10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________________________________________________

FORM 10-K

__________________________________________________________________________________________

(Mark One)

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to

Commission file number 000-54382

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PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

(Exact Name of Registrant as Specified in Its Charter)

__________________________________________________________________________________________

Maryland	26-3842535
(State or Other Jurisdiction of<br>Incorporation or Organization)	(I.R.S. Employer<br>Identification No.)
11766 Wilshire Blvd., Suite 1670<br><br>Los Angeles, California	90025
(Address of Principal Executive Offices)	(Zip Code)

(424) 208-8100

(Registrant’s Telephone Number, Including Area Code)

__________________________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredNoneN/AN/A

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.01 par value per share

__________________________________________________________________________________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐  No  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  ☐  No  ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒ No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer	☐	Accelerated Filer	☐
Non-Accelerated Filer	☒	Smaller reporting company	☐
		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. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐  No  ☒

There is no established market for the Registrant’s shares of common stock. On November 30, 2023, the board of directors of the Registrant approved an estimated value per share of the Registrant’s common stock of $8.03 based on the estimated value of the Registrant’s assets less the estimated value of the Registrant’s liabilities divided by the number of shares outstanding, as of September 30, 2023. For a full description of the methodologies used to value the Registrant’s assets and liabilities in connection with the calculation the estimated value per share as of November 30, 2023, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Market Information.” There were approximately 100,221,133 shares of common stock held by non-affiliates as of June 30, 2023, the last business day of the Registrant’s most recently completed second fiscal quarter.

As of March 28, 2024, there were 103,257,859 outstanding shares of common stock of the Registrant.

Documents Incorporated by Reference:

Registrant incorporates by reference in Part III (Items 10, 11, 12, 13 and 14) of this Form 10-K portions of its Definitive Proxy Statement for its 2024 Annual Meeting of Stockholders.

TABLE OF CONTENTSPART I.4ITEM 1.BUSINESS4ITEM 1A.RISK FACTORS8ITEM 1B.UNRESOLVED STAFF COMMENTS38ITEM 1C.CYBERSECURITY38ITEM 2.PROPERTIES40ITEM 3.LEGAL PROCEEDINGS41ITEM 4.MINE SAFETY DISCLOSURES41PART II.41ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES42ITEM 6.RESERVED53ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS53ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK65ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA67ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE67ITEM 9A.CONTROLS AND PROCEDURES67ITEM 9B.OTHER INFORMATION68ITEM 9C.DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS68PART III.68ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE69ITEM 11.EXECUTIVE COMPENSATION69ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS69ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE69ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES69PART IV.70ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES70ITEM 16.FORM 10-K SUMMARY89INDEX TO CONSOLIDATED FINANCIAL STATEMENTSF-1

FORWARD-LOOKING STATEMENTS

Certain statements included in this Annual Report on Form 10-K are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of Pacific Oak Strategic Opportunity REIT, Inc. and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.

The following are some of the risks and uncertainties, although not all of the risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:

•We depend on our advisor, Pacific Oak Capital Advisors, LLC and its affiliates to conduct our operations and eventually dispose of our investments.

•We depend on tenants for our revenue and, accordingly, our revenue is dependent upon the success and economic viability of our tenants. Revenues from our property investments could decrease due to a reduction in tenants (caused by factors including, but not limited to, tenant defaults, tenant insolvency, early termination of tenant leases and non-renewal of existing tenant leases) and/or lower rental rates, limiting our ability to pay distributions to our stockholders.

•We depend on the availability of, and costs associated with, sources of real estate liquidity

•Our opportunistic investment strategy involves a higher risk of loss than would a strategy of investing in some other types of real estate and real estate-related investments.

•Inflation and increased interest rates may adversely affect our financial condition and results of operations, including with respect to our ability to refinance maturing debt.

•We have paid distributions from financings and in the future we may not pay distributions solely from our cash flow from operations or gains from asset sales. To the extent that we pay distributions from sources other than our cash flow from operations or gains from asset sales, we will have less funds available for investment in loans, properties and other assets, the overall return to our stockholders may be reduced and subsequent investors may experience dilution.

•All of our executive officers and some of our directors and other key real estate and debt finance professionals are also officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor, our dealer manager and other Pacific Oak-affiliated entities. As a result, they face conflicts of interest, including significant conflicts created by our former or current advisor’s compensation arrangements with us and other Pacific Oak-advised programs and investors and conflicts in allocating time among us and these other programs and investors. These conflicts could result in unanticipated actions. Fees paid to our advisor in connection with transactions involving the origination, acquisition and management of our investments are based on the cost of the investment, not on the quality of the investment or services rendered to us. This arrangement could influence our advisor to recommend riskier transactions to us.

•We pay substantial fees to and expenses of our advisor and its affiliates. These payments increase the risk that our stockholders will not earn a profit on their investment in us and increase our stockholders’ risk of loss.

•We have focused, and may continue to focus, our investments in non-performing real estate and real estate-related loans, real estate-related loans secured by non-stabilized assets and real estate-related securities, which involve more risk than investments in performing real estate and real estate-related assets.

All forward-looking statements should be read in light of the risks identified in Part I, Item 1A of this Annual Report on Form 10-K.

SUMMARY RISK FACTORS

An investment in shares of our common stock involves significant risks, See “Risk Factors” beginning on page 7. These risks include, among others:

•Because no public trading market for our shares currently exists, it will be difficult for our stockholders to sell their shares.

•A concentration of our real estate investments in any one property class may leave our profitability vulnerable to a downturn in such sector.

•Because of the concentration of a significant portion of our assets in two geographic areas, any adverse economic, real estate or business conditions in these areas could affect our operating results and our ability to make distributions to our stockholders.

•Disruptions in the financial markets and uncertain economic conditions could adversely affect our ability to implement our business strategy, including market rental rates, commercial real estate values, and our ability to secure debt financing and service debt obligations, and generate returns to stockholders. In addition, our real estate investments may be affected by unfavorable real estate market and general economic conditions, which could decrease the value of those assets and reduce the investment return to our stockholders.

•Elevated market and economic volatility due to adverse economic and geopolitical conditions, health crises or dislocations in the credit markets, could have a material adverse effect on our results of operations, financial condition and ability to borrow on terms and conditions that we find acceptable.

•Inflation and increased interest rates may adversely affect our financial condition and results of operations.

•We cannot guarantee that we will make distributions. Our distribution policy is not to use the proceeds of our offerings to make distributions. However, our charter permits us to pay distributions from any source, including offering proceeds or borrowings (which may constitute a return of capital), and our charter does not limit the amount of funds we may use from any source to pay such distributions. From time to time, we may use proceeds from third party financings to fund at least a portion of distributions in anticipation of cash flow to be received in later periods. We may also fund such distributions from the sale of assets. If we pay distributions from sources other than our cash flow from operations, the overall return to our stockholders may be reduced.

•All of our executive officers, our affiliated directors and other key real estate and debt finance professionals of our advisor are also officers, affiliated directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor, our dealer manager and/or other Pacific Oak-affiliated entities. As a result, they face conflicts of interest, including but not limited to, conflicts arising from time constraints and allocation of investment opportunities.

•We have no employees and are dependent on our advisor to conduct our operations, to identify investments, to manage our investments and for the disposition of our properties. If our advisor faces challenges in performing its obligations to us, it could negatively impact our ability to achieve our investment objectives.

•Because investment opportunities that are suitable for us may also be suitable for other Pacific Oak-sponsored programs or Pacific Oak-advised investors, our advisor and its affiliates face conflicts of interest relating to the purchase of properties and other investments and such conflicts may not be resolved in our favor, meaning that we could invest in less attractive assets, which could reduce the investment return to our stockholders.

•There are limits on the ownership and transferability of our shares.

•We depend on tenants for the revenue generated by our real estate investments and, accordingly, the revenue generated by our real estate investments is dependent upon the success and economic viability of our tenants. Revenues from our properties could decrease due to a reduction in occupancy (caused by factors including, but not limited to, tenant defaults, tenant insolvency, early termination of tenant leases and non-renewal of existing tenant leases) and/or lower rental rates, making it more difficult for us to meet our debt service obligations and limiting our ability to pay distributions to our stockholders.

•Our policies do not limit us from incurring debt until our aggregate borrowings would exceed 300% of our net assets, which approximates aggregate liabilities of 75% of the cost of our tangible assets (before deducting depreciation or other non-cash reserves), and we may exceed this limit with the approval of the conflicts committee of our board of directors. To the extent financing in excess of this limit is available on attractive terms, our conflicts committee may approve debt such that our total liabilities would exceed this limit. High debt levels could limit the amount of cash we have available to distribute and could result in a decline in the value of an investment in us.

•If we fail to qualify as a REIT and no relief provisions apply, our cash available for distribution to our stockholders could materially decrease.

ITEM 1.    BUSINESS

Overview

Pacific Oak Strategic Opportunity REIT, Inc. was formed on October 8, 2008 as a Maryland corporation, elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2010 and intends to operate in such manner. As used herein, the terms “we,” “our” and “us” refer to Pacific Oak Strategic Opportunity REIT, Inc. and as required by context, Pacific Oak Strategic Opportunity Limited Partnership, a Delaware limited partnership formed on December 10, 2008 (the “Operating Partnership”), and its subsidiaries. Pacific Oak Capital Advisors, LLC (“Pacific Oak Capital Advisors”) is our advisor and as our advisor, Pacific Oak Capital Advisors manages our day-to-day operations and our portfolio of investments. Our advisor also has the authority to make all of the decisions regarding our investments, except for our residential home portfolio. Our residential home portfolio, held through our subsidiary Pacific Oak Residential Trust, Inc. (“PORT”), is managed by Pacific Oak Residential Advisors, LLC (“PORA”), an affiliate of our advisor. The advisory duties are subject to the limitations in our charter and the direction and oversight of our board of directors. Our advisor also provides asset-management, marketing, investor-relations, and other administrative services on our behalf. We have sought to invest in and manage a diverse portfolio of opportunistic real estate, real estate equity securities and other real estate-related investments. We conduct our business primarily through our Operating Partnership, of which we are the sole general partner.

On January 8, 2009, we filed a registration statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) to offer a minimum of 250,000 shares and a maximum of 140,000,000 shares of common stock for sale to the public, of which 100,000,000 shares were registered in our primary offering and 40,000,000 shares were registered under our dividend reinvestment plan. We sold 56,584,976 shares of common stock in the primary offering for gross offering proceeds of $561.7 million and ceased offering shares of common stock in our primary offering on November 14, 2012. On October 5, 2020, Pacific Oak Strategic Opportunity REIT II (“POSOR II”) merged with an indirect subsidiary of ours (the “Merger”). At the effective time of the Merger, each issued and outstanding share of POSOR II’s common stock converted into 0.9643 shares of our common stock or 28,973,906 shares. As of March 28, 2023, we indefinitely suspended offering shares of common stock under the dividend reinvestment plan to minimize administrative costs. As of December 31, 2023, we had redeemed 27,951,857 of the shares sold in our offering for $324.1 million and had issued 36,398,447 shares of common stock in connection with special dividends.

Objectives and Strategies

Our investment objectives aim to enhance shareholder value and provide consistent returns by increasing our income through rentals, redevelopment, and realizing growth across our portfolio. Additionally, we seek to strengthen our liquidity and cash flow for distribution through timely transactions that maximize value, safeguarding the capital contributions of our stockholders.

We have sought to achieve these objectives by investing in and managing a portfolio of opportunistic real estate, real estate equity securities, and other real estate-related investments.

Our primary real estate strategies are:

•monetizing land sites available for future development;

•deriving rental revenue from tenants and stabilizing existing assets by leasing vacant space;

•optimizing returns from strategic dispositions;

•maintaining favorable leasing terms for our residential portfolio; and

•stabilizing dynamically located co-investment ventures by completing the build-out and leasing.

In pursuit of these strategies, we aim to explore ways to enhance the value of our current assets and strive for increased returns on our investments through strategic timing of asset sales to optimize their value. Additionally, we are committed to actively seeking new lending and investment prospects that we anticipate will deliver favorable risk-adjusted returns for our shareholders.

With respect to liquidity for stockholders, on December 6, 2022, our board of directors authorized the Advisor to meet with and recommend to the board of directors one or more financial and other advisors to be engaged on our behalf to consider ways to provide more liquidity to stockholders, including but not limited to capital raising, asset sales, a listing of our common stock on a national stock exchange or other ways.

The Advisor did have certain preliminary, exploratory discussions with financial advisors on such matters. However, because of the rapid interest rate increases and deterioration in the commercial real estate market which occurred since then, the Advisor has concluded, and the board of directors has concurred, that the hiring of financial and other advisors can be deferred until market conditions improve. Therefore, our goals with respect to stockholder liquidity currently include (i) increasing our

liquidity via opportunistic property sales and/or other transactions and (ii) continuing to manage our portfolio so as to add value and maximize the total return despite the current challenges in the commercial real estate market. We will continue to monitor the market conditions and look for improvements which could offer opportunities to generate the liquidity that can be provided to stockholders who want it.

