8-K
Pacific Oak Strategic Opportunity REIT, Inc. (PCOK)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 8-K
__________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 2, 2024
PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
(Exact name of registrant specified in its charter)
______________________________________________________
| Maryland | 000-54382 | 26-3842535 |
|---|---|---|
| (State or other jurisdiction of<br>incorporation or organization) | (Commission File Number) | (IRS Employer<br>Identification No.) |
11766 Wilshire Blvd., Suite 1670
Los Angeles, California 90025
(Address of principal executive offices)
Registrant’s telephone number, including area code: (424) 208-8100
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredNoneN/AN/A
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. o
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On September 9, 2022, Pacific Oak Residential Trust, Inc. (“PORT”), a wholly owned subsidiary of Pacific Oak Strategic Opportunity REIT, Inc., a Maryland corporation (the “Company”) 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”). The Private Offering was terminated on April 2, 2024. No shares were sold in the Private Offering.
PORT Amended and Restated Advisory Agreement – Exhibit 10.1
In connection with the termination of the Private Offering, PORT entered into an amended and restated advisory agreement with Pacific Oak Residential Advisors, LLC (“PORA”) on April 2, 2024, (the “Amended and Restated PORT Advisory Agreement”). The Amended and Restated PORT Advisory Agreement removes a provision that would have reduced the asset management fee payable to PORA if a liquidity event were not achieved within two years following the termination of the Private Offering. The amendment also makes other immaterial changes to reflect that PORT will no longer be calculating a quarterly net asset value (as it is not necessary without an ongoing offering) and that no performance fee will be paid with respect to capital raised in the Private Offering.
PORT Second Amended and Restated Property Management Agreement – Exhibit 10.2
In connection with the termination of the Private Offering, on April 2, 2024, PORT entered into a second amended and restated property management agreement with DMH Realty, LLC (“DMH Realty”), an affiliate of PORA and the Company’s advisor (the “Second Amended and Restated PORT Property Management Agreement”). The Second Amended and Restated PORT Property Management Agreements makes immaterial changes to reflect that PORT will no longer be calculating a quarterly net asset value (as it is not necessary without an ongoing offering).
ITEM 1.02 TERMINATION OF A MATERIAL DEFINITIVE AGREEMENT
Termination of PORT Dealer Manager Agreement – Exhibit 10.3
PORT previously engaged Pacific Oak Capital Markets, LLC (“POCM”), an affiliate of the Company’s advisor, PORA and DHM Realty, to be the dealer manager for the Private Offering, pursuant to an amended and restated dealer manager agreement effective as of January 13, 2023 (the “PORT Dealer Manager Agreement”). Effective as of April 2, 2024, PORT and POCM agreed to terminate the PORT Dealer Manager Agreement.
ITEM 7.01 REGULATION FD DISCLOSURE
April 2024 Bondholder Presentation – Exhibit 99.1
Pacific Oak SOR (BVI) Holdings, Ltd. (the “BVI”), a wholly-owned subsidiary of the Company, completed offerings of Series B bonds in February 2020 and subsequent periods. Additionally, BVI completed offerings of Series C bonds in July 2023 and subsequent periods. Such offerings were made to investors in Israel and were registered with the Israel Securities Authority. BVI intends to use the bondholder presentation attached as Exhibit 99.1 hereto from time to time in meetings with prospective bondholders.
The information in this Item 7.01 of Form 8-K and the attached Exhibit 99.1 are furnished to the Securities and Exchange Commission (“SEC”), and shall not be deemed to be “filed” with the SEC for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act regardless of any general incorporation language in such filing.
Forward-Looking Statements
The bondholder presentation includes forward-looking statements within the meaning of the Federal Private Securities Litigation Reform Act of 1995. The Company intends that such forward-looking statements be subject to the safe harbors created by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include statements regarding the intent, belief or current expectations of the Company and members of its 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. Further, forward-looking statements speak only as of the date they are made, and the Company undertakes 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. Actual results may differ materially from those contemplated by such forward-looking statements. These statements also depend on factors such as: future economic, competitive and market conditions; the Company’s ability to maintain occupancy levels and rental rates at its real estate properties; and other risks identified in Part I, Item IA of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
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 hereunto duly authorized.
| PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC. | ||
|---|---|---|
| Dated: April 8, 2024 | BY: | /s/ Michael A. Bender |
| Michael A. Bender | ||
| Chief Financial Officer, Treasurer and Secretary |
port-aradvisoryagreement
Exhibit 10.1 AMENDED AND RESTATED ADVISORY AGREEMENT among PACIFIC OAK RESIDENTIAL TRUST, INC., PORT OP LP, PACIFIC OAK RESIDENTIAL ADVISORS, LLC, PACIFIC OAK CAPITAL ADVISORS, LLC, KEITH D. HALL, and PETER MCMILLAN III April 2, 2024 i TABLE OF CONTENTS Page ARTICLE 1 DEFINITIONS .................................................................................................................. 1 ARTICLE 2 APPOINTMENT ............................................................................................................... 6 ARTICLE 3 DUTIES OF THE ADVISOR ........................................................................................... 7 3.01 Organizational and Offering Services .......................................................................................... 7 3.02 Acquisition Services .................................................................................................................... 7 3.03 Asset Management Services ........................................................................................................ 7 ARTICLE 4 AUTHORITY OF THE ADVISOR ................................................................................ 10 4.01 General ....................................................................................................................................... 10 4.02 Powers of the Advisor ................................................................................................................ 10 4.03 Approval by the Board ............................................................................................................... 10 4.04 Modification or Revocation of Authority of Advisor ................................................................ 10 ARTICLE 5 BANK ACCOUNTS ....................................................................................................... 10 ARTICLE 6 RECORDS AND FINANCIAL STATEMENTS ........................................................... 11 ARTICLE 7 LIMITATION ON ACTIVITIES .................................................................................... 11 ARTICLE 8 FEES ............................................................................................................................... 11 8.01 Acquisition Fees ......................................................................................................................... 11 8.02 Asset Management Fees............................................................................................................. 11 8.03 Disposition Fees ......................................................................................................................... 12 8.04 Incentive Fees ............................................................................................................................ 12 8.05 Legacy Incentive Fees ................................................................................................................ 12 8.06 Hall and McMillan Fee Reduction ............................................................................................. 13 8.07 Election of Payment in Shares ................................................................................................... 13 ARTICLE 9 EXPENSES ..................................................................................................................... 14 9.01 General ....................................................................................................................................... 14 9.02 Timing of and Additional Limitations on Reimbursements....................................................... 15 9.03 Advancement of Other Organization and Offering Expenses .................................................... 15 ARTICLE 10 RELATIONSHIP OF THE ADVISOR AND THE COMPANY; OTHER ACTIVITIES OF THE ADVISOR ................................................................................. 15 10.01 Relationship ............................................................................................................................... 15 10.02 Time Commitment ..................................................................................................................... 15 ARTICLE 11 THE PACIFIC OAK NAME .......................................................................................... 15 ARTICLE 12 CHANGE OF CONTROL .............................................................................................. 16 12.01 Change of Control ...................................................................................................................... 16 ARTICLE 13 TERM AND TERMINATION OF THE AGREEMENT ............................................... 16 13.01 Term ........................................................................................................................................... 16 13.02 Termination by Either Party ....................................................................................................... 16 13.03 Payments on Termination and Survival of Certain Rights and Obligations .............................. 16 ARTICLE 14 ASSIGNMENT ............................................................................................................... 17 ARTICLE 15 INDEMNIFICATION AND LIMITATION OF LIABILITY ........................................ 17 15.01 Indemnification .......................................................................................................................... 17 15.02 Limitation on Payment of Expenses .......................................................................................... 17 ii ARTICLE 16 MISCELLANEOUS ....................................................................................................... 17 16.01 Notices ....................................................................................................................................... 17 16.02 Modification ............................................................................................................................... 18 16.03 Severability ................................................................................................................................ 18 16.04 Construction ............................................................................................................................... 18 16.05 Entire Agreement ....................................................................................................................... 18 16.06 Waiver ........................................................................................................................................ 18 16.07 Gender ........................................................................................................................................ 18 16.08 Titles Not to Affect Interpretation ............................................................................................. 18 16.09 Counterparts ............................................................................................................................... 18 1 AMENDED AND RESTATED ADVISORY AGREEMENT This Amended and Restated Advisory Agreement, entered into as of April 2, 2024 (this “Agreement”), is among Pacific Oak Residential Trust, Inc., a Maryland corporation (the “Company”); PORT OP LP, a Delaware limited partnership (the “Partnership”); Pacific Oak Residential Advisors, LLC, a Delaware limited liability company (the “Advisor”); for purposes of Article 8, Messrs. Keith D. Hall and Peter McMillan III; and for purposes of Article 9, Pacific Oak Capital Advisors, LLC, a Delaware limited liability company (the “Sponsor”). W I T N E S S E T H WHEREAS, the Company desires to avail itself of the knowledge, experience, sources of information, advice, assistance and certain facilities available to the Advisor and to have the Advisor undertake the duties and responsibilities set forth herein; and WHEREAS, the Advisor is willing to undertake to render these services on the terms and conditions hereinafter set forth. WHEREAS, the parties hereto entered into that certain Advisory Agreement, entered into as of September 1, 2022 (the “Prior Agreement”); WHEREAS, the parties hereto now wish to amend and restate the Prior Agreement in its entirety. NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto agree: ARTICLE 1 DEFINITIONS The following defined terms used in this Agreement shall have the meanings specified below: “Acquisition Expenses” means any and all expenses, excluding the fees payable to the Advisor pursuant to Section 8.01, incurred by the Company, the Partnership, the Advisor or any of their Affiliates in connection with the selection, acquisition or development of any Property, or other Residential Asset, whether or not acquired, as applicable, including, without limitation, legal fees and expenses, travel and communications expenses, costs of appraisals, due diligence, nonrefundable option payments on assets not acquired, accounting fees and expenses, title insurance premiums and miscellaneous expenses related to the selection, acquisition or development of any Property or other potential investment. “Acquisition Fees” means the fee payable to the Advisor pursuant to Section 8.01 plus all other fees and commissions, excluding Acquisition Expenses, paid by any Person to any Person in connection with investing in Residential Assets. Included in the computation of such fees or commissions shall be any real estate commission, selection fee, nonrecurring management fee, loan fees or points or any fee of a similar nature, however designated. Excluded shall be development fees and construction fees paid to Persons not Affiliated with the Advisor in connection with the actual development and construction of a Property. The Advisor shall not be entitled to more than one Acquisition Fee for each Property. “Affiliate” or “Affiliated” shall mean, with respect to any Person, (i) any Person directly or indirectly owning, controlling or holding, with the power to vote, 10% or more of the outstanding voting securities of such other Person; (ii) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled or held, with the power to vote, by such other Person; (iii) any
2 Person directly or indirectly controlling, controlled by or under common control with such other Person; (iv) any executive officer, director, trustee or general partner of such other Person; and (v) any legal entity for which such Person acts as an executive officer, director, trustee or general partner. “BPT Unit Issuance Value” means $3,026,497. “BPT Unit Redemption Value” means $6,477,147. “BPT Units” means 510,816 limited partnership units in the Partnership previously issued to BPT Holdings LLC, a Delaware limited liability company, and assigned to the Partnership on June 27, 2022 in consideration of the BPT Unit Redemption Value. “Board of Directors” or “Board” means persons holding such office, as of any particular time, under the Charter, whether they be the Directors named therein or additional or successor Directors. “Bylaws” means the bylaws of the Company, as amended from time to time. “Cause” means (a) if the Company or the Advisor materially breaches any provision of this Agreement and the breach continues for a period of thirty days after written notice thereof by the non- breaching party specifying the breach and requesting that the breach be remedied in the thirty-day period or (b) a Change of Control. “Change of Control” means the occurrence of any of the following: (i) any “person” (within the meaning of Section 13(d) of the Exchange Act, as enacted and in force on the date hereof), other than POSOR or its Affiliates, is or becomes the “beneficial owner” (as that term is defined in Rule 13d-3, as enacted and in force on the date hereof, under the Exchange Act) of securities of the Company representing more than 50% of the combined voting power of the Company’s securities then outstanding; (ii) there occurs a merger, consolidation or other reorganization of the Company which is not approved by the Board of Directors; (iii) there occurs a sale, exchange, transfer or other disposition of substantially all the assets of the Company to another Person, which disposition is not approved by the Board of Directors; or (iv) there occurs a contested proxy solicitation of the Stockholders that results in the contesting party electing candidates to a majority of the Board of Directors’ positions next up for election. “Change of Control Termination Notice” shall have the meaning set forth in Article 12 of this Agreement. “Charter” means the charter of the Company. “Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time. “Common Shares” means the shares of common stock of the Company, par value $.001 per share. “Company” means Pacific Oak Residential Trust, Inc., a corporation organized under the laws of the State of Maryland. “Competitive Real Estate Commission” means a real estate or brokerage commission for the purchase or Sale of property that is reasonable, customary, and competitive in light of the size, type, and location of the property. 3 “Contract Sales Price” means the total consideration received by the Partnership for the Sale of a Residential Asset or other Permitted Investment. “Cost of Residential Assets” means the sum of (i) with respect to Residential Assets wholly owned, directly or indirectly, by the Partnership, the amount actually paid by the Partnership for the purchase of each Residential Asset, including fees and expenses related thereto (but excluding any Acquisition Fees paid or payable to the Advisor or its affiliates under this Agreement), plus amounts funded or budgeted at the time of acquisition for capital expenditures for the development, construction or improvement of Residential Assets and (ii) in the case of Residential Assets owned by any Joint Venture in which the Partnership is, directly or indirectly, a co-venturer, the portion of the amount actually paid for the purchase of each Residential Asset, including fees and expenses related thereto (but excluding any Acquisition Fees paid or payable to the Advisor or its affiliates under this Agreement), plus amounts funded or budgeted at the time of acquisition for capital expenditures for the development, construction or improvement of Residential Assets, that is attributable to the Partnership’s investment in the Joint Venture. The Cost of Residential Assets is computed without regard to whether any portion of the cost is funded using debt financing secured by, or attributable to, the Residential Asset. “Dealer Manager” means (i) Pacific Oak Capital Markets, LLC, a Delaware limited liability company, or (ii) any successor dealer manager to the Company. “Director” means a member of the Board of Directors of the Company. “Distributions” shall have the meaning set forth in the Company’s Charter. “GAAP” means accounting principles generally accepted in the United States. “Hall and McMillan Interest” shall have the meaning described in Article 8. “Hall and McMillan Fee Reduction” shall have the meaning described in Article 8. “Initial Capitalization in November 2019” means $55,000,000. “IPO” means an initial public offering of Common Shares in the public markets with a concurrent Listing of Common Shares. “Joint Venture” means any arrangement between the Company or any Affiliate including the Partnership on the one hand and a third party on the other hand pursuant to which the Company and the third party invest in Residential Assets or other Permitted Investments. “Legacy Catch-Up” shall have the meaning described in Article 8. “Legacy Excess Profits” shall have the meaning described in Article 8. “Legacy Hurdle Amount” means that amount that results in a 5% cumulative, non-compounded, annual return on Legacy Invested Capital (calculated like simple interest on a daily basis based on a three hundred sixty-five day year). For purposes of calculating the Legacy Hurdle Amount, Legacy Invested Capital shall be determined for each day during the period for which the Legacy Hurdle Amount is being calculated. “Legacy Incentive Fee” shall have the meaning described in Article 8. 4 “Legacy Invested Capital” means (a) the Initial Capitalization in November 2019 (which is deemed invested on November 5, 2019), plus the BPT Unit Issuance Value (which is deemed invested on July 1, 2020), plus additional amounts invested by POSOR in Common Shares and/or OP Units since November 5, 2019, reduced by (b) the BPT Unit Redemption Value (which was paid to repurchase the BPT Units on June 27, 2022) plus any amounts paid by the Company to redeem or repurchase Common Shares from POSOR, plus any amounts paid by the Partnership to redeem or repurchase OP Units from POSOR (other than the BPT Units). “Legacy Total Return” shall have the meaning described in Article 8. “Listed” or “Listing” shall mean the listing of any or all of the Common Shares on a national securities exchange. “Market Value” means: in the case of an IPO, (a) the value of the outstanding Common Shares of the Company that are Listed measured by taking the average closing price or the average of the bid and ask prices, as the case may be, over a period of 30 days during which the Common Shares are traded with the period beginning 30 days after the date that the Common Shares are Listed plus (b) with respect to any classes of Common Shares that are not Listed and/or any outstanding OP Units held by third parties other than the Company, the value of such outstanding securities using a methodology that is reasonably based on the valuation determined in (a) above. “Merger or Sale Consideration Amount” means: (a) (i) in the case of a merger or sale for all or substantially all of the Company’s equity interests or Properties in which the consideration consists solely of cash, the total consideration to be received by holders of Common Shares outstanding immediately prior to the closing of such merger or sale; (ii) in the case of a merger or share exchange in which the consideration consists of securities traded on a national securities exchange, the product of (x) the number of shares of such securities received by the Stockholders at the closing of the merger or share exchange and (y) the market value of such securities, measured by taking the average closing price or the average of the bid and asked price, as the case may be, over a period of 20 consecutive days during which such securities are traded, with such 20-trading day period ending on the trading day prior to the closing date of the merger or share exchange; (iii) in the case of a merger or share exchange in which the consideration consist of securities that are not traded on a national securities exchange, the value ascribed to such securities in the merger agreement; and (iv) in the case of a merger, sale or share exchange in which the consideration is some combination of that described above, the sum of clauses (i) through (iii), as applicable plus (b) with respect to any outstanding OP Units held by third parties other than the Company, the value of such outstanding securities using a methodology that is reasonably based on the valuation determined in (a) above. “MGCL” means the Maryland General Corporation Law, as amended from time to time. “NAV” means the most recent net asset value of the Company, Common Shares or OP Units, as applicable, as calculated in accordance with the valuation guidelines approved by the POSOR Board of Directors, adjusted to reflect any subsequent distributions paid on equity capital of the Company or Partnership, distributions made in connection with redemptions of equity capital of the Company or Partnership, or net proceeds from the sale of equity capital of the Company or Partnership. “NAV REIT” means a REIT that is not publicly traded on a stock exchange, regularly calculates and discloses the NAV of its shares, conducts offerings of its stock at prices based on the NAV per share, and repurchases its shares of stock at prices based on the NAV per share. “OP Units” means units of limited partnership interest in the Partnership. 5 “Organization and Offering Expenses” means all expenses incurred by or on behalf of the Company in connection with any offering of its Common Shares, whether incurred before or after the date of this Agreement, which may include but are not limited to, total underwriting or placement agent fees, brokerage discounts and commissions (including fees of counsel to the underwriter or placement agent); any expense allowance granted by the Company to the underwriter or placement agent or any reimbursement of expenses of the underwriter, placement agent, Sponsor or Advisor by the Company; legal fees; due diligence expenses; marketing expenses; expenses for printing, engraving and mailing; charges of transfer agents, registrars, trustees, escrow holders, depositaries and experts; and expenses of qualification of the sale of the securities under federal and state laws, including taxes and fees and the fees and expenses of accountants and attorneys. “Other Organization and Offering Expenses” means all Organization and Offering Expenses excluding total underwriting or placement agent fees, brokerage discounts and commissions. “Partnership” means PORT OP LP, a Delaware limited partnership formed to own and operate investments in Residential Assets and other Permitted Investments on behalf of the Company. “Permitted Investments” means all investments in which the Company may acquire an interest, either directly or indirectly, including Properties, Single Family Housing Interests and short-term investments acquired for purposes of cash management, and including ownership interests in a Joint Venture. “Person” means an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c) (17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, or any government or any agency or political subdivision thereof, and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended. “POSOR” means Pacific Oak Strategic Opportunity REIT, Inc., a Maryland corporation. “POSOR Board of Directors” means the board of directors of POSOR. “Private Offering” means the private offering of Common Shares made pursuant to the Company’s private offering of up to $500 million of Common Shares in the primary offering, and $50 million of Common Shares through the distribution reinvestment plan, which commenced on September 9, 2022 and terminated on April 2, 2024. “Property” or “Properties” means any real property or properties transferred or conveyed to the Company or the Partnership, either directly or indirectly, or any real property acquired, transferred or conveyed to a Joint Venture in which the Company is, directly or indirectly, a co-venturer. “Property Manager” means an entity that has been retained to perform and carry out property- management services at one or more of the Properties. “Public NAV REIT Conversion” means conversion of the Company to a publicly-offered perpetual life NAV REIT. “REIT” means a “real estate investment trust” under Sections 856 through 860 of the Code. “Residential Assets” means Single Family Rental Properties and Single Family Housing Interests.
