Matching Capital with Opportunity

Pacific Oak Strategic Opportunity REIT’s Bond Offering and Valuation News

On October 24, 2021, Pacific Oak Strategic Opportunity REIT, Inc. (“the Company”) announced its intention to commence a new bond offering in Israel. The Company expects to raise up to approximately $125 million in gross proceeds from new bond issuances and to retire up to approximately $200 million in currently outstanding bonds with earlier maturities. In connection with this announcement, the Company disclosed that preliminary drafts of appraisals were received by the Company as part of the preparation of the Company’s annual estimation of value per share and the September 30, 2021, financial statements for the Company’s Pacific Oak SOR (BVI) Holdings, Ltd subsidiary.

According to these preliminary drafts, there is an indication of an increase in value in the Company’s properties that might lead to an increase in the Company’s equity value in a range between 5% to 10%, compared to the Company’s last estimation. These draft appraisals are preliminary, not final and may change; consequently, the increase in value of the Company’s properties, and the implied increase in value per share, may be materially different. In addition, the preliminary appraisal estimates ignore the Company’s financial results for the third quarter of 2021 and the impact of other potential valuation changes, including the valuation of the Company’s financings.

Pacific Oak Strategic Opportunity REIT, Inc. is a diversified nontraded REIT. As of June 30, 2021, the Company consolidated nine office properties (of which one office property was held for sale), 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 1,807 single-family homes, three investments in undeveloped land with approximately 800 developable acres, and owned four investments in unconsolidated entities and three investments in real estate equity securities. Additionally, as of June 30, 2021, the Company had entered into a consolidated joint venture to develop one office/retail property. On July 27, 2021, the REIT sold City Tower in Orange, California, for $150 million.

On January 22, 2020, the Company filed a registration statement on Form S-11 with the SEC to offer up to $1 billion in additional shares of its common stock. This new registration statement contemplates a proposed conversion of the Company to a perpetual-life net asset value or “NAV” REIT that offers and sells shares of its common stock continuously through a number of distribution channels in ongoing public offerings, and seeks to provide increased liquidity to current and future stockholders through an expansion of the Company’s current share redemption program. On December 18, 2020, the Company filed Amendment No. 1 to the registration statement on Form S-11 with the SEC.

Pursuant to the Twelfth Amended and Restated Share Redemption Program (the “SRP”) of the Company, on October 14, 2021, the board of directors of the Company approved an additional $1.0 million of funds available for redemptions in connection with a stockholder’s death, “qualifying disability”, or “determination of incompetence” which will carry forward until depleted.

Sources: SEC, S&P Capital IQ