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 SeptemberJune 30, 20222023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission file number 000-54382

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
(Exact Name of Registrant as Specified in Its Charter)
______________________________________________________
Maryland26-3842535
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
11766 Wilshire Blvd., Suite 1670 
Los Angeles,California90025
(Address of Principal Executive Offices) (Zip Code)
(424) 208-8100
(Registrant’s Telephone Number, Including Area Code)

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated FilerAccelerated Filer
Non-Accelerated FilerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   No  
As of November 11, 2022,August 9, 2023, there were 104,041,817103,610,544 outstanding shares of common stock of Pacific Oak Strategic Opportunity REIT, Inc.


Table of Contents
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
FORM 10-Q
SeptemberJune 30, 20222023
INDEX 
PART I.
Item 1.
Consolidated Balance Sheets as of SeptemberJune 30, 20222023 (unaudited) and December 31, 20212022
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

1


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

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
September 30, 2022December 31, 2021 June 30, 2023December 31, 2022
(unaudited) (unaudited)
AssetsAssetsAssets
Real estate held for investment, netReal estate held for investment, net$1,234,197 $1,118,550 Real estate held for investment, net$1,162,118 $1,216,898 
Real estate held for sale, netReal estate held for sale, net— 96,249 Real estate held for sale, net— 2,506 
Real estate equity securitiesReal estate equity securities63,784 112,096 Real estate equity securities30,474 60,153 
Total real estate and real estate-related investments, netTotal real estate and real estate-related investments, net1,297,981 1,326,895 Total real estate and real estate-related investments, net1,192,592 1,279,557 
Cash and cash equivalentsCash and cash equivalents85,368 84,172 Cash and cash equivalents69,521 97,931 
Restricted cashRestricted cash57,325 21,259 Restricted cash45,984 61,113 
Investments in unconsolidated entitiesInvestments in unconsolidated entities72,838 88,256 Investments in unconsolidated entities52,509 70,842 
Rents and other receivables, netRents and other receivables, net21,140 21,795 Rents and other receivables, net23,323 21,518 
Above-market leases, net2,364 2,642 
Due from affiliate13 7,039 
Prepaid expenses and other assetsPrepaid expenses and other assets21,902 18,108 Prepaid expenses and other assets25,211 22,848 
GoodwillGoodwill5,436 13,534 Goodwill5,436 5,436 
Assets related to real estate held for sale, net— 919 
Total assetsTotal assets$1,564,367 $1,584,619 Total assets$1,414,576 $1,559,245 
Liabilities, mezzanine equity and equity
Liabilities and equityLiabilities 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, netNotes and bonds payable, net1,042,860 998,949 Notes and bonds payable, net$975,842 $1,044,709 
Accounts payable and accrued liabilitiesAccounts payable and accrued liabilities27,236 23,852 Accounts payable and accrued liabilities22,203 25,231 
Due to affiliatesDue to affiliates3,252 1,903 Due to affiliates6,683 2,799 
Below-market leases, net2,986 4,080 
Other liabilitiesOther liabilities52,431 42,851 Other liabilities71,386 66,967 
Redeemable common stock payableRedeemable common stock payable1,567 684 Redeemable common stock payable1,426 2,638 
Restricted stock payableRestricted stock payable508 508 Restricted stock payable508 508 
Dividends payable— 11,016 
Liabilities related to real estate held for sale, net— 662 
Total liabilitiesTotal liabilities1,130,840 1,084,505 Total liabilities1,078,048 1,142,852 
Commitments and contingencies
Mezzanine equity
Noncontrolling cumulative convertible redeemable preferred stock15,233 15,233 
Redeemable noncontrolling interest— 2,822 
Commitments and contingencies (Note 10)Commitments and contingencies (Note 10)
EquityEquityEquity
Pacific Oak Strategic Opportunity REIT, Inc. stockholders’ equityPacific Oak Strategic Opportunity REIT, Inc. stockholders’ equityPacific Oak Strategic Opportunity REIT, Inc. stockholders’ equity
Preferred stock, $.01 par value; 10,000,000 shares authorized, no shares issued and outstandingPreferred stock, $.01 par value; 10,000,000 shares authorized, no shares issued and outstanding— — 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 
Common stock, $.01 par value; 1,000,000,000 shares authorized, 103,626,096 and 103,932,083 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectivelyCommon stock, $.01 par value; 1,000,000,000 shares authorized, 103,626,096 and 103,932,083 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively1,036 1,039 
Additional paid-in capitalAdditional paid-in capital909,533 818,440 Additional paid-in capital905,046 907,044 
Cumulative distributions and net lossCumulative distributions and net loss(494,998)(347,691)Cumulative distributions and net loss(572,838)(495,782)
Total Pacific Oak Strategic Opportunity REIT, Inc. stockholders’ equityTotal Pacific Oak Strategic Opportunity REIT, Inc. stockholders’ equity415,576 471,690 Total Pacific Oak Strategic Opportunity REIT, Inc. stockholders’ equity333,244 412,301 
Noncontrolling interestsNoncontrolling interests2,718 10,369 Noncontrolling interests3,284 4,092 
Total equityTotal equity418,294 482,059 Total equity336,528 416,393 
Total liabilities, mezzanine equity and equity$1,564,367 $1,584,619 
Total liabilities and equityTotal liabilities and equity$1,414,576 $1,559,245 
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 per share amounts)
Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended June 30,Six Months Ended June 30,
20222021202220212023202220232022
Revenues:Revenues:Revenues:
Rental incomeRental income$31,445 $29,504 $89,806 $94,812 Rental income$32,152 $28,979 $64,229 $58,360 
Hotel revenuesHotel revenues9,182 12,153 27,952 24,578 Hotel revenues2,565 12,854 5,478 18,771 
Other operating incomeOther operating income830 923 2,559 3,118 Other operating income1,066 887 2,204 1,728 
Dividend income from real estate equity securitiesDividend income from real estate equity securities2,148 3,189 5,354 6,693 Dividend income from real estate equity securities113 819 2,110 3,206 
Total revenuesTotal revenues43,605 45,769 125,671 129,201 Total revenues35,896 43,539 74,021 82,065 
Expenses:Expenses:Expenses:
Operating, maintenance, and managementOperating, maintenance, and management12,342 10,668 32,560 31,444 Operating, maintenance, and management11,107 10,342 22,275 20,218 
Real estate taxes and insuranceReal estate taxes and insurance5,650 5,262 15,753 15,949 Real estate taxes and insurance5,843 5,079 12,260 10,103 
Hotel expensesHotel expenses5,377 6,483 17,485 15,715 Hotel expenses1,984 6,998 3,945 12,109 
Asset management fees to affiliate3,630 3,422 9,945 10,802 
Asset management fees to affiliatesAsset management fees to affiliates3,710 3,189 7,684 6,315 
General and administrative expensesGeneral and administrative expenses2,504 2,365 8,486 7,120 General and administrative expenses3,222 2,983 6,220 5,977 
Foreign currency transaction (gain) loss, net(6,001)2,271 (37,100)(568)
Foreign currency transaction loss (gain), netForeign currency transaction loss (gain), net6,272 (23,833)3,553 (31,098)
Depreciation and amortizationDepreciation and amortization12,717 13,895 39,379 45,969 Depreciation and amortization12,110 14,098 24,158 26,662 
Interest expenseInterest expense12,976 10,092 33,319 30,713 Interest expense15,788 10,780 31,819 20,343 
Impairment charges on real estate11,942 10,971 11,942 10,971 
Impairment charges on goodwill8,098 2,808 8,098 2,808 
Impairment charges on real estate and related intangiblesImpairment charges on real estate and related intangibles18,926 — 36,589 — 
Total expensesTotal expenses69,235 68,237 139,867 170,923 Total expenses78,962 29,636 148,503 70,629 
Other (loss) income:Other (loss) income:Other (loss) income:
Equity in loss of unconsolidated entities(3,376)(569)(6,130)(144)
Casualty-related gain— 27 — 27 
Loss from unconsolidated entities, netLoss from unconsolidated entities, net(14,630)(2,075)(16,962)(2,754)
Other interest incomeOther interest income61 55 155 148 Other interest income1,012 48 1,216 94 
(Loss) gain on real estate equity securities(20,722)(2,614)(48,312)12,939 
Change in subordinated performance fee due upon termination to affiliate— (1,545)— (1,745)
(Loss) gain on sale of real estate(75)216 3,273 31,385 
Loss on real estate equity securities, netLoss on real estate equity securities, net(4,089)(20,070)(16,122)(27,591)
Gain (loss) on sale of real estateGain (loss) on sale of real estate3,292 (175)32,761 3,348 
Gain on extinguishment of debtGain on extinguishment of debt— 1,352 2,367 1,365 Gain on extinguishment of debt— — — 2,367 
Gain from consolidation of previously unconsolidated entity18,742 — 18,742 — 
Total other (loss) income, netTotal other (loss) income, net(5,370)(3,078)(29,905)43,975 Total other (loss) income, net(14,415)(22,272)893 (24,536)
Net (loss) income(31,000)(25,546)(44,101)2,253 
Net loss attributable to noncontrolling interests881 1,188 844 1,949 
Net loss before income taxesNet loss before income taxes(57,481)(8,369)(73,589)(13,100)
Income tax provisionIncome tax provision— — (3,662)— 
Net lossNet loss(57,481)(8,369)(77,251)(13,100)
Net loss (income) loss attributable to noncontrolling interestsNet loss (income) loss attributable to noncontrolling interests(156)195 (38)
Net loss attributable to redeemable noncontrolling interestNet loss attributable to redeemable noncontrolling interest— 33 81 113 Net loss attributable to redeemable noncontrolling interest— 34 — 81 
Preferred stock dividendsPreferred stock dividends(373)(191)(1,091)(644)Preferred stock dividends— (528)— (718)
Net (loss) income attributable to common stockholders$(30,492)$(24,516)$(44,267)$3,671 
Net (loss) income per common share, basic and diluted$(0.29)$(0.25)$(0.43)$0.04 
Net loss attributable to common stockholdersNet loss attributable to common stockholders$(57,475)$(9,019)$(77,056)$(13,775)
Net loss per common share, basic and dilutedNet loss per common share, basic and diluted$(0.55)$(0.09)$(0.74)$(0.13)
Weighted-average number of common shares outstanding, basic and dilutedWeighted-average number of common shares outstanding, basic and diluted104,180,800 97,659,731 103,351,040 97,879,983 Weighted-average number of common shares outstanding, basic and diluted103,737,734 104,422,035 103,804,676 102,929,284 

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 SeptemberJune 30, 20222023 and 20212022
(unaudited)
(in thousands, except share amounts)
Common StockAdditional
Paid-in Capital
Cumulative Distributions and Net LossTotal Stockholders' EquityNoncontrolling InterestsTotal Equity
 SharesAmounts
Balance, June 30, 2022104,319,092 $1,043 $914,463 $(464,506)$451,000 $10,373 $461,373 
Net loss— — — (30,492)(30,492)(881)(31,373)
Transfers to redeemable common stock payable, net— — (188)— (188)— (188)
Redemptions of common stock(243,135)(2)(2,311)— (2,313)— (2,313)
Stock distribution issued924 — — — — — — 
Acquisition of noncontrolling interest— — — — — 1,125 1,125 
Noncontrolling interests distributions— — (2,431)— (2,431)(8,199)(10,630)
Noncontrolling interest contribution— — — — — 300 300 
Balance, 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 LossTotal Stockholders' EquityNoncontrolling InterestsTotal Equity
SharesAmounts
Balance, June 30, 202197,906,268 $979 $829,294 $(297,533)$532,740 $12,560 $545,300 
Net loss— — — (24,516)(24,516)(1,188)(25,704)
Transfers to redeemable common stock payable, net— — (1,955)— (1,955)— (1,955)
Redemptions of common stock(3,641,866)(37)(28,080)— (28,117)— (28,117)
Change in classification of restricted stock— — 21,123 — 21,123 — 21,123 
Noncontrolling interest contribution— — — — — 20 20 
Balance, September 30, 202194,264,402 $942 $820,382 $(322,049)$499,275 $11,392 $510,667 
Common StockAdditional
Paid-in Capital
Cumulative Distributions and Net LossTotal Stockholders' EquityNoncontrolling InterestsTotal Equity
 SharesAmounts
Balance, March 31, 2023103,788,298 $1,038 $907,045 $(515,363)$392,720 $3,903 $396,623 
Net loss— — — (57,475)(57,475)(6)(57,481)
Transfers to redeemable common stock, net— — (297)— (297)— (297)
Redemptions of common stock(162,202)(2)(1,702)— (1,704)— (1,704)
Noncontrolling interests distribution— — — — — (613)(613)
Balance, June 30, 2023103,626,096 $1,036 $905,046 $(572,838)$333,244 $3,284 $336,528 
Common StockAdditional
Paid-in Capital
Cumulative Distributions and Net LossTotal Stockholders' EquityNoncontrolling InterestsTotal Equity
SharesAmounts
Balance, March 31, 2022104,496,165 $1,045 $914,460 $(453,770)$461,735 $10,251 $471,986 
Net (loss) income— — — (9,019)(9,019)156 (8,863)
Transfers from redeemable common stock— — 1,685 — 1,685 — 1,685 
Redemptions of common stock(177,171)(2)(1,683)— (1,685)— (1,685)
Adjustment to value of redeemable noncontrolling interest— — — (1,716)(1,716)— (1,716)
Stock distribution issued98 — (1)— — — 
Noncontrolling interests distribution— — — — — (34)(34)
Balance, June 30, 2022104,319,092 $1,043 $914,463 $(464,506)$451,000 $10,373 $461,373 