Real Estate and Real Estate-Related Investments

Our investments in commercial real estate focus on a range of asset types primarily including: office, residential homes, apartments, and land parcels, as well as other specialty property types. Our investments in commercial real estate also include joint ventures, which enable us to invest side-by-side with institutional investors into a diversified portfolio of high quality and stabilized commercial real estate with good fundamentals, and we also invest in other real estate-related assets, including stock of publicly traded real estate companies. As of December 31, 2023, we consolidated nine office complexes, encompassing, in the aggregate, approximately 3.2 million rentable square feet and these properties were 68% occupied. In addition, we owned one residential home portfolio consisting of 2,182 residential homes, and two apartment properties containing 609 units, which were 93% and 96% occupied, respectively as of December 31, 2023. We also owned one hotel property with 196 rooms, four investments in undeveloped land with approximately 581 developable acres, one office/retail development property, and held an interest in three investments in unconsolidated entities and two investments in real estate equity securities.

We have attempted to diversify our tenant base in order to limit exposure to any one tenant or industry. As of December 31, 2023, we had no tenants that represented more than 10% of our total annualized base rent and our top ten tenants represented approximately 16% of our total annualized base rent. For more information about our real estate investments, see Part I, Item 2 of this Annual Report on Form 10-K.

Financing Objectives

We have financed the majority of our real estate and real estate-related investments with a combination of the proceeds from the primary portion of our initial public offering, proceeds from our dividend reinvestment plan, proceeds from the sale of real estate and real estate-related investments, cash flow generated by our real estate and real estate-related investments, and debt financing, including bond offerings in Israel. We expect to use leverage to provide additional funds to support our investment activities and seek to increase potential returns to our stockholders.

Our financing objectives include (i) increasing our liquidity via opportunistic property sales and/or other transactions and (ii) continuing to manage our portfolio, including the related debt, so as to add value and maximize the total return despite the current challenges in the commercial real estate markets and credit markets. We have and will continue to focus on stabilizing our portfolio and managing debt maturities in 2024. Our managing of debt maturities may involve reworking portfolio allocations in order to better contend with the higher cost of capital.

Our decision to use leverage currently or in the future to finance our real estate and real estate-related investments will be based on our advisor’s assessment of a variety of factors, including, among others, the anticipated liquidity and price volatility of the assets in our investment portfolio, the potential for losses and extension risk in our portfolio, the availability of credit at favorable prices or at all, the credit quality of our portfolio and our outlook for borrowing costs. These decisions are subject to certain borrowing limits described below and are not subject to the approval of our stockholders. We will continue to monitor the market conditions and look for improvements which could offer opportunities to generate the liquidity that can become available to stockholders. As a holder of floating-rate debt, we have already faced fluctuations in the credit markets and will continue to on a loan-by-loan basis or as loans mature with a focus on value. If we were to become further dependent on debt refinancing there could be untimely asset dispositions.

We used debt financing to increase the amount available for investment and to potentially increase overall investment yields to us and our stockholders. As of December 31, 2023, the weighted-average interest rate on our debt was 6.0%.

We borrow funds at both fixed and variable rates; as of December 31, 2023, we had $637.1 million and $408.7 million of fixed and variable rate debt outstanding, respectively. The weighted-average interest rates of our fixed rate debt and variable rate debt as of December 31, 2023 was 4.8% and 7.9%, respectively. The weighted-average interest rate represents the actual interest rate in effect as of December 31, 2023, using interest rate indices as of December 31, 2023, where applicable. As of December 31, 2023, we had entered into three separate interest rate caps with an aggregate notional amount of $153.5 million which effectively limits our exposure to increases in one-month Secured Overnight Finance Rate (“SOFR”) above certain thresholds.

In February 2020, Pacific Oak SOR (BVI) Holdings, Ltd. (“Pacific Oak SOR BVI”) issued 254.1 million Israeli new shekels of Series B bonds (the “Series B Bonds”) to Israeli investors pursuant to a public offering registered with the Israel Securities Authority. The Series B Bonds bear interest at the rate of 3.93% per year. The Series B Bonds have principal installment payments equal to 33.33% of the face amount of the Series B Bonds on January 31st of each year from 2024 to 2026. Pacific Oak SOR BVI issued additional Series B Bonds subsequent to the initial issuance and as of December 31, 2023, 1.2 billion Israeli new shekels (approximately $321.7 million as December 31, 2023) were outstanding. The additional Series B Bonds have an equal level of security, pari passu, amongst themselves and between them and the initial Series B Bonds, which were initially issued, without any right of precedence or preference between any of them. Subsequent to December 31, 2023, we made the first Series B Bonds installment payment.

In July 2023, Pacific Oak SOR BVI issued 340.3 million Israeli new shekels of Series C bonds (the “Series C Bonds”) to Israeli investors pursuant to offerings registered with the Israeli Securities Authority. Pacific Oak SOR BVI issued additional Series C Bonds subsequent to the initial issuance and as of December 31, 2023, 360.0 million Israeli new shekels (approximately $99.5 million as of December 31, 2023) were outstanding. The Series C Bonds have an equal level of security, pari passu, amongst themselves without any right of precedence or preference between any of them. The Series C Bonds are collateralized by real estate held for investment (specified lands in Park Highlands and Richardson).

Additionally, as of December 31, 2023, we entered into cross currency swaps for risk management purposes to hedge our exposure to variability in foreign currency exchange rates of the Israeli new shekel versus the U.S. Dollar.

We have tried to spread the maturity dates of our debt to minimize maturity and refinance risk in our portfolio. In addition, a majority of our debt allows us to extend the maturity dates, subject to certain conditions. Although we may satisfy the conditions to extend the maturity of our debt obligations, we can give no assurance in this regard. The following table shows the current and fully extended maturities, including principal amortization payments, of our debt as of December 31, 2023 (in thousands):

	Current Maturity		Extended Maturity
2024	$	289,025	$	271,063
2025	238,655		150,608
2026	518,141		369,704
2027	—		54,738
2028	—		181,745
Thereafter	—		17,963
	$	1,045,821	$	1,045,821

There is no limitation on the amount we may borrow for any single investment. Our charter does not limit us from incurring debt until our aggregate borrowings would exceed 300% of our net assets, which approximates aggregate liabilities of 75% of the cost of our tangible assets (before deducting depreciation or other non-cash reserves), and we may exceed this limit with the approval of the conflicts committee of our board of directors. To the extent financing in excess of this limit is available on attractive terms, our conflicts committee may approve debt such that our total liabilities would exceed this limit. We would disclose such borrowing to our common stockholders in our next quarterly report with an explanation from the conflicts committee of the justification for the excess borrowing. As of December 31, 2023, our borrowings and other liabilities were approximately 71% of the cost (before depreciation and other noncash reserves) and book value (before depreciation) of our tangible assets, respectively.

We do not intend to exceed the leverage limit in our charter. High levels of debt could cause us to incur higher interest charges and higher debt service payments, which would decrease the amount of cash available for distribution to our investors and could also be accompanied by restrictive covenants. High levels of debt could also increase the risk of being unable to refinance when loans become due, or of being unable to refinance on favorable terms, and the risk of loss with respect to assets pledged as collateral for loans.

Except with respect to the borrowing limits contained in our charter, we may reevaluate and change our debt policy in the future without a stockholder vote. Factors that we would consider when reevaluating or changing our debt policy include: then-current economic conditions, the relative cost and availability of debt and equity capital, any investment opportunities, the ability of our investments to generate sufficient cash flow to cover debt service requirements and other similar factors. Further, we may increase or decrease our ratio of debt to book value in connection with any change of our borrowing policies.

Disposition Policies

The period that we will hold our investments will vary depending on the type of asset, interest rates and other factors. Our advisor has developed a well-defined exit strategy for each investment we have made and will continually perform a hold-sell analysis on each asset to determine the optimal time to hold the asset and generate a strong return for our stockholders.

Economic and market conditions may influence us to hold our investments for different periods of time. We optimize returns from strategic dispositions and we may dispose of an asset before the end of the expected holding period if we believe that market conditions have maximized its value to us, or the disposition of the asset would otherwise be in the best interests of our stockholders. During the year ended December 31, 2023, we sold one office building, approximately 186 acres of developable land, 274 residential homes and investments in real estate equity securities. There were no properties classified as held for sale as of December 31, 2023. The disposition strategy is consistent with our objectives of acquiring opportunistic investments, improving the investments, and timing asset sales to realize the growth in the value that was created during our hold period.

Economic Dependency

We are dependent on our advisor for certain services that are essential to us, including the identification, evaluation, negotiation, origination, acquisition, and disposition of investments; management of the daily operations and leasing of our investment portfolio; and other general and administrative responsibilities. If our advisor is unable to provide the respective services, we will be required to obtain such services from other sources.

Competitive Market Factors

The U.S. real estate leasing markets remain competitive. We face competition from various entities for prospective tenants and to retain our current tenants, including other REITs, pension funds, insurance companies, investment funds and companies, partnerships, and developers. Many of these entities have substantially greater financial resources than we do and may be able to accept more risk than we can prudently manage, including risks with respect to the creditworthiness of a tenant. As a result of their greater resources, those entities may have more flexibility than we do in their ability to offer rental concessions to attract and retain tenants. This could put pressure on our ability to maintain or raise rents and could adversely affect our ability to attract or retain tenants. As a result, our financial condition, results of operations, cash flow, ability to satisfy our debt service obligations and ability to pay distributions to our stockholders may be adversely affected. We may also face competition from other entities that are selling assets. Competition from these entities may increase the supply of real estate investment opportunities or increase the bargaining power of real estate investors seeking to buy.

Although we believe that we are well-positioned to compete effectively in each facet of our business, there is enormous competition in our market sector and there can be no assurance that we will compete effectively or that we will not encounter increased competition in the future that could limit our ability to conduct our business effectively.

Compliance with Federal, State and Local Environmental Law

Under various federal, state and local environmental laws, ordinances and regulations, a current or previous real property owner or operator may be liable for the cost of removing or remediating hazardous or toxic substances on, under or in such property. These costs could be substantial. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us from entering into leases with prospective tenants that may be impacted by such laws. Environmental laws provide for sanctions for noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for the release of and exposure to hazardous substances, including asbestos-containing materials. Third parties may seek recovery from real property owners or operators for personal injury or property damage associated with exposure to released hazardous substances. The cost of defending against claims of liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims could reduce the amounts available for distribution to our stockholders.

All of our real estate properties, other than properties acquired through foreclosure, were subject to Phase I environmental assessments at the time they were acquired. Some of the properties we have acquired are subject to potential environmental liabilities arising primarily from historic activities at or in the vicinity of the properties. Based on our environmental diligence and assessments of our properties and our purchase of pollution and remediation legal liability insurance with respect to some of our properties, we do not believe that environmental conditions at our properties are likely to have a material adverse effect on our operations.

Segments

We operate in three reportable business segments: strategic opportunistic properties and real estate-related investments, residential homes, and hotel, which is how our management manages the business. In general, we intend to hold our investments in opportunistic real estate and other real estate-related assets for capital appreciation. Traditional performance metrics of opportunistic real estate and other real estate-related assets may not be meaningful as these investments are generally non-stabilized and do not provide a consistent stream of interest income or rental revenue. These investments exhibit similar long-term financial performance and have similar economic characteristics. These investments typically involve a higher degree of risk and do not provide a constant stream of ongoing cash flows. As a result, our management views opportunistic real estate

and other real estate-related assets as similar investments and aggregated into one reportable business segment. We own residential homes in 18 markets and are all aggregated into one reportable business segment due to the homes being stabilized, having high occupancy rates and have similar economic characteristics. Additionally, we own one hotel and is represented into one reportable business segment due to the nature of the hotel business with short-term stays.

Human Capital

We have no paid employees. The employees of our advisor or its affiliates provide management, acquisition, disposition, advisory and certain administrative services for us.

Principal Executive Office

Our principal executive offices are located at 11766 Wilshire Blvd., Suite 1670, Los Angeles, California 90025. Our telephone number and web address are (424) 208-8100 and http://www.sorinvinfo.com/.

Available Information

Access to copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other filings with the SEC, including amendments to such filings, may be obtained free of charge from the following website, http://www.sorinvinfo.com/ or through a link to the SEC’s website, http://www.sec.gov. These filings are available promptly after we file them with, or furnish them to, the SEC.

ITEM 1A.    RISK FACTORS

The following are some of the risks and uncertainties that could cause our actual results to differ materially from those presented in our forward-looking statements. The risks and uncertainties described below are not the only ones we face but do represent those risks and uncertainties that we believe are material to us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also harm our business.