6 “Sale” means any transaction or series of related transactions whereby: (A) the Company, directly or indirectly, including through the Partnership sells, grants, transfers, conveys, or relinquishes its ownership of any Property, or other Permitted Investment or portion thereof, including the transfer of any Property that is the subject of a ground lease, and including any event with respect to any Property or other Permitted Investment that gives rise to a significant amount of insurance proceeds or condemnation awards, and including the issuance by one of the Company’s subsidiaries of any asset-backed securities or collateralized debt obligations as part of a securitization transaction; (B) the Company, directly or indirectly, including through the Partnership, sells, grants, transfers, conveys, or relinquishes its ownership of all or substantially all of the interest in any Joint Venture in which it is, directly or indirectly, a co- venturer; or (C) any Joint Venture in which the Company, directly or indirectly, through the Partnership is, a co-venturer, sells, grants, transfers, conveys, or relinquishes its ownership of any Property or other Permitted Investment or portion thereof, including any event with respect to any Property or other Permitted Investment that gives rise to insurance claims or condemnation awards, and including the issuance by the Joint Venture or one of its subsidiaries of any asset-backed securities or collateralized debt obligations as part of a securitization transaction. “SEC” means the United States Securities and Exchange Commission. “Single Family Rental Properties” means a residential building consisting of one to four units for rent. “Single Family Housing Interest” means securities or other interests that generate cash flow derived from single family housing such as mortgages secured by single family homes, subordinated, mezzanine or bridge loans made to owners or investors in single family homes and other related structured investments. “Sponsor” means Pacific Oak Capital Advisors, LLC, a Delaware limited liability company. “Stockholders” means the record holders of the Common Shares or any other series of class of stock of the Company. “Termination Date” means the date of termination of the Agreement determined in accordance with Article 13 hereof. “Total Incentive Fee” shall have the meaning described in Article 8. “Trigger Date” means the effective date of any subordinated incentive fee becoming due pursuant to Article 8. “Triggering Event” means an event which triggers the Company’s obligation to pay a subordinated incentive fee pursuant to Article 8 to the Advisor: (1) an IPO, a sale of all or substantially all of the Company’s equity interests or Properties, a merger, or a share exchange, in a transaction that provides Stockholders with any combination of cash and/or securities of a publicly traded company in exchange for their Common Shares; (2) a Public NAV REIT Conversion; or (3) if this Agreement is terminated (including through non-renewal) (except for cause) by the Company. ARTICLE 2 APPOINTMENT The Company hereby appoints the Advisor to serve as its advisor on the terms and conditions set forth in this Agreement, and the Advisor hereby accepts such appointment. 7 ARTICLE 3 DUTIES OF THE ADVISOR The Advisor is responsible for managing, operating, directing and supervising the operations and administration of the Company and its assets, subject to the condition that any investment advisory services provided with respect to securities shall be provided by a registered investment adviser. The Advisor undertakes to make investment decisions on behalf of the Company subject to the direction and oversight of the Board and Section 4.03 hereof, and to provide the Company with a continuing and suitable investment program consistent with the investment objectives and policies of the Company as determined and adopted from time to time by the Board. Subject to the limitations set forth in this Agreement, including Article 4 hereof, and the continuing and exclusive authority of the Board over the management of the Company, the Advisor shall, either directly or by engaging an Affiliate or third party, perform the following duties: 3.01 Organizational and Offering Services. The Advisor shall perform all services related to the organization of the Company or any offering of Company securities, other than services that (i) are to be performed by the Dealer Manager, (ii) the Company elects to perform directly or (iii) would require the Advisor to register as a broker-dealer with the SEC or any state. 3.02 Acquisition Services. (i) Provide the Company with relevant market research and economic and statistical data in connection with the Company’s assets and investment objectives and policies; (ii) Subject to Section 4 hereof and the investment objectives and policies of the Company: (a) locate, analyze and select potential investments; (b) structure and negotiate the terms and conditions of transactions pursuant to which investments in Residential Assets and other Permitted Investments will be made; (c) cause the Company to, directly or indirectly, acquire Residential Assets and other Permitted Investments; (d) arrange for financing and refinancing and make other changes in the asset or capital structure of investments in Residential Assets and other Permitted Investments; and (e) enter into leases, service contracts and other agreements for Residential Assets and other Permitted Investments, or to engage an approved Property Manager; (iii) Perform due diligence on prospective investments; (iv) Prepare reports regarding prospective investments that include recommendations and supporting documentation necessary for the Directors to evaluate the proposed investments; (v) Obtain reports (which may be prepared by the Advisor or its Affiliates), where appropriate, concerning the value of contemplated investments of the Company; and (vi) Deliver to or maintain on behalf of the Company copies of all appraisals or valuations obtained in connection with the Company’s investments. 3.03 Asset Management Services. (i) Real Estate and Related Services: (a) Investigate, select and, on behalf of the Company, engage and conduct business with (including enter contracts with) such Persons as the Advisor deems necessary to the proper performance of its obligations as set forth in this Agreement, including but 8 not limited to consultants, accountants, lenders, technical advisors, attorneys, brokers, underwriters, corporate fiduciaries, escrow agents, depositaries, custodians, agents for collection, insurers, insurance agents, developers, construction companies, Property Managers and any and all Persons acting in any other capacity deemed by the Advisor necessary or desirable for the performance of any of the foregoing services; (b) Negotiate any borrowings that the Company, directly or indirectly, makes and to cause the Company or the underlying borrower to pay any amounts due on the borrowings; (c) Monitor applicable markets and obtain reports (which may be prepared by the Advisor or its Affiliates) where appropriate, concerning the value of investments of the Company; (d) Monitor and evaluate the performance of each asset of the Company and the Company’s overall portfolio of assets, provide daily management services to the Company and perform and supervise the various management and operational functions related to the Company’s investments; (e) Formulate and oversee the implementation of strategies for the administration, promotion, management, operation, maintenance, improvement, financing and refinancing, marketing, leasing and disposition of Residential Assets and other Permitted Investments on an overall portfolio basis; (f) Consult with the Company’s officers and the Board and assist the Board in formulating and implementing the Company’s financial policies, and, as necessary with respect to investment and borrowing opportunities presented to the Board, furnish the Board with advice and recommendations with respect to the making of investments consistent with the investment objectives and policies of the Company and in connection with any borrowings proposed to be undertaken by the Company; (g) Oversee and evaluate the performance by the Property Manager(s) of their duties, including collection and proper deposits of rental payments and payment of Property expenses and maintenance; (h) Conduct periodic on-site property visits to some or all (as the Advisor deems reasonably necessary) of the Properties to inspect the physical condition of the Properties; (i) Review, analyze and comment upon the operating budgets, capital budgets and leasing plans prepared and submitted by each Property Manager and aggregate these property budgets into the Company’s overall budget; (j) Coordinate and manage relationships between the Company and any co- venturers; and (k) Consult with the Company’s officers and the Board and provide assistance with the evaluation and approval of potential asset disposition, Sale and refinancing opportunities. (ii) Accounting and Other Administrative Services: 9 (a) Provide the day-to-day management of the Company and perform and supervise the various administrative functions reasonably necessary for the management of the Company; (b) From time to time, or at any time reasonably requested by the Board, make reports to the Board on the Advisor’s performance of services to the Company under this Agreement; (c) Provide or arrange for any administrative services and items, legal and other services, office space, office furnishings, personnel and other overhead items necessary and incidental to the Company’s business and operations; (d) Provide financial and operational planning services; (e) Maintain accounting and other record-keeping functions at the Company and investment levels, including information concerning the activities of the Company as shall be required to prepare and to file all periodic financial reports, tax returns and any other information required to be filed with the Internal Revenue Service and any other regulatory agency; (f) Maintain and preserve all appropriate books and records of the Company; (g) Provide services necessary to ensure the Company’s compliance with the rules and regulations governing qualification as a REIT, including any asset, income and shareholder testing, and addressing with the Board, if necessary, any actions required to maintain REIT compliance; (h) Provide tax and compliance services and coordinate with appropriate third parties, including the Company’s independent auditors and other consultants, on related tax matters; (i) Provide the Company with all necessary cash management services; (j) Manage and coordinate with the transfer agent payment of dividends and other distributions to Stockholders; (k) Consult with the Company’s officers and the Board and assist the Board in evaluating and obtaining necessary insurance coverage based upon risk management determinations; (l) Provide the Company’s officers and the Board with timely updates related to the overall regulatory environment affecting the Company, as well as managing compliance with such matters; (m) Consult with the Company’s officers and the Board relating to the corporate governance structure and appropriate policies and procedures related thereto; (n) Perform all reporting, record keeping, internal controls and similar matters in a manner to allow the Company to comply with applicable law;
10 (o) Notify the Board of all proposed material transactions before they are completed; and (p) Do all things necessary to assure its ability to render the services described in this Agreement. ARTICLE 4 AUTHORITY OF THE ADVISOR 4.01 General. All rights and powers to manage and control the day-to-day business and affairs of the Company shall be vested in the Advisor. The Advisor shall have the power to delegate all or any part of its rights and powers to manage and control the business and affairs of the Company to such officers, employees, Affiliates, agents and representatives of the Advisor or the Company as it may deem appropriate. Any authority delegated by the Advisor to any other Person shall be subject to the limitations on the rights and powers of the Advisor specifically set forth in this Agreement or the Charter. Notwithstanding the foregoing, any investment advisory services provided with respect to securities shall be provided by a registered investment adviser. 4.02 Powers of the Advisor. Subject to the express limitations set forth in this Agreement and the continuing and exclusive authority of the Board over the management of the Company, the power to direct the management, operation and policies of the Company, including making, financing and disposing of investments, shall be vested in the Advisor, which shall have the power by itself and shall be authorized and empowered on behalf and in the name of the Company to carry out any and all of the objectives and purposes of the Company and to perform all acts and enter into and perform all contracts and other undertakings that it may in its sole discretion deem necessary, advisable or incidental thereto to perform its obligations under this Agreement. 4.03 Approval by the Board. Notwithstanding the foregoing, the Advisor may not take any action on behalf of the Company without the prior approval of the Board or duly authorized committees thereof if the Charter or the MGCL require the prior approval of the Board. If the Board or a committee of the Board must approve a proposed investment, financing or disposition or chooses to do so, the Advisor will deliver to the Board or committee, as applicable, all documents required by it to evaluate such investment, financing or disposition. 4.04 Modification or Revocation of Authority of Advisor. The Board may, at any time upon the giving of notice to the Advisor, modify or revoke the authority or approvals set forth in Article 3 and this Article 4 hereof; provided, however, that such modification or revocation shall be effective upon receipt by the Advisor and shall not be applicable to investment transactions to which the Advisor has committed the Company prior to the date of receipt by the Advisor of such notification. ARTICLE 5 BANK ACCOUNTS The Advisor may establish and maintain one or more bank accounts in its own name for the account of the Company or in the name of the Company and may collect and deposit into any such account or accounts, and disburse from any such account or accounts, any money on behalf of the Company, under such terms and conditions as the Board may approve, provided that no funds shall be commingled with the funds of the Advisor. The Advisor shall from time to time render appropriate accountings of such collections and payments to the Board and the independent auditors of the Company. 11 ARTICLE 6 RECORDS AND FINANCIAL STATEMENTS The Advisor, in the conduct of its responsibilities to the Company, shall maintain adequate and separate books and records for the Company’s operations, which shall be supported by sufficient documentation to ascertain that such books and records are properly and accurately recorded. Such books and records shall be the property of the Company and shall be available for inspection by the Board and by counsel, auditors and other authorized agents of the Company or persons with rights to inspect the books and records, at any time or from time to time during normal business hours. Such books and records shall include all information necessary to calculate and audit the fees paid or reimbursements made under this Agreement. The Advisor shall utilize procedures to attempt to ensure such control over accounting and financial transactions as is reasonably required to protect the Company’s assets from theft, error or fraudulent activity. All financial statements that the Advisor delivers to the Company for distribution to Stockholders shall be prepared on an accrual basis in accordance with GAAP, except for special financial reports that by their nature require a deviation from GAAP. The Advisor shall liaise with the Company’s officers and independent auditors and shall provide such officers and auditors with the reports and other information that the Company so requests. ARTICLE 7 LIMITATION ON ACTIVITIES Notwithstanding any provision in this Agreement to the contrary, the Advisor shall not take any action that, in its sole judgment made in good faith, would (i) adversely affect the ability of the Company to qualify or continue to qualify as a REIT under the Code, (ii) subject the Company to regulation under the Investment Company Act of 1940, as amended, (iii) violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over the Company, its Common Shares or its other securities, (iv) require the Advisor to register as a broker-dealer with the SEC or any state, (v) violate the Charter or Bylaws, or (vi) cause the Company’s parent, Pacific Oak Strategic Opportunity REIT, Inc., to violate its charter (the “SOR Charter”). ARTICLE 8 FEES 8.01 Acquisition Fees. As compensation for the investigation, selection, sourcing and acquisition or origination (by purchase, investment or exchange) of Residential Assets and other Permitted Investments, the Company shall pay the Advisor an Acquisition Fee for each such investment equal to 1.0% of the Cost of Residential Assets for any given transaction. With respect to the acquisition of any Residential Asset or other Permitted Investment through any Joint Venture in which the Partnership is, directly or indirectly, a partner, member or stockholder the Acquisition Fee payable to the Advisor shall equal 1.0% of each investment in the Joint Venture. The Advisor shall submit an invoice to the Company following the closing or closings of each investment. Generally, the Acquisition Fee payable to the Advisor shall be paid at the closing of the transaction upon receipt of the invoice by the Company. The Advisor may, in its discretion, waive or defer any Acquisition Fee, in whole or in part, in its sole discretion. All or any portion of the Acquisition Fees deferred shall not bear interest and may be paid by the Company in the Joint Venture in such other fiscal year as the Advisor shall determine. 8.02 Asset Management Fees. As compensation for the services described in Section 3.03 the Company shall pay the Advisor an asset management fee equal to 0.25% quarterly (1% annually) on the most recent aggregate value of the Partnership’s Residential Assets and other Permitted Investments, as determined in accordance with the valuation guidelines approved by the POSOR Board of Directors (adjusted to reflect any subsequent purchases or sales of portfolio assets based on the purchase or sale 12 prices). The Advisor shall submit an invoice to the Company, accompanied by a computation of the fees for the applicable period. Generally, the Asset Management Fee payable to the Advisor shall be paid on the last day of such quarter, or the first business day following the last day of such quarter. In the event this Agreement commences on a date other than the first day of a quarter, the Advisor will be entitled to receive its prorated asset management fee calculated from the date of commencement. In the event this Agreement is terminated or its term expires without renewal, the Adviser will be entitled to receive its prorated asset management fee through the date of termination. Such pro ration shall take into account the number of days of any partial quarter for which this Agreement was in effect. 8.03 Disposition Fees. If the Advisor or any of its Affiliates provide a substantial amount of services in connection with a Sale, the Advisor or such Affiliate shall receive a fee at the closing (the “Disposition Fee”) equal to 1% of the Contract Sales Price; provided, however, that if in connection with such Sale commissions are paid to third parties other than the Advisor or its Affiliates, the fee paid to the Advisor or any of its Affiliates may not exceed the commissions paid to such unaffiliated third parties. Any Disposition Fee payable under this Section 8.03 may be paid in addition to commissions paid to non- Affiliates, provided that the total commissions (including such Disposition Fee) paid to all Persons by the Company for each Sale shall not exceed an amount equal to the lesser of (i) 6% of the aggregate Contract Sales Price of each Residential Asset or other Permitted Investment or (ii) the Competitive Real Estate Commission for each Residential Asset or other Permitted Investment. 8.04 Incentive Fees. Upon a Triggering Event, the Company shall pay to the Advisor a Total Incentive Fee, as calculated following the methodology below. If the Company pays the Advisor the Total Incentive Fee associated with one Triggering Event, the Company will not pay the Advisor any further incentive fees. For each Triggering Event, the Total Incentive Fee is equal to the applicable Legacy Incentive Fee described in Section 8.05, subject to the Hall and McMillan Fee Reduction described in Section 8.06. Any Total Incentive Fee due on Public NAV REIT Conversion will be payable to the Advisor in Common Shares and such shares will be subordinate to repurchase requests from other Stockholders under the Company’s share repurchase plan (although no deduction for early repurchase will apply to the Advisor’s Common Shares). 