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 (CONTINUED)
For the NineSix Months Ended SeptemberJune 30, 20222023 and 20212022
(unaudited)
(in thousands, except share amounts)
Common StockAdditional
Paid-in Capital
Cumulative Distributions and Net LossTotal Stockholders' EquityNoncontrolling InterestsTotal Equity
 SharesAmounts
Balance, December 31, 202194,141,251 $941 $818,440 $(347,691)$471,690 $10,369 $482,059 
Net loss— — — (44,267)(44,267)(844)(45,111)
Transfers to redeemable common stock payable, net— — (883)— (883)— (883)
Redemptions of common stock(485,471)(4)(4,583)— (4,587)— (4,587)
Adjustment to value of redeemable noncontrolling interest— — — (3,946)(3,946)— (3,946)
Stock distribution issued10,421,101 104 98,990 (99,094)— — — 
Acquisition of noncontrolling interest— — — — — 1,125 1,125 
Noncontrolling interests distributions— — (2,431)— (2,431)(8,232)(10,663)
Noncontrolling interest contribution— — — — — 300 300 
Balance, 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 LossTotal Stockholders' EquityNoncontrolling InterestsTotal Equity
 SharesAmounts
Balance, December 31, 202098,054,582 $979 $831,295 $(325,720)$506,554 $13,158 $519,712 
Net income (loss)— — — 3,671 3,671 (1,949)1,722 
Transfers to redeemable common stock payable, net— — (2,521)— (2,521)— (2,521)
Redemptions of common stock(3,790,180)(37)(29,515)— (29,552)— (29,552)
Change in classification of restricted stock— — 21,123 — 21,123 — 21,123 
Noncontrolling interests contributions— — — — 183 183 
Balance, September 30, 202194,264,402 $942 $820,382 $(322,049)$499,275 $11,392 $510,667 
Common StockAdditional
Paid-in Capital
Cumulative Distributions and Net LossTotal Stockholders' EquityNoncontrolling InterestsTotal Equity
 SharesAmounts
Balance, December 31, 2022103,932,083 $1,039 $907,044 $(495,782)$412,301 $4,092 $416,393 
Net loss— — — (77,056)(77,056)(195)(77,251)
Transfers to redeemable common stock, net— — 1,213 — 1,213 — 1,213 
Redemptions of common stock(305,987)(3)(3,211)— (3,214)— (3,214)
Noncontrolling interests distribution— — — — — (613)(613)
Balance, June 30, 2023103,626,096 $1,036 $905,046 $(572,838)$333,244 $3,284 $336,528 
Common StockAdditional
Paid-in Capital
Cumulative Distributions and Net LossTotal Stockholders' EquityNoncontrolling InterestsTotal Equity
 SharesAmounts
Balance, December 31, 202194,141,251 $941 $818,440 $(347,691)$471,690 $10,369 $482,059 
Net loss— — — (13,775)(13,775)38 (13,737)
Transfers to redeemable common stock— — (695)— (695)— (695)
Redemptions of common stock(242,336)(2)(2,272)— (2,274)— (2,274)
Adjustment to value of redeemable noncontrolling interest— — — (3,946)(3,946)— (3,946)
Stock distribution issued10,420,177 104 98,990 (99,094)— — — 
Noncontrolling interests contributions— — — — — (34)(34)
Balance, June 30, 2022104,319,092 $1,043 $914,463 $(464,506)$451,000 $10,373 $461,373 

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,
 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 $166,238 
Six Months Ended June 30,
 20232022
Cash Flows from Operating Activities:
Net loss$(77,251)$(13,100)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Impairment charges on real estate and related intangibles36,589 — 
Loss from unconsolidated entities, net16,962 2,754 
Depreciation and amortization24,158 26,662 
Loss on real estate equity securities, net16,122 27,591 
Gain on sale of real estate(32,761)(3,348)
Unrealized gain on interest rate caps(328)(270)
Deferred rent(1,508)(1,427)
Gain on extinguishment of debt— (2,367)
Amortization of above- and below-market leases, net(151)(508)
Amortization of deferred financing costs and debt discount and premium, net4,567 3,844 
Foreign currency transaction loss (gain), net3,553 (31,098)
Changes in assets and liabilities:
Rents and other receivables, net(409)(175)
Prepaid expenses and other assets(3,120)(1,150)
Accounts payable and accrued liabilities(3,068)502 
Due to affiliates3,884 3,753 
Other liabilities3,355 668 
Net cash (used in) provided by operating activities(9,406)12,331 
Cash Flows from Investing Activities:
Improvements to real estate(10,349)(10,110)
Proceed from sales of real estate, net40,795 357 
Contribution to unconsolidated entity— (22,500)
Distribution of capital from unconsolidated entity1,144 569 
Purchase of interest rate caps(347)(506)
Advance to affiliate— (1,201)
Purchase of foreign currency derivatives(67,140)— 
Proceeds from disposition of foreign currency derivatives49,176 — 
Proceeds from advances due from affiliates— 6,448 
Proceeds from the sale of real estate equity securities13,557 — 
Escrow deposit for future real estate sale— 17,000 
Proceeds for development obligations1,855 — 
Funding for development obligations(1,421)(4,025)
Net cash provided by (used in) investing activities27,270 (13,968)
Cash Flows from Financing Activities:
Proceeds from notes payable980 145,104 
Principal payments on notes payable(56,922)(61,613)
Payments of deferred financing costs(409)(2,829)
Payments to redeem common stock(3,214)(2,274)
Distributions paid— (11,016)
Preferred dividends paid— (718)
Noncontrolling interests distribution(613)(34)
Net cash (used in) provided by financing activities(60,178)66,620 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(1,225)(3,619)
Net (decrease) increase in cash, cash equivalents and restricted cash(43,539)61,364 
Cash, cash equivalents and restricted cash, beginning of period159,044 105,431 
Cash, cash equivalents and restricted cash, end of period$115,505 $166,795 
See accompanying condensed notes to consolidated financial statements.
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(unaudited)
(in thousands)
Six Months Ended June 30,
20232022
Supplemental Disclosure of Cash Flow Information:
Interest paid, net of capitalized interest of $1,743 and $1,026 for the six months ended June 30, 2023 and 2022, respectively27,379 15,446 
Supplemental Disclosure of Significant Noncash Transaction:
Accrued improvements to real estate1,915 3,262 
Redeemable common stock payable1,426 1,379 
Distributions paid to common stockholders through common stock issuances— 99,094 
PPP notes forgiveness— 2,367 
See accompanying condensed notes to consolidated financial statements.
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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
SeptemberJune 30, 20222023
(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.

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, 2021.2022. 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, 20212022 included in the Company’s Annual Report on Form 10-K filed with the SEC.Securities and Exchange Commission (“SEC”).
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 FASBFinancial Accounting Standards Board 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 ninesix months ended SeptemberJune 30, 20222023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.2023.
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, and 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)
SeptemberJune 30, 20222023
(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 5,of July 1, 2023, the Company has $383.0$460.1 million of debt obligations coming due over the next 12-month period.scheduled to mature within 12 months of that date. 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 pay downspaydowns 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. SeeRefer to Note 5 for further details.discussion.
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.
Segments
The Company operates in three reportable business segments: opportunistic real estate and real estate-related investments, residential homes, and hotel, which is how the Company’s management manages the business. In general, the Company intends to hold its investments in opportunistic real estate and real estate-related assets for capital appreciation. Traditional performance metrics of opportunistic real estate and 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 real estate-related assets as similar investments and aggregatedaggregates them into one reportable business segment. The Company ownsowned residential homes in 18 markets, which are all aggregated into one reportable business segment due to the homes being stabilized, having high occupancy rates and havehaving similar economic characteristics. Additionally, as of SeptemberJune 30, 2022,2023 the Company ownsowned one hotel, which is aggregated into onea separate reportable business segment due to the nature of the hotel business with short-term stays. See Note 10 for further details.
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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)
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”) were not included as the shares are contingent on PORT being public.
Square Footage, Occupancy and Other Measures
Any references to square footage, acreage, 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 AdoptedIssued 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. The Company 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 to the Company.Standards Updates
There have been no other recent accounting pronouncements, changes in accounting pronouncements or recently adopted accounting guidance during the ninethree and six months ended SeptemberJune 30, 20222023 that are of significance or potential significance to the 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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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)
SeptemberJune 30, 20222023
(unaudited)
3. REAL ESTATE HELD FOR INVESTMENT
As of June 30, 2023, the Company owned eight office properties, one office portfolio consisting of two office buildings and 25 acres of undeveloped land, encompassing, in the aggregate, approximately 3.2 million rentable square feet and these properties were 69% occupied. In addition, the Company owned one residential home portfolio consisting of 2,453 residential homes and encompassing approximately 3.5 million rental square feet and two apartment properties, containing 609 units and encompassing approximately 0.5 million rentable square feet, which were 95% and 93% occupied, respectively. The Company also owned one hotel property with 196 rooms, two investments in undeveloped land with approximately 671 developable acres and one office/retail development property. The following table summarizes the Company’s real estate held for investment as of June 30, 2023 and December 31, 2022, respectively (in thousands):
June 30, 2023December 31, 2022
Land$258,570 $267,634 
Buildings and improvements1,035,684 1,062,822 
Tenant origination and absorption costs20,937 27,996 
Total real estate, cost1,315,191 1,358,452 
Accumulated depreciation and amortization(153,073)(141,554)
Total real estate held for investment, net$1,162,118 $1,216,898 

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 SeptemberJune 30, 2022,2023, the leases, excluding options to extend, apartment leases and residential homes,home leases, which have terms that are generally one year or less, had remaining terms of up to 12.912.1 years with a weighted-average remaining term of 3.7 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$5.5 million and $6.5 million as of SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively.
During the three and ninesix months ended SeptemberJune 30, 2022,2023, the Company recognized deferred rent from tenants of $0.5$0.7 million and $2.0$1.5 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.amortization, respectively. As of SeptemberJune 30, 20222023 and December 31, 2021,2022, the cumulative deferred rent receivable balance, including unamortized lease incentive receivables, was $17.8$20.2 million and $16.3$18.3 million, respectively, and is included in rents and other receivables on the accompanying consolidated balance sheets. The cumulative deferred rent balance included $3.0$2.9 million and $3.3$2.8 million of unamortized lease incentives as of SeptemberJune 30, 20222023 and December 31, 2021,2022, 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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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)
SeptemberJune 30, 20222023
(unaudited)
As of June 30, 2023, the future minimum rental income from the Company’s properties, excluding apartment and residential leases which generally have initial terms of 12 months or less, under non-cancelable operating leases was as follows (in thousands):
July 1, 2023 through December 31, 2023$31,253 
202458,854 
202548,673 
202634,938 
202726,894 
Thereafter60,377 
$260,989 

As of June 30, 2023, 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 Administration15$7,221 11.6 %
Professional, Scientific, and Technical Services387,133 11.5 %
Computer Systems Design and Related Services296,865 11.1 %
$21,219 34.2 %
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of June 30, 2023, 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.
Geographic Concentration Risk
As of SeptemberJune 30, 2022,2023, the Company’s real estate investments in California and Georgia represented 21.9%20.4% and 10.3%10.8%, 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 RevenuesProperties
The following table provides detailed information regarding the Company’s hotel revenues for its two hotel propertiesproperty (the Springmaid Beach Resort was sold on September 1, 2022) during the three and ninesix months ended SeptemberJune 30, 2023 and 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.
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Hotel revenues:
Room$2,240 $9,905 $4,805 $14,200 
Food, beverage and convention services214 309 445 589 
Campground— 1,603 — 2,395 
Other111 1,037 228 1,587 
Hotel revenues$2,565 $12,854 $5,478 $18,771 
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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)
SeptemberJune 30, 20222023
(unaudited)
On September 1, 2022,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 (referenced below) and another developer for the value of land that was contributed to a master association that is consolidated by the Company, through an indirect wholly owned subsidiary, soldwhich are included in other liabilities in the Springmaid Beach Resort to a purchaser unaffiliated withaccompanying consolidated balance sheets, as of June 30, 2023 and December 31, 2022 (in thousands):
June 30, 2023December 31, 2022
Contract liabilities$27,137 $23,904 
Revenue recognized in the period from:
 Amounts included in contract liabilities at the beginning of the period$1,547 $9,215 

Real Estate Sale
In May 2023, the Company orsold a vacant building within the AdvisorMadison Square property in Phoenix, Arizona (“Madison Square School”) for $91.0proceeds of $6.4 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 theCompany recognized a gain on sale of the Springmaid Beach Resort, the Company repaid $52.0$3.3 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.disposition of the Madison Square School, net of closing costs and adjustments. The purchaser is not affiliated with the Company nor the Advisor. As a result of the sale of the Springmaid Beach Resort,Madison Square School, certain assets and liabilities were reclassified to held for sale on the consolidated balance sheets as of December 31, 2021.2022. As of June 30, 2023, the Madison Square property had three office buildings remaining.
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,In February 2023, 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 234sold approximately 71 developable acres of undeveloped land located in North Las Vegas, Nevada (“Park Highlands”) for gross sales proceeds of approximately $121.4$34.5 million, beforenet of closing costs and credits.credits of $1.9 million for future development obligations. The due diligence period expiredCompany recognized a pre-tax gain on February 23, 2022 andsale of real estate of $29.5 million related to the buyer’s deposit of $13.5 million is no longer refundable and is recognized as restricted cash ondisposition within the consolidated balance sheets. This depositstatements of operations. The purchaser is held in an escrow account and will become available once the sale is completed. Actions are required bynot affiliated with the Company nor the Advisor.
In addition, the land parcels were held and sold through one of the Company’s taxable REIT subsidiaries (“TRS”) for certain tax planning purposes and to completeensure preservation of the planned sale.
On March 10, 2022,Company’s REIT status. For purposes of the determination of U.S. federal and state income taxes, the Company’s TRS record current or deferred income taxes based on differences (both permanent and timing) between the determination of their taxable income and net income under GAAP. In connection with the Park Highlands sales, the Company throughrecorded an indirect wholly owned subsidiary, entered into a purchaseincome tax provision of $3.7 million at the TRS level. There were no state taxes related to this disposition. The U.S. federal statutory and sale agreement, as amended, to sell 77 developable acres of Park Highlandseffective income tax rate 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 milliontransaction’s taxable gain 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.21%.
Impairment of Real Estate
The evolving office rental business environment and slowdown in economic growth due to rising interest rates led the Company to reassess its real estate and related intangibles. During the three and ninesix months ended SeptemberJune 30, 2022,2023, the Company recorded impairment charges on real estate and related intangibles in the aggregateamounts of $11.9$18.9 million and $36.6 million, respectively, 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,two strategic opportunistic properties to their estimated fair valuevalues due to a changeincreases in the projected hold perioddiscount and related decreasecap rate assumptions and decreases 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.
DuringThere were no impairment charges during the three and ninesix months ended SeptemberJune 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 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.2022.


