8-K - PCOK - Equibles

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): August 9, 2021

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 A debentures and Series B debentures to investors in Israel in March 2016 and February 2020, respectively. Such offerings 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”). The English translation of the IFRS interim consolidated financial statements as of June 30, 2021 are attached as Exhibit 99.1 to this Form 8-K. The English translation of the IFRS separate financial data annexed to the consolidated financial statements as of June 30, 2021 are attached as Exhibit 99.2 to this Form 8-K. The English translation of the IFRS pro forma consolidated financial statements as of June 30, 2021 is attached as Exhibit 99.3 to this Form 8-K. The pro forma consolidated financial statements have been prepared to give effect to the October 5, 2020 merger between Pacific Oak Strategic Opportunity REIT II, Inc. with and into, Pacific Oak SOR II, LLC, an indirect subsidiary of the Company.

The information in this Item 7.01 of Form 8-K and the attached Exhibit 99.1, Exhibit 99.2 and Exhibit 99.3 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 June 30, 2021 (unaudited)
99.2	Pacific Oak SOR (BVI) Holdings, Ltd. Financial Statements as of June 30, 2021 (unaudited)
99.3	Pacific Oak SOR (BVI) Holdings, Ltd. Pro Forma Consolidated Financial Statements as of June 30, 2021 (unaudited)

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: August 9, 2021	BY:	/s/ Michael A. Bender
		Michael A. Bender
		Chief Financial Officer, Treasurer and Secretary

Document

Exhibit 99.1

PACIFIC OAK SOR (BVI) HOLDINGS, LTD.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2021

UNAUDITED

U.S. DOLLARS IN THOUSANDS

INDEX

	Page
Consolidated Statements of Financial Position	2
Consolidated Statements of Profit or Loss	3
Consolidated Statements of Comprehensive Income	4
Consolidated Statements of Equity	5
Consolidated Statements of Cash Flows	6-9
Notes to Interim Consolidated Financial Statements	10-19

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

	June 30,					December 31,
	2021		2020			2020
	Unaudited					Audited
	U.S. dollars in thousands
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	126,382	$	78,742		$	59,387
Financial assets at fair value through profit or loss	99,017		—			97,903
Rents and other receivables, net	6,203		2,584			6,701
Prepaid expenses and other assets	3,567		12,791			3,475
Restricted cash	2,556		1,956			1,731
	237,725		96,073			169,197
Investment property held for sale	150,500		—			—
	388,225		96,073			169,197
NON-CURRENT ASSETS
Investment properties	1,414,888		1,064,879			1,601,933
Property plant and equipment - hotels, net	134,770		—			136,262
Goodwill	16,342		—			16,342
Investment in joint ventures	216,995		225,052			215,955
Financial assets at fair value through profit or loss	—		90,654			—
Restricted cash	23,229		10,306			12,253
	1,806,224		1,390,891			1,982,745
Total assets	$	2,194,449	$	1,486,964		$	2,151,942
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Notes and bond payable, net	$	145,565	$	24,255	*)	$	111,447
Debentures, net	97,864		56,013			60,399
Accounts payable and accrued liabilities	25,057		15,003			23,054
Due to affiliates	1,477		2,430			3,045
Distribution payable to Owner	—		—			11,758
Other liabilities	30,086		14,631			19,144
Lease obligation	360		—			360
Series A Cumulative Convertible Redeemable Preferred Stock	15,233		—			—
	315,642		112,332			229,207
Note payable related to property held for sale, net	98,066		—			—
	413,708		112,332			229,207
LONG-TERM LIABILITIES
Notes and bond payable, net	609,464		455,231		*)	730,665
Debentures, net	171,197		181,203			196,557
Lease obligation	8,958		—			8,914
Rental security deposits	6,810		4,269			5,719
Series A Cumulative Convertible Redeemable Preferred Stock	—		15,233			15,233
	796,429		655,936			957,088
Total liabilities	1,210,137		768,268			1,186,295
EQUITY
Owner's net equity	949,057		703,122			929,770
Non-controlling interests	35,255		15,574			35,877
Total equity	984,312		718,696			965,647
Total liabilities and equity	$	2,194,449	$	1,486,964		$	2,151,942

*) Retrospective application, see Note 2b.

The accompanying notes are an integral part of the interim consolidated financial statements.

August 5, 2021	/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.

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

	Six months ended June 30,				Three months ended June 30,				Year ended <br>December 31,
	2021		2020		2021		2020		2020
	Unaudited								Audited
	U.S. dollars in thousands
Revenues and other income:
Rental income	$	60,521	$	40,122	$	30,346	$	20,114	$	93,107
Tenant reimbursements	6,705		5,029		3,435		2,497		10,171
Hotel revenues	12,424		—		9,849		—		3,718
Other operating income	1,173		946		620		399		1,927
Total revenues and other income	80,823		46,097		44,250		23,010		108,923
Expenses:
Operating, maintenance, and management fees	(22,471)		(15,118)		(11,289)		(7,351)		(36,091)
Real estate taxes and insurance	(10,688)		(6,779)		(5,399)		(3,351)		(15,702)
Hotel expenses	(9,231)		—		(5,841)		—		(3,836)
Total expenses	(42,390)		(21,897)		(22,529)		(10,702)		(55,629)
Gross profit	38,433		24,200		21,721		12,308		53,294
Fair value adjustment of investment properties, net	(6,822)		(24,206)		(15,456)		(1,491)		(24,214)
Depreciation	(1,525)		—		(787)		—		(832)
Equity in (loss) income of unconsolidated joint ventures	(3,002)		(5,317)		57		(6,619)		(29,593)
Asset management fees to affiliate	(7,380)		(4,441)		(3,528)		(2,335)		(9,982)
General and administrative expenses	(2,134)		(1,564)		(1,495)		(991)		(3,590)
Operating profit (loss)	17,570		(11,328)		512		872		(14,917)
Transaction and related costs	—		—		—		—		(6,018)
Finance income	94		248		49		6		318
Finance income from financial assets at fair value through profit or (loss)	19,058		(12,688)		5,552		12,235		(6,435)
Finance expenses	(21,072)		(13,379)		(10,909)		(6,218)		(30,126)
Gain on extinguishment of debt	13		—		13		—		415
Foreign currency transaction adjustments, net	2,839		12,783		(5,507)		(2,213)		(2,912)
Net income (loss)	$	18,502	$	(24,364)	$	(10,290)	$	4,682	$	(59,675)
Net income (loss) attributable to owner	$	19,287	$	(23,732)	$	(10,425)	$	4,919	$	(63,293)
Net (loss) income attributable to non-controlling interests	(785)		(632)		135		(237)		3,618
Net income (loss)	$	18,502	$	(24,364)	$	(10,290)	$	4,682	$	(59,675)

The accompanying notes are an integral part of the interim consolidated financial statements.

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Six months ended June 30,				Three months ended June 30,				Year ended December 31,
	2021		2020		2021		2020		2020
	Unaudited								Audited
	U.S. dollars in thousands
Net income (loss)	$	18,502	$	(24,364)	$	(10,290)	$	4,682	$	(59,675)
Total comprehensive income (loss)	$	18,502	$	(24,364)	$	(10,290)	$	4,682	$	(59,675)
Total comprehensive income (loss) attributable to owner	$	19,287	$	(23,732)	$	(10,425)	$	4,919	$	(63,293)
Total comprehensive (loss) income attributable to non-controlling interests	(785)		(632)		135		(237)		3,618
Total comprehensive income (loss)	$	18,502	$	(24,364)	$	(10,290)	$	4,682	$	(59,675)

The accompanying notes are an integral part of the interim consolidated financial statements.

