 $2,548 $2,642 $(3,730)$(4,080)

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 months ended March 31, 20212022 and 20202021 were as follows (in thousands):
 Tenant Origination and
Absorption Costs		Above-Market
Lease Assets		Below-Market
Lease Liabilities
 For the Three Months Ended March 31,For the Three Months Ended March 31,For the Three Months Ended March 31,
 202120202021202020212020
Amortization$(5,222)$(1,736)$(234)$(92)$560 $269 
 Tenant Origination and
Absorption Costs		Above-Market
Lease Assets		Below-Market
Lease Liabilities
 For the Three Months Ended March 31,For the Three Months Ended March 31,For the Three Months Ended March 31,
 202220212022202120222021
Amortization$(2,490)$(5,222)$(94)$(234)$350 $560 


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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)
March 31, 2022
(unaudited)
As of March 31, 20212022 and December 31, 2020,2021, 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. Asmillion. During both of March 31, 2021, the housing subsidy intangible asset has a remaining amortization period of 27.7 years. During the three months ended March 31, 2022 and 2021, the Company recorded amortization expense of $18,000 related to the housing subsidy intangible asset.
Additionally, as of March 31, 20212022 and December 31, 2020,2021, the Company had recorded tax abatement intangible assets, net of amortization, on real estate held for investment,investments, which are included in prepaid expenses and other assets in the accompanying consolidated balance sheets, of $1.3$0.6 million and $1.6$0.7 million, respectively. During the three months ended March 31, 20212022 and 2020,2021, the Company recorded amortization expense of $0.3$0.1 million and $0.1$0.3 million respectively, related to tax abatement intangible assets. Asassets, respectively. 
The remaining unamortized balance for these outstanding intangible assets and liabilities as of March 31, 2021,2022 will be amortized for the tax abatement intangible assets had a remaining amortization period of 1.9 years.years ending December 31 as follows (in thousands):
Tenant Origination and
Absorption Costs		Above-Market
Lease Assets		Below-Market
Lease Liabilities		Housing SubsidyTax Abatements
April 1, 2022 through December 31, 2022$(4,875)$(274)$1,029 $(53)$(352)
2023(5,004)(356)1,102 (71)(229)
2024(3,787)(355)835 (71)(6)
2025(2,521)(339)552 (71)— 
2026(1,224)(309)139 (71)— 
Thereafter(2,772)(915)73 (1,536)— 
$(20,183)$(2,548)$3,730 $(1,873)$(587)
Weighted-Average Remaining Amortization Period4.6 years8.1 years3.3 years26.6 years1.3 years

5. REAL ESTATE EQUITY SECURITIES
As of March 31, 2022, the Company owned three 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 March 31, 2022 and December 31, 2021 (dollars in thousands):
March 31, 2022December 31, 2021
Real Estate Equity SecurityNumber of Shares OwnedTotal Carrying ValueNumber of Shares OwnedTotal Carrying Value
Keppel Pacific Oak US REIT64,165,352 $47,162 64,165,352 $51,332 
Franklin Street Properties Corp.6,915,089 40,799 6,915,089 41,145 
Plymouth Industrial REIT, Inc.613,085 16,614 613,085 19,619 
71,693,526 $104,575 71,693,526 $112,096 

The following summarizes the portion of gain and loss for the period related to real estate equity securities held during the three months ended March 31, 2022 and 2021 (in thousands):
Three Months Ended March 31,
20222021
Net (loss) gain recognized during the period on real estate equity securities$(7,521)$10,753 
Less net gain recognized during the period on real estate equity securities sold during the period— (225)
Unrealized (loss) gain recognized during the reporting period on real estate equity securities held at the end of the period$(7,521)$10,528 
12

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)
March 31, 2022
(unaudited)
During the three months ended March 31, 2022 and 2021, the Company recognized $2.4 million and $2.8 million, respectively, of dividend income from real estate equity securities.

6. NOTES AND BONDS PAYABLE
As of March 31, 2022 and December 31, 2021, the Company’s notes and bonds payable consisted of the following (dollars in thousands):
 
Book Value as of
March 31, 2022
Book Value as of
December 31, 2021
Contractual Interest Rate as of
March 31, 2022
Effective Interest Rate at
March 31, 2022 (1)
Payment Type (2)
Maturity Date (3)
Richardson Portfolio Mortgage Loan$19,190 $28,470 Floating Rate + 2.50%2.95%Principal & Interest11/01/2022
Park Centre Mortgage Loan26,185 26,185 Floating Rate + 1.75%2.20%Interest Only06/27/2022
1180 Raymond Mortgage Loan (4)
31,070 31,070 Floating Rate + 2.25%2.70%Interest Only12/01/2023
Pacific Oak SOR BVI Series B
Debentures (5)
264,503 271,978 3.93%3.93%(5)01/31/2026
Crown Pointe Mortgage Loan53,758 52,315 Floating Rate + 2.30%2.75%Interest Only04/01/2025
The Marq Mortgage Loan61,683 61,874 Floating Rate + 1.55%2.00%Principal & Interest06/06/2022
Eight & Nine Corporate Centre Mortgage Loan48,395 48,545 Floating Rate + 1.60%2.05%Principal & Interest06/08/2022
Georgia 400 Center Mortgage Loan61,154 61,154 Floating Rate + 1.55%2.00%Interest Only05/22/2023
PORT Mortgage Loan 151,302 51,302 4.74%4.74%Interest Only10/01/2025
PORT Mortgage Loan 210,523 10,523 4.72%4.72%Interest Only03/01/2026
PORT MetLife Loan60,000 60,000 3.90%3.90%Interest Only04/10/2026
Springmaid Beach Resort Mortgage Loan55,143 55,491 
Floating Rate + 2.25% (6)
5.75%Principal & Interest08/12/2022
Q&C Hotel Mortgage Loan25,000 25,000 
Floating Rate + 2.50% (7)
4.50%Principal & Interest12/23/2022
Lincoln Court Mortgage Loan (4)
34,524 34,623 Floating Rate + 1.75%2.20%Principal & Interest
04/01/2022 (8)
Lofts at NoHo Commons Mortgage Loan74,536 74,536 
Floating Rate + 2.18% (9)
3.93%Interest Only09/09/2022
210 West 31st Street Mortgage Loan (4)
7,425 8,850 Floating Rate + 3.00%3.45%Principal & Interest06/16/2022
Oakland City Center Mortgage Loan95,747 96,075 Floating Rate + 1.75%2.20%Principal & Interest09/01/2022
Madison Square Mortgage Loan17,500 17,500 4.63%4.63%Interest Only10/07/2024
Total Notes and Bonds Payable principal outstanding997,638 1,015,491 
Discount on Notes and Bonds Payable, net (10)
(7,130)(8,146)
Deferred financing costs, net(8,577)(8,396)
Total Notes and Bonds Payable, net$981,931 $998,949 
_____________________
(1) Contractual interest rate represents the interest rate in effect under the loan as of March 31, 2022. Effective interest rate is calculated as the actual interest rate in effect as of March 31, 2022 (consisting of the contractual interest rate and contractual floor rates), using interest rate indices at March 31, 2022, where applicable.
(2) Represents the payment type required under the loan as of March 31, 2022. 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.
13

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)
March 31, 20212022
(unaudited)
5. REAL ESTATE EQUITY SECURITIES
As of March 31, 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 March 31, 2021 and December 31, 2020 (dollars in thousands):
March 31, 2021December 31, 2020
Real Estate Equity SecurityNumber of Shares OwnedTotal Carrying ValueNumber of Shares OwnedTotal Carrying Value
Keppel Pacific Oak US REIT64,165,352 $46,200 64,165,352 $44,274 
Franklin Street Properties Corp.6,915,089 37,687 6,915,089 30,219 
Plymouth Industrial REIT, Inc.613,085 10,330 1,560,660 23,410 
71,693,526 $94,217 72,641,101 $97,903 

The following summarizes the portion of gain and loss for the period related to real estate equity securities held during the three months ended March 31, 2021 and 2020 (in thousands):
Three Months Ended March 31,
20212020
Net gain (loss) recognized during the period on real estate equity securities$10,753 $(26,454)
Less net gain recognized during the period on real estate equity securities sold during the period(225)(364)
Unrealized gain (loss) recognized during the reporting period on real estate equity securities held at the end of the period$10,528 $(26,818)

During the three months ended March 31, 2021 and 2020, the Company recognized $2.8 million and $1.1 million, respectively, of dividend income from real estate equity securities.


