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


 FORM 10-Q

(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 November 10, 2021,11, 2022, there were 93,896,447104,041,817 outstanding shares of common stock of Pacific Oak Strategic Opportunity REIT, Inc.

Table of Contents
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
FORM 10-Q
September 30, 20212022
INDEX 
PART I.
2
Item 1.
2
Consolidated Balance Sheets as of September 30, 20212022 (unaudited) and December 31, 20202021
2
3
4
6
7
Item 2.
4027
Item 3.
5540
Item 4.
5642
PART II.
5743
Item 1.
5743
Item 1A.
5743
Item 2.
5743
Item 3.
5944
Item 4.
5944
Item 5.
5944
Item 6.
6045
6146

1

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

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
 September 30, 2021December 31, 2020
 (unaudited)
Assets
Real estate held for investment, net$1,219,531 $1,272,784 
Real estate held for sale, net— 140,239 
Real estate equity securities96,403 97,903 
Total real estate and real estate-related investments, net1,315,934 1,510,926 
Cash and cash equivalents138,037 60,335 
Restricted cash28,201 13,984 
Investments in unconsolidated entities83,854 79,666 
Rents and other receivables, net24,730 22,212 
Above-market leases, net2,735 3,157 
Prepaid expenses and other assets22,103 19,363 
Goodwill13,534 16,342 
Assets related to real estate held for sale, net— 5,680 
Total assets$1,629,128 $1,731,665 
Liabilities, mezzanine equity and equity
Notes and bonds payable, net
Notes and bonds payable related to real estate held for investment, net$1,023,778 $1,004,971 
Note payable related to real estate held for sale, net— 94,097 
Notes and bonds payable, net1,023,778 1,099,068 
Accounts payable and accrued liabilities22,054 24,169 
Due to affiliate2,152 2,842 
Below-market leases, net4,436 5,797 
Other liabilities43,994 34,734 
Redeemable common stock payable3,385 864 
Restricted stock payable574 14,600 
Liabilities related to real estate held for sale, net— 669 
Total liabilities1,100,373 1,182,743 
Commitments and contingencies (Note 15)00
Mezzanine equity
Restricted stock— 11,009 
Noncontrolling cumulative convertible redeemable preferred stock15,233 15,233 
Redeemable noncontrolling interest2,855 2,968 
Equity
Pacific Oak Strategic Opportunity REIT, Inc. stockholders’ equity
Preferred stock, $.01 par value; 10,000,000 shares authorized, no shares issued and outstanding— — 
Common stock, $.01 par value; 1,000,000,000 shares authorized, 94,264,402 and 98,054,582 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively942 979 
Additional paid-in capital820,382 831,295 
Cumulative distributions and net income(322,049)(325,720)
Total Pacific Oak Strategic Opportunity REIT, Inc. stockholders’ equity499,275 506,554 
Noncontrolling interests11,392 13,158 
Total equity510,667 519,712 
Total liabilities, mezzanine equity and equity$1,629,128 $1,731,665 

 September 30, 2022December 31, 2021
 (unaudited)
Assets
Real estate held for investment, net$1,234,197 $1,118,550 
Real estate held for sale, net— 96,249 
Real estate equity securities63,784 112,096 
Total real estate and real estate-related investments, net1,297,981 1,326,895 
Cash and cash equivalents85,368 84,172 
Restricted cash57,325 21,259 
Investments in unconsolidated entities72,838 88,256 
Rents and other receivables, net21,140 21,795 
Above-market leases, net2,364 2,642 
Due from affiliate13 7,039 
Prepaid expenses and other assets21,902 18,108 
Goodwill5,436 13,534 
Assets related to real estate held for sale, net— 919 
Total assets$1,564,367 $1,584,619 
Liabilities, mezzanine equity and equity
Notes and bonds payable related to real estate held for investment, net$1,042,860 $935,073 
Note payable related to real estate held for sale, net— 63,876 
Notes and bonds payable, net1,042,860 998,949 
Accounts payable and accrued liabilities27,236 23,852 
Due to affiliates3,252 1,903 
Below-market leases, net2,986 4,080 
Other liabilities52,431 42,851 
Redeemable common stock payable1,567 684 
Restricted stock payable508 508 
Dividends payable— 11,016 
Liabilities related to real estate held for sale, net— 662 
Total liabilities1,130,840 1,084,505 
Commitments and contingencies
Mezzanine equity
Noncontrolling cumulative convertible redeemable preferred stock15,233 15,233 
Redeemable noncontrolling interest— 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, 104,076,881 and 94,141,251 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively1,041 941 
Additional paid-in capital909,533 818,440 
Cumulative distributions and net loss(494,998)(347,691)
Total Pacific Oak Strategic Opportunity REIT, Inc. stockholders’ equity415,576 471,690 
Noncontrolling interests2,718 10,369 
Total equity418,294 482,059 
Total liabilities, mezzanine equity and equity$1,564,367 $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 September 30,Nine Months Ended September 30, Three Months Ended September 30,Nine Months Ended September 30,
20212020202120202022202120222021
Revenues:Revenues:Revenues:
Rental incomeRental income$29,504 $23,871 $94,812 $67,808 Rental income$31,445 $29,504 $89,806 $94,812 
Hotel revenuesHotel revenues12,153 — 24,578 — Hotel revenues9,182 12,153 27,952 24,578 
Other operating incomeOther operating income923 888 3,118 2,722 Other operating income830 923 2,559 3,118 
Dividend income from real estate equity securitiesDividend income from real estate equity securities3,189 2,986 6,693 5,339 Dividend income from real estate equity securities2,148 3,189 5,354 6,693 
Total revenuesTotal revenues45,769 27,745 129,201 75,869 Total revenues43,605 45,769 125,671 129,201 
Expenses:Expenses:Expenses:
Operating, maintenance, and management costs10,668 7,888 31,444 22,258 
Operating, maintenance, and managementOperating, maintenance, and management12,342 10,668 32,560 31,444 
Real estate taxes and insuranceReal estate taxes and insurance5,262 3,791 15,949 10,570 Real estate taxes and insurance5,650 5,262 15,753 15,949 
Hotel expensesHotel expenses6,483 — 15,715 — Hotel expenses5,377 6,483 17,485 15,715 
Asset management fees to affiliateAsset management fees to affiliate3,422 2,426 10,802 6,867 Asset management fees to affiliate3,630 3,422 9,945 10,802 
General and administrative expensesGeneral and administrative expenses2,365 1,960 7,120 6,302 General and administrative expenses2,504 2,365 8,486 7,120 
Foreign currency transaction loss (gain), net2,271 445 (568)(12,338)
Foreign currency transaction (gain) loss, netForeign currency transaction (gain) loss, net(6,001)2,271 (37,100)(568)
Depreciation and amortizationDepreciation and amortization13,895 9,470 45,969 27,417 Depreciation and amortization12,717 13,895 39,379 45,969 
Interest expenseInterest expense10,092 6,274 30,713 19,055 Interest expense12,976 10,092 33,319 30,713 
Impairment charges on real estateImpairment charges on real estate10,971 — 10,971 — Impairment charges on real estate11,942 10,971 11,942 10,971 
Impairment charges on goodwillImpairment charges on goodwill2,808 — 2,808 — Impairment charges on goodwill8,098 2,808 8,098 2,808 
Total expensesTotal expenses68,237 32,254 170,923 80,131 Total expenses69,235 68,237 139,867 170,923 
Other income (loss):
Gain from remeasurement of prior equity interest— 2,009 — 2,009 
Equity in (loss) income of unconsolidated entities(569)519 (144)1,564 
Other (loss) income:Other (loss) income:
Equity in loss of unconsolidated entitiesEquity in loss of unconsolidated entities(3,376)(569)(6,130)(144)
Casualty-related gainCasualty-related gain27 — 27 51 Casualty-related gain— 27 — 27 
Other interest incomeOther interest income55 19 148 297 Other interest income61 55 155 148 
(Loss) gain on real estate equity securities(Loss) gain on real estate equity securities(2,614)(6,527)12,939 (21,620)(Loss) gain on real estate equity securities(20,722)(2,614)(48,312)12,939 
Change in subordinated performance fee due upon termination to affiliateChange in subordinated performance fee due upon termination to affiliate(1,545)1,121 (1,745)814 Change in subordinated performance fee due upon termination to affiliate— (1,545)— (1,745)
Gain on sale of real estate216 — 31,385 — 
(Loss) gain on sale of real estate(Loss) gain on sale of real estate(75)216 3,273 31,385 
Gain on extinguishment of debtGain on extinguishment of debt1,352 — 1,365 — Gain on extinguishment of debt— 1,352 2,367 1,365 
Gain from consolidation of previously unconsolidated entityGain from consolidation of previously unconsolidated entity18,742 — 18,742 — 
Total other (loss) income, netTotal other (loss) income, net(3,078)(2,859)43,975 (16,885)Total other (loss) income, net(5,370)(3,078)(29,905)43,975 
Net (loss) incomeNet (loss) income(25,546)(7,368)2,253 (21,147)Net (loss) income(31,000)(25,546)(44,101)2,253 
Net loss attributable to noncontrolling interestsNet loss attributable to noncontrolling interests1,188 43 1,949 115 Net loss attributable to noncontrolling interests881 1,188 844 1,949 
Net loss attributable to redeemable noncontrolling interestNet loss attributable to redeemable noncontrolling interest33 23 113 23 Net loss attributable to redeemable noncontrolling interest— 33 81 113 
Preferred stock dividendsPreferred stock dividends(191)(191)(644)(788)Preferred stock dividends(373)(191)(1,091)(644)
Net (loss) income attributable to common stockholdersNet (loss) income attributable to common stockholders$(24,516)$(7,493)$3,671 $(21,797)Net (loss) income attributable to common stockholders$(30,492)$(24,516)$(44,267)$3,671 
Net (loss) income per common share, basic and dilutedNet (loss) income per common share, basic and diluted$(0.25)$(0.11)$0.04 $(0.32)Net (loss) income per common share, basic and diluted$(0.29)$(0.25)$(0.43)$0.04 
Weighted-average number of common shares outstanding, basic and dilutedWeighted-average number of common shares outstanding, basic and diluted97,659,731 69,225,212 97,879,983 68,179,046 Weighted-average number of common shares outstanding, basic and diluted104,180,800 97,659,731 103,351,040 97,879,983 

See accompanying condensed notes to consolidated financial statements.
3

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

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONSOLIDATED STATEMENTS OF EQUITY
For the Three Months Ended September 30, 20212022 and 20202021
(unaudited)
(dollars in thousands)thousands, except share amounts)
Common StockAdditional
Paid-in Capital		Cumulative Distributions and Net LossTotal Stockholders' EquityNoncontrolling InterestsTotal Equity
SharesAmountsTotal Equity
Balance, June 30, 2022Balance, June 30, 2022104,319,092 $1,043 $914,463 $(464,506)$451,000 $10,373 $461,373 
Net lossNet loss— — — (30,492)(30,492)(881)(31,373)
Transfers to redeemable common stock payable, netTransfers to redeemable common stock payable, net— — (188)— (188)— (188)
Redemptions of common stockRedemptions of common stock(243,135)(2)(2,311)— (2,313)— (2,313)
Stock distribution issuedStock distribution issued924 — — — — — — 
Acquisition of noncontrolling interestAcquisition of noncontrolling interest— — — — — 1,125 1,125 
Noncontrolling interests distributionsNoncontrolling interests distributions— — (2,431)— (2,431)(8,199)(10,630)
Noncontrolling interest contributionNoncontrolling interest contribution— — — — — 300 300 
Balance, September 30, 2022Balance, September 30, 2022104,076,881 $1,041 $909,533 $(494,998)$415,576 $2,718 $418,294 
Common StockAdditional
Paid-in Capital		Cumulative Distributions and Net Income (Loss)Total Stockholders' EquityNoncontrolling InterestsTotal EquityCommon StockAdditional
Paid-in Capital		Cumulative Distributions and Net LossTotal Stockholders' EquityNoncontrolling InterestsTotal Equity
SharesAmountsTotal EquitySharesAmountsAdditional
Paid-in Capital		Cumulative Distributions and Net LossTotal Stockholders' EquityNoncontrolling Interests
Balance, June 30, 2021Balance, June 30, 202197,906,268 $979 $829,294 $(297,533)$532,740 $12,560 $545,300 Balance, June 30, 202197,906,268 $979 $829,294 $(297,533)$532,740 $12,560 $545,300 
Net (loss) income— — — (24,516)(24,516)(1,188)(25,704)
Net lossNet loss— — — (24,516)(24,516)(1,188)(25,704)
Transfers to redeemable common stock— — (1,955)— (1,955)— (1,955)
Transfers to redeemable common stock payable, netTransfers to redeemable common stock payable, net— — (1,955)— (1,955)— (1,955)
Redemptions of common stockRedemptions of common stock(3,641,866)(37)(28,080)— (28,117)— (28,117)Redemptions of common stock(3,641,866)(37)(28,080)— (28,117)— (28,117)
Change in classification of restricted stockChange in classification of restricted stock— — 21,123 — 21,123 — 21,123 Change in classification of restricted stock— — 21,123 — 21,123 — 21,123 
Noncontrolling interest contributionNoncontrolling interest contribution— — — — — 20 20 Noncontrolling interest contribution— — — — — 20 20 
Balance, September 30, 202194,264,402 $942 $820,382 $(322,049)$499,275 $11,392 $510,667 
Common StockAdditional
Paid-in Capital		Cumulative Distributions and Net Income (Loss)Total Stockholders' EquityNoncontrolling InterestsTotal Equity
SharesAmountsTotal Equity
Balance, June 30, 202069,225,617 $693 $553,129 $(292,096)$261,726 $795 $262,521 
Net loss— — — (7,493)(7,493)(43)(7,536)
Transfers from redeemable common stock— — 6 — 6 — 6 
Redemptions of common stock(601)— (6)— (6)— (6)
Distribution of noncontrolling interest— — — — — (28)(28)
Balance, September 30, 202069,225,016 $693 $553,129 $(299,589)$254,233 $724 $254,957 
Balance, September 30, 2021Balance, September 30, 202194,264,402 $942 $820,382 $(322,049)$499,275 $11,392 $510,667 

See accompanying condensed notes to consolidated financial statements.
4

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

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONSOLIDATED STATEMENTS OF EQUITY
For the Nine Months Ended September 30, 20212022 and 20202021
(unaudited)
(dollars in thousands)thousands, except share amounts)
Common StockAdditional
Paid-in Capital		Cumulative Distributions and Net LossTotal Stockholders' EquityNoncontrolling InterestsTotal Equity
SharesAmountsTotal Equity
Balance, December 31, 2021Balance, December 31, 202194,141,251 $941 $818,440 $(347,691)$471,690 $10,369 $482,059 
Net lossNet loss— — — (44,267)(44,267)(844)(45,111)
Transfers to redeemable common stock payable, netTransfers to redeemable common stock payable, net— — (883)— (883)— (883)
Redemptions of common stockRedemptions of common stock(485,471)(4)(4,583)— (4,587)— (4,587)
Adjustment to value of redeemable noncontrolling interestAdjustment to value of redeemable noncontrolling interest— — — (3,946)(3,946)— (3,946)
Stock distribution issuedStock distribution issued10,421,101 104 98,990 (99,094)— — — 
Acquisition of noncontrolling interestAcquisition of noncontrolling interest— — — — — 1,125 1,125 
Noncontrolling interests distributionsNoncontrolling interests distributions— — (2,431)— (2,431)(8,232)(10,663)
Noncontrolling interest contributionNoncontrolling interest contribution— — — — — 300 300 
Balance, September 30, 2022Balance, September 30, 2022104,076,881 $1,041 $909,533 $(494,998)$415,576 $2,718 $418,294 
Common StockAdditional
Paid-in Capital		Cumulative Distributions and Net Income (Loss)Total Stockholders' EquityNoncontrolling InterestsTotal EquityCommon StockAdditional
Paid-in Capital		Cumulative Distributions and Net LossTotal Stockholders' EquityNoncontrolling InterestsTotal Equity
SharesAmountsTotal EquitySharesAmountsAdditional
Paid-in Capital		Cumulative Distributions and Net LossTotal Stockholders' EquityNoncontrolling Interests
Balance, December 31, 2020Balance, December 31, 202098,054,582 $979 $831,295 $(325,720)$506,554 $13,158 $519,712 Balance, December 31, 202098,054,582 $979 $831,295 $(325,720)$506,554 $13,158 $519,712 
Net income (loss)Net income (loss)— — — 3,671 3,671 (1,949)1,722 Net income (loss)— — — 3,671 3,671 (1,949)1,722 
Transfers to redeemable common stock— — (2,521)— (2,521)— (2,521)
Transfers to redeemable common stock payable, netTransfers to redeemable common stock payable, net— — (2,521)— (2,521)— (2,521)
Redemptions of common stockRedemptions of common stock(3,790,180)(37)(29,515)— (29,552)— (29,552)Redemptions of common stock(3,790,180)(37)(29,515)— (29,552)— (29,552)
Change in classification of restricted stockChange in classification of restricted stock— — 21,123 — 21,123 — 21,123 Change in classification of restricted stock— — 21,123 — 21,123 — 21,123 
Noncontrolling interests contributionsNoncontrolling interests contributions— — — — — 183 183 Noncontrolling interests contributions— — — — 183 183 
Balance, September 30, 2021Balance, September 30, 202194,264,402 $942 $820,382 $(322,049)$499,275 $11,392 $510,667 Balance, September 30, 202194,264,402 $942 $820,382 $(322,049)$499,275 $11,392 $510,667 
Common StockAdditional
Paid-in Capital		Cumulative Distributions and Net Income (Loss)Total Stockholders' EquityNoncontrolling InterestsTotal Equity
SharesAmountsTotal Equity
Balance, December 31, 201965,866,765 $659 $553,170 $(277,196)$276,633 $755 $277,388 
Net loss— — — (21,797)(21,797)(115)(21,912)
Issuance of common stock24,645 — 262 — 262 — 262 
Transfers from redeemable common stock— — 567 — 567 — 567 
Redemptions of common stock(78,131)— (830)— (830)— (830)
Distributions declared— — — (596)(596)— (596)
Other offering costs— — (6)— (6)— (6)
Issuance of restricted stock3,411,737 34 (34)— — — — 
Noncontrolling interests contributions— — — — — 112 112 
Distribution to noncontrolling interest— — — — — (28)(28)
Balance, September 30, 202069,225,016 $693 $553,129 $(299,589)$254,233 $724 $254,957 

See accompanying condensed notes to consolidated financial statements.
5

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

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Nine Months Ended September 30,
 20212020
Cash Flows from Operating Activities:
Net income (loss)$2,253 $(21,147)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Change in subordinated performance fee due upon termination to affiliate1,745 (814)
Impairment charges on real estate10,971 — 
Impairment charges on goodwill2,808 — 
Gain from remeasurement of prior equity interest— (2,009)
Equity in loss (income) of unconsolidated entities144 (1,151)
Depreciation and amortization45,969 27,417 
(Gain) loss on real estate equity securities(12,939)21,620 
Gain on sale of real estate(31,385)— 
Unrealized loss on interest rate caps17 10 
Deferred rent(1,529)(2,559)
Gain on extinguishment of debt(1,365)— 
Amortization of above- and below-market leases, net(1,015)(435)
Amortization of deferred financing costs2,470 2,481 
Amortization of discount on bond and notes payable1,906 14 
Foreign currency transaction gain, net(568)(12,338)
Changes in assets and liabilities:
Rents and other receivables(1,898)(566)
Prepaid expenses and other assets(4,371)(2,286)
Accounts payable and accrued liabilities(984)(3,471)
Due to affiliates(726)182 
Other liabilities(190)(142)
Net cash provided by operating activities11,313 4,806 
Cash Flows from Investing Activities:
Acquisitions of real estate, net of cash acquired(4,107)(19,034)
Improvements to real estate(12,923)(15,946)
Proceeds from sales of real estate, net194,528 — 
Contributions to unconsolidated entities(4,769)(1,708)
Distributions of capital from unconsolidated entities— 1,225 
Purchase of interest rate cap(18)(6)
Investment in real estate equity securities— (35,510)
Proceeds from the sale of real estate equity securities14,439 10,964 
Proceeds for future development obligations6,203 — 
Proceeds from disposition of foreign currency collars— 14,125 
Net cash provided by (used in) investing activities193,353 (45,890)
Cash Flows from Financing Activities:
Proceeds from notes and bonds payable157,246 104,143 
Principal payments on notes and bonds payable(233,964)(57,611)
Payments of deferred financing costs(2,745)(2,438)
Payments to redeem common stock(29,552)(830)
Payment to redeem restricted stock(5,656)— 
Payment of prepaid other offering costs(164)(606)
Distributions paid— (334)
Preferred dividends paid(644)(563)
Noncontrolling interests contributions183 112 
Distributions to noncontrolling interests— (28)
Other financing proceeds2,367 — 
Net cash (used in) provided by financing activities(112,929)41,845 
Effect of exchange rate changes on cash, cash equivalents and restricted cash182 83 
Net increase in cash, cash equivalents and restricted cash91,919 844 
Cash, cash equivalents and restricted cash, beginning of period74,319 88,494 
Cash, cash equivalents and restricted cash, end of period$166,238 $89,338 