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF EQUITY

	Owner contributions (distributions)		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 at January 1, 2021	$	693,554	$	194,585	$	41,631	$	929,770	$	35,877	$	965,647
Net income (loss)	—		19,287		—		19,287		(785)		18,502
Total comprehensive income (loss)	—		19,287		—		19,287		(785)		18,502
Non-controlling interest contributions	—		—		—		—		163		163
Balance at June 30, 2021	$	693,554	$	213,872	$	41,631	$	949,057	$	35,255	$	984,312
	Owner contributions (distributions)		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 at January 1, 2020	$	413,087	$	272,136	$	41,631	$	726,854	$	16,094	$	742,948
Net loss	—		(23,732)		—		(23,732)		(632)		(24,364)
Total comprehensive loss	—		(23,732)		—		(23,732)		(632)		(24,364)
Non-controlling interest contributions	—		—		—		—		112		112
Balance at June 30, 2020	$	413,087	$	248,404	$	41,631	$	703,122	$	15,574	$	718,696
	Owner contributions (distributions)		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 at April 1, 2021	$	693,554	$	224,297	$	41,631	$	959,482	$	34,977	$	994,459
Net (loss) income	—		(10,425)		—		(10,425)		135		(10,290)
Total comprehensive (loss) income	—		(10,425)		—		(10,425)		135		(10,290)
Non-controlling interest contributions	—		—		—		—		143		143
Balance at June 30, 2021	$	693,554	$	213,872	$	41,631	$	949,057	$	35,255	$	984,312
	Owner contributions (distributions)		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 at April 1, 2020	$	413,087	$	243,485	$	41,631	$	698,203	$	15,811	$	714,014
Net income (loss)	—		4,919		—		4,919		(237)		4,682
Total comprehensive income (loss)	—		4,919		—		4,919		(237)		4,682
Balance at June 30, 2020	$	413,087	$	248,404	$	41,631	$	703,122	$	15,574	$	718,696

The accompanying notes are an integral part of the interim consolidated financial statements.

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF EQUITY

	Owner contributions (distributions)		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 at January 1, 2020	$	413,087	$	272,136	$	41,631	$	726,854	$	16,094	$	742,948
Net (loss) income	—		(63,293)		—		(63,293)		3,618		(59,675)
Total comprehensive (loss) income	—		(63,293)		—		(63,293)		3,618		(59,675)
Contributions from Owner	280,467		—		—		280,467		12,325		292,792
Dividends declared to Owner	—		(14,258)		—		(14,258)		—		(14,258)
Non-controlling interests contributions	—		—		—		—		3,868		3,868
Distributions to non-controlling interests	—		—		—		—		(28)		(28)
Balance at December 31, 2020	$	693,554	$	194,585	$	41,631	$	929,770	$	35,877	$	965,647

The accompanying notes are an integral part of the interim consolidated financial statements.

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six months ended June 30,				Three months ended June 30,				Year ended December 31,
	2021		2020		2021		2020		2020
	Unaudited								Audited
	U.S. dollars in thousands
Cash Flows from Operating Activities:
Net income (loss)	$	18,502	$	(24,364)	$	(10,290)	$	4,682	$	(59,675)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Equity in loss (income) of unconsolidated joint ventures	3,002		5,317		(57)		6,619		29,593
Fair value adjustment on investment properties, net	6,822		24,206		15,456		1,491		24,214
Depreciation	1,525		—		787		—		832
Transaction and related costs	—		—		—		—		6,018
Gain on extinguishment of debt	(13)		—		(13)		—		(415)
Deferred rent	(1,378)		(1,550)		(167)		(579)		(3,918)
Bad debt expense	1,697		751		947		553		2,306
Financing expense	21,072		13,379		10,885		6,218		30,142
Financing income	(94)		(248)		(49)		(6)		(318)
Finance (income) loss from financial assets at fair value through profit or loss	(19,058)		12,688		(5,552)		(12,235)		6,435
Foreign currency transaction (gain) loss, net	(2,839)		(12,783)		5,507		2,213		2,912
	29,238		17,396		17,454		8,956		38,126
Changes in assets and liabilities:
Restricted cash	(1,274)		(1,284)		(2,066)		(1,145)		690
Rents and other receivables	(1,383)		(403)		(1,440)		(190)		(3,264)
Prepaid expenses and other assets	(65)		(9)		1,668		823		637
Accounts payable and accrued liabilities	(1,431)		(302)		2,325		1,923		(3,128)
Rental security deposits	1,091		(76)		1,028		(47)		(93)
Due to affiliates	(1,604)		2,430		(3,856)		464		201
Other liabilities	(522)		(47)		(577)		(874)		650
Lease incentive additions	900		(1,086)		1,384		(419)		(2,014)
	(4,288)		(777)		(1,534)		535		(6,321)
Net cash provided by operating activities	24,950		16,619		15,920		9,491		31,805
Cash Flows from Investing Activities:
Acquisitions of investment properties	(4,117)		(17,249)		(2,080)		(17,249)		(19,312)
Acquisition of BPT *)	—		—		—		—		403
POSOR II merger **)	—		—		—		—		3,717
Improvements to investment properties	(9,256)		(13,739)		(4,467)		(5,072)		(25,048)
Proceeds from sales of investment properties, net	49,662		—		49,496		—		332
Additions to property plant and equipment - hotels	(33)		—		(27)		—		(94)
Investment in unconsolidated joint venture	(4,026)		(433)		(2,846)		(202)		(12,620)
Investments in financial assets at fair value through profit or loss, net	—		(21,283)		—		(4,494)		(35,971)
Distribution from financial assets at fair value through profit or loss, net	—		1,225		—		—		1,370
Proceeds from the sale of investments in financial assets at fair value through profit or loss, net	14,439		10,964		—		3,115		10,964
Purchase of interest rate cap	(18)		(6)		—		—		(16)
Proceeds from disposition of foreign currency collars	—		—		—		—		14,125
Interest income received	95		243		49		34		316
Dividend income received from financial assets at fair value through profit or loss	3,688		2,479		745		1,006		6,214
Restricted cash (deposited) used for capital expenditures	(4,052)		—		15		—		—
Net cash provided by (used in) investing activities	46,382		(37,799)		40,885		(22,862)		(55,620)

The accompanying notes are an integral part of the interim consolidated financial statements.

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six months ended June 30,				Three months ended June 30,				Year ended December 31,
	2021		2020		2021		2020		2020
	Unaudited								Audited
	U.S. dollars in thousands
Cash Flows from Financing Activities:
Proceeds from debentures, notes and bonds payable	$	157,246	$	101,893	$	60,121	$	12,000	$	112,480
Principal payments on notes and bond payable	(131,672)		(57,149)		(70,372)		(329)		(70,649)
Payments of deferred financing costs	(2,133)		(2,452)		(1,079)		(150)		(2,570)
Interest paid	(17,968)		(11,754)		(6,520)		(3,431)		(24,528)
(Contribution) release of restricted cash for debt service obligations	(358)		1,011		—		—		1,011
Non-controlling interests contributions	163		112		143		—		844
Distributions to non-controlling interests	—		—		—		—		(28)
Dividends to Owner	(11,758)		—		(10,608)		—		(2,500)
Other financing proceeds, net	2,367		—		—		—		—
Net cash (used in) provided by financing activities	(4,113)		31,661		(28,315)		8,090		14,060
Effect of exchange rate changes on cash and cash equivalents	(224)		(117)		1,411		258		764
Net increase (decrease) in cash and cash equivalents	66,995		10,364		29,901		(5,023)		(8,991)
Cash and cash equivalents, beginning of period	59,387		68,378		98,481		83,765		68,378
Cash and cash equivalents, end of period	$	126,382	$	78,742	$	128,382	$	78,742	$	59,387	Supplemental Disclosure of Noncash Activities:
---	---	---	---	---	---	---	---	---	---	---
Accrual improvements to real estate	$	6,075	$	2,175	$	6,075	$	2,175	$	2,733
Distribution payable to Owner	$	—	$	—	$	—	$	—	$	11,758

