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): May 16, 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 class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| None | N/A | N/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 7.01 REGULATION FD DISCLOSURE
Pacific Oak SOR (BVI) Holdings, Ltd. (the “BVI”), a wholly-owned subsidiary of Pacific Oak Strategic Opportunity REIT, Inc. (the “Company”), completed offerings of Series B, C and D bonds since February 2020. Such offerings were made to investors in Israel and were registered with the Israel Securities Authority. Consequently, the BVI is required to prepare and file with the Israel Securities Authority certain financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”).
On May 16, 2024, BVI filed IFRS consolidated and separate interim financial statements. The English translations of the IFRS consolidated and separate interim financial statements, as of and for the three months ended March 31, 2024, are attached as Exhibits 99.1 and 99.2, respectively, to this Form 8-K.
The information in this Item 7.01 of Form 8-K and the attached Exhibits 99.1 and 99.2 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.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
| (d) | Exhibits |
|---|---|
| Ex. | Description |
| 99.1 | Pacific Oak SOR (BVI) Holdings, Ltd. Consolidated Interim Financial Statements as of March 31, 2024 (unaudited) |
| 99.2 | Pacific Oak SOR (BVI) Holdings, Ltd. Separate Interim Financial Statements as of March 31, 2024 (unaudited) |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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: May 16, 2024 | BY: | /s/ Michael A. Bender |
| Michael A. Bender | ||
| Chief Financial Officer, Treasurer and Secretary |
Document
Exhibit 99.1
| This English translation is 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. |
|---|
PACIFIC OAK SOR (BVI) HOLDINGS, LTD.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2024
UNAUDITED
U.S. DOLLARS IN THOUSANDS
INDEX
| Page | |
|---|---|
| Condensed Consolidated Statements of Financial Position | 2 |
| Condensed Consolidated Statements of Profit or Loss | 3 |
| Condensed Consolidated Statements of Equity | 4 |
| Condensed Consolidated Statements of Cash Flows | 5-6 |
| Notes to Interim Condensed Consolidated Financial Statements | 7-15 |
PACIFIC OAK SOR (BVI) HOLDINGS LTD.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
| March 31, | December 31, | |||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | 2023 | ||||
| Unaudited | Audited | |||||
| U.S. dollars in thousands | ||||||
| ASSETS | ||||||
| CURRENT ASSETS | ||||||
| Cash and cash equivalents | $ | 19,779 | $ | 122,673 | $ | 95,092 |
| Financial assets at fair value through profit or loss | 11,950 | 48,120 | 41,609 | |||
| Rents and other receivables, net | 3,117 | 3,476 | 3,366 | |||
| Prepaid expenses and other assets | 7,836 | 7,532 | 9,669 | |||
| Restricted cash | 15,973 | 17,734 | 36,452 | |||
| 58,655 | 199,535 | 186,188 | ||||
| NON-CURRENT ASSETS | ||||||
| Investment properties | 1,451,772 | 1,613,510 | 1,493,587 | |||
| Property plant and equipment - hotel, net | 36,900 | 41,393 | 40,634 | |||
| Goodwill | 949 | 5,436 | 949 | |||
| Investment in joint ventures | 159,860 | 138,279 | 148,582 | |||
| Restricted cash | 11,899 | 26,893 | 23,171 | |||
| 1,661,380 | 1,825,511 | 1,706,923 | ||||
| Total assets | $ | 1,720,035 | $ | 2,025,046 | $ | 1,893,111 |
| LIABILITIES AND EQUITY | ||||||
| CURRENT LIABILITIES | ||||||
| Notes payable | $ | 163,595 | $ | 281,035 | $ | 163,823 |
| Bonds payable | 105,244 | 103,413 | 107,241 | |||
| Accounts payable and accrued liabilities | 24,774 | 16,841 | 28,660 | |||
| Due to affiliates | 11,702 | 3,029 | 9,538 | |||
| Other liabilities | 19,388 | 32,976 | 19,107 | |||
| 324,703 | 437,294 | 328,369 | ||||
| NON-CURRENT LIABILITIES | ||||||
| Notes payable, net | 474,768 | 446,096 | 456,439 | |||
| Bonds payable, net | 191,605 | 206,827 | 301,180 | |||
| Lease obligation | 9,201 | 9,108 | 9,177 | |||
| Rental security deposits | 4,555 | 4,485 | 4,623 | |||
| Other liabilities | 9,907 | 12,568 | 10,433 | |||
| 690,036 | 679,084 | 781,852 | ||||
| Total liabilities | 1,014,739 | 1,116,378 | 1,110,221 | |||
| EQUITY | ||||||
| Owner's net equity | 694,606 | 896,834 | 772,166 | |||
| Non-controlling interests | 10,690 | 11,834 | 10,724 | |||
| Total equity | 705,296 | 908,668 | 782,890 | |||
| Total liabilities and equity | $ | 1,720,035 | $ | 2,025,046 | $ | 1,893,111 |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
| May 16, 2024 | /s/ Michael Allen Bender | /s/ Peter McMillan III | /s/ Keith David Hall |
|---|---|---|---|
| Date of approval of | Bender, Michael Allen | McMillan III, Peter | Hall, Keith David |
| financial statements | Chief Financial Officer | Chairman of Board of Directors | Chief Executive Officer |
PACIFIC OAK SOR (BVI) HOLDINGS LTD.
CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
| Three months ended March 31, | Year ended December 31, | |||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | 2023 | ||||
| Unaudited | Audited | |||||
| U.S. dollars in thousands | ||||||
| Revenues and other income: | ||||||
| Rental income | $ | 28,726 | $ | 29,821 | $ | 121,974 |
| Tenant reimbursements | 3,121 | 3,135 | 12,309 | |||
| Hotel revenues | 2,804 | 2,913 | 9,153 | |||
| Other operating income | 472 | 487 | 2,097 | |||
| Total revenues and other income | 35,123 | 36,356 | 145,533 | |||
| Expenses: | ||||||
| Operating, maintenance, and management fees | (11,288) | (11,627) | (50,446) | |||
| Real estate taxes and insurance | (6,476) | (6,417) | (28,213) | |||
| Hotel expenses | (1,876) | (1,969) | (6,945) | |||
| Total expenses | (19,640) | (20,013) | (85,604) | |||
| Gross profit | 15,483 | 16,343 | 59,929 | |||
| Fair value adjustment of investment properties, net | (51,800) | (58,946) | (113,281) | |||
| Depreciation | (280) | (314) | (1,263) | |||
| Equity in loss of joint ventures, net | (4,356) | (22,063) | (43,187) | |||
| Asset management fees to affiliates | (4,102) | (3,973) | (15,415) | |||
| Impairment charges on goodwill | — | — | (4,487) | |||
| Impairment charges on property plant and equipment - hotel | (3,454) | — | — | |||
| General and administrative expenses | (1,758) | (1,531) | (4,932) | |||
| Operating loss | (50,267) | (70,484) | (122,636) | |||
| Finance income | 455 | 207 | 3,347 | |||
| Finance loss from financial assets at fair value through profit or loss | (15,272) | (10,034) | (718) | |||
| Finance expenses, net | (16,773) | (16,031) | (68,216) | |||
| Foreign currency transaction gain (loss), net | 3,913 | 2,720 | (18,712) | |||
| Net loss before income taxes | $ | (77,944) | $ | (93,622) | $ | (206,935) |
| Income tax provision | — | (3,662) | (6,576) | |||
| Net loss | $ | (77,944) | $ | (97,284) | $ | (213,511) |
| Net loss attributable to owner | $ | (77,560) | $ | (96,546) | $ | (212,214) |
| Net loss attributable to non-controlling interests | (384) | (738) | (1,297) | |||
| Net loss | $ | (77,944) | $ | (97,284) | $ | (213,511) |
| Total comprehensive loss | $ | (77,944) | $ | (97,284) | $ | (213,511) |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
PACIFIC OAK SOR (BVI) HOLDINGS LTD.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
| Owner contributions | Retained earnings | Paid-in Capital resulting from transactions with non-controlling interests | Owner's net equity | Non-controlling interests | Total equity | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Unaudited | ||||||||||||
| U.S. dollars in thousands | ||||||||||||
| Balance as of January 1, 2024 | $ | 693,554 | $ | 35,538 | $ | 43,074 | $ | 772,166 | $ | 10,724 | $ | 782,890 |
| Net loss | — | (77,560) | — | (77,560) | (384) | (77,944) | ||||||
| Total comprehensive income | — | (77,560) | — | (77,560) | (384) | (77,944) | ||||||
| Noncontrolling interests’ contributions | — | — | — | — | 350 | 350 | ||||||
| Balance as of March 31, 2024 | $ | 693,554 | $ | (42,022) | $ | 43,074 | $ | 694,606 | $ | 10,690 | $ | 705,296 |
| Owner contributions | Retained earnings | Paid-in Capital resulting from transactions with non-controlling interests | Owner's net equity | Non-controlling interests | Total equity | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Unaudited | ||||||||||||
| U.S. dollars in thousands | ||||||||||||
| Balance as of January 1, 2023 | $ | 693,554 | $ | 256,752 | $ | 43,074 | $ | 993,380 | $ | 12,572 | $ | 1,005,952 |
| Net loss | — | (96,546) | — | (96,546) | (738) | (97,284) | ||||||
| Total comprehensive income | — | (96,546) | — | (96,546) | (738) | (97,284) | ||||||
| Balance as of March 31, 2023 | $ | 693,554 | $ | 160,206 | $ | 43,074 | $ | 896,834 | $ | 11,834 | $ | 908,668 |
| Owner contributions | Retained earnings | Paid-in Capital resulting from transactions with non-controlling interests | Owner's net equity | Non-controlling interests | Total equity | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Audited | ||||||||||||
| U.S. dollars in thousands | ||||||||||||
| Balance as of December 31, 2022 | 693,554 | 256,752 | 43,074 | 993,380 | 12,572 | 1,005,952 | ||||||
| Net loss | — | (212,214) | — | (212,214) | (1,297) | (213,511) | ||||||
| Total comprehensive loss | — | (212,214) | — | (212,214) | (1,297) | (213,511) | ||||||
| Distributions to owner | — | (9,000) | — | (9,000) | — | (9,000) | ||||||
| Non-controlling interests’ contributions | — | — | — | — | 543 | 543 | ||||||
| Non-controlling interests’ distributions | — | — | — | — | (1,094) | (1,094) | ||||||
| Balance as of December 31, 2023 | $ | 693,554 | $ | 35,538 | $ | 43,074 | $ | 772,166 | $ | 10,724 | $ | 782,890 |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
PACIFIC OAK SOR (BVI) HOLDINGS LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Three months ended <br>March 31, | Year ended December 31, | |||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | 2023 | ||||
| Unaudited | Audited | |||||
| U.S. dollars in thousands | ||||||
| Cash Flows from Operating Activities: | ||||||
| Net loss | $ | (77,944) | $ | (97,284) | $ | (213,511) |
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||
| Equity in loss of joint ventures, net | 4,356 | 22,063 | 43,187 | |||
| Fair value adjustment on investment properties, net | 51,800 | 58,946 | 113,281 | |||
| Depreciation | 280 | 314 | 1,263 | |||
| Impairment charges on goodwill | — | — | 4,487 | |||
| Impairment charges on property plant and equipment - hotel | 3,454 | — | — | |||
| Income tax provision | — | 3,662 | 6,576 | |||
| Deferred rent | (35) | (894) | (176) | |||
| Credit loss on financial assets | 406 | 459 | 4,923 | |||
| Finance expenses, net | 16,773 | 16,031 | 68,216 | |||
| Finance income | (455) | (207) | (3,347) | |||
| Finance loss from financial assets at fair value through profit or loss | 15,272 | 10,034 | 718 | |||
| Foreign currency transaction (loss) gain, net | (3,913) | (2,720) | 18,712 | |||
| 9,994 | 10,404 | 44,329 | ||||
| Changes in assets and liabilities: | ||||||
| Restricted cash | 13,715 | 16,073 | 5,107 | |||