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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)
SeptemberJune 30, 20222023
(unaudited)
PORT II Consolidation
On July 1, 2022, the Company became the primary beneficiary of Pacific Oak Residential Trust II, Inc. (“PORT II”), a related party and consolidated PORT II into the Company's financial statements. As of July 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 PORT II and the 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 loss for the period related to real estate equity securities held during the three and ninesix months ended SeptemberJune 30, 20222023 and 20212022 (in thousands):
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)$12,714 
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Loss on real estate equity securities, net$(4,089)$(20,070)$(16,122)$(27,591)
Less net gain recognized during the period on real estate equity securities sold during the period5,809 — 5,809 — 
Unrealized loss recognized during the reporting period on real estate equity securities held at the end of the period$(9,898)$(20,070)$(21,931)$(27,591)

5. NOTES AND BONDS PAYABLE
As of June 30, 2023 and December 31, 2022, the Company’s notes and bonds payable consisted of the following (dollars in thousands):
 
Book Value as of
June 30, 2023
Book Value as of
December 31, 2022
Contractual Interest Rate as of
June 30, 2023
Effective Interest Rate at
June 30, 2023 (1)
Payment Type (2)
Maturity Date (3)
Richardson Portfolio Mortgage Loan$18,675 $18,844 SOFR + 2.50%7.57%Principal & Interest11/01/2023
Park Centre Mortgage Loan26,072 26,233 BSBY + 4.75%9.92%Principal & Interest
06/27/2023 (4)
1180 Raymond Mortgage Loan (5)
31,070 31,070 BSBY + 2.25%7.42%Interest Only12/01/2023
Pacific Oak SOR BVI Series B
Debentures (6)
314,130 331,213 3.93%3.93%(6)01/31/2026
Crown Pointe Mortgage Loan54,738 53,758 SOFR + 2.30%7.37%Interest Only04/01/2025
The Marq Mortgage Loan60,460 60,796 BSBY + 4.55%9.72%Principal & Interest
06/06/2023 (4)
Eight & Nine Corporate Centre Mortgage Loan (7)
— 47,945 (7)(7)(7)(7)
Georgia 400 Center Mortgage Loan40,432 44,129 SOFR + 1.55%6.62%Interest Only05/22/2024
PORT Mortgage Loan 151,304 51,302 4.74%4.74%Interest Only10/01/2025
PORT Mortgage Loan 210,523 10,523 4.72%4.72%Interest Only03/01/2026
PORT MetLife Loan60,000 60,000 3.90%3.90%Interest Only04/10/2026
PORT II Metlife Loan (8)
93,701 93,701 3.99%3.99%Interest Only04/10/2026
Q&C Hotel Mortgage Loan24,671 24,784 SOFR + 3.50%8.57%Principal & Interest01/31/2024
Lincoln Court Mortgage Loan (5)
35,314 35,314 SOFR + 3.25%8.32%Interest Only08/07/2025
Lofts at NoHo Commons Mortgage Loan71,536 71,536 
SOFR + 2.18% (9)
7.25%Interest Only09/09/2023
Oakland City Center Mortgage Loan (5)
82,500 87,000 BSBY + 3.00%8.17%Principal & Interest09/01/2023
Madison Square Mortgage Loan17,961 17,964 4.63%4.63%Interest Only10/07/2024
Total Notes and Bonds Payable principal outstanding993,087 1,066,112 
Deferred financing costs and debt discount and premium, net (10)
(17,245)(21,403)
Total Notes and Bonds Payable, net975,842 1,044,709 

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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)
SeptemberJune 30, 20222023
(unaudited)
5. NOTES AND BONDS PAYABLE
As of September 30, 2022 and December 31, 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, 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 
_____________________
(1) Contractual interest rate represents the interest rate in effect under the loan as of SeptemberJune 30, 2022. Effective2023. The interest rate is calculated as the actual interest rate in effect as of SeptemberJune 30, 20222023 (consisting of the contractual interest rate and contractual floor rates), using interest rate indices at SeptemberJune 30, 2022,2023, where applicable.
(2) Represents the payment type required under the loan as of SeptemberJune 30, 2022.2023. 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 SeptemberJune 30, 2022;2023; subject to certain conditions, the maturity dates of certain loans may be extended beyond the date shown.
(4) Subsequent to September 30, 2022,As filing date of this Quarterly Report on Form 10-Q, the Company extendedwas in refinancing negotiations with the Richardson Portfolio Mortgage Loan to October 10, 2022.lender for loans that have matured, see below for further discussion.
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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)
(5) The Company’s notes and bond’sbonds 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 SeptemberJune 30, 2022,2023, the guaranteed amount in the aggregate was $41.9$37.2 million.
(6) See “Israeli Bond Financings”Financing” below.
(7) The Springmaid Beach Resort Mortgage LoanThis loan was paid off in conjunction withduring the sale of the Springmaid Beach Resort. See Note 3 for further details.six months ended June 30, 2023.
(8) The interest rate is variable atAs of June 30, 2023, $93.7 million had been disbursed to the higher of one-month LIBOR + 2.5% or 4.5%.Company and up to $6.3 million was available for future disbursements, subject to certain terms and conditions contained in the loan documents.
(9)The variable rate is at the higher of one-month SOFR or 1.75%, plus 2.18%.
(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 ninesix months ended SeptemberJune 30, 2022,2023, the Company incurred $13.0$15.8 million and $33.3$31.8 million, respectively, of interest expense. Included in interest expense forduring the three and ninesix months ended SeptemberJune 30, 20222023 was $1.0$1.1 million and $2.6$2.4 million, respectively, of amortization of deferred financing costs.costs and debt discount and premium, net. Included in interest expense for the three and ninesix months ended SeptemberJune 30, 20222023 was $1.1 million and $3.4$2.2 million, respectively, of amortization on discount on notes and bonds payable, net. Additionally, during the three and ninesix months ended SeptemberJune 30, 2022,2023, the Company capitalized $0.7$0.9 million and $1.7 million, respectively, of interest related to its investments in undeveloped land.
During the three and ninesix months ended SeptemberJune 30, 2021,2022, the Company incurred $10.1$10.8 million and $30.7$20.3 million, respectively, of interest expense. Included in interest expense for the three and ninesix months ended SeptemberJune 30, 20212022 was $0.8 million and $2.5$1.6 million, respectively, of amortization of deferred financing costs. Included in interest expense for the three and ninesix months ended SeptemberJune 30, 20212022 was $0.5$1.2 million and $1.9$2.3 million, respectively, of amortization on discount on notes and bonds payable, net. Additionally, during the three and ninesix months ended SeptemberJune 30, 2021,2022, the Company capitalized $0.5 million and $1.6$1.0 million, respectively, of interest related to its investments in undeveloped land.
As of SeptemberJune 30, 20222023 and December 31, 2021,2022, the Company’s interest payable was $5.2$9.3 million and $6.6$9.1 million, respectively.
The following is a schedule of maturities, including principal amortization payments, for all notes and bonds payable outstanding as of SeptemberJune 30, 20222023 (in thousands):
October 1, 2022 through December 31, 2022$49,443 
2023368,500 
July 1, 2023 through December 31, 2023July 1, 2023 through December 31, 2023$264,241 
20242024126,512 2024213,847 
20252025249,216 2025246,066 
20262026273,065 2026268,933 
20272027— 
ThereafterThereafter— Thereafter— 
$1,066,736 $993,087 

As
14


Table of November 14, 2022, the Company had a total of $383.0 million of debt obligations scheduled to mature over the next 12 months. Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 2023
(unaudited)
The Company has extension options with respect to $185.4$70.3 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 the 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 B Debentures. The Company plans to utilize available extension options or refinance the notes payable. The Company may also choose to market the properties for sale or may negotiate a turnover of the secured properties back to the related mortgage lender.

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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 containcontains financial debt covenants, including minimum equity requirements and liquidity ratios. As of SeptemberJune 30, 2022,2023, the Company was in compliance with all of these debt covenants with the exception that the Oakland City CenterPark Centre Mortgage Loan, Lofts at NoHo Commons Mortgage Loan, Richardson Portfolio Mortgage Loan, and Georgia 400 CenterLincoln Court Mortgage Loan were not in compliance with the debt service coverage requirement. As a result of such non-compliance, the Company is required to provide a cash sweep for the Georgia 400 CenterLincoln Court Mortgage Loan. Additionally,Loan, and the remaining loans are at-risk of cash sweeps and/or principal pay downs if in consecutive non-compliance.
The Company is in discussion with the lender regarding refinancing loans that have matured. As of the filing date of this Quarterly Report on Form 10-Q, the Company maydid not fulfill the obligation to repay $86.5 million, the outstanding principal amount, of the two mortgage loans by the maturity dates, resulting in the accrual of penalty interest. The two mortgage loans are non-recourse to the Company. There are several potential outcomes, including negotiating a modification to the loans, refinancing the loans, or consensual short sales. However, there is no assurance that the Company will be requiredsuccessful in achieving any of these potential outcomes. If unsuccessful, the lenders would retain their right to partially pay downexercise the Oakland City Center Mortgage Loan ifremedies under the non-compliance continues through September 2023.loans including, but not limited to, declaring the debt to be immediately payable and foreclosing on the assets.
Israeli Bond FinancingsFinancing
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 Debenturesdebentures (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 November 1, 2021, Pacific Oak SOR BVI issued additional Series B Debentures insubsequent to the amountinitial issuance and as of 536.4 millionJune 30, 2023, 1.2 billion 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(approximately $314.1 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 offering. The private offering Series B DebenturesJune 30, 2023) were issued at a 3.1% discount resulting in a total consideration of 52.0 million Israeli new Shekels ($16.7 million as of 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).outstanding. The additional Series B Debentures have an equal level of security, pari passu, amongst themselves and between them and the initial Series B Debentures without any right of precedence or preference between any of them.
The deed of trust that governs the terms of the Series B Debentures containcontains various financial covenants. As of SeptemberJune 30, 2022,2023, the Company was in compliance with all of these financial debt covenants.
On July 6, 2023, Pacific Oak SOR BVI issued 319.6 million Israeli new Shekels (approximately $86.4 million) of Series C bonds (the “Series C Bonds”) to Israeli investors pursuant to a public offering registered with the Israeli Securities Authority. Additionally, on July 17, 2023, Pacific Oak SOR BVI issued an additional 20.7 million Israeli new Shekels (approximately $5.6 million) of Series C bonds (the “Series C Expansion”). The Series C Expansion has an equal level of security, pari passu, amongst themselves and between them and the Series C Bonds without any right of precedence or preference between any of them. The deed of trust that governs the terms of the Series C Bonds and Series C Expansion contains various financial covenants. Refer to Note 11 for further discussion.


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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)
June 30, 2023
(unaudited)
6. FAIR VALUE DISCLOSURES
The following were the face values, carrying amounts and fair values of the Company’s financial instruments as of SeptemberJune 30, 20222023 and December 31, 2021,2022, which carrying amounts do not approximate the fair values (in thousands):
September 30, 2022December 31, 2021
Face ValueCarrying AmountFair ValueFace ValueCarrying AmountFair Value
Financial liabilities (Level 3):
Notes and bond payable$740,213 $732,676 $720,286 $743,513 $740,176 $740,347 
Financial liabilities (Level 1):
Pacific Oak SOR (BVI) Holdings, Ltd. Series B Debentures$326,523 $310,184 $306,099 $271,978 $258,773 $274,697 

June 30, 2023December 31, 2022
Face ValueCarrying AmountFair ValueFace ValueCarrying AmountFair Value
Financial liabilities (Level 3):
Notes payable$678,957 $660,208 $660,879 $734,899 $728,433 $716,813 
Financial liabilities (Level 1):
Pacific Oak SOR BVI Series B Debentures$314,130 $315,634 $296,389 $331,213 $316,276 $304,758 
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.

As of June 30, 2023, 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$30,474 $30,474 $— $— 
Asset derivative - interest rate caps (1)
$1,764 $— $1,764 $— 
Liability derivative - foreign currency collar (1)
$4,437 $— $4,437 $— 
Nonrecurring Basis:
Impaired real estate (2)
$182,436 $— $— $182,436 
Impaired investment in unconsolidated entity (2)
$26,290 $— $— $26,290 
_____________________
(1) Interest rate caps and foreign currency collars are included in prepaid expenses and other assets and other liabilities, respectively, on the consolidated balance sheets.
(2) Amounts represent the fair value for real estate assets and investment in unconsolidated entity impacted by impairment charges during the six months ended June 30, 2023, as of the date that the fair value measurement was made. The carrying value for the real estate asset may have subsequently increased or decreased from the fair value reflected due to activity that has occurred since the measurement date.
As of June 30, 2023, two of the Company’s real estate properties were measured at the estimated fair values. The two real estate properties were measured based on an income approach with the significant unobservable inputs used in evaluating the estimated fair value of these properties, including discount rates between 7.5 to 9.0% and terminal cap rates of 7.0 to 8.25%. One investment in unconsolidated entity was measured at the estimated value of the Company’s ownership calculated based on a hypothetical liquidation of the net assets, discounted for lack of marketability and control. The Company used a discount rate of 8.75% and a cap rate of 7.0% to estimate the fair value of the real estate, an interest rate adjustment of 0.15% to estimate the fair value of the debt, a discount rate of 20% for lack of marketability, and a discount rate of 20% for lack of control.
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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)
SeptemberJune 30, 20222023
(unaudited)
As of September 30,December 31, 2022, the Company measured the following assets at fair value (in thousands):
 Fair Value Measurements UsingFair Value Measurements Using
TotalQuoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
TotalQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Recurring Basis:Recurring Basis:Recurring Basis:
Real estate equity securitiesReal estate equity securities$63,784 $63,784 $— $— Real estate equity securities$60,153 $60,153 $— $— 
Asset derivative - interest rate capsAsset derivative - interest rate caps$1,971 $— $1,971 $— Asset derivative - interest rate caps$2,267 $— $2,267 $— 
Liability derivative - foreign currency collarLiability derivative - foreign currency collar$3,115 $— $3,115 $— 
Nonrecurring Basis:Nonrecurring Basis:Nonrecurring Basis:
Impaired real estateImpaired real estate$220,360 $— $— $220,360 Impaired real estate$212,800 $— $— $212,800 
Impaired goodwillImpaired goodwill$5,436 $— $— $5,436 Impaired goodwill$5,436 $— $— $5,436 

As of September 30, 2022, 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, 2022. 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 6.50% and a terminal cap rate of 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, 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, Oakland City Center, and the Springmaid Beach Resort. The fair value of the Company's real 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, 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, 2022
(unaudited)
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$$— $$— 
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.

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 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 an advisory agreement (the “Advisory Agreement”). The Advisory Agreement is currently effective through November 1, 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.
Pacific Oak Residential Advisors, LLC
Effective September 1, 2022, the CompanyCompany’s wholly-owned subsidiary, Pacific Oak Residential Trust, Inc. (“PORT”), entered into an advisory agreement with Pacific Oak Residential Advisors, LLC (“PORA”) (the “PORT Advisory Agreement”) pursuant to which PORA will act as a product specialist with respect to the Company’s residential homes portfolio, held through a wholly owned subsidiary.PORT. The PORT Advisory Agreement has an initial two-year term and may be renewed for additional one-year terms. Pursuant to the PORT Advisory Agreement, the CompanyPORT 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 (2) a quarterly asset management fee equal to 0.25% (1.0% annually) on the aggregate value of the Company’s residential homes portfolio assets, as determined in accordance with the Company’sPORT’s valuation 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’sPORT’s proportionate share of the joint venture. For substantial assistance in connection with the sale of properties or other investments related to the Company’s residential homes portfolio, the CompanyPORT also pays PORA or its affiliates 1.0% of the contract sales price with a limit to not exceed commission paid to unaffiliated third parties.
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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)
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”).which was subsequently renewed as of November 1, 2022. Under the Amended Company Advisory Agreement, the Company will no longerdoes not 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 under the Amended Company Advisory Agreement.