*) Assets and liabilities assumed or eliminated in connection with Battery Point Trust acquisition:

Rents and other receivables	$	—	$	—	$	—	$	—	$	17
Prepaid expenses and other assets	—		—		—		—		4
Investment property	—		—		—		—		56,148
Financial assets at fair value through profit or loss	—		—		—		—		(16,000)
Notes payable	—		—		—		—		(36,003)
Accounts payable and accrued liabilities	—		—		—		—		(344)
Due to Owner	—		—		—		—		(721)
Other liabilities	—		—		—		—		(480)
Non-controlling interests	—		—		—		—		(3,024)
Cash assumed in connection with Battery Point Trust acquisition	$	—	$	—	$	—	$	—	$	(403)

The accompanying notes are an integral part of the interim consolidated financial statements.

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

**) Assets and liabilities assumed in connection with POSOR II merger:

Rents and other receivables	$	—	$	—	$	—	$	—	$	2,567
Prepaid expenses and other assets	—		—		—		—		3,341
Investment property	—		—		—		—		465,908
Property plant and equipment - hotels, net	—		—		—		—		137,000
Investment in joint ventures	—		—		—		—		3,150
Financial assets at fair value through profit or loss	—		—		—		—		6,271
Restricted cash	—		—		—		—		3,243
Goodwill	—		—		—		—		16,342
Notes payable	—		—		—		—		(328,203)
Accounts payable and accrued liabilities	—		—		—		—		(9,926)
Due to Owner	—		—		—		—		(2,123)
Lease obligation	—		—		—		—		(9,258)
Other liabilities	—		—		—		—		(3,788)
Rental security deposits	—		—		—		—		(1,467)
Owner's net equity	—		—		—		—		(280,467)
Non-controlling interests	—		—		—		—		(12,325)
Transaction and related costs	—		—		—		—		6,018
Cash assumed in connection with POSOR II merger	$	—	$	—	$	—	$	—	$	(3,717)

The accompanying notes are an integral part of the interim consolidated financial statements.

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands

NOTE 1: GENERAL INFORMATION

a. These financial statements have been prepared in a condensed format as of June 30, 2021 and for the six and three months period then ended ("interim condensed financial statements"). These interim condensed financial statements should be read in conjunction with the Company's annual financial statements as of December 31, 2020 and for the year then ended and the accompanying notes ("annual financial statements").

b. 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 started recognizing two reporting segments beginning November 2019 consisting of strategic opportunistic properties and single-family homes. Prior to November 2019, the Company had only one segment. The Company started recognizing three reporting segments beginning October 2020 consisting of strategic opportunistic properties, single-family homes and hotels.

c. The recent global outbreak of COVID-19 (more commonly known as the Coronavirus) has significantly disrupted economic markets and impacted commercial activity worldwide, including the US, and the prolonged economic impact is uncertain. Some economists and major investment banks have expressed concern that the continued spread of the virus globally will lead to a world-wide economic downturn. Customers and potential customers of the properties we own could be adversely affected by the disruption to business caused by the global outbreak of the Coronavirus. This could lead to similar negative impacts on our business. The Company's June 2021 rents were over 94% collected.

Because our property investments are located in the United States, COVID-19 has begun and will continue to impact our properties and operating results given its continued spread within the United States reduces occupancy, increases the cost of operation, results in limited hours or necessitates the closure of such properties. In addition, quarantines, states of emergencies and other measures taken to curb the spread of COVID-19 may negatively impact the ability of such properties to continue to obtain necessary goods and services or provide adequate staffing, which may also adversely affect our properties and operating results.

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

a. Basis of presentation of the consolidated financial statements:

The interim 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 consolidated financial statements are consistent with those followed in the preparation of the annual consolidated financial statements, except as described below:

b. IAS 1 Presentation of Financial Statements: Amendments to classification of liabilities as current or non-current

The Company has elected to early adopt IAS 1, "Presentation of Financial Statement: Amendments to classification of liabilities as current or non-current." The adoption of the IAS 1 amendment on January 1, 2020, applied retrospectively, resulted in the reclassification of $242.1 million as of June 30, 2020 for notes and bond payable, net from current liabilities to long term liabilities as a result of the Company's analysis. Due to the amendment, the accounting policy of the company is:

a.Only the existing rights of the company at the end of the reporting period, will be used to determine if the Company has the right to exclude the obligation.

b. The consideration and the discretion in the Company's ability to postpone the payment for period of 12 months from the report period.

c. Disposal of liability can be done through transfer of cash but, also in capital instruments of the entity, assets or services.

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands

NOTE 3: INVESTMENT IN JOINT VENTURES

110 William Joint Venture:

The Company does not attach the financial statements of Pacific Oak SOR SREF III 110 William, LLC, since its reports are insignificant to the Company's financial statements and do not add more information to the contained below.

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) (1):

	June 30,					December 31,
	2021		2020			2020
	Unaudited					Audited
	U.S. dollars in thousands
Current assets	$	16,125	$	14,316		$	16,914
Non-current assets (investment property)	501,293		531,840			503,559
Current liabilities	41,888		6,272		*)	4,024
Non-current liabilities	278,863		308,919		*)	316,827
Equity	196,667		230,965			199,622
Equity attributable to equity holders of the Company (Based on the waterfall mechanism)	$	103,387	$	117,098		$	103,835

*) As a result of the early adoption of the IAS 1 amendment, applied retrospectively, resulted in the reclassification of $308.4 million as of June 30, 2020 for the 110 William Street Mortgage Loans from current liabilities to long term liabilities.

	Six months ended June 30,				Three months ended June 30,				Year ended December 31,
	2021		2020		2021		2020		2020
	Unaudited								Audited
	U.S. dollars in thousands
Revenues	$	16,251	$	16,451	$	8,227	$	8,517	$	36,304
Gross profit	4,461		8,927		483		5,122		20,691
Operating profit (loss) *)	4,461		(11,213)		483		(14,878)		(34,274)
Net loss *)	(2,955)		(19,143)		(3,049)		(18,903)		(50,464)
Share of loss from joint venture (Based on the waterfall mechanism)	(448)		(7,822)		(922)		(8,098)		(21,085)
*) Includes revaluation of investment properties	$	—	$	(20,140)	$	—	$	(20,000)	$	(54,965)

(1) The company holds 60% of Pacific Oak SOR SREF III 110 William, LLC.

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands

NOTE 3: INVESTMENT IN JOINT VENTURES (Cont.)

353 Sacramento Joint Venture:

The Company does not attach the financial statements of Pacific Oak SOR Acquisition XXIX, LLC (353 Sacramento Street), since its reports are insignificant to the Company's financial statements and do not add more information to the contained below:

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):

	June 30,					December 31,
	2021		2020			2020
	Unaudited					Audited
	U.S. dollars in thousands
Current assets	$	10,952	$	6,823		$	7,484
Non-current assets (investment property)	243,497		273,455			250,600
Current liabilities	112,747		6,204		*)	113,228
Non-current liabilities	1,754		117,222		*)	1,754
Equity	139,948		156,852			143,102
Equity attributable to equity holders of the Company (Based on the waterfall mechanism)	$	80,899	$	86,674		$	82,119

*) As a result of the early adoption of the IAS 1 amendment, applied retrospectively, resulted in the reclassification of $115.4 million as of June 30, 2020 for the 353 Sacramento Street Mortgage Loan from current liabilities to long term liabilities.