Nine Months Ended September 30,
 20222021
Cash Flows from Operating Activities:
Net (loss) income$(44,101)$2,253 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Change in subordinated performance fee due upon termination to affiliate— 1,745 
Impairment charges on real estate11,942 10,971 
Impairment charges on goodwill8,098 2,808 
Equity in loss of unconsolidated entities6,130 144 
Depreciation and amortization39,379 45,969 
Loss (gain) on real estate equity securities48,312 (12,939)
Loss (gain) on sale of real estate(3,273)(31,385)
Gain from consolidation of previously unconsolidated entity(18,742)— 
Unrealized (gain) loss on interest rate caps(1,103)17 
Deferred rent(1,966)(1,529)
Gain on extinguishment of debt(2,367)(1,365)
Amortization of above- and below-market leases, net(762)(1,015)
Amortization of deferred financing costs and discount on bonds and notes payable5,953 4,376 
Foreign currency transaction gain, net(37,100)(568)
Changes in assets and liabilities:
Rents and other receivables2,403 (1,898)
Prepaid expenses and other assets(3,010)(4,371)
Accounts payable and accrued liabilities(955)(984)
Due to affiliates1,201 (726)
Other liabilities(1,379)(190)
Net cash provided by operating activities8,660 11,313 
Cash Flows from Investing Activities:
Acquisitions of real estate(6,689)(4,107)
Improvements to real estate(16,515)(12,923)
Proceeds from sales of real estate, net97,933 194,528 
Cash and restricted cash received upon consolidation of previously unconsolidated entity1,834 — 
Contributions to unconsolidated entities(23,887)(4,769)
Distributions of capital from unconsolidated entities569 — 
Purchase of interest rate cap(566)(18)
Proceeds from the sale of real estate equity securities— 14,439 
Advance to affiliate(1,201)— 
Proceeds from advances due from affiliates8,227 — 
Escrow deposits for future real estate sales17,000 — 
Proceeds for future development obligations— 6,203 
Funding for development obligations(6,407)— 
Net cash provided by investing activities70,298 193,353 
Cash Flows from Financing Activities:
Proceeds from notes and bonds payable191,667 157,246 
Principal payments on notes and bonds payable(190,515)(233,964)
Payments of deferred financing costs(4,686)(2,745)
Payments to redeem common stock(4,587)(29,552)
Payment to redeem restricted stock— (5,656)
Payment of prepaid other offering costs— (164)
Payment to redeem noncontrolling interests(6,687)— 
Distributions paid(11,016)— 
Preferred dividends paid(1,091)(644)
Noncontrolling interests distributions(10,663)— 
Noncontrolling interest contribution300 183 
Other financing proceeds— 2,367 
Net cash used in financing activities(37,278)(112,929)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(4,418)182 
Net increase in cash, cash equivalents and restricted cash37,262 91,919 
Cash, cash equivalents and restricted cash, beginning of period105,431 74,319 
Cash, cash equivalents and restricted cash, end of period$142,693 $166,238 
See accompanying condensed notes to consolidated financial statements.
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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
September 30, 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 “Advisory Agreement”) which is currently effective through November 1, 2022; however the Company or the Advisor may terminate the Advisory Agreement without cause or penalty upon providing 60 days’ written notice. The Advisor conducts the Company’s operations and manages its portfolio of real estate and other real estate-related investments.
On January 8, 2009, the Company filed a registration statement on Form S-11 with the SEC to offer a minimum of 250,000 shares and a maximum of 140,000,000 shares of common stock for sale to the public (the “Offering”), of which 100,000,000 shares were registered in a primary offering and 40,000,000 shares were registered to be sold under the Company’s dividend reinvestment plan. The SEC declared the Company’s registration statement effective on November 20, 2009. The Company ceased offering shares of common stock in its primary offering on November 14, 2012 and continues to offer shares under its dividend reinvestment plan.
The Company sold 56,584,976 shares of common stock in its primary offering for gross offering proceeds of $561.7 million. As of September 30, 2021, the Company had sold 6,851,969 shares of common stock under its dividend reinvestment plan for gross offering proceeds of $76.5 million. Also, as of September 30, 2021, the Company had redeemed 27,247,458 shares for $317.3 million. As of September 30, 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 September 1, 2021, the Company repurchased 584,267 shares of the Restricted Stock for $5.7 million and 2,254,289 shares of Restricted Stock were transferred to GKP Holding LLC (“GKP”), a company owned by Keith D. Hall and Peter McMillan III. See Note 10 for further details.
On March 2, 2016, Pacific Oak SOR BVI filed a final prospectus with the Israel Securities Authority for a proposed offering of up to 1,000,000,000 Israeli new Shekels of Series A debentures (the “Series A Debentures”) at an annual interest rate not to exceed 4.25%. On March 1, 2016, Pacific Oak SOR BVI commenced the institutional tender of the Series A Debentures and accepted application for 842.5 million Israeli new Shekels. On March 7, 2016, Pacific Oak SOR BVI commenced the public tender of the Series A Debentures and accepted 127.7 million Israeli new Shekels. In the aggregate, Pacific Oak SOR BVI accepted 970.2 million Israeli new Shekels (approximately $249.2 million as of March 8, 2016) in both the institutional and public tenders at an annual interest rate of 4.25%. Pacific Oak SOR BVI issued the Series A Debentures on March 8, 2016.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
In connection with the above-referenced offering, on March 8, 2016, the Operating Partnership assigned to Pacific Oak SOR BVI all of its interests in the subsidiaries through which the Company indirectly owns all of its real estate and real estate-related investments. The Operating Partnership owns all of the issued and outstanding equity of Pacific Oak SOR BVI. As a result of these transactions, the Company now holds all of its real estate and real estate-related investments indirectly through Pacific Oak SOR BVI.
On February 16, 2020, Pacific Oak SOR BVI issued 254.1 million Israeli new Shekels (approximately $74.1 million as of February 16, 2020) of Series B debentures (the “Series B Debentures”) to Israeli investors pursuant to a public offering registered with the Israel Securities Authority. The Series B Debentures bears interest at the rate of 3.93% per year. The Series B Debentures have principal installment payments equal to 33.33% of the face amount of the Series B Debentures on January 31st of each year from 2024 to 2026.
On January 22, 2020, the Company filed a registration statement on Form S-11 with the SEC to offer up to $1 billion in additional shares of its common stock. This new registration statement contemplates a proposed conversion of the Company to a perpetual-life net asset value or “NAV” REIT that offers and sells shares of its common stock continuously through a number of distribution channels in ongoing public offerings, and seeks to provide increased liquidity to current and future stockholders through an expansion of the Company’s current share redemption program. On December 18, 2020, the Company filed Amendment No. 1 to the registration statement on Form S-11 with the SEC.
On February 19, 2020, the Company, Pacific Oak SOR II, LLC, an indirect subsidiary of the Company’s (“Merger Sub”), and Pacific Oak Strategic Opportunity REIT II, Inc. (“POSOR II”) entered into an Agreement and Plan of Merger (the “Merger Agreement”). On October 5, 2020, pursuant to the Merger Agreement, POSOR II merged with and into Merger Sub, with Merger Sub surviving as an indirect subsidiary of the Company’s (the “Merger”). At such time, in accordance with the applicable provisions of the Maryland General Corporation Law and the Maryland Limited Liability Company Act, the separate existence of POSOR II ceased. At the effective time of the Merger, each issued and outstanding share of POSOR II’s common stock (or a fraction thereof), $0.01 par value per share, converted into 0.9643 shares of the Company’s common stock, $0.01 par value per share, or 28,973,905 shares of the Company’s common stock. The combined company after the Merger retained the name “Pacific Oak Strategic Opportunity REIT, Inc.” The Merger was intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended. As a result of the Merger, the Company acquired 2 hotel properties, 3 office properties, 1 apartment building, 1 consolidated joint venture to develop 1 office/retail property, 2 real estate equity securities and 2 investments in unconsolidated entities. Additionally, the Company assumed $331.8 million of loans related to the acquired properties.
On March 4, 2021, Pacific Oak SOR BVI issued additional Series A Debentures in the amount of 250.0 million Israeli new Shekels par value through a private placement. The additional Series A Debentures were issued at a 1.9% discount resulting in total consideration of 245.3 million Israeli new Shekels ($74.2 million as of March 4, 2021). The additional Series A Debentures have an equal level of security, pari passu, amongst themselves and between them and the initial Series A Debentures, which were initially issued, without any right of precedence or preference between any of them.
As of September 30, 2021, the Company consolidated 8 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 1,806 single-family homes, 3 investments in undeveloped land with approximately 800 developable acres, and owned 4 investments in unconsolidated entities and 3 investments in real estate equity securities. Additionally, as of September 30, 2021, the Company had entered into a consolidated joint venture to develop 1 office/retail property.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 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)
September 30, 2021
(unaudited)
Principles of Consolidation and Basis of Presentation
The accompanying unaudited consolidated financial statements and condensed notes thereto have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the FASB Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods. Operating results for the three and nine months ended September 30, 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)
September 30, 2022
(unaudited)
Liquidity
The Company generally finances its real estate investments using notes payable that are typically structured as non-recourse 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 7,5, the Company has $518.0$383.0 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 paydownspay downs 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 toSee Note 75 for further discussion.details.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation. In that regard, the Company reclassified held for sale activity related to dispositions in its 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)
September 30, 2021
(unaudited)
Redeemable Common Stock
The Company limits the dollar value of shares that may be redeemed under the share redemption program. During the nine months ended September 30, 2021, the Company had redeemed $29.6 million of common stock under the share redemption program. The Company processed all redemption requests received in good order and eligible for redemption through the September 2021 redemption date, except for 13,913,664 shares totaling $128.0 million due to the limitations under the share redemption program. The Company recorded $3.4 million and $0.9 million of redeemable common stock payable on the Company’s balance sheet as of September 30, 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 has $3.2 million 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.
Reclassifications
Certain amounts in the Company’s prior period consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of the prior period. During the nine months ended September 30, 2021, the Company sold 1 office property. As a result, certain assets and liabilities were reclassified as held for sale on the consolidated balance sheets for the prior period.
Segments
The Company operates in 3three reportable business segments: opportunistic real estate and real estate-related investments, single-familyresidential homes, and hotels,hotel, which is how the Company'sCompany’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 them into 1one reportable business segment. The Company owns single-familyresidential homes in 1718 markets andwhich are all aggregated into 1one reportable business segment due to the homes being stabilized, having high occupancy rates and have similar economic characteristics. Additionally, as of September 30, 2022, the Company owns 2 hotels and areone hotel which is aggregated into 1one 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 See Note 10 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.further details.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20212022
(unaudited)
Per Share Data
The Company determines 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 the Company considers any participating securities, including unvested restricted stock, for purposes of applying the two-class method. The Company determines 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”) Series A convertible redeemable preferred shares arewere 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 both of the three and nine months ended September 30, 2021 and 2020, as the restriction is not contingent on any conditions except the passage of time.
There were no distributions declared for both of the three and nine months ended September 30, 2021 and 2020, with the exception of distributions declared per share of $0.0086 during the three months ended March 31, 2020.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 IssuedAdopted Accounting Standards UpdatesPronouncements
Reference Rate Reform — In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic(ASC Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional relief to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. Additionally, in January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (ASC Topic 848) (“ASU No. 2020-04”) contains practical, which clarifies that certain optional expedients and exceptions in ASC 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The Company adopted ASC Topic 848 on September 30, 2022 and the related prospective optional expedients for referenceits variable rate reformdebt and related activities thatderivatives is not expected to have a material impact debt, leases, derivatives andto the Company.
There have been no other contracts. Therecent accounting pronouncements, changes in accounting pronouncements or recently adopted accounting guidance in ASU No. 2020-04 is optional and may be elected over time as reference rate reform activities occur. Duringduring the nine months ended September 30, 2021, the Company elected to apply the hedge accounting expedients related to probability and the assessments2022 that are of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. For the period from January 1, 2020 (the earliest date the Company may elect to apply ASU No. 2020-04) through September 30, 2021, the Company did not have any contract modifications that meet the criteria described above, specifically contract modifications that have been modified from LIBOR to an alternative reference rate. The Company’s loan agreements, derivative instruments, and certain lease agreements use LIBOR as the current reference rate. For eligible contract modifications, the Company expects to adopt the temporary optional expedients described in ASU No. 2020-04. The optional expedients for hedging relationships described in ASU No. 2020-04 are not expected to have an impactsignificance or potential significance to the Company, as the Company has elected to not designate its derivative instruments as a hedge.Company.

3. REAL ESTATE HELD FOR INVESTMENT
As of September 30, 2022, the Company owned eight office properties, one office portfolio consisting of two office buildings and 14 acres of undeveloped land, encompassing, in the aggregate, approximately 3.2 million rentable square feet. As of September 30, 2022, these properties were 70% occupied. As of September 30, 2022, the Company owned one residential home portfolio consisting of 2,458 residential homes and encompassing approximately 3.5 million rental square feet. In addition, the Company owned two apartment properties, containing 609 units and encompassing approximately 0.5 million rentable square feet, which were 96% and 95% occupied, respectively, as of September 30, 2022. As of September 30, 2022, the Company also owned one hotel property with 196 rooms and three investments in undeveloped land with approximately 800 developable acres and one office/retail development property. The following table summarizes the Company’s real estate held for investment as of September 30, 2022 and December 31, 2021, respectively (in thousands):
September 30, 2022December 31, 2021
Land$275,715 $245,200 
Buildings and improvements1,062,342 954,851 
Tenant origination and absorption costs30,785 43,375 
Total real estate, cost1,368,842 1,243,426 
Accumulated depreciation and amortization(134,645)(124,876)
Total real estate held for investment, net$1,234,197 $1,118,550 

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20212022
(unaudited)
3. REAL ESTATE HELD FOR INVESTMENT
As of September 30, 2021, the Company owned 8 office properties, 1 office portfolio consisting of 4 office buildings and 14 acres of undeveloped land, encompassing, in the aggregate, approximately 3.3 million rentable square feet. As of September 30, 2021, these properties were 73% occupied. In addition, the Company owned one residential home portfolio consisting of 1,806 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% and 96% occupied, respectively as of September 30, 2021. As of September 30, 2021, the Company also owned 2 hotel properties with an aggregate of 649 rooms and 3 investments in undeveloped land with approximately 800 developable acres. Additionally, as of September 30, 2021, the Company had entered into a consolidated joint venture to develop 1 office/retail property. The following table summarizes the Company’s real estate held for investment as of September 30, 2021 and December 31, 2020, respectively (in thousands):
September 30, 2021December 31, 2020
Land$275,419 $288,514 
Buildings and improvements1,018,850 1,019,329 
Tenant origination and absorption costs44,527 50,881 
Total real estate, cost1,338,796 1,358,724 
Accumulated depreciation and amortization(119,265)(85,940)
Total real estate, net$1,219,531 $1,272,784 

Operating Leases
Certain of the Company’s real estate properties are leased to tenants under operating leases for which the terms and expirations vary. As of September 30, 2021,2022, the leases, excluding options to extend, and apartment leases and single-familyresidential homes, which have terms that are generally one year or less, had remaining terms of up to 15.512.9 years with a weighted-average remaining term of 4.53.7 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 $6.0 million and $5.7 million as of September 30, 20212022 and December 31, 2020,2021, respectively.
During the three and nine months ended September 30, 2022, the Company recognized deferred rent from tenants of $0.5 million and $2.0 million, respectively, net of lease incentive amortization. During the three and nine months ended September 30, 2021, the Company recognized deferred rent from tenants of $0.4 million and $1.5 million, respectively, net of lease incentive amortization. During the three and nine months ended September 30, 2020, the Company recognized deferred rent from tenants of $0.9 million and $2.6 million, respectively, net of lease incentive amortization. As of September 30, 20212022 and December 31, 2020,2021, the cumulative deferred rent receivable balance, including unamortized lease incentive receivables, were $15.7was $17.8 million and $15.5$16.3 million, respectively, and is included in rents and other receivables on the accompanying consolidated balance sheets. The cumulative deferred rent balance included $3.1$3.0 million and $4.2$3.3 million of unamortized lease incentives as of September 30, 20212022 and December 31, 2020,2021, respectively.
As of September 30, 2022, the future minimum rental income from the Company’s properties, excluding apartment leases and residential homes, under non-cancelable operating leases was as follows (in thousands):
October 1, 2022 through December 31, 2022$15,105 
202359,457 
202454,145 
202543,184 
202630,074 
Thereafter72,929 
$274,894 

As of September 30, 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
Public Administration14$7,762 12.6 %
Professional, Scientific, and Technical Services387,346 11.9 %
Computer Systems Design and Related Services307,037 11.4 %
$22,145 35.9 %
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of September 30, 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.

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20212022
(unaudited)
As of September 30, 2021, the future minimum rental income from the Company’s properties, excluding apartment leases and single-family homes, under non-cancelable operating leases was as follows (in thousands):
October 1, 2021 through December 31, 2021$16,095 
202261,448 
202353,140 
202445,750 
202535,726 
Thereafter86,512 
$298,671 

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

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

Contract Liabilities
The following table summarizes the Company’s contract liabilities, which are comprised of hotel advanced deposits and deferred proceeds received from the buyers of the Park Highlands land sales (discussed below) and another developer for the value of land that was contributed to a master association that is consolidated by the Company, which are included in other liabilities in the accompanying consolidated balance sheets, as of September 30, 2021 and December 31, 2020 (in thousands):
September 30, 2021December 31, 2020
Contract liability$6,551 $3,369 
Revenue recognized in the period from:
 Amounts included in contract liability at the beginning of the period$142 $— 

Geographic Concentration Risk
As of September 30, 2021,2022, the Company’s real estate investments in California and Georgia represented 21.9% and 10.3%, 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 and Georgia 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.
Hotel Revenues
The following table provides detailed information regarding the Company’s hotel revenues for its two hotel properties (the Springmaid Beach Resort was sold on September 1, 2022) during the three and nine months ended September 30, 2022 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Hotel revenues:
Room$7,223 $9,396 $21,423 $18,508 
Food, beverage and convention services217 1,452 807 2,830 
Campground984 280 3,379 792 
Other757 1,025 2,343 2,448 
Hotel revenues$9,181 $12,153 $27,952 $24,578 
Contract Liabilities
The following table summarizes the Company’s contract liabilities, which are comprised of hotel advanced deposits and deferred proceeds from historical and future land sales received from the buyers of the Park Highlands land sales (discussed below) and another developer for the value of land that was contributed to a master association that is consolidated by the Company, which are included in other liabilities in the accompanying consolidated balance sheets, as of September 30, 2022 and December 31, 2021 (in thousands):
September 30, 2022December 31, 2021
Contract liability$23,115 $7,313 
Revenue recognized in the period from:
 Amounts included in contract liability at the beginning of the period$449 $159 

Recent Real Estate Sales
On January 24, 2022, the Company, through an indirect wholly owned subsidiary, sold two 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 7), for $11.0 million, before closing costs and credits. The carrying value of the Greenway Buildings as of 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 recognized a gain on sale of $3.6 million related to the disposition of the Greenway Buildings, net of closing 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 December 31, 2021.
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20212022
(unaudited)
On September 1, 2022, the Company, through an indirect wholly owned subsidiary, sold the Springmaid Beach Resort to a purchaser unaffiliated with the Company or the Advisor for $91.0 million, before closing costs and credits. The carrying value of the Springmaid Beach Resort as of the disposition date was $87.2 million, which was net of $3.4 million of accumulated depreciation and amortization and $2.5 million of impairment charges. In connection with the sale of the Springmaid Beach Resort, the Company repaid $52.0 million of the outstanding principal balance due under the mortgage loan secured by the Springmaid Beach Resort and $1.3 million of the proceeds were held for contingent repairs related to the property. As a result of the sale of the Springmaid Beach Resort, certain assets and liabilities were reclassified to held for sale on the consolidated balance sheets as of December 31, 2021.
Park Highlands Land Purchase and Sale Contracts
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 developable acres of undeveloped land located in North Las Vegas, Nevada, (“Park Highlands”) for gross sales proceeds of approximately $121.4 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 and is recognized as restricted cash on the consolidated balance sheets. This deposit is held in an escrow account and will become available once the sale is completed. Actions are required by the Company to complete the planned sale.
On March 10, 2022, the Company, through an indirect wholly owned subsidiary, entered into a purchase and sale agreement, as amended, to sell 77 developable acres of Park Highlands for gross sales proceeds of approximately $52.9 million, before closing costs and credits. The due diligence period expired on May 31, 2022 and the buyer’s deposit of $3.5 million is no longer refundable and is recognized as restricted cash on the consolidated balance sheets. This deposit is held in an escrow account and will become available once the sale is completed. Actions are required by the Company to complete the planned sale.
On June 22, 2022, the Company, through an indirect wholly owned subsidiary, entered into a purchase and sale agreement, to sell 67 developable acres of Park Highlands for gross sales proceeds of approximately $55.0 million, before closing costs and credits. The due diligence period expired on October 20, 2022, after which the buyer’s deposit of $3.0 million is no longer be refundable and is recognized as restricted cash on the consolidated balance sheets. This deposit is held in an escrow account and will become available once the sale is completed. Actions are required by the Company to complete the planned sale.
Impairment of Real Estate
During the three and nine months ended September 30, 2022, the Company recorded impairment charges on real estate in the aggregate of $11.9 million, to write down the carrying value of 210 West 31st Street by $4.4 million, a development property located in New York, New York (“210 West 31st Street”) and Oakland City Center by $5.0 million, an office property located in Oakland, California, to their estimated fair value due to a change in the projected hold period and related decrease in projected cash flows. Additionally, the Company determined that based on the amended sale price of the Springmaid Beach Resort, the book value was not recoverable and the Company wrote down the carrying value of Springmaid Beach Resort by $2.5 million.
During the three and nine months ended September 30, 2021, the Company recorded impairment charges on real estate in the aggregate of $11.0 million, to write down the carrying value of 210 West 31st Street by $6.6 million a development property located in New York, New York and Lincoln Court by $4.4 million, an office property located in Campbell, California, to their estimated fair value due to a change in the projected hold period and related decrease in projected cash flows.
Recent Real Estate Land Sale
On June 3, 2021, the Company sold approximately 193 developable acres of Park Highlands undeveloped land for an aggregate sales price, net of closing credits, of $50.4 million, excluding closing costs. The purchaser is not affiliated with the Company or the Advisor. The Company recognized a gain on sale of $31.1 million related to the land sale, which is net of deferred profit of $2.6 million related to proceeds received from the purchaser for the value of land that was contributed to a master association which is consolidated by the Company.
Recent Real Estate Sale
On July 27, 2021, the Company, through an indirect wholly owned subsidiary, sold an office building containing 435,177 rentable square feet located on approximately 4.92 acres of land in Orange, California (“City Tower”) to a purchaser unaffiliated with the Company or the Advisor, for $150.5 million, before closing costs and credits. The carrying value of City Tower as of the disposition date was $145.1 million, which was net of $20.5 million of accumulated depreciation and amortization. In connection with the sale of City Tower, the Company repaid $98.1 million of the outstanding principal balance due under the mortgage loan secured by City Tower. The Company recognized a gain on sale of $0.1 million related to the disposition of City Tower.
Recent Real Estate Asset Acquisitions
On March 17, 2021, the Company, through a wholly owned subsidiary of PORT OP, LP (“PORT OP”), acquired a single-family home portfolio consisting of 21 homes in Chicago, Illinois for $2.1 million.
On April 6, 2021, the Company, through a wholly owned subsidiary of PORT OP, acquired a single-family home portfolio consisting of 23 homes in multiple states for $2.0 million. The portfolio was purchased from DayMark Master Trust, an entity affiliated with the Advisor.

4. TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES
As of September 30, 2021 and December 31, 2020, the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities (excluding fully amortized assets and liabilities and accumulated amortization) were as follows (in thousands):
 Tenant Origination and
Absorption Costs		Above-Market
Lease Assets		Below-Market
Lease Liabilities
 September 30, 2021December 31, 2020September 30, 2021December 31, 2020September 30, 2021December 31, 2020
Cost$44,527 $50,881 $4,138 $4,159 $(6,718)$(7,679)
Accumulated Amortization(19,107)(13,491)(1,403)(1,002)2,282 1,882 
Net Amount$25,420 $37,390 $2,735 $3,157 $(4,436)$(5,797)

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20212022
(unaudited)
Increases (decreases) in net income asPORT II Consolidation
On July 1, 2022, the Company became the primary beneficiary of Pacific Oak Residential Trust II, Inc. (“PORT II”), a resultrelated party and consolidated PORT II into the Company's financial statements. As of amortizationJuly 1, 2022, PORT II had 588 residential homes. Refer to Note 8 for additional details on PORT II and the consolidation. The following table summarizes the components of the Company’s tenant originationPORT II and absorption costs, above-market leasethe gain recognized by the Company (in thousands):
PORT II's assets and liabilities, based upon fair values as determined by the Company, as follows:
Assets:
Real estate held for investment, net$135,096 
Cash and cash equivalents1,473 
Restricted cash361 
Prepaid expenses and other assets639 
Total Assets137,569 
Liabilities:
Notes payable, net(82,646)
Accounts payable and accrued liabilities(804)
Due to affiliates(147)
Other liabilities(1,499)
Total Liabilities(85,096)
Noncontrolling interest(1,125)
Elimination of the Company’s investment in PORT II(32,606)
Gain from consolidation of previously unconsolidated entity$18,742 

4. REAL ESTATE EQUITY SECURITIES
The following summarizes the portion of gain and below-market lease liabilitiesloss for the period related to real estate equity securities held during the three and nine months ended September 30, 20212022 and 2020 were as follows2021 (in thousands):
 Tenant Origination and
Absorption Costs		Above-Market
Lease Assets		Below-Market
Lease Liabilities
 For the Three Months Ended September 30,For the Three Months Ended September 30,For the Three Months Ended September 30,
 202120202021202020212020
Amortization$(3,253)$(1,625)$(94)$(74)$388 $194 
 Tenant Origination and
Absorption Costs		Above-Market
Lease Assets		Below-Market
Lease Liabilities
 For the Nine Months Ended September 30,For the Nine Months Ended September 30,For the Nine Months Ended September 30,
 202120202021202020212020
Amortization$(12,397)$(4,965)$(421)$(241)$1,436 $676 
As of September 30, 2021 and December 31, 2020, the Company had recorded a housing subsidy intangible asset, net of amortization, which is included in prepaid expenses and other assets in the accompanying consolidated balance sheets, of $1.9 million and $2.0 million, respectively. As of September 30, 2021, the housing subsidy intangible asset has a remaining amortization period of 27.1 years. During the three and nine months ended September 30, 2021, the Company recorded amortization expense of $18,000 and $54,000, respectively, related to the housing subsidy intangible asset.
Additionally, as of September 30, 2021 and December 31, 2020, the Company had recorded tax abatement intangible assets, net of amortization, which are included in prepaid expenses and other assets in the accompanying balance sheets, of $0.8 million and $1.6 million, respectively. During the three and nine months ended September 30, 2021, the Company recorded amortization expense of $0.2 million and $0.8 million, respectively, related to tax abatement intangible assets. During the three and nine months ended September 30, 2020, the Company recorded amortization expense of $0.1 million and $0.5 million, respectively, related to tax abatement intangible assets. As of September 30, 2021, the tax abatement intangible assets had a remaining amortization period of 1.6 years.
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Net (loss) gain recognized during the period on real estate equity securities$(20,722)$(2,614)$(48,312)$12,939 
Less net gain recognized during the period on real estate equity securities sold during the period— — — (225)
Unrealized (loss) gain recognized during the reporting period on real estate equity securities held at the end of the period$(20,722)$(2,614)$(48,312)$12,714 

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

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20212022
(unaudited)
The following summarizes the portion of gain and loss for the period related to real estate equity securities held during the three and nine months ended September 30, 2021 and 2020 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Net (loss) gain recognized during the period on real estate equity securities$(2,614)$(6,527)$12,939 $(21,620)
Less net gain recognized during the period on real estate equity securities sold during the period— — (225)(711)
Unrealized (loss) gain recognized during the reporting period on real estate equity securities held at the end of the period$(2,614)$(6,527)$12,714 $(22,331)

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

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

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
The operations and gain on sale of City Tower is included in continuing operations on the accompanying statements of operations. The following table summarizes certain revenue and expenses related to these properties for the three and nine months ended September 30, 2021 and 2020 (in thousands):
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
Revenues
Rental income$1,085 $3,318 $8,660 $9,998 
Other operating income51 265 520 792 
Total revenues$1,136 $3,583 $9,180 $10,790 
Expenses
Operating, maintenance, and management$363 $1,004 $2,096 $2,855 
Real estate taxes and insurance95 389 979 1,258 
Asset management fees to affiliate194 305 807 907 
Depreciation and amortization14 1,769 2,436 5,342 
Interest expense152 518 1,146 1,953 
Total expenses$818 $3,985 $7,464 $12,315 


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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
7.5. NOTES AND BONDS PAYABLE
As of September 30, 20212022 and December 31, 2020,2021, the Company’s notes and bonds payable, including notes payable related to real estate held for sale, consisted of the following (dollars in thousands):
 Book Value as of
September 30, 2021		Book Value as of
December 31, 2020
Contractual Interest Rate as of
September 30, 2021
Effective Interest Rate at
September 30, 2021 (1)
Payment Type (2)
Maturity Date (3)
Richardson Portfolio Mortgage Loan$28,685 $35,832 One-Month LIBOR + 2.50%2.58%Principal & Interest
11/01/2021 (4)
Park Centre Mortgage Loan26,185 26,185 One-Month LIBOR + 1.75%1.83%Interest Only06/27/2022
1180 Raymond Mortgage Loan (5)
29,548 29,848 
One-Month LIBOR + 2.50% (6)
3.50%Principal & Interest12/01/2021
1180 Raymond Bond Payable5,705 5,870 6.50%6.50%Principal & Interest09/01/2036
Pacific Oak SOR (BVI) Holdings, Ltd. Series A Debentures (7)
197,901 181,198 4.25%4.25%(7)03/01/2023
Pacific Oak SOR (BVI) Holdings, Ltd. Series B Debentures (7)
78,794 79,078 3.93%3.93%(7)01/31/2026
Crown Pointe Mortgage Loan (5)
52,508 53,072 One-Month LIBOR + 2.60%2.70%Principal & Interest02/13/2022
City Tower Mortgage Loan— 94,167 (8)(8)(8)(8)
The Marq Mortgage Loan62,066 62,257 One-Month LIBOR + 1.55%1.63%Interest Only06/06/2022
Eight & Nine Corporate Centre Mortgage Loan48,695 47,066 One-Month LIBOR + 1.60%1.68%Principal & Interest06/08/2022
Georgia 400 Center Mortgage Loan61,154 59,690 One-Month LIBOR + 1.55%1.63%Interest Only05/22/2023
PORT Mortgage Loan 151,302 51,362 4.74%4.74%Interest Only10/01/2025
PORT Mortgage Loan 210,523 10,523 4.72%4.72%Interest Only03/01/2026
PORT Mortgage Loan 3 (9)
— 12,000 (9)(8)(8)(8)
Battery Point Trust Mortgage Loan (9)
— 38,608 (8)(8)(8)(8)
MetLife Loan (9)
60,000 — 3.90%3.90%Interest Only04/10/2026
Springmaid Beach Resort Mortgage Loan55,839 57,015 
One-month LIBOR + 2.25% (10)
5.75%Principal & Interest08/12/2022
Q&C Hotel Mortgage Loan25,000 25,000 
One-month LIBOR + 2.50% (11)
4.50%Principal & Interest12/23/2022
Lincoln Court Mortgage Loan (5)
34,723 34,416 One-month LIBOR + 1.75%1.83%Principal & Interest12/01/2021
Lofts at NoHo Commons Mortgage Loan74,536 74,536 
One-month LIBOR + 2.18% (12)
3.93%Interest Only09/09/2022
210 West 31st Street Mortgage Loan (5)
10,275 15,050 One-month LIBOR + 3.00%3.08%Principal & Interest06/16/2022
Oakland City Center Mortgage Loan96,404 96,782 One-month LIBOR + 1.75%1.83%Principal & Interest09/01/2022
Madison Square Mortgage Loan (13)
20,891 16,822 One-month LIBOR + 4.05%5.05%Interest Only10/09/2021
Total Notes and Bonds Payable principal outstanding1,030,734 1,106,377 
Discount on Notes and Bonds Payable, net (14)
(2,249)(2,851)
Deferred financing costs, net(4,707)(4,458)
Total Notes and Bonds Payable, net$1,023,778 $1,099,068 

 
Book Value as of
September 30, 2022
Book Value as of
December 31, 2021
Contractual Interest Rate as of
September 30, 2022
Effective Interest Rate at
September 30, 2022 (1)
Payment Type (2)
Maturity Date (3)
Richardson Portfolio Mortgage Loan$18,944 $28,470 LIBOR + 2.50%5.64%Principal & Interest
11/1/2022 (4)
Park Centre Mortgage Loan26,104 26,185 BSBY + 1.75%4.88%Principal & Interest06/27/2023
1180 Raymond Mortgage Loan (5)
31,070 31,070 BSBY + 2.25%5.38%Interest Only12/01/2023
Pacific Oak SOR (BVI) Holdings, Ltd. Series B Debentures (6)
326,523 271,978 3.93%3.93%(6)01/31/2026
Crown Pointe Mortgage Loan53,758 52,315 SOFR + 2.30%4.77%Interest Only04/01/2025
The Marq Mortgage Loan60,998 61,874 BSBY + 1.55%4.68%Principal & Interest06/06/2023
Eight & Nine Corporate Centre Mortgage Loan48,095 48,545 BSBY + 1.60%4.73%Principal & Interest06/08/2023
Georgia 400 Center Mortgage Loan44,129 61,154 LIBOR + 1.55%4.69%Interest Only05/22/2023
PORT Mortgage Loan 151,303 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 Loans153,703 60,000 3.90%3.90%Interest Only04/10/2026
Springmaid Beach Resort Mortgage Loan(7)55,491 (7)(7)(7)(7)
Q&C Hotel Mortgage Loan24,815 25,000 
LIBOR + 2.50% (8)
5.64%Principal & Interest12/23/2022
Lincoln Court Mortgage Loan (5)
35,314 34,623 SOFR + 3.25%5.72%Interest Only08/07/2025
Lofts at NoHo Commons Mortgage Loan71,536 74,536 
SOFR + 2.18% (9)
4.65%Interest Only09/09/2023
210 West 31st Street Mortgage Loan (5)
3,000 8,850 BSBY + 3.00%6.13%Principal & Interest12/16/2022
Oakland City Center Mortgage Loan (5)
89,250 96,075 BSBY + 3.00%6.13%Principal & Interest09/01/2023
Madison Square Mortgage Loan17,671 17,500 4.63%4.63%Interest Only10/07/2024
Total Notes and Bonds Payable principal outstanding1,066,736 1,015,491 
Discount on Notes and Bonds Payable, net (10)
(13,376)(8,146)
Deferred financing costs, net(10,500)(8,396)
Total Notes and Bonds Payable, net$1,042,860 $998,949 
_____________________
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
(1) Contractual interest rate represents the interest rate in effect under the loan as of September 30, 2021.2022. Effective interest rate is calculated as the actual interest rate in effect as of September 30, 20212022 (consisting of the contractual interest rate and contractual floor rates), using interest rate indices at September 30, 2021,2022, where applicable.
(2) Represents the payment type required under the loan as of September 30, 2021.2022. 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.
(3) Represents the initial maturity date or the maturity date as extended as of September 30, 2021;2022; subject to certain conditions, the maturity dates of certain loans may be extended beyond the date shown.
(4) Subsequent to September 30, 2021,2022, the Company extended the maturity of the Richardson Portfolio Mortgage Loan to November 1,October 10, 2022.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2022
(unaudited)
(5) The Company’s notes and bond’s payable are generally non-recourse. These mortgage loans have guarantees over certain balances whereby the Company would be required to make guaranteed payments in the event that the Company turned the property over to the lender. The guarantees are typically 25% of the outstanding loan balance. As of September 30, 2021,2022, the guaranteed amount in the aggregate was $39.5$41.9 million.
(6)This mortgage loan has a LIBOR floor of 1%.
(7) See “ – Israeli“Israeli Bond Financings” below.
(8)(7) On July 27, 2021,The Springmaid Beach Resort Mortgage Loan was paid off in connectionconjunction with the dispositionsale of City Tower, the Company repaid the $98.1 million outstanding principal balance due under the City Tower Mortgage Loan.Springmaid Beach Resort. See Note 3 for further details.
(9) On April 6, 2021, the Company refinanced the PORT Mortgage Loan 3 and the Battery Point Trust Mortgage Loan with a mortgage loan from MetLife for borrowings up to $60.0 million.
(10) The interest rate is variable at the higher of one-month LIBOR + 2.25% or 5.77%.
(11)(8) The interest rate is variable at the higher of one-month LIBOR + 2.5% or 4.5%. Principal payments will commence on January 1, 2022.
(12)(9) The LIBORvariable rate is variable at the higher of one-month LIBORSOFR or 1.75%, plus 2.18%.
(13) On October 7, 2021, the Company refinanced the Madison Square Mortgage Loan with a mortgage loan from an unaffiliated lender for borrowings up to $27.0 million. The new loan matures on October 7, 2024 and has a fixed interest rate of 4.625%. See Note 17, “Subsequent Events” for a further discussion.
(14)(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 and nine months ended September 30, 2022, the Company incurred $13.0 million and $33.3 million, respectively, of interest expense. Included in interest expense for the three and nine months ended September 30, 2022 was $1.0 million and $2.6 million, respectively, of amortization of deferred financing costs. Included in interest expense for the three and nine months ended September 30, 2022 was $1.1 million and $3.4 million, respectively, of amortization on discount on notes and bonds payable, net. Additionally, during the three and nine months ended September 30, 2022, the Company capitalized $0.7 million and $1.7 million, respectively, of interest related to its investments in undeveloped land.
During the three and nine months ended September 30, 2021, the Company incurred $10.1 million and $30.7 million, respectively, of interest expense. Included in interest expense for the three and nine months ended September 30, 2021 was $0.8 million and $2.5 million, respectively, of amortization of deferred financing costs. Included in interest expense for the three and nine months ended September 30, 2021 was $0.5 million and $1.9 million, respectively, of amortization on discount on notes and bonds payable, net. Additionally, during the three and nine months ended September 30, 2021, the Company capitalized $0.5 million and $1.6 million, respectively of interest related to its investments in undeveloped land.
During the three and nine months ended September 30, 2020, the Company incurred $6.3 million and $19.1 million, respectively, of interest expense. Included in interest expense for the three and nine months ended September 30, 2020 was $0.8 million and $2.5 million, respectively, of amortization of deferred financing costs. Included in interest expense for the three and nine months ended September 30, 2020 was $64,000 and $14,000, respectively, of amortization of discount on notes and bonds payable, net. Additionally, during the three and nine months ended September 30, 2020, the Company capitalized $0.7 million and $2.4 million, respectively of interest related to its investments in undeveloped land.
As of September 30, 20212022 and December 31, 2020,2021, the Company’s interest payable was $3.3$5.2 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 September 30, 20212022 (in thousands):
October 1, 2021 through December 31, 2021$116,538 
2022548,061 
2023160,359 
202426,535 
202577,858 
Thereafter101,383 
$1,030,734 
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
October 1, 2022 through December 31, 2022$49,443 
2023368,500 
2024126,512 
2025249,216 
2026273,065 
Thereafter— 
$1,066,736 

As of November 12, 2021,14, 2022, the Company had a total of $518.0$383.0 million of debt obligations scheduled to mature over the next 12 months. The Company has extension options with respect to $239.8$185.4 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 wethe Company will be able to meet these requirements. All of the Company’s debt obligations are generally non-recourse, subject to certain limited guaranty payments, as outlined in the table above, except for the Company’s Series A Debentures and Series B Debentures. Subsequent to September 30, 2021, the Company issued additional Series B Debentures, with the intent of using the proceeds and available cash on hand to payoff the outstanding Series A Debentures. See Note 17, “Subsequent Events” for a further discussion on the Series B Debentures issuance. The Company plans to utilize available extension options or refinance the notes payable. The Company may also choose to market the properties for sale or may negotiate a turnover of the secured properties back to the related mortgage lender.

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2022
(unaudited)
The Company’s notes payable contain financial debt covenants, including minimum equity requirements and liquidity ratios. As of September 30, 2021,2022, the Company was in compliance with all of these debt covenants exceptwith the exception that the Madison SquareOakland City Center Mortgage Loan wasand Georgia 400 Center Mortgage Loan were not in compliance with the debt yieldservice coverage 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 the Richardson Portfolio Mortgage Loan and Georgia 400 Center Mortgage Loan. As a result of such non-compliance,Additionally, the Company ismay be required to partially paydownpay down the loan in the case of the Richardson PortfolioOakland City Center Mortgage Loan and provide a cash sweep inif the case of the Georgia 400 Center Mortgage Loan.non-compliance continues through September 2023.
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 SOR 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). On November 8, 2021, Pacific Oak SOR 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).
Additionally, on May 2, 2022, Pacific Oak SOR BVI issued Series B Debentures in the amount of 320.4 million Israeli new Shekels par value through a private offering. The private offering Series B Debentures were issued at a 4.0% discount, resulting in a total consideration of 307.6 million Israeli new Shekels ($95.3 million as of May 2, 2022). 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 governgoverns the Series A Debentures and Series B Debentures contain various financial covenants. As of September 30, 2021,2022, the Company was in compliance with all of these financial debt covenants.
Subsequent to September 30, 2021, the Company issued additional Series B Debentures. See Note 17, “Subsequent Events” for a further discussion on the Series B Debentures issuance.


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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
8. DERIVATIVE INSTRUMENTS
The Company enters into derivative instruments for risk management purposes to hedge its exposure to cash flow variability caused by changing interest rates and foreign currency exchange rate movements. The primary goal of the Company’s risk management practices related to interest rate risk is to prevent changes in interest rates from adversely impacting the Company’s ability to achieve its investment return objectives. The Company does not enter into derivatives for speculative purposes.
The Company enters into foreign currency collars to mitigate its exposure to foreign currency exchange rate movements on its bonds payable outstanding denominated in Israeli new Shekels. A foreign currency collar consists of a purchased call option to buy and a sold put option to sell Israeli new Shekels. A foreign currency collar guarantees that the exchange rate of the currency will not fluctuate beyond the range of the options’ strike prices.
The following table summarizes the notional amount and other information related to the Company’s foreign currency collars as of September 30, 2021 and December 31, 2020. The notional amount is an indication of the extent of the Company’s involvement in each instrument at that time, but does not represent exposure to credit, interest rate or market risks (currency in thousands):
September 30, 2021December 31, 2020Strike PriceTrade DateMaturity Date
Derivative InstrumentsNumber of InstrumentsNotional AmountNumber of InstrumentsNotional Amount
Derivative instruments not designated as hedging instruments
Foreign currency collar1194,045 ILS——3.16 - 3.29 ILS - USD06/14/202111/22/2021

The Company enters into interest rate caps to mitigate its exposure to rising interest rates on its variable rate notes payable. The values of interest rate caps are primarily impacted by interest rates, market expectations about interest rates, and the remaining life of the instrument. In general, increases in interest rates, or anticipated increases in interest rates, will increase the value of interest rate caps. As the remaining life of an interest rate cap decreases, the value of the instrument will generally decrease towards zero.
As of September 30, 2021, the Company had entered into 4 interest rate caps, which were not designated as a hedging instruments. The following table summarizes the notional amounts and other information related to the Company’s derivative instruments as of September 30, 2021. The notional amount is an indication of the extent of the Company’s involvement in the instrument at that time, but does not represent exposure to credit, interest rate or market risks (dollars in thousands):
Derivative InstrumentEffective DateMaturity DateNotional ValueReference Rate
Interest rate 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 cap09/15/202109/15/2022$75,950 One-month LIBOR at 3.50%
Interest rate cap06/21/201905/22/2023$51,252 One-month LIBOR at 4.00%


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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
The following table sets forth the fair value of the Company’s derivative instruments as well as their classification on the consolidated balance sheets as of September 30, 2021 and December 31, 2020 (dollars in thousands):
September 30, 2021December 31, 2020
Derivative InstrumentsBalance Sheet LocationNumber of InstrumentsFair ValueNumber of InstrumentsFair Value
Derivative instruments not designated as hedging instruments
Interest rate capsPrepaid expenses and other assets4$2 7$1 
Foreign currency collarOther liabilities1$(44)—$— 

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

9.6. FAIR VALUE DISCLOSURES
The following were the face values, carrying amounts and fair values of the Company’s financial instruments as of September 30, 20212022 and December 31, 2020,2021, which carrying amounts do not approximate the fair values (in thousands):
September 30, 2021December 31, 2020September 30, 2022December 31, 2021
Face ValueCarrying AmountFair ValueFace ValueCarrying AmountFair ValueFace ValueCarrying AmountFair ValueFace ValueCarrying AmountFair Value
Financial liabilities (Level 3):Financial liabilities (Level 3):Financial liabilities (Level 3):
Notes and bond payableNotes and bond payable$754,039 $751,064 $752,417 $846,101 $842,112 $846,608 Notes and bond payable$740,213 $732,676 $720,286 $743,513 $740,176 $740,347 
Financial liabilities (Level 1):Financial liabilities (Level 1):Financial liabilities (Level 1):
Pacific Oak SOR (BVI) Holdings, Ltd. Series A Debentures$197,901 $195,428 $197,437 $181,198 $179,786 $178,450 
Pacific Oak SOR (BVI) Holdings, Ltd. Series B DebenturesPacific Oak SOR (BVI) Holdings, Ltd. Series B Debentures$78,794 $77,286 $76,899 $79,078 $77,170 $69,433 Pacific Oak SOR (BVI) Holdings, Ltd. Series B Debentures$326,523 $310,184 $306,099 $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.