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1.     Financial Statements (continued)
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 2023
(unaudited)
DMH Realty, LLC
Effective September 1, 2022, the CompanyPORT 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 CompanyPORT 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 limited 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 the Private Offering, pursuant to a dealer manager agreement effective as of September 9, 2022, which was subsequently amended and restated as of January 13, 2023 to reflect the creation of a $5 million escrow arrangement (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 the sale of shares under the distribution reinvestment plan. The Advisor is the sponsor for the Private Offering and as the sponsor, they will incur reimbursable organization and offering costs on behalf of PORT. PORT will ratably reimburse the Advisor over a 60-month period following the first anniversary of the commencement of the offering. PORT will incur an organization and offering expense fee equal to 0.5% of the NAV of each share sold in the Private Offering to help fund the reimbursement to the sponsor.

Pursuant to the terms of these agreements, summarized below are the related-party costs incurred by the Company for the three and six months ended June 30, 2023 and 2022, respectively, and any related amounts payable as of June 30, 2023 and December 31, 2022 (in thousands):
Incurred during the three months ended June 30,Incurred during the six months ended June 30,Payable as of
Expensed2023202220232022June 30, 2023December 31, 2022
Asset management fees$3,710 $3,189 $7,684 $6,315 $5,491 $2,618 
Property management fees (1)
859 133 1,523 258 298 181 
Disposition fees58 — 420 107 — — 
Capitalized
Reimbursable offering costs (2)
894 — 894 — 894 — 
$5,521 $3,322 $10,521 $6,680 $6,683 $2,799 
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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)
SeptemberJune 30, 20222023
(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) DispositionProperty management fees with respectrelated to real estate soldDMH Realty are included inrecorded as operating, maintenance, and management expenses on the gain (loss) on sale of real estate in the accompanyingCompany’s consolidated statements of operations.
(2) Change in estimate of fees payableReimbursable offering costs to the Company’s previous advisor, KBS Capital Advisors LLC (“KBS Capital Advisors) dueAdvisor related to the termination of the former advisory agreement with KBS Capital Advisors.
(3) Acquisition fees associated with asset acquisitionsPrivate Offering are capitalized while costs associated with business combinations expensedand recorded as incurred.
PORT OP LP Share Redemption
On June 24, 2022,prepaid expenses and other assets on 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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balance sheet.

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)
Pacific Oak Opportunity Zone Fund I
As of SeptemberJune 30, 2022,2023, the Company’s investment balance in the Pacific Oak Opportunity Zone Fund I, LLC (“Pacific Oak Opportunity Zone Fund I”) is $26.3$26.2 million, which is 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 incurred (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 willwould be distributed to the Company. During the three and nine months ended September 30, 2022, the Company recorded $0.3 million and $0.4 million, respectively, of waived asset management fees recorded as equity in income of unconsolidated entities. During the three and nine months ended September 30, 2021, the Company recorded $0.2 million and $0.3 million, respectively, of waived asset management fees recorded as equity in income of unconsolidated entities.

8. INVESTMENTINVESTMENTS IN UNCONSOLIDATED ENTITIES
As of SeptemberJune 30, 20222023 and December 31, 2021,2022, the Company’s investments in unconsolidated entities were composed of the following (dollars in(in thousands):
Number of Properties as of September 30, 2022Investment Balance atNumber of Properties as of June 30, 2023Investment Balance as of
Joint VentureJoint VentureLocationOwnership %September 30, 2022December 31, 2021Joint VentureLocationOwnership %June 30, 2023December 31, 2022
110 William Joint Venture110 William Joint Venture1New York, New York60.0%$— $— 110 William Joint Venture1New York, New York
60% (1)
$— (2)$— 
353 Sacramento Joint Venture353 Sacramento Joint Venture1San Francisco, California55.0%46,572 49,916 353 Sacramento Joint Venture1San Francisco, California55.0%26,290 45,173 
Pacific Oak Opportunity Zone Fund I(3)Pacific Oak Opportunity Zone Fund I(3)3Various46.0%26,266 27,215 Pacific Oak Opportunity Zone Fund I(3)3Various46.0%26,219 25,669 
PORT II OP LP(1)(1)(1)(1)11,125 
$72,838 $88,256 $52,509 $70,842 
_____________________
(1) On June 27, 2023, Pacific Oak SOR SREF III 110 William, LLC (the “110 William Joint Venture”) executed a lease for approximately 640,000 square feet of office space in the 110 William Joint Venture’s property. Additionally, in July 1, 2022,2023, the 110 William Joint Venture completed a debt and equity restructuring. Refer to Note 11 for further discussion.
(2) As of June 30, 2023, the Company’s investment in the 110 William Joint Venture was $0 due to historical distributions from the 110 William Joint Venture exceeding the Company’s book value and the Company through PORT OP, made a tender offersuspended the equity method of accounting.
(3) The maximum exposure to purchase 76,735 shares of PORT II common stock held by unrelated parties for a price of $14.66 per share. Asloss as a result of the Company determined that it became the primary beneficiary of PORT II, which resultedCompany’s investment in the consolidation of PORT II intoPacific Oak Opportunity Zone Fund I is limited to the Company’s consolidated financial statements. On July 29, 2022, the Company consummated the transactions with the unrelated parties and owned 100% of PORT II. See Note 3 for the assessmentcarrying amount of the fair 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 Company to provide financial support to PORT II. The Company and the aforementioned unrelated parties did not guarantee any debt in connection with the transaction.investment.





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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)
June 30, 2023
(unaudited)
Summarized financial information for investments in unconsolidated entities (in thousands):
June 30, 2023December 31, 2022
Assets:
Real estate held for investment, net$475,063 $471,503 
Total assets541,670 546,142 
Liabilities:
Notes payable related to real estate held for investment, net498,579 490,302 
Total liabilities526,208 501,861 
Total equity$15,462 $44,281 
For the Three Months Ended June 30,For the Six Months Ended June 30,
2023202220232022
Total revenues$10,673 $12,461 $21,793 $24,570 
Operating loss(13,718)(6,807)(27,753)(12,060)
Net loss$(13,771)$(6,795)$(27,719)$(12,036)
The Company’s investments in unconsolidated entities are reviewed for impairment annually or when conditions exist that may indicate that the decrease in the carrying amount of the investment has occurred and is other-than-temporary. Triggering events or impairment indicators for the Company’s investments in unconsolidated entities may include recurring operating losses, change in economic environment, and weakening of the general market condition of the geographic area. Upon determination that an other-than-temporary impairment has occurred, an impairment is recognized in loss from unconsolidated entities, net to reduce the carrying amount of the investment to its estimated fair value.
During the three and six months ended June 30, 2023, the carrying amount of the Company’s investment in a joint venture was impaired by $14.8 million, primarily due to weakening market conditions of the geographic area. During three and six months ended June 30, 2022, no investments in unconsolidated entities were impaired.

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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)
June 30, 2023
(unaudited)
9. REPORTING SEGMENTS
The Company recognizes three reporting segments for the three and six months ended June 30, 2023 and 2022: 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. The selected financial information for reporting segments for the three and six months ended June 30, 2023 and 2022 are as follows (in thousands):
Three Months Ended June 30, 2023
Strategic Opportunistic PropertiesResidential HomesHotelTotal
Total revenues$23,874 $9,457 $2,565 $35,896 
Total expenses(64,298)(11,403)(3,261)(78,962)
Total other (loss) income(14,482)21 46 (14,415)
Net (loss) before income taxes$(54,906)$(1,925)$(650)$(57,481)
Six Months Ended June 30, 2023
Strategic Opportunistic PropertiesResidential HomesHotelTotal
Total revenues$49,761 $18,782 $5,478 $74,021 
Total expenses(119,673)(22,668)(6,162)(148,503)
Total other income797 21 75 893 
Net (loss) income before income taxes$(69,115)$(3,865)$(609)$(73,589)


Three Months Ended June 30, 2022
Strategic Opportunistic PropertiesSingle-Family HomesHotelsTotal
Total revenues$24,884 $5,801 $12,854 $43,539 
Total expenses(13,699)(6,505)(9,432)(29,636)
Total other (loss) income(21,797)(479)(22,272)
Net (loss) income before income taxes$(10,612)$(1,183)$3,426 $(8,369)
Six Months Ended June 30, 2022
Strategic Opportunistic PropertiesSingle-Family HomesHotelsTotal
Total revenues$51,750 $11,544 $18,771 $82,065 
Total expenses(40,776)(13,009)(16,844)(70,629)
Total other (loss) income(26,387)(521)2,372 (24,536)
Net (loss) income before income taxes$(15,413)$(1,986)$4,299 $(13,100)

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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)
SeptemberJune 30, 20222023
(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 multifamily homes, see Note 3 for further details on the acquisition. On September 1, 2022, the Company made a prospective name change to the “Hotels” segment to “Hotel” to reflect the September 1, 2022 disposition of the Springmaid Beach Resort, see Note 3 for further details on the disposition. The selected financial information for reporting segments for the three and nine months ended September 30, 2022 and 2021 are as 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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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)
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 reporting segments as of SeptemberJune 30, 20222023 and December 31, 20212022 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 three and nine months ended September 30, 2022, the Company recorded impairment charges on goodwill of $5.5 million and $2.6 million related to the Strategic Opportunistic Properties and Hotel segments, respectively. 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.
June 30, 2023
Strategic Opportunistic PropertiesResidential HomesHotelTotal
Total assets$1,029,968 $333,241 $51,367 $1,414,576 
Goodwill4,220 — 1,216 5,436 
December 31, 2022
Strategic Opportunistic PropertiesResidential HomesHotelTotal
Total assets$1,173,481 $333,128 $52,636 $1,559,245 
Goodwill4,220 — 1,216 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, 2022
(unaudited)
11. PORT MEZZANINE EQUITY
The following is a reconciliation of PORT’s noncontrolling cumulative convertible redeemable preferred stock for the nine months ended September 30, 2022 and 2021 (dollars in thousands):
Series A Preferred StockSeries B Preferred Stock
SharesAmountsSharesAmounts
Balance, December 31, 202115,000 $15,134 125 $99 
Dividends Available Upon Redemption— 1,045 — 
Dividends Paid— (1,045)— (8)
Balance, September 30, 202215,000 $15,134 125 $99 
Series A Preferred StockSeries B Preferred Stock
SharesAmountsSharesAmounts
Balance, December 31, 202015,000 $15,134 125 $99 
Dividends Available Upon Redemption— 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. (“Battery Point”). Battery Point is a real estate investment trust that owned, at the time of acquisition, 559 single-family rental homes throughout the midwestern and southeastern United States. All of these assets are held by the Company through its subsidiary, PORT OP.
The Company acquired Battery Point by acquiring all the 1,000,000 outstanding shares of Battery Point common stock from BPT Holdings. 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 Special 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 
_____________________
(1) On 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 redeemed the noncontrolling interest in PORT OP in July 2022.
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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)

12.10. COMMITMENTS AND CONTINGENCIES
Lease Obligations
As of SeptemberJune 30, 2022,2023, the Company’s lease and rights to a leasehold interest with respect to 210 West 31st, Street, which was accounted for as a finance lease, are included in the consolidated balance sheetsheets as follows:
Right-of-use asset (included in real estate held for investment, net) net, in thousands)(1)
$7,281 
Lease obligation (included in other liabilities)liabilities, in thousands)9,4249,491 
Remaining lease term91.3 years90.4
Discount rate4.8 %
The components of lease expense were as follows:
Interest on lease obligation for the three months ended SeptemberJune 30, 20222023 (in thousands)112$113 
Interest on lease obligation for the ninesix months ended SeptemberJune 30, 20222023 (in thousands)334225 
_____________________
(1) During the three and nine months ended September 30, 2022, the Company wrote down its right-of-use asset and recorded an impairment charge of $0.8 million on 210 West 31st Street.
As of SeptemberJune 30, 2022,2023, the Company had a leasehold interest expiring in 2114. Future minimum lease payments owed by the Company under the finance lease as of SeptemberJune 30, 20222023 are as follows (in thousands):
July 1, 2021 through December 31, 2021$90 
2022360 
2023360 
July 1, 2023 through December 31, 2023July 1, 2023 through December 31, 2023$180 
20242024393 2024360 
20252025396 2025393 
20262026396 
20272027396 
ThereafterThereafter52,167 Thereafter51,771 
Total expected minimum lease obligationsTotal expected minimum lease obligations53,766 Total expected minimum lease obligations53,496 
Less: Amount representing interest (1)
Less: Amount representing interest (1)
(44,342)
Less: Amount representing interest (1)
(44,005)
Present value of net minimum lease payments (2)
Present value of net minimum lease payments (2)
$9,424 
Present value of net minimum lease payments (2)
$9,491 
_____________________
(1) Interest includes the amount necessary to reduce the total expected minimum lease obligations to present value calculated at the Company’s incremental borrowing rate at acquisition.
(2) The present value of net minimum lease payments are presented in other liabilities in the accompanying consolidated balance sheets.
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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)
June 30, 2023
(unaudited)
Economic Dependency
The Company is dependent on the Advisor, PORA, and DMH Realty 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, isPORA, and DMH Realty are unable to provide these services, the Company will be required to obtain such services from other sources.

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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)
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 SeptemberJune 30, 2022.2023. 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.
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.

13.11. SUBSEQUENT EVENTS
The Company evaluates subsequent events up until the date the consolidated financial statements are issued.
Dividends on and accretion to redemption value of Series A Redeemable Preferred Stock110 William Joint Venture
On October 25, 2022,July 5, 2023, in exchange for the Company’s 77.5% preferred interest ownership percentage in the 110 William Joint Venture, the Company received noticeagreed to make future capital contributions of up to $105.0 million to fund expenditures and improvements (the “Capital Contributions”). The 110 William Joint Venture also exchanged a mezzanine loan encumbering the property of approximately $85.7 million between 110 William Mezz III, LLC, an indirect subsidiary of 110 William Joint Venture, as a borrower and Invesco CMI Investments 110 William, LLC (“Invesco”) as lender, into Invesco’s 22.5% preferred equity interest in the 110 William Joint Venture. As part of the restructuring, SREF III 110 William JV, LLC’s previous 40% membership interest was diluted in exchange for contingent consideration of 10% of net cash received. Following the buyout of SREF III 110 William JV, LLC, the Company held 100% of the common interests in the joint venture for previously contributed capital.
110 William Joint Venture entered into an amended loan agreement, which restructured the original loan of $248.7 million (the “Original Loan”), and increased the supplemental loan by $56.7 million (the “Supplemental Loan”). The initial maturity date of the holdersOriginal Loan and the Supplemental Loan are July 5, 2026, although the maturity date may be extended. The interest rate with respect to the Original Loan is the sum of PORT’s SOFR plus a spread beginning at 2% and increasing up to 3% during the term of the loan and any extension period, and the interest rate with respect to the Supplemental Loan is the sum of SOFR plus a spread beginning at 3% and increasing up to 3.5% during the term of the loan and any extension period. Pacific Oak SOR Properties, LLC, an indirect subsidiary of the Company is the guarantor for all debt service under the amended loan agreement and the Capital Contributions.