	Six months ended June 30,				Three months ended June 30,				Year ended December 31,
	2021		2020		2021		2020		2020
	Unaudited								Audited
	U.S. dollars in thousands
Revenues	$	10,594	$	9,964	$	5,366	$	5,212	$	20,282
Gross profit	6,001		6,967		3,064		3,648		13,909
Operating (loss) profit *)	(2,312)		6,770		3,064		3,648		(10,539)
Net (loss) profit *)	(4,052)		4,426		2,193		2,626		(14,827)
Share of (loss) profit from joint venture (Based on the waterfall mechanism)	(2,120)		2,506		1,185		1,480		(7,551)
*) Includes revaluation of investment properties	$	(8,313)	$	(197)	$	—	$	—	$	(24,448)

(1) The company holds 55% of Pacific Oak SOR Acquisition XXIX, LLC.

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands

NOTE 4: FINANCIAL INSTRUMENTS

The fair value of non-current notes payables as of June 30, 2021 is not materially different from its fair value as presented in the annual consolidated financial statements as of December 31, 2020. The fair value of the debentures payable as of June 30, 2021 was approximately $275.2 million (897.2 million NIS).

As of June 30, 2021, the Company had a working capital shortfall, excluding held for sale, amounting to $77.9 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 and does not anticipate any challenges in refinancing such loans 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. Accordingly, the Company does not view the working capital shortfall as a liquidity problem.

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands

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 Company started recognizing two reporting segments beginning November 2019 consisting of strategic opportunistic properties and single-family homes. Prior to November 2019, the Company had only one segment. The Company started recognizing three reporting segments beginning October 2020 consisting of strategic opportunistic properties, single-family homes and hotels. The selected financial information for the reporting segments as of and for the six and three months ended June 30, 2021 and 2020 and as of and the year ended December 31, 2020 is as follows (in thousands):

	June 30, 2021
	Unaudited
	U.S. dollars in thousands
	Strategic Opportunistic Properties		Single-Family Homes		Hotel		Total
Investment properties (Including held for sale)	$	1,341,912	$	223,476	$	—	$	1,565,388
Property plant and equipment - hotels, net	$	—	$	—	$	134,770	$	134,770
Total assets	$	1,801,316	$	243,246	$	149,887	$	2,194,449
Total liabilities	$	980,811	$	140,100	$	89,226	$	1,210,137
	Six months ended June 30, 2021
	Unaudited
	U.S. dollars in thousands
	Strategic Opportunistic Properties		Single-Family Homes		Hotel		Total
Total revenues and other income	$	57,278	$	11,121	$	12,424	$	80,823
Gross profit	$	29,906	$	5,334	$	3,193	$	38,433
Finance expenses	$	14,644	$	3,448	$	2,980	$	21,072
	Three months ended June 30, 2021
	Unaudited
	U.S. dollars in thousands
	Strategic Opportunistic Properties		Single-Family Homes		Hotel		Total
Total revenues and other income	$	28,752	$	5,649	$	9,849	$	44,250
Gross profit	$	14,944	$	2,769	$	4,008	$	21,721
Finance expenses	$	7,527	$	1,882	$	1,500	$	10,909

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands

NOTE 5: SEGMENT INFORMATION (cont.)

	June 30, 2020
	Unaudited
	U.S. dollars in thousands
	Strategic Opportunistic Properties		Single-Family Homes		Hotel		Total
Investment properties	$	937,111	$	127,768	$	—	$	1,064,879
Property plant and equipment - hotels, net	$	—	$	—	$	—	$	—
Total assets	$	1,354,226	$	132,738	$	—	$	1,486,964
Total liabilities	$	677,953	$	90,315	$	—	$	768,268
	Six months ended June 30, 2020
	Unaudited
	U.S. dollars in thousands
	Strategic Opportunistic Properties		Single-Family Homes		Hotel		Total
Total revenues and other income	$	39,994	$	6,103	$	—	$	46,097
Gross profit	$	21,332	$	2,868	$	—	$	24,200
Finance expenses	$	11,226	$	2,153	$	—	$	13,379
	Three months ended June 30, 2020
	Unaudited
	U.S. dollars in thousands
	Strategic Opportunistic Properties		Single-Family Homes		Hotel		Total
Total revenues and other income	$	19,814	$	3,196	$	—	$	23,010
Gross profit	$	10,681	$	1,627	$	—	$	12,308
Finance expenses	$	5,171	$	1,047	$	—	$	6,218

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands

NOTE 5: SEGMENT INFORMATION (cont.)

	December 31, 2020
	Audited
	U.S. dollars in thousands
	Strategic Opportunistic Properties		Single-Family Homes		Hotel		Total
Investment properties	$	1,383,802	$	218,131	$	—	$	1,601,933
Property plant and equipment - hotels, net	$	—	$	—	$	136,262	$	136,262
Total assets	$	1,772,688	$	228,408	$	150,846	$	2,151,942
Total liabilities	$	962,118	$	130,957	$	93,220	$	1,186,295
	Year ended December 31, 2020
	Audited
	U.S. dollars in thousands
	Strategic Opportunistic Properties		Single-Family Homes		Hotel		Total
Total revenues and other income	$	88,188	$	17,017	$	3,718	$	108,923
Gross profit (loss)	$	45,195	$	8,217	$	(118)	$	53,294
Finance expenses	$	23,450	$	5,171	$	1,505	$	30,126

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands

NOTE 6: SIGNIFICANT EVENTS DURING THE REPORTING PERIOD

Series A Debentures

On March 1, 2021, the Company paid the third principal installment payment of 194.0 million Israeli new Shekels (approximately $58.9 million as of March 1, 2021).

On March 4, 2021 the Company issued debentures (series A) in the amount of 250.0 million NIS par value through a private placement. The debentures were issued at a 1.9% discount resulting in total consideration of 245.3 million NIS ($74.2 million as of March 4, 2021). The additional debentures shall have an equal level of security, pari passu, amongst themselves and between them and the debentures (Series A), which were initially issued, without any right of precedence or preference between any of them.

Series B Debentures

On February 16, 2020, the Company issued 254.1 million Israeli new Shekels (approximately $74.1 million as of February 16, 2020) of Series B debentures to Israeli investors pursuant to a public offering registered with the Israel Securities Authority. The Series B Debentures bears interest at the rate of 3.93% per year. The first interest payment was on July 31, 2020 and subsequent payments are on January 31st and July 31st of each year from 2021 to 2026. The aggregate offering costs were approximately $2.2 million and the effective interest rate is approximately 4.5%. The Series B Debentures have principal installment payments equal to 33.33% of the face amount of the Series B Debentures on January 31st of each year from 2024 to 2026.

The Series B Debentures 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 June 30, 2021, the Company was in compliance with all covenants under the deed of trust of the Series B Debentures; (i) Consolidated Equity Capital of the Company as of June 30, 2021 was $949.1 million; (ii) the Net Adjusted Debt to Net Adjusted Cap was 54%; (iii) the Adjusted NOI was $90.3 million for the trailing twelve months ended June 30, 2021; and (iv) the consolidated scope of projects was $0 as of June 30, 2021.

Park Highlands Sale

On June 3, 2021, the Company sold approximately 193 developable acres of Park Highlands undeveloped land for an aggregate sales price, net of closing credits, costs and deferred profit, of $46.6 million. The purchasers are not affiliated with the Company or the Advisor.

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands

NOTE 7: SUBSEQUENT EVENTS

The Company evaluates subsequent events up until the date the consolidated financial statements are issued.