14

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)
March 31, 2021
(unaudited)
6. NOTES AND BONDS PAYABLE
As of March 31, 2021 and December 31, 2020, the Company’s notes and bonds payable consisted of the following (dollars in thousands):
 Book Value as of
March 31, 2021		Book Value as of
December 31, 2020
Contractual Interest Rate as of
March 31, 2021
Effective Interest Rate at
March 31, 2021 (1)
Payment Type (2)
Maturity Date (3)
Richardson Portfolio Mortgage Loan$35,573 $35,832 One-Month LIBOR + 2.50%2.61%Principal & Interest11/01/2021
Park Centre Mortgage Loan26,185 26,185 One-Month LIBOR + 1.75%1.86%Interest Only06/27/2022
1180 Raymond Mortgage Loan (4)
29,748 29,848 
One-Month LIBOR + 2.50% (5)
3.50%Principal & Interest12/01/2021
1180 Raymond Bond Payable5,815 5,870 6.50%6.50%Principal & Interest09/01/2036
Pacific Oak SOR (BVI) Holdings, Ltd. Series A Debentures (6)
190,931 181,198 4.25%4.25%(6)03/01/2023
Pacific Oak SOR (BVI) Holdings, Ltd. Series B Debentures (6)
76,019 79,078 3.93%3.93%(6)01/31/2026
Crown Pointe Mortgage Loan (4)
52,886 53,072 One-Month LIBOR + 2.60%2.71%Principal & Interest02/13/2022
City Tower Mortgage Loan (4)
98,530 94,167 One-Month LIBOR + 1.55%1.66%Interest Only
03/05/2021 (7)
The Marq Mortgage Loan62,257 62,257 One-Month LIBOR + 1.55%1.66%Interest Only06/06/2021
Eight & Nine Corporate Centre Mortgage Loan48,845 47,066 One-Month LIBOR + 1.60%1.71%Interest Only06/08/2021
Georgia 400 Center Mortgage Loan61,154 59,690 One-Month LIBOR + 1.55%1.66%Interest Only05/22/2023
PORT Mortgage Loan 151,304 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 12,000 6.50%6.50%Interest Only
03/31/2021 (8)
Battery Point Trust Mortgage Loan38,485 38,608 
One-Month LIBOR + 2.50% (5)
3.50%Interest Only
03/20/2022 (8)
Springmaid Beach Resort Mortgage Loan57,015 57,015 
One-month LIBOR + 2.25% (9)
5.77%Principal & Interest08/10/2022
Q&C Hotel Mortgage Loan25,000 25,000 
One-month LIBOR + 2.50% (10)
4.50%Principal & Interest12/23/2022
Lincoln Court Mortgage Loan (4)
34,922 34,416 One-month LIBOR + 1.75%1.86%Principal & Interest06/01/2021
Lofts at NoHo Commons Mortgage Loan74,536 74,536 
One-month LIBOR + 2.18% (11)
3.93%Interest Only09/09/2021
210 West 31st Street Mortgage Loan (4)
13,850 15,050 One-month LIBOR + 3.00%3.11%Principal & Interest06/16/2021
Oakland City Center Mortgage Loan97,063 96,782 One-month LIBOR + 1.75%1.86%Principal & Interest09/01/2022
Madison Square Mortgage Loan20,891 16,822 
One-month LIBOR + 4.05% (12)
5.05%Interest Only10/09/2021
Margin Loan (13)
10,000 0 (13)0.85%Interest Only(13)
Total Notes and Bonds Payable principal outstanding1,133,532 1,106,377 
Discount on Notes and Bonds Payable, net (14)
(3,806)(2,851)
Deferred financing costs, net(4,699)(4,458)
Total Notes and Bonds Payable, net$1,125,027 $1,099,068 
_____________________
15

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)
March 31, 2021
(unaudited)
(1) Contractual interest rate represents the interest rate in effect under the loan as of March 31, 2021. Effective interest rate is calculated as the actual interest rate in effect as of March 31, 2021 (consisting of the contractual interest rate and contractual floor rates), using interest rate indices at March 31, 2021, where applicable.
(2) Represents the payment type required under the loan as of March 31, 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 March 31, 2021;2022; subject to certain conditions, the maturity dates of certain loans may be extended beyond the date shown.
(4) 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 March 31, 2021,2022, the guaranteed amount in the aggregate was $67.9$23.8 million.
(5)These mortgage loans have a LIBOR floor of 1%.
(6) See “ – Israeli“Israeli Bond Financing” below.
(7) Subsequent to March 31, 2021, the Company extended the maturity of the City Tower Mortgage Loan to March 5, 2022.
(8) Subsequent to March 31, 2021, the Company refinanced the PORT Mortgage Loan 3 and the Battery Point Trust loan. See Note 15, “Subsequent Events”.
(9)(6) The interest rate is variable at the higher of one-month LIBOR + 2.25% or 5.77%.
(10)(7) The interest rate is variable at the higher of one-month LIBOR + 2.5% or 4.5%. Principal payments will commence on January
(8) Subsequent to March 31, 2022, the Company extended the maturity date to August 1, 2022.
(11)(9) The LIBORfloating interest rate is variable at the higher of one-month LIBOR or 1.75%, plus 2.18% .
(12) The Madison Square Mortgage Loan bears interest at a floating rate of 405 basis points over one-month LIBOR, but at no point shall the interest rate be less than 5.05%.
(13) On February 19, 2021, the Company received a $10.0 million Margin Loan that is due on demand and is collateralized by the Company’s Franklin Street Properties Corp. real estate equity securities. The Company must maintain a coverage ratio of approximately 30%. The interest rate charged on the Margin Loan is the bank’s margin rate.
(14)(10) Represents the unamortized premium/discount on notes and bonds payable due to the above- and below-market interest rates when the debt was assumed. The discount/premium is amortized over the remaining life of the notes and bonds payable.
During the three months ended March 31, 20212022 and 2020,2021, the Company incurred $9.9$9.6 million and $6.8$9.9 million, respectively, of interest expense. Included in interest expense during the three months ended March 31, 2022 and 2021 and 2020 was $0.8$0.7 million and $0.9$0.8 million, respectively of amortization of deferred financing costs. Additionally, during the three months ended March 31, 20212022 and 2020,2021, the Company capitalized $0.6$0.5 million and $0.9$0.6 million, respectively of interest related to its investments in undeveloped land.
As of March 31, 20212022 and December 31, 2020,2021, the Company’s interest payable was $3.6 million and $6.2$6.6 million, respectively.
The following is a schedule of maturities, including principal amortization payments, for all notes and bonds payable outstanding as of March 31, 20212022 (in thousands):
April 1, 2021 through December 31, 2021$443,911 
2022389,746 
April 1, 2022 through December 31, 2022April 1, 2022 through December 31, 2022$447,827 
20232023156,875 202392,224 
2024202425,610 2024105,668 
2025202576,933 2025193,229 
20262026158,690 
ThereafterThereafter40,457 Thereafter— 
$1,133,532 $997,638 

16

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)
March 31, 2021
(unaudited)
As of May 7, 2021,6, 2022, the Company had a total of $580.0$444.0 million of debt obligations scheduled to mature over the next 12 months. The Company has extension options with respect to $340.5$309.6 million of the debt obligations outstanding that are 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. 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.
The Company’s notes payable contain financial debt covenants, including minimum equity requirements and liquidity ratios. As of March 31, 2021,2022, the Company was in compliance with all of these debt covenants exceptwith the exception that the Madison SquareGeorgia 400 Center Mortgage Loan and Q&C Hotel Mortgage Loan were not in compliance with the debt service coverage requirement and the Lofts at Noho Commons Mortgage Loan was not in compliance with the debt yield requirement. Such non-compliance does not constitute an event of default under the loan agreement. As a result of such non-compliance, the Company is required to maintain an interest shortfall reserve and provide a cash sweeps. Additionally, the Company was not compliance with the debt service coverage requirementsweep for these mortgage loans, as well as a deposit for the Lincoln CourtGeorgia 400 Center Mortgage Loan. As a resultSee Note 14 for further details on the deposit.

14

Table of such non-compliance, the Company would be required to partially paydown the loan if the non-compliance continues for two consecutive quarters.Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
March 31, 2022
(unaudited)
Israeli Bond Financings
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,November 1, 2021, Pacific Oak SORStrategic Opportunity BVI issued additional Series AB Debentures in the amount of 250.0536.4 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, on November 8, 2021, Pacific Oak Strategic Opportunity BVI also issued Series B Debentures in the amount of 53.6 million Israeli new Shekels par value through a private placement.offering. The additionalprivate offering Series AB Debentures were issued at a 1.9%3.1% discount resulting in a total consideration of 245.352.0 million Israeli new Shekels ($74.216.7 million as of March 4,November 8, 2021). The additional Series AB Debentures have an equal level of security, pari passu, amongst themselves and between them and the initial Series AB Debentures, which were initially issued, without any right of precedence or preference between any of them.
The deedsdeed of trust that governs the terms of the Series A Debentures and Series B Debentures contain various financial covenants. As of March 31, 2021,2022, the Company was in compliance with all of these financial debt covenants.