Risks Related to an Investment in Us

Because no public trading market for our shares currently exists, it will be difficult for our stockholders to sell their shares and, if they are able to sell their shares, it will likely be at a substantial discount to the public offering price.

Our charter does not require our directors to seek stockholder approval to liquidate our assets by a specified date, nor does our charter require our directors to list our shares for trading on a national securities exchange by a specified date. There is no public market for our shares and we currently have no plans to list our shares on a national securities exchange. Until our shares are listed, if ever, our stockholders may not sell their shares unless the buyer meets the applicable suitability and minimum purchase standards. In addition, our charter prohibits the ownership of more than 9.8% of our stock, unless exempted by our board of directors, which may inhibit large investors from purchasing our shares. In its sole discretion, our board of directors could amend, suspend or terminate our share redemption program upon ten business days’ notice. Further, the share redemption program includes numerous restrictions that would limit a stockholder’s ability to sell his or her shares. Therefore, it will be difficult for our stockholders to sell their shares promptly or at all. It is also likely that our shares would not be accepted as the primary collateral for a loan. Because of the illiquid nature of our shares, our stockholders should be prepared to hold our shares for an indefinite period of time.

If we are unable to find suitable investments, we may not be able to achieve our investment objectives or pay distributions.

Our ability to achieve our investment objectives and to pay distributions depends upon the performance of our advisor, in the acquisition of our investments, including the determination of any financing arrangements, and the ability of our advisor to source loan origination opportunities for us. Competition from competing entities may reduce the number of suitable investment opportunities offered to us or increase the bargaining power of counterparties in transactions. We will also depend upon the performance of third-party loan servicers and property managers in connection with managing our investments. Stockholders must rely entirely on the management abilities of our advisor, the loan servicers and property managers our advisor selects and the oversight of our board of directors. We can give our stockholders no assurance that our advisor will be successful in obtaining suitable investments on financially attractive terms or that, if our advisor makes investments on our behalf, our objectives will be achieved. In the event we are unable to timely locate suitable investments, we may be unable or limited in our ability to pay distributions and we may not be able to meet our investment objectives.

A concentration of our real estate investments in any one property class may leave our profitability vulnerable to a downturn in such sector.

Our investments are primarily categorized into three segments: strategic opportunistic real estate-related investments, residential homes, and hotel. As a result, we will be subject to risks inherent in investments in limited types of properties. If our investments are substantially in limited property classes, then the potential effects on our revenues, and as a result, on cash available for distribution to our stockholders, resulting from a downturn in the businesses conducted in those types of properties

could be more pronounced than if we had more fully diversified our investments. As of December 31, 2023, our investments in strategic opportunistic real estate and related investments, our residential homes, and hotel segments represented 70.2%, 26.1% and 3.7% of our total assets, respectively.

Because of the concentration of a significant portion of our assets in two geographic areas, any adverse economic, real estate or business conditions in these areas could affect our operating results and our ability to make distributions to our stockholders.

As of December 31, 2023, our real estate held for investment in California and Georgia represented 18.8% and 10.7% of our total assets, respectively. As a result, the geographic concentration of our portfolio makes it particularly susceptible to adverse economic developments in the California and Georgia real estate markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for office space resulting from the local business climate, could adversely affect our operating results and our ability to make distributions to stockholders.

Disruptions in the financial markets and uncertain economic conditions could adversely affect market rental rates, commercial real estate values and our ability to secure debt financing, service debt obligations, or pay distributions to our stockholders.

Currently, both the investing and leasing environments are highly competitive and have made businesses reluctant to make long-term commitments or changes in their business plans. Possible future declines in rental rates, slower or potentially negative net absorption of leased space and expectations of future rental concessions, including free rent to renew tenants early, to retain tenants who are up for renewal or to attract new tenants, may result in decreases in cash flows.

We have relied on debt financing to finance our real estate properties and we may have difficulty refinancing some of our debt obligations prior to or at maturity or we may not be able to refinance these obligations at terms as favorable as the terms of our existing indebtedness and we also may be unable to obtain additional debt financing on attractive terms or at all. If we are not able to refinance our existing indebtedness on attractive terms at the various maturity dates, we may be forced to dispose of some of our assets. Market conditions can change quickly, which could negatively impact the value of our assets.

Disruptions in the financial markets and continued uncertain economic conditions could adversely affect the values of our investments. It remains uncertain whether the capital markets can sustain the current transaction levels. Any disruption to the debt and capital markets could result in fewer buyers seeking to acquire commercial properties and possible increases in capitalization rates and lower property values. Furthermore, declining economic conditions could negatively impact commercial real estate fundamentals and result in lower occupancy, lower rental rates and declining values in our real estate portfolio and in the collateral securing our loan investments, which could have the following negative effects on us:

•the values of our investments in commercial properties could decrease below the amounts paid for such investments;

•the value of collateral securing any loan investments we may make could decrease below the outstanding principal amount of such loans; and/or

•revenues from our properties could decrease due to fewer tenants and/or lower rental rates, making it more difficult for us to pay distributions or meet our debt service obligations on debt financing.

All of these factors could impair our ability to make distributions to our investors and decrease the value of an investment in us.

Elevated market and economic volatility due to adverse economic and geopolitical conditions (such as the crisis in Israel), health crises and dislocations in the credit markets could have a material adverse effect on our results of operations, financial condition and ability to borrow on terms and conditions that we find acceptable.

Our business may be adversely affected by market and economic volatility experienced by the U.S. and global economies, the U.S. office market as a whole and/or the local economies in the markets in which our properties are located. Such adverse economic and geopolitical conditions may be due to, among other issues, increased labor market challenges impacting the recruitment and retention of employees, rising inflation and interest rates, volatility in the public equity and debt markets, and international economic and other conditions, including pandemics, geopolitical instability (such as the crisis in Israel), sanctions and other conditions beyond our control. These current conditions, or similar conditions existing in the future, may adversely affect our results of operations, financial condition, and ability to pay dividends and/or distributions as a result of one or more of the following, among other potential consequences:

•the financial condition of our tenants may be adversely affected, which may result in tenant defaults under leases due to bankruptcy, lack of liquidity, lack of funding, operational failures or for other reasons;

•potential changes in customer behavior, such as the continued social acceptance, desirability and perceived economic benefits of work-from-home arrangements, which could materially and negatively impact the future demand for office space, resulting in slower overall leasing and an adverse impact to our operations and the valuation of our investments;

•significant job losses may occur, which may decrease demand for our office space, causing market rental rates and property values to be negatively impacted;

•our ability to borrow on terms and conditions that we find acceptable, or at all, may be limited, which could reduce our ability to refinance existing debt and increase our future interest expense;

•reduced values of our properties may limit our ability to dispose of assets at attractive prices or to obtain debt financing secured by our properties and may reduce the availability of unsecured loans;

•the value and liquidity of our short-term investments and cash deposits could be reduced as a result of a deterioration of the financial condition of the institutions that hold our cash deposits or the institutions or assets in which we have made short-term investments, a dislocation of the markets for our short-term investments, increased volatility in market rates for such investments or other factors; and

•to the extent we enter into derivative financial instruments, one or more counterparties to our derivative financial instruments could default on their obligations to us, or could fail, increasing the risk that we may not realize the benefits of these instruments.

Inflation and increased interest rates may adversely affect our financial condition and results of operations.

Inflation has adversely impacted our operations in the recent past. Inflation reached a 40-year high in 2022 and beginning in March of 2022, the Federal Reserve began raising the federal funds rate in an effort to curb inflation. The Federal Reserve’s action, coupled with other macroeconomic factors, may trigger a recession in the United States, globally, or both. Increased inflation and interest rates could have an adverse impact on our variable rate debt, our ability to borrow money, and general and administrative expenses, as these costs could increase at a rate higher than our rental and other revenue. Increases in the costs of owning and operating our properties due to inflation could reduce our net operating income and the value of an investment in us to the extent such increases are not reimbursed or paid by our tenants. If we are materially impacted by increasing inflation because, for example, inflationary increases in costs are not sufficiently offset by the contractual rent increases and operating expense reimbursement provisions or escalations in the leases with our tenants, we may implement measures to conserve cash or preserve liquidity. Such measures could include reducing or suspending the number of shares redeemed under our share redemption program and reducing or suspending distributions we make to our stockholders. In addition, 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.

In addition, tenants and potential tenants of our properties may be adversely impacted by inflation and rising interest rates, which could negatively impact our tenants’ ability to pay rent and the demand for our properties. Such adverse impacts on our tenants may cause increased vacancies, which may add pressure to lower rents and increase our expenditures for re-leasing.

Uncertainty and volatility in the credit markets could affect our ability to obtain debt financing on reasonable terms, or at all, which could reduce the number of properties we may be able to acquire and the amount of cash distributions we can make to our stockholders.

The U.S. and global credit markets have in the past experienced severe dislocations and liquidity disruptions, which caused volatility in the credit spreads on prospective debt financings and constrained the availability of debt financing due to the reluctance of lenders to offer financing at high leverage ratios. Similar conditions in the future could adversely impact our ability to access additional debt financing on reasonable terms or at all, which may adversely affect investment returns on future acquisitions or our ability to make acquisitions.

If mortgage debt or unsecured debt is unavailable on reasonable terms as a result of increased interest rates, increased credit spreads, decreased liquidity or other factors, we may not be able to finance the initial purchase of properties. In addition, when we incur mortgage debt or unsecured debt, we run the risk of being unable to refinance such debt upon maturity, or of being unable to refinance on favorable terms.

If interest rates are higher or other financing terms, such as principal amortization, the need for a corporate guaranty, or other terms are not as favorable when we refinance debt or issue new debt, our income could be reduced. To the extent we are unable to refinance debt on reasonable terms, at appropriate times or at all, we may be required to sell properties on terms that are not advantageous to us, or that could result in the foreclosure of such properties. If any of these events occur, our cash flow could be reduced. This, in turn, could reduce cash available for distribution to our stockholders and may hinder our ability to raise more capital by issuing securities or borrowing more money.

Because we depend upon our advisor and its affiliates to select, acquire, manage, and dispose of our real estate investments and to conduct our operations, any adverse changes in the financial health of our advisor or its affiliates or our relationship with them could cause our operations to suffer.

We depend on our advisor and its affiliates to select, acquire, manage, and dispose of our real estate investments and to conduct our operations. Our advisor and its affiliates depend upon the fees and other compensation that it receives from us and other Pacific Oak-sponsored programs that they advise in connection with the purchase, management, and sale of assets to conduct their operations. Any adverse changes to our relationship with, or the financial condition of, our advisor and its affiliates could hinder their ability to successfully manage our operations and our portfolio of investments.

If we pay distributions from sources other than our cash flow from operations, we will have less funds available for investments and the overall return to our stockholders may be reduced.

We will declare distributions when our board of directors determines we have sufficient cash flow from operations, investment activities and/or strategic financings. We expect to fund distributions from interest and rental income on investments, the maturity, payoff, or settlement of those investments and from strategic sales of loans, properties and other assets. We may also fund distributions from debt financings.

As a REIT, we will generally have to hold our assets for two years for the production of rental income in order to meet the safe harbor to avoid a 100% prohibited transactions tax, unless such assets are held through a taxable REIT subsidiary (“TRS”) or other taxable corporation. At such time as we have assets that we have held for at least two years, we anticipate that we may authorize and declare distributions based on gains on asset sales, to the extent we close on the sale of one or more assets and the board of directors does not determine to reinvest the proceeds of such sales. Additionally, our board of directors intends to declare distributions quarterly based on cash flow from our investments.

To maintain our qualification as a REIT, we must make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). If we meet the REIT qualification requirements, we generally will not be subject to federal income tax on the income that we distribute to our stockholders each year. In general, we anticipate making distributions to our stockholders of at least 100% of our REIT taxable income so that none of our income is subject to federal income tax. Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board of directors deems relevant.

Our distribution policy is not to pay distributions from sources other than cash flow from operations, investment activities and strategic financings. However, our organizational documents do not restrict us from paying distributions from any source and do not restrict the amount of distributions we may pay from any source, including proceeds from the issuance of securities, borrowings, advances from our advisor or sponsors or from our advisor’s deferral of its fees under the advisory agreement. Distributions paid from sources other than current or accumulated earnings and profits may constitute a return of capital. From time to time, we may generate taxable income greater than our taxable income for financial reporting purposes, or our taxable income may be greater than our cash flow available for distribution to stockholders. In these situations, we may make distributions in excess of our cash flow from operations, investment activities and strategic financings to satisfy the REIT distribution requirement described above. In such an event, we would look first to other third-party borrowings to fund these distributions. If we fund distributions from financings, the proceeds from issuances of securities or sources other than our cash flow from operations, we will have less funds available for investment in real estate-related loans, opportunistic real estate, real estate equity securities and other real estate-related investments and the overall return to our stockholders may be reduced.