| Rents and other receivables, net | (332) | (772) | (5,096) | |||
| Prepaid expenses and other assets | 1,296 | (3,007) | (115) | |||
| Accounts payable and accrued liabilities | (3,620) | (5,532) | (2,175) | |||
| Rental security deposits | (68) | (285) | (1,868) | |||
| Due to affiliates | 2,839 | 415 | 6,924 | |||
| Other liabilities | (3,994) | 4,377 | 3,336 | |||
| Lease incentive additions | — | 464 | — | |||
| 9,836 | 11,733 | 6,113 | ||||
| Net cash provided by operating activities | 19,830 | 22,137 | 50,442 | |||
| Cash Flows from Investing Activities: | ||||||
| Improvements to investment properties | (9,862) | (6,774) | (23,177) | |||
| Proceeds from sales of investment properties, net | 1,498 | 34,139 | 123,846 | |||
| Taxes paid related to sales of investment properties | — | — | (11,500) | |||
| Contributions to joint ventures | (15,634) | — | (30,284) | |||
| Distribution of capital from joint venture | — | 1,144 | — | |||
| Proceeds from the sale of investments in financial assets at fair value through profit or loss, net | 14,309 | — | 13,946 | |||
| Purchase of interest rate caps | (941) | — | (1,236) | |||
| Proceeds from interest rate caps | 1,478 | — | — | |||
| Payments on foreign currency derivatives, net | (478) | (6,250) | (30,209) | |||
| Finance income received | 630 | 204 | 3,176 | |||
| Dividend income received from financial assets at fair value through profit or loss | 78 | 1,995 | 4,014 | |||
| Proceeds for development obligations | 4 | — | 12,005 | |||
| Funding for development obligations | (2,250) | — | (8,689) | |||
| (Payments) proceeds from capital expenditures | — | (71) | 209 | |||
| Net cash (used in) provided by investing activities | (11,168) | 24,387 | 52,101 |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
PACIFIC OAK SOR (BVI) HOLDINGS LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
| Three months ended <br>March 31, | Year ended December 31, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2023 | ||||||||||||
| Unaudited | Audited | |||||||||||||
| U.S. dollars in thousands | ||||||||||||||
| Cash Flows from Financing Activities: | ||||||||||||||
| Proceeds from notes and bonds payable | $ | 21,562 | $ | 980 | $ | 98,502 | ||||||||
| Principal payments on notes and bonds payable | (108,996) | (2,841) | (111,243) | |||||||||||
| Payments of deferred financing costs | (1,422) | (472) | (5,416) | |||||||||||
| Interest paid | (16,095) | (15,924) | (58,884) | |||||||||||
| Noncontrolling interests’ contributions | 350 | — | 543 | |||||||||||
| Noncontrolling interests’ distributions | — | — | (1,094) | |||||||||||
| Release (distribution) of restricted cash for debt service obligations | 20,556 | — | (16,640) | |||||||||||
| Distributions to owner | (675) | — | (7,453) | |||||||||||
| Net cash used in financing activities | (84,720) | (18,257) | (101,685) | |||||||||||
| Effect of exchange rate changes on cash and cash equivalents | 745 | 15 | (157) | |||||||||||
| Net (decrease) increase in cash and cash equivalents | (75,313) | 28,282 | 701 | |||||||||||
| Cash and cash equivalents, beginning of period | 95,092 | 94,391 | 94,391 | |||||||||||
| Cash and cash equivalents, end of period | $ | 19,779 | $ | 122,673 | $ | 95,092 | Supplemental Disclosure of Noncash Activities: | |||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||||
| Accrued development obligations | $ | 8,967 | $ | 2,554 | $ | 11,213 | ||||||||
| Deposit applied to sale of investment property | $ | — | $ | — | $ | 7,528 | ||||||||
| Accrual improvements to investment properties | $ | 4,736 | $ | — | $ | 4,108 | ||||||||
| Distribution payable to owner | $ | 1,075 | $ | — | $ | 1,750 | ||||||||
| Asset management fee reimbursement payable to owner | $ | 9,284 | $ | 2,830 | $ | 7,047 |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
PACIFIC OAK SOR (BVI) HOLDINGS LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: GENERAL INFORMATION
These financial statements have been prepared in a condensed format as of March 31, 2024, and for the three months period then ended ("interim condensed consolidated financial statements"). These interim condensed consolidated financial statements should be read in conjunction with the Company's annual financial statements as of December 31, 2023, and for the year then ended and the accompanying notes ("annual financial statements").
The Company and its subsidiaries (the "Group") operate in the investment real estate segment in the United States, which includes mainly investment in office and residential real estate and undeveloped lands. In addition, the Company invests in real estate equity securities. The Company has three reporting segments: 1) strategic opportunistic properties 2) residential homes and 3) hotel.
As of March 31, 2024, the Company consolidated nine office complexes, encompassing, in the aggregate, approximately 3.2 million rentable square feet and these properties were 67% occupied. In addition, the Company owned one residential home portfolio consisting of 2,168 residential homes, and two apartment properties containing 609 units, which were 94% and 95% occupied, respectively. The Company also owned one hotel property with 196 rooms, four investments in undeveloped land with approximately 581 developable acres, and one office/retail development property, three investments in unconsolidated joint ventures and two financial assets at fair value through profit or loss.
Due to rising interest rates, we may experience restrictions in our liquidity based on certain financial covenant requirements, our inability to refinance maturing debt in part or in full as it comes due and higher debt service costs and reduced yields relative to cost of debt. If we are unable to find alternative credit arrangements or other funding in a high interest environment, our business needs may not be adequately met. Based on interest rates as of March 31, 2024, if interest rates were 100 basis points higher or lower during the three months ending March 31, 2024, the annualized interest expense on our variable rate debt would increase or decrease by $2.4 million and $2.5 million, respectively.