8.05 Legacy Incentive Fees. (i) Legacy Incentive Fee Due on IPO, Sale, or Merger. In the event of an IPO, a sale of all or substantially all of the Company’s equity interests or Properties, a merger, or a share exchange, in a transaction that provides Stockholders with any combination of cash and/or securities of a publicly traded company in exchange for their Common Shares, then a Legacy Incentive Fee shall be due to the Advisor using the formula below under Section 8.05(ii), but the Market Value or the Merger or Sale Consideration Amount, as applicable, of the OP Units and/or Common Shares held by POSOR will be used instead of the then-current NAV of the OP Units and/or Common Shares held by POSOR when calculating Legacy Total Return. (ii) Legacy Incentive Fee Due on Public NAV REIT Conversion. If the Company completes a Public NAV REIT Conversion, and has satisfied all properly submitted requests under the Company’s share repurchase program for the 12 months prior to the Trigger Date, the Advisor will be entitled to a Legacy Incentive Fee equal to 12.5% of the Legacy Total Return, subject to a 5% Legacy Hurdle Amount with a Legacy Catch-Up. Specifically, the Legacy Incentive Fee will equal: (a) First, if the Legacy Total Return exceeds the Legacy Hurdle Amount (any such excess, the “Legacy Excess Profits”), 100% of such Legacy Excess Profits until the total amount allocated to the Advisor hereunder equals 12.5% of the sum of (x) the Legacy 13 Hurdle Amount and (y) any amount due to the Advisor pursuant to this clause (this is referred to as a “Legacy Catch-Up”); and (b) Second, to the extent there are remaining Legacy Excess Profits, 12.5% of such remaining Legacy Excess Profits. (c) “Legacy Total Return” shall equal the sum of (i) all distributions accrued or paid (without duplication) on OP Units and Common Shares held by POSOR between November 5, 2019 and the Trigger Date, plus (ii) all distributions accrued or paid (without duplication) on OP Units held by BPT Holdings LLC between November 5, 2019 and the September 9, 2022, plus (iii) the amount by which (a) the sum of the then-current NAV of the outstanding OP Units and/or Common Shares held by POSOR, plus any amounts POSOR received from the Company or the Partnership upon repurchase or redemption of Common Shares or OP Units, plus the BPT Unit Redemption Value exceeds (b) the sum of the Initial Capitalization in November 2019 and all subsequent amounts POSOR invested in the Company and/or the Partnership in exchange for Common Shares and/or OP Units, plus the BPT Unit Issuance Value, plus (iv) the accrued Legacy Incentive Fee, if any (after taking into account the fee reduction in Section 8.06). (iii) Legacy Incentive Fee Due on Termination. The Legacy Incentive Fee calculated pursuant to 8.05(ii) above will also be due if this Agreement is terminated (including through non- renewal) (except for cause) by the Company. If a fee is due, the Company will only pay the amounts due from the proceeds from the Sale of one or more assets or with the excess proceeds from financing or refinancing the Company’s assets. Amounts not paid will not bear interest and will only be paid from the excess proceeds from future asset Sales, financings or refinancing. 8.06 Hall and McMillan Fee Reduction. Messrs. Peter McMillan and Keith Hall have an economic interest in the cash flows of BPT Holdings, LLC, which in turn owns 100% of Pacific Oak Residential, Inc. (“PORI”), which in turn owns 100% of the Advisor (the “Hall and McMillan Interest”). As of the date of this Agreement, the Hall and McMillan Interest is 52%. If a Legacy Incentive Fee becomes due pursuant to Article 8, and the Hall and McMillan Interest is at least 52% at that time, the Company will pay to the Advisor the Legacy Incentive Fee, reduced by that portion of the Legacy Incentive Fee which is equivalent to the Hall and McMillan Interest. If a Legacy Incentive Fee becomes due pursuant to Article 8 and the Hall and McMillan Interest is less than 52% at that time, the Company shall pay the Advisor 48% of the Legacy Incentive Fee. In addition, Messrs. McMillan and Hall undertake and agree not to share, directly or indirectly, in the portion of the Legacy Incentive Fee paid by the Company to the Advisor, but rather that it shall be distributed in its entirety to the other members of BPT Holdings, LLC. Messrs. McMillan and Hall agree and PORA agrees, on behalf of itself and its direct and indirect owners, to work in good faith with the other members of BPT Holdings, LLC to ensure that Messrs. McMillan and Hall are not responsible for paying income tax on such amount, as it will be distributed to other members of BPT Holdings, LLC and not to Messrs. McMillan and Hall. 8.07 Election of Payment in Shares. Subject to Section 8.04, the Advisor may elect, in its sole discretion, to receive payment of any fees described herein in cash or cash equivalent aggregate NAV amounts of Class A Common Shares, with the value per Class A Common Share equal to the most recent NAV per Class A Common Share determined in accordance with the valuation guidelines approved by the POSOR Board of Directors. Such Common Shares issued to the Advisor are eligible to participate in the Company’s share repurchase program, subject to the applicable limits, holding period and early repurchase deduction therein, provided that in the applicable repurchase period all repurchase requests made in good order from unaffiliated stockholders are satisfied first as a priority.
14 ARTICLE 9 EXPENSES 9.01 General. In addition to the compensation paid to the Advisor pursuant to Article 8 hereof, but subject to Section 9.03 below, the Company shall pay directly or reimburse the Advisor for Other Organization and Offering Expenses incurred by the Advisor or its Affiliates in connection with the Private Offering and for all of the third-party expenses paid or incurred by the Advisor or its Affiliates on behalf of the Company or in connection with the services provided to the Company pursuant to this Agreement; provided, however, neither the Advisor nor any of its Affiliates shall be entitled to any reimbursement for any cost or expenses for salaries, bonuses and benefits of persons employed by the Advisor or its Affiliates who perform services for the Company or in any way related to the overhead or operations of the Advisor or its Affiliates; provided further that any expenses incurred by the Dealer Manager or relating to its activities must be pre-approved by the Company in order to be eligible for reimbursement pursuant to this section. The third-party expenses for which payment or reimburse will be allowed include, but are not limited to: (i) Acquisition Expenses incurred in connection with the selection and acquisition of Residential Assets and other Permitted Investments, including expenses incurred related to assets pursued or considered but not ultimately acquired by the Company; (ii) The cost of goods and services used by the Company and obtained from third parties other than the Advisor or its Affiliates; (iii) Interest and other costs for borrowed money, including discounts, points and other similar fees; (iv) Taxes and assessments on income or Properties, taxes as an expense of doing business and any other taxes otherwise imposed on the Company and its business, assets or income; (v) All expenses, except expenses incurred by any Property Manager affiliated with the Advisor, of managing, improving, developing, operating and selling Residential Assets and other Permitted Investments owned, directly or indirectly, by the Company, as well as expenses of other transactions relating to the Residential Assets and other Permitted Investments; (vi) All expenses in connection with payments to the Board and meetings of the Board and Stockholders; (vii) Expenses of providing services for and maintaining communications with Stockholders, including the cost of preparing, printing, and mailing annual reports and other Stockholder reports, proxy statements and other reports required by governmental entities; (viii) Out-of-pocket costs associated with insurance required in connection with the business of the Company or by its officers and directors; (ix) Audit, accounting and legal fees, and other fees for professional services relating to the operations of the Company and all such fees incurred at the request, or on behalf of, the Board or any committee of the Board; (x) Expenses for the Company to comply with all applicable laws, regulations and ordinances; 15 (xi) Expenses connected with payments of Distributions and stock dividends made or caused to be made by the Company to the Stockholders; (xii) Expenses of merging, liquidating or dissolving the Company or of amending the Charter or the Bylaws; and (xiii) All other third-party out-of-pocket costs incurred by the Advisor in performing its duties hereunder. 9.02 Timing of and Additional Limitations on Reimbursements. (i) Expenses incurred by the Advisor on behalf of the Company and reimbursable to the Advisor pursuant to this Article 9 shall be reimbursed upon delivery by the Advisor to the Board of a statement documenting the reimbursable expenses for the prior quarter; provided that the statement shall be delivered within 45 days after the end of each quarter. 9.03 Advancement of Other Organization and Offering Expenses. (i) The Sponsor will advance the Company’s Other Organization and Offering Expenses through the first anniversary of the date of the commencement of the Private Offering. (ii) The Company will reimburse the Sponsor for such advanced expenses ratably over the 60 months following the first anniversary of the date of the commencement of the Private Offering. ARTICLE 10 RELATIONSHIP OF THE ADVISOR AND THE COMPANY; OTHER ACTIVITIES OF THE ADVISOR 10.01 Relationship. The Company and the Advisor are not partners or joint venturers with each other, and nothing in this Agreement shall be construed to make them partners or joint venturers. This Agreement shall not limit or restrict the right of any manager, director, officer, employee or equity holder of the Advisor or its Affiliates to engage in any other business or to render services of any kind to any other Person. The Advisor may, with respect to any investment in which the Company is a participant, also render advice and service to each and every other participant therein. The Advisor shall promptly disclose to the Board the existence of any additional condition or circumstance, existing or anticipated, of which it has knowledge that creates or could create a conflict of interest between the Advisor’s obligations to the Company and its obligations to or its interest in any other Person. 10.02 Time Commitment. The Advisor shall, and shall cause its Affiliates and their respective employees, officers and agents to, devote to the Company such time as shall be reasonably necessary to conduct the business and affairs of the Company in an appropriate manner consistent with the terms of this Agreement. The Company acknowledges that the Advisor and its Affiliates and their respective employees, officers and agents may also engage in activities unrelated to the Company and may provide services to Persons other than the Company or any of its Affiliates. ARTICLE 11 THE PACIFIC OAK NAME The Advisor and its Affiliates have a proprietary interest in the name “Pacific Oak.” The Advisor hereby grants to the Company a non-transferable, non-assignable, non-exclusive royalty-free right and 16 license to use the name “Pacific Oak” during the term of this Agreement. Accordingly, and in recognition of this right, if at any time the Company ceases to retain the Advisor or one of its Affiliates to perform advisory services for the Company, the Company will, promptly after receipt of written request from the Advisor, cease to conduct business under or use the name “Pacific Oak” or any derivative thereof and the Company shall change its name and the names of any of its subsidiaries to a name that does not contain the name “Pacific Oak” or any other word or words that might, in the reasonable discretion of the Advisor, be susceptible of indication of some form of relationship between the Company and the Advisor or any of its Affiliates. At such time, the Company will also make any changes to any trademarks, service marks or other marks necessary to remove any references to the word “Pacific Oak.” Consistent with the foregoing, it is specifically recognized that the Advisor or one or more of its Affiliates has in the past and may in the future organize, sponsor or otherwise permit to exist other investment vehicles (including vehicles for investment in real estate) and financial and service organizations having “Pacific Oak” as a part of their name, all without the need for any consent (and without the right to object thereto) by the Company. ARTICLE 12 CHANGE OF CONTROL 12.01 Change of Control. Notwithstanding any other provisions of this Agreement to the contrary, in the event of a Change of Control of the Company, either the Company or the Advisor shall have the right, subject to the Company’s and the Partnership’s right to assign this Agreement in accordance with Section 14, upon sixty (60) days prior written notice to the other (the “Change of Control Termination Notice”), to terminate this Agreement. If the Advisor or the Company so elects to terminate this Agreement pursuant to this Section 12, the Termination Date shall be the date specified in the Change of Control Termination Notice, but in any event no later than thirty (30) days after the Change of Control of the Company. ARTICLE 13 TERM AND TERMINATION OF THE AGREEMENT 13.01 Term. The term of this Agreement is through September 1, 2024 and may be renewed for an unlimited number of successive one-year terms upon mutual consent of the parties. The Company will evaluate the performance of the Advisor before renewing this Agreement, and each such renewal shall be for a term of no more than one year. Any such renewal must be approved by the Board of Directors. 13.02 Termination by Either Party. This Agreement may be terminated for Cause upon 60 days written notice by either the Company or the Advisor. The provisions of Articles 1, 11, 13, 15 and 16 shall survive termination of this Agreement. 13.03 Payments on Termination and Survival of Certain Rights and Obligations. (i) After the Termination Date, the Advisor shall not be entitled to compensation for further services hereunder except it shall be entitled to receive from the Company within 30 days after the effective date of such termination (a) all unpaid reimbursements of expenses and all earned but unpaid fees payable to the Advisor prior to termination of this Agreement and (b) any incentive fees due under Article 8 hereunder. Notwithstanding the foregoing, no incentive fee will be paid if this Agreement is terminated for Cause by the Company in accordance with Section 13.02 following an event described in clause (a) of the definition of Cause. (ii) The Advisor shall promptly upon termination: 17 (a) pay over to the Company all monies, if any, after deducting any accrued fees and reimbursement for its expenses to which it is then entitled; (b) deliver to the Board a full accounting, including a statement showing all payments collected by it and a statement of all money held by it, covering the period following the date of the last accounting furnished to the Board; (c) deliver to the Board all documents including, but not limited to those related to the Company’s assets then in the custody of the Advisor; and (d) cooperate with the Company to provide an orderly transition of advisory functions. ARTICLE 14 ASSIGNMENT This Agreement may be assigned by the Advisor to an Affiliate with the consent of the Board. This Agreement shall not be assigned by the Company without the consent of the Advisor, except in the case of an assignment by the Company to a corporation or other organization that is a successor to all of the assets, rights and obligations of the Company, in which case such successor organization shall be bound hereunder and by the terms of the assignment in the same manner as the Company is bound by this Agreement. ARTICLE 15 INDEMNIFICATION AND LIMITATION OF LIABILITY 15.01 Indemnification. The Company shall, to the fullest extent to which the Company many indemnify its directors under the MGCL, indemnify, defend and hold harmless the Advisor and its Affiliates, including their respective officers, directors, partners, agents and employees, from all liability, claims, damages or losses arising in the performance of their duties hereunder, and related expenses, including reasonable attorneys’ fees, incurred by these persons or entities to the extent such liability, claims, damages or losses and related expenses are not fully reimbursed by insurance. 15.02 Limitation on Payment of Expenses. The Company shall pay or reimburse the reasonable legal expenses and other costs incurred by the Advisor or its Affiliates in advance of the final disposition of a proceeding subject to the limitations and requirements set forth in the MGCL. ARTICLE 16 MISCELLANEOUS 16.01 Notices. Any notice, report or other communication required or permitted to be given hereunder shall be in writing unless some other method of giving such notice, report or other communication is required by the Charter, the Bylaws or is accepted by the party to whom it is given, and shall be given by being delivered by hand or by overnight mail or other overnight delivery service to the addresses set forth herein: To the Company or the Board: Pacific Oak Residential Trust, Inc. 13901 Sutton Park Dr S. Suite B 160 Jacksonville, FL 32224
18 Email: mgough@pac-oak.com Attention: Michael Gough To the Advisor: Pacific Oak Residential Advisors, LLC 13901 Sutton Park Dr S. Suite B 160 Jacksonville, FL 32224 Email: JAnstis@pac-oak.com Attention: Jeff Anstis Either party may at any time give notice in writing to the other party of a change in its address for the purposes of this Section 16.01. 16.02 Modification. This Agreement shall not be changed, modified, terminated or discharged, in whole or in part, except by an instrument in writing signed by both parties hereto, or their respective successors or permitted assigns. 16.03 Severability. The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part. 16.04 Construction. The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware. 16.05 Entire Agreement. This Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing. 16.06 Waiver. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver. 16.07 Gender. Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires. 16.08 Titles Not to Affect Interpretation. The titles of Articles and Sections contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof. 16.09 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when 19 one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. [Signature Page to Amended and Restated Advisory Agreement] IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date and year first above written. PACIFIC OAK RESIDENTIAL TRUST, INC. By: /s/ Michael S. Gough Name: Michael S. Gough Title: Director, Chief Executive Officer and President PORT OP LP By: Pacific Oak Residential Trust, Inc., its general partner By: /s/ Michael S. Gough Name: Michael S. Gough Title: Director, Chief Executive Officer and President PACIFIC OAK RESIDENTIAL ADVISORS, LLC By: Pacific Oak Residential, Inc., sole Member By: /s/ Michael S. Gough Michael S. Gough, President PACIFIC OAK CAPITAL ADVISORS, LLC By: Pacific Oak Holding Group, LLC, sole Member By: /s/ Peter McMillan III Peter McMillan III, Member By: /s/ Keith D. Hall Keith D. Hall, Member By: /s/ Keith D. Hall Name: Keith D. Hall By: /s/ Peter McMillan III Name: Peter McMillan III
port-secondardmh_propert