In addition, to the extent distributions exceed cash flow from operations and gains realized from the dispositions of properties, a stockholder’s basis in our stock will be reduced and, to the extent distributions exceed a stockholder’s basis, the stockholder may recognize capital gain. There is no limit on the amount of distributions we may fund from sources other than from cash flows from operations or gains realized from the dispositions of properties. There were no distributions paid during the year ended December 31, 2023. For the year ended December 31, 2022, we paid aggregate distributions of $0.6 million (of which $0.3 million was reinvested through our dividend reinvestment plan). Our cash flow used in operations and net loss attributable to stockholders for the year ended December 31, 2023 were $24.3 million and $144.2 million, respectively. Our cash flow provided by operations and net loss attributable to stockholders for the year ended December 31, 2022 were $11.9 million and $43.2 million, respectively. Our cash flow provided by operations and net loss attributable to stockholders for the year ended December 31, 2021 were $16.0 million and $11.0 million, respectively. From inception through December 31, 2023, we funded 9% of total distributions paid, which includes cash distributions and dividends reinvested by stockholders, with proceeds from debt financing, funded 46% of total distributions paid with the gains realized from the dispositions of properties and funded 45% of total distributions paid with cash provided by operations. Our cumulative distributions paid and net loss attributable to common stockholders from inception through December 31, 2023 was $639.9 million.

The loss of or the inability to retain or obtain key real estate and debt finance professionals at our advisor and its affiliates could delay or hinder implementation of our investment, management and disposition strategies, which could limit our ability to pay distributions and decrease the value of an investment in our shares.

Our success depends to a significant degree upon the contributions of Messrs. Hall and McMillan and the team of real estate and debt finance professionals at our advisor and its affiliates. Neither we nor our advisor or its affiliates have employment agreements with these individuals, and they may not remain associated with us, our advisor or its affiliates. If any of these persons were to cease their association with us, our advisor or its affiliates, we may be unable to find suitable replacements and our operating results could suffer as a result. We do not maintain key person life insurance on any person. We believe that our future success depends, in large part, upon our advisor’s and its affiliates’ ability to attract and retain highly skilled managerial, operational and marketing professionals. Competition for such professionals is intense, and our advisor and its affiliates may be unsuccessful in attracting and retaining such skilled professionals. Further, we have established strategic relationships with firms that have special expertise in certain services or detailed knowledge regarding real properties in certain geographic regions. Maintaining such relationships will be important for us to effectively compete in such regions. We may be unsuccessful in maintaining such relationships. If we lose or are unable to obtain the services of highly skilled professionals or do not establish or maintain appropriate strategic relationships, our ability to implement our investment, management and disposition strategies could be delayed or hindered and the value of our stockholders’ investment in us could decline.

The termination or replacement of our advisor could trigger a repayment event under our mortgage loans for some of our properties and the credit agreement governing any line of credit we obtain.

Lenders for certain of our properties may request provisions in the mortgage loan documentation that would make the termination or replacement of the advisor an event requiring the immediate repayment of the full outstanding balance of the loan. Similarly, under any line of credit we obtain, the termination or replacement of the advisor could trigger repayment of outstanding amounts under the credit agreement governing our line of credit. If a repayment event occurs with respect to any of our properties, our results of operations and financial condition may be adversely affected.

Our rights and the rights of our stockholders to recover claims against our independent directors are limited, which could reduce our stockholders’ and our recovery against our independent directors if they negligently cause us to incur losses.

Maryland law provides that a director has no liability in that capacity if he performs his duties in good faith, in a manner he reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Our charter provides that no independent director shall be liable to us or our stockholders for monetary damages and that we will generally indemnify them for losses unless they are grossly negligent or engage in willful misconduct. As a result, our stockholders and we may have more limited rights against our independent directors than might otherwise exist under common law, which could reduce our stockholders’ and our recovery from these persons if they act in a negligent manner. In addition, we may be obligated to fund the defense costs incurred by our independent directors (as well as by our other directors, officers, employees (if we ever have employees) and agents) in some cases, which would decrease the cash otherwise available for distribution to our stockholders.

We may change our targeted investments without stockholder consent.

We may change our targeted investments and investment guidelines at any time without the consent of our stockholders, which could result in us making investments that are different from, and possibly riskier than, our targeted investments as described in Part I, Item 1 of this Annual Report on Form 10-K. For example, we modified our investment objectives and criteria in January 2012 and March 2024 and we may do so again in the future. A change in our targeted investments or investment guidelines may increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could adversely affect the value of our common stock and our ability to make distributions to our stockholders.

We face risks associated with security breaches through cyber-attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems.

We face risks associated with security breaches, whether through cyber-attacks or cyber intrusions over the Internet, malware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to systems inside our organization, and other significant disruptions of our IT networks and related systems. The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations. Although we make efforts to maintain the security and integrity of these types of IT networks and related systems, and we have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed not be detected and, in fact, may not be detected. Accordingly, we

may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate this risk.

A security breach or other significant disruption involving our IT networks and related systems could:

•disrupt the proper functioning of our networks and systems and therefore our operations;

•result in misstated financial reports, violations of loan covenants and/or missed reporting deadlines;

•result in our inability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT;

•result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of, proprietary, confidential, sensitive or otherwise valuable information of ours or others, which others could use to compete against us or which could expose us to damage claims by third-parties for disruptive, destructive or otherwise harmful purposes and outcomes;

•require significant management attention and resources to remedy any damages that result;

•subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements; or

•damage our reputation among our stockholders.

Any or all of the foregoing could have a material adverse effect on our results of operations, financial condition and cash flows.

Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland shall be the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders with respect to our company, our directors, our officers or our employees (we note we currently have no employees). This exclusive forum provision does not apply to claims under the Securities Act, the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder believes is favorable for disputes with us or our directors, officers or employees, which may discourage meritorious claims from being asserted against us and our directors, officers and employees. Alternatively, if a court were to find this provision of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations. We adopted this provision because we believe it makes it less likely that we will be forced to incur the expense of defending duplicative actions in multiple forums and less likely that plaintiffs’ attorneys will be able to employ such litigation to coerce us into otherwise unjustified settlements, and we believe the risk of a court declining to enforce this provision is remote, as the General Assembly of Maryland has specifically amended the Maryland General Corporation Law to authorize the adoption of such provisions.

Uncertain market conditions could cause us to sell our real estate investments or investments in unconsolidated entities at a loss in the future.

We intend to hold our real estate investments and investments in unconsolidated entities until such time as we determine that a sale or other disposition appears to be advantageous to achieve our investment objectives. We may exercise discretion as to whether and when to sell an investment, and we will have no obligation to sell at any particular time. We cannot predict with any certainty the various market conditions affecting real estate investments that will exist at any particular time in the future. Because of the uncertainty of market conditions that may affect the future disposition of our investments, we may not be able to sell our investments at a profit in the future or at all. In addition, if we are unable to access the capital markets for financing in the future, we may need to sell some of our investments to raise capital. We may incur prepayment penalties in the event that we sell a property subject to a mortgage earlier than we otherwise had planned. Additionally, we could be forced to sell our investments at inopportune times which could result in us selling the affected investment at a substantial loss. Any inability to sell a property could adversely impact our ability to make debt payments as they come due.

Risks Related to Conflicts of Interest

Our advisor and its affiliates, including all of our executive officers and some of our directors and other key real estate and debt finance professionals, face conflicts of interest caused by their compensation arrangements with us, which could result in actions that are not in the long-term best interests of our stockholders.

All of our executive officers and some of our directors and other key real estate and debt finance professionals are also officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor, Pacific Oak Capital Markets, LLC (“POCM”) and other affiliated Pacific Oak entities. Our advisor and its affiliates receive substantial

fees from us. These fees could influence our advisor and its affiliates’ advice to us. Among other matters, these compensation arrangements could affect their judgment with respect to:

•the continuation, renewal or enforcement of our agreements with our advisor and its affiliates, including the advisory agreement;

•public offerings of equity by us, which may entitle POCM to dealer-manager fees and may entitle our advisor to asset management fees and certain other fees;

•sales of investments, which may entitle our advisor to disposition fees and possible subordinated incentive fees;

•acquisitions of investments and originations of loans, which may entitle our advisor to acquisition and origination fees and asset management fees and, in the case of acquisitions of investments from other Pacific Oak-sponsored programs, might entitle affiliates of our advisor to disposition fees and possible subordinated incentive fees in connection with its services for the seller;

•borrowings to acquire investments and to originate loans, which borrowings may increase the acquisition and origination fees and asset management fees payable to our advisor;

•whether to engage our advisor, which may receive fees in connection with the management of our properties regardless of the quality of the services provided to us, to manage our properties; and

•whether we pursue a liquidity event such as a listing of our shares of common stock on a national securities exchange, a sale of the company or a liquidation of our assets, which (i) may make it more likely for us to become self-managed or internalize our management, (ii) could positively or negatively affect the sales efforts for other Pacific Oak-sponsored programs, depending on the price at which our shares trade or the consideration received by our stockholders, and/or (iii) affect the advisory fees received by our advisor.

The fees our advisor may receive in connection with the acquisition, origination or management of assets are based on the cost of the investment, and not based on the quality of the investment or the quality of the services rendered to us. This may influence our advisor to recommend riskier transactions to us.

Our advisor faces conflicts of interest relating to the leasing of properties and such conflicts may not be resolved in our favor, meaning that we may obtain less credit-worthy or desirable tenants, which could limit our ability to make distributions and reduce our stockholders’ overall investment return.

We and other Pacific Oak-sponsored programs and Pacific Oak-advised investors rely on our sponsors and other key real estate professionals at our advisor, including Messrs. Hall and McMillan, to supervise the property management and leasing of properties. If the Pacific Oak team of real estate professionals directs credit-worthy prospective tenants to properties owned by another Pacific Oak-sponsored program or Pacific Oak-advised investor when they could direct such tenants to our properties, our tenant base may have more inherent risk and our properties’ occupancy may be lower than might otherwise be the case.

Further, Messrs. Hall and McMillan and existing and future Pacific Oak-sponsored programs and Pacific Oak-advised investors are generally not prohibited from engaging, directly or indirectly, in any business or from possessing interests in any other business venture or ventures, including businesses and ventures involved in the acquisition, development, ownership, leasing or sale of real estate investments.

Our advisor and its affiliates face conflicts of interest relating to the acquisition of assets, the leasing of properties and the disposition of properties due to their relationship with other Pacific Oak-sponsored programs and/or Pacific Oak-advised investors, which could result in decisions that are not in our best interest or the best interests of our stockholders.

We rely on the key real estate and debt finance professionals of our advisor and its affiliates, including Messrs. Hall and McMillan, to identify suitable investments. Messrs. Hall and McMillan and other real estate professionals are also the key real estate professionals for other Pacific Oak-sponsored programs and Pacific Oak-advised investors. As such, other Pacific Oak-sponsored programs and Pacific Oak-advised investors that have funds available for investment rely on many of the same professionals, as will future programs and investors. Some investment opportunities that are suitable for us may also be suitable for other Pacific Oak-sponsored programs and Pacific Oak-advised investors. Although there may be some overlap of investment opportunities, we generally do not expect to be in direct competition with these programs due to their specific investment focus and timing of funds available for investment. When these real estate and debt finance professionals direct an investment opportunity to any Pacific Oak-sponsored program or Pacific Oak-advised investors, they, in their sole discretion, will have to determine the program or investor for which the investment opportunity is most suitable based on the investment objectives, portfolio and criteria of each program or investor. As a result, these Pacific Oak real estate and debt finance professionals could direct attractive investment opportunities to other programs or investors.

For so long as we are externally advised, our charter provides that it shall not be a proper purpose of the corporation for us to make any significant investment unless our advisor and its affiliates have recommended the investment to us. Thus, the real estate and debt finance professionals of our advisor and its affiliates could direct attractive investment opportunities to other

Pacific Oak-sponsored programs or Pacific Oak-advised investors. Such events could result in us investing in properties that provide less attractive returns, which would reduce the level of distributions we may be able to pay our stockholders.

We and other Pacific Oak-sponsored programs and Pacific Oak-advised investors also rely on these real estate professionals to supervise the property management and leasing of properties. If the Pacific Oak team of real estate professionals directs creditworthy prospective tenants to properties owned by another Pacific Oak-sponsored program or Pacific Oak-advised investor when it could direct such tenants to our properties, our tenant base may have more inherent risk and our properties’ occupancy may be lower than might otherwise be the case.