17

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)
March 31, 2021
(unaudited)
7. DERIVATIVE INSTRUMENTS
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 term 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 March 31, 2021,2022, the Company had entered into 63 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 March 31, 2021.2022. 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 cap07/25/201908/10/09/15/2021$65,325 One-month LIBOR at 4.00%
Interest rate cap07/25/201908/10/2021$1,675 One-month LIBOR at 4.00%
Interest rate cap08/30/201909/15/20212022$75,950 One-month LIBOR at 3.50%
Interest rate cap10/15/202010/15/2021$26,200 One-month LIBOR at 3.00%
Interest rate cap02/12/202102/14/2022$47,715 One-month LIBOR at 3.00%
Interest rate cap06/21/201905/22/2023$51,252 One-month LIBOR at 4.00%
Interest rate cap03/24/202204/01/2024$53,758 One-month SOFR at 2.50%

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 March 31, 20212022 and December 31, 20202021 (dollars in thousands):
March 31, 2021December 31, 2020March 31, 2022December 31, 2021
Derivative InstrumentsDerivative InstrumentsBalance Sheet LocationNumber of InstrumentsFair ValueNumber of InstrumentsFair ValueDerivative InstrumentsBalance Sheet LocationNumber of InstrumentsFair ValueNumber of InstrumentsFair Value
Derivative instruments not designated as hedging instrumentsDerivative instruments not designated as hedging instrumentsDerivative instruments not designated as hedging instruments
Interest rate capsInterest rate capsPrepaid expenses and other assets6$6 7$1 Interest rate capsPrepaid expenses and other assets3$569 2$8 


15

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)
March 31, 2022
(unaudited)
8. FAIR VALUE DISCLOSURES
The following were the face values, carrying amounts and fair values of the Company’s financial instruments as of March 31, 20212022 and December 31, 2020,2021, which carrying amounts do not approximate the fair values (in thousands):
March 31, 2021December 31, 2020
Face ValueCarrying AmountFair ValueFace ValueCarrying AmountFair Value
Financial liabilities (Level 3):
Notes and bond payable$866,582 $863,342 $869,876 $846,101 $842,112 $846,608 
Financial liabilities (Level 1):
Pacific Oak SOR (BVI) Holdings, Ltd. Series A Debentures$190,931 $187,382 $191,553 $181,198 $179,786 $178,450 
Pacific Oak SOR (BVI) Holdings, Ltd. Series B Debentures$76,019 $74,303 $71,355 $79,078 $77,170 $69,433 
March 31, 2022December 31, 2021
Face ValueCarrying AmountFair ValueFace ValueCarrying AmountFair Value
Financial liabilities (Level 3):
Notes payable$733,135 $729,713 $727,436 $743,513 $740,176 $740,347 
Financial liabilities (Level 1):
Pacific Oak SOR BVI Series B Debentures$264,503 $252,218 $262,453 $271,978 $258,773 $274,697 

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.
18

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)
March 31, 2021
(unaudited)
As of March 31, 2021,2022, the Company measured the following assets at fair value (in thousands):
 Fair Value Measurements Using  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)		TotalQuoted Prices in Active Markets for Identical Assets
(Level 1)		Significant Other Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
Recurring Basis:Recurring Basis:Recurring Basis:
Real estate equity securitiesReal estate equity securities$94,217 $94,217 $0 $0 Real estate equity securities$104,575 $104,575 $— $— 
Asset derivative - interest rate capsAsset derivative - interest rate caps$6 $0 $6 $0 Asset derivative - interest rate caps$569 $— $569 $— 

As of December 31, 2020,2021, the Company measured the following assets and liabilities at fair value (in thousands):
Fair Value Measurements UsingFair Value Measurements Using
TotalQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)TotalQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Recurring Basis:Recurring Basis:Recurring Basis:
Real estate equity securitiesReal estate equity securities$97,903 $97,903 $0 $0 Real estate equity securities$112,096 $112,096 $— $— 
Asset derivative - interest rate capsAsset derivative - interest rate caps$1 $0 $1 $0 Asset derivative - interest rate caps$8 $— $8 $— 

9. 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,Pacific Oak Capital Advisors, LLC (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.
Subject to certain restrictions and limitations, the business of the Company is externally managed by the Advisor pursuant to the Advisory Agreement.an advisory agreement (the “Advisory Agreement”). The Advisory Agreement is currently effective through November 1, 2021;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. On March 27, 2020, the Company issued 3,411,737 shares of Restricted Stock to KBS Capital Advisors pursuant to the Restricted Stock Agreement.

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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)
March 31, 20212022
(unaudited)
Pursuant to the terms of the Advisory Agreement, summarized below are the related-party costs incurred by the Company for the three months ended March 31, 20212022 and 2020,2021, respectively, and any related amounts payable as of March 31, 20212022 and December 31, 20202021 (in thousands):
IncurredPayable as ofIncurred during the three months ended March 31,Payable as of
20212020March 31, 2021December 31, 202020222021March 31, 2022December 31, 2021
ExpensedExpensedExpensed
Asset management feesAsset management fees$3,852 $2,106 $5,061 $2,837 Asset management fees$3,127 $3,852 $3,850 $1,903 
Property management fees (1)
Property management fees (1)
120 0 0 0 
Property management fees (1)
125 120 31 — 
Reimbursable operating expenses (2)
0 93 0 0 
Change in subordinated performance fee due upon termination to affiliate (3)
461 0 (3)(3)
Change in subordinated performance fee due upon termination to affiliate (2)
Change in subordinated performance fee due upon termination to affiliate (2)
— 461 (2)(2)
CapitalizedCapitalizedCapitalized
Acquisition fees on real estate (4)
200 200 
Acquisition fees on real estate equity securities0 99 5 5 
Acquisition fees on real estate (3)
Acquisition fees on real estate (3)
— 20— — 
Disposition fees on real estateDisposition fees on real estate107 — — — 
Acquisition fee on investment in unconsolidated entitiesAcquisition fee on investment in unconsolidated entities29 0 29 0 Acquisition fee on investment in unconsolidated entities— 29 — — 
$4,482 $2,298 $5,115 $2,842 $3,359 $4,482 $3,881 $1,903 
_____________________
(1) Property management fees are for single-family homes under Battery Point Trust Inc. (“Battery Point”) and paid to DayMark.a subsidiary of the Advisor (“DayMark”). These fees are included in the line item “Operating, maintenance, and management cost” in the consolidated statement of operations.
(2) The Advisor may seek reimbursement for certain employee costs under the Advisory Agreement. The Company has reimbursed the 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 $71,000 for the three months ended March 31, 2020 and were the only employee costs reimbursed under the Advisory Agreement during these periods. There were 0 employee cost reimbursements during the three months ended March 31, 2021. 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)Change in estimate of fees payable to the Company’s previous advisor, KBS Capital Advisors LLC (“KBS Capital Advisors) due 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.
(4)(3) Acquisition fees associated with asset acquisitions are capitalized, while costs associated with business combinations expensed as 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)
During the three months ended March 31, 2022, the Company provided $1.2 million of funding to the 110 William Joint Venture for mortgage loan refinancing fees. As of March 31, 2022 and December 31, 2021,
(unaudited)
the Company recognized a due from affiliate of $8.2 million and $7.0 million, respectively, of which $7.0 million from both periods are related to funding provided to the 353 Sacramento Joint Venture for mortgage loan refinancing fees.
Pacific Oak Opportunity Zone Fund I
During the year ended DecemberAs of March 31, 2019,2022, 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”) and POSOR II (which was acquired by the Company pursuant to the Merger) acquired 13 Class A Units in Pacific Oak Opportunity Zone Fund I for $2.9 million,, which are included in investments in unconsolidated entities on the consolidated balance sheets. When the Company acquired the additional 13 Class A Units through the Merger with POSOR II, it was recorded at its fair value of $3.0 million. Additionally, the Company acquired 7 Class A Units for $1.5 million during the year ended December 31, 2020. Pacific Oak Opportunity Zone Fund I is sponsored by Pacific Oak Holding. The Advisor is entitled to certain fees in connection with the fund. Pacific 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. The 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 investment. In addition, side letter agreements between the Advisor and Pacific Oak Opportunity Zone Fund I were executed on February 28, 2020 and stipulate that any asset management fees allocable to the Company and waived by Pacific Oak Capital Advisors for Pacific Oak Opportunity Zone Fund I will distributed to the Company. During the three months ended March 31, 2022 and 2021, the Company recorded $0.1 million and $0.2 million, respectively, of waived asset management fees recorded as equity in income of unconsolidated entities, of which $0.4$0.1 million was a receivable as of March 31, 2021.2022 and included in rents and other receivables, net on the consolidated balance sheet.
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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)
March 31, 2022
(unaudited)

PORT II
During the year ended DecemberAs of March 31, 2020,2022, the Company contributed $5.0$13.0 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 the 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 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.

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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)
March 31, 2021
(unaudited)
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. The number of Restricted Stock to be awarded was 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 vest on November 1, 2021. Within 60 days from vesting 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 Pacific Oak Capital Advisors that with respect to any fiscal quarter that any matter related to the award of Restricted Stock results in a company expense that falls within the definition of Total Operating Expenses (as defined in the Company’s charter), if Total Operating Expenses for the four consecutive fiscal quarters then ended exceed the 2%/25% Guidelines (as defined in the Company’s charter), then the Company’s conflicts committee will determine an Excess Amount (as defined 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 Expenses for the four consecutive fiscal quarters then ended comprised of the Restricted Stock expenses to be paid or incurred by the company without reimbursement by the Advisor (as defined in the Company’s charter) and (b) to allow any other portion 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.