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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)
June 30, 2023
(unaudited)
Series A noncontrolling cumulative convertible redeemable preferred stockC Bonds
On July 6, 2023, Pacific Oak SOR BVI, completed a public offering to redeem their outstanding redeemable preferred stock. If outstandingIsraeli investors, of 319.6 million Israeli new Shekels (approximately $86.4 million) Series C Bonds. The Series C Bonds were issued and registered with the Tel Aviv Stock Exchange on November 4, 2022,July 9, 2023. The terms of the Series A redeemable preferred stock must be redeemedC Bonds are governed by a deed of trust, containing various financial covenants, among Pacific Oak SOR BVI and Reznik Paz Nevo Trusts Ltd., as trustee. The notes will bear interest at the Company within 120 days after November 4, 2022.rate of 9% per year. The Company authorizedSeries C Bonds mature on June 30, 2026 and approvedare collateralized by land.
On July 17, 2023, Pacific Oak SOR BVI issued additional Series C bonds in the redemptionamount of all 15,000 outstanding20.7 million Israeli new Shekels. The Series A Preferred Shares,C Expansion was issued at a price1.0% discount, resulting in a total consideration of (i) $1,120 per20.5 million Israeli new Shekels (approximately $5.6 million). The Series A Preferred Share, plus (ii) all accrued but unpaid dividends, throughC Expansion has an equal level of security, pari passu, amongst themselves and between them and the redemption date.initial Series C Bonds, without any right of precedence or preference between any of them.
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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 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.
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.
Inflation and increased interest rates may adversely affect our financial condition and results of operations, including with respect to our ability to refinance maturing debt.
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 assets.
All forward-looking statements should be read in light of the risks identified in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021,2022, and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the period ended March 31, 2023, each as filed with the Securities and Exchange Commission (the “SEC”).

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
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. Pacific Oak Capital Advisors, LLC (“Pacific Oak Capital Advisors”) is our advisor and as our advisor, Pacific Oak Capital Advisors manages our day-to-day operations and our portfolio of investments. Pacific Oak Capital Advisors also has the authority to make all of the decisions regarding our investments, except for our residential homes portfolio. Our residential homes portfolio, held through our subsidiary Pacific Oak Residential Trust, Inc. (“PORT”), is managed by Pacific Oak Residential Advisors, LLC (“PORA”), an affiliate of Pacific Oak Capital Advisors. The advisory duties are 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, real estate equity securities and other real estate-related investments. We conduct our business primarily through our operating partnership,Operating Partnership, of which we are the sole general partner.
As of SeptemberJune 30, 2022,2023, we consolidated eight office properties, one office portfolio consisting of two office buildings and 1425 acres of undeveloped land, two apartment properties, one hotel property, one residential home portfolio consisting of 2,4582,453 residential homes, threetwo investments in undeveloped land with approximately 800671 developable acres, one office/retail development property and owned three investments in unconsolidated entities and three investments in real estate equity securities.
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.
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 and funding obligations, redemptions and purchases of our common stock and payments of distributions to stockholders. 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 SeptemberJune 30, 2022,2023, we had sold 6,851,969 shares of common stock under the dividend reinvestment plan for gross offering proceeds of $76.5 million. The Company ceased offering shares of common stock in its primary offering on November 14, 2012 and suspended offering shares under its dividend reinvestment plan as of March 28, 2023. 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 and, 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.
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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 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 collectability of rent and operating recoveries from our tenants and how well we manage our expenditures. As of SeptemberJune 30, 2022,2023, our office properties were collectively 70%68% occupied, our residential home portfolio was 96%95% occupied and our apartment properties were 95%93% occupied.
Our investmentsinvestment in the hotel properties generateproperty generates 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 areproperty is primarily dependent upon the occupancy levels of our hotels,hotel, the average daily rates and how well we manage our expenditures. The following table provides summary information regarding our hotel propertiesproperty for the ninesix months ended SeptemberJune 30, 20222023 and 2021:2022:
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
_____________________
Percentage Occupied for the Six Months Ended June 30,Average Daily Rate for the Six Months Ended June 30,Average Revenue per Available Room for the Six Months Ended June 30,
PropertyNumber of Rooms202320222023202220232022
Q&C Hotel19671.0%66.3%$190.77$207.64$135.45$137.63
(1) 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 SeptemberJune 30, 2022,2023, we had three investments in real estate equity securities outstanding with a total carrying value of $63.8$30.5 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 SeptemberJune 30, 20222023 did not exceed the charter-imposed limitation.
For the ninesix months ended SeptemberJune 30, 2022,2023, our cash needs for capital expenditures, redemptions of common stock and debt servicingrequirements were met with proceeds from dispositions of real estate, proceeds from debt financing and cash on hand.hand, except where otherwise noted. 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 SeptemberJune 30, 2022,2023, we had outstanding debt obligations in the aggregate principal amount of $1.1 billion,$993.1 million, with a weighted-average remaining term of 2.31.7 years. As of SeptemberJune 30, 2022,2023, we had a total of $386.9$460.1 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 also agreed to fund expenditures and improvements in our 110 William Joint Venture of up to $105.0 million. We have begun conversations with our lenders about refinancing options upon maturity and we believe it is possible that we will be successful in refinancing the amounts outstanding. There can be no assurance that the refinancing will occur or on the terms currently contemplated. If sufficient refinancing cannot be arranged to satisfy our upcoming obligations, we believe we have other options to meet our obligations. These other options include but are not limited to, refinancing with other lending institutions, issuing additional debt, and selling properties and using net sales proceeds to satisfy the obligations. We believe that with these options we have sufficient cash on hand and availability to address our debt maturities and capital needs scheduled to mature within 12 months of June 30, 2023.
We have elected to be taxed as a REIT and intend to operate as a REIT. To maintain our qualification as a REIT, we are required to make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (computed without regard to the dividends paid deduction and excluding net capital gain). Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board of directors deems relevant. We have not established a minimum distribution level.

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Cash Flows from Operating Activities
As of SeptemberJune 30, 2022,2023, we consolidated eight office properties, one office portfolio consisting of two office buildings and 1425 acres of undeveloped land, two apartment properties, one hotel properties,property, one residential home portfolio consisting of 2,4582,453 residential homes, threetwo investments in undeveloped land with approximately 800671 developable acres, one office/retail development property and owned three investments in unconsolidated entities and three investments in real estate equity securities. During the ninesix months ended SeptemberJune 30, 2022,2023, net cash provided byused in operating activities was $8.7$9.4 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 $70.3$27.3 million for the ninesix months ended SeptemberJune 30, 20222023 and primarily consisted of the following:
Proceeds from sales of real estate net of $97.9$40.8 million;
Contributions to unconsolidated entitiesNet cash paid on foreign currency derivative settlements of $23.9$18.0 million, as a result of purchase of foreign currency derivatives of $67.1 million and proceeds from disposition of foreign currency derivatives of $49.2 million;
Earnest money received of $17.0 million related toProceeds from the pending sale of Park Highlands land;real estate equity securities of $13.6 million; and
Improvements to real estate of $16.5 million;
Proceeds from advances due from affiliates of $8.2 million;
Acquisitions of real estate of $6.7 million; and
Funding of $6.4 million for development obligations related to Park Highlands land.$10.3 million.
Cash Flows from Financing Activities
Net cash used in financing activities was $37.3$60.2 million for the ninesix months ended SeptemberJune 30, 20222023 and primarily consisted of the following:
$11.0 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
$3.556.3 million of net cash used forin debt and other financings as a result of principal payments on notes payable of $190.5$56.9 million and payments of deferred financing costs of $4.7$0.4 million and partially offset by proceeds from notes payable of $191.7 million.$1.0 million; and
$3.2 million of cash used for redemptions of common stock.
In order to execute our investment strategy, we utilize secured debt and we may, to the extent available, utilize unsecured debt, to finance a portion of our investment portfolio. Management remains vigilant in monitoring the risks inherent with the use of debt in our portfolio and is taking actions to ensure that these risks, including refinancing and interest risks, are properly balanced with the benefit of using leverage. There is no limitation on the amount we may borrow for any single investment. Our charter limits our total liabilities such that our total liabilities may not exceed 75% of the cost of our tangible assets; however, we may exceed that limit if a majority of the conflicts committee approves each borrowing in excess of our charter limitation and we disclose such borrowing to our common stockholders in our next quarterly report with an explanation from the conflicts committee of the justification for the excess borrowing. As of SeptemberJune 30, 2022,2023, our borrowings and other liabilities were both approximately 70%64% of the cost (before depreciation and other noncash reserves) and the book value (before depreciation) of our tangible assets.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
On February 16, 2020, Pacific Oak Strategic Opportunity BVI issued 254.1 million Israeli new Shekels (approximately $74.1 million as of February 16, 2020) of the Series B Debenturesdebentures (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 November 1, 2021, Pacific Oak Strategic Opportunity BVI issued additional Series B Debentures insubsequent to the amountinitial issuance and as of 536.4 millionJune 30, 2023, 1.2 billion 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(approximately $314.1 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 offering.June 30, 2023) were outstanding. 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 ($16.7 million as of 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 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.
On July 6, 2023, Pacific Oak Strategic Opportunity BVI completed a public offering to Israeli investors 319.6 million Israeli new Shekels (approximately $86.4 million) Series C Bonds. Additionally, on July 17, 2023, Pacific Oak SOR BVI issued an additional 20.7 million Israeli new Shekels (approximately $5.6 million) of Series C Expansion. Refer to the Subsequent Events section for further discussion.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
In addition to making investments in accordance with our investment objectives, we use or have used our capital resources to make certain payments to our advisor and our dealer manager. During our offering stage, these payments included payments to our dealer manager for selling commissions and dealer manager fees related to sales in our primary offering and payments to our dealer manager and our advisor for reimbursement of certain organization and other offering expenses related both to the primary offering and the dividend reinvestment plan. During our acquisition and development stage, we expect to continue to make payments to our advisor in connection with the selection and origination or purchase of investments, the management of our assets and costs incurred by our advisor in providing services to us as well as for any dispositions of assets (including the discounted payoff of non-performing loans).
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. Investments made in or through PORT are excluded from the calculation of the asset management fee we pay to our advisor. In addition to other fees described in the advisory agreement between PORT and PORA, PORT pays PORA a quarterly asset management fee equal to 0.25% (1.0% annually) on the aggregate value of PORT’s assets, as determined in accordance with PORT’s valuation guidelines, as of the end of each quarter.
Contractual Commitments and Contingencies
The following is a summary of our contractual obligations as of SeptemberJune 30, 20222023 (in thousands):
Payments Due During the Years Ending December 31,Payments Due During the Years Ending December 31,
Contractual ObligationsContractual ObligationsTotalRemainder of 20222023-20242025-2026ThereafterContractual ObligationsTotalRemainder of 20232024-20252026-2027Thereafter
Outstanding debt obligations (1)
Outstanding debt obligations (1)
$1,066,736 $49,441 $495,012 $522,283 $— 
Outstanding debt obligations (1)
$993,087 $264,241 $459,913 $268,933 $— 
Interest payments on outstanding debt obligations (2)
Interest payments on outstanding debt obligations (2)
85,083 12,459 55,469 17,155 — 
Interest payments on outstanding debt obligations (2)
68,174 23,098 42,624 2,452 — 
Finance lease obligationFinance lease obligation53,766 90 720 789 52,167 Finance lease obligation53,496 180 753 792 51,771 
_____________________
(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 SeptemberJune 30, 2022.2023.



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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Results of Operations
Overview
As of SeptemberJune 30, 2022,2023, we consolidated eight office properties, one office portfolio consisting of two office buildings and 1425 acres of undeveloped land, two apartment properties, one hotel property, one residential home portfolio consisting of 2,4582,453 residential homes, threetwo investments in undeveloped land with approximately 800671 developable acres, one office/retail development property and owned three investments in unconsolidated entities 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. Our results of operations for the three and ninesix months ended SeptemberJune 30, 20222023 may not be indicative of those in future periods due to acquisition and disposition activities. Additionally, the occupancy in our office properties excluding our residential home portfolio, has not been stabilized. As of SeptemberJune 30, 2022,2023, our office properties were collectively 70%69% occupied, our residential home portfolio was 96%95% occupied and our apartment properties were 95%was 93% 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 occupanciesthe occupancy of our assets will increase, or that we will recognize a gain on the sale of our assets. In general, we expect that our income and expenses related to our portfolio will increase in future periods as a result of leasing additional space and acquiring additional assets but decrease due to disposition activity.
Comparison of the three months ended June 30, 2023 versus the three months ended June 30, 2022