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20212022
(unaudited)
As of September 30, 2021,2022, the Company measured the following assets at fair value (in thousands):
  Fair Value Measurements Using
TotalQuoted Prices in Active Markets for Identical Assets
(Level 1)		Significant Other Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
Recurring Basis:
Real estate equity securities$96,403 $96,403 $— $— 
Asset derivative - interest rate caps$2 $— $2 $— 
Liability derivative - foreign currency collar$(44)$— $(44)$— 

As of December 31, 2020, the Company measured the following assets and liabilities 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$96,403 $96,403 $— $— Real estate equity securities$63,784 $63,784 $— $— 
Asset derivative - interest rate capsAsset derivative - interest rate caps$2 $— $2 $— Asset derivative - interest rate caps$1,971 $— $1,971 $— 
Nonrecurring Basis:Nonrecurring Basis:
Impaired real estateImpaired real estate$220,360 $— $— $220,360 
Impaired goodwillImpaired goodwill$5,436 $— $— $5,436 

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

As of September 30, 2021, 22022, two of the Company’s real estate properties were measured at their estimated fair value. 210 West 31st Street was based on a sales comparison approach as of September 30, 2021. Lincoln Court2022. Oakland City Center was based on an income approach with the significant unobservable inputs used in measuring the estimated fair value of this property include a discount rate of 7.75%6.50% and a terminal cap rate of 6.75%5.75%. Additionally, the Springmaid Beach Resort was measured at it’s estimated fair value based on the contractual sale price. During the three and nine months ended September 30, 2021,2022, the Company recorded impairment charges on real estate in the aggregate of $11.0$11.9 million, to write down the carrying value of 210 West 31st Street, Oakland City Center, and Lincoln Court.
The Company recorded goodwill in connection with the Merger with Pacific Oak Strategic Opportunity REIT II, Inc. ("POSOR II"). Due to a decline in projected cash flows for real estate held in certain reporting units, the Company determined that the carrying value of certain reporting units exceeded the estimated fair value and recognized impairment charges of $2.8 million.Springmaid Beach Resort. The fair value of the Company's reporting unitsreal estate were measured using significant other observable inputs (Level 2) and significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2021,2022, which included contractual sale price, discounted cash flows, terminal capitalization rates, and discount rates.
As of September 30, 2022, the Company determined that based on the sale of the Springmaid Beach Resort and a decline in projected cash flows for Oakland City Center, it was more likely than not that the fair value of the reporting units that included Oakland City Center and Springmaid Beach Resort were less than book value. The resulting real estate impairment charge on Oakland City Center and the sale of Springmaid Beach Resort, resulted in the fair value of the reporting units to be below fair value and the entirety of the goodwill associated to the reporting units to be written off. During the three and nine months ended September 30, 2022, the Company recorded goodwill impairment charges of $8.1 million in the consolidated statement of operations.
The following table summarizes the goodwill impairment activity during nine months ended September 30, 2022 (in thousands):
Gross GoodwillAccumulated ImpairmentNet Goodwill
Balance, December 31, 2021$16,342 $(2,808)$13,534 
Impairment charges on goodwill— (8,098)(8,098)
Balance, September 30, 2022$16,342 $(10,906)$5,436 

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20212022
(unaudited)
Balance as of December 31, 2020$16,342 
Impairment loss(2,808)
Balance as of September 30, 2021$13,534 
As of December 31, 2021, the Company measured the following assets at fair value (in thousands):
Fair Value Measurements Using
TotalQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Recurring Basis:
Real estate equity securities$112,096 $112,096 $— $— 
Asset derivative - interest rate caps$8 $— $8 $— 
Nonrecurring Basis:
Impaired real estate (1)
$97,600 $— $— $97,600 
Impaired goodwill (1)
$13,534 $— $— $13,534 
_____________________
(1) The fair value of these assets were assessed as of September 30, 2021.

10.7. RELATED PARTY TRANSACTIONS
Pacific Oak Capital Advisors, LLC
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, 2022;2023; 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, alongPacific Oak Residential Advisors, LLC
Effective September 1, 2022, the Company entered into an advisory agreement 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 CapitalPacific Oak Residential Advisors, LLC (“KBS Capital Advisors”PORA”), (the “PORT Advisory Agreement”) pursuant to which PORA will act as a product specialist with respect to the Company’s advisor priorresidential homes portfolio, held through a wholly owned subsidiary. The PORT Advisory Agreement has an initial two-year term and may be renewed for additional one-year terms. Pursuant to November 1, 2019,the PORT Advisory Agreement, the Company will pay PORA: (1) an acquisition fee equal to 1.0% of the cost of each asset which consists of the price paid for the asset plus any amounts funded or budgeted at the time of acquisition for capital expenditures; and KBS Capital Markets Group LLC,(2) a quarterly asset management fee equal to 0.25% (1.0% annually) on the entity that acted as the dealer manageraggregate value of the Company’s now-terminated primary initial public offering.
Fromresidential homes portfolio assets, as determined in accordance with the Company’s inception through October 31, 2019, KBS Capital Advisors provided day-to-day managementvaluation guidelines, as of the end of each quarter. In the case of investments made through a joint venture, the acquisition fee will be based on the Company’s business. The advisory agreementproportionate share of the joint venture. For substantial assistance in connection with KBS Capital Advisors terminated on October 31, 2019. On March 27, 2020,the sale of properties or other investments related to the Company’s residential homes portfolio, the Company issued 3,411,737 sharesalso pays PORA or its affiliates 1.0% of Restricted Stockthe contract sales price with a limit to KBS Capital Advisors pursuant to the Restricted Stock Agreement. Refer to paragraph below for further discussion.
Pursuant to the terms of these agreements, summarized below are the related-party costs incurred by the Company for the three and nine months ended September 30, 2021 and 2020, respectively, and any related amounts payable as of September 30, 2021 and December 31, 2020 (in thousands):
IncurredPayable as of
Three Months Ended September 30,Nine Months Ended September 30,September 30, 2021December 31, 2020
Expensed2021202020212020
Asset management fees$3,422 $2,426 $10,802 $6,867 $2,132 $2,837 
Property management fees (1)
119 114 362 114 — — 
Reimbursable operating expenses (2)
— 56 — 148 — — 
Disposition fees (3)
692 — 1,196 — — — 
Change in subordinated performance fee due upon termination to affiliate (4)
1,545 (1,121)1,745 (814)(3)(3)
Capitalized
Acquisition fees on real estate equity securities— — — 122 — 5 
Acquisition fees on real estate (5)
— — 20 171 20 — 
Acquisition fee on investment in unconsolidated entities— — 45 — — — 
$5,778 $1,475 $14,170 $6,608 $2,152 $2,842 
_____________________
(1) Property management fees are for single-family homes under PORT andnot exceed commission paid to DayMark. These fees are included in the line item “Operating, maintenance, and management cost” in the consolidated statement of operations.unaffiliated third parties.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20212022
(unaudited)
(2)In connection with the PORT Advisory Agreement, the Company amended and restated its advisory agreement with the Advisor, also effective September 1, 2022 (the “Amended Company Advisory Agreement”). Under the Amended Company Advisory Agreement, the Company will no longer pay acquisition fees, asset management fees or disposition fees to the Advisor with respect to the Company’s residential homes portfolio. The Company’s residential homes portfolio will still be considered when computing any potential incentive fees due to the Advisor may seek reimbursement for certain employee costs under the Amended Company Advisory Agreement.
DMH Realty, LLC
Effective September 1, 2022, the Company entered into a property management agreement with DMH Realty, LLC (“DMH Realty”), an affiliate of PORA and the Advisor (the “PORT Property Management Agreement”) for the Company’s residential homes portfolio. The PORT Property Management Agreement has an initial two-year term and may be renewed for additional one-year terms. Pursuant to the PORT Property Management Agreement, the Company will pay DMH Realty a property management fee equal to the following: (a) 8% of Collected Rental Revenues, as defined below, up to $50.0 million per annum; (b) 7% of Collected Rental Revenues in excess of $50.0 million per annum, but less than or equal to $75.0 million per annum; and (c) 6% of Collected Rental Revenues in excess of $75.0 million per annum, “Collected Rental Revenues” means the amount of rental revenue actually collected for each property per the terms of the lease pertaining to each property (including lease breakage fees) or pursuant to any early termination buyouts, but excluding other income items, fees or revenue collected by DMH Realty, including but not reimburselimited to: application fees, insufficient funds fees, late fees, move-in fees, pet fees, and security deposits (except to the extent applied to rent per the terms of the lease pertaining to any property).
Pacific Oak Capital Markets, LLC
On September 9, 2022, the Company, through PORT, commenced a private offering of up to $500 million of common stock in a primary offering and up to $50 million of common stock under its distribution reinvestment plan (the “Private Offering”). PORT engaged Pacific Oak Capital Markets, LLC (“POCM”), an affiliate of the Advisor, PORA and DHM Realty, to be the dealer manager for employee coststhe Private Offering, pursuant to a dealer manager agreement effective as of September 9, 2022 (the “PORT Dealer Manager Agreement”). Pursuant to the PORT Dealer Manager Agreement, with respect to Class A shares, PORT will generally pay POCM: (1) selling commissions equal to up to 6.0% of the net asset value (“NAV”) of each share sold in the primary offering, which POCM may reallow in part or in full to participating broker-dealers; (2) a dealer manager fee equal to up to 1.5% of the NAV of each share sold in the primary offering, which POCM may reallow in part or in full to participating broker-dealers; and (3) a placement agent fee equal to up to 1.5% of the NAV of each share sold in the primary offering. With respect to Class T shares, PORT will generally pay POCM: (1) selling commissions equal to up to 3.0% of the NAV of each share sold in the primary offering, which POCM may reallow in part or in full to participating broker-dealers; (2) a dealer manager fee equal to up to 0.75% of the NAV of each share sold in the primary offering, which POCM may reallow in part or in full to participating broker-dealers; and (3) a placement agent fee equal to up to 0.75% of the NAV of each share sold in the primary offering. PORT will not pay any selling commissions, dealer manager or placement agent fees in connection with services for which the sale of shares under the distribution reinvestment plan. The Advisor earns acquisition, origination or disposition fees (other than reimbursement of travel and communication expenses) oris the sponsor for the salaries or benefitsPrivate Offering and as 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 directsponsor, they will incur reimbursable organization and offering costs incurred from third parties that were initially paid by the Advisor on behalf of PORT. PORT will incur an organization and offering expense fee equal to 0.5% of the Company.NAV of each share sold in the Private Offering to help fund the reimbursement to the sponsor.

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2022
(unaudited)
Pursuant to the terms of the related party agreements, summarized below are the related-party costs incurred by the Company for the three and nine months ended September 30, 2022 and 2021, respectively, and any related amounts payable as of September 30, 2022 and December 31, 2021 (in thousands):
IncurredPayable as of
Three Months Ended September 30,Nine Months Ended September 30,September 30, 2022December 31, 2021
Expensed2022202120222021
Asset management fees$3,630 $3,422 $9,945 $10,802 $3,252 $1,903 
Property management fees294 119 552 362 — — 
Disposition fees (1)
637 692 744 1,196 — — 
Change in subordinated performance fee due upon termination to affiliate (2)
— 1,545 — 1,745 (2)(2)
Capitalized
Acquisition fees on real estate (3)
67 — 67 20 — — 
Acquisition fee on investment in unconsolidated entities— — — 45 — — 
$4,628 $5,778 $11,308 $14,170 $3,252 $1,903 
_____________________
(1) Disposition fees with respect to real estate sold are included in the gain (loss) on sale of real estate in the accompanying consolidated statements of operations.
(4)(2) Change in estimate of fees payable to the fair value of the Restricted Stock relatedCompany’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.
(5)(3) Acquisition fees associated with asset acquisitions are capitalized, while costs associated with business combinations expensed as incurred.
PORT OP LP Share Redemption
On June 24, 2022, the Company’s board of directors authorized and approved the redemption of the 510,816 Special Common Units of PORT OP LP, a consolidated subsidiary of the Company (“PORT OP”), representing approximately 3.20% interest, held by BPT Holdings, LLC (“BPT Holdings”), a subsidiary of the Advisor, for a price of $13.09 per unit. In July 2022, the Company redeemed the special common units of PORT OP for $6.7 million. Following the redemption, the Company owned 100% of PORT OP.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2022
(unaudited)
Pacific Oak Opportunity Zone Fund I
As of September 30, 2021,2022, the Company owned 124 Class A UnitsCompany’s investment balance in the Pacific Oak Opportunity Zone Fund I, LLC (“Pacific Oak Opportunity Zone Fund I”), is $26.3 million, which areis included in investments in unconsolidated entities on the consolidated balance sheets. 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 incurincurred (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 and nine months ended September 30, 2021,2022, the Company recorded $0.2$0.3 million and $0.5$0.4 million, respectively, of waived asset management fees recorded as equity in income of unconsolidated entities, of which $0.7 million was a receivable as of September 30, 2021.
PORT II
As ofentities. During the three and nine months ended September 30, 2021, the Company has contributed $5.5recorded $0.2 million and $0.3 million, respectively, of waived asset management fees recorded as equity in income of unconsolidated entities.

8. INVESTMENT IN UNCONSOLIDATED ENTITIES
As of September 30, 2022 and December 31, 2021, the Company’s investments in unconsolidated entities were composed of the following (dollars in thousands):
Number of Properties as of September 30, 2022Investment Balance at
Joint VentureLocationOwnership %September 30, 2022December 31, 2021
110 William Joint Venture1New York, New York60.0%$— $— 
353 Sacramento Joint Venture1San Francisco, California55.0%46,572 49,916 
Pacific Oak Opportunity Zone Fund I3Various46.0%26,266 27,215 
PORT II OP LP(1)(1)(1)(1)11,125 
$72,838 $88,256 
_____________________
(1) On July 1, 2022, the Company, through PORT OP, made a tender offer to purchase 76,735 shares of PORT II OP, LLC (“common stock held by unrelated parties for a price of $14.66 per share. As a result, the Company determined that it became the primary beneficiary of PORT II, OP”), a wholly owned subsidiarywhich resulted in the consolidation of Pacific Oak Residential Trust II, Inc. ("PORT II"). On August 31, 2020, PORT II entered into an advisory agreement (as subsequently amendedthe Company’s consolidated financial statements. On July 29, 2022, the Company consummated the transactions with the unrelated parties and restated on October 9, 2020, “PORT II Advisory Agreement”) with Pacific Oak Residential Advisors, LLC (“PORA”), an affiliateowned 100% of PORT II. See Note 3 for the assessment of the Advisor. Pursuantfair value of the assets and liabilities of PORT II. There are no liquidity arrangements or agreements to fund capital or purchase assets that could require the PORT II Advisory Agreement, PORT II has engaged PORACompany to act as its external advisor with respectprovide financial support 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, theII. 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 andaforementioned unrelated parties did not by the Advisor. In addition, the amendment provides that the Advisor will rebate or offset its fees under its advisory agreementguarantee any debt in connection 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).transaction.
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.


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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20212022
(unaudited)
9. SUPPLEMENTAL CASH FLOW AND SIGNIFICANT NONCASH TRANSACTION DISCLOSURES
Supplemental cash flow and significant noncash transaction disclosures were as follows (in thousands):
Nine Months Ended September 30,
20222021
Supplemental Disclosure of Cash Flow Information:
Interest paid, net of capitalized interest of $1,703 and $1,579 for the nine months ended September 30, 2022 and 2021, respectively$29,839 $29,220 
Supplemental Disclosure of Significant Noncash Transactions:
Assets acquired in the consolidation of previously unconsolidated entity137,569 — 
Liabilities assumed in the consolidation of previously unconsolidated entity85,096 — 
Accrued improvements to real estate6,389 1,721 
Redeemable common stock payable1,567 3,385 
Distributions paid to common stockholders through common stock issuances99,094 — 
Accrued preferred dividends225 225 
PPP notes forgiveness2,367 1,500 

10. REPORTING SEGMENTS
The Company recognizes three reporting segments for the three and nine months ended September 30, 2022 and 2021: strategic opportunistic properties, residential 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. On July 1, 2022, the Company made a prospective name change to the “Single-Family Homes” segment to “Residential Homes” to reflect the Company’s acquisition of PORT II is a Maryland corporation formed and sponsored by the Advisor to acquire, own and operate single-familymultifamily homes, as rental properties as well as to acquire and own other interests, including mortgages on or securities related to single-family homes.
Subordinated Performance Fee Due Upon Termination to KBS Capital Advisors
The Company and KBS Capital Advisors agreed to terminate their advisory agreement effective October 31, 2019. In connection with that agreement, the Company agreed to pay KBS Capital Advisors a subordinated performance fee due upon termination in the form of Restricted Stock, to be paid to KBS Capital Advisors upon the filing of its Annual Report on Form 10-Ksee Note 3 for the year ended December 31, 2019. At that time, GKP Holding LLC, a Delaware limited liability company (“GKP”), was a manager of KBS Capital Advisors and of KBS Holdings LLC (“KBS Holdings”), which wholly owns KBS Capital Advisors. At that time, GKP owned 1/3 of KBS Holdings. Keith D. Hall, the Company’s Chief Executive Officer and a director, and Peter McMillan III, the Company’s President and Chairman of the Board, are the managers of GKP and each own 50% of GKP. The number of shares of Restricted Stock to be awarded 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 basedfurther details 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.
acquisition. On September 1, 2021, GKP ceased2022, the Company made a prospective name change to be a manager of KBS Capital Advisors and KBS Holdings and ceasedthe “Hotels” segment to own an interest in KBS Holdings. Also on“Hotel” to reflect the September 1, 2021, GKP and KBS Capital Advisors entered into Amendment No. 1 (the “Amendment”) to the Restricted Stock Agreement and the Unvested Share Transfer Agreement (the “Unvested Share Agreement”). Pursuant to the Amendment, on September 1, 2021, the Company repurchased 584,2672022 disposition of the shares of Restricted Stock from KBS Capital AdvisorsSpringmaid Beach Resort, see Note 3 for consideration of $5,655,705 in cash, or $9.68 per share. Pursuant tofurther details on the terms ofdisposition. The selected financial information for reporting segments for the Amendmentthree and the Unvested Share Agreement, onnine months ended September 1,30, 2022 and 2021 KBS Capital Advisors transferred 2,254,289 of the shares of Restricted Stock to GKP (the “GKP Restricted Shares”). KBS Capital Advisors transferred the GKP Restricted Sharesare as partial consideration for and to effectuate the conclusion of the acquisition of GKP’s 1/3 ownership interest in KBS Holdings by its other owners. On September 1, 2021, upon the transfer of GKP’s 1/3 ownership interest in KBS Holdings, GKP ceased to be a manager of KBS Capital Advisors and KBS Holdings and ceased to have an ownership interest in KBS Holdings. Under the Amendment, the GKP Restricted Shares are nonvested and forfeitable until the earliest of: (i) July 1, 2026 or (ii) immediately before and contingent upon the occurrence of a Change in Control (as defined in the Restricted Stock Agreement) of the Company. Notwithstanding the foregoing, and at the option of either Keith Hall’s estate or Peter McMillan’s estate, in the event of the death of either Keith Hall or Peter McMillan, such event can trigger the vesting of that number of GKP Restricted Shares corresponding to 100% of the deceased party’s proportional economic interest in GKP Restricted Shares. In addition, unvested GKP Restricted Shares will be forfeited in certain instances if GKP fails to comply with certain requirements set forth in the Amendment, which forfeiture may be waived by the Company’s Conflict Committee in certain cases. Non-vested GKP Restricted Shares are not eligible for redemption by the Company under any circumstances unless approved by the Company’s board of directors.follows (in thousands):
Three Months Ended September 30, 2022
Strategic Opportunistic PropertiesResidential HomesHotelTotal
Total revenues$25,847 $8,576 $9,182 $43,605 
Total expenses(46,453)(10,726)(12,056)(69,235)
Total other (loss) income(24,052)18,671 11 (5,370)
Net (loss) income$(44,658)$16,521 $(2,863)$(31,000)
Nine Months Ended September 30, 2022
Strategic Opportunistic PropertiesResidential HomesHotelTotal
Total revenues$77,599 $20,120 $27,952 $125,671 
Total expenses(87,232)(23,735)(28,900)(139,867)
Total other (loss) income(50,436)18,149 2,382 (29,905)
Net (loss) income$(60,069)$14,534 $1,434 $(44,101)
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20212022
(unaudited)
After
Three Months Ended September 30, 2021
Strategic Opportunistic PropertiesSingle-Family HomesHotelsTotal
Total revenues$28,050 $5,566 $12,153 $45,769 
Total expenses(52,891)(6,398)(8,948)$(68,237)
Total other (loss) income(4,435)81 1,276 $(3,078)
Net (loss) income$(29,276)$(751)$4,481 $(25,546)
Nine Months Ended September 30, 2021
Strategic Opportunistic PropertiesSingle-Family HomesHotelsTotal
Total revenues$88,187 $16,436 $24,578 $129,201 
Total expenses(128,418)(19,581)$(22,924)$(170,923)
Total other income42,527 159 $1,289 $43,975 
Net income (loss)$2,296 $(2,986)$2,943 $2,253 
Total assets and goodwill related to the vestingreporting segments as of September 30, 2022 and December 31, 2021 are as follows (in thousands):
September 30, 2022
Strategic Opportunistic PropertiesResidential HomesHotelTotal
Total assets$1,174,855 $337,513 $51,999 $1,564,367 
Goodwill (1)
4,220 — 1,216 5,436 
December 31, 2021
Strategic Opportunistic PropertiesSingle-Family HomesHotelsTotal
Total assets$1,223,122 $211,050 $150,447 $1,584,619 
Goodwill (1)
9,489 — 4,045 13,534 
_____________________
(1) During the GKP Restricted Shares,three and only upon receiving a request from GKP and the consent of the Company’s Conflicts Committee, within 60 days from the request,nine months ended September 30, 2022, the Company will redeem 50%recorded impairment charges on goodwill of $5.5 million and $2.6 million related to the vested GKP Restricted Shares, withStrategic Opportunistic Properties and Hotel segments, respectively. During the amount of the cash payment per share determined based on the then most recent board-approved net asset value per share (which must not be more than sixthree and nine months old). Any vested GKP Restricted Shares that are not required to be redeemed in accordance with the preceding sentence are referred to herein as the “Retained Vested GKP Shares.” The Retained Vested GKP Shares are not eligible for redemption under the Company’s share redemption program unlessended September 30, 2021, the Company has satisfied all outstanding redemption requests from other stockholders, provided that this restriction may be waived in certain situations, such as upon a changerecorded impairment charges on goodwill of control of$2.8 million related to the Company, as determined by the Conflicts Committee of the Board. The Amendment also provides that an additional 59,714 Restricted Shares held by KBS Capital Advisors and 513,467 Restricted Shares that were transferred to affiliates of KBS Capital Advisors under the Amendment were immediately vested and fully released from all restrictions and requirements of the Restricted Stock Agreement (the “KBS Vested Shares”), provided that the KBS Vested Shares are not eligible for redemption under the Company’s share redemption program unless the Company has satisfied all outstanding redemption requests from other stockholders, provided further that (i) this restriction may be waived in certain situations, such as upon a change of control of the Company, as determined by the Conflicts Committee and (ii) notwithstanding the foregoing, within 60 days after November 1, 2024, the Company will be required to redeem any remaining outstanding KBS Vested Shares, separate and outside of any general stockholder share redemption program, at the then most recent board-approved net asset value per share (which must not be more than six months old).Strategic Opportunistic Properties segment.