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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)
March 31, 2021
(unaudited)
10. INVESTMENT IN UNCONSOLIDATED ENTITIES
As of March 31, 20212022 and December 31, 2020,2021, the Company’s investments in unconsolidated entities were composed of the following (dollars in thousands):
Number of Properties as of March 31, 2021Investment Balance atNumber of Properties as of March 31, 2022Investment Balance as of
Joint VentureJoint VentureLocationOwnership %March 31, 2021December 31, 2020Joint VentureLocationOwnership %March 31, 2022December 31, 2021
110 William Joint Venture110 William Joint Venture1New York, New York60.0%$0 0 110 William Joint Venture1New York, New York60.0%$— — 
353 Sacramento Joint Venture353 Sacramento Joint Venture1San Francisco, California55.0%50,807 49,665 353 Sacramento Joint Venture1San Francisco, California55.0%49,280 49,916 
Pacific Oak Opportunity Zone Fund IPacific Oak Opportunity Zone Fund I3VariousN/A25,077 24,996 Pacific Oak Opportunity Zone Fund I3Various46.0%27,214 27,215 
PORT II OP LPPORT II OP LP7Southaven, MississippiN/A5,005 5,005 PORT II OP LP251Various91.9%12,440 11,125 
$80,889 $79,666 $88,934 $88,256 

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)
March 31, 2022
(unaudited)
As of March 31, 20212022 and December 31, 2020,2021, the book value of the Company’s investment in the 110 William Joint Venture was $0. During the three months ended 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 months ended March 31, 20212022 and March 31, 2020,2021, 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):
March 31, 2021December 31, 2020
Assets:
       Real estate assets, net of accumulated depreciation and amortization$244,042 $246,166 
       Other assets44,101 44,004 
       Total assets$288,143 $290,170 
Liabilities and equity:
       Notes payable, net$318,238 $316,421 
       Other liabilities4,557 5,532 
       Partners’ deficit(34,652)(31,783)
Total liabilities and equity$288,143 $290,170 
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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)
March 31, 2021
(unaudited)
Three Months Ended March 31,
20212020
Revenues$8,093 $7,982 
Expenses:
       Operating, maintenance, and management1,993 2,302 
       Real estate taxes and insurance1,956 1,823 
       Depreciation and amortization3,129 2,643 
       Interest expense3,896 3,926 
Total expenses10,974 10,694 
Total other income12 22 
Net loss$(2,869)$(2,690)
Company’s share of net loss (1)
$(1,721)$(1,614)
_____________________
(1) The Company suspended the equity method of accounting and did 0t record the Company's share of losses for both of the three months ended March 31, 2021 and 2020.

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 three months ended March 31, 2021, the Company contributed an additional $0.9 million into the 353 Sacramento Joint Venture.
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 forDuring the three months ended March 31, 2021, the Company made a contribution of $0.9 million to the 353 Sacramento Joint Venture follows (in thousands):
March 31, 2021December 31, 2020
Assets:
       Real estate assets, net of accumulated depreciation and amortization$181,186 $182,318 
       Other assets22,001 19,810 
       Total assets$203,187 $202,128 
Liabilities and equity:
       Notes payable, net$109,856 $109,783 
       Other liabilities7,345 7,639 
       Partners’ capital85,986 84,706 
Total liabilities and equity$203,187 $202,128 
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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)
Venture. There were no contributions during the three months ended March 31, 2022. During the three months ended March 31, 2022 and 2021,
(unaudited)
Three Months Ended March 31,
20212020
Revenues$4,639 $4,887 
Expenses:
       Operating, maintenance, and management772 680 
       Real estate taxes and insurance759 753 
       Depreciation and amortization1,867 1,603 
       Interest expense869 1,321 
Total expenses4,267 4,357 
Net income$372 $530 
Company’s equity in income of unconsolidated joint venture$243 $328 

 the Company recognized a $0.6 million loss and income of $0.2 million, respectively, related to the 353 Sacramento Joint Venture.
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. As of March 31, 2021,2022, the book value of the Company’s investment in Pacific Oak Opportunity Zone Fund I was $25.1$27.2 million, which includes $0.2 million of acquisition fees. As of March 31, 2021,2022, Pacific Oak Opportunity Zone Fund I consolidated 3 joint ventures with real estate under development. As of March 31, 2021,2022, 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.
During the three months ended March 31, 2022 and 2021, the Company recognized a $0.1 million and $0.2 million loss related to this investment. 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 $25.1$27.2 million as of March 31, 2021.2022.
Investment in 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 March 31, 2021,2022, the Company has contributed $5.0 million in capitalowns 600 shares of common stock of PORT II, of which the Company exercises significant influence over the operations, financial policies and decision making with respect to PORT II, OP.but does not control. The Company made its investment through PORT OP, of which the Company owns 96.1%91.9% of PORT II OP as of March 31, 2021.2022. As of March 31, 2021,2022, the Company has concluded that PORT 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. During the three months ended March 31, 2022 and 2021, the Company recognized a $45,000 loss and $0, respectively, related to this investment.

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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)
March 31, 2022
(unaudited)
11. SUPPLEMENTAL CASH FLOW AND SIGNIFICANT NONCASH TRANSACTION DISCLOSURES
Supplemental cash flow and significant noncash transaction disclosures were as follows (in thousands):
Three Months Ended March 31,
20222021
Supplemental Disclosure of Cash Flow Information:
Interest paid, net of capitalized interest of $479 and $559 for the three months ended March 31, 2022 and 2021, respectively$10,950 $11,227 
Supplemental Disclosure of Significant Noncash Transaction:
Accrued improvements to real estate2,685 3,906 
Redeemable common stock payable3,064 11 
Distributions paid to common stockholders through common stock issuances99,093 — 

12. REPORTING SEGMENTS

The Company recognizes 3 reporting segments for the three months ended March 31, 2022 and 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 selected financial information for reporting segments for the three months ended March 31, 2022 and 2021 are as follows (in thousands):
Three Months Ended March 31, 2022
Strategic Opportunistic PropertiesSingle-Family HomesHotelsTotal
Total revenues$26,867 $5,743 $5,917 $38,527 
Total expenses(27,076)(6,504)(7,412)(40,992)
Total other income(4,589)(42)2,367 (2,264)
Net (loss) income$(4,798)$(803)$872 $(4,729)
Three Months Ended March 31, 2021
Strategic Opportunistic PropertiesSingle-Family HomesHotelsTotal
Total revenues$31,063 $5,306 $2,575 $38,944 
Total expenses(31,594)(6,184)(5,651)(43,429)
Total other income10,504 23 — 10,527 
Net income (loss)$9,973 $(855)$(3,076)$6,042 
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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)
March 31, 2021
(unaudited)
11. SUPPLEMENTAL CASH FLOW AND SIGNIFICANT NONCASH TRANSACTION DISCLOSURES
Supplemental cash flow and significant noncash transaction disclosures were as follows (in thousands):
Three Months Ended March 31,
20212020
Supplemental Disclosure of Cash Flow Information:
Interest paid, net of capitalized interest of $559 and $901 for the three months ended March 31, 2021 and 2020, respectively$11,227 $8,184 
Supplemental Disclosure of Significant Noncash Transactions:
Accrued improvements to real estate3,906 2,699 
Redeemable common stock payable11 623 
Distributions paid to common stockholders through common stock issuances pursuant to the dividend reinvestment plan0 262 

12. REPORTING SEGMENTS
The Company recognizes 3 reporting segments for the three months ended March 31, 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 months ended March 31, 2020. The selected financial information for reporting segments for the three months ended March 31, 2021 and 2020 are as follows (in thousands):
Three Months Ended March 31, 2021
Strategic Opportunistic PropertiesSingle-Family HomesHotelsTotal
Total revenues$31,063 $5,306 $2,575 $38,944 
Total expenses(31,594)(6,184)(5,651)(43,429)
Total other income10,504 23 0 10,527 
Net income (loss)$9,973 $(855)$(3,076)$6,042 
Three Months Ended March 31, 2020
Strategic Opportunistic PropertiesSingle-Family HomesHotelsTotal
Total revenues$21,752 $2,849 $0 $24,601 
Total expenses(12,896)(3,540)0 (16,436)
Total other loss(25,804)0 0 (25,804)
Net loss$(16,948)$(691)$0 $(17,639)
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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)
March 31, 20212022
(unaudited)
Total assets and goodwill related to the reporting segments as of March 31, 20212022 and December 31, 20202021 are as follows (in thousands):
March 31, 2021March 31, 2022
Strategic Opportunistic PropertiesSingle-Family HomesHotelsTotalStrategic Opportunistic PropertiesSingle-Family HomesHotelsTotal
Total assetsTotal assets$1,420,296 $194,889 $146,868 $1,762,053 Total assets$1,199,749 $208,737 $149,809 $1,558,295 
GoodwillGoodwill12,297 0 4,045 16,342 Goodwill9,489 — 4,045 13,534 
December 31, 2020December 31, 2021
Strategic Opportunistic PropertiesSingle-Family HomesHotelsTotalStrategic Opportunistic PropertiesSingle-Family HomesHotelsTotal
Total assets$1,404,509 $182,486 $144,670 $1,731,665 
Goodwill12,297 0 4,045 16,342 
Total assets (1)
Total assets (1)
$1,223,122 $211,050 $150,447 $1,584,619 
Goodwill (1)
Goodwill (1)
9,489 — 4,045 13,534 
_____________________
(1) During the year ended December 31, 2021, the Company recorded impairment charges on real estate and related intangibles and on goodwill of $11.0 million and $2.8 million, respectively, related to the Strategic Opportunistic Properties segment.

