Exhibit 99.1
PACIFIC OAK SOR (BVI) HOLDINGS, LTD.
(Formerly known as KBS SOR (BVI) Holdings, Ltd.)
UNAUDITED
Timely information
December 31, 2019
PACIFIC OAK SOR (BVI) HOLDINGS, LTD.
(Formerly known as KBS SOR (BVI) Holdings, Ltd.)
Timely information
December 31, 2019
UNAUDITED
The preliminary financial data as of December 31, 2019, included in this preliminary report, are provided on a one-off basis and are published in connection with possible actions by Pacific Oak SOR (BVI) Holdings, Ltd. (the "Company"), including the potential purchase of the Company’s debentures, and its assessment that the information may be useful to the capital market for this reason. It should be emphasized that as of that date of this preliminary report, no decision has been made to purchase such securities and it may not happen. As of the date of this preliminary report, the Company did not adopt preliminary reporting policies and does not intend to regularly publish additional preliminary reports with respect to future reporting periods.
The financial data in this preliminary report do not constitute a substitute for the full disclosure to be included in the Company's audited consolidated financial statements for 2019 (the "Annual Reports"), which will be released by the Company, and there is no assurance that the amounts will be identical to the final data to be included in the Annual Reports. The figures in this preliminary report have not been audited by the auditor of the Company and cannot be considered as audited data, the Company's Balance Sheet Committee has not recommended to the Company's Board of Directors the approval of the data as final and the data have not yet been approved by the Company's Board of Directors. In light of that fact, as well as the completion of the annual report and audit work, this data may, in whole or in part, vary until the date of publication of the annual reports.
PACIFIC OAK SOR (BVI) HOLDINGS LTD.
(Formerly known as KBS SOR (BVI) Holdings, Ltd.)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION - timely information (Unaudited)
|
| | | | | | | | |
| | | December 31, |
| | | 2019 | | 2018 |
| | | U.S. dollars in thousands |
| ASSETS | | | | |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents | | $ | 68,378 |
| | $ | 127,680 |
|
| Rents and other receivables, net | | 3,001 |
| | 2,496 |
|
| Prepaid expenses and other assets | | 778 |
| | 1,424 |
|
| Restricted cash | | 1,482 |
| | 1,013 |
|
| Investment in debt instruments, net | | - |
| | 10,859 |
|
| Due from Owner | | - |
| | 4,500 |
|
| | | 73,639 |
| | 147,972 |
|
| Investment property held for sale | | - |
| | 43,758 |
|
| | | 73,639 |
| | 191,730 |
|
| NON-CURRENT ASSETS | | | | |
| Investment properties | | 1,059,830 |
| | 912,989 |
|
| Investment in joint ventures | | 229,936 |
| | 185,684 |
|
| Financial assets at fair value through profit or loss | | 96,653 |
| | 75,351 |
|
| Restricted cash | | 10,520 |
| | 9,329 |
|
| | | 1,396,939 |
| | 1,183,353 |
|
| Total assets | | $ | 1,470,578 |
| | $ | 1,375,083 |
|
| | | | | |
| LIABILITIES AND EQUITY | | | | |
| CURRENT LIABILITIES | | | | |
| Notes and bond payable, net | | $ | 81,772 |
| | $ | 49,957 |
|
| Debentures, net | | 56,186 |
| | 51,903 |
|
| Accounts payable and accrued liabilities | | 19,794 |
| | 18,950 |
|
| Other liabilities | | 14,820 |
| | 17,312 |
|
| | | 172,572 |
| | 138,122 |
|
| Note payable related to property held for sale, net | | - |
| | 22,845 |
|
| | | 172,572 |
| | 160,967 |
|
| LONG-TERM LIABILITIES | | | | |
| Notes and bond payable, net | | 369,971 |
| | 327,668 |
|
| Debentures, net | | 165,734 |
| | 203,099 |
|
| Rental security deposits | | 4,345 |
| | 3,703 |
|
| Redeemable Series A Cumulative Convertible Redeemable Preferred Stock | | 15,008 |
| | - |
|
| | | 555,058 |
| | 534,470 |
|
| Total liabilities | | 727,630 |
| | 695,437 |
|
| EQUITY | | | | |
| Owner's net equity | | 726,854 |
| | 657,049 |
|
| Non-controlling interests | | 16,094 |
| | 22,597 |
|
| Total equity | | 742,948 |
| | 679,646 |
|
| Total liabilities and equity | | $ | 1,470,578 |
| | $ | 1,375,083 |
|
|
| | | | | | |
| March 19, 2020 | | /s/ Michael Allen Bender | | /s/ Peter McMillan III | | /s/ Keith David Hall |
| Date of approval of | | Bender, Michael Allen | | McMillan III, Peter | | Hall, Keith David |
| financial statements | | Chief Financial Officer | | Chairman of Board of Directors | | Chief Executive Officer |
PACIFIC OAK SOR (BVI) HOLDINGS LTD.