11. INVESTMENT IN UNCONSOLIDATED ENTITIES
As of September 30, 2021 and December 31, 2020, the Company’s investments in unconsolidated entities were composed of the following (dollars in thousands):
Number of Properties as of September 30, 2021Investment Balance at
Joint VentureLocationOwnership %September 30, 2021December 31, 2020
110 William Joint Venture1New York, New York60.0%$— — 
353 Sacramento Joint Venture1San Francisco, California55.0%50,769 49,665 
Pacific Oak Opportunity Zone Fund I3VariousN/A27,638 24,996 
PORT II OP LP117Various89.7%5,447 5,005 
$83,854 $79,666 
Investment in 110 William Joint Venture
On December 23, 2013, the Company, through an indirect wholly owned subsidiary, entered into an agreement with SREF III 110 William JV, LLC (the “110 William JV Partner”) to form a joint venture (the “110 William Joint Venture”). On May 2, 2014, the 110 William Joint Venture acquired an office property containing 928,157 rentable square feet located on approximately 0.8 acres of land in New York, New York (“110 William Street”). Each of the Company and the 110 William JV Partner hold a 60% and 40% ownership interest in the 110 William Joint Venture, respectively.
The Company exercises significant influence over the operations, financial policies and decision making with respect to the 110 William Joint Venture but significant decisions require approval from both members. Accordingly, the Company has accounted for its investment in the 110 William Joint Venture under the equity method of accounting. Income, losses, contributions and distributions are generally allocated based on the members’ respective equity interests.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20212022
(unaudited)
As of September 30, 2021 and December 31, 2020, 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 and nine months ended September 30, 2021 and September 30, 2020, the Company did not record equity in income from the 110 William Joint venture.
Summarized financial information for the 110 William Joint Venture follows (in thousands):
September 30, 2021December 31, 2020
Assets:
       Real estate assets, net of accumulated depreciation and amortization$232,201 $246,166 
       Other assets34,200 44,004 
       Total assets$266,401 $290,170 
Liabilities and equity:
       Notes payable, net$318,280 $316,421 
       Other liabilities3,003 5,532 
       Partners’ deficit(54,882)(31,783)
Total liabilities and equity$266,401 $290,170 
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Revenues$5,729 $10,005 $18,721 $26,604 
Expenses:
       Operating, maintenance, and management2,359 2,096 6,212 5,994 
       Real estate taxes and insurance1,698 1,935 5,588 5,580 
       Depreciation and amortization2,962 3,139 19,071 8,721 
       Interest expense3,548 4,125 10,986 12,093 
Total expenses10,567 11,295 41,857 32,388 
Total other income11 12 35 50 
Net loss$(4,827)$(1,278)$(23,101)$(5,734)
Company’s share of net loss (1)
$(2,896)$(767)$(13,861)$(3,440)
_____________________
(1) The Company suspended the equity method of accounting and did not record the Company's share of losses for both of the three and nine months ended September 30, 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 nine months ended September 30, 2021, the Company contributed an additional $1.1 million into the 353 Sacramento Joint Venture.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
The Company exercises significant influence over the operations, financial policies and decision making with respect to the 353 Sacramento Joint Venture but significant decisions require approval from both members. Accordingly, the Company has accounted for its investment in the 353 Sacramento Joint Venture under the equity method of accounting. Income, losses, contributions and distributions are generally allocated based on the members’ respective equity interests.
Summarized financial information for the 353 Sacramento Joint Venture follows (in thousands):
September 30, 2021December 31, 2020
Assets:
       Real estate assets, net of accumulated depreciation and amortization$178,874 $182,318 
       Other assets27,539 19,810 
       Total assets$206,413 $202,128 
Liabilities and equity:
       Notes payable, net$110,000 $109,783 
       Other liabilities6,335 7,639 
       Partners’ capital90,078 84,706 
Total liabilities and equity$206,413 $202,128 
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Revenues$3,373 $5,520 $13,252 $15,771 
Expenses:
       Operating, maintenance, and management862 932 2,490 2,450 
       Real estate taxes and insurance848 755 2,768 2,235 
       Depreciation and amortization1,850 1,894 5,574 5,135 
       Interest expense960 948 2,700 3,290 
Total expenses4,520 4,529 13,532 13,110 
Net income$(1,147)$991 (280)$2,661 
Company’s equity in (loss) income of unconsolidated joint venture$(592)$583 $(40)$1,576 

Investment in Pacific Oak Opportunity Zone Fund I
During the year ended December 31, 2019, the Company acquired 91 Class A Units for $20.6 million in Pacific Oak Opportunity Zone Fund I. Additionally, with the POSOR II Merger, the Company acquired an additional 13 Class A Units with a fair value of $3.0 million and also acquired 7 Class A Units for $1.5 million during the year ended December 31, 2020. During the nine months ended September 30, 2021, the Company acquired additional 13 Class A Units for $3.1 million.
As of September 30, 2021, the book value of the Company’s investment in Pacific Oak Opportunity Zone Fund I was $27.6 million, which includes $0.2 million of acquisition fees. As of September 30, 2021, Pacific Oak Opportunity Zone Fund I consolidated 3 joint ventures with real estate under development. As of September 30, 2021, the Company has concluded that Pacific Oak Opportunity Zone Fund I qualifies as a Variable Interest Entity (“VIE”) because there is insufficient equity at risk to finance the entity’s activities and the entity is structured with non-substantive voting rights. The Company concluded it is not the primary beneficiary of this VIE since it does not have the power to direct the activities that most significantly impact the entity’s economic performance and will account for its investment under the equity method of accounting.
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
During the three and nine months ended September 30, 2021, the Company recognized $0.1 million and $0.5 million, respectively, of losses 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 $27.6 million as of September 30, 2021.
PORT II
PORT II is a Maryland corporation formed and sponsored by the Advisor to acquire, own and operate single-family homes as rental properties as well as to acquire and own other interests, including mortgages on or securities related to single-family homes. As of September 30, 2021, the Company owns 600 shares of common stock of PORT II, of which the Company exercises significant influence over the operations, financial policies and decision making with respect to PORT II, but does not control. In addition, as of September 30, 2021, the Company had contributed $5.5 million in capital to PORT II OP, of which the Company owns 89.7%. The remaining ownership percentage is owned by PORT II. As of September 30, 2021, 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 and nine months ended September 30, 2021, the Company recognized $47,000 and $0.1 million of losses related to this investment, respectively.

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


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

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
Total assets and goodwill related to the reporting segments as of September 30, 2021 and December 31, 2020 are as follows (in thousands):
September 30, 2021
Strategic Opportunistic PropertiesSingle-Family HomesHotelsTotal
Total assets$1,274,093 $202,349 $152,686 $1,629,128 
Goodwill (1)
9,489 — 4,045 13,534 
December 31, 2020
Strategic Opportunistic PropertiesSingle-Family HomesHotelsTotal
Total assets$1,404,509 $182,486 $144,670 $1,731,665 
Goodwill12,297 — 4,045 16,342 
_____________________
(1) During the three and nine months ended September 30, 2021, the Company recorded impairment charges on goodwill of $2.8 million related to the Strategic Opportunistic Properties segment.

14.11. 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 September 30, 2021.
On November 6, 2019, PORT issued 15,000 shares out of its available 25,000,000 shares of Series A Cumulative Convertible Redeemable Preferred Stock for gross proceeds of $1,000 per share resulting in net proceeds of $15.0 million before issuance costs. The shares provide for an annual dividend of 6% payable quarterly, which increases to 12% if all shares are not redeemed by the Company immediately following the redemption date. However, the 12% dividend rate does not apply until the aggregate number of shares selected for redemption do not constitute 10% or more of all outstanding shares. The shares may be redeemed by the holders beginning on November 4, 2021 for $1,000 per share plus all accrued but unpaid dividends through the redemption date, or after November 4, 2022 for $1,120 per share plus all accrued but unpaid dividends through the redemption date. In addition, after November 4, 2020, the shares are redeemable at the Company’s option, at any time or from time to time, at a redemption price of $1,120 per share plus unpaid accrued dividends. Additionally, if the common shares of PORT are publicly traded, the holder may elect to convert its preferred shares into PORT common shares based on a value of the preferred shares of $1,120 per share plus unpaid accrued dividends, and a conversion price of the common shares as stated in the agreement.
On November 22, 2019, PORT issued 125 shares of its Series B Cumulative Redeemable Preferred Stock for gross proceeds of $1,000 per share resulting in net proceeds of $0.1 million after issuance costs. The shares provide for an annual dividend of 12.5% payable semiannually. The shares may be redeemed by the holders for $1,050 per share until December 31, 2021 and for $1,000 per share thereafter.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
The following is a reconciliation of PORT’s noncontrolling cumulative convertible redeemable preferred stock for the nine months ended September 30, 20212022 and 20202021 (dollars in thousands):
Series A Preferred StockSeries B Preferred StockSeries A Preferred StockSeries B Preferred Stock
SharesAmountsSharesAmountsSharesAmountsSharesAmounts
Balance, December 31, 202015,000 15,134 125 $99 
Balance, December 31, 2021Balance, December 31, 202115,000 $15,134 125 $99 
Dividends Available Upon RedemptionDividends Available Upon Redemption— 636 — 8 Dividends Available Upon Redemption— 1,045 — 8 
Dividends PaidDividends Paid— (636)— (8)Dividends Paid— (1,045)— (8)
Balance, September 30, 202115,000 $15,134 125 $99 
Balance, September 30, 2022Balance, September 30, 202215,000 $15,134 125 $99 
Series A Preferred StockSeries B Preferred Stock
SharesAmountsSharesAmounts
Balance, December 31, 201915,000 $14,909 125 $99 
Dividends Available Upon Redemption— 781 — 7 
Dividends Paid— (556)— (7)
Balance, September 30, 202015,000 $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— 453 — — 
Dividends Paid— (453)— — 
Balance, September 30, 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”). Battery Point is a real estate investment trust that owned, at the time of acquisition, 559 single-family rental homes throughout the Midwesternmidwestern and Southeasternsoutheastern United States. All of these assets are held by the Company through its subsidiary, PORT OP.
The Company acquired Battery Point by acquiring all the 1,000,000 outstanding shares of Battery Point common stock from BPT Holdings, LLC (“BPT Holdings”), a partially owned subsidiary of the Advisor.Holdings. 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 unitsSpecial Common Units in PORT OP, approximately 4.5% of the outstanding common equity units, as of July 1, 2020. The value of the interests exchanged was estimated by the participants at approximately $3.0 million. The common equity units issued to BPT Holdings are redeemable after one year at the request of BPT Holdings for all or a portion of the common equity units at a redemption price equal to and in the form of cash based on the unit price of PORT OP. The following table summarizes the redeemable non-controlling interest activity related to the PORT OP equity units held by BPT Holdings for the nine months ended September 30, 2022 and 2021 (in thousands):
December 31, 2021$2,822 
Net loss attributable to redeemable noncontrolling interest(81)
Adjustment to value of redeemable noncontrolling interest (1)
3,946 
Payment to redeem noncontrolling interest(6,687)
September 30, 2022$— 
December 31, 2020$2,968 
Net loss attributable to redeemable noncontrolling interest(113)
September 30, 2021$2,855 

_____________________
15. RESTRICTED STOCK
(1)On March 27, 2020,June 24, 2022, the Company’s board of directors approved the redemption of the 510,816 PORT OP Special Common Units held by BPT Holdings for a price of $13.09 per unit.and recorded at its fair value. The Company issued 3,411,737 restricted shares to KBS Capital Advisorsredeemed the noncontrolling interest in connection with the subordinated performance fee due upon termination (the “Restricted Stock”), which were expected to vest on November 1, 2021. These shares are subject to non-compete provisions, which are treated as clawback contingent features and will be accounted for if and when the Restricted Stock is required to be returned.PORT OP in July 2022.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 20212022
(unaudited)
On September 1, 2021, the Company, KBS Capital Advisors, and GKP entered into amendment no. 1 to the Restricted Stock Agreement (the "Amendment"). Pursuant to the Amendment, 1,157,448 shares of Restricted Stock ("Released Shares") were immediately vested and fully released from all restrictions and requirements of the Restricted Stock Agreement. Of the Released Shares, the Company repurchased 584,267 shares from KBS Capital Advisors for consideration of $5,655,705 in cash, or $9.68 per share. After a one year period, 513,467 of the Released Shares are eligible for redemption under the Company's share redemption program. Within a 60 day period following November 1, 2024, 59,714 of the Released Shares are to be redeemed by the Company, though prior to this date, the shares are eligible for redemption under the Company's share redemption program if all outstanding redemption requests from other stockholders have been satisfied.
Additionally, KBS Capital Advisors transferred 2,254,289 shares of Restricted Stock to GKP ("GKP Restricted Shares"). The GKP Restricted Shares vest on the earlier of the following: (i) July 1, 2026 or (ii) a change of control. Upon vesting, 50% of the GKP Restricted Shares are eligible for redemption based on the most recent board approved NAV per share, but requires approval of the Company's conflicts committee of the board of directors. The remaining 50% of the GKP Restricted Shares are eligible for redemption under the Company's share redemption program if all outstanding redemption requests from other stockholders have been satisfied.
The 59,714 of the Released Shares are classified as a liability instrument, accounted for as restricted stock payable on the accompanying consolidated balance sheets, and are recorded at the fair value of the shares at each reporting period until settled. The remaining Released Shares and GKP Restricted Shares are classified as an equity instrument and recorded in additional paid-in-capital on the accompanying balance sheet.
For the three and nine months ended September 30, 2021, the Company recorded $1.5 million subordinated performance fee due upon termination to affiliate expense to record the Restricted Stock at fair value. The fair value of the Restricted Stock was estimated based on the Company's NAV, adjusted for a lack of marketability discount. As of September 1, 2021, the Company measured the Restricted Stock at its fair value of $9.61 per share.

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

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
Lease Obligations
As of September 30, 2021,2022, the Company’s lease and rights to a leasehold interest with respect to 210 West 31st Street, an office/retail building in New York, NY, which was accounted for as a finance lease, are included in the consolidated balance sheet as follows:
Right-of-use asset (included in real estate held for investment, net) (1)
$8,0747,281 
Lease obligation (included in other liabilities)9,3399,424 
Remaining lease term92.591.3 years
Discount rate4.8 %
The components of lease expense were as follows:
Interest on lease obligation for the three months ended September 30, 2022112 
Interest on lease obligation for the nine months ended September 30, 20212022441334 
_____________________
(1) During the three and nine months ended September 30, 2021,2022, the Company wrote down its right-of-use asset and recorded an impairment charge of $1.2$0.8 million on 210 West 31st Street.
As of September 30, 2021,2022, the Company had a leasehold interest expiring onin 2114. Future minimum lease payments owed by the Company under the finance lease as of September 30, 20212022 are as follows (in thousands):
October 1, 2021 through December 31, 2021$90 
July 1, 2021 through December 31, 2021July 1, 2021 through December 31, 2021$90 
20222022360 2022360 
20232023360 2023360 
20242024360 2024393 
20252025393 2025396 
ThereafterThereafter52,563 Thereafter52,167 
Total expected minimum lease obligationsTotal expected minimum lease obligations54,126 Total expected minimum lease obligations53,766 
Less: Amount representing interest (1)
Less: Amount representing interest (1)
(44,787)
Less: Amount representing interest (1)
(44,342)
Present value of net minimum lease payments (2)
Present value of net minimum lease payments (2)
$9,339 
Present value of net minimum lease payments (2)
$9,424 
_____________________
(1) Interest includes the amount necessary to reduce the total expected minimum lease obligations to present value calculated at the Company’s incremental borrowing rate at acquisition.
(2) The present value of net minimum lease payments are presented in other liabilities in the accompanying consolidated balance sheets.
Paycheck Protection Program
On February 10, 2021 and March 13, 2021, the Company, through wholly owned subsidiaries of joint ventures, entered into Paycheck Protection Program Promissory (“PPP”) notes for the Q&C Hotel and Springmaid Beach Resort and received funding of $0.6 million and $1.8 million, respectively. The PPP notes are supplementing payroll costs for the third-party managers of the joint ventures. In accordance with the requirements of the CARES Act, at least 60% of the proceeds used to date have been used to pay eligible payroll costs. Under the requirements of the CARES Act, the loan may be fully forgiven if (i) proceeds are used to pay eligible payroll costs, rent, mortgage interest and utilities and (ii) full-time employee headcount and salaries are either maintained during the applicable twenty-four-week period after loan origination. Any forgiveness of the loan will be subject to approval by the U.S. Small Business Administration (the “SBA”) and will require the Company to apply for such treatment in the future. While the Company may apply for forgiveness of the PPP notes in accordance with the requirements and limitations under the CARES Act and the SBA regulations and requirements, no assurance can be given that any portion of the PPP notes will be forgiven. On July 6, 2021, the SBA approved the Company’s application for forgiveness of the Springmaid Beach Resort PPP note of $1.3 million. As of September 30, 2021 and December 31, 2020, the PPP notes balance was $2.4 million and $1.5 million and recorded in other liabilities in the accompanying consolidated balance sheets, respectively.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
Economic Dependency
The Company is dependent on the Advisor for certain services that are essential to the Company, including the identification, evaluation, negotiation, origination, acquisition and disposition of investments; management of the daily operations of the Company’s investment portfolio; and other general and administrative responsibilities. In the event that the Advisor is unable to provide these services, the Company will be required to obtain such services from other sources.

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2022
(unaudited)
Environmental
As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. Although there can be no assurance, the Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations as of September 30, 2021.2022. 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 and collectability assessments on operating lease receivables. While our current analyses did not result in any material adjustments to amounts as of and during the nine months ended September 30, 2021, circumstances related to the COVID-19 pandemic may result in recording impairments, lease modifications and changes to collectability assessments in future periods.
Legal Matters
From time to time, the Company is a party to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on the Company’s results of operations or financial condition, which would require accrual or disclosure of the contingency and the possible range of loss. Additionally, the Company has not recorded any loss contingencies related to legal proceedings in which the potential loss is deemed to be remote.