In addition, we and other Pacific Oak-sponsored programs and Pacific Oak-advised investors rely on our sponsor and other key real estate professionals at our advisor and its affiliates to sell our properties. These Pacific Oak-sponsored programs and Pacific Oak-advised investors may possess properties in similar locations and/or of the same property types as ours and may be attempting to sell these properties at the same time we are attempting to sell some of our properties. If our advisor and its affiliates direct potential purchasers to properties owned by another Pacific Oak-sponsored program or Pacific Oak-advised investor when it could direct such purchasers to our properties, we may be unable to sell some or all of our properties at the time or at the price we otherwise would, which could limit our ability to pay distributions and reduce our stockholders’ overall investment return.

Further, existing and future Pacific Oak-sponsored programs and Pacific Oak-advised investors and Messrs. Hall and McMillan generally are not and will not be prohibited from engaging, directly or indirectly, in any business or from possessing interests in any other business venture or ventures, including businesses and ventures involved in the acquisition, origination, development, ownership, leasing or sale of real estate-related investments.

Our advisor will face conflicts of interest relating to joint ventures that we may form with affiliates of our advisor, which conflicts could result in a disproportionate benefit to the other venture partners at our expense.

If approved by both a majority of our board of directors and a majority of our independent directors, we may enter into joint venture agreements with other Pacific Oak-sponsored programs or affiliated entities for the acquisition, development or improvement of properties or other investments. Our advisor and its affiliates, the advisors to the other Pacific Oak-sponsored programs and the investment advisers to institutional investors in real estate and real estate-related assets, have some of the same executive officers, directors and other key real estate and debt finance professionals; and these persons will face conflicts of interest in determining which Pacific Oak program or investor should enter into any particular joint venture agreement. These persons may also face a conflict in structuring the terms of the relationship between our interests and the interests of the Pacific Oak-affiliated co-venturer and in managing the joint venture. Any joint venture agreement or transaction between us and a Pacific Oak-affiliated co-venturer will not have the benefit of arm’s-length negotiation of the type normally conducted between unrelated co-venturers. The Pacific Oak-affiliated co-venturer may have economic or business interests or goals that are or may become inconsistent with our business interests or goals. These co-venturers may thus benefit to our and stockholders’ detriment.

Our sponsor, our officers, our advisor and the real estate, debt finance, management and accounting professionals assembled by our advisor face competing demands on their time and this may cause our operations and our stockholders’ investment in us to suffer.

We rely on our sponsor, our officers, our advisor and its affiliates and the key real estate, debt finance, management and accounting professionals that our advisor and its affiliates have assembled for the day‑to‑day operation of our business. All of our executive officers, our affiliated directors and other key real estate and debt finance professionals of our advisor and its affiliates are also officers, affiliated directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor, our dealer manager and/or other Pacific Oak-affiliated entities. As a result of their interests in other Pacific Oak-sponsored programs, their obligations to Pacific Oak-advised investors and the fact that they engage in and they will continue to engage in other business activities on behalf of themselves and others, Messrs. Hall and McMillan and the key real estate, debt finance, management and accounting professionals at our advisor and its affiliates face conflicts of interest in allocating their time among us, other Pacific Oak-sponsored programs, Pacific Oak-advised investors and other business activities in which they are involved. Our executive officers and the key real estate, debt finance, management and accounting professionals affiliated with our sponsor who provide services to us are not obligated to devote a fixed amount of their time to us. In addition, our advisor and its affiliates share many of the same key real estate, management and accounting professionals. During times of intense activity in other programs and ventures, these individuals may devote less time and fewer resources to our business than are necessary or appropriate to manage our business. Furthermore, some or all of these individuals may become employees of another Pacific Oak-sponsored program in an internalization transaction or, if we internalize our advisor, may not become our employees as a result of their relationship with other Pacific Oak-sponsored programs. If these events occur, the returns on our investments, and the value of our stockholders’ investment in us, may decline.

If we were to internalize our management or if another investment program, whether sponsored or advised by affiliates of our advisor or otherwise, conducts its own internalization transaction, we could incur significant costs and/or our business could be harmed.

At some point in the future, we may consider internalizing the functions performed for us by our advisor or its affiliates. Any internalization transaction could result in significant payments to the principals of our advisor and its affiliates, including in the form of our stock which could reduce the percentage ownership of our then existing stockholders and concentrate ownership in the owners of our advisor and its affiliates. In addition, we rely on persons employed by our advisor or its affiliates to manage our day-to-day operating and acquisition activities. If we were to effectuate an internalization of our advisor or its affiliates, we may not be able to retain all of the employees of our advisor or its affiliates or to maintain relationships with other entities sponsored or advised by affiliates of our advisor. In addition, some of the employees of our advisor or its affiliates may provide services to one or more other investment programs. These programs or third parties may decide to retain some or all of the key employees in the future. If this occurs, these programs could hire certain of the persons currently employed by our advisor or its affiliates who are most familiar with our business and operations, thereby potentially adversely impacting our business.

All of our executive officers, our affiliated directors and the key real estate and debt finance professionals assembled by our advisor and its affiliates face conflicts of interest related to their positions and/or interests in our advisor and its affiliates, which could hinder our ability to implement our business strategy and to generate returns to our stockholders.

All of our executive officers, our affiliated directors and the key real estate and debt finance professionals assembled by our advisor are also executive officers, affiliated directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor, our dealer manager, and/or other Pacific Oak-affiliated investment advisors that are the sponsors of other Pacific Oak-sponsored programs or are the advisors of Pacific Oak-advised investors. As a result, they owe fiduciary duties to each of these entities, their stockholders, members and limited partners and these investors, which fiduciary duties may from time-to-time conflict with the fiduciary duties that they owe to us and our stockholders. Their loyalties to these other entities and investors could result in action or inaction that is detrimental to our business, which could harm the implementation of our business strategy and our investment and leasing opportunities. Further, Messrs. Hall and McMillan and existing and future Pacific Oak-sponsored programs and Pacific Oak-advised investors generally are not and will not be prohibited from engaging, directly or indirectly, in any business or from possessing interests in any other business venture or ventures, including businesses and ventures involved in the acquisition, development, ownership, leasing or sale of real estate investments. If we do not successfully implement our business strategy, we may be unable to generate the cash needed to pay distributions to our stockholders and to maintain or increase the value of our assets.

Risks Related to Our Corporate Structure

Our charter limits the number of shares a person may own, which may discourage a takeover that could otherwise result in a premium price to our stockholders.

Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT. To help us comply with the REIT ownership requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), our charter prohibits a person from directly or constructively owning more than 9.8% of our outstanding shares, unless exempted by our board of directors. This restriction may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for holders of our common stock.

Our charter permits our board of directors to issue stock with terms that may subordinate the rights of our common stockholders or discourage a third party from acquiring us in a manner that could result in a premium price to our stockholders.

Our board of directors may classify or reclassify any unissued common stock or preferred stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms or conditions of redemption of any such stock. Thus, our board of directors could authorize the issuance of preferred stock with priority as to distributions and amounts payable upon liquidation over the rights of the holders of our common stock. Such preferred stock could also have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price to holders of our common stock.

Our stockholders’ investment return may be reduced if we are required to register as an investment company under the Investment Company Act; if we or our subsidiaries become an unregistered investment company, we could not continue our business.

Neither we nor any of our subsidiaries intend to register as investment companies under the Investment Company Act of 1940, as amended (the “Investment Company Act”). If we or our subsidiaries were obligated to register as investment

companies, we would have to comply with a variety of substantive requirements under the Investment Company Act that impose, among other things:

•limitations on capital structure;

•restrictions on specified investments;

•prohibitions on transactions with affiliates; and

•compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses.

Under the relevant provisions of Section 3(a)(1) of the Investment Company Act, an investment company is any issuer that:

•pursuant to section 3(a)(1)(A), is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities (the “primarily engaged test”); or

•pursuant to section 3(a)(1)(C), is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of such issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis (the “40% test”). “Investment securities” excludes U.S. government securities and securities of majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) (relating to private investment companies).

With respect to the primarily engaged test, we and our Operating Partnership are holding companies and do not intend to invest or trade in securities ourselves. Rather, through the majority-owned subsidiaries of our Operating Partnership, we and our Operating Partnership will be primarily engaged in the non-investment company businesses of these subsidiaries, namely the business of purchasing or otherwise acquiring real estate and real estate-related assets.

If any of the subsidiaries of our Operating Partnership fail to meet the 40% test, we believe they will usually, if not always, be able to rely on Section 3(c)(5)(C) of the Investment Company Act for an exception from the definition of an investment company. Otherwise, they should be able to rely on the exceptions for private investment companies pursuant to Section 3(c)(1) and Section 3(c)(7) of the Investment Company Act. As reflected in no-action letters, the SEC staff’s position on Section 3(c)(5)(C) generally requires that an issuer maintain at least 55% of its assets in “mortgages and other liens on and interests in real estate,” or qualifying assets; at least 80% of its assets in qualifying assets plus real estate-related assets; and no more than 20% of the value of its assets in other than qualifying assets and real estate-related assets, which we refer to as miscellaneous assets. To constitute a qualifying asset under this 55% requirement, a real estate interest must meet various criteria based on no-action letters. We expect that any of the subsidiaries of our Operating Partnership relying on Section 3(c)(5)(C) will invest at least 55% of its assets in qualifying assets, and approximately an additional 25% of its assets in other types of real estate-related assets. If any subsidiary relies on Section 3(c)(5)(C), we expect to rely on guidance published by the SEC staff or on our analyses of guidance published with respect to types of assets to determine which assets are qualifying real estate assets and real estate-related assets.

Rapid changes in the values of our assets may make it more difficult for us to maintain our qualification as a REIT or our exception from the definition of an investment company under the Investment Company Act.

If the market value or income potential of our qualifying real estate assets changes as compared to the market value or income potential of our non-qualifying assets, or if the market value or income potential of our assets that are considered “real estate-related assets” under the Investment Company Act or REIT qualification tests changes as compared to the market value or income potential of our assets that are not considered “real estate-related assets” under the Investment Company Act or REIT qualification tests, whether as a result of increased interest rates, prepayment rates or other factors, we may need to modify our investment portfolio in order to maintain our REIT qualification or exception from the definition of an investment company. If the decline in asset values or income occurs quickly, this may be especially difficult, if not impossible, to accomplish. This difficulty may be exacerbated by the illiquid nature of many of the assets that we may own. We may have to make investment decisions that we otherwise would not make absent REIT and Investment Company Act considerations.

Our stockholders will have limited control over changes in our policies and operations, which increases the uncertainty and risks our stockholders face.

Our board of directors determines our major policies, including our policies regarding financing, growth, debt capitalization, REIT qualification and distributions. Our board of directors may amend or revise these and other policies without a vote of the stockholders. Under Maryland General Corporation Law and our charter, our stockholders have a right to vote only on limited matters. Our board’s broad discretion in setting policies and our stockholders’ inability to exert control over those policies increases the uncertainty and risks our stockholders face.

Our stockholders may not be able to sell their shares under our share redemption program and, if our stockholders are able to sell their shares under the program, they may not be able to recover full the amount of their investment in our shares.

Our share redemption program includes numerous restrictions that limit our stockholders’ ability to sell their shares. Our stockholders must hold their shares for at least one year in order to participate in the share redemption program, except for redemptions sought upon a stockholder’s death, “qualifying disability” or “determination of incompetence.” We limit the number of shares redeemed pursuant to the share redemption program as follows: (i) during any calendar year, we may redeem no more than 5% of the weighted-average number of shares outstanding during the prior calendar year and (ii) during 2024, we may redeem no more than $2.2 million of shares in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence”. During the year ended December 31, 2023, we made available $6.0 million for redemptions in connection with a stockholder's death, “qualifying disability”, or “determination of incompetence” and are carry forward until depleted. We may increase or decrease this limit upon ten business days’ notice to stockholders. Further, we have no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency. These limits may prevent us from accommodating all redemption requests made in any year. Our board is free to amend, suspend or terminate the share redemption program upon 10 business days’ notice.

The price at which we will redeem shares under the program is 95% of our most recent estimated value per share.

The most recent estimated value per share of our common stock is $8.03. For a full description of the methodologies and assumptions used to value our assets and liabilities in connection with the calculation of the estimated value per share, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Market Information.” The value of our shares will fluctuate over time in response to developments related to individual assets in our portfolio and the management of those assets and in response to the real estate and finance markets. As such, the estimated value per share does not take into account developments in our portfolio since November 30, 2023. We currently expect to utilize our advisor and/or an independent valuation firm to update our estimated value per share no later than December 2024. Upon updating our estimated value per share, the redemption price per share will also change. Because of the restrictions of our share redemption program, our stockholders may not be able to sell their shares under the program, and if stockholders are able to sell their shares, depending upon the then current redemption price, they may not recover the amount of their investment in us.

The estimated value per share of our common stock may not reflect the value that stockholders will receive for their investment.