(Formerly known as KBS SOR (BVI) Holdings, Ltd.)
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS - timely information (Unaudited)
|
| | | | | | | | | | | | |
| | | Years ended December 31, |
| | | 2019 | | 2018 | | 2017 |
| | | U.S. dollars in thousands |
| Revenues and other income: | | | | | | |
| | | | | | | |
| Rental income | | $ | 72,283 |
| | $ | 71,181 |
| | $ | 108,113 |
|
| Tenant reimbursements | | 10,789 |
| | 12,621 |
| | 21,710 |
|
| Interest income from debt investments | | 369 |
| | 2,018 |
| | 1,782 |
|
| Other operating income | | 3,078 |
| | 2,812 |
| | 4,001 |
|
| | | | | | | |
| Total revenues and other income | | 86,519 |
| | 88,632 |
| | 135,606 |
|
| | | | | | | |
| Expenses: | | | | | | |
| Operating, maintenance, and management fees | | (29,845) |
| | (29,110) |
| | (42,611) |
|
| Real estate taxes and insurance | | (12,631) |
| | (11,762) |
| | (17,404) |
|
| | | | | | | |
| Total expenses | | (42,476) |
| | (40,872) |
| | (60,015) |
|
| | | | | | | |
| Gross profit | | 44,043 |
| | 47,760 |
| | 75,591 |
|
| | | | | | | |
| | | | | | | |
| Fair value adjustment of investment properties, net | | 22,142 |
| | 17,111 |
| | 4,755 |
|
| Loss on deconsolidation | | - |
| | - |
| | (667) |
|
| Loss on extinguishment of debt | | (1,106) |
| | (494) |
| | (478) |
|
| Provision for loss on debt investments | | - |
| | (2,500) |
| | - |
|
| Equity in income of unconsolidated joint ventures | | 31,206 |
| | 17,469 |
| | 24,130 |
|
| Asset management fees to affiliate | | (8,158) |
| | (8,525) |
| | (10,686) |
|
| General and administrative expenses | | (3,479) |
| | (4,929) |
| | (2,852) |
|
| | | | | | | |
| Operating profit | | 84,648 |
| | 65,892 |
| | 89,793 |
|
| | | | | | | |
| Finance income | | 1,842 |
| | 1,798 |
| | 1,021 |
|
| Finance income (loss) from financial assets at fair value through profit or loss | | 26,478 |
| | (12,579) |
| | 12,640 |
|
| Finance expenses | | (28,849) |
| | (31,054) |
| | (37,149) |
|
| Transaction costs | | (4,462) |
| | - |
| | - |
|
| Foreign currency transaction adjustments, net | | (12,498) |
| | 10,141 |
| | (15,298) |
|
| | | | | | | |
| Net income | | $ | 67,159 |
| | $ | 34,198 |
| | $ | 51,007 |
|
| | | | | | | |
| Net income attributable to owner | | $ | 69,805 |
| | $ | 41,320 |
| | $ | 48,317 |
|
| Net (loss) income attributable to non-controlling interests | | (2,646 | ) | | (7,122 | ) | | 2,690 |
|
| Net income | | $ | 67,159 |
| | $ | 34,198 |
| | $ | 51,007 |
|
PACIFIC OAK SOR (BVI) HOLDINGS LTD.