In addition, tenants and potential tenants of the Company’s properties may be adversely impacted by inflation and rising interest rates, which could negatively impact the Company’s tenants’ ability to pay rent and the demand for the Company’s properties. Such adverse impacts on the Company’s tenants may cause increased vacancies, which may add pressure to lower rents and increase the Company’s expenditures for re-leasing.
As of March 31, 2024, the Company had a working capital shortfall amounting to $266.0 million, primarily attributed to loans maturing in the year following the date of the statement of financial position. The Company intends to refinance loans as they come due, given the relatively low leverage of the Company’s properties, the Company’s relationship with third-party lenders and its past experience placing debt on its properties. There are no significant limitations on the Company’s ability to withdraw funds from the Company’s subsidiaries, except for restricted cash. The Company expects to generate cash flow from additional asset sales in the current year and subsequent to March 31, 2024, the Company issued Series D Bonds for 288.1 million Israeli new shekels (approximately $76.2 million as of April 24, 2024) par value through a public offering. Refer to note 7 for additional details. Accordingly, the Company and the board of directors does not view the working capital shortfall as a liquidity problem.
PACIFIC OAK SOR (BVI) HOLDINGS LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2: SIGNIFICANT ACCOUNTING POLICY
Basis of presentation of the interim condensed consolidated financial statements:
The interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for the preparation of financial statements for interim periods, as prescribed in IAS 34, "Interim Financial Reporting", and in accordance with the disclosure requirements of Chapter D of the Securities Regulations (Periodic and Immediate Reports), 1970.
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the annual consolidated financial statements.
Disclosures of new standards in the period prior to their adoption:
IFRS 18 "Presentation and Disclosures in Financial Statements":
On April 9, 2024, the IASB issued IFRS 18 "Presentation and Disclosures in Financial Statements" to set out requirements for the presentation and disclosure of information in general purpose financial statements. The standard is effective for annual periods beginning on or after January 2027. The Company is assessing the impact of the new standard, including the impact of amendments to other accounting standards, as a result of the new standard on the consolidated financial statements.
NOTE 3: INVESTMENT IN JOINT VENTURES
As of March 31, 2024, the Company’s investment in joint ventures was composed of the following (dollars in thousands):
| Properties as of March 31, 2024 | Investment Balance as of | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| March 31, | December 31, 2023 | ||||||||||||||
| 2024 | 2023 | ||||||||||||||
| Joint Venture | Location | Ownership % | (Unaudited) | (Audited) | |||||||||||
| 110 William Joint Venture | 1 | New York, New York | (1) | $ | 123,434 | $ | 43,392 | $ | 112,514 | ||||||
| Pacific Oak Opportunity Zone Fund I | 4 | Various | 47.0% | 36,426 | (2) | 36,157 | 36,068 | ||||||||
| 353 Sacramento Joint Venture | 1 | San Francisco, California | 55.0% | — | (3) | 58,730 | — | ||||||||
| $ | 159,860 | $ | 138,279 | $ | 148,582 |
_____________________
(1)The 110 William Joint Venture is governed by an amended and restated limited liability company agreement, dated July 5, 2023. In July 2023, the 110 William Joint Venture entered into debt and equity restructuring agreements and as a result, the Company committed to funding up to $105.0 million (the “Capital Commitments”) to the 110 William Joint Venture in exchange for 77.5% of preferred interest in the joint venture. As of March 31, 2024, the Company owned 100% of the common interest and 77.5% of preferred interest in the joint venture, and based on a tiered waterfall.
(2)In April 2024, the Company received a distribution of capital of $1.5 million from the Pacific Oak Opportunity Zone Fund I.
(3)The Company’s investment in the 353 Sacramento Joint Venture is limited to the investment balance, as such, the Company does not guarantee any debt or other obligations associated with the joint venture.
PACIFIC OAK SOR (BVI) HOLDINGS LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: INVESTMENT IN JOINT VENTURES (Cont.)
The equity in profit (loss) of joint ventures for the three months ended March 31, 2024 and 2023 and the year ended December 31, 2023 was as follows (in thousands):
| Three Months Ended March 31, | Year ended December 31, 2023 | |||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | |||||
| (Unaudited) | (Audited) | |||||
| 110 William Joint Venture | $ | (4,713) | $ | (4,182) | $ | 33,448 |
| Pacific Oak Opportunity Zone Fund I | 357 | (618) | (706) | |||
| 353 Sacramento Joint Venture | — | (17,263) | (75,929) | |||
| Equity in loss of joint ventures, net | $ | (4,356) | $ | (22,063) | $ | (43,187) |
110 William Joint Venture:
Summarized information about the statements of financial position and the statements of profit or loss of Pacific Oak SOR SREF III 110 William, LLC (100%) (in thousands):
| March 31, | December 31, | |||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | 2023 | ||||
| (Unaudited) | (Audited) | |||||
| Current assets | $ | 8,787 | $ | 8,343 | $ | 8,911 |
| Non-current assets (investment property) | 390,864 | 402,109 | 386,670 | |||
| Current liabilities | 3,496 | 337,540 | 10,514 | |||
| Non-current liabilities | 248,592 | 592 | 248,555 | |||
| Equity | 147,563 | 72,320 | 136,512 | |||
| Equity attributable to equity holders of the Company (Based on the waterfall mechanism) | $ | 123,434 | $ | 43,392 | $ | 112,514 |
| Three months ended March 31, | Year ended December 31, | |||||
| --- | --- | --- | --- | --- | --- | --- |
| 2024 | 2023 | 2023 | ||||
| (Unaudited) | (Audited) | |||||
| Revenues | $ | 4,086 | $ | 6,525 | $ | 24,474 |
| Gross (loss) profit | (3) | 2,143 | 4,908 | |||
| Operating profit (loss) *) | 24 | 2,143 | (30,776) | |||
| Net (loss) income *) | (4,583) | (6,917) | 4,988 | |||
| Share of equity in (loss) profit from joint venture (Based on the waterfall mechanism) | (4,713) | (4,182) | 33,448 | |||
| *) Includes revaluation of investment properties | $ | — | $ | — | $ | (35,402) |
Pacific Oak Opportunity Zone Fund I:
Summarized information about the statements of financial position and the statements of profit or loss of Pacific Oak Opportunity Zone Fund 1, LLC (100%) (in thousands):
PACIFIC OAK SOR (BVI) HOLDINGS LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: INVESTMENT IN JOINT VENTURES (Cont.)