The following table provides summary information about our results of operations for the three months ended June 30, 2023 and 2022 (dollar amounts in thousands):
 Three Months Ended June 30,Increase (Decrease)Percentage Change
$ Change Due to Acquisitions/Dispositions (1)
$ Change Due to 
Investments Held Throughout
Both Periods (2)
20232022
Rental income$32,152 $28,979 $3,173 11 %$3,611 $(438)
Hotel revenues2,565 12,854 (10,289)(80)%(9,755)(534)
Other operating income1,066 887 179 20 %— 179 
Dividend income from real estate equity securities113 819 (706)(86)%— (706)
Operating, maintenance, and management11,107 10,342 765 %883 (118)
Real estate taxes and insurance5,843 5,079 764 15 %845 (81)
Hotel expenses1,984 6,998 (5,014)(72)%(5,187)173 
Asset management fees to affiliates3,710 3,189 521 16 %606 (85)
General and administrative expenses3,222 2,983 239 %n/an/a
Foreign currency transaction loss (gain), net6,272 (23,833)30,105 (126)%n/an/a
Depreciation and amortization12,110 14,098 (1,988)(14)%750 (2,738)
Interest expense15,788 10,780 5,008 46 %(5)5,013 
Impairment charges on real estate and related intangibles18,926 — 18,926 100 %n/an/a
Loss from unconsolidated entities, net(14,630)(2,075)(12,555)605 %355 (12,910)
Other interest income1,012 48 964 2,008 %n/an/a
Loss on real estate equity securities, net(4,089)(20,070)15,981 (80)%— 15,981 
Gain (loss) on sale of real estate3,292 (175)3,467 (1,981)%3,467 — 
_____________________
(1) Represents the dollar amount increase (decrease) for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 related to real estate and real estate-related investments acquired or disposed on or after July 1, 2022.
(2) Represents the dollar amount increase (decrease) for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 with respect to real estate and real estate-related investments owned by us during the entirety of both periods presented.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Comparison of the three months ended September 30, 2022 versus the three months ended September 30, 2021
The following table provides summary information about our results of operations for the three months ended September 30, 2022 and 2021 (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)
20222021
Rental income$31,445 $29,504 $1,941 %$1,511 $430 
Hotel revenues9,182 12,153 (2,971)(24)%(2,892)(79)
Other operating income830 923 (93)(10)%(89)(4)
Dividend income from real estate equity securities2,148 3,189 (1,041)(33)%— (1,041)
Operating, maintenance, and management12,342 10,668 1,674 16 %858 816 
Real estate taxes and insurance5,650 5,262 388 %365 23 
Hotel expenses5,377 6,483 (1,106)(17)%(1,249)(1,106)
Asset management fees to affiliate3,630 3,422 208 %210 (2)
General and administrative expenses2,504 2,365 139 %n/an/a
Foreign currency transaction (gain) loss, net(6,001)2,271 (8,272)(364)%n/an/a
Depreciation and amortization12,717 13,895 (1,178)(8)%436 (1,614)
Interest expense12,976 10,092 2,884 29 %161 2,723 
Impairment charges on real estate11,942 10,971 971 %n/an/a
Impairment charges on goodwill8,098 2,808 5,290 188 %n/an/a
Equity in loss of unconsolidated entities(3,376)(569)(2,807)493 %— (2,807)
Casualty-related gain— 27 (27)(100)%n/an/a
Other interest income61 55 11 %n/an/a
Loss on real estate equity securities(20,722)(2,614)(18,108)693 %— (18,108)
Change in subordinated performance fee due upon termination to affiliate— (1,545)1,545 (100)%n/an/a
(Loss) gain on sale of real estate(75)216 (291)(135)%(291)— 
Gain on extinguishment of debt— 1,352 (1,352)100 %n/an/a
Gain 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, 2022 compared to the three months ended September 30, 2021 related to real estate and real estate-related investments acquired or disposed on or after October 1, 2021.
(2) Represents the dollar amount increase (decrease) for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 with respect to real estate and real estate-related investments owned by us during the entirety of both periods presented.
Rental income increased from $29.5to $32.2 million for the three months ended SeptemberJune 30, 2021 to $31.42023 from $29.0 million for the three months ended SeptemberJune 30, 2022, primarily as a result of the consolidation of Pacific Oak Residential Trust II, Inc. (“PORT II consolidation,II”) in July 2022, which attributed to a $3.0accounted for approximately $3.7 million increase and partially offset byof rental income during the disposition of City Tower on July 27, 2021, which attributed to a $1.1 million decrease.three months ended June 30, 2023. There were no significant changes to the occupancy rate and annualized base rent per square foot of our office properties held throughout both periods. We expect rental income to increase in future periods as a result of leasing additional space and to the extent we acquire additional properties, but to decrease to the extent we dispose of properties.
Hotel revenues decreased from $12.2to $2.6 million for the three months ended SeptemberJune 30, 2021 to $9.22023 from $12.9 million for the three months ended SeptemberJune 30, 2022, primarily as a result of the disposition of the Springmaid Beach Resort onin September 1, 2022, which accounted for approximately $9.4 million of hotel revenues during the three months ended June 30, 2022.
Operating, maintenance, and partially offset by the increase in occupancy for the Q&C Hotel.
Property operatingmanagement costs, and real estate taxes and insurance increased from $10.7to $11.1 million and $5.8 million, respectively, for the three months ended SeptemberJune 30, 2021 to $12.32023 from $10.3 million and $5.1 million, respectively for the three months ended SeptemberJune 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 dispositionconsolidation of City Tower. RealPORT II, which accounted for approximately $0.9 million and $0.8 million of operating, maintenance, and management costs, and real estate taxes and insurance, slightly increased betweenrespectively, during the two periods.three months ended June 30, 2023. We expect property operating, maintenance, and management costs and real estate taxes and insurance to increase in future periods 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.
Hotel expenses decreased to $2.0 million for the three months ended June 30, 2023 from $7.0 million for the three months ended June 30, 2022, primarily as a result of the disposition of the Springmaid Beach Resort during 2022, which accounted for approximately $4.6 million of hotel expenses during the three months ended June 30, 2022
Asset management fees increased to $3.7 million for the three months ended June 30, 2023 from $3.2 million for the three months ended June 30, 2022, primarily due to the consolidation of PORT II, which accounted for approximately $0.8 million increase during the three months ended June 30, 2023. 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.
We recognized a $6.3 million foreign currency transaction loss, net for the three months ended June 30, 2023 and $23.8 million of foreign currency transaction gain, net, for the three months ended June 30, 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 and partially offset by results of foreign currency collars.
Depreciation and amortization decreased to $12.1 million for the three months ended June 30, 2023 from $14.1 million for the three months ended June 30, 2022, primarily due to the disposition of the Springmaid Beach Resort, which accounted for approximately $0.5 million of depreciation and amortization during the three months ended June 30, 2022 and lease intangibles that were fully amortized during the three months ended June 30, 2022 and partially offset by the consolidation of PORT II, which accounted for $1.3 million of depreciation and amortization during the three months ended June 30, 2023. We expect depreciation and amortization to increase in future periods to the extent we acquire additional properties, but to decrease as a result of amortization of lease intangibles related to lease expirations and disposition of properties.
Interest expense increased to $15.8 million for the three months ended June 30, 2023 from $10.8 million for the three months ended June 30, 2022 primarily due to increased one-month floating rates during the three months ended June 30, 2023 and partially offset by a decrease in the outstanding debt balance during three months ended June 30, 2023. Our interest expense in future periods will vary based on interest rate fluctuations, the amount of interest capitalized and our level of future borrowings, which will depend on the availability and cost of debt financing and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives and will decrease to the extent we dispose of properties and pay down debt, including annual principal installment payments on the debentures.
During the three months ended June 30, 2023, we recognized impairment charges of $18.9 million for our two real estate properties. There were no impairments recognized during the three months ended June 30, 2022.
Loss from unconsolidated entities, net increased to $14.6 million for the three months ended June 30, 2023 from $2.1 million for the three months ended June 30, 2022, primarily related to the impairment of an unconsolidated joint venture of $14.8 million and partially offset by income recognized from an unconsolidated joint venture, which accounted for $1.1 million of income from unconsolidated entities for the three months ended June 30, 2023.
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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)
Hotel expensesLoss on real estate equity securities, net decreased from $6.5to $4.1 million for the three months ended SeptemberJune 30, 2021 to $5.42023 from $20.1 million for the three months ended SeptemberJune 30, 2022, primarily due to the dispositionwhich was composed of the Springmaid Beach Resort, which resulted in a decrease of $0.7 million. We expect hotel expenses to vary in future periods based on occupancy rates.
Asset management fees slightly increased from $3.4$9.9 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 the PORT II consolidation, which attributed to 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.
We recognized a $6.0 million foreign currency transaction gain, net for the three months ended September 30, 2022 and $2.3 million of foreign currency transactionunrealized loss net, for the three months ended September 30, 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.
Depreciation and amortization decreased from $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 the disposition of the Springmaid Beach Resort, which attributed to $0.5 million decrease, intangibles that were fully amortized in 2021, which attributed to a $1.0 million decrease, and 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 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 $10.1 million for the three months ended September 30, 2021 to $13.0 million for the three months ended September 30, 2022, 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 partially offset by a decrease in the 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 210 West 31st Street, Oakland City Center and the 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.
During the three months ended September 30, 2022, we recognized impairment charges 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.
Equity in loss of unconsolidated entities increased from $0.6 million for the three months ended September 30, 2021 to $3.4 million for the three months ended September 30, 2022, 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 $2.6held at June 30, 2023 and $5.8 million forrealized gain on real estate equity securities sold during the three months ended SeptemberJune 30, 2021 to $20.7 million for the three months ended September 30, 2022.2023. 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 SeptemberJune 30, 2022,2023, we consolidated PORT II and recognizedsold a vacant building related to the Madison Square property in Phoenix, Arizona (“Madison Square School”) that resulted in a gain from consolidationon sale of previously unconsolidated entityreal estate of $18.7$3.3 million.