On November 30, 2023, our board of directors approved an estimated value per share of our common stock of $8.03 based on the estimated value of our assets less the estimated value of our liabilities, or net asset value, divided by the number of shares outstanding as of September 30, 2023. There were no material changes between September 30, 2023 and November 30, 2023 to the net values of our assets and liabilities that materially impacted the overall estimated value per share. We are providing this estimated value per share to assist broker-dealers that participated in our initial public offering in meeting their customer account statement reporting obligations under National Association of Securities Dealers Conduct Rule 2340 as required by the Financial Industry Regulatory Authority (“FINRA”). This valuation was performed in accordance with the provisions of and also to comply with Practice Guideline 2013–01, Valuations of Publicly Registered Non-Listed REITs, issued by the Investment Program Association (“IPA”) in April 2013. The estimated value per share was based upon the recommendation and valuation prepared by our advisor.

As with any valuation methodology, the methodologies used are based upon a number of estimates and assumptions that may not be accurate or complete. Different parties with different assumptions and estimates could derive a different estimated value per share, and these differences could be significant. The estimated value per share is not audited and does not represent the fair value of our assets less our liabilities according to GAAP, nor does it represent a liquidation value of our assets and liabilities or the amount at which our shares of common stock would trade at on a national securities exchange. The estimated value per share does not reflect a discount for the fact that we are externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated value per share also does not take into account estimated disposition costs and fees for real estate properties that are not held for sale, debt prepayment penalties that could apply upon the prepayment of certain of our debt obligations or the impact of restrictions on the assumption of debt. The estimated value per share does consider any participation or incentive fees that would be due to our advisor based on our aggregate net asset value and that would be payable in our hypothetical liquidation as of the valuation date in accordance with the terms of our advisory agreement.

Accordingly, with respect to the estimated value per share, we can give no assurance that:

•a stockholder would be able to resell his or her shares at this estimated value per share;

•a stockholder would ultimately realize distributions per share equal to our estimated value per share upon liquidation of our assets and settlement of our liabilities or a sale of the company;

•our shares of common stock would trade at the estimated value per share on a national securities exchange;

•an independent third-party appraiser or other third-party valuation firm would agree with our estimated value per share; or

•the methodology used to estimate our value per share would be acceptable to FINRA or for compliance with ERISA reporting requirements.

For a full description of the methodologies and assumptions used to value our assets and liabilities in connection with the calculation of the estimated value per share, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Market Information.” We currently expect to utilize our advisor and/or an independent valuation firm to update the estimated value per share in December 2024.

Our investors’ interest in us will be diluted if we issue additional shares, which could reduce the overall value of their investment.

Our common stockholders do not have preemptive rights to any shares we issue in the future. Our charter authorizes us to issue 1,010,000,000 shares of capital stock, of which 1,000,000,000 shares are designated as common stock and 10,000,000 shares are designated as preferred stock. Our board of directors may increase the number of authorized shares of capital stock without stockholder approval. Our board may elect to (i) sell additional shares in our current or future public offerings, including through our dividend reinvestment plan if we elect to resume it, (ii) issue equity interests in private offerings, (iii) issue shares to our advisor, or its successors or assigns, in payment of an outstanding fee obligation or (iv) issue shares of our common stock to sellers of assets we acquire in connection with an exchange of limited partnership interests of the Operating Partnership. To the extent we issue additional equity interests, our stockholders’ percentage ownership interest in us will be diluted. In addition, depending upon the terms and pricing of any additional offerings, the use of the proceeds and the value of our investments, our stockholders may also experience dilution in the book value and fair value of their shares and in the earnings and distributions per share.

Payment of fees to our advisor and its affiliates reduces cash available for investment and distribution and increases the risk that our stockholders will not be able to recover the amount of their investment in our shares.

Our advisor and its affiliates perform services for us in connection with the selection, acquisition, origination, management, and administration of our investments. We pay them substantial fees for these services, which results in immediate dilution to the value of our stockholders’ investment and reduces the amount of cash available for investment or distribution to stockholders. Compensation to be paid to our advisor and its affiliates may be increased subject to approval by our conflicts committee and the other limitations in our charter, which would further dilute our stockholders’ investment and reduce the amount of cash available for investment or distribution to stockholders.

We may also pay significant fees during our listing/liquidation stage. Although most of the fees payable during our listing/liquidation stage are contingent on our investors first enjoying agreed-upon investment returns, the investment-return thresholds may be reduced subject to approval by our conflicts committee and the other limitations in our charter.

Therefore, these fees increase the risk that the amount available for distribution to common stockholders upon a liquidation of our portfolio would be less than the price paid by our stockholders to purchase shares in our initial public offering. These substantial fees and other payments also increase the risk that our stockholders will not be able to resell their shares at a profit, even if our shares are listed on a national securities exchange.

Failure to procure adequate capital and funding would negatively impact our results and may, in turn, negatively affect our ability to make distributions to our stockholders.

We depend upon the availability of adequate funding and capital for our operations. The failure to secure acceptable financing could reduce our taxable income, as our investments would no longer generate the same level of net interest income due to the lack of funding or increase in funding costs. A reduction in our net income could reduce our liquidity and our ability to make distributions to our stockholders. We cannot assure our stockholders that any, or sufficient, funding or capital will be available to us in the future on terms that are acceptable to us. Therefore, in the event that we cannot obtain sufficient funding on acceptable terms, there may be a negative impact on our ability to make distributions.

Although we are not currently afforded the protection of the Maryland General Corporation Law relating to deterring or defending hostile takeovers, our board of directors could opt into these provisions of Maryland law in the future, which may discourage others from trying to acquire control of us and may prevent our stockholders from receiving a premium price for their stock in connection with a business combination.

Under Maryland law, “business combinations” between a Maryland corporation and certain interested stockholders or affiliates of interested stockholders are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. Also under Maryland law, control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent

approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquirer, an officer of the corporation or an employee of the corporation who is also a director of the corporation are excluded from the vote on whether to accord voting rights to the control shares. Should our board of directors opt into these provisions of Maryland law, it may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer. Similarly, provisions of Title 3, Subtitle 8 of the Maryland General Corporation Law could provide similar anti-takeover protection.

Our charter includes an anti-takeover provision that may discourage a stockholder from launching a tender offer for our shares.

Our charter provides that any tender offer made by a stockholder, including any “mini-tender” offer, must comply with most provisions of Regulation 14D of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The offering stockholder must provide us with notice of such tender offer at least 10 business days before initiating the tender offer. If the offering stockholder does not comply with these requirements, we will have the right to redeem that stockholder’s shares and any shares acquired in such tender offer. In addition, the noncomplying stockholder shall be responsible for all of our expenses in connection with that stockholder’s noncompliance. This provision of our charter may discourage a stockholder from initiating a tender offer for our shares and prevent our stockholders from receiving a premium price for their shares in such a transaction.

General Risks Related to Investments

Our investments will be subject to the risks typically associated with real estate.

We have invested in and will continue to invest in a diverse portfolio of opportunistic real estate, real estate-related loans, real estate equity securities and other real estate-related investments. Each of these investments will be subject to the risks typically associated with real estate. Our potential investments in residential and commercial mortgage-backed securities, collateralized debt obligations and other real estate-related investments may be similarly affected by real estate property values. The value of real estate may be adversely affected by a number of risks, including:

•natural disasters such as hurricanes, earthquakes, floods and pandemics;

•acts of war or terrorism;

•adverse changes in national and local economic and real estate conditions;

•an oversupply of (or a reduction in demand for) space in the areas where particular properties are located and the attractiveness of particular properties to prospective tenants;

•changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance therewith and the potential for liability under applicable laws;

•costs of remediation and liabilities associated with environmental conditions affecting properties; and

•the potential for uninsured or underinsured property losses.

The value of each property is affected significantly by its ability to generate cash flow and net income, which in turn depends on the amount of rental or other income that can be generated net of expenses required to be incurred with respect to the property. Many expenditures associated with properties (such as operating expenses and capital expenditures) cannot be reduced when there is a reduction in income from the properties. These factors may have a material adverse effect on the ability of our borrowers to pay their loans and our tenants to pay their rent, as well as on the value that we can realize from other real estate-related assets we originate, own or acquire.

We depend on tenants for revenue, and lease defaults or terminations could reduce our net income and limit our ability to make distributions to our stockholders.

The success of our real estate investments materially depends on the financial stability of our tenants. A default or termination by a significant tenant on its lease payments to us would cause us to lose the revenue associated with such lease and could require us to find an alternative source of revenue to meet mortgage payments and prevent a foreclosure, if the property is subject to a mortgage. In the event of a tenant default or bankruptcy, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-leasing our property. If a tenant defaults on or terminates a significant lease, we may be unable to lease the property for the rent previously received or sell the property without incurring a loss. These events could cause us to reduce the amount of distributions to our stockholders.

We are dependent on the third-party manager of our hotel.

We currently own one hotel property. In order to qualify as a REIT, we are not able to operate any hotel properties or participate in the decisions affecting the daily operations of any such hotels. We will lease any hotels we acquire to a “taxable REIT subsidiary” or “TRS” in which we may own up to a 100% interest. Our TRS will enter into management agreements with eligible independent contractors that are not our subsidiaries or otherwise controlled by us to manage the hotel. Thus, independent hotel operators, under management agreements with our TRS, will control the daily operations of any hotels we own.

We depend on the independent management company to adequately operate our hotel as provided in the management agreements. We will not have the authority to require any hotel to be operated in a particular manner or to govern any particular aspect of the daily operations of any hotel (for instance, setting room rates). Thus, even if we believe our hotel is being operated inefficiently or in a manner that does not result in satisfactory occupancy rates, revenue per available room and average daily rates, we may not be able to force the management company to change its method of operation of our hotel. We can only seek redress if a management company violates the terms of the applicable management agreement with the TRS, and then only to the extent of the remedies provided for under the terms of the management agreement. In the event that we need to replace our management company, we may be required by the terms of the management agreement to pay substantial termination fees and may experience significant disruptions at our hotel.

Properties that have significant vacancies could be difficult to sell, which could diminish the return on these properties.

A property may incur vacancies either by the expiration of tenant leases or the continued default of tenants under their leases. If vacancies continue for a long period of time, we may suffer reduced revenues resulting in less cash available to distribute to our stockholders. In addition, because a property’s market value depends principally upon the value of the leases associated with that property, the resale value of a property with high or prolonged vacancies could suffer, which could further reduce our returns.

Our opportunistic property-acquisition strategy involves a higher risk of loss than would a strategy of investing in other properties.

A substantial portion of our portfolio consists of direct investments in opportunistic real estate. We consider opportunistic or enhanced-return properties to be properties with significant possibilities for short-term capital appreciation, such as non-stabilized properties, properties with moderate vacancies or near-term lease rollovers, poorly managed and positioned properties, properties owned by distressed sellers and built-to-suit properties. These properties may include, but are not limited to, office, industrial and retail properties, hospitality properties and undeveloped residential lots.

Traditional performance metrics of real estate assets may not be meaningful for opportunistic real estate. Non-stabilized properties, for example, do not have stabilized occupancy rates to provide a useful measure of revenue. Appraisals may provide a sense of the value of the investment, but any appraisal of the property will be based on numerous estimates, judgments and assumptions that significantly affect the appraised value of the underlying property. Further, an appraisal of a non-stabilized property, in particular, involves a high degree of subjectivity due to high vacancy levels and uncertainties with respect to future market rental rates and timing of lease-up and stabilization. Accordingly, different assumptions may materially change the appraised value of the property. In addition, the value of the property will change over time.

In addition, we may pursue more than one strategy to create value in an opportunistic real estate investment. These strategies may include development, redevelopment, or lease-up of such property. Our ability to generate a return on these investments will depend on numerous factors, some or all of which may be out of our control, such as (i) our ability to correctly price an asset that is not generating an optimal level of revenue or otherwise performing under its potential, (ii) our ability to choose and execute on a successful value-creating strategy, (iii) our ability to avoid delays, regulatory hurdles, and other potential impediments, (iv) local market conditions, and (v) competition for similar properties in the same market. The factors described above make it challenging to evaluate opportunistic real estate investments and make investments in such properties riskier than investments in other properties.

Investment in non-conforming and non-investment grade loans may involve increased risk of loss.

Loans we acquire or originate may not conform to conventional loan criteria applied by traditional lenders and may not be rated or may be rated as non-investment grade. Non-investment grade ratings for these loans typically result from the overall leverage of the loans, the lack of a strong operating history for the properties underlying the loans, the borrowers’ credit history, the properties’ underlying cash flow or other factors. As a result, non-conforming and non-investment grade loans we acquire or originate may have a higher risk of default and loss than conventional loans. Any loss we incur may reduce distributions to stockholders and adversely affect the value of our common stock.