| Three months ended March 31, | December 31, | |||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | 2023 | ||||
| (Unaudited) | (Audited) | |||||
| Current assets | $ | 2,368 | $ | 2,953 | $ | 3,123 |
| Non-current assets (investment property) | 127,461 | 101,427 | 125,691 | |||
| Current liabilities | 1,931 | 791 | 1,626 | |||
| Non-current liabilities | 51,002 | 48,998 | 51,065 | |||
| Equity | 76,896 | 54,591 | 76,417 | |||
| Equity attributable to equity holders of the Company (Based on the waterfall mechanism) | $ | 36,426 | $ | 36,157 | $ | 36,068 |
| Three months ended March 31, | Year ended December 31, | |||||
| --- | --- | --- | --- | --- | --- | --- |
| 2024 | 2023 | 2023 | ||||
| (Unaudited) | (Audited) | |||||
| Revenues | $ | 2,283 | $ | 1,625 | $ | 7,744 |
| Gross profit | 1,858 | 1,305 | 6,776 | |||
| Operating profit (loss) *) | 1,235 | 1,211 | (5,050) | |||
| Net profit (loss) *) | 831 | 798 | (7,162) | |||
| Share of equity in profit (loss) from joint venture (Based on the waterfall mechanism) | 357 | (618) | (706) | |||
| *) Includes revaluation of investment properties | $ | 361 | $ | 741 | $ | (7,587) |
The Company does not attach the financial statements related to the investment in joint ventures, as the reports do not add more information to the contained above.
353 Sacramento Joint Venture:
Summarized information about the statements of financial position and the statements of profit or loss of 353 Sacramento Street, Pacific Oak SOR Acquisition XXIX, LLC (100%) (in thousands):
| March 31, | December 31, | |||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | 2023 | ||||
| (Unaudited) | (Audited) | |||||
| Current assets | $ | 3,623 | $ | 16,151 | $ | 12,552 |
| Non-current assets (investment property) | 106,843 | 202,699 | 98,800 | |||
| Current liabilities | 113,839 | 2,010 | 113,157 | |||
| Non-current liabilities | 1,662 | 112,440 | 1,662 | |||
| (Deficit) equity | (5,035) | 104,401 | (3,467) | |||
| Equity attributable to equity holders of the Company (Based on the waterfall mechanism) | $ | — | $ | 58,730 | $ | — |
PACIFIC OAK SOR (BVI) HOLDINGS LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: INVESTMENT IN JOINT VENTURES (Cont.)
| Three months ended March 31, | Year ended December 31, | |||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | 2023 | ||||
| (Unaudited) | (Audited) | |||||
| Revenues | $ | 2,982 | $ | 2,971 | $ | 12,102 |
| Gross profit | 1,268 | 1,041 | 4,896 | |||
| Operating profit (loss) *) | 1,217 | (29,684) | (130,218) | |||
| Net loss *) | (1,569) | (32,428) | (140,272) | |||
| Share of equity in loss from joint venture (Based on the waterfall mechanism) | — | (17,263) | (75,929) | |||
| *) Includes revaluation of investment properties | $ | — | $ | (30,731) | $ | (134,537) |
The Company does not attach the financial statements related to the investment in joint ventures, as the reports do not add more information to the contained above.
NOTE 4: FINANCIAL INSTRUMENTS
The following were the fair values of the Company’s financial instruments as of March 31, 2024 and 2023, and December 31, 2023 (in thousands):
| March 31, | December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2023 | ||||||
| Unaudited | ||||||||
| Notes payable | $ | 631,653 | $ | 718,158 | $ | 611,725 | ||
| Series B bonds | $ | 201,331 | $ | 286,725 | $ | 296,380 | ||
| Series C bonds | $ | 103,221 | $ | — | $ | 102,664 |
The Series B bonds contain the following covenants: (i) Consolidated Equity Capital of the Company (not including minority rights) shall not be less than USD 475 million; (ii) the Net Adjusted Financial Debt to Net Adjusted Cap (shall not exceed a rate of 75%); (iii) Adjusted NOI shall be no lower than USD 35 million; and (iv) the consolidated scope of the projects for development of the Company shall not exceed 10% of the adjusted balance. As of March 31, 2024, the Company was in compliance with all covenants under the deed of trust of the Series B Bonds; (i) Consolidated Equity Capital of the Company as of March 31, 2024 was $694.6 million; (ii) the Net Adjusted Debt to Net Adjusted Cap was 62%; (iii) the Adjusted NOI was $64.8 million for the trailing twelve months ended March 31, 2024; and (iv) the consolidated scope of projects was $0 as of March 31, 2024.
The Series C bonds contain the following covenants: (i) Consolidated Equity Capital of the Company (not including minority rights) shall not be less than USD 450 million; (ii) the Net Adjusted Financial Debt to Net Adjusted Cap (shall not exceed a rate of 75%); (iii) and the Loan to Collateral Ratio shall not exceed a rate of 75%. As of March 31, 2024, the Company was in compliance with all covenants under the deed of trust of the Series C bonds; (i) Consolidated Equity Capital of the Company as of March 31, 2024 was $694.6 million; (ii) the Net Adjusted Debt to Net Adjusted Cap was 62%; (iii) and the Loan to Collateral Ratio as of March 31, 2024 was 48%.
PACIFIC OAK SOR (BVI) HOLDINGS LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4: FINANCIAL INSTRUMENTS (Cont.)