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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)
There were no material dispositions during the three months ended June 30, 2022.
Comparison of the ninesix months ended SeptemberJune 30, 20222023 versus the ninesix months ended SeptemberJune 30, 20212022
The following table provides summary information about our results of operations for the ninesix months ended SeptemberJune 30, 20222023 and 20212022 (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)
Months Ended June 30,Increase (Decrease)Percentage Change
$ Change Due to Acquisitions/ Dispositions (1)
$ Change Due to 
Investments Held Throughout
Both Periods (2)
2022202120232022
Rental incomeRental income$89,806 $94,812 $(5,006)(5)%$(6,133)$1,127 Rental income$64,229 $58,360 $5,869 10 %$7,138 $(1,269)
Hotel revenuesHotel revenues27,952 24,578 3,374 14 %(314)3,688 Hotel revenues5,478 18,771 (13,293)(71)%(13,269)(24)
Other operating incomeOther operating income2,559 3,118 (559)(18)%(614)55 Other operating income2,204 1,728 476 28 %(15)491 
Dividend income from real estate equity securitiesDividend income from real estate equity securities5,354 6,693 (1,339)(20)%— (1,339)Dividend income from real estate equity securities2,110 3,206 (1,096)(34)%— (1,096)
Operating, maintenance, and managementOperating, maintenance, and management32,560 31,444 1,116 %(1,012)2,128 Operating, maintenance, and management22,275 20,218 2,057 10 %1,651 406 
Real estate taxes and insuranceReal estate taxes and insurance15,753 15,949 (196)(1)%(306)110 Real estate taxes and insurance12,260 10,103 2,157 21 %689 1,468 
Hotel expensesHotel expenses17,485 15,715 1,770 11 %(16)1,786 Hotel expenses3,945 12,109 (8,164)(67)%(8,693)529 
Asset management fees to affiliate9,945 10,802 (857)(8)%(481)(376)
Asset management fees to affiliatesAsset management fees to affiliates7,684 6,315 1,369 22 %1,166 203 
General and administrative expensesGeneral and administrative expenses8,486 7,120 1,366 19 %n/an/aGeneral and administrative expenses6,220 5,977 243 %n/an/a
Foreign currency transaction gain, net(37,100)(568)(36,532)6,432 %n/an/a
Foreign currency transaction loss (gain), netForeign currency transaction loss (gain), net3,553 (31,098)34,651 (111)%n/an/a
Depreciation and amortizationDepreciation and amortization39,379 45,969 (6,590)(14)%(2,521)(4,069)Depreciation and amortization24,158 26,662 (2,504)(9)%1,170 (3,674)
Interest expenseInterest expense33,319 30,713 2,606 %(1,301)3,907 Interest expense31,819 20,343 11,476 56 %(447)11,923 
Impairment charges on real estate and related intangiblesImpairment charges on real estate and related intangibles36,589 — 36,589 100 %n/an/a
Loss from unconsolidated entities, netLoss from unconsolidated entities, net(16,962)(2,754)(14,208)516 %451 (14,659)
Other interest incomeOther interest income1,216 94 1,122 1,194 %n/an/a
Loss on real estate equity securities, netLoss on real estate equity securities, net(16,122)(27,591)11,469 (42)%— 11,469 
Impairment charges on real estate11,942 10,971 971 %n/an/a
Impairment charges on goodwill8,098 2,808 5,290 188 %n/an/a
Equity in loss of unconsolidated entities(6,130)(144)(5,986)4,157 %— (5,986)
Casualty-related gain— 27 (27)(100)%n/an/a
Other interest income155 148 %n/an/a
(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 affiliate— (1,745)1,745 (100)%n/an/a
(Loss) gain on sale of real estate3,273 31,385 (28,112)(90)%(28,112)— 
Gain on sale of real estateGain on sale of real estate32,761 3,348 29,413 879 %29,413 — 
Gain on extinguishment of debtGain on extinguishment of debt2,367 1,365 1,002 73 %n/an/aGain on extinguishment of debt— 2,367 (2,367)(100)%n/an/a
Gain from consolidation of previously unconsolidated entity18,742 — 18,742 100 %18,742 — 
Income tax provisionIncome tax provision(3,662)— (3,662)100 %(3,662)— 
_____________________
(1) Represents the dollar amount increase (decrease) for the ninesix months ended SeptemberJune 30, 20222023 compared to the ninesix months ended SeptemberJune 30, 20212022 related to real estate and real estate-related investments acquired or disposed on or after OctoberJuly 1, 2021.2022.
(2) Represents the dollar amount increase (decrease) for the ninesix months ended SeptemberJune 30, 20222023 compared to the ninesix months ended SeptemberJune 30, 20212022 with respect to real estate and real estate-related investments owned by us during the entirety of both periods presented.
Rental income decreased from $94.8increased to $64.2 million for the ninesix months ended SeptemberJune 30, 2021 to $89.82023 from $58.4 million for the ninesix months ended SeptemberJune 30, 2022, primarily due toas a result of the dispositionconsolidation of City Tower, which attributed to a $8.7 million decrease and partially offset with the PORT II consolidation,in July 2022, which attributed to a $3.6accounted for approximately $7.3 million increase.of rental income during the six months ended June 30, 2023. There were no significant changes to the occupancy rate and annualized base rent per square foot of our office properties held throughout both periods. We expect rental income to increase in future periods as a result of leasing additional space and to the extent we acquire additional properties, but to decrease to the extent we dispose of properties.
Hotel revenues increased from $24.6decreased to $5.5 million for the ninesix months ended SeptemberJune 30, 2021 to $28.02023 from $18.8 million for the ninesix months ended SeptemberJune 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 fordisposition of the Springmaid Beach Resort as well asin September 2022, which accounted for approximately $12.7 million of hotel revenues during 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.six months ended June 30, 2022.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Property operatingOperating, maintenance, and management costs, and real estate taxes and insurance increased from $31.4to $22.3 million and $12.3 million, respectively, for the ninesix months ended SeptemberJune 30, 2021 to $32.62023 from $20.2 million and $10.1 million, respectively for the ninesix months ended SeptemberJune 30, 2022, primarily due to increase in legal and marketing fees related to various properties and the consolidation of PORT II, which attributed to an increase ofaccounted for approximately $1.7 million and was partially offset by the disposition$1.7 million of City Tower, which attributed to a $2.0 million decrease. Realoperating, maintenance, and management costs, and real estate taxes and insurance, slightly decreased betweenrespectively, during the two periods.six months ended June 30, 2023. We expect property operating, maintenance, and management costs and real estate taxes and insurance to increase in future periods 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.
Hotel expenses increased from $15.7decreased to $3.9 million for the ninesix months ended SeptemberJune 30, 2021 to $17.52023 from $12.1 million for the ninesix 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 SeptemberJune 30, 2022, primarily as a result of the disposition of City Tower,the Springmaid Beach Resort in September 2022, which attributedaccounted for approximately $8.1 million of hotel expenses during the six months ended June 30, 2022.
Asset management fees increased to a $0.8$7.7 million decrease and partially offset byfor the six months ended June 30, 2023 from $6.3 million for the six months ended June 30, 2022, primarily due to the consolidation of PORT II, consolidation, which attributed to anaccounted for approximately $1.5 million increase of $0.4 million.during the six months ended June 30, 2023. 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 $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$3.6 million foreign currency transaction loss, net for the six months ended June 30, 2023 and a $31.1 million foreign currency transaction gain, net for the ninesix months ended September 30, 2021 and $37.1 million foreign currency transaction gain, net, for the nine months ended SeptemberJune 30, 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.rates and partially offset by results of foreign currency collars.
Depreciation and amortization decreased from $46.0to $24.2 million for the ninesix months ended SeptemberJune 30, 2021 to $39.42023 from $26.7 million for the ninesix months ended SeptemberJune 30, 2022, primarily as a result ofdue to the disposition of City Tower,the Springmaid Beach Resort, which attributed to $2.4accounted for approximately $1.0 million decreaseof depreciation and amortization during the six months ended June 30, 2022 and lease intangibles that were fully amortized in 2021,during the six months ended June 30, 2022 and partially offset by the consolidation of PORT II, which attributed to a $3.4accounted for $2.2 million decrease.of depreciation and amortization during the six months ended June 30, 2023. We expect depreciation and amortization to increase in future periods as a result ofto the extent we acquire additional properties, but to decrease as a result of amortization of tenant origination costslease intangibles related to lease expirations and disposition of properties.
Interest expense increased from $30.7to $31.8 million for the ninesix months ended SeptemberJune 30, 2021 to $33.32023 from $20.3 million for the ninesix months ended SeptemberJune 30, 2022, primarily due to increasing benchmarkincreased one-month floating rates affecting our variable rate debt, increase in notes payable balance of $86.5 million related toduring the PORT II consolidation,six months ended June 30, 2023 and partially offset by a decrease in the notes payableoutstanding debt balance during the six months ended June 30, 2023. Our interest expense in future periods will vary based on interest rate fluctuations, the amount of $53.1 million relatedinterest capitalized and our level of future borrowings, which will depend on the availability and cost of debt financing and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives and will decrease to the dispositionextent we dispose of properties and pay down debt, including annual principal installment payments on the Springmaid Beach Resort.debentures.
During the ninesix months ended SeptemberJune 30, 2022,2023, we recognized impairment charges of $4.4$36.6 million $5.0 million and $2.5 million on 210 West 31st Street, Oakland City Center andfor our two real estate properties. There were no impairments recognized during the Springmaid Beach Resort, respectively. During the ninesix months ended SeptemberJune 30, 2021, we recognized impairment charges of $6.6 million on 210 West 31st Street and $4.4 million on Lincoln Court.2022.
During the nine months ended September 30, 2022, we recognized impairment charges on 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 loss ofLoss from unconsolidated entities, increase from $0.1net increased to $17.0 million for the ninesix months ended SeptemberJune 30, 2021 to $6.12023 from $2.8 million for the ninesix months ended SeptemberJune 30, 2022, primarily related to losses with the: 353 Sacramento Joint Venturethe impairment of $3.3 million loss, primarily as a resultan unconsolidated joint venture of the allowance for credit losses, the 110 William Joint Venture of $1.7$14.8 million and partially offset by income recognized from an unconsolidated joint venture, which accounted for $0.5 million of income from unconsolidated entities for the Pacific Oak Opportunity Zone Fund I of $0.4 million .six months ended June 30, 2023.
GainLoss on real estate equity securities, net decreased from $12.9to $16.1 million for the ninesix months ended SeptemberJune 30, 2021 to a $48.32023 from $27.6 million loss for the ninesix months ended SeptemberJune 30, 2022.2022, which was composed of $21.9 million unrealized loss on real estate equity securities held at June 30, 2023 and $5.8 million realized gain on real estate equity securities sold during the six months ended June 30, 2023. 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 six months ended June 30, 2023, we sold approximately 71 acres of developable land and the Madison Square School and recognized a gain on sale of real estate of $29.5 million and $3.3 million, respectively. During the six months ended June 30, 2022, we sold two office buildings related to the Richardson Portfolio and recognized a gain on sale of $3.6 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)
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. During the nine months ended September 30, 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, 2022, we consolidated PORT II and recognized a gain from consolidation of previously unconsolidated entity of $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.entities. In addition, we elected the option to exclude mark-to-market changes in value recognized on equity securities in the calculation of FFO. We believe FFO facilitates comparisons of operating performance between periods and among other REITs. However, our computation of FFO may not be comparable to other REITs that do not define FFO in accordance with the NAREIT definition or that interpret the current NAREIT definition differently than we do. Our management believes that historical cost accounting for real estate assets in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and provides a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities.
Changes in accounting rules have resulted in a substantial increase in the number of non-operating and non-cash items included in the calculation of FFO. As a result, our management also uses modified funds from operations (“MFFO”) as an indicator of our ongoing performance as well as our dividend sustainability. MFFO excludes from FFO: acquisition fees and expenses (to the extent that such fees and expenses have been recorded as operating expenses); adjustments related to contingent purchase price obligations; amounts relating to straight-line rents and amortization of above- and below-market intangible lease assets and liabilities; accretion of discounts and amortization of premiums on debt investments; amortization of closing costs relating to debt investments; impairments of real estate-related investments; mark-to-market adjustments included in net income; and gains or losses included in net income for the extinguishment or sale of debt or hedges. We compute MFFO in accordance with the definition of MFFO included in the practice guideline issued by the Institute for Portfolio Alternatives (“IPA”) in November 2010 as interpreted by management. Our computation of MFFO may not be comparable to other REITs that do not compute MFFO in accordance with the current IPA definition or that interpret the current IPA definition differently than we do.
In addition, our management uses an adjusted MFFO (“Adjusted MFFO”) as an indicator of our ongoing performance, as well as our dividend sustainability. Adjusted MFFO provides adjustments to reduce MFFO related to operating expenses that are capitalized with respect to certain of our investments in undeveloped land. 
We believe that MFFO and Adjusted MFFO are helpful as measures of ongoing operating performance because they exclude costs that management considers more reflective of investing activities and other non-operating items included in FFO. Management believes that excluding acquisition costs, prior to our early adoption of ASU No. 2017-01 on January 1, 2017, from MFFO and Adjusted MFFO provides investors with supplemental performance information that is consistent with management’s analysis of the operating performance of the portfolio over time, including periods after our acquisition stage. MFFO and Adjusted MFFO also exclude non-cash items such as straight-line rental revenue. Additionally, we believe that MFFO and Adjusted MFFO provide investors with supplemental performance information that is consistent with the performance indicators and analysis used by management, in addition to net income and cash flows from operating activities as defined by GAAP, to evaluate the sustainability of our operating performance. MFFO provides comparability in evaluating the operating performance of our portfolio with other non-traded REITs which typically have limited lives with short and defined acquisition periods and targeted exit strategies.  MFFO, or an equivalent measure, is routinely reported by non-traded REITs, and we believe often used by analysts and investors for comparison purposes.
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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.
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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)
Although MFFO includes other adjustments, the exclusion of straight-line rent, the amortization of above- and below-market leases, amortization of premium or discount on bond and notes payable, 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.
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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.income tax provision. We believe excluding this item appropriately presents the ongoing operating performance of our real estate investments on a comparative basis.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Our calculation of FFO, which we believe is consistent with the calculation of FFO as defined by NAREIT, is presented in the following table, along with our calculations of MFFO and Adjusted MFFO, for the three and ninesix months ended SeptemberJune 30, 20222023 and 20212022 (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 June 30,For the Six Months Ended June 30,
20222021202220212023202220232022
Net (loss) income attributable to common stockholders$(30,492)$(24,516)$(44,267)$3,671 
Net loss attributable to common stockholdersNet loss attributable to common stockholders$(57,475)$(9,019)$(77,056)$(13,775)
Depreciation of real estate assetsDepreciation of real estate assets8,882 8,569 25,544 26,689 Depreciation of real estate assets9,615 8,368 19,001 16,662 
Impairment charges on real estate and related intangiblesImpairment charges on real estate and related intangibles18,926 — 36,589 — 
Amortization of lease-related costsAmortization of lease-related costs3,835 5,326 13,835 19,279 Amortization of lease-related costs2,495 5,730 5,157 10,000 
Loss (gain) on sale of real estate (1)
2,621 (216)(727)(31,385)
Impairment charges on real estate11,942 10,971 11,942 10,971 
Loss (gain) on real estate equity securities20,722 2.614 48,312 (12,939)
(Gain) loss on sale of real estate (1)
(Gain) loss on sale of real estate (1)
(3,292)175 (32,761)(3,348)
Loss on real estate equity securities, netLoss on real estate equity securities, net4,089 20,070 16,122 27,591 
Adjustments for noncontrolling interests - consolidated entities (2)
Adjustments for noncontrolling interests - consolidated entities (2)
(1,724)(400)(2,308)(1,238)
Adjustments for noncontrolling interests - consolidated entities (2)
112 (287)(70)(584)
Adjustments for investments in unconsolidated entities (3)
Adjustments for investments in unconsolidated entities (3)
(4,716)(25)(1,783)747 
Adjustments for investments in unconsolidated entities (3)
10,872 2,021 7,368 2,933 
FFO attributable to common stockholdersFFO attributable to common stockholders11,070 (288)50,548 15,795 FFO attributable to common stockholders(14,658)27,058 (25,650)39,479 
Straight-line rent and amortization of above- and below-market leasesStraight-line rent and amortization of above- and below-market leases(791)(711)0(2,729)(2,544)Straight-line rent and amortization of above- and below-market leases(814)(621)(1,841)(1,935)
Amortization of premium/discount on bond and notes payable, net1,117 461 3,372 1,906 
Amortization of net premium/discount on bond and notes payableAmortization of net premium/discount on bond and notes payable1,082 1,477 2,185 2,255 
Gain on extinguishment of debtGain on extinguishment of debt— (1.352)(2,367)(1.365)Gain on extinguishment of debt— — — (2,367)
Unrealized (gain) loss on interest rate caps(834)(1,103)17 
Gain from consolidation of previously unconsolidated entity(18,742)— (18,742)— 
Mark-to-market foreign currency transaction (gain) loss, net(6,001)2,271 (37,100)(568)
Unrealized gain on interest rate capsUnrealized gain on interest rate caps(364)(215)(328)(270)
Foreign currency transaction loss (gain), netForeign currency transaction loss (gain), net6,272 (23,833)3,553 (31,098)
Adjustments for noncontrolling interests - consolidated entities (2)
Adjustments for noncontrolling interests - consolidated entities (2)
(21)(24)(100)(122)
Adjustments for noncontrolling interests - consolidated entities (2)
(3)(42)(7)(82)
Adjustments for investments in unconsolidated entities (3)
Adjustments for investments in unconsolidated entities (3)
98 15 2,999 1,662 
Adjustments for investments in unconsolidated entities (3)
384 3,166 811 2,901 
MFFO attributable to common stockholdersMFFO attributable to common stockholders(14,104)1,724 (5,222)16,145 MFFO attributable to common stockholders(8,101)6,990 (21,277)8,883 
Other capitalized operating expenses (4)
Other capitalized operating expenses (4)
(801)(597)(2,012)(1,926)
Other capitalized operating expenses (4)
(2,002)(638)(2,002)(1,211)
Casualty-related gain— (27)— (27)
Change in subordinated performance fee due upon termination to affiliate— 1,545 — 1,745 
Income tax provisionIncome tax provision— — 3,662 — 
Adjusted MFFO attributable to common stockholdersAdjusted MFFO attributable to common stockholders(14,905)2,645 (7,234)15,937 Adjusted MFFO attributable to common stockholders$(10,103)$6,352 $(19,617)$7,672 
_____________________
(1) Reflects an adjustment to eliminate gains or lossespre-tax gain on salessale of real estate.
(2) Reflects adjustments to eliminate the noncontrolling interest holders’ share of the adjustments to convert our net income (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 and an impairment charge to an unconsolidated entity to convert our net income (loss) income attributable to common stockholders to FFO, MFFO and Adjusted MFFO for our equity investments in unconsolidated joint ventures.entities.
(4) Reflects real estate taxes, property insurance and financing costs that are capitalized with respect to certain of our investments in undeveloped land and unconsolidated entity. During the periods in which we are incurring costs necessary to bring these investments to their intended use, certain normal recurring operating costs are capitalized in accordance with GAAP and not reflected in our net income (loss) 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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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Distributions
There were no distributions declared for the ninesix months ended SeptemberJune 30, 2022.2023. Our net loss attributable to common stockholders for the ninesix months ended SeptemberJune 30, 20222023 was $44.3$77.1 million and our cash flows provided byused in operations were $8.7$9.4 million. Our cumulative distributions paid and net incomeloss attributable to common stockholders from inception through SeptemberJune 30, 20222023 were $495.0$572.8 million. We have funded our cumulative distributions paid, which includes net cash distributions and distributions reinvested by stockholders, with prior period cash flow from operating activities in excess of distributions paid and with cash from gains realized from the disposition of properties. To the extent that we pay distributions from sources other than our cash flow from operations or gains from asset sales, we will have fewer funds available for investment in real estate-related loans, opportunistic real estate, real estate-related debt securities, real estate equity securities and other real estate-related investments, the overall return to our stockholders may be reduced and subsequent investors may experience dilution.
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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Critical Accounting Policies
Our consolidated interim financial statements have been prepared in accordance with GAAP and in conjunction with the rules and regulations of the SEC. The preparation of our financial statements requires significant management judgments and assumptions, requirerequires estimates about matters that are inherently uncertain and because theywhich 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, 20212022 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 other recent accounting pronouncements,significant changes in accounting pronouncements or recently adopted accounting guidanceto our policies during the nine months ended September 30, 2022 that are of significance or potential significance to us.2023.
Subsequent Events
We evaluate subsequent events up until the date the consolidated financial statements are issued.
Dividends on110 William
On July 5, 2023, in exchange for the Company’s 77.5% preferred interest ownership percentage in 110 William Joint Venture, the Company agreed to make future capital contributions of up to $105.0 million to fund expenditures and accretionimprovements (the “Capital Contributions”). The 110 William Joint Venture also converted a mezzanine loan encumbering the property of approximately $85.7 million between 110 William Mezz III, LLC, an indirect subsidiary of 110 Williams Joint Venture, as a borrower and Invesco CMI Investments 110 William, LLC (“Invesco”) as lender, into Invesco’s 22.5% preferred equity interest in the 110 William Joint Venture. As part of the restructuring, SREF III 110 William JV, LLC’s previous 40% membership interest was diluted in exchange for contingent consideration of 10% of net cash received. Following the buyout of SREF III 110 William JV, LLC, the Company held 100% of the common interests in the joint venture for contributed capital.
110 William Joint Venture entered into an amended loan agreement, which restructured the original loan of $248.7 million (the “Original Loan”), and increased the supplemental loan by $56.7 million (the “Supplemental Loan”). The initial maturity date of the Original Loan and the Supplemental Loan is July 5, 2026, although the maturity date may be extended. The interest rate with respect to redemption valuethe Original Loan is the sum of SOFR plus a spread beginning at 2% and increasing up to 3% during the term of the loan and any extension period, and the interest rate with respect to the Supplemental Loan is the sum of SOFR plus a spread beginning at 3% and increasing up to 3.5% during the term of the loan and any extension period. Pacific Oak SOR Properties, LLC, an indirect subsidiary of the Company is the guarantor for all debt service under the amended loan agreement and the Capital Contributions.
Series C Bonds
On July 6, 2023, Pacific Oak SOR BVI, completed a public offering to Israeli investors, of 319.6 million Israeli new Shekels (approximately $86.4 million) of Series A Redeemable PreferredC bonds (the “Series C Bonds”). The Series C Bonds were issued and registered with the Tel Aviv Stock Exchange on July 9, 2023. The terms of the Series C Bonds are governed by a deed of trust, containing various financial covenants, among Pacific Oak SOR BVI and Reznik Paz Nevo Trusts Ltd., as trustee. The notes will bear interest at the rate of 9% per year. The Series C Bonds mature on June 30, 2026 and are collateralized by real estate held for investment.
On October 25, 2022, we received notice byJuly 17, 2023, Pacific Oak SOR BVI issued additional Series C bonds in the holdersamount of PORT’s20.7 million Israeli new Shekels par value (the “Series C Expansion”). The Series A noncontrolling cumulative convertible redeemable preferred stock to redeem their outstanding redeemable preferred stock. If outstanding on November 4, 2022,C Expansion was issued at a 1.0% discount, resulting in a total consideration of 20.5 million Israeli new Shekels (approximately $5.6 million). The Series C Expansion has an equal level of security, pari passu, amongst themselves and between them and the Series A redeemable preferred stock must be redeemed by us within 120 days after November 4, 2022. We authorizedC Bonds, without any right of precedence or preference between any of them. The deed of trust that governs the terms of the Series C Bonds and approved the redemptionSeries C Expansion contains various financial covenants.