13. PORT MEZZANINE EQUITY
The Company has authorized and issued preferred 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 March 31, 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.
The following is a reconciliation of the Company’s noncontrolling cumulative convertible redeemable preferred stock for the three months ended March 31, 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— 225 — 0 
Dividends Paid— (225)— 0 
Balance, March 31, 202115,000 $15,134 125 $99 

share.
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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)
March 31, 20212022
(unaudited)
Series A Preferred StockSeries B Preferred Stock
SharesAmountsSharesAmounts
Balance, December 31, 201915,000 $14,909 125 $99 
Dividends Available Upon Redemption— 365 — 0 
Dividends Paid— (140)— 0 
Balance, March 31, 202015,000 $15,134 125 $99 
The following is a reconciliation of the Company’s noncontrolling cumulative convertible redeemable preferred stock for the three months ended March 31, 2022 and 2021 (dollars in thousands):
Series A Preferred StockSeries B Preferred Stock
SharesAmountsSharesAmounts
Balance, December 31, 202115,000 $15,134 125 $99 
Dividends Available Upon Redemption— 191 — — 
Dividends Paid— (191)— — 
Balance, March 31, 202215,000 $15,134 125 $99 

Series A Preferred StockSeries B Preferred Stock
SharesAmountsSharesAmounts
Balance, December 31, 202015,000 $15,134 125 $99 
Dividends Available Upon Redemption— 225 — — 
Dividends Paid— (225)— — 
Balance, March 31, 202115,000 $15,134 125 $99 

On July 1, 2020, the Company acquired, through its subsidiaries, Battery Point Trust Inc., a Maryland corporation (“Battery Point”).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 (formerly known as Reven Housing REIT OP, L.P.).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 three months ended March 31, 2022 and 2021 (in thousands):
December 31, 2021$2,822 
Net loss attributable to redeemable noncontrolling interest(47)
Adjustment to redemption value of mezzanine equity redeemable noncontrolling interest2,231 
March 31, 2022$5,006 
December 31, 2020$2,968 
Net loss attributable to redeemable noncontrolling interest(32)
March 31, 2021$2,936 



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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)
March 31, 2022
(unaudited)
14. 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”).
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Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
March 31, 2021
(unaudited)
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.
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 each of the three months ended March 31, 2022 and 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.

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Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
March 31, 2022
(unaudited)
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 the three months ended March 31, 2022 and 2021, the Company incurred $22,000$0.2 million of fees related to the management agreement, which are included in hotel expenses on the accompanying consolidated statements of operations.
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Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
March 31, 2021
(unaudited)
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 each of the three months ended March 31, 2022 and 2021, the Company incurred $0.1 million 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.
Lease Obligations
As of March 31, 2021,2022, the Company’s lease and rights to a leasehold interest with respect to 210 West 31st, 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)net)
$9,2588,074 
Lease obligation (included in other liabilities)liabilities)
9,2989,381 
Remaining lease term92.891.8 years
Discount rate4.8 %
The components of lease expense were as follows:
Interest on lease obligation114111 


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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)
March 31, 2022
(unaudited)
As of March 31, 2021,2022, the Company had a leasehold interest expiring on 2114. Future minimum lease payments owed by the Company under the finance lease as of March 31, 20212022 are as follows (in thousands):
April 1, 2021 through December 31, 2021$270 
2022360 
April 1, 2022 through December 31, 2022April 1, 2022 through December 31, 2022$270 
20232023360 2023360 
20242024360 2024360 
20252025393 2025393 
20262026396 
ThereafterThereafter52,563 Thereafter52,167 
Total expected minimum lease obligationsTotal expected minimum lease obligations54,306 Total expected minimum lease obligations53,946 
Less: Amount representing interest (1)
Less: Amount representing interest (1)
(45,008)
Less: Amount representing interest (1)
(44,565)
Present value of net minimum lease payments (2)
Present value of net minimum lease payments (2)
$9,298 
Present value of net minimum lease payments (2)
$9,381 
_____________________
(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.


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Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
March 31, 2021
(unaudited)
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. As of March 31, 2021 and December 31, 2020, the PPP notes balance was $3.9 million and $1.5 million and recorded in other liabilities in the accompanying consolidated balance sheets, respectively.
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 March 31, 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 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 2020 Annual Report on Form 10-K, including those related to impairments of real estate assets and investments in unconsolidated affiliates, collectability assessments on operating lease receivables. While the results of our current analyses did not result in any material adjustments to amounts as of and during the three months ended March 31, 2021, circumstances related to the COVID-19 pandemic may result in recording impairments and lease modifications or adjustments to rental revenues for lease payments deemed not probably of collection 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.


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Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
March 31, 20212022
(unaudited)
15. SUBSEQUENT EVENTS
The Company evaluates subsequent events up until the date the consolidated financial statements are issued.
Notes Payable RefinancingGeorgia 400 Mortgage Loan Deposit
On April 6, 2021,4, 2022, the Company refinancedpaid a deposit of $20.4 million to the PORTlender of the Georgia 400 Center Mortgage Loan 3as a result of being out of compliance with the debt service coverage requirement and required a cash sweep. Additionally, the Battery Point Trust Mortgage LoanCompany was unable to be in compliance with a mortgage loan from unaffiliated lenders (the “Refinancing”) for borrowings up to $60.0 million. At closing, $51.4 millionthe debt service coverage requirement within 180 days of the loan was funded andcash sweep initiation.
Series B Debentures
On May 2, 2022, the remaining $8.6 million was available for future disbursements, subject to certain terms and conditions contained in the loan documents. The Refinancing is interest only with an annual fixed rate of 3.90% and has a maturity date of April 10, 2026. In connection with the execution of the Refinancing,Company, through Pacific Oak SOR Equity Holdings X LLC,BVI, raised approximately $95.3 million (foreign currency denominated as approximately 320.4 million Israeli new Shekels at a wholly owned subsidiary, is providing an unconditional guarantee and will be held liable, asprice of 0.96 for every 1) of additional Series B Debentures to Israeli investors pursuant to a primary obligor for the Company’s obligations under the Refinancing.
Subsequent Acquisitions
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 affiliatedprivate offering registered with the Advisor.Israel Securities Authority. The Series B Debentures would be identical in the terms and pari passu to the existing bonds discussed in Note 6.
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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 advisor, our dealer manager and other Pacific Oak-affiliated entities. As a result, they face conflicts of interest, including significant conflicts created by our 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 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 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
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
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, 2020,2021, 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 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 with the SEC, which was filed on November 8, 2019. On November 1, 2019, we entered into a new advisory agreement with Pacific Oak Capital Advisors, LLC (“Pacific Oak Capital Advisors”), which was renewed on November 1, 2020. The advisory agreement is currently effective through November 1, 2021; however, we or Pacific Oak Capital Advisors may terminate the advisory agreement without cause or penalty upon providing 60 days’ written notice.
Asour advisor and 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 March 31, 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 March 31, 2021, we had redeemed 24,129,688 of the shares sold in our offering for $288.5 million. As of March 31, 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.
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”).
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 ours (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 Company’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 March 31, 2021,2022, we consolidated nineeight office properties, one office portfolio consisting of fourtwo office buildings and 14 acres of undeveloped land, two apartment properties, two hotel properties, one residential home portfolio consisting of 1,7861,814 single-family homes, three investments in undeveloped land with approximately 1,000800 developable acres, one office/retail development property and owned four investments in unconsolidated entities and three investments in real estate equity securities. Additionally, as of March 31, 2021, we 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 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 three months ended March 31, 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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PART I. FINANCIAL INFORMATION (CONTINUED)
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. 
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
We 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 March 31, 2021,2022, 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. As of March 31, 2021 and December 31, 2020, the PPP notes balance was $3.9 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 March 31, 2021,2022, our office properties were collectively 76%73% occupied, our residential home portfolio was 94%92% occupied and our apartment properties were 89%96% occupied. As of April 2021, we collected 93% of total charged rent for the month of March 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 three months ended March 31, 2022 and 2021:
Percentage Occupied for the Three Months Ended March 31,Average Daily Rate for the Three Months Ended March 31,Average Revenue per Available Room for the Three Months Ended March 31,
PropertyPropertyNumber of RoomsPercentage Occupied for the Three Months Ended March 31, 2021Average Daily Rate for the Three Months Ended March 31, 2021Average Revenue per Available Room for the Three Months Ended March 31, 2021PropertyNumber of Rooms202220212022202120222021
Springmaid Beach ResortSpringmaid Beach Resort45326.9%$111.82$30.11Springmaid Beach Resort45339.3%26.9%$136.45$111.82$53.63$30.11
Q&C HotelQ&C Hotel19624.3%$104.11$25.24Q&C Hotel19662.3%24.3%$191.97$104.11$119.54$25.24
Investments in real estate equity securities generate cash flow in the form of dividend income, which is reduced by asset management fees. As of March 31, 2021,2022, we had three investments in real estate equity securities outstanding with a total carrying value of $94.2$104.6 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 has determined that such excess expenses were justified based on unusual and non-recurring factors. Operating expenses for the four fiscal quarters ended March 31, 20212022 did not exceed the charter-imposed limitation.
For the three months ended March 31, 2021,2022, 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 March 31, 2021,2022, we had outstanding debt obligations in the aggregate principal amount of $1.1 billion,$997.6 million, with a weighted-average remaining term of 1.42.0 years. As of March 31, 2021,2022, we had a total of $592.4$447.8 million of debt obligations scheduled to mature within 12 months of that date. We plan to exercise our extension options available under our loan agreements or pay down or refinance the related notes payable prior to 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.