Exhibit 10.2 SECOND AMENDED AND RESTATED MANAGEMENT AGREEMENT This SECOND AMENDED AND RESTATED MANAGEMENT AGREEMENT (this “Agreement”), entered into as April 2, 2024, is made and entered into by and among Pacific Oak Residential Trust, Inc., a Maryland corporation (“PORT”), and DMH Realty, LLC, a Florida limited liability company (“Property Manager”). RECITALS WHEREAS, PORT owns through its operating partnership, PORT OP LP, a Delaware limited partnership (the “Partnership”), or otherwise has the right to collect rents from, and contract for managerial services for, the single-family rental properties identified and described in Schedule A attached hereto, as adjusted by any properties acquired, directly or indirectly, by PORT or the Partnership, in accordance with this Agreement, minus any properties sold by PORT or the Partnership from time to time in accordance with this Agreement (collectively, the “Properties” and each, a “Property”); WHEREAS, the parties desire to enter into this Agreement, pursuant to which Property Manager will undertake certain management, acquisition, disposition and oversight functions with respect to the Properties as provided herein, subject to the limitations set forth herein; WHEREAS, the parties entered into that certain Amended and Restated Management Agreement on as of September 1, 2022 (the “Prior Agreement”); and WHEREAS, the parties desire to amend and restate the Prior Agreement in its entirety with this Agreement. AGREEMENT NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE I APPOINTMENT OF PROPERTY MANAGER Section 1.01 Appointment of Property Manager. PORT hereby appoints Property Manager the sole and exclusive manager for the Properties upon the terms and conditions set forth herein. Property Manager hereby accepts such appointment on the terms and conditions set forth herein and shall furnish the services of its organization for the management of the Properties. Section 1.02 Independent Contractor Status. Property Manager is hereby engaged to manage the Properties as an independent contractor. ARTICLE II TERM OF AGREEMENT Section 2.01 Term of Agreement. The term of this Agreement shall continue until September 30, 2024 (the “Term”). Upon expiration of the Term, this Agreement will automatically renew for additional one-year periods until terminated as provided in Article VIII. 2 ARTICLE III PROPERTY MANAGER’S DUTIES AND RESPONSIBILITIES Section 3.01 General Scope. Property Manager shall devote such efforts as are consistent with the Standard of Care (as defined below) in managing, coordinating and supervising the ordinary and usual business and affairs pertaining to the identification, acquisition, operation, maintenance, leasing, licensing, rehabilitation, construction, disposition and management of the Properties and in compliance with the directives of PORT or PORT’s advisor, Pacific Oak Residential Advisors, LLC (“Advisor”), all pursuant to the terms, conditions and limitations of this Agreement. Property Manager shall have such responsibilities, and shall perform and take, or cause to be performed or taken, all such services and actions customarily taken by managing agents of property of similar nature, location, and character to that of the Properties consistent with the duties set forth in this Article III. Unless otherwise specifically provided in this Agreement or the written directives of PORT or Advisor (collectively, the “Guiding Documents”), all services and actions that Property Manager is required or permitted to perform or take, or cause to be performed or taken, in connection with the management of the Properties shall be performed or taken, as the case may be, on behalf of PORT and at PORT’s sole cost, expense, and risk. Property Manager’s authority is limited to performing the services set forth herein and the other Guiding Documents. Except as provided in the Guiding Documents, Property Manager shall have no authority (a) to execute any contract or agreement for or on behalf of PORT, (b) to provide additional services or modify existing services to tenants, or (c) to assume or create any obligation or liability or to make any representation, covenant, agreement or warranty for or on behalf of PORT. Section 3.02 Standard of Care. Property Manager shall perform its duties and obligations hereunder in a commercially reasonable manner, consistent with the degree of care, skill, prudence, diligence and good faith that a property manager would use in managing other properties or performing similar services in the same geographic location (the “Standard of Care”). Without limiting the generality of the foregoing, Property Manager shall employ such efforts as are consistent with the Standard of Care to comply with all applicable requirements of federal, state and local laws, ordinances, rules, regulations and orders governing the leasing, promotion, management, use, operation, repair and maintenance of the Properties and the terms of any leases, mortgages or other agreements to which Properties are subject (collectively, the “Requirements” or individually a “Requirement”). Property Manager shall have in its employ at all times a sufficient number of capable employees to properly, adequately, safely and economically perform the duties hereunder. Further, Property Manager shall carry out its duties set forth herein in a manner that is consistent with PORT’s written instructions concerning its election to be taxed as a real estate investment trust under the Internal Revenue Code of 1986, as amended. Section 3.03 Marketing Authorization. Property Manager is authorized to establish rental rates and implement marketing strategies in accordance therewith. Property Manager shall supervise the preparation of all advertising layouts, brochures, and campaigns. Advertising and promotional materials shall be prepared in accordance with Property Manager’s budget and full compliance with federal, state, and municipal fair housing laws, and Property Manager shall not use PORT’s name (or any Affiliate of PORT) without PORT’s express written approval. Section 3.04 Acquisition and Disposition. Property Manager shall provide management, supervisory, administrative and logistical services and support to PORT and to Advisor consistent with the Standard of Care and the Guiding Documents in connection with (i) the identification and evaluation of Properties that might be suitable for purchase or other acquisition, (ii) the purchase or other acquisition of Properties, (iii) the financing or refinancing of Properties, and (iv) the sale or other disposition of Properties (including, without limitation, the structuring and negotiation of such transactions and the management of PORT’s dealings with brokers, appraisers, bankers and other professionals engaged by PORT in connection with such transactions). For purposes of clarification, Properties acquired, directly or indirectly, by PORT 3 or the Partnership will be deemed Properties under this Agreement, and Properties sold by PORT or the Partnership shall no longer be deemed Properties under this Agreement, in either case regardless of whether this Agreement or any exhibit or schedule is formally amended to reflect the new or former Properties. Section 3.05 Leasing. Property Manager shall exercise such efforts as are consistent with the Standard of Care to obtain and keep residents and will cooperate with any broker in any reasonable manner likely to aid in filling any vacancy. Property Manager is authorized, consistent with the Standard of Care and Guiding Documents, to negotiate, prepare, and execute all leases on PORT’s approved lease form, including all renewals and extensions of leases and to cancel and modify existing leases, provided such actions are taken in accordance with all Requirements. Section 3.06 Security Deposits. Property Manager is authorized to establish accounts on behalf of PORT for holding security deposits, if any, in accordance with all Requirements, and shall collect and refund security deposits in accordance with the terms of each resident’s lease and as may be required by applicable law. If required by statute, Property Manager will deposit security deposits into a separate interest-bearing account and pay residents the interest earned on such deposit; otherwise, Property Manager will deposit security deposits into the Operating Account (as defined below). When Property Manager reasonably deems appropriate, Property Manager may offset resident charges with forfeited security deposit amounts and disburse any surplus security deposits from the Operating Account. Section 3.07 Collection of Rents and Enforcement of Leases. Property Manager shall exercise such efforts as are consistent with the Standard of Care to promptly collect all rents and other charges for services provided in connection with the use of the Properties. All monies collected shall be promptly deposited into the Operating Account unless otherwise directed by PORT. When necessary and permissible by applicable Requirements, Property Manager is authorized to institute the following actions: (a) terminate tenancies; (b) sign and serve such notices as are deemed reasonably necessary or expedient by Property Manager; (c) institute and prosecute actions and evict residents; (d) recover rents and other sums due by legal proceedings; and (e) settle, compromise, and release such actions or suits, or reinstitute such tenancies. Attorney’s fees, filing fees, court costs, and other reasonable and necessary expenses incurred in connection with such actions and not recovered from residents shall be paid out of the Operating Account. Section 3.08 Operating Expenditures. (a) The term “Operating Expenditures” shall mean the aggregate of all actual, reasonable expenses incurred by Property Manager in accordance with this Agreement in connection with or arising from the identification, acquisition, financing, ownership, operation, management, repair, disposition, replacement, maintenance, and use or occupancy of the Properties including, without limitation, expenditures for: (i) license and permit fees, landowner association fees and assessments, and all other charges of any kind and nature by any governmental or public authority; (ii) management fees and any other reasonable expenses incurred by Property Manager consistent with the Guiding Documents; (iii) advertising and marketing expenses, and leasing fees and commissions; (iv) legal, accounting, engineering, and other professional and consulting fees and disbursements; (v) accounts payable to independent contractors providing labor, material, services and equipment to the Properties; (vi) premiums for insurance paid with respect to the Properties or the operations thereof; (vii) resident improvements and replacement and segregated reserves therefor; (viii) maintenance and repair of the Properties and all property and equipment used in connection with the operation thereof; (ix) renovation, improvement and development of the Properties and all property and equipment used in connection with the operation thereof; (x) refunds or security or other deposits to resident and contracting parties; (xi) funds reserved for contingent or contested liabilities, real estate taxes, insurance premiums, or other amounts not payable on a monthly basis; (xii) service contracts and public utility charges and assessments; (xiii) personnel administration charges 4 and pre-employment screening and testing costs; (xiv) cost of third party revenue management programs; and (xv) costs of credit reports, bank charges, and like matters. Operating Expenditures may include (A) payroll, benefits and overhead expenses approved by PORT, and (B) other costs and expenses of Property Manager’s or its Affiliates’ personnel engaged in any Additional Services; provided, however, that Property Manager shall be responsible for paying, and shall not be reimbursed for, its general administrative overhead costs and expenses, including without limitation the costs and expenses of renting its offices, employing its general administrative staff, purchasing or renting its office equipment and supplies, and maintaining phone and internet connections. (b) For purposes of clarification, Property Manager may perform (or cause its Affiliates to perform) certain services (including without limitation services related to leasing, onboarding, fit-up, inspecting, renovation, improvement, development, construction, maintenance, repair, cleaning, painting or decorating any of the Properties) that could be contracted or subcontracted out to third parties hereunder, and, for performing such services, Property Manager (or its Affiliates) shall be entitled to reimbursement for the costs and expenses incurred performing such services (in addition to the Leasing Fees, Property Management Fee, and Shared Fees contemplated under Article VI) at rates commensurate with rates that would be payable to unrelated third parties if Property Manager engaged such unrelated third parties to perform such services (collectively, the “Additional Services”). (c) Property Manager is authorized to incur expenses in connection with the operation and management of the Properties. Property Manager shall employ such efforts as are consistent with the Standard of Care to insure that the actual costs of maintaining and operating the Properties shall not be excessive in relation to comparable properties. In cases of emergency, Property Manager may make expenditures if such expenditures are necessary in the reasonable judgment of Property Manager to effectively protect the Properties or to prevent personal injury and is not in excess of $10,000 with respect to any individual Property or $250,000 collectively among all Properties during any calendar year. Property Manager will promptly notify PORT of any such emergency. Section 3.09 Capital Expenditures. Any capital expenditure (excluding expenditures related to acquisition activities and rehabilitation of newly acquired Properties) over $15,000 per Property shall be awarded on the basis of competitive bidding, solicited in the following manner: (a) a minimum of two (2) written bids shall be obtained for each purchase where possible and practical to obtain such bids; (b) each bid will be solicited in a form so that uniformity will exist in the bid quotes; (c) Property Manager shall provide Advisor with all bid responses accompanied by Property Manager’s recommendations as to the most acceptable bid; and (d) Advisor shall be free to accept or reject any and all bids, provided that if Advisor fails to do so within three (3) Business Days, Property Manager shall provide written notice to Advisor that a failure to respond within one (1) Business Day shall constitute a deemed approval, and if Advisor fails to do so within such one (1) Business Day, such failure shall be deemed acceptance. PORT shall be responsible for capital expenditures and may pay some from its own resources or may authorize payment by Property Manager out of available funds in the Operating Account. Section 3.10 Public Utility and Service Contracts. To the extent applicable, Property Manager shall negotiate and execute, in its capacity as PORT’s agent, contracts for water, electricity, gas, vermin or pest extermination, and any other services which are necessary to properly maintain the Properties. All required utility deposits will be the responsibility of PORT and each contract shall: (a) be in the name of, and expense of, PORT; and (b) include a provision for cancellation thereof by PORT or Property Manager. Section 3.11 Reserved. Section 3.12 Compliance with Regulations. Property Manager shall employ such efforts as are consistent with the Standard of Care to cause the Properties to be in compliance with all Requirements.
5 Property Manager shall promptly give notice to Advisor of Property Manager’s receipt of any oral or written notice of the existence of a material violation of any material Requirement or as otherwise required by the Standard of Care (a “Violation”), and Property Manager shall promptly cure at PORT’s expense any such Violation applicable to any Property, other than a Violation that is required to be cured by the respective tenants under the leases in effect at the Property. Expenses incurred in curing any Violation applicable to any Property may be paid from the Operating Account to the extent such expenses have been budgeted for, and provided such expenses do not exceed $2,500 in any one instance. If (1) such expenses have not been so budgeted, (2) more than $2,500 is required to remedy a Violation, or (3) a Violation is one for which PORT may be subject to penalty, Property Manager shall immediately notify PORT of such Violation and advise PORT regarding a course of action for curing such Violation. Section 3.13 Environmental Risk Management. PORT acknowledges and understands that Property Manager, except with respect to the obligations set forth in Section 3.04, is not responsible for (1) evaluating the presence or absence of hazardous or toxic substances, mold, waste, materials, electromagnetic field, radon or radioactive materials upon, within, above, or beneath the Properties; (2) maintaining or evaluating compliance with environmental, hazardous or solid materials or waste laws, rules and regulations except for any operating and maintenance plan applicable to the Properties or in connection with Property Manager’s construction management duties; or (3) conducting or ensuring clean-up or remediation of existing or identified hazardous material spills or contamination unless the parties otherwise agree in writing or as expressly provided herein. (a) Accordingly, Property Manager’s obligations to PORT with respect to the presence of Hazardous Materials and/or with the compliance and enforcement of Hazardous Materials Laws shall be subject to, conditioned upon, and limited by the following: (i) PORT may from time to time, at PORT’s sole discretion and expense, obtain from an independent environmental consultant retained by PORT, an environmental assessment report on the Properties (or any of them) and may have such assessment report periodically updated. (ii) Except as provided by Section 3.13(a)(iii), Section 3.04, or as otherwise expressly agreed in writing by the parties, Property Manager shall not be obligated to make an independent determination as to the presence or absence of Hazardous Materials, or whether the Properties are in violation or compliance with any Hazardous Materials Laws. Property Manager may seek, on PORT’s behalf and at PORT’s expense, to enforce a resident’s compliance with any Hazardous Materials Laws in accordance with an environmental consultant’s recommendations contained in any environmental assessment report. Property Manager shall not have any obligation to determine whether or not PORT, any residents, the Properties, or any portion thereof is in compliance with Hazardous Materials Laws; provided, Property Manager shall promptly notify PORT of any violations or potential violations of Hazardous Materials Laws observed on the Properties. (iii) Property Manager shall be responsible for any Hazardous Materials which it uses or introduces to the Properties, including storage, containment, removal, or remediation as required by applicable law. To the extent Hazardous Materials (such as cleaning supplies or fuel) are required by Property Manager in the discharge of its duties under this Agreement, Property Manager shall only use and store quantities of such Hazardous Materials as are permitted under applicable law, and shall store, use and dispose of such Hazardous Materials in accordance with applicable laws. In connection with the foregoing, Property Manager hereby agrees to and shall indemnify, protect, defend, save, and hold harmless PORT, its principals and employees, and their respective successors and assigns from any claim, cause of action, liability, loss, demand, damages (including damages associated with any 6 environmental law), fine, penalty, injury, cost, or expense (including attorney’s fees and expenses) arising out of or relating in any way to Property Manager’s violation of this Section 3.13(a)(iii). (iv) Property Manager shall not be responsible for the abatement, clean-up or remediation of any spill of or contamination from any Hazardous Materials upon, beneath, or within all, or any portion, of the Properties (other than Hazardous Materials introduced, used or stored by Property Manager in violation of Section 3.13(a)(iii)), and the entire responsibility for such clean-up, abatement, or remediation shall lie with PORT and PORT’s environmental consultation. However, Property Manager shall cooperate with PORT in coordinating and supervising any abatement, clean-up, monitoring or remedial action on a Property site. PORT agrees that, with respect to any abatement, clean-up, or remedial action, PORT shall employ a qualified and licensed environmental clean-up company to undertake such clean-up and remediation, and PORT’s environmental consultant shall oversee the entire abatement, clean-up and remediation process and the obtaining of any required governmental approvals. If the clean- up or remediation is the responsibility of any resident of the Properties and/or PORT’s environmental consultant, Property Manager shall, on PORT’s behalf, require the resident to utilize qualified and licensed environmental clean-up companies and ensure that the clean-up and remediation is conducted to PORT’s satisfaction and in accordance with all Hazardous Materials Laws, governmental laws and approvals of which Property Manager is aware. (v) In connection with the foregoing, PORT hereby agrees to and shall indemnify, protect, defend, save, and hold harmless Property Manager, its principals and employees, and their respective successors and assigns from any claim, cause of action, liability, loss, demand, damages (including damages associated with any environmental law), fine, penalty, injury, cost or expense (including attorney’s fees and expenses) arising out of or relating in any way to (1) the actions, or failure to act, by Property Manager in following PORT’s and PORT’s environmental consultant’s directions, (2) PORT’s failure or refusal to employ an environmental consultant with respect to the Properties, (3) the acts, omissions, or negligence of PORT, PORT’s environmental consultant, or the failure of such environmental consultant, to fulfill its obligations with respect to the Properties, (4) any violation of Hazardous Materials Laws applicable to the Properties, (5) the designation of Property Manager as an “operator” or the Properties as a “regulated facility” under Hazardous Materials Laws, or otherwise liable as a party under any Hazardous Materials Laws, or as a party in any claim for contribution, cost recovery or indemnity against Property Manager, or its insurer arising out of the foregoing, and (6) any condition or circumstance arising initially prior to the date of this Agreement (regardless of whether such condition or circumstance continues). The foregoing indemnity shall not apply to any claim, cause of action, liability, loss, demand, damages (including damages associated with any environmental