City Tower Disposition

On July 27, 2021, the Company, through an indirect wholly owned subsidiary, sold City Tower, which was classified as held for sale as of June 30, 2021, to a purchaser unaffiliated with the Company or the Advisor, for $150.5 million, before closing costs and credits. The Company repaid $98.1 million of the outstanding principal balance due under the mortgage loan secured by the property.

Dividend Approval

On August 5, 2021, the Company’s board of directors approved a distribution of dividend in the amount of $30.0 million to the Owner.

Document

Exhibit 99.2

PACIFIC OAK SOR (BVI) HOLDINGS, LTD.

PRESENTATION OF SEPARATE FINANCIAL DATA FROM THE

CONSOLIDATED FINANCIAL STATEMENTS ATTRIBUTABLE TO THE COMPANY

June 30, 2021 (Unaudited)

PACIFIC OAK SOR (BVI) HOLDNGS, LTD.

PRESENTATION OF SEPARATE FINANCIAL DATA

FROM THE CONSOLIDATED FINANCIAL STATEMENTS

ATTRIBUTABLE TO THE COMPANY

AS OF JUNE 30, 2021

(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 Comprehensive Income Attributable to the Company	5
Financial Information from the Consolidated Statements of Cash Flows Attributable to the Company	6
Additional Information	7 - 8

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 June 30, 2021, 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) HOLDNGS, LTD.

Financial Information from the Consolidated Statements of Financial Position Attributable to the Company

	June 30,				December 31,
	2021		2020		2020
	Unaudited				Audited
	U.S. dollars in thousands
ASSETS
Non-current assets
Investments in investees	$	1,175,151	$	917,967	$	1,187,342
Restricted cash	6,521		5,788		6,246
	1,181,672		923,755		1,193,588
Current assets
Cash and cash equivalents	42,518		10,939		11,956
Derivative asset	—		11,977		—
	42,518		22,916		11,956
Total assets	$	1,224,190	$	946,671	$	1,205,544
EQUITY	$	949,057	$	703,122	$	929,770
NON-CURRENT LIABILITIES
Debentures, net	171,197		181,203		196,557
Current liabilities
Accounts payable and accrued liabilities	4,256		3,903		4,015
Debentures, net	97,864		56,013		60,399
Derivative liability	339		—		—
Due to Owner	1,477		2,430		3,045
Distribution payable to Owner	—		—		11,758
	103,936		62,346		79,217
Total liabilities	275,133		243,549		275,774
Total equity and liabilities	$	1,224,190	$	946,671	$	1,205,544

The accompanying notes are an integral part of the condensed interim financial data.

August 5, 2021	/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) HOLDNGS, LTD.

Financial Information from the Consolidated Statements of Profit or Loss Attributable to the Company

	Six months ended June 30,				Three months ended June 30,				Year ended December 31,
	2021		2020		2021		2020		2020
	Unaudited								Audited
	U.S. dollars in thousands
Share of profit (loss) from investees, net	$	32,577	$	(24,698)	$	3,588	$	13,328	$	(35,051)
Asset management fees to affiliate	(7,380)		(4,441)		(3,528)		(2,335)		(9,982)
General and administrative expenses	(2,134)		(1,564)		(1,495)		(991)		(3,590)
Operating income (loss)	23,063		(30,703)		(1,435)		10,002		(48,623)
Finance expense	(6,620)		(5,824)		(3,486)		(2,873)		(11,785)
Finance income	5		12		3		3		15
Foreign currency transaction adjustments, net	2,839		12,783		(5,507)		(2,213)		(2,900)
Net income (loss)	$	19,287	$	(23,732)	$	(10,425)	$	4,919	$	(63,293)

The accompanying notes are an integral part of the condensed interim financial data.

PACIFIC OAK SOR (BVI) HOLDNGS, LTD.

Financial Information from the Consolidated Statements of Comprehensive Income Attributable to the Company

	Six months ended June 30,				Three months ended June 30,				Year ended December 31,
	2021		2020		2021		2020		2020
	Unaudited								Audited
	U.S. dollars in thousands
Net income (loss)	$	19,287	$	(23,732)	$	(10,425)	$	4,919	$	(63,293)
Total comprehensive income (loss)	$	19,287	$	(23,732)	$	(10,425)	$	4,919	$	(63,293)

The accompanying notes are an integral part of the condensed interim financial data.

PACIFIC OAK SOR (BVI) HOLDNGS, LTD.

Financial Information from the Consolidated Statements of Cash Flows Attributable to the Company

	Six months ended June 30,				Three months ended June 30,				Year ended <br>December 31,
	2021		2020		2021		2020		2020
	Unaudited								Audited
	U.S. dollars in thousands
Cash flows from operating activities
Net income (loss) for the period	$	19,287	$	(23,732)	$	(10,425)	$	4,919	$	(63,293)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Share of (profit) loss from investees	(32,577)		24,698		(3,588)		(13,328)		35,051
Finance expense	6,620		5,824		3,486		2,873		11,785
Distribution from investees, net	28,497		23,060		14,134		12,180		47,048
Foreign currency transaction adjustments, net	(2,839)		(12,783)		5,507		2,213		2,900
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities	79		74		43		(46)		(196)
Restricted cash for operational expenditures	(361)		(506)		(3)		2		(511)
Due to Owner	(1,568)		2,430		(3,870)		365		3,045
Net cash provided by operating activities	17,138		19,065		5,284		9,178		35,829
Cash flows from investing activities
Distributions from (investments in) investees	16,271		(19,613)		(25,236)		(9,344)		(42,862)
Proceeds from termination of derivative financial instrument	—		—		—		—		14,125
Net cash provided by (used in) investing activities	16,271		(19,613)		(25,236)		(9,344)		(28,737)
Cash flows from financing activities
Proceeds from debentures	74,232		74,118		—		—		74,118
Payments of deferred financing costs	(923)		(2,168)		—		—		(2,168)
Principal payments on debentures	(58,889)		(56,611)		—		—		(56,611)
Interest paid	(5,285)		(4,814)		—		—		(9,818)
Release of restricted cash for debt service obligations	—		1,011		—		—		1,011
Distribution to Owner	(11,758)		—		(10,608)		—		(2,500)
Net cash (used in) provided by financing activities	(2,623)		11,536		(10,608)		—		4,032
Effect of exchange rate changes on cash and cash equivalents	(224)		(117)		1,411		258		764
Increase (decrease) in cash	30,562		10,871		(29,149)		92		11,888
Cash, beginning of the period	11,956		68		71,667		10,847		68
Cash, end of the period	$	42,518	$	10,939	$	42,518	$	10,939	$	11,956

The accompanying notes are an integral part of the condensed interim financial data.

PACIFIC OAK SOR (BVI) HOLDNGS, LTD.

Additional Information

U.S. dollars in thousands

NOTE 1: BASIS OF PREPARATION

Separate financial information is prepared in a condensed format as of June 30, 2021 and for the six and 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, 2020 and for the year then ended, and the information accompanying notes (hereinafter - the annual consolidated financial statements).

As of June 30, 2021, the Company had a working capital shortfall amounting to $61.4 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. Accordingly, the Company does not view the working capital shortfall as a liquidity problem.

The recent global outbreak of COVID-19 (more commonly known as the Coronavirus) has significantly disrupted economic markets and impacted commercial activity worldwide, including the US, and the prolonged economic impact is uncertain. Some economists and major investment banks have expressed concern that the continued spread of the virus globally will lead to a world-wide economic downturn. Customers and potential customers of the properties we own could be adversely affected by the disruption to business caused by the global outbreak of the Coronavirus. This could lead to similar negative impacts on our business. The Company's June 2021 rents were over 94% collected.