17.13. SUBSEQUENT EVENTS
The Company evaluates subsequent events up until the date the consolidated financial statements are issued.
Richardson Acquisition
On November 22, 2011, the Company, through an indirect wholly owned subsidiary,Dividends on and JP-Richardson, LLC, an affiliateaccretion to redemption value of JP Realty Partners, LTD., entered into an agreement to form a joint venture (the “Richardson Joint Venture”), and on November 23, 2011, the Richardson Joint Venture acquired a portfolio of office buildings and undeveloped land in Richardson, Texas (the “Richardson Portfolio”).Series A Redeemable Preferred Stock
On October 18, 2021,25, 2022, the Company purchasedreceived notice by the 10% minority interest inholders of PORT’s Series A noncontrolling cumulative convertible redeemable preferred stock to redeem their outstanding redeemable preferred stock. If outstanding on November 4, 2022, the Richardson Joint Venture, for $4.0 million from JP-Richardson, LLC. As of the date of purchase, the Richardson Portfolio consisted of four office buildings and 14 acres of undeveloped land. Subsequent to the purchase,Series A redeemable preferred stock must be redeemed by the Company owned 100%within 120 days after November 4, 2022. The Company authorized and approved the redemption of the Richardson Joint Venture.

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2021
(unaudited)
Bond Offerings
Subsequent to September 30, 2021, the Company issued additional Series B Debentures in the amount of 536.4 million Israeli new Shekels par value through a public offering. The public offering Series B Debentures were issued at a 2.6% discount resulting in a total consideration of 522.4 million Israeli new Shekels ($166.8 million as of November 1, 2021). Additionally, the Company also issued 53.6 million Israeli new Shekels par value through a private offering. The private offering Series B Debentures were issued at a 3.1% discount resulting in a total consideration of 52.0 million Israeli new Shekels ($16.6 million as of November 1, 2021). The additional Series B Debentures have an equal level of security, pari passu, amongst themselves and between them and the initial Series B Debentures, which were initially issued, without any right of precedence or preference between any of them. The Series B Debentures were issued with the intent of using the proceeds and available cash on hand to payoff theall 15,000 outstanding Series A Debentures.
Notes Payable Refinancing
On October 7, 2021,Preferred Shares, at a price of (i) $1,120 per Series A Preferred Share, plus (ii) all accrued but unpaid dividends, through the Company refinanced the Madison Square Mortgage Loan with a mortgage loan from an unaffiliated lender (the “Refinancing”) for borrowings up to $27.0 million. At closing, $17.5 million of the loan was funded and the remaining $9.5 million was available for future disbursements, subject to certain terms and conditions contained in the loan documents. The Refinancing is interest only with a fixed interest rate of 4.625% and has a maturity date of October 7, 2024. In connection with the execution of the Refinancing, Pacific Oak SOR Properties, LLC, a wholly owned subsidiary, is providing an unconditional guarantee and will be held liable, as a primary obligor for our obligations under the Refinancing.


redemption date.
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PART I. FINANCIAL INFORMATION (CONTINUED)
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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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
•We cannot predict with any certainty how much, if any, of our dividend reinvestment plan proceeds will be available for general corporate purposes, including, but not limited to, the redemption of shares under our share redemption program, future funding obligations under any real estate loans receivable we acquire, the funding of capital expenditures on our real estate investments or the repayment of debt. If such funds are not available from the dividend reinvestment plan offering, then we may have to use a greater proportion of our cash flow from operations to meet these cash requirements, which would reduce cash available for distributions and could limit our ability to redeem shares under our share redemption program.
•We have focused, and may continue to focus, our investments in non-performing real estate and real estate-related loans, real estate-related loans secured by non-stabilized assets and real estate-related securities, which involve more risk than investments in performing real estate and real estate-related assetsassets.
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 has since been renewed is our advisor and is currently effective through November 1, 2022; however, we or Pacific Oak Capital Advisors may terminate the advisory agreement without cause or penalty upon providing 60 days’ written notice.
Asas our advisor, Pacific Oak Capital Advisors manages our day-to-day operations and our portfolio of investments. Pacific Oak Capital Advisors also has the authority to make all of the decisions regarding our investments, subject to the limitations in our charter and the direction and oversight of our board of directors. Pacific Oak Capital Advisors also provides asset-management, marketing, investor-relations and other administrative services on our behalf. We have sought to invest in and manage a diverse portfolio of real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments. We conduct our business primarily through our operating partnership, of which we are the sole general partner.
On January 8, 2009, we filed a registration statement on Form S-11 with the SEC to offer a minimum of 250,000 shares and a maximum of 140,000,000 shares of common stock for sale to the public, of which 100,000,000 shares were registered in our primary offering and 40,000,000 shares were registered under our dividend reinvestment plan. We ceased offering shares of common stock in our primary offering on November 14, 2012. We sold 56,584,976 shares of common stock in the primary offering for gross offering proceeds of $561.7 million. We continue to offer shares of common stock under the dividend reinvestment plan. As of September 30, 2021, we had sold 6,851,969 shares of common stock under the dividend reinvestment plan for gross offering proceeds of $76.5 million. Also as of September 30, 2021, we had redeemed 27,247,458 of the shares sold in our offering for $317.3 million. As of September 30, 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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PART I. FINANCIAL INFORMATION (CONTINUED)
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 September 30, 2021,2022, we consolidated eight office properties, one office portfolio consisting of fourtwo office buildings and 14 acres of undeveloped land, two apartment properties, twoone hotel properties,property, one residential home portfolio consisting of 1,806 single-family2,458 residential homes, three investments in undeveloped land with approximately 800 developable acres, one office/retail development property and owned fourthree investments in unconsolidated entities and three investments in real estate equity securities. Additionally, as of September 30, 2021, the Company had entered into a consolidated joint venture to develop one office/retail property.
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 nine months ended September 30, 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 September 30, 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. On July 6, 2021, the SBA approved our application for forgiveness of the Springmaid Beach Resort PPP note of $1.3 million. As of September 30, 2021 and December 31, 2020, the PPP notes balance was $2.4 million and $1.5 million and recorded in other liabilities in the accompanying consolidated balance sheets, respectively.
Our investments in real estate generate cash flow in the form of rental revenues and tenant reimbursements, which are reduced by operating expenditures and corporate general and administrative expenses. Cash flow from operations from our real estate investments is primarily dependent upon the occupancy levels of our properties, the net effective rental rates on our leases, the collectibilitycollectability of rent and operating recoveries from our tenants and how well we manage our expenditures. As of September 30, 2021,2022, our office properties were collectively 73%70% occupied, our residential home portfolio was 94%96% occupied and our apartment properties were 96%95% occupied. As of October 2021, we collected 95.1% of total charged rent for the month of September 2021.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Our investments in hotel properties generate cash flow in the form of room, food, beverage and convention services, campground and other revenues, which are reduced by hotel expenses, capital expenditures, debt service payments, the payment of asset management fees and corporate general and administrative expenses. Cash flow from operations from our hotel properties are primarily dependent upon the occupancy levels of our hotels, the average daily rates and how well we manage our expenditures. The following table provides summary information regarding our hotel properties for the nine months ended September 30, 2022 and 2021:
Percentage Occupied for the Nine Months Ended September 30,Average Daily Rate for the Nine Months Ended September 30,Average Revenue per Available Room for the Nine Months Ended September 30,
PropertyNumber of Rooms202220212022202120222021
Springmaid Beach Resort (1)
45361.4%58.4%$226.60$218.28$139.05$127.49
Q&C Hotel19659.3%42.3%$192.73$121.24$114.30$51.24
_____________________
(1)
PropertyNumber of RoomsPercentage Occupied for the Nine Months Ended September 30, 2021Average Daily Rate for the Nine Months Ended September 30, 2021Average Revenue per Available Room for the Nine Months Ended September 30, 2021
Springmaid Beach Resort45358.4%$218.28$127.49
Q&C Hotel19642.3%$121.24$51.24
The Springmaid Beach Resort was sold on September 1, 2022.
Investments in real estate equity securities generate cash flow in the form of dividend income, which is reduced by asset management fees. As of September 30, 2021,2022, we had three investments in real estate equity securities outstanding with a total carrying value of $96.4$63.8 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 September 30, 20212022 did not exceed the charter-imposed limitation.
For the nine months ended September 30, 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 September 30, 2021,2022, we had outstanding debt obligations in the aggregate principal amount of $1.0$1.1 billion, with a weighted-average remaining term of 1.52.3 years. As of September 30, 2021,2022, we had a total of $640.0$386.9 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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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Cash Flows from Operating Activities
As of September 30, 2021,2022, we consolidated eight office properties, one office portfolio consisting of fourtwo office buildings and 14 acres of undeveloped land, two apartment properties, twoone hotel properties, one residential home portfolio consisting of 1,806 single-family2,458 residential homes, three investments in undeveloped land with approximately 800 developable acres, one office/retail development property and owned fourthree investments in unconsolidated entities and three investments in real estate equity securities. Additionally, as of September 30, 2021, the Company had entered into a consolidated joint venture to develop one office/retail property. During the nine months ended September 30, 2021,2022, net cash provided by operating activities was $11.3$8.7 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 $193.4$70.3 million for the nine months ended September 30, 20212022 and primarily consisted of the following:
•Proceeds from the salesales of real estate, net of $194.5$97.9 million;
•Proceeds fromContributions to unconsolidated entities of $23.9 million;
•Earnest money received of $17.0 million related to the pending sale of real estate equity securities of $14.4 million;Park Highlands land;
•Improvements to real estate of $12.9$16.5 million;
•Proceeds for future development obligationsfrom advances due from affiliates of $6.2$8.2 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)
•ContributionAcquisitions of capital to unconsolidated entitiesreal estate of $4.8$6.7 million; and
•AcquisitionFunding of real estate of $4.1 million.$6.4 million for development obligations related to Park Highlands land.
Cash Flows from Financing Activities
Net cash used in financing activities was $112.9$37.3 million for the nine months ended September 30, 20212022 and primarily consisted primarily of the following:
•$79.511.0 million of cash distributions paid;
•$10.7 million of distributions paid to noncontrolling interests;
•$4.6 million of cash used for redemptions of common stock; and
•$3.5 million of net cash used in debt and other financings as a result offor principal payments on notes and bonds payable of $234.0$190.5 million and payments of deferred financing costs of $2.7$4.7 million and partially offset by proceeds from notes payable of $157.2 million;
•$29.6 million of cash used for redemptions of common stock;
•$5.7 million of cash used for redemption of restricted stock;
•$2.4 million of cash provided by PPP Notes; and
•$0.6 million of cash used for preferred dividends.$191.7 million.
In order to execute our investment strategy, we utilize secured debt and we may, to the extent available, utilize unsecured debt, to finance a portion of our investment portfolio. Management remains vigilant in monitoring the risks inherent with the use of debt in our portfolio and is taking actions to ensure that these risks, including refinancing and interest risks, are properly balanced with the benefit of using leverage. There is no limitation on the amount we may borrow for any single investment. Our charter limits our total liabilities such that our total liabilities may not exceed 75% of the cost of our tangible assets; however, we may exceed that limit if a majority of the conflicts committee approves each borrowing in excess of our charter limitation and we disclose such borrowing to our common stockholders in our next quarterly report with an explanation from the conflicts committee of the justification for the excess borrowing. As of September 30, 2021,2022, our borrowings and other liabilities were both approximately 65%70% 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
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Table 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.Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
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). 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).
Additionally, on May 2, 2022, Pacific Oak Strategic Opportunity BVI also issued Series B Debentures in the amount of 320.4 million Israeli new Shekels par value through a private offering. The private offering Series B Debentures were issued at a 4.0% discount resulting in a total consideration of 307.6 million Israeli new Shekels ($95.3 million as of May 2, 2022). All 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.
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 September 30, 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)
$1,030,734 $116,538 $708,421 $104,393 $101,382 
Outstanding debt obligations (1)
$1,066,736 $49,441 $495,012 $522,283 $— 
Interest payments on outstanding debt obligations (2)
Interest payments on outstanding debt obligations (2)
58,720 9,112 33,077 13,920 2,611 
Interest payments on outstanding debt obligations (2)
85,083 12,459 55,469 17,155 — 
Finance lease obligationFinance lease obligation54,126 90 720 753 52,563 Finance lease obligation53,766 90 720 789 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 September 30, 2021. We incurred interest expense2022.

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Table of $29.9 million, excluding amortizationContents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of deferred financing costsFinancial Condition and Results of $2.4 million and including interest capitalized of $1.6 million, for the nine months ended September 30, 2021.Operations (continued)
Results of Operations
Overview
As of September 30, 2020,2022, we consolidated sixeight office properties, one office portfolio consisting of fourtwo office buildings and 14 acres of undeveloped land, two apartment properties, one apartmenthotel property, andone residential home portfolio consisting of 2,458 residential homes, three investments in undeveloped land with approximately 1,000800 developable acres, one residential home portfolio consisting of 1,769 single-family homesoffice/retail development property and owned sixthree investments in unconsolidated joint venturesentities and three investments in real estate equity securities. As of September 30, 2021, we consolidated eight office properties, one office portfolio consisting of four office buildings and 14 acres of undeveloped land, two apartment properties, two hotel properties, one residential home portfolio consisting of 1,806 single-family homes, three investments in undeveloped land with approximately 800 developable acres, one office/retail development property, and owned four investments in unconsolidated entities and three investments in real estate equity securities. Additionally, as of September 30, 2021, the Company had entered into a consolidated joint venture to develop one office/retail property. Our results of operations for the three and nine months ended September 30, 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 properties, excluding our residential home portfolio, has not been stabilized. As of September 30, 2021,2022, our office properties were collectively 73%70% occupied, our residential home portfolio was 94%96% occupied and our apartment properties were 96%95% 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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Table of Contents
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 September 30, 20212022 versus the three months ended September 30, 20202021
The following table provides summary information about our results of operations for the three months ended September 30, 20212022 and 20202021 (dollar amounts in thousands):
Three Months Ended September 30,Increase (Decrease)Percentage Change
$ Change Due to Acquisitions/ Dispositions (1)
$ Change Due to 
Investments Held Throughout
Both Periods (2)
 Three Months Ended September 30,Increase (Decrease)Percentage Change
$ Change Due to Acquisitions/ Dispositions (1)
$ Change Due to 
Investments Held Throughout
Both Periods (2)
2021202020222021
Rental incomeRental income$29,504 $23,871 $5,633 24 %$5,730 $(97)Rental income$31,445 $29,504 $1,941 7 %$1,511 $430 
Hotel revenuesHotel revenues12,153 — 12,153 100 %12,153 — Hotel revenues9,182 12,153 (2,971)(24)%(2,892)(79)
Other operating incomeOther operating income923 888 35 4 %(39)74 Other operating income830 923 (93)(10)%(89)(4)
Dividend income from real estate equity securitiesDividend income from real estate equity securities3,189 2,986 203 7 %203 — Dividend income from real estate equity securities2,148 3,189 (1,041)(33)%— (1,041)
Operating, maintenance, and management costs10,668 7,888 2,780 35 %2,228 552 
Operating, maintenance, and managementOperating, maintenance, and management12,342 10,668 1,674 16 %858 816 
Real estate taxes and insuranceReal estate taxes and insurance5,262 3,791 1,471 39 %1,270 201 Real estate taxes and insurance5,650 5,262 388 7 %365 23 
Hotel expensesHotel expenses6,483 — 6,483 100 %6,483 — Hotel expenses5,377 6,483 (1,106)(17)%(1,249)(1,106)
Asset management fees to affiliateAsset management fees to affiliate3,422 2,426 996 41 %932 45 Asset management fees to affiliate3,630 3,422 208 6 %210 (2)
General and administrative expensesGeneral and administrative expenses2,365 1,960 405 21 %n/an/aGeneral and administrative expenses2,504 2,365 139 6 %n/an/a
Foreign currency transaction loss, net2,271 445 1,826 410 %n/an/a
Foreign currency transaction (gain) loss, netForeign currency transaction (gain) loss, net(6,001)2,271 (8,272)(364)%n/an/a
Depreciation and amortizationDepreciation and amortization13,895 9,470 4,425 47 %4,284 141 Depreciation and amortization12,717 13,895 (1,178)(8)%436 (1,614)
Interest expenseInterest expense10,092 6,274 3,818 61 %2,146 1,672 Interest expense12,976 10,092 2,884 29 %161 2,723 
Impairment charges on real estateImpairment charges on real estate10,971 — 10,971 100 %10,971 — Impairment charges on real estate11,942 10,971 971 9 %n/an/a
Impairment charges on goodwillImpairment charges on goodwill2,808 — 2,808 100 %2,808 — Impairment charges on goodwill8,098 2,808 5,290 188 %n/an/a
Gain from remeasurement of prior equity interest— 2,009 (2,009)(100)%n/an/a
Equity in (loss) income of unconsolidated entities(569)519 (1,088)(210)%— (1,088)
Equity in loss of unconsolidated entitiesEquity in loss of unconsolidated entities(3,376)(569)(2,807)493 %— (2,807)
Casualty-related gainCasualty-related gain27 — 27 100 %n/an/aCasualty-related gain— 27 (27)(100)%n/an/a
Other interest incomeOther interest income55 19 36 189 %n/an/aOther interest income61 55 6 11 %n/an/a
Loss on real estate equity securitiesLoss on real estate equity securities(2,614)(6,527)3,913 (60)%n/an/aLoss on real estate equity securities(20,722)(2,614)(18,108)693 %— (18,108)
Change in subordinated performance fee due upon termination to affiliateChange in subordinated performance fee due upon termination to affiliate(1,545)1,121 (2,666)(238)%n/an/aChange in subordinated performance fee due upon termination to affiliate— (1,545)1,545 (100)%n/an/a
Gain on sale of real estate216 — 216 100 %216 — 
(Loss) gain on sale of real estate(Loss) gain on sale of real estate(75)216 (291)(135)%(291)— 
Gain on extinguishment of debtGain on extinguishment of debt1,352 — 1,352 100 %n/an/aGain on extinguishment of debt— 1,352 (1,352)100 %n/an/a
Gain from consolidation of previously unconsolidated entityGain from consolidation of previously unconsolidated entity18,742 — 18,742 100 %18,742 — 
_____________________
(1) Represents the dollar amount increase (decrease) for the three months ended September 30, 20212022 compared to the three months ended September 30, 20202021 related to real estate and real estate-related investments acquired or disposed on or after JulyOctober 1, 2020.2021.
(2) Represents the dollar amount increase (decrease) for the three months ended September 30, 20212022 compared to the three months ended September 30, 20202021 with respect to real estate and real estate-related investments owned by us during the entirety of both periods presented.
Rental income increased from $23.9 million for the three months ended September 30, 2020 to $29.5 million for the three months ended September 30, 2021 to $31.4 million for the three months ended September 30, 2022, primarily as a result of properties acquired subsequentthe PORT II consolidation, which attributed to September 30, 2020a $3.0 million increase and partially offset by overall decrease in rentalthe disposition of City Tower on July 27, 2021, which attributed to a $1.1 million decrease. There were no significant changes to the occupancy rate and occupancy rates for properties held throughout both periods. The occupancy of our office properties, held throughout both periods decreased from 79% as of September 30, 2020 to 76% as of September 30, 2021. Annualizedannualized base rent per square foot decreased from $23.07 as of September 30, 2020 to $22.83 as of September 30, 2021 related toour office properties (excluding apartments and single-family homes) held throughout both periods. We expect rental income to increase in future periods as a result of leasing additional space and to the extent we acquire additional properties, but to decrease to the extent we dispose of properties.
Other operating income remained consistent at $0.9Hotel revenues decreased from $12.2 million for both of the three months ended September 30, 2021 to $9.2 million for the three months ended September 30, 2022, primarily as a result of the disposition of the Springmaid Beach Resort on September 1, 2022, and 2020.partially offset by the increase in occupancy for the Q&C Hotel.
Property operating costs increased from $10.7 million for the three months ended September 30, 2021 to $12.3 million for the three months ended September 30, 2022, primarily as a result of the PORT II consolidation, which attributed to a $1.5 million increase and partially offset by a $0.3 million decrease due to the disposition of City Tower. Real estate taxes and insurance slightly increased between the two periods. We expect otherproperty operating incomecosts and real estate taxes and insurance 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, increase occupancy of our real estate assets and due to general inflation, but to decrease to the extent we dispose of properties.
Dividend income from real estate equity securities increased from $3.0 million for the three months ended September 30, 2020 to $3.2 million for the three months ended September 30, 2021, primarily as a result of the dispositions and acquisitions of real estate equity securities subsequent to September 30, 2020. We expect dividend income from real estate equity securities to vary in future periods as a result of the timing of dividends declared and investment activity.
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Property operating costs increasedHotel expenses decreased from $7.9 million for the three months ended September 30, 2020 to $10.7$6.5 million for the three months ended September 30, 2021 and real estate taxes and insurance increased from $3.8to $5.4 million for the three months ended September 30, 20202022, primarily due to $5.3 million for the three months ended September 30, 2021, primarily asdisposition of the Springmaid Beach Resort, which resulted in a resultdecrease of properties acquired subsequent to September 30, 2020.$0.7 million. We expect property operating costs and real estate taxes and insurancehotel expenses to increasevary in future periods to the extent we acquire additional properties, increasingbased on occupancy of our real estate assets and general inflation, but to decrease to the extent we dispose of properties.rates.
Asset management fees slightly increased from $2.4 million for the three months ended September 30, 2020 to $3.4 million for the three months ended September 30, 2021 to $3.6 million for the three months ended September 30, 2022, primarily as a result of properties acquired subsequentthe PORT II consolidation, which attributed to September 30, 2020.a $0.4 million increase and partially offset by the disposition of City Tower, which attributed to a $0.2 million decrease. We expect asset management fees to increase in future periods to the extent we acquire additional properties, but to decrease to the extent we dispose of properties.
General and administrative expenses increased from $2.0 million for the three months ended September 30, 2020 to $2.4 million for the three months ended September 30, 2021, primarily due to increased accounting and advisory expenses. We expect general and administrative expenses to fluctuate in future periods based on investment and disposition activity as well as costs incurred to evaluate strategic transactions.
We recognized a $2.3$6.0 million foreign currency transaction loss,gain, net for the three months ended September 30, 20212022 and $0.4$2.3 million of foreign currency transaction loss, net, for the three months ended September 30, 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, but expect our exposure to be limited to the extent that we have entered into foreign currency options and foreign currency collars. As of September 30, 2021, we had entered into one foreign currency collar to hedge against a change in the exchange rate of the Israeli new Shekel versus the U.S. Dollar. The foreign currency collar expire in November 2021 and has an aggregate Israeli new Shekels notional amount of 194.0 million. During the three months ended September 30, 2021, we recognized a $0.3 million gain related to the foreign currency collar and a $2.6 million foreign currency transaction loss. During the three months ended September 30, 2020, we recognized a $2.2 million gain related to the foreign currency collars and a $2.6 million foreign currency transaction loss in the accompanying consolidated statements of operations as foreign currency transaction loss, net.rates.
Depreciation and amortization increaseddecreased from $9.5 million for the three months ended September 30, 2020 to $13.9 million for the three months ended September 30, 2021 to $12.7 million for the three months ended September 30, 2022, primarily as a result of properties acquired subsequentthe disposition of the Springmaid Beach Resort, which attributed to September 30, 2020$0.5 million decrease, intangibles that were fully amortized in 2021, which attributed to a $1.0 million decrease, and capital expenditures.partially offset by the PORT II consolidation, which attributed to a $1.0 million increase. 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 costs related to lease expirations and disposition of properties.
Interest expense increased from $6.3 million for the three months ended September 30, 2020 to $10.1 million for the three months ended September 30, 2021 primarily as a result of the increased borrowings related to properties acquired subsequent to September 30, 2020, additional Series A Debentures issued on March 4, 2021 of 250.0$13.0 million Israeli new Shekels (approximately $74.2 million as of March 4, 2021) and partially offset by March 31, 2020 and 2021 Series A Debentures principal installment payments of 194.0 million Israeli new Shekels (approximately $56.6 million as of March 1, 2020 and $58.9 million as of March 1, 2021). Excluded from interest expense was $0.5 million and $0.7 million of interest capitalized to our investments in undeveloped land and an unconsolidated entity duringfor the three months ended September 30, 20212022, primarily due to increasing benchmark rates affecting our variable rate debt, increase in notes payable balance of $86.5 million related to the PORT II consolidation, and 2020, respectively. Our interest expensepartially offset by a decrease in future periods will vary basedthe notes payable balance of $53.1 million related to the disposition of the Springmaid Beach Resort.
During the three months ended September 30, 2022, we recognized impairment charges of $4.4 million, $5.0 million and $2.5 million 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 financing210 West 31st Street, Oakland City Center and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives and will decrease to the extent we dispose of properties and paydown debt, including annual principal installment payments on the Series A and Series B Debentures.
Springmaid Beach Resort, respectively. During the three months ended September 30, 2021, we recognized impairment charges of $6.6 million on 210 West 31st Street and $4.4 million on Lincoln Court. No
During the three months ended September 30, 2022, we recognized impairment charges were recorded in 2020.
on goodwill of $5.5 million and $2.6 million on Oakland City Center and the Springmaid Beach Resort, respectively. During the three months ended September 30, 2021, we recognized impairment charges on goodwill of $1.6 million on Lincoln Court and $1.2 million on 210 West 31st Street. No impairment charges on goodwill were recorded in 2020.
During the three months ended September 30, 2020, we recognized a $2.0 million gain from remeasurement of prior equity interest due to our acquisition of Battery Point.
Equity in incomeloss of unconsolidated entities decreasedincreased from $0.5$0.6 million for the three months ended September 30, 20202021 to a $0.6 million loss for the three months ended September 30, 2021, primarily as a result of bad debt expense for the 353 Sacramento joint venture for the three months ended September 30, 2021.
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Loss on real estate equity securities decreased from $6.5$3.4 million for the three months ended September 30, 20202022, primarily as a result of losses related to the 110 William Joint Venture of $1.7 million and the Pacific Oak Opportunity Zone Fund I of $0.9 million for the three months ended September 30, 2022.
Loss on real estate equity securities increased from $2.6 million for the three months ended September 30, 2021.2021 to $20.7 million for the three months ended September 30, 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.
During the three months ended September 30, 2021,2022, we consolidated PORT II and recognized a gain on extinguishmentfrom consolidation of debtpreviously unconsolidated entity of $1.4 million$18.7 million.