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Cash Flows from Operating Activities
As of March 31, 2021,2022, we consolidated nineeight office properties, one office portfolio consisting of fourtwo office buildings and 14 acres of undeveloped land, two apartment properties, two hotel properties, one residential home portfolio consisting of 1,7861,814 single-family homes, three investments in undeveloped land with approximately 1,000800 developable acres, one office/retail development property and owned four investments in unconsolidated entities and three investments in real estate equity securities. Additionally, as of March 31, 2021, we had entered into a consolidated joint venture to develop one office/retail property. During the three months ended March 31, 2021,2022, net cash used inprovided by operating activities was $1.3$0.3 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 provided by investing activities was $6.9$5.9 million for the three months ended March 31, 20212022 and primarily consisted primarily of the following:
•Proceeds fromEarnest money received of $13.5 million related to the pending sale of real estate equity securities of $14.4 million;Park Highlands;
•Improvements to real estate of $4.4$4.9 million;
•AcquisitionInvestment in an unconsolidated entity of real estate of $2.0$1.5 million; and
•Investment of unconsolidated entitiesAdvance to affiliate of $1.2 million.

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Cash Flows from Financing Activities
Net cash provided byused in financing activities was $36.0$14.0 million for the three months ended March 31, 20212022 and consisted primarily of the following:
•$34.711.0 million of cash distributions paid;
•$2.2 million of net cash provided byused in debt and other financings as a result of proceeds from notes payable of $97.1 million, partially offset by principal payments on notes and bonds payable of $61.3$55.1 million and payments of deferred financing costs of $1.1$0.9 million and partially offset by proceeds from notes payable of $53.8 million; and
•$2.4 million of cash provided by PPP Notes;
•$0.90.6 million of cash used for redemptions of common stock; and
•$0.2 million of cash distributions to preferred stockholders.stock.
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 March 31, 2021,2022, our borrowings and other liabilities were both approximately 67%66% 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 Series A Debentures have a seven year term, with principal payable in five equal annual installments from 2019 to 2023.
On February 16, 2020, Pacific Oak SORStrategic Opportunity 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,November 1, 2021, wePacific Oak Strategic Opportunity BVI issued additional Series AB Debentures in the amount of 250.0536.4 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, on November 8, 2021, Pacific Oak Strategic Opportunity BVI also issued Series B Debentures in the amount of 53.6 million Israeli new Shekels par value through a private placement.offering. The additionalprivate offering Series AB Debentures were issued at a 1.9%3.1% discount resulting in a total consideration of 245.352.0 million Israeli new Shekels ($74.216.7 million as of March 4,November 8, 2021). The additional Series AB Debentures have an equal level of security, pari passu, amongst themselves and between them and the initial Series AB Debentures, which were initially issued, without any right of precedence or preference between any of them. Refer to the Subsequent Events note for additional discussion related to proceeds raised.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
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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PART I. FINANCIAL INFORMATION (CONTINUED)
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 March 31, 20212022 (in thousands):
Payments Due During the Years Ending December 31,Payments Due During the Years Ending December 31,
Contractual ObligationsContractual ObligationsTotalRemainder of 20212022-20232024-2025ThereafterContractual ObligationsTotalRemainder of 20222023-20242025-2026Thereafter
Outstanding debt obligations (1)
Outstanding debt obligations (1)
$1,133,532 $443,911 $546,621 $102,543 $40,457 
Outstanding debt obligations (1)
$997,638 $447,827 $197,892 $351,919 $— 
Interest payments on outstanding debt obligations (2)
Interest payments on outstanding debt obligations (2)
59,927 23,608 25,236 9,124 1,959 
Interest payments on outstanding debt obligations (2)
64,323 20,686 33,799 9,838 — 
Finance lease obligationFinance lease obligation54,306 270 720 753 52,563 Finance lease obligation53,946 270 720 789 52,167 
_____________________
(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 March 31, 2021. We incurred interest expense of $9.7 million, excluding amortization of deferred financing costs of $0.8 million and including interest capitalized of $0.6 million, for the three months ended March 31, 2021.2022.
Results of Operations
Overview
As of March 31, 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 993 single-family homes and owned five investments in unconsolidated entities and three investments in real estate equity securities. As of March 31, 2021, we consolidated nine 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 1,786 single-family homes, three investments in undeveloped land with approximately 1,000 developable acres, one office/retail development property and owned four investments in unconsolidated entities and three investments in real estate equity securities. Additionally, asAs of March 31, 2021,2022, we had entered into a consolidated joint venture to developeight office properties, one office portfolio consisting of two office buildings and 14 acres of undeveloped land, two apartment properties, two hotel properties, one residential home portfolio consisting of 1,814 single-family homes, three investments in undeveloped land with approximately 800 developable acres, one office/retail property.development property and owned four investments in unconsolidated entities and three investments in real estate equity securities. Our results of operations for the three months ended March 31, 20212022 may not be indicative of those in future periods due to acquisition and disposition activities and COVID-19 related impacts.activities. Additionally, the occupancy in our office properties has not been stabilized. As of March 31, 2021,2022, our office properties were collectively 76%73% occupied, our residential home portfolio was 94%92% occupied and our apartment property was 89%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.