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Table of all 15,000 outstanding Series A Preferred Shares, at a price of (i) $1,120 per Series A Preferred Share, plus (ii) all accrued but unpaid dividends, through the redemption date.Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Foreign Currency and Interest Rate Risk
Certain transactions, assets, and liabilities are exposed to foreign currency risk. We monitor our foreign currency exposures to maximize the economic effectiveness of our foreign currency positions, including hedges. Principal currency exposure is Israeli New Shekel.
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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 3. Quantitative and Qualitative Disclosures about Market Risk
WeShekel; in particular, we are exposed to the effects of foreign currency changes in Israel with respect to the 3.93% Series B Debentures, the Series C Bonds and Series C Expansion issued to investors in Israel.
In addition, we are exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity, fund distributions and to fund the refinancing of our real estate investment portfolio and operations. We may also be exposed to the effects of changes in interest rates as a result of the acquisition and origination of mortgage, mezzanine, bridge and other loans and the acquisition of real estate securities. 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 SeptemberJune 30, 2022,2023, we held 129.939.8 million Israeli new Shekels and 24.624.7 million Israeli new Shekels in cash and restricted cash, respectively. In addition, as of SeptemberJune 30, 2022,2023, we had bonds outstanding and the related interest payable in the amounts of 1.2 billion Israeli new Shekels and 7.619.1 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 ninesix months ended SeptemberJune 30, 2022,2023, if foreign currency exchange rates were to increase or decrease by 10%, our net income would increase or decrease by approximately $25.9$23.5 million and $31.7$37.5 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 Federal 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 acquisition and origination of mortgage, mezzanine, bridge and other loans and the acquisition of real estate securities.
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 SeptemberJune 30, 2022,2023, the fair value of our Pacific Oak SOR BVI Series B Debentures was $306.1$296.4 million and the outstanding principal balance was $326.5$314.1 million. As of SeptemberJune 30, 2022,2023, excluding the Pacific Oak SOR BVI Series B Debentures, the fair value of our fixed rate debt was $216.6$219.7 million and the outstanding principal balance of our fixed rate debt was $233.2$233.5 million. The fair value estimate of our Pacific Oak SOR BVIthe Series B Debentures werewas calculated using the quoted bond price as of SeptemberJune 30, 20222023 on the Tel Aviv Stock Exchange of 94.4095.99 Israeli new Shekels.Shekels, respectively. The fair value estimate of our fixed rate debt was calculated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loans were originated as of SeptemberJune 30, 2022.2023. 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 SeptemberJune 30, 2022,2023, we had entered into three separate interest rate caps with an aggregate notional of $181.0$156.6 million which effectively limits our exposure to increases in one-month LIBOR and SOFR above certain thresholds. Based on interest rates as of SeptemberJune 30, 2022,2023, if interest rates were 100 basis points higher or lower during the 12 months ending SeptemberJune 30, 2022, interest expense on our variable rate debt would increase or decrease by $4.0$2.8 million and $4.8$5.3 million, respectively.
The weighted-average interest rates of our fixed rate debt and variable rate debt as of June 30, 2023 were 4.1% and 7.5%, respectively. The interest rate and weighted-average interest rate represent the actual interest rate in effect as of June 30, 2023 (consisting of the contractual interest rate and the effect of contractual floor rates, if applicable), using interest rate indices as of June 30, 2023 where applicable.
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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, 2022 were 4.10 and 5.2%, respectively. The interest rate and weighted-average interest rate represent the actual interest rate in effect as of September 30, 2022 (consisting of the contractual interest rate and the effect of contractual floor rates, if applicable), using interest rate indices as of September 30, 2022 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 SeptemberJune 30, 2022,2023, we owned real estate equity securities with a book value of $63.8$30.5 million. Based solely on the prices of real estate equity securities as of SeptemberJune 30, 2022,2023, if prices were to increase or decrease by 10%, our net income would increase or decrease by approximately $6.4$3.1 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 fromIn addition to the risk factors previously disclosedfactor discussed below, please see the risks discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 20212022, and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the six monthsperiod ended June 30, 2022,March 31, 2023, each as filed with the SEC.
In certain cases, financings for our investments may be recourse to us.
Generally, commercial real estate financings are structured as nonrecourse to the borrower. However, lenders customarily will require that a creditworthy parent entity enter so-called “recourse carveout” guarantees. For example, a lender might require guarantees from the guarantors for the completion of tenant improvements, payment of the guarantor’s obligation, or against certain bad acts. In addition, certain guarantees typically provide that the loan will be a full personal recourse obligation of the guarantor, for certain actions.
The change in the value of Israeli currency may materially and adversely affect our results of operations and financial condition.
On February 16, 2020, Pacific Oak Strategic Opportunity 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, which bonds are denominated in Israeli new Shekels. The Series B Debentures 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. Pacific Oak Strategic Opportunity BVI issued additional Series B Debentures subsequent to the initial issuance and as of June 30, 2023, 1.2 billion Israeli new Shekels (approximately $314.1 million as June 30, 2023) were outstanding.
On July 6, 2023, Pacific Oak SOR BVI, completed a public offering to Israeli investors, of 319.6 million Israeli new Shekels (approximately $86.4 million) Series C Bonds. The Series C Bonds were issued and registered with the Tel Aviv Stock Exchange on July 9, 2023. The terms of the Series C Bonds are governed by a deed of trust, among Pacific Oak SOR BVI and Reznik Paz Nevo Trusts Ltd., as trustee. The notes will bear interest at the rate of 9% per year. The Series C Bonds mature on June 30, 2026 and are collateralized by land. On July 17, 2023, Pacific Oak SOR BVI issued additional Series C bonds in the amount of 20.7 million Israeli new Shekels par value. The Series C Bonds were issued at a 1.0% discount, resulting in a total consideration of 20.5 million Israeli new Shekels (approximately $5.6 million). The additional Series C Expansion has an equal level of security, pari passu, amongst themselves and between them and the Series C Bonds, without any right of precedence or preference between any of them. The deed of trust that governs the terms of the Series C Bonds and Series C Expansion contains various financial covenants.
As a result, we are subject to foreign currency risk due to potential fluctuations in exchange rates between Israeli new Shekels and U.S. Dollars. More specifically, a significant change in the value of the Israeli new Shekels may have an adverse effect on our results of operations and financial condition. We have attempted to mitigate this foreign currency risk by using derivative contracts. However, there can be no assurance that those attempts to mitigate foreign currency risk will ultimately be successful.
Uncertain market conditions could cause us to sell our real estate investments or investments in unconsolidated entities at a loss in the future.
We intend to hold our real estate investments and investments in unconsolidated entities until such time as we determine that a sale or other disposition appears to be advantageous to achieve our investment objectives. We may exercise discretion as to whether and when to sell an investment, and we will have no obligation to sell at any particular time. We generally intend to hold our investments for an extended period of time, and we cannot predict with any certainty the various market conditions affecting real estate investments that will exist at any particular time in the future. Because of the uncertainty of market conditions that may affect the future disposition of our investments, we may not be able to sell our investments at a profit in the future or at all. In addition, if we are unable to access the capital markets for financing in the future, we may need to sell some of our investments to raise capital. We may incur prepayment penalties in the event that we sell a property subject to a mortgage earlier than we otherwise had planned. Additionally, we could be forced to sell our investments at inopportune times which could result in us selling the affected investment at a substantial loss. Any inability to sell a property could adversely impact our ability to make debt payments as they come due.

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PART II. OTHER INFORMATION (CONTINUED)
Item 2.2 Unregistered Sales of Equity Securities and Use of Proceeds
a)During the period covered by this Form 10-Q, we did not sell any equity securities that were not registered under the Securities Act of 1933, as amended.
b)Not applicable.
c)We have adopted a share redemption program that may enable stockholders to sell their shares to us in limited circumstances.
Pursuant to the share redemption program there are several limitations on our ability to redeem shares:
Unless the shares are being redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence” (each as defined under the share redemption program), we may not redeem shares until the stockholder has held the shares for one year.
During any calendar year, we may redeem no more than 5% of the weighted-average number of shares outstanding during the prior calendar year.
We have no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency.
During any calendar year, we may redeem only the number of shares that we can purchase with the amount of net proceeds from the sale of shares under 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. We indefinitely suspended the dividend reinvestment plan as of March 28, 2023. Furthermore, during any calendar year, once we have received requests for redemptions, whether in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence”, or otherwise, that if honored, and when combined with all prior redemptions made during the calendar year, would result in the amount of remaining funds available for the redemption of additional shares in such calendar year being $1.0 million or less, the last $1.0 million of available funds shall be reserved exclusively for shares being redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence.” To the extent that, in the last month of any calendar year, the amount of redemption requests in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence” is less than the amount of available funds reserved for such redemptions in accordance with the previous sentence, any excess funds may be used to redeem shares not in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence” during such month.
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PART II. OTHER INFORMATION (CONTINUED)
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds (Continued)
We may not redeem more than $3.0 million of shares in a given quarter (excluding shares redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence”). To the extent that, in a given fiscal quarter, we redeem less than the sum of (a) $3.0 million of shares (excluding shares redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence”) and (b) any excess capacity carried over to such fiscal quarter from a prior fiscal quarter as described below, any remaining excess capacity to redeem shares in such fiscal quarter will be added to our capacity to otherwise redeem shares (excluding shares redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence”) during succeeding fiscal quarter. We may increase or decrease this limit upon ten business days’ notice to stockholders.
We may amend, suspend or terminate the program upon ten business days’ notice to our stockholders. We may provide notice to our stockholders by including such information in a Current Report on Form 8-K or in our annual or quarterly reports, all publicly filed with the SEC, or by a separate mailing to our stockholders.
Separate from the funding described in the first bullet above, on March 10, 2022 and July 22, 2022, our board of directors made available a total of $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. As of September 30, 2022, $1.6 million remained available.
During the ninesix months ended SeptemberJune 30, 2022,2023, 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 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 
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 202375,025 $10.50 (2)
February 202325,954 $10.50 (2)
March 202342,806 $10.50 (2)
April 202347,885 $10.50 (2)
May 202347,410 $10.50 (2)
June 202366,907 $10.50 (2)
Total305,987 
_____________________
(1) On January 26,December 2, 2022, our board of directors approved an estimated value per share of our common stock of $9.51.$10.50. The change in the redemption price became effective for the January 20222023 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 2022.2023.
(2) We limit the dollar value of shares that may be redeemed under the program as described above. During the ninesix months ended September 2022,June 2023, we redeemed $4.6$3.2 million of common stock under the program, which represented all redemption requests received in good order and eligible for redemption through the September 2022June 2023 redemption date, except for the $134.0$146.8 million of shares in connection with redemption requests not made upon a stockholder’s death, “qualifying disability” or “determination of incompetence,” which redemption requests will be fulfilled subject to the limitations described above. Based on the Twelfth SRP, we had $1.6$1.4 million available for redemptions in the remainder of 20222023, as of September 2022,June 30, 2023, and on May 11, 2023 and August 10, 2023, our board of directors approved additional $2.0 million and 4.0 million, respectively, all of which are in connection with a stockholders’ death, “qualifying disability” or “determination of incompetence,” subject to the limitations described above.
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PART II. OTHER INFORMATION (CONTINUED)

Item 3. Defaults upon Senior Securities
None.As of June 30, 2023, we had two outstanding mortgage loans which were past due. See Note 5 to our accompanying condensed notes to consolidated financial statements.

Item 4. Mine Safety Disclosures
None.


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PART II. OTHER INFORMATION (CONTINUED)
Item 5. Other Information
On November 14, 2022, we renewedPursuant to the advisory agreementTwelfth Amended and Restated Share Redemption Program, on August 10, 2023, our board of directors approved an additional $4.0 million of funds available for redemptions in connection with the Advisor. The renewed advisory agreement is effective through November 1, 2023. The termsa stockholder’s death, “qualifying disability” or “determination of the renewed advisory agreement are consistent with those of the advisory agreement that was previously in effect.incompetence,” which will carry forward until depleted.

Item 6. Exhibits
Ex.Description
3.1
3.2
3.3
3.4
4.1
4.2
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
31.1
31.2
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PART II. OTHER INFORMATION (CONTINUED)
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 14, 2022August 11, 2023By:
/S/ KEITH D. HALL        
Keith D. Hall
Chief Executive Officer and Director
(principal executive officer)
Date:November 14, 2022August 11, 2023By:/S/ MICHAEL A. BENDER   
 Michael A. Bender
 Chief Financial Officer
(principal financial officer)

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