law), fine, penalty, injury, cost, or expense (including attorney’s fees and expenses) resulting from an indemnified party’s sole or gross negligence or willful misconduct. (b) The indemnities herein shall be immediately vested and shall survive the expiration or termination of this Agreement. Section 3.14 Disclaimer of Certain Liabilities. Property Manager assumes no liability for any acts or omissions of PORT. Property Manager assumes no liability for any failure of, or default by, any tenant in the payment of any rent or other charges due PORT or in the performance of any obligations owed by any tenant to PORT pursuant to any lease or otherwise. Section 3.15 No Requirement to Advance Funds. In no event shall Property Manager advance any monies on behalf of PORT, lend its credit to the Properties, or incur any liability in Property Manager’s own name. Section 3.16 Representations. Property Manager represents and warrants to PORT as follows: 7 (a) Property Manager (i) is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Florida, (ii) has qualified or will qualify to do business as a foreign corporation and will remain so qualified, and is and will remain in good standing, in each jurisdiction where the character of its property or the nature of its activities makes such qualification necessary and in which failure to so qualify would have a material adverse effect upon Property Manager or its ability to perform its obligations hereunder, (iii) has and will have full limited liability company power to own its property, carry on its business as presently conducted, and to enter into and perform it obligations under this Agreement and (iv) has and will have all licenses or other governmental approvals necessary to perform it obligations hereunder. (b) The execution and delivery by Property Manager of this Agreement has been duly authorized by all necessary limited liability company action on the part of Property Manager. Neither the execution and delivery of this Agreement, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof, will conflict with or result in a breach of, or constitute a default under, any of the provisions of any law, governmental rule, regulation, judgment, decree or order binding on Property Manager or its property or the certificate of formation of Property Manager, or any of the provisions of any indenture, mortgage, contract or other instrument to which Property Manager is a party or by which it is bound or result in the creation or imposition of any lien, charge or encumbrance upon any of its property pursuant to the terms of any such indenture, mortgage, contract or other instrument. (c) The execution and delivery by Property Manager of this Agreement does not require the consent or approval of, the giving of notice to, the registration or filing with, or the taking of any other action in respect of any state, federal or other governmental authority or agency. (d) This Agreement has been duly executed and delivered by Property Manager and, assuming due authorization, execution and delivery by PORT, constitutes a valid and binding obligation of Property Manager enforceable against it in accordance with its terms (subject to applicable bankruptcy and insolvency laws and other similar laws affecting the enforcement of the rights of creditors generally and general principles of equity). (e) There are no actions, suits, or proceedings pending, or, to the knowledge of Property Manager, threatened or likely to be asserted against or affecting Property Manager before or by any court, administrative agency, arbitrator, or governmental body (i) with respect to any of the transactions contemplated by this Agreement or (ii) with respect to any other matter which in the judgment of Property Manager will be determined adversely to Property Manager or if determined adversely to Property Manager, will materially and adversely affect it or its business, assets, operations or condition, financial or otherwise, or adversely affect Property Manager’s ability to perform its obligations under this Agreement. Property Manager is not in default with respect to any order of any court, administrative agency, arbitrator or governmental body so as to materially and adversely affect the transactions contemplated by the above mentioned documents. (f) No consents, approvals, waivers or notifications of members, creditors, lessors or other nongovernmental persons are required to be obtained by Property Manager in connection with the execution and delivery of this Agreement and the consummation of all the transactions herein contemplated. (g) Property Manager is not (and no person or entity owning a beneficial interest equal to or greater than twenty percent (20%) in Property Manager shall be) subject to sanctions of the United States government or in violation of any federal, state, municipal or local laws, statutes, codes, ordinances, orders, decrees, rules or regulations (“Laws”) relating to terrorism or money laundering, including, without limitation, Executive Order No. 13224 on Terrorist Financing, effective September 24, 8 2001 (the “Executive Order”) and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56, the “Patriot Act”). (h) Neither Property Manager nor any person or entity owning a beneficial interest equal to or greater than twenty percent (20%) in Property Manager is a “Prohibited Person,” which term is defined as: (i) a person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order; (ii) a person or entity owned or controlled by, or acting for or on behalf of, any person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order; (iii) a person or entity with whom Property Manager is prohibited from dealing or otherwise engaging in any transaction by any terrorism or anti-money laundering Law, including the Executive Order and the Patriot Act; (iv) a person or entity who commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order; or (v) a person or entity that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official website, https://www.treasury.gov/ofac/downloads/sdnlist.pdf, or any replacement website or other replacement official publication of such list. (i) As of the Effective Date, Property Manager has no actual knowledge of any illegal activities relating to controlled substances on any Property. (j) As of the Effective Date, to Property Manager’s actual knowledge, (i) each Property is being used exclusively as a residential rental property and (ii) no illegal activity is taking place at any Property. Section 3.17 Advisor. Notwithstanding anything to the contrary herein, the duties and responsibilities of Property Manager set forth herein are subject in all respects to the authority of Advisor. Section 3.18 Additional Covenants. Property Manager shall exercise such efforts as are consistent with the Standard of Care to comply with the terms and conditions of any additional requirements of Lender(s) to the Properties and agrees not to knowingly or intentionally take any action in material contravention thereof. ARTICLE IV BANKING AND FINANCIAL RECORDS Section 4.01 Account Agency Agreement & Bank Accounts. Concurrent with the commencement of this Agreement, PORT and Property Manager shall enter into a joint account agreement (the “Account Agency Agreement”) at PORT’s platform bank or other bank acceptable to PORT (the “Operating Account”). PORT shall retain the ability to change the platform banks at its discretion with reasonable notice to Property Manager. It is understood that the bank account contemplated and authorized by the Account Agency Agreement shall be a non-interest bearing checking account. Section 4.02 Financial Recordkeeping. Financial records include, but are not limited to, general ledgers for each account, journal entries, all supporting documentation and calculations used to create journal entries, trial balances, financial statements, bank statements, bank reconciliations, tax reports, accounts payable and receivable records, rent rolls, tenant information, portfolio analysis routinely created or created at the request of PORT, ad hoc reports requested by PORT from time to time and any other financial records and reports listed on Schedule B. At PORT’s cost, Property Manager shall maintain, at Property Manager’s premises and electronically in a centralized location designated and accessible by PORT, and maintain in a manner customary and consistent with generally accepted accounting principles, financial records based on PORT’s fiscal year-end. Property Manager shall not delete, destroy, relocate or
9 otherwise make any historical record inaccessible to PORT without PORT’s prior written consent. Property Manager shall use the Company’s chart of accounts. PORT shall bear the expense of maintaining financial records electronically and the expense of storing historical financial records that are more than 36 months old. Section 4.03 Internal Controls Environment. Property Manager shall continuously maintain an internal control environment that is customary and consistent with the size and complexity of PORT’s business. At PORT’s expense, PORT may hire consultants and other advisors to further develop and refine Property Manager’s internal controls. Property Manager agrees, at PORT’s expense, to implement all reasonable suggestions PORT makes to modify internal controls and agrees to periodic testing and remediation of any identified deficiencies. Property Manager also agrees to assist in an audit of the internal controls if requested by PORT, to be completed at PORT’s expense and in accordance with Section 4.05 herein. Section 4.04 Required Financial Reports. Property Manager shall furnish as listed on Schedule B monthly reports of collections, disbursements, and other accounting matters, on a schedule agreed to by PORT and any Lender(s). To support the monthly financial reports, Property Manager shall maintain at Property Manager’s premises copies of the following: (a) bank statements, bank deposit slips, and cancelled checks; (b) comprehensive bank reconciliations; (c) detailed cash receipt records; (d) summaries of adjusting journal entries, and (e) supporting documentation for payroll, payroll taxes, and employee benefits. Section 4.05 PORT’s Right to Audit and Test. Property Manager, in the conduct of its responsibilities and obligations to PORT hereunder, shall maintain complete, accurate, and separate books and records for the Properties, the entries to which shall be supported by sufficient documentation to ascertain that said entries are properly and accurately recorded with regard to each Property. Such books and records shall be maintained in accordance with PORT’s financial information requirements and shall at all times be the property of PORT. Property Manager shall maintain such books and records for a period of not less than 12 months after the date of expiration or earlier termination of this Agreement, except that upon any termination of this Agreement by PORT, Property Manager shall immediately deliver to PORT all such books and records. PORT reserves the right to conduct an examination of the books and records maintained by Property Manager for PORT or that relate to the calculation of the fees, expenses, or other compensation paid or payable pursuant to this Agreement, and to perform any and all audit tests (whether conducted by the external auditors or PORT’s internal audit team) relating to Property Manager’s activities, either at the Properties, or at the office of Property Manager; provided such examination and tests are related to those activities performed by Property Manager for PORT or the calculation of the fees, expenses, or other compensation paid or payable pursuant to this Agreement. PORT may also conduct periodic testing of Property Manager’s internal controls. PORT shall give Property Manager not less than forty-eight (48) hours written notice of any such audit, examination or testing. Any and all such audits conducted either by PORT’s employees or appointees will be at the sole expense of PORT. Section 4.06 Disbursement of Deposits. If requested by PORT, Property Manager shall remit to PORT with the monthly financial report all unexpended operating funds, except for a reserve of contingencies, as provided in Section 5.01 below, which shall remain in the Operating Account. ARTICLE V PORT’S DUTIES AND RESPONSIBILITIES Section 5.01 Initial Deposits and Contingency Reserves. Immediately upon the commencement of this Agreement, to the extent not previously deposited, PORT shall deposit into the Operating Account the following amounts: (a) the sum of $100,000 to be deposited in the Operating 10 Account as an initial deposit representing the estimated disbursements for Operating Expenditures to be made in the first month following the commencement of this Agreement. Furthermore, PORT authorizes Property Manager to maintain a contingency reserve of $250 per Property at all times in the Operating Account to enable Property Manager to pay obligations of PORT under this Agreement as they become due in accordance with this Agreement. Section 5.02 Insufficient Operating Funds. If a cash flow deficit can be anticipated in the next budgeted month of operations, PORT agrees to, prior to the commencement of the next budgeted month, remit to Property Manager sufficient funds to cover the anticipated deficiency and fully fund the Operating Expenditures and approved contingency reserves. In the event that funds in the Operating Account become insufficient to cover all Operating Expenditures and approved contingency reserves, PORT agrees to, within three (3) days of notice, remit to Property Manager sufficient funds to cover the deficiency and replenish the contingency reserves. Notwithstanding any provision hereof to the contrary, Property Manager’s performance under this Agreement shall be excused and shall in no event be in default in the event there are insufficient funds in the Operating Account to perform its services described hereunder unless due to the gross negligence or willful misconduct of Property Manager. Section 5.03 Property Manager’s Compensation. PORT agrees to pay Property Manager, as compensation for services rendered in managing and leasing the Properties in accordance with the terms of this Agreement, the compensation as specified in Article VI below. Property Manager’s compensation may be paid to itself by Property Manager, on behalf of PORT when due hereunder from the Operating Account. Section 5.04 Property Manager’s Costs to be Reimbursed. PORT agrees to reimburse Property Manager for all direct costs incurred in managing and leasing the Properties in accordance with the terms of this Agreement. Property Manager’s reimbursement may be paid to itself by Property Manager, on behalf of PORT, from the Operating Account as incurred by Property Manager. Section 5.05 Representations. As of the Effective Date, PORT represents and warrants to Property Manager as follows: (a) PORT is a corporation duly formed, validly existing and in good standing under the laws of the State of Maryland, (ii) has qualified or will qualify to do business as a foreign corporation and will remain so qualified, and is and will remain in good standing, in each jurisdiction where the character of its Properties or the nature of its activities makes such qualification necessary and in which failure to so qualify would have a material adverse effect upon PORT or its ability to perform its obligations hereunder, (iii) has and will have full corporate power to own the Properties, carry on its business as presently conducted, and to enter into and perform it obligations under this Agreement and (iv) has and will have all licenses or other governmental approvals necessary to perform it obligations hereunder. (b) The execution and delivery by PORT of this Agreement has been duly authorized by all necessary corporate action on the part of PORT. Neither the execution and delivery of this Agreement, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof, will conflict with or result in a breach of, or constitute a default under, any of the provisions of any law, governmental rule, regulation, judgment, decree or order binding on PORT or its Properties or the certificate of formation of PORT, or any of the provisions of any indenture, mortgage, contract or other instrument to which PORT is a party or by which it is bound or result in the creation or imposition of any lien, charge or encumbrance upon any of the Properties pursuant to the terms of any such indenture, mortgage, contract or other instrument. The execution and delivery by PORT of this Agreement does not require the consent or approval of, the giving of notice to, the registration or filing with, or the taking of any other action in respect of any state, federal or other governmental authority or agency. 11 (c) This Agreement has been duly executed and delivered by PORT and, assuming due authorization, execution and delivery by Property Manager, constitutes a valid and binding obligation of PORT enforceable against it in accordance with its terms (subject to applicable bankruptcy and insolvency laws and other similar laws affecting the enforcement of the rights of creditors generally and general principles of equity). (d) There are no actions, suits, or proceedings pending, or, to the knowledge of PORT, threatened or likely to be asserted against or affecting PORT before or by any court, administrative agency, arbitrator, or governmental body (i) with respect to any of the transactions contemplated by this Agreement or (ii) with respect to any other matter which in the judgment of PORT will be determined adversely to PORT or if determined adversely to PORT, will materially and adversely affect it or its business, assets, operations or condition, financial or otherwise, or adversely affect PORT’s ability to perform its obligations under this Agreement. PORT is not in default with respect to any order of any court, administrative agency, arbitrator or governmental body so as to materially and adversely affect the transactions contemplated by the above mentioned documents. (e) No consents, approvals, waivers or notifications of members, creditors, lessors or other nongovernmental persons are required to be obtained by PORT in connection with the execution and delivery of this Agreement and the consummation of all the transactions herein contemplated. (f) PORT is not (and no person or entity owning a beneficial interest equal to or greater than twenty percent (20%) in PORT shall be) subject to sanctions of the United States government or in violation of any Laws relating to terrorism or money laundering, including, without limitation, the Executive Order and the Patriot Act. Neither PORT nor any person or entity owning a beneficial interest equal to or greater than twenty percent (20%) in PORT is a Prohibited Person. ARTICLE VI COMPENSATION OF PROPERTY MANAGER Section 6.01 Leasing Fees. PORT shall pay to Property Manager on a monthly basis in arrears, the following fees in connection with ongoing lease activity: (a) for all newly placed tenants, one-half of one month’s rent applicable to the initial rent period, and (b) for all renewal tenants, $100. Section 6.02 Property Management Fee. PORT shall pay to Property Manager, on a monthly basis in arrears, fees for services provided by Property Manager to manage each Property (the “Property Management Fee”) equal to the following: (a) For all Collected Rental Revenues up to $50,000,000 per annum (or $4,166,667 per month), 8%; (b) For all Collected Rental Revenues in excess of $50,000,000 per annum, but less than or equal to $75,000,000 per annum (or $6,250,000 per month), 7%; and (c) For all Collected Rental Revenues in excess of $75,000,000 per annum (or $6,250,000 per month), 6%. Section 6.03 Shared Fees. PORT shall pay to Property Manager on a monthly basis in arrears, the following portion of additional fees actually collected from any Properties: (a) from application fees collected, 100% to Property Manager, (b) from insufficient funds fees collected, 50% to Property Manager; (c) from any late fees collected, 50% to Property Manager, and (d) from any other fees, 50% to Property Manager. For the avoidance of doubt, PORT shall retain 100% of the following fees: (x) any move-in fees, and (y) any pet fees. 12 Section 6.04 Definitions. “Collected Rental Revenues” shall mean 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 Property Manager, 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). Section 6.05 Additional Services; No Other Compensation. The Leasing Fees, Property Management Fee, and Shared Fees are in addition to the reimbursements otherwise due to Property Manager under this Agreement, including for the Additional Services as described in Section 3.09. Property Manager expressly agrees that Property Manager shall not be entitled to receive any other compensation or other payments from PORT for services provided in respect of the Property (including, without limitation, for construction management, legal, tenant coordination, design, engineering, consulting or any other services performed by Property Manager or its Affiliates) unless expressly provided for in this Agreement or pursuant to a separate written agreement between PORT and Property Manager. Section 6.06 Election of Payment in Shares. Property Manager may elect, in its sole discretion, to receive payment of up to 2.0% of the Property Management Fee in any monthly period(s) in cash or cash equivalent aggregate net asset value amounts of Class A common shares of PORT, with the value per share equal to the most recent net asset value per share determined in accordance with the valuation guidelines approved by the board of directors of Pacific Oak Strategic Opportunity REIT, Inc. Such common shares issued to the Property Manager are eligible to participate in PORT’s share repurchase program, subject to the applicable limits, holding period and early repurchase deduction therein, provided that in the applicable repurchase period all repurchase requests made in good order from unaffiliated stockholders are satisfied first as a priority. ARTICLE VII INSURANCE AND INDEMNIFICATION Section 7.01 Property and Liability Insurance. Property Manager shall, at PORT’s sole cost and expense, promptly obtain and keep in force at all times adequate insurance against physical damage (e.g., fire with extended coverage endorsement) and against liability for loss, damage, or injury to property or persons which might arise out of the occupancy, management, operation, or maintenance of the Properties and in accordance with the policies of PORT and/or Lender(s). Section 7.02 Workers’ Compensation Insurance. Property Manager shall maintain workers’ compensation insurance covering all employees of Property Manager employed in, on, or about the Properties so as to provide statutory benefits required by state and federal laws. Section 7.03 Fidelity Bond. Property Manager will maintain, at Property Manager’s expense, a comprehensive fidelity bond covering all employees of Property Manager who handle or are responsible for the safekeeping of any monies of PORT, and shall provide evidence of such policies to PORT. Section 7.04 Indemnification. PORT shall indemnify, defend, and hold harmless Property Manager and its agents and employees from and against all claims, liabilities, losses, damages, and/or expenses arising out of (i) Property Manager’s performance under this Agreement, or (ii) facts, occurrences, or matters first arising prior to the date of this Agreement. PORT, at its own cost and expense, shall defend any action or proceeding against Property Manager arising therefrom. Notwithstanding the foregoing, PORT shall not be required to indemnify Property Manager against damages or expenses suffered as a result of the gross negligence, willful misconduct, or fraud on the part of Property Manager, its agents or employees. Property Manager shall indemnify, defend and hold harmless PORT and its agents from and against all claims, liabilities, losses, damages and/or expenses arising out of the gross negligence, willful