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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 three months ended March 31, 20212022 versus the three months ended March 31, 20202021
The following table provides summary information about our results of operations for the three months ended March 31, 20212022 and 20202021 (dollar amounts in thousands):
Three Months Ended March 31,Increase (Decrease)Percentage Change
$ Change Due to Acquisitions/ Dispositions (1)
$ Change Due to 
Investments Held Throughout
Both Periods (2)
 Three Months Ended March 31,Increase (Decrease)Percentage Change
$ Change Due to Acquisitions/ Dispositions (1)
$ Change Due to 
Investments Held Throughout
Both Periods (2)
2021202020222021
Rental incomeRental income$32,648 $22,151 $10,497 47 %$10,483 $14 Rental income$29,382 $32,648 $(3,266)(10)%$(3,917)$651 
Hotel revenuesHotel revenues2,575 — 2,575 100 %2,575 — Hotel revenues5,917 2,575 3,342 100 %— 3,342 
Other operating incomeOther operating income968 971 (3)— %241 (244)Other operating income841 968 (127)(13)%(227)100 
Dividend income from real estate equity securitiesDividend income from real estate equity securities2,753 1,479 1,274 86 %1,274 — Dividend income from real estate equity securities2,387 2,753 (366)(13)%(366)— 
Operating, maintenance, and management costsOperating, maintenance, and management costs10,433 7,572 2,861 38 %3,301 (440)Operating, maintenance, and management costs9,875 10,433 (558)(5)%(924)366 
Real estate taxes and insuranceReal estate taxes and insurance5,289 3,428 1,861 54 %1,923 (62)Real estate taxes and insurance5,024 5,289 (265)(5)%(464)199 
Hotel expensesHotel expenses3,390 — 3,390 100 %3,390 — Hotel expenses5,113 3,390 1,723 100 %— 1,723 
Asset management fees to affiliateAsset management fees to affiliate3,852 2,106 1,746 83 %1,454 292 Asset management fees to affiliate3,127 3,852 (725)(19)%(294)(431)
General and administrative expensesGeneral and administrative expenses1,869 2,546 (677)(27)%n/an/aGeneral and administrative expenses2,991 1,869 1,122 60 %n/an/a
Foreign currency transaction gain, netForeign currency transaction gain, net(8,346)(14,996)6,650 (44)%n/an/aForeign currency transaction gain, net(7,266)(8,346)1,080 (13)%n/an/a
Depreciation and amortizationDepreciation and amortization17,001 8,984 8,017 89 %8,280 (263)Depreciation and amortization12,565 17,001 (4,436)(26)%(1,809)(2,627)
Interest expenseInterest expense9,941 6,796 3,145 46 %4,420 (1,275)Interest expense9,563 9,941 (378)(4)%(417)39 
Equity in income of unconsolidated entities, netEquity in income of unconsolidated entities, net169 328 (159)(48)%— (159)Equity in income of unconsolidated entities, net(679)169 (848)(502)%— (848)
Other interest incomeOther interest income45 270 (225)(83)%n/an/aOther interest income46 45 1 2 %n/an/a
Gain (loss) on real estate equity securities10,753 (26,454)37,207 (141)%n/an/a
(Loss) gain on real estate equity securities(Loss) gain on real estate equity securities(7,521)10,753 (18,274)(170)%2,811 (21,085)
Gain on sale of real estateGain on sale of real estate21 — 21 100 %21 — Gain on sale of real estate3,523 21 3,502 100 %3,502 — 
Gain on extinguishment of debtGain on extinguishment of debt2,367 — 2,367 100 %— 2,367 
Change in subordinated performance fee due upon termination to affiliateChange in subordinated performance fee due upon termination to affiliate461 — 461 100 %n/an/aChange in subordinated performance fee due upon termination to affiliate— (461)461 100 %n/an/a
_____________________
(1) Represents the dollar amount increase (decrease) for the three months ended March 31, 20212022 compared to the three months ended March 31, 20202021 related to real estate and real estate-related investments acquired or disposed on or after January 1, 2020.2021.
(2) Represents the dollar amount increase (decrease) for the three months ended March 31, 20212022 compared to the three months ended March 31, 20202021 with respect to real estate and real estate-related investments owned by us during the entirety of both periods presented.
Rental income increaseddecreased from $22.2 million for the three months ended March 31, 2020 to $32.6 million for the three months ended March 31, 2021 to $29.4 million for the three months ended March 31, 2022, primarily as a result of properties acquired in 2020 and an overall increase inthe disposition of City Tower on July 27, 2021, which accounted for $3.8 million of rental rates for properties held throughout both periods.income during the three months ended March 31, 2021. The occupancy of our office properties held throughout both periods slightly decreased from 81%74% as of March 31, 20202021 to 78%73% as of March 31, 2021.2022. Annualized base rent per square foot increased from $24.49$27.76 as of March 31, 20202021 to $26.17$27.98 as of March 31, 20212022 related to office properties 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 was $1.0Hotel revenues increased from $2.6 million for both of the three months ended March 31, 2021 to $5.9 million for the three months ended March 31, 2022, primarily as a result of the increase in occupancy from 26.9% to 39.3% and 2020.average daily rate from $111.82 to $136.45 for the Springmaid Beach Resort as well as the increase in occupancy from 24.3% to 62.3% and average daily rate from $104.11 to $191.97 for the Q&C Hotel.
Other operating income decreased from $1.0 million for the three months ended March 31, 2021 to $0.8 million for the three months ended March 31, 2022, primarily as a result of the disposition of City Tower, which account for $0.3 million of other operating income during the three months ended March 31, 2021. 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 increaseddecreased from $1.5 million for the three months ended March 31, 2020 to $2.8 million for the three months ended March 31, 2021 to $2.4 million for the three months ended March 31, 2022, primarily as a result of real estate equity securities acquireddisposed subsequent to March 31, 2020, partially offset by the sale of equity securities subsequent to March 31, 2020.2021. 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 increaseddecreased from $7.6 million for the three months ended March 31, 2020 to $10.4 million for the three months ended March 31, 2021 and real estate taxes and insurance increased from $3.4to $9.9 million for the three months ended March 31, 2020 to2022 and real estate taxes and insurance decreased from $5.3 million for the three months ended March 31, 2021 to $5.0 million for the three months ended March 31, 2022, primarily as a resultdue to the disposition of properties acquired in 2020.City Tower, which accounted for $0.8 million of property operating costs and $0.4 million of real estate taxes and insurance during the three months ended March 31, 2021. 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.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Asset management fees increaseddecreased from $2.1 million for the three months ended March 31, 2020 to $3.9 million for the three months ended March 31, 2021 to $3.1 million for the three months ended March 31, 2022, primarily as a resultdue to the disposition of properties acquired in 2020.City Tower, which accounted for $0.3 million of asset management fees during the three months ended March 31, 2021. 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 decreasedincreased from $2.5 million for the three months ended March 31, 2020 to $1.9 million for the three months ended March 31, 2021 to $3.0 million for the three months ended March 31, 2022, primarily due to legal and advisory expenses of $1.1$0.6 million related to the proposed merger with Pacific Ok Strategic Opportunity REIT II incurred during the three months ended March 31, 2020.pending Park Highlands sale and other portfolio matters. 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 $8.3$7.3 million foreign currency transaction gain, net for the three months ended March 31, 20212022 and $15.0$8.3 million of foreign currency transaction gain, net, for the three months ended March 31, 2020,2021, 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. During the three months ended March 31, 2020, we recognized a $6.0 million gain related to the foreign currency collars and a $9.0 million foreign currency transaction gain.
Depreciation and amortization increaseddecreased from $9.0 million for the three months ended March 31, 2020 to $17.0 million for the three months ended March 31, 2021 to $12.6 million for the three months ended March 31, 2022, primarily as a result of properties acquired in 2020the disposition of City Tower, which accounted for $1.8 million of depreciation during the three months ended March 31, 2021 and capital expenditures.lease intangibles that were fully amortized during the three months ended March 31, 2021 and accounted for $2.0 million. We expect depreciation and amortization to increase in future periods as a result of owning the property acquired during 2020 for an entire period and to the extent we acquire additional properties, but to decrease as a result of amortization of tenant origination costslease intangibles related to lease expirations and disposition of properties.
Interest expense increaseddecreased from $6.8 million for the three months ended March 31, 2020 to $9.9 million for the three months ended March 31, 2021 to $9.6 million for the three months ended March 31, 2022 primarily as a result of increased borrowings relateddue to properties acquired in 2020decreased outstanding loan balances and partially offset by the 2021 Debentures principal installment payments of 194.0 Israeli new Shekels (approximately $56.6 million as of March 31, 2020 and $58.9 million as of March 1, 2021) and decreasedincreased one-month LIBORfloating rates during the three months ended March 31, 2021. Excluded from interest expense was $0.6 million and $0.7 million of interest capitalized to our investments in undeveloped land during the three months ended March 31, 2021 and 2020, respectively.2022. 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 Debentures.
Loss on real estate equity securities was $26.5 million for the three months ended March 31, 2020. Gain on real estate equity securities was $10.8 million for the three months ended March 31, 2021. Loss on real estate equity securities was $7.5 million for the three months ended March 31, 2022. 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.