PACIFIC OAK SOR (BVI) HOLDNGS, LTD.

Additional Information

U.S. dollars in thousands

NOTE 2: SIGNIFICANT EVENTS DURING THE REPORTING PERIOD

Series A Debentures

On March 1, 2021, the Company paid the third principal installment payment of 194.0 million Israeli new Shekels (approximately $58.9 million as of March 1, 2021).

Series B Debentures

Dividend Approval

On August 5, 2021, the Company’s board of directors approved a distribution of dividend in the amount of $30.0 million to the Owner.

Document

Exhibit 99.3

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

PRO FORMA INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2021

AUDITED

U.S. DOLLARS IN THOUSANDS

INDEX

	Page
Pro Forma Consolidated Statements of Profit or Loss	2-6
Pro Forma Consolidated Statements of Comprehensive Income	7-8
Notes to Pro Forma Interim Consolidated Financial Statements	9-13

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

PRO FORMA CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

	Six months ended June 30, 2021
	As previously reported		Merger Adjustments		Pro Forma Total
	Unaudited
	U.S. dollars in thousands
Revenues and other income:
Rental income	$	60,521	$	—	$	60,521
Tenant reimbursements	6,705		—		6,705
Hotel revenues	12,424		—		12,424
Other operating income	1,173		—		1,173
Total revenues and other income	80,823		—		80,823
Expenses:
Operating, maintenance, and management fees	(22,471)		—		(22,471)
Real estate taxes and insurance	(10,688)		—		(10,688)
Hotel expenses	(9,231)		—		(9,231)
Total expenses	(42,390)		—		(42,390)
Gross profit	38,433		—		38,433
Fair value adjustment of investment properties, net	(6,822)		—		(6,822)
Depreciation	(1,525)		—		(1,525)
Equity in loss of unconsolidated joint ventures	(3,002)		—		(3,002)
Asset management fees to affiliate	(7,380)		—		(7,380)
General and administrative expenses	(2,134)		—		(2,134)
Operating profit	17,570		—		17,570
Finance income	94		—		94
Finance income from financial assets at fair value through profit or loss	19,058		—		19,058
Finance expenses	(21,072)		—		(21,072)
Gain on extinguishment of debt	13		—		13
Foreign currency transaction adjustments, net	2,839		—		2,839
Net income	$	18,502	$	—	$	18,502
Net income attributable to owner	$	19,287	$	—	$	19,287
Net loss attributable to non-controlling interests	(785)		—		(785)
Net income	$	18,502	$	—	$	18,502

The accompanying notes are an integral part of the pro forma consolidated financial statements.

August 5, 2021	/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
pro forma financial statements	Chief Financial Officer	Chairman of Board of Directors	Chief Executive Officer

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

PRO FORMA CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

	Six months ended June 30, 2020
	As previously reported		POSOR II		Merger Adjustments		Pro Forma Total
	Unaudited
	U.S. dollars in thousands
Revenues and other income:
Rental income	$	40,122	$	15,114	$	—	$	55,236
Tenant reimbursements	5,029		1,636		—		6,665
Hotel revenues	—		6,687		—		6,687
Other operating income	946		333		—		1,279
Total revenues and other income	46,097		23,770		—		69,867
Expenses:
Operating, maintenance, and management fees	(15,118)		(5,341)		—		(20,459)
Real estate taxes and insurance	(6,779)		(2,902)		—		(9,681)
Hotel expenses	—		(7,386)		—		(7,386)
Total expenses	(21,897)		(15,629)		—		(37,526)
Gross profit	24,200		8,141		—		32,341
Fair value adjustment of investment properties, net	(24,206)		(4,364)		—		(28,570)
Depreciation	—		(1,272)		(390)		(1,662)
Equity in loss of unconsolidated joint ventures	(5,317)		—		—		(5,317)
Asset management fees to affiliate	(4,441)		(2,096)		(188)		(6,725)
General and administrative expenses	(1,564)		(3,101)		—		(4,665)
Operating loss	(11,328)		(2,692)		(578)		(14,598)
Finance income	248		60		—		308
Finance loss from financial assets at fair value through profit or loss	(12,688)		(4,327)		—		(17,015)
Finance expenses	(13,379)		(7,867)		—		(21,246)
Foreign currency transaction adjustments, net	12,783		27		—		12,810
Net loss	$	(24,364)	$	(14,799)	$	(578)	$	(39,741)
Net loss attributable to owner	$	(23,732)	$	(13,549)	$	(539)	$	(37,820)
Net loss attributable to non-controlling interests	(632)		(1,250)		(39)		(1,921)
Net loss	$	(24,364)	$	(14,799)	$	(578)	$	(39,741)

The accompanying notes are an integral part of the pro forma consolidated financial statements.

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

PRO FORMA CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

	Three months ended June 30, 2021
	As previously reported		Merger Adjustments		Pro Forma Total
	Unaudited
	U.S. dollars in thousands
Revenues and other income:
Rental income	$	30,346	$	—	$	30,346
Tenant reimbursements	3,435		—		3,435
Hotel revenues	9,849		—		9,849
Other operating income	620		—		620
Total revenues and other income	44,250		—		44,250
Expenses:
Operating, maintenance, and management fees	(11,289)		—		(11,289)
Real estate taxes and insurance	(5,399)		—		(5,399)
Hotel expenses	(5,841)		—		(5,841)
Total expenses	(22,529)		—		(22,529)
Gross profit	21,721		—		21,721
Fair value adjustment of investment properties, net	(15,456)		—		(15,456)
Depreciation	(787)		—		(787)
Equity in income of unconsolidated joint ventures	57		—		57
Asset management fees to affiliate	(3,528)		—		(3,528)
General and administrative expenses	(1,495)		—		(1,495)
Operating profit	512		—		512
Finance income	49		—		49
Finance income from financial assets at fair value through profit or loss	5,552		—		5,552
Finance expenses	(10,909)		—		(10,909)
Gain on extinguishment of debt	13		—		13
Foreign currency transaction adjustments, net	(5,507)		—		(5,507)
Net loss	$	(10,290)	$	—	$	(10,290)
Net loss attributable to owner	$	(10,425)	$	—	$	(10,425)
Net income attributable to non-controlling interests	135		—		135
Net loss	$	(10,290)	$	—	$	(10,290)

The accompanying notes are an integral part of the pro forma consolidated financial statements.

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

PRO FORMA CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

	Three months ended June 30, 2020
	As previously reported		POSOR II		Merger Adjustments		Pro Forma Total
	Unaudited
	U.S. dollars in thousands
Revenues and other income:
Rental income	$	20,114	$	7,544	$	—	$	27,658
Tenant reimbursements	2,497		757		—		3,254
Hotel revenues	—		2,607		—		2,607
Other operating income	399		152		—		551
Total revenues and other income	23,010		11,060		—		34,070
Expenses:
Operating, maintenance, and management fees	(7,351)		(2,578)		—		(9,929)
Real estate taxes and insurance	(3,351)		(1,436)		—		(4,787)
Hotel expenses	—		(2,725)		—		(2,725)
Total expenses	(10,702)		(6,739)		—		(17,441)
Gross profit	12,308		4,321		—		16,629
Fair value adjustment of investment properties, net	(1,491)		—		—		(1,491)
Depreciation	—		(636)		(195)		(831)
Equity in loss of unconsolidated joint ventures	(6,619)		—		—		(6,619)
Asset management fees to affiliate	(2,335)		(1,052)		(90)		(3,477)
General and administrative expenses	(991)		(1,428)		—		(2,419)
Operating profit (loss)	872		1,205		(285)		1,792
Finance income	6		25		—		31
Finance income (loss) from financial assets at fair value through profit or loss	12,235		(577)		—		11,658
Finance expenses	(6,218)		(3,741)		—		(9,959)
Foreign currency transaction adjustments, net	(2,213)		—		—		(2,213)
Net income (loss)	$	4,682	$	(3,088)	$	(285)	$	1,309
Net income (loss) attributable to owner	$	4,919	$	(2,876)	$	(265)	$	1,778
Net loss attributable to non-controlling interests	(237)		(212)		(20)		(469)
Net income (loss)	$	4,682	$	(3,088)	$	(285)	$	1,309

The accompanying notes are an integral part of the pro forma consolidated financial statements.