The Company's investments in real estate equity securities are carried at their estimated fair value based on quoted market prices (Level 1) for the securities. Unrealized gains and losses are reported in finance loss from financial assets at fair value through profit or loss.
NOTE 5: SEGMENT INFORMATION
The operating segments are identified on the basis of information that is reviewed by the chief operating decision maker ("CODM") to make decisions about resources to be allocated and asses its performance. All corporate related costs are included in the strategic opportunistic properties segment to align with how financial information is presented to the CODM. The selected financial information for the reporting segments as of and for the three months ended March 31, 2024 and 2023 and as of and the year ended December 31, 2023 is as follows (in thousands):
| March 31, 2024 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Strategic Opportunistic Properties | Residential Homes | Hotel | Total | |||||
| (Unaudited) | ||||||||
| Investment properties | $ | 1,051,423 | $ | 400,349 | $ | — | $ | 1,451,772 |
| Property plant and equipment - hotel, net | $ | — | $ | — | $ | 36,900 | $ | 36,900 |
| Total assets | $ | 1,262,730 | $ | 410,789 | $ | 46,516 | $ | 1,720,035 |
| Total liabilities | $ | 787,098 | $ | 201,670 | $ | 25,971 | $ | 1,014,739 |
| Three months ended March 31, 2024 | ||||||||
| Strategic Opportunistic Properties | Residential Homes | Hotel | Total | |||||
| (Unaudited) | ||||||||
| Total revenues and other income | $ | 23,163 | $ | 9,156 | $ | 2,804 | $ | 35,123 |
| Gross profit | $ | 10,289 | $ | 4,266 | $ | 928 | $ | 15,483 |
| Finance expenses, net | $ | 13,833 | $ | 2,370 | $ | 570 | $ | 16,773 |
PACIFIC OAK SOR (BVI) HOLDINGS LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5: SEGMENT INFORMATION (Cont.)
| March 31, 2023 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Strategic Opportunistic Properties | Residential Homes | Hotel | Total | |||||
| (Unaudited) | ||||||||
| Investment properties | $ | 1,189,035 | $ | 424,475 | $ | — | $ | 1,613,510 |
| Property plant and equipment - hotel, net | $ | — | $ | — | $ | 41,393 | $ | 41,393 |
| Total assets | $ | 1,541,680 | $ | 436,133 | $ | 47,233 | $ | 2,025,046 |
| Total liabilities | $ | 879,509 | $ | 210,852 | $ | 26,017 | $ | 1,116,378 |
| Three months ended March 31, 2023 | ||||||||
| Strategic Opportunistic Properties | Residential Homes | Hotel | Total | |||||
| (Unaudited) | ||||||||
| Total revenues and other income | $ | 24,005 | $ | 9,438 | $ | 2,913 | $ | 36,356 |
| Gross profit | $ | 10,734 | $ | 4,665 | $ | 944 | $ | 16,343 |
| Finance expenses, net | $ | 12,777 | $ | 2,731 | $ | 523 | $ | 16,031 |
| December 31, 2023 | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Strategic Opportunistic Properties | Residential Homes | Hotel | Total | |||||
| (Audited) | ||||||||
| Investment properties | $ | 1,087,376 | $ | 406,211 | $ | — | $ | 1,493,587 |
| Property plant and equipment - hotel, net | $ | — | $ | — | $ | 40,634 | $ | 40,634 |
| Total assets | $ | 1,407,870 | $ | 436,394 | $ | 48,847 | $ | 1,893,111 |
| Total liabilities | $ | 879,854 | $ | 203,410 | $ | 26,957 | $ | 1,110,221 |
| Year ended December 31, 2023 | ||||||||
| Strategic Opportunistic Properties | Residential Homes | Hotel | Total | |||||
| (Audited) | ||||||||
| Total revenues and other income | $ | 97,743 | $ | 38,637 | $ | 9,153 | $ | 145,533 |
| Gross profit | $ | 41,438 | $ | 16,283 | $ | 2,208 | $ | 59,929 |
| Finance expenses, net | $ | 55,590 | $ | 10,279 | $ | 2,347 | $ | 68,216 |
NOTE 6: SIGNIFICANT EVENTS DURING THE REPORTING PERIOD
Series B Bond Payment
In January 2024, the Company made the first principal installment payment of 388.1 million Israeli new Shekels (approximately $106.6 million as of January 31, 2024) in connection with the Company’s Series B bonds. Subsequent to the first installment payment, two additional Series B Bond installments remain, each, due on January 31, 2025 and 2026, respectively.
PACIFIC OAK SOR (BVI) HOLDINGS LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6: SIGNIFICANT EVENTS DURING THE REPORTING PERIOD (Cont.)
Eight & Nine Corporate Centre Loan
In January 2024, the Company obtained an interest-only mortgage loan with a maximum principal amount of $23.5 million, of which $20.0 million was funded at the time of closing. The loan is secured by the Eight & Nine Corporate Centre office complex, has a contractual interest rate of the greater of 8.90% or a floating rate of 490 basis points over the one-month SOFR rate, has an initial maturity date of February 9, 2026, and three one-year extension options.
Sale of Financial Assets
During the three months ended March 31, 2024 the Company sold a partial interest in one of the Company’s financial assets (real estate equity securities) for gross sale proceeds of approximately $14.3 million.
Park Highlands Land
In March 2024, the Company, through indirect wholly owned subsidiaries, entered into a purchase and sale agreement for the sale of approximately 454 developable acres of Park Highlands undeveloped land, from the Company’s strategic opportunistic properties segment, for gross sale proceeds of approximately $195.0 million, before net closing costs, credits and taxes. A portion of the acres to be sold are pledged as collateral for an offering of Series C bonds. There can be no assurance that the Company will complete the sale. The purchaser is not affiliated with the Company or the Advisor.
NOTE 7: SUBSEQUENT EVENTS
The Company evaluates subsequent events up until the date the interim condensed consolidated financial statements are issued.