Risks of cost overruns and non-completion of the construction or renovation of the properties underlying loans we make or acquire may materially and adversely affect our investment.

The renovation, refurbishment or expansion by a borrower under a mortgaged or leveraged property involves risks of cost overruns and non-completion. Costs of construction or improvements to bring a property up to standards established for the market position intended for that property may exceed original estimates, possibly making a project uneconomical. Other risks may include environmental risks and the possibility of construction, rehabilitation and subsequent leasing of the property not being completed on schedule. If such construction or renovation is not completed in a timely manner, or if it costs more than expected, the borrower may experience a prolonged impairment of net operating income and may not be able to make payments on our investment.

Investments that are not United States government insured involve risk of loss.

We may originate and acquire uninsured loans and assets as part of our investment strategy. Such loans and assets may include mortgage loans, mezzanine loans and bridge loans. While holding such interests, we are subject to risks of borrower defaults, bankruptcies, fraud, losses and special hazard losses that are not covered by standard hazard insurance. In the event of any default under loans, we bear the risk of loss of principal and nonpayment of interest and fees to the extent of any deficiency between the value of the collateral and the principal amount of the loan. To the extent we suffer such losses with respect to our investments in such loans, the value of our company and the price of our common stock may be adversely affected.

Prepayments can adversely affect the yields on our investments.

The yields of our assets may be affected by the rate of prepayments differing from our projections. Prepayments on debt instruments, where permitted under the debt documents, are influenced by changes in current interest rates and a variety of economic, geographic and other factors beyond our control, and consequently, such prepayment rates cannot be predicted with certainty. If we are unable to invest the proceeds of any prepayments, we receive in assets with at least an equivalent yield, the yield on our portfolio will decline. In addition, we may acquire assets at a discount or premium and if the asset does not repay when expected, our anticipated yield may be impacted. Under certain interest rate and prepayment scenarios we may fail to recoup fully our cost of acquisition of certain investments.

If credit spreads widen before we obtain long-term financing for our assets, the value of our assets may suffer.

We will price our assets based on our assumptions about future credit spreads for financing of those assets. We expect to obtain longer-term financing for our assets using structured financing techniques in the future. In such financings, interest rates are typically set at a spread over a certain benchmark, such as the yield on United States Treasury obligations, swaps, or SOFR. If the spread that borrowers will pay over the benchmark widens and the rates, we charge on our assets to be securitized are not increased accordingly, our income may be reduced or we may suffer losses.

Hedging against interest rate and foreign currency exposure may adversely affect our earnings, limit our gains or result in losses, which could adversely affect cash available for distribution to our stockholders.

We have entered into, and may continue to enter into, interest rate swap agreements and other interest rate and foreign currency hedging strategies. Our hedging activity will vary in scope based on the level of interest rates, the type of portfolio investments held, the foreign currency held and other changing market conditions. Interest rate and foreign currency hedging may fail to protect or could adversely affect us because, among other things:

•interest rate and foreign currency hedging can be expensive, particularly during periods of rising and volatile interest rates or exchange rates, as applicable;

•available interest rate and foreign currency hedging products may not correspond directly with the risk for which protection is sought;

•the duration of the hedge may not match the duration of the related liability or asset;

•the amount of income that a REIT may earn from hedging transactions to offset losses due to fluctuations in interest rates is limited by federal tax provisions governing REITs;

•the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction;

•the party owing money in the hedging transaction may default on its obligation to pay; and

•we may purchase a hedge that turns out not to be necessary, i.e., a hedge that is out of the money.

Any hedging activity we engage in may adversely affect our earnings, which could adversely affect cash available for distribution to our stockholders. Therefore, while we may enter into such transactions to seek to reduce interest rate and foreign currency risks, unanticipated changes in interest rates or exchange rates, as applicable, may result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged or liabilities being hedged may vary materially. Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and the interest rate risk or exchange rate risk sought to be hedged. Any such imperfect correlation may prevent us from achieving the intended accounting treatment and may expose us to risk of loss.

Hedging instruments often are not traded on regulated exchanges, guaranteed by an exchange or its clearing house, or regulated by any U.S. or foreign governmental authorities and involve risks and costs.

The cost of using hedging instruments increases as the period covered by the instrument increases and during periods of rising and volatile interest rates. We may increase our hedging activity and thus increase our hedging costs during periods when interest rates are volatile or rising and hedging costs have increased. In addition, hedging instruments involve risk since they often are not traded on regulated exchanges, guaranteed by an exchange or its clearing house, or regulated by any U.S. or foreign governmental authorities. Consequently, there are no requirements with respect to record keeping, financial responsibility or segregation of customer funds and positions. Furthermore, the enforceability of agreements underlying derivative transactions may depend on compliance with applicable statutory, commodity and other regulatory requirements and, depending on the identity of the counterparty, applicable international requirements. The business failure of a hedging counterparty with whom we enter into a hedging transaction will most likely result in a default. Default by a party with whom we enter into a hedging transaction may result in the loss of unrealized profits and force us to cover our resale commitments, if any, at the then current market price. Although generally we will seek to reserve the right to terminate our hedging positions, it may not always be possible to dispose of or close out a hedging position without the consent of the hedging counterparty, and we may not be able to enter into an offsetting contract in order to cover our risk. We cannot be certain that a liquid secondary market will exist for hedging instruments purchased or sold, and we may be required to maintain a position until exercise or expiration, which could result in losses.

We will assume the credit risk of our counterparties with respect to derivative transactions.

We may enter into derivative contracts for risk management purposes to hedge our exposure to cash flow variability caused by changing interest rates on our variable rate notes payable. These derivative contracts generally are entered into with bank counterparties and are not traded on an organized exchange or guaranteed by a central clearing organization. We would therefore assume the credit risk that our counterparties will fail to make periodic payments when due under these contracts or become insolvent. If a counterparty fails to make a required payment, becomes the subject of a bankruptcy case, or otherwise defaults under the applicable contract, we will have the right to terminate all outstanding derivative transactions with that counterparty and settle them based on their net market value or replacement cost. In such an event, we may be required to make a termination payment to the counterparty, or we may have the right to collect a termination payment from such counterparty. We assume the credit risk that the counterparty will not be able to make any termination payment owing to us. We may not receive any collateral from a counterparty, or we may receive collateral that is insufficient to satisfy the counterparty’s obligation to make a termination payment. If a counterparty is the subject of a bankruptcy case, we will be an unsecured creditor in such case unless the counterparty has pledged sufficient collateral to us to satisfy the counterparty’s obligations to us.

We will assume the risk that our derivative counterparty may terminate transactions early.

If we fail to make a required payment or otherwise default under the terms of a derivative contract, the counterparty will have the right to terminate all outstanding derivative transactions between us and that counterparty and settle them based on their net market value or replacement cost. In certain circumstances, the counterparty may have the right to terminate derivative transactions early even if we are not defaulting. If our derivative transactions are terminated early, it may not be possible for us to replace those transactions with another counterparty, on as favorable terms or at all.

We may be required to collateralize our derivative transactions.

We may be required to secure our obligations to our counterparties under our derivative contracts by pledging collateral to our counterparties. That collateral may be in the form of cash, securities, or other assets. If we default under a derivative contract with a counterparty, or if a counterparty otherwise terminates one or more derivative contracts early, that counterparty may apply such collateral toward our obligation to make a termination payment to the counterparty. If we have pledged securities or other assets, the counterparty may liquidate those assets in order to satisfy our obligations. If we are required to post cash or securities as collateral, such cash or securities will not be available for use in our business. Cash or securities pledged to counterparties may be repledged by counterparties and may not be held in segregated accounts. Therefore, in the event of a counterparty insolvency, we may not be entitled to recover some, or all collateral pledged to that counterparty, which could result in losses and have an adverse effect on our operations.

Our investments in preferred and common equity securities will be subject to the specific risks relating to the particular issuer of the securities and may involve greater risk of loss than secured debt financings.

We may make equity investments in funds or corporate entities with a primary focus on the commercial real estate and real estate finance industries or with significant exposure to real estate, such as REITs, hotels and gaming companies. We may purchase the common or preferred stock of these entities or purchase or write options with respect to their stock. We may eventually seek to acquire or gain a controlling interest in the companies that we target. We do not expect our non-controlling equity investments in other public companies to represent a substantial portion of our assets at any one time. We may also invest in preferred equity securities issued by funds or corporate entities with a primary focus on the commercial real estate and

real estate finance industries or with significant exposure to real estate. Our investments in preferred and common equity securities will involve special risks relating to the particular issuer of the securities, including the financial condition and business outlook of the issuer. Issuers that are REITs and other real estate companies are subject to the inherent risks associated with real estate investments. Furthermore, preferred and common equity securities may involve greater risk of loss than secured debt financings due to a variety of factors, including that such investments are generally unsecured and may also be subordinated to other obligations of the issuer. As a result, investments in preferred and common equity securities are subject to risks of (i) limited liquidity in the secondary trading market, (ii) substantial market price volatility resulting from changes in prevailing interest rates, (iii) subordination to the claims of banks and senior lenders to the issuer, (iv) the operation of mandatory sinking fund or call/redemption provisions during periods of declining interest rates that could cause the issuer to reinvest redemption proceeds in lower yielding assets, (v) the possibility that earnings of the issuer may be insufficient to meet its debt service and distribution obligations, and (vi) the declining creditworthiness and potential for insolvency of the issuer during periods of rising interest rates and economic downturn. These risks may adversely affect the value of outstanding preferred and common equity securities and the ability of the issuers thereof to make principal, interest and/or distribution payments to us.

Declines in the market values of our investments may adversely affect periodic reported results of operations and credit availability, which may reduce earnings and, in turn, cash available for distribution to our stockholders.

Our investments in equity securities are carried at estimated fair value and temporary changes in the market values of those assets will be directly charged or credited to the income statement.

A decline in the market value of our assets may adversely affect us, particularly in instances where we have borrowed money based on the market value of those assets. If the market value of those assets declines, the lender may require us to post additional collateral to support the loan. If we were unable to post the additional collateral, we may have to sell assets at a time when we might not otherwise choose to do so. A reduction in credit available may reduce our earnings and, in turn, cash available for distribution to stockholders.

Further, credit facility providers may require us to maintain a certain amount of cash reserves or to set aside unlevered assets sufficient to maintain a specified liquidity position, which would allow us to satisfy our collateral obligations. As a result, we may not be able to leverage our assets as fully as we would choose, which could reduce our return on equity. In the event that we are unable to meet these contractual obligations, our financial condition could deteriorate rapidly.

Market values of our investments may decline for a number of reasons, such as changes in prevailing interest rates, increases in defaults, increases in voluntary prepayments for our investments that are subject to prepayment risk, widening of credit spreads, downgrades of ratings of the securities by ratings agencies and global recession or significant declines in the overall economy.

Our joint venture partners could take actions that decrease the value of an investment to us and lower our stockholders’ overall return.

We have entered into, and may continue to enter into, joint ventures with third parties to make investments. We may also make investments in partnerships or other co-ownership arrangements or participations. Such investments may involve risks not otherwise present with other methods of investment, including, for example, the following risks:

•that our co-venturer or partner in an investment could become insolvent or bankrupt;

•that such co-venturer or partner may at any time have economic or business interests or goals that are or that become inconsistent with our business interests or goals; or

•that such co-venturer or partner may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives.

Any of the above might subject us to liabilities and thus reduce our returns on our investment with that co-venturer or partner.

We depend on debtors for our revenue, and, accordingly, our revenue and our ability to make distributions to our stockholders will be dependent upon the success and economic viability of such debtors.

The success of our investments in real estate-related loans and other real estate-related investments materially depend on the financial stability of the debtors underlying such investments. The inability of a single major debtor or a number of smaller debtors to meet their payment obligations could result in reduced revenue or losses for us.

Our inability to sell a property at the time and on the terms we want could limit our ability to pay cash distributions to our stockholders.

Many factors that are beyond our control affect the real estate market and could affect our ability to sell properties for the price, on the terms or within the time frame that we desire. These factors include general economic conditions, the availability of financing, interest rates and other factors, including supply and demand. Because real estate investments are relatively

illiquid, we have a limited ability to vary our portfolio in response to changes in economic or other conditions. Further, before we can sell a property on the terms we want, it may be necessary to expend funds to correct defects or to make improvements. However, we can give no assurance that we will have the funds available to correct such defects or to make such improvements. We may be unable to sell our properties at a profit. Our inability to sell properties at the time and on the terms we want could reduce our cash flow and limit our ability to make distributions to our stockholders and could reduce the value of our shares.

Potential development and construction delays and resultant increased costs and risks may hinder our operating results and decrease our net income.