13 misconduct, or fraud on the part of Property Manager, its agents, or employees, and shall at its own cost and expense defend any action or proceeding against PORT arising therefrom. ARTICLE VIII TERMINATION Section 8.01 Termination. Notwithstanding the provisions of Article II above, this Agreement may also be terminated as follows: (a) Automatically, in the event of an initial public offering of PORT’s common shares in the public markets with a concurrent listing of the common shares on a national securities exchange (an “IPO”); a sale of all or substantially all of PORT’s equity interests or Properties, a merger, or a share exchange, in a transaction that provides PORT’s stockholders with any combination of cash and/or securities of a publicly traded company in exchange for their common shares; or if the advisory agreement between PORT and Advisor is terminated (including through non-renewal) (except for cause) by PORT; (b) by Property Manager, in the event PORT defaults in the performance of any of its obligations under this Agreement and fails to cure such default within fifteen (15) days after its receipt from Property Manager of a notice of default (specifying in reasonable detail the nature of the default complained of); provided, however, with respect to any non-monetary default that cannot be cured within fifteen (15) days, PORT shall have such additional period as shall be reasonable, provided that PORT has commenced to cure such default within such fifteen (15) day period, has proceeded to prosecute such cure with due diligence, and such cure is completed within sixty (60) days after PORT’s receipt of the notice of default; or (c) by PORT, in the event Property Manager defaults in the performance of any of its obligations under this Agreement and fails to cure such default within fifteen (15) days after its receipt from PORT of a notice of default (specifying in reasonable detail the nature of the default complained of); provided, however, that if such default cannot be cured within fifteen (15) days, then such additional period as shall be reasonable, provided that Property Manager has commenced to cure such default within such fifteen (15) day period, has proceeded to prosecute such cure with due diligence and such cure is completed within sixty (60) days after Property Manager’s receipt of the notice of default; or (d) by either PORT or Property Manager, if a Bankruptcy Event occurs with respect to the other party, or if any involuntary bankruptcy petition shall be filed against the other party and is not dismissed within sixty (60) days of the date of such filing, or in the event the other party shall make an assignment for the benefit of creditors, or take advantage of any insolvency statute or similar law, in any such event, termination to become effective upon written notice to the other party; or (e) by PORT, without cause upon not less than ninety (90) days prior written notice to Property Manager. Any amounts accruing to Property Manager prior to such termination shall be due and payable upon termination of this Agreement; provided, however, that in the event this Agreement is terminated pursuant to Section 8.01(c), no further fees or expenses shall be payable to Property Manager thereafter, other than reimbursement of expenses properly documented and supported by invoices or receipts. Section 8.02 Termination Fee. If PORT terminates this Agreement pursuant to Section 8.01(a) before the end of the Term or any subsequent term year, then PORT shall be obligated to pay Property Manager an amount equal to two times the sum of the annual Property Management Fee for the trailing 12- month period. If PORT terminates this Agreement pursuant to Section 8.01(e) before the end of the Term 14 or any subsequent term year, then PORT shall be obligated to pay Property Manager an amount equal to three times the sum of the annual Property Management Fee for the trailing 12-month period. Any amounts accruing to Property Manager prior to such termination shall be due and payable upon termination of this Agreement. To the extent funds are available, such sums shall be payable from the Operating Account. Any amount due in excess of the funds available from the Operating Account shall be paid by PORT to Property Manager upon demand. For the avoidance of doubt, Leasing Fees, Shared Fees, and fees attributable to Additional Services are not considered in the calculation of the Termination Fee. Section 8.03 PORT Responsible for Payments. PORT will be responsible for the direct handling and payment of invoices received after notice of termination. Upon notice of termination, Property Manager will submit to PORT written notice of all obligations payable with respect to the Properties through the termination date. Section 8.04 Final Accounting. Within sixty (60) days after termination, Property Manager shall deliver to PORT: (a) a final accounting, reflecting the balance of income and expenses on the Properties as of the date of termination; (b) all records, contracts, leases, receipts, deposits, unpaid bills, and other papers or documents which pertain to the Properties; and (c) all remaining funds held by Property Manager with respect to the Properties. In consideration of performing the services contemplated under the preceding sentence during such post-termination period, provided this Agreement is not terminated pursuant to Section 8.01(c), PORT shall pay Property Manager an accounting fee equal to $75,000 per month. Section 8.05 Property Manager’s Retention of Copies. Property Manager shall be entitled to retain copies of all documents referred to in Section 8.04. Section 8.06 Survival of Obligations. All obligations of the parties hereunder, as to which performance is contemplated to occur after termination, shall survive termination of this Agreement. Without limiting the generality of the foregoing, all representations and warranties of the parties contained herein and all provisions of this Agreement that require PORT to have insured or to defend, reimburse, or indemnify Property Manager shall survive the termination of this Agreement; and if Property Manager is or becomes involved in any proceeding or litigation by reason of having been PORT’s agent, such provisions shall apply as if this Agreement were still in effect. ARTICLE IX RESERVED ARTICLE X PROPERTY MANAGER RESTRUCTURING Section 10.01 Subcontracting. Property Manager is authorized to subcontract or delegate any of its responsibilities hereunder to any of its Affiliates provided that such Affiliate executes a joinder to this Agreement, in form and substance satisfactory to PORT. ARTICLE XI MISCELLANEOUS Section 11.01 Notices. All notices or other communications required or permitted by this Agreement shall be in writing and shall be deemed to have been duly received (i) if given by electronic mail transmitted delivery receipt requested, upon receipt of a delivery receipt, (ii) if given by certified or registered mail, return receipt requested, postage prepaid, three (3) Business Days after being deposited in 15 the U.S. mails and (iii) if given by courier or other means, when received or personally delivered, and, in any such case, addressed as follows: If to PORT: Pacific Oak Residential Trust, Inc. 13901 Sutton Park Dr. S., Suite B 160 Jacksonville, FL 32224 Attention: Michael Gough Email: mgough@pac-oak.com If to Property Manager: DMH Realty LLC 13901 Sutton Park Dr S., Suite B 160 Jacksonville, FL 32224 Attention: Mark Peta and Dan Umstead Email: mpeta@pac-oak.com and dumstead@pac-oak.com or to such other addresses as may be specified by any such person to the other person pursuant to notice given by such person in accordance with the provisions of this Section 11.01. Section 11.02 Governing Law; Waiver of Jury Trial. THE PROVISIONS OF THIS AGREEMENT SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA AS AT THE TIME IN EFFECT, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. THE PARTIES TO THIS AGREEMENT HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF FLORIDA, INCLUDING ANY APPELLATE COURTS THEREOF. THE PARTIES ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND, THEREFORE, EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. Section 11.03 Entire Agreement. This Agreement sets forth the final, entire agreement among the parties hereto with respect to the subject matter hereof and supersedes any and all prior commitments, agreements, representations, and understandings, whether written or oral, relating to the subject matter hereof. Section 11.04 Amendment; Modification. This Agreement shall not be amended, supplemented, modified, terminated, or discharged, in whole or in part, except by an instrument in writing signed by the parties hereto, or their respective successors or assignees; provided that PORT shall deliver an updated Schedule A to Property Manager each month in accordance with Section 11.01. Section 11.05 Severability. The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part. 16 Section 11.06 Construction. This Agreement shall be construed as if jointly drafted by PORT and Property Manager. Headings for sections, subsections, and other parts of this Agreement are for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. Section 11.07 Counterparts. This Agreement and any amendments, waivers, consents, or supplements may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute but one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by facsimile, scanned pages or electronic signature shall be effective as delivery of a manually executed counterpart to this Agreement. Section 11.08 Transferability; Successors and Assigns. This Agreement is not transferable by Property Manager. The rights of PORT hereunder are transferable to any of its respective Affiliates upon no less than ten (10) days’ prior written notice to Property Manager. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Section 11.09 Confidentiality. No party to this Agreement will disclose the terms of this Agreement to any third party without the consent of the other parties hereto, except as required by securities or other applicable laws. Notwithstanding the above provisions, each party may disclose the terms of this Agreement (i) in connection with the requirements of a public or private offering or securities filing, (ii) to accountants, banks, and financing sources (both debt and equity) and their advisors, (iii) in connection with the enforcement of this Agreement or rights under this Agreement, or (iv) in connection with a merger or acquisition (whether by an equity or asset transfer), or the like. [Signature page follows]
[Signature Page to Second Amended and Restated Management Agreement] CLOSED\1607203270.3 IN WITNESS WHEREOF, the parties have executed and delivered this SECOND AMENDED AND RESTATED MANAGEMENT AGREEMENT effective as of the date first written above. Pacific Oak Residential Trust, Inc. By: /s/ Michael S. Gough Name: Michael S. Gough Title: Chief Executive Officer, President, and Director DMH Realty, LLC By: /s/ Michael S. Gough Name: Michael S. Gough Title: Manager A-1 Schedule A The Properties B-1 Schedule B Financial Record and Reports (to be provided monthly unless otherwise noted) 1. Profit and Loss Statement (actual versus budgeted) 2. Rent Roll with Security Deposit 3. Leasing status report 4. Statement of Cash Flows 5. Monthly General Ledger detail 6. Capital Expenditure Report 7. Aged Receivable Report 8. Management Fee Calculation 9. Casualty reports (quarterly) detailing all damages and potential insurance claims 10. Liability reports (quarterly) detailing all current and potential legal claims from tenants, vendors, and third parties related to the Properties 11. Real estate tax analysis (quarterly) C-1 Schedule C Defined Terms Capitalized terms used in this Agreement but not otherwise defined herein have the following definitions: “Affiliate” shall mean, with respect to any Person, (i) any Person directly or indirectly owning, controlling or holding, with the power to vote, 10% or more of the outstanding voting securities of such other Person; (ii) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled or held, with the power to vote, by such other Person; (iii) any Person directly or indirectly controlling, controlled by or under common control with such other Person; (iv) any executive officer, director, trustee or general partner of such other Person; and (v) any legal entity for which such Person acts as an executive officer, director, trustee or general partner. “Bankruptcy Code” means the United States Bankruptcy Code, 11 U.S.C. Section 101 et seq., as amended from time to time. “Bankruptcy Event” with respect to any Person, means the occurrence of any of the following: (a) Such Person voluntarily files for bankruptcy protection under the Bankruptcy Code. (b) Such Person voluntarily becomes subject to any reorganization, receivership, insolvency proceeding, or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights. (c) Any Property becomes an asset in a voluntary bankruptcy or becomes subject to any voluntary reorganization, receivership, insolvency proceeding, or other similar voluntary proceeding pursuant to any other federal or state law affecting debtor and creditor rights. (d) An order of relief is entered against such Person pursuant to the Bankruptcy Code or other federal or state law affecting debtor and creditor rights in any involuntary bankruptcy proceeding initiated or joined in by a Related Party. If such Person, any general partner of such person if such Person is a general partnership, or any Related Party has solicited creditors to initiate or participate in such a proceeding, regardless of whether any of the creditors solicited actually initiates or participates in the proceeding, then such proceeding will be considered as having been initiated by a Related Party. (e) An involuntary bankruptcy or other involuntary insolvency proceeding is commenced against such Person (by a party other than PORT) but only if such Person has failed to use commercially reasonable efforts to dismiss such proceeding or has consented to such proceeding. “Commercially reasonable efforts” will not require any direct or indirect interest holders in such Person to contribute or cause the contribution of additional capital to such Person. (f) If such Person is a general partnership, any of the following occur: (i) Any general partner of such Person voluntarily files for bankruptcy protection under the Bankruptcy Code.
C-2 (ii) Any general partner of such Person voluntarily becomes subject to any reorganization, receivership, insolvency proceeding, or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights. (iii) An order of relief is entered against any general partner of such Person pursuant to the Bankruptcy Code or other federal or state law affecting debtor and creditor rights in any involuntary bankruptcy proceeding initiated or joined in by a Related Party. (iv) An involuntary bankruptcy or other involuntary insolvency proceeding is commenced against any general partner of such Person (by a party other than PORT) but only if such Person or such general partner of such Person has failed to use commercially reasonable efforts to dismiss such proceeding or has consented to such proceeding. “Commercially reasonable efforts” will not require any direct or indirect interest holders in such Person or such general partner of such Person to contribute or cause the contribution of additional capital to such Person. “Business Day” means any day other than a Saturday, a Sunday, or any other day on which PORT or the national banking associations are not open for business. “Governmental Authority” means any board, commission, department, agency or body of any municipal, county, state or federal governmental unit, or any subdivision of any of them, which has or acquires jurisdiction over any Property, or the use, operation or improvement of any Property, or over Property Manager. “Hazardous Materials” means petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives; flammable materials; radioactive materials; polychlorinated biphenyls (PCBs) and compounds containing them; lead and lead-based paint; asbestos or asbestos containing materials in any form that is or could become friable; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which on any Property is prohibited by any Governmental Authority; any substance that requires special handling and any other material or substance now or in the future that (i) is defined as a “hazardous substance,” “hazardous material,” “hazardous waste,” “toxic substance,” “toxic pollutant,” “contaminant,” or “pollutant” by or within the meaning of any Hazardous Materials Law, or (ii) is regulated in any way by or within the meaning of any Hazardous Materials Law. “Hazardous Materials Law” and “Hazardous Materials Laws” means any and all federal, state and local laws, ordinances, regulations and standards, rules, policies and other governmental requirements, administrative rulings and court judgments and decrees in effect now or in the future, including all amendments, that relate to Hazardous Materials or the protection of human health or the environment and apply to Property Manager or to any Property. Hazardous Materials Laws include the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101 et seq., and their state analogs. “Lender” means any lender providing a loan to PORT which is secured by a mortgage or deed of trust on any Property. “Person” means an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c) (17) of the Internal Revenue Code of 1986, as amended from time to time C-3 (the “Code”)), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, or any government or any agency or political subdivision thereof, and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended. “Related Party” means all the following: (a) Property Manager. (b) Any general partner of Property Manager if Property Manager is a general partnership. (c) Any Person that holds, directly or indirectly, any ownership interest (including any shareholder, member or partner) in Property Manager, any general partner of Property Manager if Property Manager is a general partnership, or any Person that has a right to manage Property Manager or any general partner of Property Manager if Property Manager is a general partnership. (d) Any creditor of Property Manager that is related by blood, marriage or adoption to Property Manager. (e) Any creditor of Property Manager or any general partner of Property Manager if Property Manager is a general partnership that is related to any partner, shareholder or member of, or any other Person holding an interest in, Property Manager or any general partner of Property Manager, if Property Manager is a general partnership.