Series D Bonds
In April 2024, the Company issued 288.1 million Israeli new shekels (approximately $76.2 million as of April 24, 2024) of Series D bonds (the “Series D Bonds”) to Israeli investors pursuant to offerings registered with the Israeli Securities Authority. The Series D Bonds bear interest of 9.5% and have principal installment payments equal to 33.33% of the face amount due on February 28th from 2027 to 2029.
Dividend Approval
On May 16, 2024, the Company’s board of directors approved a distribution of dividend in the amount of $5.0 million to the owner.
14
Document
Exhibit 99.2
| This English translation is 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. |
|---|
PACIFIC OAK SOR (BVI) HOLDINGS, LTD.
PRESENTATION OF SEPARATE FINANCIAL DATA FROM THE
CONSOLIDATED FINANCIAL STATEMENTS ATTRIBUTABLE TO THE COMPANY
March 31, 2024 (Unaudited)
PACIFIC OAK SOR (BVI) HOLDINGS, LTD.
PRESENTATION OF SEPARATE FINANCIAL DATA
FROM THE CONSOLIDATED FINANCIAL STATEMENTS
ATTRIBUTABLE TO THE COMPANY
AS OF MARCH 31, 2024
(UNAUDITED)
U.S. DOLLARS IN THOUSANDS
INDEX
| Page | |
|---|---|
| Special Report Presented Pursuant to Regulation 38d | 2 |
| Financial Information from the Consolidated Statements of Financial Position Attributable to the Company | 3 |
| Financial Information from the Consolidated Statements of Profit or Loss Attributable to the Company | 4 |
| Financial Information from the Consolidated Statements of Cash Flows Attributable to the Company | 5 |
| Additional Information | 6 |
Special Report in accordance with Regulation 38d
Financial Information and Financial Data from the
Consolidated Financial Statements Attributable to the Company
Below is separate financial information and financial data attributable to the Company from the Group's consolidated financial statements as of March 31, 2024, published as part of the periodic reports ("consolidated financial statements"), presented in accordance with Regulation 38d to the Israeli Securities Regulations (Periodic and Immediate Reports), 1970.
PACIFIC OAK SOR (BVI) HOLDINGS, LTD.
Financial Information from the Consolidated Statements of Financial Position Attributable to the Company
| March 31, | December 31, | |||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | 2023 | ||||
| Unaudited | Audited | |||||
| U.S. dollars in thousands | ||||||
| ASSETS | ||||||
| NON-CURRENT ASSETS | ||||||
| Investments in investees | $ | 1,000,660 | $ | 1,188,877 | $ | 1,135,916 |
| Restricted cash | 508 | 14,277 | 6,231 | |||
| 1,001,168 | 1,203,154 | 1,142,147 | ||||
| CURRENT ASSETS | ||||||
| Cash and cash equivalents | 385 | 3,070 | 21,503 | |||
| Restricted cash | 4,719 | 6,862 | 28,849 | |||
| Other assets | — | — | 3,655 | |||
| 5,104 | 9,932 | 54,007 | ||||
| Total assets | $ | 1,006,272 | $ | 1,213,086 | $ | 1,196,154 |
| EQUITY | $ | 694,606 | $ | 896,834 | $ | 772,166 |
| NON-CURRENT LIABILITIES | ||||||
| Bonds payable, net | 191,605 | 206,827 | 301,180 | |||
| CURRENT LIABILITIES | ||||||
| Accounts payable and accrued liabilities | 4,458 | 3,450 | 6,029 | |||
| Bonds payable | 105,244 | 103,413 | 107,241 | |||
| Due to owner | 10,359 | 2,562 | 9,538 | |||
| 120,061 | 109,425 | 122,808 | ||||
| Total liabilities | 311,666 | 316,252 | 423,988 | |||
| Total equity and liabilities | $ | 1,006,272 | $ | 1,213,086 | $ | 1,196,154 |
The accompanying notes are an integral part of the condensed interim financial data.
| May 16, 2024 | /s/ Michael Allen Bender | /s/ Peter McMillan III | /s/ Keith David Hall |
|---|---|---|---|
| Date of approval of | Bender, Michael Allen | McMillan III, Peter | Hall, Keith David |
| financial statements | Chief Financial Officer | Chairman of Board of Directors | Chief Executive Officer |
PACIFIC OAK SOR (BVI) HOLDINGS, LTD.
Financial Information from the Consolidated Statements of Profit or Loss Attributable to the Company
| Three months ended March 31, | Year ended December 31, | |||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | 2023 | ||||
| Unaudited | Audited | |||||
| U.S. dollars in thousands | ||||||
| Share of loss from investees, net | $ | (71,841) | $ | (90,227) | $ | (157,546) |
| Advisory fees to affiliate | (3,087) | (2,884) | (11,776) | |||
| General and administrative expenses | (605) | (1,531) | (2,039) | |||
| Operating loss | (75,533) | (94,642) | (171,361) | |||
| Finance expense | (6,248) | (4,636) | (22,897) | |||
| Finance income | 308 | 12 | 756 | |||
| Foreign currency transaction gain (loss), net | 3,913 | 2,720 | (18,712) | |||
| Net loss | $ | (77,560) | $ | (96,546) | $ | (212,214) |
| Total comprehensive loss | $ | (77,560) | $ | (96,546) | $ | (212,214) |
The accompanying notes are an integral part of the condensed interim financial data.
PACIFIC OAK SOR (BVI) HOLDINGS, LTD.