(Formerly known as KBS SOR (BVI) Holdings, Ltd.)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - timely information (Unaudited)
|
| | | | | | | | | | | |
| | Years ended December 31, |
| | 2019 | | 2018 | | 2017 |
| | U.S. dollars in thousands |
| | | | | | |
| Net income | $ | 67,159 |
| | $ | 34,198 |
| | $ | 51,007 |
|
| | | | | | |
| Total comprehensive income | $ | 67,159 |
| | $ | 34,198 |
| | $ | 51,007 |
|
| | | | | | |
| Total comprehensive income attributable to owner | $ | 69,805 |
| | $ | 41,320 |
| | $ | 48,317 |
|
| | | | | | |
| Total comprehensive (loss) income attributable to non-controlling interests | (2,646) |
| | (7,122) |
| | 2,690 |
|
| | | | | | |
| Total comprehensive income | $ | 67,159 |
| | $ | 34,198 |
| | $ | 51,007 |
|
PACIFIC OAK SOR (BVI) HOLDINGS LTD.
(Formerly known as KBS SOR (BVI) Holdings, Ltd.)
CONSOLIDATED STATEMENTS OF EQUITY - timely information (Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Owner contributions (distributions) | | Retained earnings | | Paid-in Capital resulting from transactions with non-controlling interests | | Owner's net equity | | Non-controlling interests | | Total equity |
| | | U.S. dollars in thousands |
| | | | | | | | | | | | | |
| Balance at January 1, 2017 | | $ | 413,087 |
| | $ | 407,994 |
| | $ | 41,631 |
| | $ | 862,712 |
| | $ | 26,131 |
| | $ | 888,843 |
|
| | | | | | | | | | | | | |
| Net income | | — |
| | 48,317 |
| | — |
| | 48,317 |
| | 2,690 |
| | 51,007 |
|
| | | | | | | | | | | | | |
| Total comprehensive income | | — |
| | 48,317 |
| | — |
| | 48,317 |
| | 2,690 |
| | 51,007 |
|
| Dividends to Owner | | — |
| | (123,500 | ) | | — |
| | (123,500 | ) | | — |
| | (123,500 | ) |
| Non-controlling interests contributions | | — |
| | — |
| | — |
| | — |
| | 158 |
| | 158 |
|
| Distributions to non-controlling interests | | — |
| | — |
| | — |
| | — |
| | (22 | ) | | (22 | ) |
| | | | | | | | | | | | | |
| Balance at December 31, 2017 | | 413,087 |
| | 332,811 |
| | 41,631 |
| | 787,529 |
| | 28,957 |
| | 816,486 |
|
| | | | | | | | | | | | | |
| Net income (loss) | | — |
| | 41,320 |
| | — |
| | 41,320 |
| | (7,122 | ) | | 34,198 |
|
| Total comprehensive income (loss) | | — |
| | 41,320 |
| | — |
| | 41,320 |
| | (7,122 | ) | | 34,198 |
|
| Dividends to Owner | | — |
| | (171,800 | ) | | — |
| | (171,800 | ) | | — |
| | (171,800 | ) |
| Non-controlling interests contributions | | — |
| | — |
| | — |
| | — |
| | 762 |
| | 762 |
|
| | | | | | | | | | | | | |
| Balance at December 31, 2018 | | 413,087 |
| | 202,331 |
| | 41,631 |
| | 657,049 |
| | 22,597 |
| | 679,646 |
|
| | | | | | | | | | | | | |
| Net income (loss) | | — |
| | 69,805 |
| | — |
| | 69,805 |
| | (2,646 | ) | | 67,159 |
|
| Total comprehensive income (loss) | | — |
| | 69,805 |
| | — |
| | 69,805 |
| | (2,646 | ) | | 67,159 |
|
| Non-controlling interests contributions | | — |
| | — |
| | — |
| | — |
| | 12 |
| | 12 |
|
| Distributions to non-controlling interests | | — |
| | — |
| | — |
| | — |
| | (3,869 | ) | | (3,869 | ) |
| | | | | | | | | | | | | |
| Balance at December 31, 2019 | | $ | 413,087 |
| | $ | 272,136 |
| | $ | 41,631 |
| | $ | 726,854 |
| | $ | 16,094 |
| | $ | 742,948 |
|
PACIFIC OAK SOR (BVI) HOLDINGS LTD.