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and this is primarily due to the SBA approving our application for forgivenessAnalysis of the Springmaid Beach Resort PPP noteFinancial Condition and Results of $1.3 million.Operations (continued)
Comparison of the nine months ended September 30, 20212022 versus the nine months ended September 30, 20202021
The following table provides summary information about our results of operations for the nine months ended September 30, 20212022 and 20202021 (dollar amounts in thousands):
Nine Months Ended September 30,Increase (Decrease)Percentage Change
$ Change Due to Acquisitions/ Dispositions (1)
$ Change Due to 
Investments Held Throughout
Both Periods (2)
 Nine Months Ended September 30,Increase (Decrease)Percentage Change
$ Change Due to Acquisitions/ Dispositions (1)
$ Change Due to 
Investments Held Throughout
Both Periods (2)
2021202020222021
Rental incomeRental income$94,812 $67,808 $27,004 40 %$24,329 $2,675 Rental income$89,806 $94,812 $(5,006)(5)%$(6,133)$1,127 
Hotel revenuesHotel revenues24,578 — 24,578 100 %24,578 — Hotel revenues27,952 24,578 3,374 14 %(314)3,688 
Other operating incomeOther operating income3,118 2,722 396 15 %755 (359)Other operating income2,559 3,118 (559)(18)%(614)55 
Dividend income from real estate equity securitiesDividend income from real estate equity securities6,693 5,339 1,354 25 %1,354 — Dividend income from real estate equity securities5,354 6,693 (1,339)(20)%— (1,339)
Operating, maintenance, and management costs31,444 22,258 9,186 41 %7,996 1,190 
Operating, maintenance, and managementOperating, maintenance, and management32,560 31,444 1,116 4 %(1,012)2,128 
Real estate taxes and insuranceReal estate taxes and insurance15,949 10,570 5,379 51 %4,587 792 Real estate taxes and insurance15,753 15,949 (196)(1)%(306)110 
Hotel expensesHotel expenses15,715 — 15,715 100 %15,715 — Hotel expenses17,485 15,715 1,770 11 %(16)1,786 
Asset management fees to affiliateAsset management fees to affiliate10,802 6,867 3,935 57 %3,480 455 Asset management fees to affiliate9,945 10,802 (857)(8)%(481)(376)
General and administrative expensesGeneral and administrative expenses7,120 6,302 818 13 %n/an/aGeneral and administrative expenses8,486 7,120 1,366 19 %n/an/a
Foreign currency transaction gain, netForeign currency transaction gain, net(568)(12,338)11,770 (95)%n/an/aForeign currency transaction gain, net(37,100)(568)(36,532)6,432 %n/an/a
Depreciation and amortizationDepreciation and amortization45,969 27,417 18,552 68 %17,209 1,343 Depreciation and amortization39,379 45,969 (6,590)(14)%(2,521)(4,069)
Interest expenseInterest expense30,713 19,055 11,658 61 %9,629 2,029 Interest expense33,319 30,713 2,606 8 %(1,301)3,907 
Impairment charges on real estateImpairment charges on real estate10,971 — 10,971 100 %10,971 — Impairment charges on real estate11,942 10,971 971 9 %n/an/a
Impairment charges on goodwillImpairment charges on goodwill2,808 — 2,808 100 %2,808 — Impairment charges on goodwill8,098 2,808 5,290 188 %n/an/a
Gain from remeasurement of prior equity interest— 2,009 (2,009)100 %n/an/a
Equity in (loss) income of unconsolidated entities(144)1,564 (1,708)(109)%— (1,708)
Equity in loss of unconsolidated entitiesEquity in loss of unconsolidated entities(6,130)(144)(5,986)4,157 %— (5,986)
Casualty-related gainCasualty-related gain27 51 (24)(47)%n/an/aCasualty-related gain— 27 (27)(100)%n/an/a
Other interest incomeOther interest income148 297 (149)(50)%n/an/aOther interest income155 148 7 5 %n/an/a
Gain (loss) on real estate equity securities12,939 (21,620)34,559 (160)%n/an/a
(Loss) gain on real estate equity securities(Loss) gain on real estate equity securities(48,312)12,939 (61,251)(473)%225 (61,476)
Change in subordinated performance fee due upon termination to affiliateChange in subordinated performance fee due upon termination to affiliate(1,745)814 (2,559)(314)%n/an/aChange in subordinated performance fee due upon termination to affiliate— (1,745)1,745 (100)%n/an/a
Gain on sale of real estate31,385 — 31,385 100 %31,385 — 
(Loss) gain on sale of real estate(Loss) gain on sale of real estate3,273 31,385 (28,112)(90)%(28,112)— 
Gain on extinguishment of debtGain on extinguishment of debt1,365 — 1,365 100 %1,365 — Gain on extinguishment of debt2,367 1,365 1,002 73 %n/an/a
Gain from consolidation of previously unconsolidated entityGain from consolidation of previously unconsolidated entity18,742 — 18,742 100 %18,742 — 
_____________________
(1) Represents the dollar amount increase (decrease) for the nine months ended September 30, 20212022 compared to the nine months ended September 30, 20202021 related to real estate and real estate-related investments acquired or disposed on or after JanuaryOctober 1, 2020.2021.
(2) Represents the dollar amount increase (decrease) for the nine months ended September 30, 20212022 compared to the nine months ended September 30, 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 $67.8 million for the nine months ended September 30, 2020 to $94.8 million for the nine months ended September 30, 2021 primarily as a result of properties acquired subsequent to $89.8 million for the nine months ended September 30, 20202022, primarily due to the disposition of City Tower, which attributed to a $8.7 million decrease and partially offset by overall decrease in rentalwith the PORT II consolidation, which attributed to a $3.6 million increase. There were no significant changes to the occupancy rate and occupancy rates for properties held throughout both periods. The occupancy of our office properties, held throughout both periods decreased from 79% as of September 30, 2020 to 76% as of September 30, 2021. Annualizedannualized base rent per square foot decreased from $23.07 as of September 30, 2020 to $22.83 as of September 30, 2021 related toour office properties (excluding apartments and single-family homes) held throughout both periods. We expect rental income to increase in future periods as a result of leasing additional space and to the extent we acquire additional properties, but to decrease to the extent we dispose of properties.
Hotel revenues increased from $24.6 million for the nine months ended September 30, 2021 to $28.0 million for the nine months ended September 30, 2022, primarily as a result of the increase in occupancy from 58.4%% to 61.4% and average daily rate from $127.49 to $139.05 for the Springmaid Beach Resort as well as the increase in occupancy from 42.3% to 59.3% and average daily rate from $51.24 to $114.30 for the Q&C Hotel. The increase was partially offset by the Springmaid Beach Resort disposition, which attributed to a $0.4 million decrease.
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Other operating income increased from $2.7 million for the nine months ended September 30, 2020 to $3.1 million for the nine months ended September 30, 2021, primarily due to properties acquired subsequent to September 30, 2020. We expect other operating income to increase in future periods as a result of leasing additional space, increases in parking income as we stabilize properties and to the extent we acquire additional properties, but to decrease to the extent we dispose of properties.
Dividend income from real estate equity securities increased from $5.3 million for the nine months ended September 30, 2020 to $6.7 million for the nine months ended September 30, 2021, primarily as a result of the dispositions and acquisitions of real estate equity securities subsequent to September 30, 2020. We expect dividend income from real estate equity securities to vary in future periods as a result of the timing of dividends declared and investment activity.
Property operating costs increased from $22.3 million for the nine months ended September 30, 2020 to $31.4 million for the nine months ended September 30, 2021 and real estate taxes and insurance increased from $10.6to $32.6 million for the nine months ended September 30, 20202022, primarily due to $15.9increase in legal and marketing fees related to various properties and the consolidation of PORT II, which attributed to an increase of $1.7 million forand was partially offset by the nine months ended September 30, 2021, primarily asdisposition of City Tower, which attributed to a result of properties acquired subsequent to September 30, 2020.$2.0 million decrease. Real estate taxes and insurance slightly decreased between the two periods. We expect property operating costs and real estate taxes and insurance to increase in future periods to the extent we acquire additional properties, increasingincrease occupancy of our real estate assets and due to general inflation, but to decrease to the extent we dispose of properties.
Asset management feesHotel expenses increased from $6.9$15.7 million for the nine months ended September 30, 20202021 to $17.5 million for the nine months ended September 30, 2022, primarily as a result of the increase in occupancy from 58.4%% to 61.4% for the Springmaid Beach Resort as well as the increase in occupancy from 42.3% to 59.3% for the Q&C Hotel. We expect hotel expenses to vary in future periods based on occupancy rates.
Asset management fees decreased from $10.8 million for the nine months ended September 30, 2021 to $9.9 million for the nine months ended September 30, 2022, primarily as a result of properties acquired subsequentthe disposition of City Tower, which attributed to September 30, 2020.a $0.8 million decrease and partially offset by the PORT II consolidation, which attributed to an increase of $0.4 million. We expect asset management fees to increase in future periods to the extent we acquire additional properties, but to decrease to the extent we dispose of properties.
General and administrative expenses increased from $6.3 million for the nine months ended September 30, 2020 to $7.1 million for the nine months ended September 30, 2021 to $8.5 million for the nine months ended September 30, 2022, primarily due to increased accounting and advisory expenses. We expect general and administrative expenses to fluctuate in future periods based on investment and disposition activity as well as costs incurred to evaluate strategic transactions.
We recognized a $0.6 million foreign currency transaction gain, net for the nine months ended September 30, 2021 and $12.3$37.1 million foreign currency transaction gain, net, for the nine months ended September 30, 2020,2022, 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, but expect our exposure to be limited to the extent that we have entered into foreign currency options and foreign currency collars. As of September 30, 2021, we had entered into one foreign currency collar to hedge against a change in the exchange rate of the Israeli new Shekel versus the U.S. Dollar. The foreign currency collar expire in November 2021 and has an aggregate Israeli new Shekels notional amount of 194.0 million. During the nine months ended September 30, 2021, we recognized a $0.6 million gain related to the foreign currency collar and a $44,000 foreign currency transaction loss. During the nine months ended September 30, 2020, we recognized a $14.3 million gain related to the foreign currency collars and a $2.0 million foreign currency transaction loss.rates.
Depreciation and amortization increaseddecreased from $27.4 million for the nine months ended September 30, 2020 to $46.0 million for the nine months ended September 30, 2021 to $39.4 million for the nine months ended September 30, 2022, primarily as a result of properties acquiredthe disposition of City Tower, which attributed to $2.4 million decrease and intangibles that were fully amortized in 2020 and capital expenditures.2021, which attributed to a $3.4 million decrease. 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 costs related to lease expirations and disposition of properties.
Interest expense increased from $19.1 million for the nine months ended September 30, 2020 to $30.7 million for the nine months ended September 30, 2021 primarily as a result of the increased borrowings related to properties acquired subsequent to September 30, 2020, additional Series A Debentures issued on March 4, 2021 of 250.0$33.3 million Israeli new Shekels (approximately $74.2 million as of March 4, 2021) and partially offset by the March 31, 2020 and 2021 Series A Debentures principal installment payments of 194.0 million Israeli new Shekels (approximately $56.6 million as of March 1, 2020 and $58.9 million as of March 1, 2021). Excluded from interest expense was $1.6 million and $2.4 million of interest capitalized to our investments in undeveloped land and an unconsolidated entity duringfor the nine months ended September 30, 20212022, primarily due to increasing benchmark rates affecting our variable rate debt, increase in notes payable balance of $86.5 million related to the PORT II consolidation, and 2020, respectively. Our interest expensepartially offset by a decrease in future periods will vary basedthe notes payable balance of $53.1 million related to the disposition of the Springmaid Beach Resort.
During the nine months ended September 30, 2022, we recognized impairment charges of $4.4 million, $5.0 million and $2.5 million 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 financing210 West 31st Street, Oakland City Center and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives and will decrease to the extent we dispose of properties and paydown debt, including annual principal installment payments on the Series A and Series B Debentures.
Springmaid Beach Resort, respectively. During the nine months ended September 30, 2021, we recognized impairment charges of $6.6 million on 210 West 31st Street and $4.4 million on Lincoln Court. No
During the nine months ended September 30, 2022, we recognized impairment charges were recordedon goodwill of $5.5 million and $2.6 million on Oakland City Center and the Springmaid Beach Resort, respectively. During the nine months ended September 30, 2021, we recognized impairment charges on goodwill of $1.6 million on Lincoln Court and $1.2 million on 210 West 31st Street.
Equity in 2020.loss of unconsolidated entities increase from $0.1 million for the nine months ended September 30, 2021 to $6.1 million for the nine months ended September 30, 2022, primarily related to losses with the: 353 Sacramento Joint Venture of $3.3 million loss, primarily as a result of the allowance for credit losses, the 110 William Joint Venture of $1.7 million and the Pacific Oak Opportunity Zone Fund I of $0.4 million .
Gain on real estate equity securities decreased from $12.9 million for the nine months ended September 30, 2021 to a $48.3 million loss for the nine months ended September 30, 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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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
During the nine months ended September 30, 2021, we recognized impairment charges on goodwill of $1.6 million on Lincoln Court and $1.2 million on 210 West 31st Street. No impairment charges on goodwill were recorded in 2020.
Equity in income of unconsolidated entities decreased from income of $1.6 million for the nine months ended September 30, 2020 to a $0.1 million loss for the nine months ended September 30, 2021, primarily as a result of bad debt expense for the 353 Sacramento joint venture for the nine months ended September 30, 2021.
Loss on real estate equity securities was $21.6 million for the nine months ended September 30, 2020, which was made up of a $22.3 million unrealized loss on real estate securities held at September 30, 2020 and a $0.7 million realized loss on real estate securities sold during the nine months ended September 30, 2020. Gain on real estate equity securities was $12.9 million for the nine months ended September 30, 2021, which was made up of a $9.9 million unrealized gain on real estate securities held at September 30, 2021 and a $3.0 million realized gain on real estate securities sold during the nine months ended September 30, 2021. We expect gains and losses on real estate equity securities to fluctuate in future periods as a result of changes in share prices of our investments in real estate equity securities.
During the nine months ended September 30, 2021, we sold approximately 193 developable acres of Park Highlands undeveloped land that resulted in a gain on sale of $31.1 million. There were no material dispositions duringDuring the nine months ended September 30, 2020.2022, we sold two office buildings related to the Richardson Portfolio and the Springmaid Beach Resort and recognized an aggregate gain on sale of $3.3 million.
During the nine months ended September 30, 2021,2022, we consolidated PORT II and recognized a gain on extinguishmentfrom consolidation of debtpreviously unconsolidated entity of $1.4 million and this is primarily due to the SBA approving our application for forgiveness of the Springmaid Beach Resort PPP note of $1.3$18.7 million.
Funds from Operations, Modified Funds from Operations and Adjusted Modified Funds from Operations
We believe that funds from operations (“FFO”) is a beneficial indicator of the performance of an equity REIT. We compute FFO in accordance with the current National Association of Real Estate Investment Trusts (“NAREIT”) definition. FFO represents net income, excluding gains and losses from sales of real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), impairment losses on real estate assets, depreciation and amortization of real estate assets, and adjustments for unconsolidated partnerships and joint ventures. In addition, we elected the option to exclude mark-to-market changes in value recognized on equity securities in the calculation of FFO. We believe FFO facilitates comparisons of operating performance between periods and among other REITs. However, our computation of FFO may not be comparable to other REITs that do not define FFO in accordance with the NAREIT definition or that interpret the current NAREIT definition differently than we do. Our management believes that historical cost accounting for real estate assets in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and provides a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities.
Changes in accounting rules have resulted in a substantial increase in the number of non-operating and non-cash items included in the calculation of FFO. As a result, our management also uses modified funds from operations (“MFFO”) as an indicator of our ongoing performance as well as our dividend sustainability. MFFO excludes from FFO: acquisition fees and expenses (to the extent that such fees and expenses have been recorded as operating expenses); adjustments related to contingent purchase price obligations; amounts relating to straight-line rents and amortization of above- and below-market intangible lease assets and liabilities; accretion of discounts and amortization of premiums on debt investments; amortization of closing costs relating to debt investments; impairments of real estate-related investments; mark-to-market adjustments included in net income; and gains or losses included in net income for the extinguishment or sale of debt or hedges. We compute MFFO in accordance with the definition of MFFO included in the practice guideline issued by the Institute for Portfolio Alternatives (“IPA”) in November 2010 as interpreted by management. Our computation of MFFO may not be comparable to other REITs that do not compute MFFO in accordance with the current IPA definition or that interpret the current IPA definition differently than we do.
In addition, our management uses an adjusted MFFO (“Adjusted MFFO”) as an indicator of our ongoing performance, as well as our dividend sustainability. Adjusted MFFO provides adjustments to reduce MFFO related to operating expenses that are capitalized with respect to certain of our investments in undeveloped land. 
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
We believe that MFFO and Adjusted MFFO are helpful as measures of ongoing operating performance because they exclude costs that management considers more reflective of investing activities and other non-operating items included in FFO. Management believes that excluding acquisition costs, prior to our early adoption of ASU No. 2017-01 on January 1, 2017, from MFFO and Adjusted MFFO provides investors with supplemental performance information that is consistent with management’s analysis of the operating performance of the portfolio over time, including periods after our acquisition stage. MFFO and Adjusted MFFO also exclude non-cash items such as straight-line rental revenue.  Additionally, we believe that MFFO and Adjusted MFFO provide investors with supplemental performance information that is consistent with the performance indicators and analysis used by management, in addition to net income and cash flows from operating activities as defined by GAAP, to evaluate the sustainability of our operating performance.  MFFO provides comparability in evaluating the operating performance of our portfolio with other non-traded REITs which typically have limited lives with short and defined acquisition periods and targeted exit strategies.  MFFO, or an equivalent measure, is routinely reported by non-traded REITs, and we believe often used by analysts and investors for comparison purposes.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
FFO, MFFO and Adjusted MFFO are non-GAAP financial measures and do not represent net income as defined by GAAP. Net income as defined by GAAP is the most relevant measure in determining our operating performance because FFO, MFFO and Adjusted MFFO include adjustments that investors may deem subjective, such as adding back expenses such as depreciation and amortization and the other items described above. Accordingly, FFO, MFFO and Adjusted MFFO should not be considered as alternatives to net income as an indicator of our current and historical operating performance. In addition, FFO, MFFO and Adjusted MFFO do not represent cash flows from operating activities determined in accordance with GAAP and should not be considered an indication of our liquidity. We believe FFO, MFFO and Adjusted MFFO, in addition to net income and cash flows from operating activities as defined by GAAP, are meaningful supplemental performance measures.
Although MFFO includes other adjustments, the exclusion of straight-line rent, the amortization of above- and below-market leases, mark to market foreign currency transaction adjustments and extinguishment of debt are the most significant adjustments for the periods presented. We have excluded these items based on the following economic considerations:
•Adjustments for straight-line rent. These are adjustments to rental revenue as required by GAAP to recognize contractual lease payments on a straight-line basis over the life of the respective lease.  We have excluded these adjustments in our calculation of MFFO to more appropriately reflect the current economic impact of our in-place leases, while also providing investors with a useful supplemental metric that addresses core operating performance by removing rent we expect to receive in a future period or rent that was received in a prior period;
•Amortization of above- and below-market leases.  Similar to depreciation and amortization of real estate assets and lease related costs that are excluded from FFO, GAAP implicitly assumes that the value of intangible lease assets and liabilities diminishes predictably over time and requires that these charges be recognized currently in revenue.  Since market lease rates in the aggregate have historically risen or fallen with local market conditions, management believes that by excluding these charges, MFFO provides useful supplemental information on the realized economics of the real estate;
•Amortization of premium or discount on bond and notes payable. These are adjustments to interest expense as required by GAAP to recognize bond and notes payable discount and premiums on a straight-line basis over the life of the respective bond or notes payable. We have excluded these adjustments in our calculation of MFFO to appropriately reflect the current economic impact of our bond and notes payable and related interest expense;
•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;
•Unrealized gain or loss from interest rate caps. These adjustments include unrealized gains from mark-to-market adjustments on interest rate caps. The change in fair value of interest rate caps not designated as a hedge are non-cash adjustments recognized directly in earnings and are included in interest expense. We have excluded these adjustments in our calculation of MFFO to more appropriately reflect the economic impact of our interest rate cap agreements;
•Gain from consolidation of previously unconsolidated entity. The gain is recognized as part of a consolidation process of a previously unconsolidated entity, where we became the primary beneficiary. We exclude them from MFFO to more appropriately present the ongoing operating performance of our real estate investments on a comparative basis; and
•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;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)
Adjusted MFFO includes adjustments to reduce MFFO related to real estate taxes, property insurance and financing costs which are capitalized with respect to certain of our investments in undeveloped land.  We have included adjustments for the costs incurred necessary to bring these investments to their intended use, as these costs are recurring operating costs that are capitalized in accordance with GAAP and not reflected in our net (loss) income, FFO and MFFO. In addition, adjusted MFFO includes an adjustment for casualty loss and fair value change of restricted stock payable.loss. We believe excluding these itemsthis 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 and nine months ended September 30, 20212022 and 20202021 (in thousands). No conclusions or comparisons should be made from the presentation of these periods.
For the Three Months Ended September 30,For the Nine Months Ended September 30,For the Three Months Ended September 30,For the Nine Months Ended September 30,
20212020202120202022202120222021
Net income (loss) attributable to common stockholders$(24,516)$(7,493)$3,671 $(21,797)
Net (loss) income attributable to common stockholdersNet (loss) income attributable to common stockholders$(30,492)$(24,516)$(44,267)$3,671 
Depreciation of real estate assetsDepreciation of real estate assets8,569 6,233 26,689 17,601 Depreciation of real estate assets8,882 8,569 25,544 26,689 
Amortization of lease-related costsAmortization of lease-related costs5,326 3,237 19,279 9,816 Amortization of lease-related costs3,835 5,326 13,835 19,279 
Gain on sale of real estate (1)
(216)— (31,385)— 
Loss (gain) on sale of real estate (1)
Loss (gain) on sale of real estate (1)
2,621 (216)(727)(31,385)
Impairment charges on real estateImpairment charges on real estate10,971 — 10,971 — Impairment charges on real estate11,942 10,971 11,942 10,971 
Impairment charges on goodwill2,808 — 2,808 — 
Loss (gain) on real estate equity securitiesLoss (gain) on real estate equity securities2,614 6,527 (12,939)21,620 Loss (gain) on real estate equity securities20,722 2.614 48,312 (12,939)
Gain on extinguishment of debt(1,352)— (1,365)— 
Adjustments for noncontrolling interests - consolidated entities (2)
Adjustments for noncontrolling interests - consolidated entities (2)
(400)(141)(1,238)(286)
Adjustments for noncontrolling interests - consolidated entities (2)
(1,724)(400)(2,308)(1,238)
Adjustments for investments in unconsolidated entities (3)
Adjustments for investments in unconsolidated entities (3)
(25)2,158 747 4,618 
Adjustments for investments in unconsolidated entities (3)
(4,716)(25)(1,783)747 
FFO attributable to common stockholdersFFO attributable to common stockholders3,779 10,521 17,238 31,572 FFO attributable to common stockholders11,070 (288)50,548 15,795 
Straight-line rent and amortization of above- and below-market leasesStraight-line rent and amortization of above- and below-market leases(711)(1,021)(2,544)(2,994)Straight-line rent and amortization of above- and below-market leases(791)(711)0(2,729)(2,544)
Amortization of net premium/discount on bond and notes payable461 64 1,906 14 
Unrealized loss on interest rate caps1 31 17 10 
Mark-to-market foreign currency transaction loss (gain), net2,271 445 (568)(12,338)
Gain from remeasurement of prior equity interest— (2,009)— (2,009)
Amortization of premium/discount on bond and notes payable, netAmortization of premium/discount on bond and notes payable, net1,117 461 3,372 1,906 
Gain on extinguishment of debtGain on extinguishment of debt— (1.352)(2,367)(1.365)
Unrealized (gain) loss on interest rate capsUnrealized (gain) loss on interest rate caps(834)1 (1,103)17 
Gain from consolidation of previously unconsolidated entityGain from consolidation of previously unconsolidated entity(18,742)— (18,742)— 
Mark-to-market foreign currency transaction (gain) loss, netMark-to-market foreign currency transaction (gain) loss, net(6,001)2,271 (37,100)(568)
Adjustments for noncontrolling interests - consolidated entities (2)
Adjustments for noncontrolling interests - consolidated entities (2)
(24)(2)(122)9 
Adjustments for noncontrolling interests - consolidated entities (2)
(21)(24)(100)(122)
Adjustments for investments in unconsolidated entities (3)
Adjustments for investments in unconsolidated entities (3)
15 (892)1,662 (3,044)
Adjustments for investments in unconsolidated entities (3)
98 15 2,999 1,662 
MFFO attributable to common stockholdersMFFO attributable to common stockholders5,792 7,137 17,589 11,220 MFFO attributable to common stockholders(14,104)1,724 (5,222)16,145 
Other capitalized operating expenses (4)
Other capitalized operating expenses (4)
(597)(828)(1,926)(2,704)
Other capitalized operating expenses (4)
(801)(597)(2,012)(1,926)
Casualty-related gainCasualty-related gain(27)— (27)(51)Casualty-related gain— (27)— (27)
Change in subordinated performance fee due upon termination to affiliateChange in subordinated performance fee due upon termination to affiliate1,545 (1,121)1,745 (814)Change in subordinated performance fee due upon termination to affiliate— 1,545 — 1,745 
Adjusted MFFO attributable to common stockholdersAdjusted MFFO attributable to common stockholders$6,713 $5,188 $17,381 $7,651 Adjusted MFFO attributable to common stockholders(14,905)2,645 (7,234)15,937 
_____________________
(1) Reflects an adjustment to eliminate gaingains or losses on salesales of real estate.
(2) Reflects adjustments to eliminate the noncontrolling interest holders’ share of the adjustments to convert our net (loss) income attributable to common stockholders to FFO, MFFO and Adjusted MFFO.
(3) Reflects adjustments to add back our noncontrolling interest share of the adjustments to convert our net (loss) income attributable to common stockholders to FFO, MFFO and Adjusted MFFO for our equity investments in unconsolidated joint ventures.
(4) Reflects real estate taxes, property insurance and financing costs that are capitalized with respect to certain of our investments in undeveloped land and unconsolidated entity.  During the periods in which we are incurring costs necessary to bring these investments to their intended use, certain normal recurring operating costs are capitalized in accordance with GAAP and not reflected in our net (loss) income, FFO and MFFO.
FFO, MFFO and Adjusted MFFO may also be used to fund all or a portion of certain capitalizable items that are excluded from FFO, MFFO and Adjusted MFFO, such as tenant improvements, building improvements and deferred leasing costs. We expect FFO, MFFO and Adjusted MFFO to improve in future periods to the extent that we continue to lease up vacant space and acquire additional assets. We expect FFO, MFFO and Adjusted MFFO to decrease as a result of dispositions.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Distributions
There were no distributions declared for the nine months ended September 30, 2021.2022. Our net incomeloss attributable to common stockholders for the nine months ended September 30, 20212022 was $3.7$44.3 million and our cash flows provided by operations were $11.3$8.7 million. Our cumulative distributions paid and net income attributable to common stockholders from inception through September 30, 20212022 were $195.4 million and $126.1 million, respectively.$495.0 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.
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.
Recently Adopted Accounting Pronouncements
Reference Rate Reform — In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (ASC Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional relief to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. Additionally, in January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (ASC Topic 848), which clarifies that certain optional expedients and exceptions in ASC 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. We adopted ASC Topic 848 on September 30, 2022 and the related prospective optional expedients for its variable rate debt and related derivatives is not expected to have a material impact us.
There have been no significantother recent accounting pronouncements, changes in accounting pronouncements or recently adopted accounting guidance during the nine months ended September 30, 2022 that are of significance or potential significance to our policies during 2021.us.
Subsequent Events
We evaluate subsequent events up until the date the consolidated financial statements are issued.
Richardson Acquisition
On November 22, 2011, we, through an indirect wholly owned subsidiary,Dividends on and JP-Richardson, LLC, an affiliateaccretion to redemption value of JP Realty Partners, LTD., entered into an agreement to form a joint venture (the “Richardson Joint Venture”), and on November 23, 2011, the Richardson Joint Venture acquired a portfolio of office buildings and undeveloped land in Richardson, Texas (the “Richardson Portfolio”).Series A Redeemable Preferred Stock
On October 18, 2021,25, 2022, we purchasedreceived notice by the 10% minority interest inholders of PORT’s Series A noncontrolling cumulative convertible redeemable preferred stock to redeem their outstanding redeemable preferred stock. If outstanding on November 4, 2022, the Richardson Joint Venture, for $4.0 million from JP-Richardson, LLC. AsSeries A redeemable preferred stock must be redeemed by us within 120 days after November 4, 2022. We authorized and approved the redemption of the date of purchase, the Richardson Portfolio consisted of four office buildings and 14 acres of undeveloped land. Subsequent to the purchase, we owned 100% of the Richardson Joint Venture.
Bond Offerings
Subsequent to September 30, 2021, we issued additional Series B Debentures in the amount of 536.4 million Israeli new Shekels par value through a public offering. The public offering Series B Debentures were issued at a 2.6% discount resulting in a total consideration of 522.4 million Israeli new Shekels ($166.8 million as of November 1, 2021). Additionally, we also issued 53.6 million Israeli new Shekels par value through a private offering. The private offering Series B Debentures were issued at a 3.1% discount resulting in a total consideration of 52.0 million Israeli new Shekels ($16.6 million as of November 1, 2021). The additional Series B Debentures have an equal level of security, pari passu, amongst themselves and between them and the initial Series B Debentures, which were initially issued, without any right of precedence or preference between any of them. The Series B Debentures were issued with the intent of using the proceeds and available cash on hand to payoff theall 15,000 outstanding Series A Debentures.