portardealermanageragree
Exhibit 10.3 TERMINATION OF AMENDED AND RESTATED DEALER MANAGER AGREEMENT The parties hereto agree to terminate that certain Amended and Restated Dealer Manager Agreement, dated and effective as of January 13, 2023, between Pacific Oak Residential Trust, Inc., a Maryland corporation and Pacific Oak Capital Markets, LLC, a Delaware limited liability company, effective as of April 2, 2024. PACIFIC OAK RESIDENTIAL TRUST, INC., a Maryland corporation By: /s/ Michael S. Gough Name: Michael S. Gough Title: Chief Executive Officer and President PACIFIC OAK CAPITAL MARKETS, LLC, a Delaware limited liability company By: /s/ Hans Henselman Name: Hans Henselman Title: Chief Executive Officer
pacificoak-presentationa
P A C I F I C O A K S O R ( B V I ) H o l d i n g s L T D Capital Market Presentation Update Based on Q4-2023 Reports Rated AA- -April 2024- Office Multifamily Single Family Rentals Hotel Land Exhibit 99.1 2 Disclaimer This presentation represents an English translation provided for convenience purposes only. This is not an official translation and is not binding. Whilst reasonable care and skill have been exercised in the preparation hereof, no translation can ever perfectly reflect the original Hebrew version. In the event of any discrepancy between the Hebrew version and this translation, the Hebrew version shall prevail. This presentation does not constitute an offer of securities by Pacific Oaks SOR (BVI) Holdings Ltd (hereinafter: the "Company") to the public and should not be construed as an offer of securities to the public. This presentation is a principled and marketing presentation of the company. The information contained in this presentation and any other information that will be provided during the presentation of the presentation (hereinafter: "the information") does not constitute a recommendation or opinion of an investment advisor or a tax advisor. The information is summary information only. Investing in securities in the company generally carries risk. It should be taken into account that past data does not necessarily indicate future performance. The purchase of the company's securities requires a thorough study of its financial statements and the information published by the company and a legal, accounting, taxation and economic analysis thereof. Information contained in this presentation, and in particular the summary of the company's investment portfolio by type (as stated in slides 5 and 6) may be considered as being presented differently from the way it was presented in the company's reports, but it can be calculated from the data included in said reports. Also, the following information is presented in this presentation for the first time: annualized NOI data (as stated in slide 3), the names of the various regulators responsible for the group's activities (as stated in slide 4), liquidity data, annualized NOI of consolidated properties, NAV to Debenture Balance Ratio and Net Property Value Ratio by property type (as stated in slide 5), breakdown of the NAV to Debenture Balance Ratio a graphical presentation thereof (as stated in slide 6), graphical presentation of the development over the years of shareholders' equity, NOI, Net Debt to Net CAP and NAV to Equity Ratio (as stated in slide 7), a graphical presentation of the increase in the residential component of the property portfolio of the Company by equity value (as stated in slide 8), details of a transaction for the sale of a small office property as well as the potential sale of properties which the Company identified as part of its normal business (as stated in slide 9), part of the Sale Price Vs Cost basis, Investment Cost Basis, Sale Price data (as stated in slide 10), the debt repayment schedule as of March 31, 2023 and information with regard to the negotiations conducted by the Company for the refinancing of loans as part of its normal course of business (as stated in slide 13), details of the issuance of the Debentures (Series C) being considered by the Company, as well as part of the details of the collateral for the aforementioned Debentures, including details of the environment of the properties and transaction history of the Group in connection with the properties (as stated in slides 15-26), gross profit data of the property portfolio by property (as stated in slide 28), occupancy data of the property portfolio of the Company, by property, in the past four quarters (as stated on slide 29), book value, debt and LTV Ratio data as of March 31, 2023 (as stated in slides 30-32), a summary of the securities portfolio of the Company as of March 31, 2023 and as of May 15, 2023 (as stated in slide 33). The information below constitutes "forward-looking information" as defined in the Securities Law (1968) (hereinafter: the "Information"): the company's plan regarding the property portfolio (as stated in slide 8), details of the cash flow from sale agreements as well as from the sale of additional potential properties (as stated in slide 10), the repayment schedule until 2027 and information about negotiations conducted by the Company for the refinancing of loans as part of its normal course of business (as stated in slide 13), the assessment of the Company with regard to the market environment of the Park Highlands property(as stated in slide 22. The company's assessments regarding the information are based on the information available to the company, economic calculations made by the company and projects with similar characteristics (including in geographic areas and in general). The realization of all or part of the forward-looking information or in a different way than observed, or its non-realization, will be affected, among other things, by the risk factors that characterize the company's activities, as well as by the developments in the economic environment and external factors that affect the company in its fields of activity. The company has no certainty that its estimates, plans and expectations will be realized, and therefore the results of the activity may differ substantially from the results estimated or implied from this information. For details regarding macroeconomic effects, see section 1.6.8 of Chapter A of the 2022 Periodic Report, section 2.6 of the Board of Directors' Report as of March 31, 2023, and for details regarding the risk factors applicable to the company, see section 1.18 of Chapter A of 2022 Periodic Report of the Company. Regarding forward-looking information in connection with sale transactions at the Park Highland property, the company's estimates are based on the sales agreements and the ongoing dialogue with the buyers. The aforementioned information may not materialize to the extent that there are adverse changes in the real estate market in the area where the property is located, due to the non-fulfillment of the conditions precedent to the agreements, the withdrawal of the purchasers from the agreements, as well as due to the materialization of the risk factors detailed in section 1.18 of the 2022 Periodic Report. Regarding forward-looking information in connection with the refinancing of additional loans as part of the normal course of business of the Company, the company's estimates with respect thereto are based on the terms and conditions that exist with the lenders, draft agreements and term sheets that have been exchanged between the parties (as applicable).. The said information may not be realized at all or may be realized partially or differently from what is described in the presentation due to changes in the conditions that will be agreed upon within the aforementioned negotiations and conditions, insofar as the aforementioned negotiations do not mature into binding financing and rental agreements, as applicable, Due to adverse changes in the real estate market in the area where the properties are located as well as due to the materialization of the risk factors listed in section 1.18 of the 2022 Periodic Report. 3 About Pacific Oak Multifamily: 1180 Raymond Boulevard, Newark, NJ Pacific Oak Group was established by Keith Hall and Peter McMillan III. Its professional advisory company, Pacific Oak Capital Advisors, serves as advisor to Pacific Oak SOR (BVI) Holdings LTD (“the Company”), advisor to the Company’s parent Pacific Oak Strategic Opportunity REIT which is a public non-traded REIT in the U.S., and U.S. asset manager for Keppel Pacific Oak US REIT (“KORE”) which is a publicly traded REIT on the main board of the Singapore Exchange Securities Trading Limited (SGX-ST). The group has approximately $4 billion of real estate assets under management. Company Figures as of Q4-2023: Shareholder Equity: $772M Net Debt to Net Cap: 58%(1) Annualized NOI(2): $57.9M (Annualized NOI for consolidated investments) ; $65.0M (Annualized NOI including the Company’s share of unconsolidated joint venture properties) S&P Maalot Bond B rating is ilAA- , Bond C Rating ilAA (first position) Strong track record in the Israel Capital Market - The first bonds in the Israeli Market were issued more than 8 Years ago. The group has been a public (non-traded) REIT in the U.S since 2010. (1) Based on the Statement of Financial Position as of December 31, 2023, and the calculation methodology for the net debt to net cap ratio in the Series B bond indenture. (2) NOI is the Q4 2023 amount, annualized, plus the dividend income currently expected in 2024 from the real estate equity securities. Amounts are adjusted for the Company’s share of consolidated and unconsolidated joint venture properties. 4 The Group Regulatory Compliance (1) U.S. financial industry’s self-regulatory organization that regulates the activities of brokerage firms and stockbrokers. It is responsible for overseeing and enforcing compliance with U.S. securities laws and regulations, as well as promoting transparency and fairness in the U.S. financial industry. (2) A leading securities and derivatives exchange in Asia, based in Singapore. U.S. Securities and Exchange Commission (“SEC”) Pacific Oak Strategic Opportunity REIT Financial Industry Regulatory Authority (“FINRA”)(1) Pacific Oak Capital Markets Israel Securities Authority (“ISA”) Pacific Oak SOR (BVI) Holdings LTD Singapore Exchange Securities Trading Limited(2) Keppel Pacific Oak US REIT (“KORE”) Pacific Oak Group’s companies are subject to the oversight and rules of multiple regulatory bodies including:
5 Financial Profile, as of December 31, 2023 Shareholder Equity $772M Total Liquidity(1) $196M Investment Properties(2) $1,534M Company Share in the Value of JV’s $149M Bond Coverage(3) Net Debt to Net Cap 58% Bond Coverage(3): 2.80x Annualized 4Q23 NOI for Consolidated Investments(5): $58M Bond B / C Rating(6): ilAA- / ilAA Maalot-S&P (1) Total of cash and cash equivalents of $95.1 million, restricted cash of $59.6 million, and equity securities valued at $41.6 million. (2) Total of (i) investment properties and (ii) property plant and equipment – hotels, net. (3) Bond coverage calculated as owner’s net equity plus bonds net, and bond coverage is calculated as bond coverage divided by bond principal. See next slide for additional details. (4) Represents the Park Highlands land, which is all under sale contract as of March 10, 2024. Of the Company’s approximately 517 developable acres of Park Highlands land held as of Dec. 31, 2023, (i) approximately 122 developable acres is under a sale contract according to which the Company holds a $9.5 million non-refundable deposit and the expected closing date is October 3, 2024 and (ii) approximately 395 developable acres (454 gross acres) is under a sale contract executed March 10, 2024 and according to which the buyer deposits and closings currently scheduled for July 2024 and July 2025 are contingent upon satisfaction of certain conditions. (5) Reflects the Q4-2023 annualized NOI (including the dividend income currently expected in 2024 from the equity securities), for consolidated investments. Except for the hotel where the annualized NOI is the amount for the trailing twelve months due to the seasonal nature of its operations. Amounts are adjusted for the Company’s share of joint venture properties. Amounts for unconsolidated investments are excluded because (i) the Company is not currently receiving distributions from these investments and (ii) the Company lacks unilateral control over the investment entities. (6) Latest bond ratings, from Maalot-S&P per reports issued March 24, 2024. The Company rating is A+. SOLD SOLD SOLD 16.7%Liquidity 21.3%Land Under Sale Contract(4) 26.3%Residential 35.8%Office 5.4%Other Properties (5.5)%Other Assets/(Liabilities), net Office Hotel Residential Park Highlands Land 6 Bond Coverage(1), as of December 31, 2023 Bond Coverage December 2023 Value ($000’s)(2) % of Total Cash & Cash Equivalents $ 95,092 8.1% Restricted Cash(3) 59,623 5.0% Equity Securities 41,609 3.5% Subtotal – Liquidity $ 196,324 16.6% Equity Value in Land Under Sale Contract(2), (4) $ 252,037 21.3% Equity Value in Residential (SFR & Apartments)(2) 310,999 26.3% Equity Value in 110 William(2) 113,677 9.6% Equity Value in Office (Excl. 110 William)(2) 308,579 26.2% Equity Value in Other Properties(2), (5) 63,987 5.4% Subtotal – Equity Value in Properties $ 1,049,279 88.9% Other Assets/(Liabilities), net (6) (65,436) (5.5%) Total – Bond Coverage Value (Owner’s Net Equity + Bonds Net) $ 1,180,167 100.0% (1) Owner’s net equity plus bonds net, divided by bond principal. (2) Using figures reflected in the Statement of Financial Position, including for Q&C Hotel which is carried in the Statement of Financial Position on a depreciated cost basis in accordance with International Financial Reporting Standards rather than fair value. Equity value in properties is calculated as the property value, less secured debt principal balance, adjusted for the Company’s share of joint venture properties. (3) Consists of $17.1 million reserve for the Series B principal amortization due in January 2024, $7.3 million reserve for Series B & C interest and expenses, $7.1 million for collateral required by the counterparty to the Company’s foreign currency hedge, $9.2 million for Park Highlands development obligations, and $18.6 million for other items including lender required reserves. (4) Represents the Park Highlands land, which is all under sale contract as of March 10, 2024. Of the Company’s approximately 517 developable acres of Park Highlands land held as of Dec. 31, 2023, (i) approximately 122 developable acres is under a sale contract according to which the Company holds a $9.5 million non-refundable deposit and the expected closing date is October 3, 2024 and (ii) approximately 395 developable acres (454 gross acres) is under a sale contract executed March 10, 2024 and according to which the buyer deposits and closings currently scheduled for July 2024 and July 2025 are contingent upon satisfaction of certain conditions. (5) Reflects equity values of $28.4 million for 210 W. 31st Street (a redevelopment project in New York, NY), $21.2 million for the Richardson developable land, and $14.4 million for the Q&C Hotel. (6) Total of other assets and liabilities in the Statement of Financial Position, which, combined with the liquidity and equity values in properties presented previously, equals the bond coverage value (owner’s equity plus bond principal). The bond principal is paid in 3 equal payments between the years 2026-2024 Liquidity, $196,744 Equity in Land Under Sale Contract, $252,037 Equity in Residential Properties, $310,999 Equity in 110 William, $113,677 Equity in Offices (Excl. 110 William) $308,579 Equity in Other Properties, $63,987 Other Assets/(Liabilities), ($65,436) $421,185 ($100,000) $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 $1,000,000 $1,100,000 $1,200,000 $1,300,000 Bond Collateral Bond Principal Bond Coverage(1), as of December 31, 2023 Of the $421 Bonds – Series B is $322 M (One Payment was made in Jan 2024 and two payments remain – 2025 and 2026) and Series C – with a first position of $99 M 7 Portfolio Strategic Shift, to SFR & Apartments(1) (1) Figures reflect the Company’s equity values, calculated as property estimated fair value less secured debt principal and net of minority interests in consolidated and unconsolidated joint ventures. As of Sep. 30th, 2015 (the financial figures prior to the Bond A offering) As of Dec. 31st, 2023 38.7% 28.5% 27.6% 1.3% 3.8% C om pa ny ’s D is po si tio n H is to ry 8 The Company’s strategies have been validated by its strong track record of realized value growth. The Company’s property sales have generated $431 million of profit relative to its cost basis, representing a 31% unlevered realized gain over the cost basis. Consistent with the prior years, the Company will continue in the future to sell properties when they have reached their potential. (1) Equals the sale price, net of seller concessions, without adjustment for joint venture partners’ share of joint ventures. Excludes selling costs and fees. (2) Equals the acquisition price (excluding acquisition costs and fees) plus capital expenditures and allocated cost for acquisitions of minority interests in joint ventures, without adjustment for joint venture partners’ share of joint ventures. Excludes depreciation recorded on the books. For Springmaid Beach Resort, the cost basis reflects the acquisition price paid to the third-party seller by Pacific Oak Strategic Opportunity REIT II (“SOR II”), not the purchase price allocation booked by the Company upon its merger with SOR II, so as to demonstrate the performance achieved by the Company’s Advisor. (3) Properties were sold prior to the Company’s initial bond offering on TASE in March 2016. (4) Reflects the sale of 11 properties to subsidiaries of Keppel-KBS US REIT, a then newly formed Singapore real estate investment trust (the “SREIT”) which was listed on the Singapore Stock Exchange. The SREIT has been renamed Keppel Pacific Oak US REIT. Successful Long Term Track Record in Value Creation Acquisition Disposition Sale Cost Basis Sale Price vs. Property Date Date Sq. Ft. Price, net (1) at Sale (2) Cost Basis Roseville (3) Jun-11 Multiple 113,341 7,989,000$ 6,022,930$ 1,966,070$ Richardson Portfolio (3) Nov-11 Multiple 293,887 38,592,133 25,983,292 12,608,841 Powers Ferry Landing (6151 & 6201 Bldgs) (3) Sep-12 Oct-13 246,475 18,540,128 11,856,283 6,683,845 Village Overlook (3) Aug-10 Aug-14 34,830 1,485,000 2,536,236 (1,051,236) 1635 N. Cahuenga (3) Aug-11 Mar-15 34,666 16,389,000 8,857,643 7,531,357 Academy Point (3) Nov-10 Sep-15 92,099 3,500,000 4,599,826 (1,099,826) 50 Congress Street (3) Jul-13 May-17 179,872 78,784,521 55,181,314 23,603,206 SREIT (11 Properties) (4) Multiple Nov-17 3,103,313 795,385,695 670,876,898 124,508,797 Central Building Jul-13 Jul-18 193,968 67,351,484 39,873,064 27,478,420 Westpark Portfolio May-16 Nov-18 782,035 166,424,343 144,668,958 21,755,386 Bedford Jan-14 Jan-19 49,220 43,786,766 41,415,046 2,371,720 Burbank Dec-12 Jul-19 39,035 25,900,000 18,806,736 7,093,264 125 John Carpenter Sep-17 Nov-19 445,317 99,557,239 88,900,923 10,656,316 City Tower Mar-18 Jul-21 435,177 146,889,055 163,657,096 (16,768,041) Springmaid Beach Resort Dec-14 Sep-22 N/A 91,000,000 69,521,367 21,478,633 Madison Square School Building Oct-17 May-23 31,842 6,400,000 2,623,240 3,776,760 Park Highlands Multiple Multiple N/A 235,122,102 56,874,617 178,247,485 Total 6,075,077 1,843,096,466$ 1,412,255,471$ 430,840,995$