(Formerly known as KBS SOR (BVI) Holdings, Ltd.)
CONSOLIDATED STATEMENTS OF CASH FLOWS - timely information (Unaudited)
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| | U.S. dollars in thousands |
| Cash Flows from Operating Activities: | | | | | |
| Net income | $ | 67,159 |
| | $ | 34,198 |
| | $ | 51,007 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
| Equity in income of unconsolidated joint ventures | (31,206) |
| | (17,469) |
| | (24,130) |
|
| Fair value adjustment on investment properties, net | (22,142) |
| | (17,111) |
| | (4,755) |
|
| Transaction costs | 4,462 |
| | - |
| | - |
|
| Loss on deconsolidation | - |
| | - |
| | 667 |
|
| Loss on extinguishment of debt | 1,106 |
| | 494 |
| | 478 |
|
| Provision for loss on debt investments | - |
| | 2,500 |
| | - |
|
| Deferred rent | (4,127) |
| | (4,736) |
| | (2,416) |
|
| Bad debt expense | 363 |
| | 161 |
| | 724 |
|
| Financing expense | 28,849 |
| | 31,054 |
| | 37,149 |
|
| Financing income | (1,842) |
| | (1,798) |
| | (1,021) |
|
| Finance (income) loss from financial assets at fair value through profit or loss | (26,478) |
| | 12,579 |
| | (12,640) |
|
| Interest income from debt instruments, net | (369) |
| | (2,018) |
| | (1,782) |
|
| Foreign currency transaction gain, net | 12,498 |
| | (10,141) |
| | 15,298 |
|
| | 28,273 |
| | 27,713 |
| | 58,579 |
|
| Changes in assets and liabilities: | | | | | |
| Restricted cash | 443 |
| | 2,272 |
| | (275) |
|
| Rents and other receivables | (289) |
| | (705) |
| | (755) |
|
| Prepaid expenses and other assets | 284 |
| | (1,007) |
| | 204 |
|
| Accounts payable and accrued liabilities | (3,705) |
| | 3,008 |
| | (3,301) |
|
| Rental security deposits | (262) |
| | (603) |
| | (2,288) |
|
| Other liabilities | 10 |
| | 73 |
| | (2,455) |
|
| Lease incentive additions | (2,130) |
| | (1,109) |
| | (482) |
|
| | (5,649) |
| | 1,929 |
| | (9,352) |
|
| Net cash provided by operating activities | 22,624 |
| | 29,642 |
| | 49,227 |
|
| Cash Flows from Investing Activities: | | | | | |
| Acquisitions of investment properties | (90,266) |
| | (312,348) |
| | (165,465) |
|
| Acquisition of PORT *) | (52,992) |
| | - |
| | - |
|
| Improvements to investment properties | (36,380) |
| | (37,423) |
| | (47,679) |
|
| Proceeds from sales of investment properties, net | 141,548 |
| | 248,834 |
| | 834,480 |
|
| Deferred proceeds related to sale of real estate | - |
| | 1,390 |
| | 1,728 |
|
| Reimbursement of construction costs | - |
| | 1,636 |
| | - |
|
| Deconsolidation of 353 Sacramento **) | - |
| | - |
| | 37,900 |
|
| Investments in debt investments, net | - |
| | - |
| | (12,514) |
|
| Repayment of debt investments | 7,750 |
| | 4,500 |
| | - |
|
| Proceeds from insurance claims | 438 |
| | - |
| | 3,540 |
|
| Distributions of capital from investment in joint venture | 7,800 |
| | - |
| | 58,170 |
|
| Investment in unconsolidated joint venture | (20,846) |
| | (1,320) |
| | - |
|
| Investments in financial assets at fair value through profit or loss, net | (26,223) |
| | (30,609) |
| | (43,308) |
|
| Distribution from financial assets at fair value through profit or loss, net | 251 |
| | 2,627 |
| | 3,704 |
|
| Proceeds from the sale of investments in financial assets at fair value through profit or loss, net | 28,034 |
| | 27,786 |
| | - |
|
| Purchase of interest rate cap | (28) |
| | (163) |
| | (107) |
|
| Purchase of derivative financial instrument | - |
| | - |
| | (3,434) |
|
| Proceeds from termination of derivative financial instrument | - |
| | - |
| | 6,557 |
|
| Interest income received | 2,725 |
| | 3,713 |
| | 1,900 |
|
| Dividend income received from financial assets at fair value through profit or loss | 6,112 |
| | 6,176 |
| | 2,189 |
|
| Restricted cash released or (deposited) for capital expenditures | - |
| | - |
| | 9,599 |
|
| Funding for development obligations | (88) |
| | (1,170) |
| | - |
|
| Due from (to) Owner | 4,500 |
| | (4,500) |
| | - |
|
| Net cash (used in) provided by from investing activities | (27,665) |
| | (90,871) |
| | 687,260 |
|
PACIFIC OAK SOR (BVI) HOLDINGS LTD.