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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Funds from Operations, 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. 
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.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Although MFFO includes other adjustments, the exclusion of 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 or gain on extinguishment of debt. A loss or gain 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 or gain from extinguishment of debt in our calculation of MFFO because these losses or gains do not impact the current operating performance of our investments and do not provide an indication of future operating performance.
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. We believe excluding this item 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 months ended March 31, 2021 and 2020 (in thousands). No conclusions or comparisons should be made from the presentation of these periods.
For the Three Months Ended March 31,For the Three Months Ended March 31,
2021202020222021
Net income (loss) attributable to common stockholders$6,512 $(17,972)
Net (loss) income attributable to common stockholdersNet (loss) income attributable to common stockholders$(4,755)$6,512 
Depreciation of real estate assetsDepreciation of real estate assets9,249 5,610 Depreciation of real estate assets8,294 9,249 
Amortization of lease-related costsAmortization of lease-related costs7,752 3,374 Amortization of lease-related costs4,271 7,752 
Gain on sale of real estate (1)
Gain on sale of real estate (1)
(21)— 
Gain on sale of real estate (1)
(3,523)(21)
(Gain) loss on real estate equity securities(10,753)26,454 
Loss (gain) on real estate equity securitiesLoss (gain) on real estate equity securities7,521 (10,753)
Adjustments for noncontrolling interests - consolidated entities (2)
Adjustments for noncontrolling interests - consolidated entities (2)
(451)(73)
Adjustments for noncontrolling interests - consolidated entities (2)
(298)(451)
Adjustments for investments in unconsolidated entities (3)
Adjustments for investments in unconsolidated entities (3)
1,126 853 
Adjustments for investments in unconsolidated entities (3)
689 1,126 
FFO attributable to common stockholdersFFO attributable to common stockholders13,414 18,246 FFO attributable to common stockholders12,199 13,414 
Straight-line rent and amortization of above- and below-market leasesStraight-line rent and amortization of above- and below-market leases(1,411)(1,204)Straight-line rent and amortization of above- and below-market leases(1,312)(1,411)
Amortization of net premium/discount on bond and notes payableAmortization of net premium/discount on bond and notes payable482 (25)Amortization of net premium/discount on bond and notes payable1,016 482 
Unrealized loss (gain) on interest rate caps13 (14)
Mark-to-market foreign currency transaction gain, net(8,346)(14,996)
Unrealized (gain) loss on interest rate capsUnrealized (gain) loss on interest rate caps(55)13 
Gain on extinguishment of debtGain on extinguishment of debt(2,367)— 
Foreign currency transaction gain, netForeign currency transaction gain, net(7,266)(8,346)
Adjustments for noncontrolling interests - consolidated entities (2)
Adjustments for noncontrolling interests - consolidated entities (2)
(51)12 
Adjustments for noncontrolling interests - consolidated entities (2)
(40)(51)
Adjustments for investments in unconsolidated entities (3)
Adjustments for investments in unconsolidated entities (3)
(136)(812)
Adjustments for investments in unconsolidated entities (3)
(47)(136)
MFFO attributable to common stockholdersMFFO attributable to common stockholders3,965 1,207 MFFO attributable to common stockholders2,128 3,965 
Other capitalized operating expenses (4)
Other capitalized operating expenses (4)
(679)(1,012)
Other capitalized operating expenses (4)
(3,061)(679)
Change in subordinated performance fee due upon termination to affiliateChange in subordinated performance fee due upon termination to affiliate461 — Change in subordinated performance fee due upon termination to affiliate— 461 
Adjusted MFFO attributable to common stockholdersAdjusted MFFO attributable to common stockholders$3,747 $195 Adjusted MFFO attributable to common stockholders$(933)$3,747 
_____________________
(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 income (loss) 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 income (loss) attributable to common stockholders to FFO, MFFO and Adjusted MFFO for our equity investments in unconsolidated entities.
(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 income (loss), 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.
Distributions
There were no distributions declared for the three months ended March 31, 2021. Our net incomeloss attributable to common stockholders for the three months ended March 31, 2021 was $6.5$4.8 million and our cash flows used inprovided by operations were $1.3$0.3 million. Our cumulative distributions paid and net income attributable to common stockholders from inception through March 31, 2021 were $195.4 million and $126.9 million, respectively.2022 was $453.8 million. We have funded our cumulative distributions paid, which includes net cash distributions and distributions reinvested by stockholders, with proceedsprior period cash flow from debt financingoperating activities in excess of $18.7 million, proceedsdistributions paid and with cash from gains realized from the dispositionsdisposition of property of $83.4 million and cash provided by operations of $93.3 million.properties. 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, real estate equity securities and other real estate-related investments, the overall return to our stockholders may be reduced and subsequent investors may experience dilution.


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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Critical Accounting Policies
Our consolidated interim financial statements 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, 20202021 filed with the SEC. There have been no significant changes to our policies during 2021.2022.
Subsequent Events
We evaluate subsequent events up until the date the consolidated financial statements are issued.
Notes Payable RefinancingGeorgia 400 Mortgage Loan Deposit
On April 6, 2021,4, 2022, we refinancedpaid a deposit of $20.4 million to the PORTlender of the Georgia 400 Center Mortgage Loan 3as a result of being out of compliance with the debt service coverage requirement and required a cash sweep. Additionally, we were unable to be in compliance with the Battery Point Trust Mortgage Loan with a mortgage loan from unaffiliated lenders (the “Refinancing”) for borrowings up to $60.0 million. At closing, $51.4 milliondebt service coverage requirement within 180 days of the loan was funded and the remaining $8.6 million was available for future disbursements, subject to certain terms and conditions contained in the loan documents. The Refinancing is interest only with an annual fixed rate of 3.90% and has a maturity date of April 10, 2026. In connection with the execution of the Refinancing,cash sweep initiation.
Series B Debentures
On May 2, 2022, we, through Pacific Oak SOR Equity(BVI) Holdings, X LLC,Ltd. (“Pacific Oak SOR BVI”) raised approximately $95.3 million (approximately 320.4 million Israeli new Shekels at a wholly owned subsidiary, is providing an unconditional guarantee and will be held liable, asprice of 0.96 for every 1) of additional Series B Debentures to Israeli investors pursuant to a primary obligor for our obligations under the Refinancing.
Subsequent Acquisitions
On April 6, 2021, we 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 affiliatedprivate offering registered with the Advisor.Israel Securities Authority. The Series B Debentures would be identical in the terms and pari passu to the existing bonds.

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% bondsSeries B Debentures issued to investors in Israel in March 2016 and February 2020, respectively.Israel. 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 March 31, 2021,2022, we held 193.11.9 million Israeli new Shekels and 21.218.3 million Israeli new Shekels in cash and restricted cash, respectively. In addition, as of March 31, 2021,2022, we had bonds outstanding and the related interest payable in the amounts of 892.1844.1 million Israeli new Shekels and 3.95.5 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 three months ended March 31, 2021,2022, if foreign currency exchange rates were to increase or decrease by 10%, our net income would increase or decrease by approximately $18.5$20.4 million and $22.7$32.1 million, respectively, for the same period.
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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 March 31, 2021,2022, the fair value of our Pacific Oak SOR (BVI) Holdings, Ltd. Series A andBVI Series B Debentures was $191.6$262.5 million and $71.4 million, respectively, and the outstanding principal balance was $190.9 million and $76.0 million, respectively.$264.5 million. As of March 31, 2021,2022, excluding the Pacific Oak SOR (BVI) Holdings, Ltd. Series A andBVI Series B Debentures, the fair value of our fixed rate debt was $84.3$135.8 million and the outstanding principal balance of our fixed rate debt was $79.6$139.3 million. The fair value estimate of our Pacific Oak SOR (BVI) Holdings, Ltd. Series A andBVI Series B Debentures were calculated using the quoted bond price as of March 31, 20212022 on the Tel Aviv Stock Exchange of 100.68 and 94.5299.88 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 March 31, 2021.2022. 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 March 31, 2021,2022, we had entered into sixthree separate interest rate caps with an aggregate notional of $268.1$181.0 million which effectively limits our exposure to increases in one-month LIBOR and SOFR above certain thresholds. Based on interest rates as of March 31, 2021,2022, if interest rates were 100 basis points higher or lower during the 12 months ending March 31, 2022, interest expense on our variable rate debt would increase or decrease by $7.2$4.4 million and $0.6$2.0 million, respectively.
The weighted-average interest rates of our fixed rate debt and variable rate debt as of March 31, 20212022 were 4.4%4.1% and 2.7%2.9%, respectively. The interest rate and weighted-average interest rate represent the actual interest rate in effect as of March 31, 20212022 (consisting of the contractual interest rate and the effect of contractual floor rates, if applicable), using interest rate indices as of March 31, 20212022 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 March 31, 2021,2022, we owned real estate equity securities with a book value of $94.2$104.6 million. Based solely on the prices of real estate equity securities as of March 31, 2021,2022, if prices were to increase or decrease by 10%, our net income would increase or decrease by approximately $9.4$10.5 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
Please see the risk factors in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020,2021, as filed with the SEC.

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.
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.
•Separate from the funding described in the first bullet above, in December 2020,on March 10, 2022, our board of directors has made available a total of $2.0$3.0 million for redemptions in connection with a stockholder's death, “qualifying disability”, or “determination of incompetence” and that will carry forward until depleted. As of March 31, 2021, $11,0002022, $3.0 million remained available. 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.
During the three months ended March 31, 2021,2022, 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 202124,076 $9.68 (2)
February 20213,138 $9.68 (2)
March 202160,929 $9.68 (2)
Total88,143 
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 2022— $— (2)
February 202242,430 $9.51 (2)
March 202222,735 $9.51 (2)
Total65,165 
_____________________
(1) On December 4, 2020,January 26, 2022, our board of directors approved an estimated value per share of our common stock of $9.68.$9.51. The change in the redemption price became effective for the December 2020January 2022 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 2021.2022.
(2) We limit the dollar value of shares that may be redeemed under the program as described above. During the three months ended March 31, 2021,2022, we redeemed $0.9$0.6 million of common stock under the program, which represented all redemption requests received in good order and eligible for redemption through the March 20212022 redemption date, except for the $117.0$131.8 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 Twelfth SRP, we had $11,000$3.1 million available for redemptions in the remainder of 20212022 as of March 31, 2021, including shares that2022, all of which are redeemed in connection with a stockholders’ death, “qualifying disability” or “determination of incompetence,” subject to the limitations described above. 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.

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
None.

Item 6. Exhibits
Ex.Description
3.1
3.2
3.3
3.4
4.1
4.2
31.1
31.2
32.1
32.2
99.1
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:May 7, 20216, 2022By:
/S/ KEITH D. HALL        
Keith D. Hall
Chief Executive Officer and Director
(principal executive officer)
Date:May 7, 20216, 2022By:/S/ MICHAEL A. BENDER   
 Michael A. Bender
 Chief Financial Officer
(principal financial officer)

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