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TablePreferred Shares, at a price of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Notes Payable Refinancing
On October 7, 2021,(i) $1,120 per Series A Preferred Share, plus (ii) all accrued but unpaid dividends, through the Company refinanced the Madison Square Mortgage Loan with a mortgage loan from an unaffiliated lender (the “Refinancing”) for borrowings up to $27.0 million. At closing, $17.5 million of the loan was funded and the remaining $9.5 million was available for future disbursements, subject to certain terms and conditions contained in the loan documents. The Refinancing is interest only with a fixed interest rate of 4.625% and has a maturity date of October 7, 2024. In connection with the execution of the Refinancing, Pacific Oak SOR Properties, LLC, a wholly owned subsidiary, is providing an unconditional guarantee and will be held liable, as a primary obligor for our obligations under the Refinancing.redemption date.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
WeForeign Currency Risk
Certain transactions, assets, and liabilities are exposed to foreign currency risk. We monitor our foreign currency exposures to maximize the effects of interest rate changes as a result of borrowings used to maintain liquidity, fund distributions and to fund the refinancingeconomic effectiveness of our real estate investment portfolioforeign currency positions, including hedges. Principal currency exposure is Israeli New Shekel.
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Item 3. Quantitative 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. Qualitative Disclosures about Market Risk
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 September 30, 2021, we had entered into one foreign currency collar to hedge against a change in the exchange rate of the Israeli new Shekel versus the U.S. Dollar. The foreign currency collar expire in November 2021 and has Israeli new Shekels notional amounts of 194.0 million. The 194.0 million Israeli new Shekels foreign currency collar consists of a purchased call option to buy Israeli new Shekels at 3.16 and a sold put option to sell the Israeli new Shekels at 3.29. The foreign currency collar is intended to permit us to exchange, on the settlement date of the collar, 194.0 million Israeli new Shekels for an amount ranging from $59.0 million to $61.4 million.
As of September 30, 2021,2022, we held 114.6129.9 million Israeli new Shekels and 21.324.6 million Israeli new Shekels in cash and restricted cash, respectively. In addition, as of September 30, 2021,2022, we had bonds outstanding and the related interest payable in the amounts of 892.1 million1.2 billion Israeli new Shekels and 3.97.6 million Israeli new Shekels, respectively. Foreign currency exchange rate risk is the possibility that our financial results could be better or worse than planned because of changes in foreign currency exchange rates. Based solely on the remeasurement for the nine months ended September 30, 2021,2022, if foreign currency exchange rates were to increase or decrease by 10%, our net income would increase or decrease by approximately $21.4$25.9 million and $26.2$31.7 million, respectively, for the same period.
Interest Rate Risk
Generally, the composition of our investments is such that declining interest rates will increase our net income, while rising interest rates will decrease our net income. Recently, interest rates have remained at relatively low levels on a historical basis and the Federal Reserve maintained the federal funds target range at 0.0% to 0.25% for much of 2021. However, in March 2022, the Federal Reserve approved a 0.25% rate increase and approved four additional 0.75% rate increases in 2022. The foreign currency transaction income or lossFederal Reserve has indicated that it foresees further increases and has maintained a stance of monetary policy that is sufficiently restrictive to to return inflation to 2%.
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 change in foreign currency exchange rates does not take into account any gains or losses on our foreign currency collar as a resultacquisition and origination of such change, which would reduce our foreign currency exposure.mortgage, mezzanine, bridge and other loans and the acquisition of real estate securities.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 3.     Quantitative and Qualitative Disclosures about Market Risk (continued)

We borrow funds at a combination of fixed and variable rates. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. As of September 30, 2021,2022, the fair value of our Pacific Oak SOR (BVI) Holdings, Ltd. Series A andBVI Series B Debentures was $197.4$306.1 million and $76.9 million, respectively, and the outstanding principal balance was $197.9 million and $78.8 million, respectively.$326.5 million. As of September 30, 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 $132.3$216.6 million and the outstanding principal balance of our fixed rate debt was $127.5$233.2 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 September 30, 20212022 on the Tel Aviv Stock Exchange of 100.12 and 98.2594.40 Israeli new Shekels, respectively.Shekels. The fair value estimate of our fixed rate debt was calculated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loans were originated as of September 30, 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 September 30, 2021,2022, we had entered into fourthree separate interest rate caps with an aggregate notional of $201.1$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 September 30, 2021,2022, if interest rates were 100 basis points higher or lower during the 12 months ending September 30, 2022, interest expense on our variable rate debt would increase or decrease by $4.2$4.0 million and $0.3$4.8 million, respectively.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 3.     Quantitative and Qualitative Disclosures about Market Risk (continued)

The weighted-average interest rates of our fixed rate debt and variable rate debt as of September 30, 20212022 were 4.2%4.10 and 2.8%5.2%, respectively. The interest rate and weighted-average interest rate represent the actual interest rate in effect as of September 30, 20212022 (consisting of the contractual interest rate and the effect of contractual floor rates, if applicable), using interest rate indices as of September 30, 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 September 30, 2021,2022, we owned real estate equity securities with a book value of $96.4$63.8 million. Based solely on the prices of real estate equity securities as of September 30, 2021,2022, if prices were to increase or decrease by 10%, our net income would increase or decrease by approximately $9.6$6.4 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
There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 20202021 and Part II, Item 1A of our Quarterly Report on Form 10-Q for the six months ended June 30, 2021,2022, each as filed with the SEC.

Item 22. 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 disabilitydisability” 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 disabilitydisability” 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 disabilitydisability” 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 disabilitydisability” 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 and July 22, 2022, our board of directors has made available a total of $2.0$3.0 million and $2.5 million, respectively for redemptions in connection with a stockholder's death, “qualifying disability”, or “determination of incompetence” and that will carry forward until depleted. Additionally, on April 12, 2021, our boardAs of directors made available an additional $2.0 million for redemptions in connection with a stockholder's death, “qualifying disability”, or “determination of incompetence” that will carry forward until depleted.
•On August 5, 2021 our board of directors approved Amendment 1 (the “Amendment”) to the Twelfth Amended and Restated Share Redemption Program (the “SRP”). The Amendment was effective as of August 20, 2021 and provides, that, pursuant to Section 4(b) of the SRP, an additional $30 million in funding was authorized for redemptions (excluding those submitted in connection with a stockholder’s death, qualifying disability or determination of incompetence). The Amendment also provided that the funding limitations set forth in Section 4(d) of the SRP shall not apply for the remainder of 2021. Finally, the Amendment provides that, for the avoidance of doubt, for purposes of Section 4(a) of the SRP, our stockholders who received their shares in connection with the POSOR II Merger shall be deemed to have held such shares in us for over a year. The Amendment will was effective for the September 2021 redemption date, which was September 30, 2021.
•On October 26, 2021, the board of directors approved the temporary suspension of processing redemptions under the share redemption program. The temporary suspension will be in effect for October and November 2021 redemptions and will resume at the end of December 2021. This will impact redemption requests made in connection with a stockholder’s death, disability or determination of incompetence, but has no impact on ordinary redemption requests, which are typically made only at quarter end.2022, $1.6 million remained available.
During the nine months ended September 30, 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)
April 202116,532 $9.68 (2)
May 202119,645 $9.68 (2)
June 202123,994 $9.68 (2)
July 202137,086 $9.68 (2)
August 202112,691 $9.68 (2)
September 20213,007,822 $9.22 (2)
Total3,205,913 
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)
April 202275,875 $9.51 (2)
May 202262,376 $9.51 (2)
June 202238,920 $9.51 (2)
July 2022178,951 $9.51 (2)
August 202241,124 $9.51 (2)
September 202223,060 $9.51 (2)
Total485,471 
_____________________
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PART II. OTHER INFORMATION (CONTINUED)
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds (Continued)
(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 nine months ended September 30, 2021,2022, we redeemed $29.6$4.6 million of common stock under the program, which represented all redemption requests received in good order and eligible for redemption through the September 20212022 redemption date, except for the $128.0$134.0 million of shares in connection with redemption requests not made upon a stockholder’s death, “qualifying disability” or “determination of incompetence,” which redemption requests will be fulfilled subject to the limitations described above. Based on the Twelfth SRP, we have $3.2had $1.6 million available for redemptions in the remainder of 2021.2022 as of September 2022, all of which are in connection with a stockholders’ death, “qualifying disability” or “determination of incompetence,” subject to the limitations described above.

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
On November 11, 2021,14, 2022, we renewed the advisory agreement with the Advisor. The renewed advisory agreement is effective through November 1, 2022.2023. The terms of the renewed advisory agreement are consistent with those of the advisory agreement that was previously in effect.

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PART II. OTHER INFORMATION (CONTINUED)
Item 6. Exhibits
Ex.Description
3.1
3.2
3.3
3.4
3.5
4.1
4.2
10.1
10.2
31.1
31.2
32.1
32.2
99.1
99.2
101.INSInline XBRL Instance Document
101.SCHInline XBRL Taxonomy Extension Schema
101.CALInline XBRL Taxonomy Extension Calculation Linkbase
101.DEFInline XBRL Taxonomy Extension Definition Linkbase
101.LABInline XBRL Taxonomy Extension Label Linkbase
101.PREInline XBRL Taxonomy Extension Presentation Linkbase
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
Date:November 12, 202114, 2022By:
/S/ KEITH D. HALL        
Keith D. Hall
Chief Executive Officer and Director
(principal executive officer)
Date:November 12, 202114, 2022By:/S/ MICHAEL A. BENDER   
 Michael A. Bender
 Chief Financial Officer
(principal financial officer)

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