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

PRO FORMA CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

	Year ended December 31, 2020
	As previously reported		POSOR II		Merger Adjustments		Pro Forma Total
	Unaudited
	U.S. dollars in thousands
Revenues and other income:
Rental income	$	93,107	$	22,509	$	—	$	115,616
Tenant reimbursements	10,171		2,375		—		12,546
Hotel revenues	3,718		12,920		—		16,638
Other operating income	1,927		456		—		2,383
Total revenues and other income	108,923		38,260		—		147,183
Expenses:
Operating, maintenance, and management fees	(36,091)		(8,599)		—		(44,690)
Real estate taxes and insurance	(15,702)		(4,357)		—		(20,059)
Hotel expenses	(3,836)		(11,853)		—		(15,689)
Total expenses	(55,629)		(24,809)		—		(80,438)
Gross profit	53,294		13,451		—		66,745
Fair value adjustment of investment properties, net	(24,214)		(28,551)		—		(52,765)
Depreciation	(832)		(1,906)		(586)		(3,324)
Impairment on property plant and equipment - hotels	—		(503)		503		—
Equity in loss of unconsolidated joint ventures	(29,593)		(34)		—		(29,627)
Asset management fees to affiliate	(9,982)		(3,148)		(278)		(13,408)
General and administrative expenses	(3,590)		(4,184)		—		(7,774)
Operating loss	(14,917)		(24,875)		(361)		(40,153)
Transaction and related costs	(6,018)		—		6,018		—
Finance income	318		58		—		376
Finance loss from financial assets at fair value through profit or loss	(6,435)		(6,448)		—		(12,883)
Finance expenses	(30,126)		(11,511)		—		(41,637)
Gain on extinguishment of debt	415		—		—		415
Foreign currency transaction adjustments, net	(2,912)		27		—		(2,885)
Net (loss) income	$	(59,675)	$	(42,749)	$	5,657	$	(96,767)
Net (loss) income attributable to owner	$	(63,293)	$	(40,011)	$	5,665	$	(97,639)
Net income (loss) attributable to non-controlling interests	3,618		(2,738)		(8)		872
Net (loss) income	$	(59,675)	$	(42,749)	$	5,657	$	(96,767)

The accompanying notes are an integral part of the pro forma consolidated financial statements.

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

PRO FORMA CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Six months ended June 30, 2021
	As previously reported		Merger Adjustments		Pro Forma Total
	Unaudited
	U.S. dollars in thousands
Net income	$	18,502	$	—	$	18,502
Total comprehensive income	$	18,502	$	—	$	18,502
Total comprehensive income attributable to owner	$	19,287	$	—	$	19,287
Total comprehensive loss attributable to non-controlling interests	(785)		—		(785)
Total comprehensive income	$	18,502	$	—	$	18,502
	Six months ended June 30, 2020
---	---	---	---	---	---	---	---	---
	As previously reported		POSOR II		Merger Adjustments		Pro Forma Total
	Unaudited
	U.S. dollars in thousands
Net loss	$	(24,364)	$	(14,799)	$	(578)	$	(39,741)
Total comprehensive loss	$	(24,364)	$	(14,799)	$	(578)	$	(39,741)
Total comprehensive loss attributable to owner	$	(23,732)	$	(13,549)	$	(539)	$	(37,820)
Total comprehensive loss attributable to non-controlling interests	(632)		(1,250)		(39)		(1,921)
Total comprehensive loss	$	(24,364)	$	(14,799)	$	(578)	$	(39,741)
	Three months ended June 30, 2021
---	---	---	---	---	---	---
	As previously reported		Merger Adjustments		Pro Forma Total
	Unaudited
	U.S. dollars in thousands
Net loss	$	(10,290)	$	—	$	(10,290)
Total comprehensive loss	$	(10,290)	$	—	$	(10,290)
Total comprehensive loss attributable to owner	$	(10,425)	$	—	$	(10,425)
Total comprehensive income attributable to non-controlling interests	135		—		135
Total comprehensive loss	$	(10,290)	$	—	$	(10,290)
	Three months ended June 30, 2020
---	---	---	---	---	---	---	---	---
	As previously reported		POSOR II		Merger Adjustments		Pro Forma Total
	Unaudited
	U.S. dollars in thousands
Net income (loss)	$	4,682	$	(3,088)	$	(285)	$	1,309
Total comprehensive income (loss)	$	4,682	$	(3,088)	$	(285)	$	1,309
Total comprehensive income (loss) attributable to owner	$	4,919	$	(2,876)	$	(265)	$	1,778
Total comprehensive loss attributable to non-controlling interests	(237)		(212)		(20)		(469)
Total comprehensive income (loss)	$	4,682	$	(3,088)	$	(285)	$	1,309

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

PRO FORMA CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Year ended December 31, 2020
	As previously reported		POSOR II		Merger Adjustments		Pro Forma Total
	Audited
	U.S. dollars in thousands
Net (loss) income	$	(59,675)	$	(42,749)	$	5,657	$	(96,767)
Total comprehensive (loss) income	$	(59,675)	$	(42,749)	$	5,657	$	(96,767)
Total comprehensive (loss) income attributable to owner	$	(63,293)	$	(40,011)	$	5,665	$	(97,639)
Total comprehensive income (loss) attributable to non-controlling interests	3,618		(2,738)		(8)		872
Total comprehensive (loss) income	$	(59,675)	$	(42,749)	$	5,657	$	(96,767)

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

NOTES TO PRO FORMA INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands

NOTE 1: GENERAL

A.Presented above are the pro forma interim consolidated financial statements for the six and three months ended June 30, 2021 and June 30, 2020 and for the year ended December 31, 2020 (together the "Pro Forma Periods"), in accordance with Regulation 38B of the Israeli Securities Regulations (Periodic and Immediate Reports), 1970 (the "Pro Forma Statements").

The Pro Forma Consolidated Statements of Operations and Pro Forma Consolidated Statements of Comprehensive Income have been prepared to give effect to the acquisition of the POSOR II on October 5, 2020, as if such acquisition occurred on January 1, 2018. The Pro Forma Statements have been prepared under certain assumptions, which are set forth in Note 2 to the Pro Forma Statements. It is clarified that the Pro Forma Statements do not reflect the actual results of the Company; rather, they have been prepared in order to provide additional information, based on different assumptions.

On February 19, 2020, the Parent Company, Pacific Oak SOR II, LLC, an indirect subsidiary of the Company and the Parent Company (“Merger Sub”), and Pacific Oak Strategic Opportunity REIT II, Inc. (“POSOR II”) entered into an Agreement and Plan of Merger (the “Merger Agreement”). Subject to the terms and conditions of the Merger Agreement, POSOR II will merge with and into Merger Sub (the “Merger”), with Merger Sub surviving the Merger (the “Surviving Entity”), such that following the Merger, the Surviving Entity will continue as an indirect subsidiary of the Parent Company. As a result of the Merger, POSOR II would cease to exist. At the effective time of the Merger and subject to the terms and conditions of the Merger Agreement, each issued and outstanding share of POSOR II’s common stock (or a fraction thereof), $0.01 par value per share, will be converted into the right to receive 0.9643 shares of the Parent Company’s common stock, par value $0.01 per share. The combined company after the Merger will retain the name “Pacific Oak Strategic Opportunity REIT, Inc.” On October 5, 2020, pursuant to the Merger Agreement, POSOR II merged with and into Merger Sub, with Merger Sub surviving as an indirect subsidiary of the Company.