(Formerly known as KBS SOR (BVI) Holdings, Ltd.)
CONSOLIDATED STATEMENTS OF CASH FLOWS - timely information (Unaudited)
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| | U.S. dollars in thousands |
| Cash Flows from Financing Activities: | | | | | |
| Proceeds from debentures, notes and bonds payable | $ | 84,268 |
| | $ | 223,425 |
| | $ | 187,204 |
|
| Principal payments on notes and bond payable | (126,603 | ) | | (152,516 | ) | | (477,089 | ) |
| Payments of deferred financing costs | (1,123 | ) | | (3,390 | ) | | (2,376 | ) |
| Interest paid | (25,703 | ) | | (27,029 | ) | | (32,688 | ) |
| Release of restricted cash for debt service obligations | 276 |
| | — |
| | — |
|
| Proceeds from Redeemable Series A Cumulative Convertible Redeemable Preferred Stock | 15,008 |
| | — |
| | — |
|
| Non-controlling interests contributions | 12 |
| | 762 |
| | 158 |
|
| Distributions to non-controlling interests | (3,869 | ) | | — |
| | (22 | ) |
| Dividends to Owner | — |
| | (171,800 | ) | | (123,500 | ) |
| Other financing proceeds, net | 1,822 |
| | — |
| | — |
|
| Net cash (used in) provided by financing activities | (55,912 | ) | | (130,548 | ) | | (448,313 | ) |
| | | | | | |
| Effect of exchange rate changes on cash and cash equivalents | 1,651 |
| | (229 | ) | | 5 |
|
| Net (decrease) increase in cash and cash equivalents | (59,302 | ) | | (192,006 | ) | | 288,179 |
|
| Cash and cash equivalents, beginning of period | 127,680 |
| | 319,686 |
| | 31,507 |
|
| Cash and cash equivalents, end of period | $ | 68,378 |
| | $ | 127,680 |
| | $ | 319,686 |
|
|
| | | | | | | | | | | |
| Supplemental Disclosure of Noncash Activities: | | | | | |
| Application of escrow deposits to acquisition of real estate | $ | — |
| | $ | — |
| | $ | 2,000 |
|
| Increase in lease commission payable | $ | 693 |
| | $ | 345 |
| | $ | — |
|
| Increase to development obligations related to sales of real estate | $ | — |
| | $ | — |
| | $ | 3,816 |
|
| Accrual improvements to real estate | $ | 2,377 |
| | $ | 3,363 |
| | $ | 3,716 |
|
| SREIT units received in connection with the Singapore Transaction | $ | — |
| | $ | — |
| | $ | 38,720 |
|
*) Assets and liabilities assumed in connection with Pacific Oak Residential Trust acquisition:
|
| | | | | | | | | | | |
| Restricted cash | $ | 1,667 |
| | $ | — |
| | $ | — |
|
| Rents and other receivables | 989 |
| | — |
| | — |
|
| Prepaid expenses and other assets | 634 |
| | — |
| | — |
|
| Investment property | 109,922 |
| | — |
| | — |
|
| Notes payable | (61,885 | ) | | — |
| | — |
|
| Accounts payable and accrued liabilities | (1,893 | ) | | — |
| | — |
|
| Rental security deposits | (904 | ) | | — |
| | — |
|
| Transaction costs | 4,462 |
| | — |
| | — |
|
| | $ | 52,992 |
| | $ | — |
| | $ | — |
|
**) Proceeds from sale of investment in previously consolidated subsidiary (353 Sacramento):
|
| | | | | | | | | | | |
| Working capital (excluding cash and cash equivalents) | $ | — |
| | $ | — |
| | $ | (256 | ) |
| Investment property | — |
| | — |
| | 174,357 |
|
| Note payable, net | — |
| | — |
| | (87,132 | ) |
| Loss on deconsolidation | — |
| | — |
| | (667 | ) |
| Investment in joint venture | — |
| | — |
| | (48,402 | ) |
| | $ | — |
| | $ | — |
| | $ | 37,900 |
|
PACIFIC OAK SOR (BVI) HOLDINGS LTD.