9 Asset Sales Under Contract, Expected & Potential Targets The Company’s current plan for property sales can be summarized as follows: In addition to these property sales, the Company has held discussions with multiple potential buyers to sell at least a portion of Pacific Oak Residential Trust and the Company has identified other properties which could be ready for sale. (1) Using the property values reflected in the Statement of Financial Position, including for Q&C Hotel which is carried in the Statement of Financial Position on a depreciated cost basis in accordance with International Financial Reporting Standards rather than fair value. Equity proceeds is calculated as the property value, less secured debt principal balance, adjusted for the Company’s share of joint venture properties and also for buyer deposits in the case of the Park Highlands land sales. Excludes selling costs and fees. (2) Represents all of the Park Highlands land owned as of Dec. 31, 2023, which is all under sale contract as of March 10, 2024. Of the approximately 517 developable acres, (i) approximately 122 developable acres is under a sale contract according to which the Company holds a $9.5 million non-refundable deposit and the expected closing date is October 3, 2024 and (ii) approximately 395 developable acres (454 gross acres) is under a sale contract executed March 10, 2024 and according to which the buyer deposits of $10.0 million and closings currently scheduled for July 2024 and July 2025 are contingent upon satisfaction of certain conditions, including, among other things, completion of due diligence period and the obtaining of required permits and entitlements from applicable municipal authorities regarding the Park Highlands’ future developments. (3) Reflects one property that has a signed letter of intent and one property for which the Company has engaged a broker and launched the sales marketing as of late-March 2024. 2024 2025 TOTAL, 2024-2025 Equity Equity Equity Proceeds (1) Proceeds (1) Proceeds (1) (After Series C) (After Series C) (After Series C) (i) Under Sale Contract as of March 10, 2024 Park Highlands Village 2 (Est. Closings July 2024 & July 2025) (2) 45,300,000$ 72,800,000$ 118,100,000$ Park Highlands Village 1 PH 4 (Est. Closing Oct. 2024) (2) 43,000,000 - 43,000,000 Park Highlands Village 1 PH 4 Buyer Deposit Credit (2) (9,500,000) - (9,500,000) Subtotal - Under Sale Contract as of March 10, 2024 78,800,000 72,800,000 151,600,000 (ii) Expected to be Under Sale Contract by Q2 2024 (3) 48,000,000 - 48,000,000 (iii) Potential Sales Targets Office Properties - 155,000,000 155,000,000 Other Properties - 70,000,000 70,000,000 Subtotal - 225,000,000 225,000,000 TOTAL 126,800,000$ 297,800,000$ 424,600,000$ The Company plans to continue conservatively managing its liquidity, given the current environment and the Israeli Series B & C bond repayment schedule. The Company’s current plan is to (i) sell properties and/or partial interests therein, (ii) sell some of the equity securities, (iii) extend the maturing secured debt, and (iv) pursue opportunities for new debt. 10 Park Highlands Land Sales Under Contract (1) The sales will close out an incredibly profitable and timely investment by the Company, which had acquired the large acreage via joint venture deals in 2011 and 2013 at the depths of the housing bust and then subsequently bought out its joint venture partners. At the time of the partner buyouts in 2016, the Company’s acquisition basis was just $68.4 million or $55K per estimated developable acre(2). Following is a history of the Park Highlands land sales, which sale proceeds are expected to total $490.6 million upon the final closing currently scheduled for July 2025: All of the Park Highlands land owned as of December 31, 2023 is now under sales contract, following the signing of the final sales contract on March 10, 2024. The sales are currently scheduled to close in July 2024, October 2024, and July 2025, and are currently expected to generate proceeds of $151.6 million before selling costs & fees and after the Series C required paydowns.(1) (1) Of the approximately 517 developable acres owned as of Dec. 31, 2023, (i) approximately 122 developable acres is under a sale contract according to which the Company holds a $9.5 million non-refundable deposit and the expected closing date is October 3, 2024 and (ii) approximately 395 developable acres (454 gross acres) is under a sale contract executed March 10, 2024 and according to which the buyer deposits of $10.0 million and closings currently scheduled for July 2024 and July 2025 (2) Equals (i) the Company’s share of the joint venture purchase prices plus (ii) the joint venture partner buyout prices. Excludes acquisition costs and fees, land development and carrying costs, and other costs incurred since acquisition. Sales are contingent upon the satisfaction of certain conditions, including, among other things, the completion of due diligence period and the obtaining of required permits and entitlements from applicable municipal authorities regarding the Park Highlands’ future developments. The Company assumes, in case the Sale Transaction will be finalized, based on data in its possession as of the date of this report, taking into consideration the value of the remaining properties pledged unto Series C Debentures Holders and the exchange rate, net cash flows projected to be generated by the Company following the closing of the Sale Transaction (both installments) are projected to total approximately USD 112 million, and this following transaction costs and expenses while taking into consideration the portion of the proceeds of the Sale Transaction which shall be retained in the Series C Debentures’ Trust Account and/or the partial repayment of Series C Debentures to maintain compliance with the loan to collateral ratio on Series C Debentures, as noted in Section 6.1.1 (c) of Appendix 6.1 to the Deed of Trust. (3) Equals the sale price, net of seller concessions including those related to infrastructure costs which can vary significantly by land parcel. Excludes selling costs and fees. Disposition Sale Sale Price Parcels Date Acres Price (3) Per Acre (3) Sales Closed: Park Highlands Village 3 May-17 101.62 17,415,876 171,382 Park Highlands Village 3 South Feb-18 25.52 2,506,563 98,220 Park Highlands Village 4 Jul-18 82.97 19,268,850 232,239 Park Highlands West Oct-18 15.27 3,500,000 229,208 Park Highlands Village 1 PH 1 & 2 Jun-21 192.74 54,079,093 280,581 Park Highlands Casino Site Nov-22 66.86 52,086,511 779,038 Park Highlands Village 1 PH 3 First Closing Feb-23 71.43 36,655,303 513,164 Park Highlands Village 1 PH 3 Second Closing Oct-23 114.73 49,609,906 432,406 Total - Sales Closed as of Dec. 31, 2023 671.14 235,122,102 350,332 Sales Under Contract: Park Highlands Village 1 PH 4 (1) Oct-24 122.13 62,117,226 508,616 Park Highlands Village 2 First Closing (2) Jul-24 184.66 91,697,000 496,560 Park Highlands Village 2 Second Closing (2) Jul-25 210.81 103,403,000 490,514 Total - Sales Under Contract as of March 10, 2024 517.60 257,217,226 496,942 Total - Sales Closed & Under Contract as of March 10, 2024 1,188.74 492,339,328 414,169 11 110 William Update DEBT RESTRUCTURED, LOWERING LEVERAGE AND INTEREST, EXTENDING MATURITY, & PROVIDING FOR FUTURE FUNDING Former mezzanine loan, which had a balance of $89.0 million and interest rate of 1-month SOFR + 9.50% as of June 30, 2023, was converted to a 22.5% preferred equity interest in the joint venture owning the property. Senior loans, which had a balance of $248.7 million and interest rate of 1-month SOFR + 4.00% as of June 30, 2023, had their maturity dates extended by up to 5 years. The new senior loans have a 3-year initial term and grant two 1-year extension options subject to meeting certain conditions. The new weighted-average interest rate is initially 1-month SOFR + 2.04% (such spread increasing up to 3.50% during the loan term and any extension period). Senior loans will provide up to $56.7 million for future funding. EQUITY RESTRUCTURED, WITH THE COMPANY ACQUIRING THE INTEREST OF ITS FORMER PARTNER The Company acquired the former partner’s 40% interest in the joint venture for contingent consideration of 10% of the net cash received by once the Company has achieved certain returns on its future contributions to the joint venture. Following the deal, the Company owns 100% of the common equity of the joint venture. The Company also committed to contribute capital of up to $105.0 million to the joint venture, in exchange for a 77.5% preferred equity interest in the joint venture, which capital shall be used toward the leasing and base building capital costs associated with the 640,000 SF new lease as well as interest and carrying cost shortfalls until rent payments begin on the 640,000 SF new lease. The Company’s preferred equity interest will receive a disproportionately larger share of distributions until certain return thresholds are achieved, according to the joint venture’s revised waterfall calculation. 640,000 SF LEASE SIGNED FOR 20 YEAR TERM WITH AA CREDIT-RATED TENANT Lease brings the building occupancy up to essentially 100%. Lease was the largest office lease signed in the market, year-to-date, as of lease signing on June 27, 2023. Tenant is scheduled to take occupancy gradually (in phases of approximately 200,000 SF each), as tenant improvements are completed. The current expectation is for full occupancy of the leased space by the second half of 2025. 12 110 William Recapitalization Economics DCAS 90.0%
13 Debt by Rate Type, as of December 31, 2023 Rate Type Principal Balance ($000’s)(1) % of Total Effective Interest Rate(2) Fixed-Rate Series B Bonds $ 321,724 30.8% 3.93% Fixed-Rate Series C Bonds 99,461 9.5% 9.00% Fixed-Rate Secured Debt 215,930 20.6% 4.18% Floating-Rate Hedged 163,373 15.6% 5.43% Floating-Rate 245,334 23.5% 8.34% Total $ 1,045,822 100.0% 5.73% Consolidated Debt Rate Type Principal Balance ($000’s)(1) % of Total Effective Interest Rate(2) Floating-Rate Senior Debt $ 248,669 100.0% 7.38% 110 William Street Debt (Unconsolidated, Floating-Rate Hedged) 353 Sacramento Street Debt (Unconsolidated, Floating-Rate Hedged) Rate Type Principal Balance ($000’s)(1) % of Total Effective Interest Rate(2) Floating-Rate Hedged Senior Debt $ 89,600 80.0% 5.39% Floating-Rate Hedged Mezzanine Debt 22,400 20.0% 11.14% Total $ 112,000 100.0% 6.54% (1) Not adjusted for the Company’s share for properties owned via joint ventures. (2) Effective interest rates reflect the impact of any hedges, and are as of December 31, 2023 (3) Hedges are interest rate caps which expire upon the underlying debt maturities. At expiration, the Company can enter into a new rate hedge, which would reflect the economics and rate curve in the market at that time. 76.5% of consolidated debt is fixed-rate debt or floating-rate debt that’s hedged(3), limiting the Company’s interest rate risk. 14 Debt by Property Type, as of December 31, 2023 Property Type Principal Balance ($000’s)(1) % of Total Loan-to-Value (LTV) % Effective Interest Rate Office $ 298,015 28.5% 48.9% 7.11% SFR & Apartments 302,043 28.9% 52.0% 4.96% Hotel 24,579 2.3% 60.5% 8.84% Land - 0.0% 0.0% N/A Subtotal – Secured Debt $ 658,187 59.7% 40.7% 6.14% Series B Bonds 321,724 30.8% 68.2% 3.93% Series C Bonds 99,461 9.5% 68.2% 9.00% Total – All Debt $ 1,045,822 100.0% 68.2% 5.73% Consolidated Debt Unconsolidated Debt (assumes 100%) Property Type Principal Balance ($000’s)(1) % of Total Loan-to-Value (LTV) % Effective Interest Rate 110 William Street (Office) (100%) $ 248,669 68.9% 64.3% 7.38% 353 Sacramento Street (Office) (100%) 112,000 31.1% 113.4% 6.54% Subtotal – Secured Debt (100%) $ 446,409 100.0% 74.3% 7.12% Company’s share of the unconsolidated Secured Debt $ 266,438 40.7% secured loan-to-value, for the consolidated debt. 55.3% net loan-to-value, for the consolidated debt.(2) (1) Not adjusted for the Company’s share for properties owned via joint ventures. (2) Net loan-to-value ratio calculated as (i) total consolidated debt net of liquidity (total of cash and cash equivalents of $95.8 million, restricted cash of $59.3 million, and equity securities valued at $41.6 million), divided by (ii) total consolidated property value (investment properties plus property plant and equipment-hotels, net as reflected in the Statement of Financial Position). (3) Rates are partially offset with interest rate caps 15 Debt Maturities, as of December 31, 2023 (1) Assumes all contractual extension options are exercised. The extension options are subject to terms and conditions outlined in the loan documents, and there can be no guarantee that the debt will be extended to the fully extended maturity date. (2) Subsequent to December 31, 2023, the Company extended the maturity date of this mortgage loan to April 30, 2024. The Company expects to modify the debt terms or refinance prior to this maturity date, to avoid a maturity default, though there can be no guarantee of such an outcome. (3) Bank of America portfolio loan is cross-collateralized by Oakland City Center, The Marq, and Park Centre (offices) as well as 1180 Raymond (apartment). The table above reflects a hypothetical allocation of the debt balance and repayment schedule to (i) offices and (ii) SFR & Apartments, done by applying the portfolio loan’s LTV to each property and for purposes of presenting the information by property type; in reality, the Bank of America portfolio loan documents do not contain any such allocation. (4) The company is working with the existing lender on the property to extend the repayment date until March 2025. Current Fully Extended Maturity Maturity 2024 2025 2026 2027 2028 Thereafter Total Consolidated Office Debt: Richardson [2] Nov-24 Nov-24 12,209 - - - - - 12,209 Georgia 400 Center [2] May-24 May-24 40,184 - - - - - 40,184 Madison Square (JV) Oct-24 Oct-29 - - - - - 17,962 17,962 Crown Pointe Apr-25 Apr-27 - - - 54,738 - - 54,738 Lincoln Court Aug-25 Aug-28 - - - - 33,310 - 33,310 BofA Portfolio Loan [3] Sep-26 Sep-28 14,660 6,693 6,693 6,693 104,879 - 139,617 Subtotal 67,052 6,693 6,693 61,431 138,189 17,962 298,019 Unconsolidated Office Debt (at SOR Share): 353 Sacramento (JV) Dec-24 Dec-26 - - 61,600 - - - 61,600 110 William (JV) Jul-26 Jul-28 - - - - 204,838 - 204,838 Subtotal - - 61,600 - 204,838 - 266,438 Consolidated SFR & Apartment Debt: Lofts at NoHo (JV) [2] Sep-24 Sep-24 68,451 - - - - - 68,451 Pacific Oak Residential Trust Oct-25 to April-26 Oct-25 to April-26 - 34,967 163,002 - - - 197,968 BofA Portfolio Loan [3] Sep-26 Sep-28 3,740 1,707 1,707 1,707 26,757 - 35,619 Subtotal 72,191 36,674 164,709 1,707 26,757 - 302,038 Other Debt: Queen & Crescent Hotel (JV) [2] Jan-24 Jan-24 24,579 - - - - - 24,579 Israeli Series B Bonds Jan-26 Jan-26 107,241 107,241 107,241 - - - 321,724 Israeli Series C Bonds Jun-26 Jun-26 - - 99,461 - - - 99,461 Total - All Debt 271,063 150,608 439,704 63,138 369,784 17,962 1,312,260 Consolidated Debt (Ex-Bonds) 163,822 43,367 171,402 63,138 164,946 17,962 624,636 All Debt (Ex-Bonds) 163,822 43,367 233,002 63,138 369,784 25,000 891,074 Israeli Bonds 107,241 107,241 206,703 - - - 421,185 Fully Extended Maturities [1] ]4[ 16 Gross Profit by Property & Sector (1) Gross profit is measured for properties only, and excludes the dividend income from equity securities. Annualized regular dividend income currently expected in 2024 from the equity securities is minimal. (2) Reflects the Company’s interest in the joint ventures that own 110 William Street and 353 Sacramento, respectively. Rental income and expenses for these properties are included in equity in income (loss) of unconsolidated joint venture in the Company’s consolidated statements of operations. (3) Pro forma adjustment is made for the hotel because of the seasonal nature of its operations. Property Name City, State Property Type Q3 2023 Q3 2023 Q2 2023 Q1 2023 Annualized Q4 2023 Yr. Ending Q4 2023 Richardson Office Portfolio Richardson, TX Office 288$ 106$ 549$ 549$ 1,152$ 1,492$ Park Centre Austin, TX Office 462 446 460 497 1,848 1,866 Crown Pointe Dunwoody, GA Office 1,053 1,130 1,242 1,304 4,213 4,729 Marquette Plaza Minneapolis, MN Office 2,070 2,019 2,201 2,020 8,282 8,311 8 & 9 Corporate Centre Nashville, TN Office 1,554 1,346 1,381 1,319 6,215 5,599 Georgia 400 Center Alpharetta, GA Office 819 1,682 986 908 3,278 4,395 Lincoln Court Campbell, CA Office 716 616 725 861 2,865 2,917 Oakland City Center Oakland, CA Office 1,540 935 1,307 1,389 6,160 5,171 Madison Square (JV) Phoenix, AZ Office (403) (112) 148 279 (1,610) (87) Subtotal - Consolidated Office 8,101 8,168 8,999 9,126 32,403 34,393 1180 Raymond Newark, NJ Apartment 1,172 1,229 1,209 1,079 4,689 4,690 Lofts at NoHo Commons (JV) North Hollywood, CA Apartment 1,183 1,287 1,282 1,257 4,732 5,009 Subtotal - Apartment 2,355 2,515 2,492 2,336 9,421 9,698 Pacific Oak Residential Trust (PORT) Various Single-Family Rentals 2,322 4,556 4,709 4,665 9,289 16,253 Subtotal - SFR 2,322 4,556 4,709 4,665 9,289 16,253 Q&C Hotel (JV) New Orleans, LA Hotel 1,876 (133) 465 1,065 7,505 3,274 Subtotal - Hotel 1,876 (133) 465 1,065 7,505 3,274 110 William St. (2) New York, NY Office 1,194 (483) 1,174 1,286 4,775 3,171 353 Sacramento (2) San Francisco, CA Office 584 547 447 594 2,335 2,172 Subtotal - Unconsolidated Office 1,777 64 1,621 1,880 7,109 5,342 Adjustments for Other Properties, Incl. Sold Properties (1,958) (861) (21) (849) (7,833) (3,690) Subtotal - All Properties 14,473 14,310 18,265 18,223 57,893 65,271 Less: Minority Interest 2,734 68 570 (201) 10,936 3,171 Grand Total (Before Adjustments) 17,207$ 14,378$ 18,835$ 18,022$ 68,829$ 68,442$ Pro Forma Adjustments: (i) Adj. Q&C Hotel to Q4 2023 Trailing Twelve Months (3) (3,808) - Grand Total (After Adjustments) 65,021$ 68,442$ Gross Profit ($000's) (1) Q4 2023
17 Portfolio Occupancy (1) Leased occupancy reflects actual leases signed, including leases that may not have commenced, as of the periods shown above. (2) The Company owns a 60% and 55% interest, respectively, in the joint ventures that own 110 William Street and 353 Sacramento. Rentable Dec. 31, 2023 Sep. 30, 2023 Jun. 30, 2023 Mar. 31, 2023 Dec. 31, 2022 Property Square Ft. Leased Leased Leased Leased Leased Property Name City, State Type Dec. 31, 2023 Occupancy % (1) Occupancy % (1) Occupancy % (1) Occupancy % (1) Occupancy % (1) Richardson Office Portfolio Richardson, TX Office 428,030 54.8% 64.5% 64.6% 65.4% 70.5% Park Centre Austin, TX Office 205,096 47.1% 55.5% 58.5% 63.1% 64.2% Crown Pointe Dunwoody, GA Office 509,792 62.6% 63.8% 63.8% 65.9% 65.8% Marquette Plaza Minneapolis, MN Office 522,656 90.8% 90.2% 90.7% 90.4% 79.8% 8 & 9 Corporate Centre Nashville, TN Office 315,299 83.5% 90.3% 88.2% 87.3% 86.1% Georgia 400 Center Alpharetta, GA Office 429,768 66.6% 68.3% 65.8% 66.1% 68.5% Lincoln Court Campbell, CA Office 123,849 71.7% 70.1% 75.8% 83.3% 85.4% Oakland City Center Oakland, CA Office 368,032 60.9% 61.3% 61.8% 60.1% 64.8% Madison Square (JV) Phoenix, AZ Office 281,916 55.9% 48.6% 43.8% 43.8% 43.8% Subtotal - Consolidated Office 3,184,438 67.4% 69.5% 69.1% 69.9% 69.7% 1180 Raymond Newark, NJ Apartment 268,648 96.8% 92.7% 92.4% 94.6% 95.6% Lofts at NoHo Commons (JV) North Hollywood, CA Apartment 224,755 94.5% 91.1% 92.1% 94.9% 94.5% Subtotal Subtotal - Apartment 493,403 95.8% 92.0% 92.3% 94.7% 95.1% Pacific Oak Residential Trust (PORT) Various Single-Family Rentals 3,174,025 93.0% 94.5% 95.3% 94.4% 94.0% Subtotal - SFR 3,174,025 93.0% 94.5% 95.3% 94.4% 94.0% 110 William St. (Unconsolidated JV) (2) New York, NY Unconsolidated Office 928,157 100.0% 100.0% 100.0% 54.0% 55.0% 353 Sacramento Unconsolidated JV (2) San Francisco, CA Unconsolidated Office 284,751 42.0% 47.1% 47.3% 49.4% 49.4% Grand Total 8,064,774 82.0% 83.5% 83.6% 78.5% 78.4% 18 Assets Table, as of December 31, 2023 (1) Statement of Financial Position reflects these values for investment properties and investments in joint ventures, which are estimated fair values except for Q&C Hotel which is carried on a cost basis in accordance with International Financial Reporting Standards. (2) Debt represents a hypothetical allocation of the Bank of America portfolio loan’s balance, done by applying the portfolio loan’s LTV to each property. The Bank of America portfolio loan is cross-collateralized by Oakland City Center, The Marq, and Park Centre (offices) as well as 1180 Raymond (apartment). In reality, the Bank of America portfolio loan documents do not contain this allocation. 19 Assets Table, as of December 31, 2023 (1) Statement of Financial Position reflects these values for investment properties and investments in joint ventures, which are estimated fair values except for Q&C Hotel which is carried on a cost basis in accordance with International Financial Reporting Standards. (2) Debt represents a hypothetical allocation of the Bank of America portfolio loan’s balance, done by applying the portfolio loan’s LTV to each property. The Bank of America portfolio loan is cross-collateralized by Oakland City Center, The Marq, and Park Centre (offices) as well as 1180 Raymond (apartment). In reality, the Bank of America portfolio loan documents do not contain this allocation. Q4-2023 Q4-2023 20 Assets Table, as of December 31, 2023 (1) Statement of Financial Position reflects these values for investment properties and investments in joint ventures, which are estimated fair values except for Q&C Hotel which is carried on a cost basis in accordance with International Financial Reporting Standards. (2) Debt represents a hypothetical allocation of the Bank of America portfolio loan’s balance, done by applying the portfolio loan’s LTV to each property. The Bank of America portfolio loan is cross-collateralized by Oakland City Center, The Marq, and Park Centre (offices) as well as 1180 Raymond (apartment). In reality, the Bank of America portfolio loan documents do not contain this allocation. Q4-2023 Q4-2023
21 Equity Securities, as of December 31, 2023 Dec. 31, 2023 Shares Owned Dec. 31, 2023 Market Value Franklin Street Properties (NYSE Ticker: FSP) 6,854,331 17,547,087$ Per Share 2.56 Keppel-Pacific Oak US REIT (SGX Ticker: CMOU) 64,165,352 24,062,007 Per Share 0.38 Total 41,609,094$ THANK YOU Office Multifamily Single Family Rentals Hotel Lands