The Company acquired two hotel properties, three office properties, one apartment building, one consolidated joint venture to develop one office/retail property, two investments in real estate equity securities and two investments in joint ventures, working capital and loans. The Company is in process of assessing the fair value of the acquired tangible assets, liabilities assumed and any applicable intangible assets and liabilities for this business combination.

Consideration of $280.5 million is based on POSOR’s most recent estimated value per share of $9.68 approved by POSOR’s board of directors on December 4, 2020, based on the estimated value of POSOR’s assets less the estimated value of POSOR’s liabilities, or net asset value, divided by the number of shares outstanding, all as of September 30, 2020, with the exception of the following adjustments: (i) an adjustment for the Merger and related expenses incurred and (ii) the issuance of 28,973,906 shares of POSOR’s common stock in connection with the Merger.

The following table summarizes the components of the estimated consideration (in thousands except per share information):

POSOR II shares outstanding	30,046,568
Exchange ratio	0.9643
Total POSOR shares issued	28,973,906
POSOR price per share	$	9.68
Estimated consideration paid	$	280,467

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

NOTES TO PRO FORMA INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands

NOTE 1: GENERAL (Cont.)

The fair values of the assets acquired and liabilities assumed at the closing date were as follows (in thousands):

Assets:
Cash	$	9,735
Rents and other receivables	2,567
Prepaid expenses and other assets	3,341
Investment property	465,908
Property plant and equipment - hotels, net	137,000
Investment in joint ventures	3,150
Financial assets at fair value through profit or loss	6,271
Restricted cash	3,243
Total assets	631,215
Liabilities:
Notes payable	(328,203)
Accounts payable and accrued liabilities	(9,926)
Due to Owner	(2,123)
Other liabilities	(3,788)
Lease obligation	(9,258)
Rental security deposits	(1,467)
Total liabilities	(354,765)
Non-controlling interests	(12,325)
Fair value of identifiable intangible asset acquired:
Goodwill	16,342
Total consideration	$	280,467

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies applied in the Pro Forma Statements are consistent with those applied in preparing the Company's annual financial statements as of December 31, 2020.

NOTE 3: PRO FORMA ASSUMPTIONS

A.General

The Pro Forma Consolidated Statements of Operations and Pro Forma Consolidated Statements of Comprehensive Income have been prepared to give effect to the acquisition of POSOR II, as if such acquisition occurred on January 1, 2018. The Pro Forma Statements have been prepared under certain assumptions, which are set forth below. It is clarified that the Pro Forma Statements do not reflect the actual results of the Company; rather, they have been prepared in order to provide additional information, based on different assumptions.

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

NOTES TO PRO FORMA INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands

NOTE 3: PRO FORMA ASSUMPTIONS (Cont.)

B.Principal assumptions used in preparing the Pro Forma Statements

The Pro Forma Statements have been prepared under the following assumptions:

1.The POSOR II merger occurred on January 1, 2018 for the Pro Forma Consolidated Statements of Operations and Pro Forma Consolidated Statements of Comprehensive Income.

2.An adjustment to depreciation is related to resetting the deprecation amounts based on the revised hotel cost basis.

Depreciation expenses in the pro forma consolidated financial statements were recognized according to temporary purchase price allocation. Hereunder details of the purchase price allocation:

Land	$	33,152
Building	101,187
Furniture and equipment	2,661
Total estimated purchase price	$	137,000

3.An adjustment to asset management fees to affiliate based on the Company's back-to-back agreement of one-twelfth of 0.75% of the sum of the amount paid.

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

NOTES TO PRO FORMA INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands

NOTE 4: 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 Company started recognizing two reporting segments beginning November 2019 consisting of strategic opportunistic properties and single-family homes. As a result of the Merger, the Company recognized a third segment, hotel. Prior to November 2019, the Company had only one segment. The selected pro forma financial information for the three reporting segments for the six and three months ended June 30, 2021 and June 30, 2020 and the year ended December 31, 2020 (in thousands):

	Six months ended June 30, 2021
	Unaudited
	U.S. dollars in thousands
	Strategic Opportunistic Properties		Single-Family Homes		Hotel		Total
Total revenues and other income	$	57,278	$	11,121	$	12,424	$	80,823
Gross profit	$	29,906	$	5,334	$	3,193	$	38,433
Finance expenses	$	14,644	$	3,448	$	2,980	$	21,072
	Six months ended June 30, 2020
---	---	---	---	---	---	---	---	---
	Unaudited
	U.S. dollars in thousands
	Strategic Opportunistic Properties		Single-Family Homes		Hotel		Total
Total revenues and other income	$	57,077	$	6,103	$	6,687	$	69,867
Gross profit (loss)	$	30,172	$	2,868	$	(699)	$	32,341
Finance expenses	$	16,543	$	2,153	$	2,550	$	21,246
	Three months ended June 30, 2021
---	---	---	---	---	---	---	---	---
	Unaudited
	U.S. dollars in thousands
	Strategic Opportunistic Properties		Single-Family Homes		Hotel		Total
Total revenues and other income	$	28,752	$	5,649	$	9,849	$	44,250
Gross profit	$	14,944	$	2,769	$	4,008	$	21,721
Finance expenses	$	7,527	$	1,882	$	1,500	$	10,909

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

NOTES TO PRO FORMA INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands

NOTE 4: SEGMENT INFORMATION (Cont.)

	Three months ended June 30, 2020
	Unaudited
	U.S. dollars in thousands
	Strategic Opportunistic Properties		Single-Family Homes		Hotel		Total
Total revenues and other income	$	28,267	$	3,196	$	2,607	$	34,070
Gross profit (loss)	$	15,120	$	1,627	$	(118)	$	16,629
Finance expenses	$	7,634	$	1,047	$	1,278	$	9,959	Year ended December 31, 2020
---	---	---	---	---	---	---	---	---
	Audited
	U.S. dollars in thousands
	Strategic Opportunistic Properties		Single-Family Homes		Hotel		Total
Total revenues and other income	$	113,528	$	17,017	$	16,638	$	147,183
Gross profit	$	57,759	$	8,217	$	769	$	66,745
Finance expenses	$	31,123	$	5,171	$	5,343	$	41,637

PACIFIC OAK SOR (BVI) HOLDINGS LTD.

BOARD OF DIRECTORS' EXPLANATIONS FOR PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

A.GENERAL

Presented are pro forma interim consolidated financial statements for the six and three months ended June 30, 2021 and June 30, 2020 and the year ended December 31, 2020 (together the "Pro Forma Periods"), in accordance with Regulation 38B of the Israeli Securities Regulations (Periodic and Immediate Reports), 1970 (the "Pro Forma Statements").

The following table summarizes the components of the estimated consideration (in thousands except per share information):

POSOR II shares outstanding	30,046,568
Exchange ratio	0.9643
Total POSOR shares issued	28,973,906
POSOR price per share	$	9.68
Estimated consideration paid	$	280,467
August 5, 2021	/s/ Peter McMillan III	/s/ Keith David Hall
---	---	---
Date of approval of	McMillan III, Peter	Hall, Keith David
pro forma financial statements	Chairman of Board of Directors	Chief Executive Officer

BOD - 1