(Formerly known as KBS SOR (BVI) Holdings, Ltd.)
ADDITIONAL INFORMATION (Unaudited)
U.S. Dollars in thousands
The financial statement notes below include a limited overview of a number of material matters that have occurred in the affairs of the Company from the date of publication of the most recent interim financial statements as of September 30, 2019. It is clarified that this is not an exhaustive list, which according to management's opinion, provides a main picture of the entire range of matters affecting the Company, which was compiled assuming readers are also referencing the immediate reports published by the company from time to time.
SIGNIFICANT EVENTS DURING THE REPORTING PERIOD
On November 1, 2019, the Company sold 125 John Carpenter to a wholly owned subsidiary of the Keppel Pacific Oak US REIT (the “SREIT”), previously known as Keppel-KBS US REIT. The sale price, before closing costs, of 125 John Carpenter was $99.6 million. The sale resulted in a $0.8 million loss recorded as fair value adjustment of investment properties, net in the accompanying consolidated statements of profit or loss. in connection with the disposition of 125 John Carpenter, the Company repaid the $53.2 million outstanding principal balance due under the 125 John Carpenter Mortgage Loan.
On November 4, 2019 the Company, through an indirect wholly owned subsidiary, acquired Reven Housing REIT, Inc. (a NASDAQ-traded real estate investment fund holding as of November 4, 2019, 993 single-family homes for rent in the southeastern and northwestern United States (hereinafter: “Reven”)) for a total consideration of approximately $56.6 million. Following the closing of the agreement, the Company holds (indirectly) the full (100%) share capital of Reven and the name thereof was changed to Pacific Oak Residential Trust Inc. (hereinafter: “PORT”). The aggregate value of the consideration paid to former holders of Reven common stock was $56.6 million in cash and in addition, the Company incurred $4.2 million of transaction related costs. In connection with the acquisition, the Company assumed a $51.4 million mortgage loan maturing on October 1, 2025 bearing a fixed interest rate of 4.74% and a $10.5million mortgage loan maturing on March 1, 2026 bearing a fixed interest rate of 4.72%.
On November 6, 2019, Pacific Oak Residential Trust, Inc., issued 15,000 shares of its Series A Cumulative Convertible Redeemable Preferred Stock for gross proceeds of $1,000 per share resulting in net proceeds of $14.9 million after issuance costs. The shares provide for an annual dividend of 6% payable quarterly. The shares may be redeemed by the holders beginning on November 4, 2021 for $1,000 per share plus all accrued but unpaid dividends through the redemption date, or after November 4, 2022 for $1,120 per share plus all accrued but unpaid dividends through the redemption date. Additionally, if the common shares of PORT are publicly traded, the holder may elect to convert its preferred shares into common shares based on a value of the preferred shares of $1,120 per share plus unpaid accrued dividends, and a market price conversion factor of the common shares as stated in the agreement.