Financial Information from the Consolidated Statements of Cash Flows Attributable to the Company
| Three months ended March 31, | Year ended <br>December 31, | |||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | 2023 | ||||
| Unaudited | Audited | |||||
| U.S. dollars in thousands | ||||||
| Cash flows from operating activities | ||||||
| Net loss | $ | (77,560) | $ | (96,546) | $ | (212,214) |
| Adjustments to reconcile net loss to net cash used in by operating activities: | ||||||
| Share of loss from investees | 71,841 | 90,227 | 157,546 | |||
| Finance expense | 6,248 | 4,636 | 22,897 | |||
| Distribution (to) from investees, net | (28,255) | (4,585) | 3,712 | |||
| Foreign currency transaction adjustments, net | (3,913) | (2,720) | 18,712 | |||
| Changes in operating assets and liabilities: | ||||||
| Accounts payable and accrued liabilities | 192 | (112) | (1,709) | |||
| Restricted cash for operational expenditures | 9,571 | (881) | 2,105 | |||
| Due to affiliates | 1,496 | (68) | 6,908 | |||
| Net cash used in operating activities | (20,380) | (10,049) | (2,043) | |||
| Cash flows from investing activities | ||||||
| Distributions from (to) investees, net | 91,670 | 6,943 | (15,712) | |||
| Payments on foreign currency derivatives, net | (478) | (6,250) | (30,209) | |||
| Net cash provided by (used in) investing activities | 91,192 | 693 | (45,921) | |||
| Cash flows from financing activities | ||||||
| Proceeds from bonds payable | — | — | 101,636 | |||
| Payment on bonds payable | (106,021) | — | — | |||
| Payments of deferred financing costs | (101) | — | (4,223) | |||
| Interest paid | (6,434) | (6,544) | (20,879) | |||
| Release of restricted cash for debt service obligations | 20,556 | 145 | (18,267) | |||
| Distributions to owner | (675) | — | (7,453) | |||
| Net cash (used in) provided by financing activities | (92,675) | (6,399) | 50,814 | |||
| Effect of exchange rate changes on cash and cash equivalents | 745 | 15 | (157) | |||
| (Decrease) increase in cash | (21,118) | (15,740) | 2,693 | |||
| Cash, beginning of the period | 21,503 | 18,810 | 18,810 | |||
| Cash, end of the period | $ | 385 | $ | 3,070 | $ | 21,503 |
| Supplemental Disclosure of Noncash Activities: | ||||||
| Distribution payable to owner | $ | 1,075 | $ | — | $ | 1,750 |
| Asset management fee reimbursement payable to owner | $ | 9,284 | $ | 2,830 | $ | 7,047 |
The accompanying notes are an integral part of the condensed interim financial data.
PACIFIC OAK SOR (BVI) HOLDINGS, LTD.
Additional Information
U.S. dollars in thousands
NOTE 1: BASIS OF PREPARATION
Separate financial information is prepared in a condensed format as of March 31, 2024 and for the three months then ended, in accordance with Regulation 38D of the Securities Regulations (Periodic and Immediate Reports), 1970.
Please refer to the separate financial information in this regard to the financial information on the annual financial statements of the Company as of December 31, 2023 and for the year then ended, and the information accompanying notes (hereinafter - the annual consolidated financial statements).
As of March 31, 2024, the Company had a working capital shortfall amounting to $115.0 million, primarily attributed to the debentures principal payment maturing in the year following the date of the statement of financial position. The Company intends to make the debentures principal payment from distribution from investees and there are no limitations on the Company's ability to withdraw funds from the investees. Refer to note 3 for additional details. Accordingly, the Company does not view the working capital shortfall as a liquidity problem.
NOTE 2: SIGNIFICANT EVENTS DURING THE REPORTING PERIOD
Series B Bonds
The Series B Bonds contains the following covenants: (i) Consolidated Equity Capital of the Company (not including minority rights) shall not be less than USD 475 million; (ii) the Net Adjusted Financial Debt to Net Adjusted Cap (shall not exceed a rate of 75%); (iii) Adjusted NOI shall be no lower than USD 35 million; and (iv) the consolidated scope of the projects for development of the Company shall not exceed 10% of the adjusted balance. As of March 31, 2024, the Company was in compliance with all covenants under the deed of trust of the Series B Bonds; (i) Consolidated Equity Capital of the Company as of March 31, 2024 was $694.6 million; (ii) the Net Adjusted Debt to Net Adjusted Cap was 62%; (iii) the Adjusted NOI was $64.8 million for the trailing twelve months ended March 31, 2024; and (iv) the consolidated scope of projects was $0 as of March 31, 2024.
In January 2024, the Company made the first principal installment payment of 388.1 million Israeli new Shekels (approximately $106.6 million as of January 31, 2024) in connection with the Company’s Series B Bonds. Subsequent to the first installment payment, two additional Series B Bond installments remain, each, due on January 31, 2025 and 2026, respectively.
Series C Bonds
The Series C Bonds contains the following covenants: (i) Consolidated Equity Capital of the Company (not including minority rights) shall not be less than USD 450 million; (ii) the Net Adjusted Financial Debt to Net Adjusted Cap (shall not exceed a rate of 75%); (iii) and the Loan to Collateral Ratio shall not exceed a rate of 75%. As of March 31, 2024, the Company was in compliance with all covenants under the deed of trust of the Series C Bonds; (i) Consolidated Equity Capital of the Company as of March 31, 2024 was $694.6 million; (ii) the Net Adjusted Debt to Net Adjusted Cap was 62%; (iii) and the Loan to Collateral Ratio as of March 31, 2024 was 48%.
NOTE 3: SUBSEQUENT EVENT
The Company evaluates subsequent events up until the date the consolidated financial statements are issued.
PACIFIC OAK SOR (BVI) HOLDINGS, LTD.
Additional Information
U.S. dollars in thousands
NOTE 3: SUBSEQUENT EVENT (Cont.)
Series D Bonds
In April 2024, Pacific Oak SOR (BVI) issued 288.1 million Israeli new shekels (approximately $76.2 million as of April 24, 2024) par value of Series D Bonds to Israeli investors pursuant to a public offering registered with the Israel Securities Authority. The Series D Bonds have principal installment payments equal to 33.33% of the face amount of the Series D Bonds on February 28th of each year from 2027 to 2029. The Series D Bonds have an equal level of security, pari passu, amongst themselves without any right of precedence or preference between any of them.
Dividend Approval
On May 16, 2024 the Company’s board of directors approved a distribution of dividend in the amount of $5.0 million to the owner.
7