Pacific Oak Opportunity Zone Fund I:
During the year ended December 31, 2019, the Company acquired 91 Class A Units for $20.8 million in Pacific Oak Opportunity Zone Fund I, LLC (“Pacific Oak Opportunity Zone Fund I”), which includes $0.2 million of acquisition fees. As of December 31, 2019, the book value of the Company’s investment in Pacific Oak Opportunity Zone Fund I was $20.8 million, which includes $0.2 million of acquisition fees. As of December 31, 2019, Pacific Oak Opportunity Zone Fund I consolidated two joint ventures with real estate under development. The Company concluded it is not the primary beneficiary of this investment since it does not have the power to direct the activities that most significantly impact the entity’s economic performance and will account for its investment as an investment in unconsolidated joint venture.
PACIFIC OAK SOR (BVI) HOLDINGS LTD.
(Formerly known as KBS SOR (BVI) Holdings, Ltd.)
ADDITIONAL INFORMATION (Unaudited)
U.S. Dollars in thousands
SUBSEQUENT EVENTS
Series B Debentures
On February 16, 2020, the Company issued 254.1 million Israeli new Shekels (approximately $74.1 million as of February 16, 2020) of Series B debentures to Israeli investors pursuant to a public offering registered with the Israel Securities Authority. The Series B Debentures will bear interest at the rate of 3.93% per year. The aggregate offering costs were approximately $2.2 million and the effective interest rate is approximately 4.4%. 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.
Proposed Merger
On February 19, 2020, Pacific Oak Strategic Opportunity REIT, Inc. (“POSOR I”), Pacific Oak SOR II, LLC, an indirect subsidiary of the Company and POSOR I (“Merger Sub”), and Pacific Oak Strategic Opportunity REIT II, Inc. (“POSOR II”) entered into an Agreement and Plan of Merger (the “Merger Agreement”). Subject to the terms and conditions of the Merger Agreement, POSOR II will merge with and into Merger Sub (the “Merger”), with Merger Sub surviving the Merger (the “Surviving Entity”), such that following the Merger, the Surviving Entity will continue as an indirect subsidiary of POSOR I. In accordance with the applicable provisions of the Maryland General Corporation Law, the separate existence of POSOR II shall cease. At the effective time of the Merger and subject to the terms and conditions of the Merger Agreement, each issued and outstanding share of POSOR II’s common stock (or a fraction thereof), $0.01 par value per share, will be converted into the right to receive 0.9643 shares of POSOR I’s common stock, par value $0.01 per share. The combined company after the Merger will retain the name “Pacific Oak Strategic Opportunity REIT, Inc.” The Merger is intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended.
Hedge
On March 16, 2020, the Company entered into a foreign currency collar with an aggregate Israeli new Shekels notional amount of 418.0 million which expires on September 16, 2020. The foreign currency collar consists of a purchased call option to buy Israeli new Shekels at 3.5875 and a sold put option to sell the Israeli new Shekels at 3.725. The foreign currency collar is intended to permit the Company to exchange, on the settlement date of the collar, 418.0 million Israeli new Shekels for an amount ranging from $112.2 million to $116.5 million. On March 17, 2020, the Company entered into a foreign currency collar with an aggregate Israeli new Shekels notional amount of 380.0 million which expires on September 16, 2020. The foreign currency collar consists of a purchased call option to buy Israeli new Shekels at 3.700 and a sold put option to sell the Israeli new Shekels at 3.820. The foreign currency collar is intended to permit the Company to exchange, on the settlement date of the collar, 380.0 million Israeli new Shekels for an amount ranging from $99.5 million to $102.7 million.
COVID-19
The recent global outbreak of COVID-19 (more commonly known as the Coronavirus) has significantly disrupted economic markets and impacted commercial activity worldwide, including the US, and the prolonged economic impact is uncertain. Some economists and major investment banks have expressed concern that the continued spread of the virus globally will lead to a world-wide economic downturn. Customers and potential customers of the properties we own could be adversely affected by the disruption to business caused by the global outbreak of the Coronavirus. This could lead to similar negative impacts on our business.