From time to time, we may acquire real property or properties that are under development or construction. Investments in such properties will be subject to the uncertainties associated with the development and construction of real property, including those related to re-zoning land for development, environmental concerns of governmental entities and/or community groups and our builders’ ability to build in conformity with plans, specifications, budgeted costs and timetables. If a builder fails to perform, we may resort to legal action to rescind the purchase or the construction contract or to compel performance. A builder’s performance may also be affected or delayed by conditions beyond the builder’s control. Delays in completing construction could also give tenants the right to terminate preconstruction leases. We may incur additional risks when we make periodic progress payments or other advances to builders before they complete construction. These and other factors can result in increased costs of a project or loss of our investment. In addition, we will be subject to normal lease-up risks relating to newly constructed projects. We also must rely on rental income and expense projections and estimates of the fair market value of property upon completion of construction when agreeing upon a purchase price at the time we acquire the property. If our projections are inaccurate, we may pay too much for a property, and the return on our investment could suffer.

Costs imposed pursuant to governmental laws and regulations may reduce our net income and the cash available for distributions to our stockholders.

Real property and the operations conducted on real property are subject to federal, state and local laws and regulations relating to protection of the environment and human health. We could be subject to liability in the form of fines, penalties or damages for noncompliance with these laws and regulations. These laws and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials, the remediation of contamination associated with the release or disposal of solid and hazardous materials, the presence of toxic building materials, and other health and safety-related concerns.

Some of these laws and regulations may impose joint and several liability on the tenants, owners or operators of real property for the costs to investigate or remediate contaminated properties, regardless of fault, whether the contamination occurred prior to purchase, or whether the acts causing the contamination were legal. Activities of our tenants, the condition of properties at the time we buy them, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties may affect our properties.

The presence of hazardous substances, or the failure to properly manage or remediate these substances, may hinder our ability to sell, rent or pledge such property as collateral for future borrowings. Any material expenditures, fines, penalties, or damages we must pay will reduce our ability to make distributions and may reduce the value of our shares.

The costs of defending against claims of environmental liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims could reduce the amounts available for distribution to our stockholders.

Under various federal, state and local environmental laws, ordinances and regulations, a current or previous real property owner or operator may be liable for the cost of removing or remediating hazardous or toxic substances on, under or in such property. These costs could be substantial. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose liens on property or restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us from entering into leases with prospective tenants that may be impacted by such laws. Environmental laws provide for sanctions for noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for the release of and exposure to hazardous substances, including asbestos-containing materials and lead-based paint. Third parties may seek recovery from real property owners or operators for personal injury or property damage associated with exposure to released hazardous substances. The costs of defending against claims of environmental liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims could reduce the amounts available for distribution to our stockholders.

Costs associated with complying with the Americans with Disabilities Act may decrease cash available for distributions.

Our properties may be subject to the Americans with Disabilities Act of 1990, as amended, or the Disabilities Act. Under the Disabilities Act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The Disabilities Act has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services be made accessible and available to people with disabilities. The Disabilities Act’s requirements could require removal of access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages. Any funds used for Disabilities Act compliance will reduce our net income and the amount of cash available for distributions to our stockholders.

Uninsured losses relating to real property or excessively expensive premiums for insurance coverage could reduce our cash flows and the return on our stockholders’ investment.

There are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters, that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. Insurance risks associated with potential acts of terrorism could sharply increase the premiums we pay for coverage against property and casualty claims. Additionally, mortgage lenders in some cases have begun to insist that commercial property owners purchase coverage against terrorism as a condition for providing mortgage loans. Such insurance policies may not be available at reasonable costs, if at all, which could inhibit our ability to finance or refinance our properties. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. We may not have adequate coverage for such losses. If any of our properties incurs a casualty loss that is not fully insured, the value of our assets will be reduced by any such uninsured loss, which may reduce the value of our shares. In addition, other than any working capital reserve or other reserves we may establish, we have no source of funding to repair or reconstruct any uninsured property. Also, to the extent we must pay unexpectedly large amounts for insurance, we could suffer reduced earnings that would result in lower distributions to our stockholders.

Terrorist attacks and other acts of violence or war may affect the markets in which we plan to operate, which could delay or hinder our ability to meet our investment objectives and reduce our stockholders’ overall return.

Terrorist attacks or armed conflicts may directly impact the value of our properties through damage, destruction, loss or increased security costs. Certain of our investments are located in major metropolitan areas. Insurance risks associated with potential acts of terrorism against office and other properties in major metropolitan areas could sharply increase the premiums we pay for coverage against property and casualty claims. Additionally, mortgage lenders in some cases have begun to insist that specific coverage against terrorism be purchased by commercial owners as a condition for providing loans. We may not be able to obtain insurance against the risk of terrorism because it may not be available or may not be available on terms that are economically feasible. The terrorism insurance that we obtain may not be sufficient to cover loss for damages to our properties as a result of terrorist attacks. In addition, certain losses resulting from these types of events are uninsurable and others may not be covered by our terrorism insurance. The costs of obtaining terrorism insurance and any uninsured losses we may suffer as a result of terrorist attacks could reduce the returns on our investments and limit our ability to make distributions to our stockholders.

Properties acquired as part of portfolios or in bulk may subject us to a variety of risks.

We expect that a substantial portion of future residential home property acquisitions will be purchased as portfolios in bulk from owners of portfolios of residential homes. To the extent the management and leasing of such properties have not been consistent with our property management and leasing standards, we may be subject to a variety of risks, including risks relating to the condition of the properties, the credit quality and employment stability of the tenants and compliance with applicable laws, among others. In addition, financial and other information provided to us regarding such portfolios during our due diligence may not be accurate, and we may not discover such inaccuracies until it is too late to seek remedies against such sellers. To the extent we timely pursue such remedies, we may not be able to successfully prevail against the seller in an action seeking damages for such inaccuracies.

A number of our residential home properties are part of homeowners associations (HOAs), and we and tenants of such properties are subject to the rules and regulations of such HOAs, which may be arbitrary or restrictive. Violations of such rules may subject us to additional fees, penalties, and litigation with such HOAs which would be costly.

A number of our residential home properties are located within HOAs, which are private entities that regulate the activities of owners and occupants of, and levy assessments on, properties in a residential subdivision. We pay all HOA fees and assessments directly. The majority of the HOA fees due on our properties are billed annually. The fees are paid when due by our property managers and are included in our property and operating expenses. HOAs in which we own properties may have or may enact onerous or arbitrary rules that restrict our ability to restore, market or lease our properties or require us to restore or maintain such properties at standards or costs that are in excess of our planned budgets. Such rules may include requirements for landscaping, limitations on signage promoting a property for lease or sale or the requirement that specific

construction materials be used in restorations. Some HOAs also impose limits on the number of property owners who may rent their homes, which, if met or exceeded, would cause us to incur additional costs to sell the property and opportunity costs of lost rental revenue. Furthermore, many HOAs impose restrictions on the conduct of occupants of homes and the use of common areas, and we may have tenants who violate HOA rules and for which we may be liable as the property owner. Additionally, the boards of directors of the HOAs in which we own property may not make important disclosures about the properties or may block our access to HOA records, initiate litigation, restrict our ability to sell our properties, impose assessments or arbitrarily change the HOA rules. We may be unaware of or unable to review or comply with HOA rules before purchasing a property, and any such excessively restrictive or arbitrary regulations may cause us to sell such property at a loss, prevent us from renting such property or otherwise reduce our cash flow from such property, which would have an adverse effect on our returns on these properties.

We are subject to tenant relief laws and may be subject to rent control laws, which could negatively impact our rental revenue.

As an owner of residential home rental properties, we expect that we will regularly be seeking to evict tenants who are not paying their rent or are otherwise in material violation of the terms of their lease. Eviction activities will result in additional legal costs and require the time and attention of our management. The eviction process is typically subject to numerous legal requirements and mandatory “cure” policies, which may increase our costs and delay our ability to gain possession of and stabilize a property. Additionally, state and local landlord-tenant laws may impose legal duties on us to assist tenants in relocating to new housing or restrict our ability to recover certain costs or charge tenants for damage tenants cause to our property. Because such laws vary by state and locality, we will need to be familiar with and take appropriate steps to comply with applicable landlord-tenant laws in the jurisdictions in which we operate, and we will need to incur supervisory and legal expenses to ensure such compliance. To the extent that we do not comply with state or local laws, we may be subjected to civil litigation filed by individuals, a class of plaintiffs or by state or local law enforcement. We may be required to pay our adversaries’ litigation fees and expenses if judgment is entered against us in such litigation or if we settle such litigation.

Furthermore, rent control laws may affect our rental revenue. Especially in times of recession and economic slowdown, rent control initiatives can receive significant political support. If rent control becomes applicable to certain of our properties, the effects on both our rental revenue and the value of such properties could be material and adverse.

Class action, tenants’ rights and consumer rights litigation may result in increased expenses and harm our results.

There are numerous tenants’ rights and consumer rights organizations that operate in our residential home property markets, and, as we grow in scale, we may attract attention from some of these organizations and become a target of legal demands or litigation. With the increased market for residential rentals arising from former homeowners who may have lost their properties, some of these organizations may shift their litigation, lobbying, fundraising and grass roots organizing activities to focus on landlord-tenant issues, including issues relating to the Fair Housing Act, or FHA, and its state law counterparts. While we intend to conduct our business lawfully and in compliance with applicable landlord-tenant and consumer laws, such organizations might work in conjunction with trial and pro bono lawyers in one state or multiple states to attempt to bring claims against us on a class action basis for damages or injunctive relief. We cannot anticipate what form such legal actions might take if initiated or what remedies they may seek. Additionally, these organizations may lobby local county and municipal attorneys or state attorneys general to pursue enforcement or litigation against us or may lobby state and local legislatures to pass new laws and regulations to constrain our business operations. If they are successful in any such endeavors, they could limit our business operations and may impose on us significant litigation expenses, including settlements to avoid continued litigation or judgments for damages or injunctions.

Poor tenant selection and defaults by our tenants may negatively affect our financial performance and reputation.

Our success with residential home rentals will depend, in large part, upon our ability to attract and retain qualified tenants for our residential home properties. This will depend, in turn, upon our ability to screen applicants, identify good tenants and avoid tenants who may default. We will inevitably make mistakes in our selection of tenants, and we may rent to tenants whose default on our leases or failure to comply with the terms of the lease or HOA regulations negatively affect our financial performance, reputation and the quality and value of our properties. For example, tenants may default on payment of rent, make unreasonable and repeated demands for service or improvements, make unsupported or unjustified complaints to regulatory or political authorities, make use of our properties for illegal purposes, damage or make unauthorized structural changes to our properties which may not be fully covered by security deposits, refuse to leave the property when the lease is terminated, engage in domestic violence or similar disturbances, disturb nearby residents with noise, trash, odors or eyesores, fail to comply with HOA regulations, sub-let to less desirable individuals in violation of our leases or permit unauthorized persons to live with them. In addition, defaulting tenants will often be effectively judgment-proof. The process of evicting a defaulting tenant from a family residence can be adversarial, protracted, and costly. Furthermore, some tenants facing eviction may damage or destroy the property. Damage to our properties may significantly delay re-leasing after eviction, necessitate expensive repairs or impair the rental revenue or value of the property, resulting in a lower-than-expected rate of return. In addition, we will incur turnover costs associated with re-leasing the properties, such as marketing expense and brokerage commissions, and will not collect

revenue while the property is vacant. Although we will attempt to work with tenants to prevent such damage or destruction, there can be no assurance that we will be successful in all or most cases. Such tenants will not only cause us not to achieve our financial objectives for the properties in which they live, but may subject us to liability, and may damage our reputation with our other tenants and in the communities where we do business.

Risks Related to Our Financing Strategy

We use leverage in connection with our investments, which increases the risk of loss associated with our investments.

We have financed the acquisition and origination of a portion of our investments with mortgages and other borrowings. Although the use of leverage may enhance returns and increase the number of investments that we can make, it may also substantially increase the risk of loss. Our ability to execute this strategy depends on various conditions in the financing markets that are beyond our control, including liquidity and credit spreads. There can be no assurance that leveraged financing will be available to us on favorable terms or that, among other factors, the terms of such financing will parallel the maturities of the underlying assets acquired. If our strategy is not viable, we will have to find alternative forms of long-term financing for our assets, as secured revolving credit facilities and repurchase facilities may not accommodate long-term financing. This could subject us to more restrictive recourse indebtedness and the risk that debt service on less efficient forms of financing would require a larger portion of our cash flows, thereby reducing cash available for distribution to our stockholders, for our operations and for future business opportunities. If alternative financing is not available, we may have to liquidate assets at unfavorable prices to pay off such financing. The return on our investments and cash available for distribution to our stockholders may be reduced to the extent that changes in market conditions cause the cost of our financing to increase relative to the income that we can derive from the assets we acquire.

We may use leverage in connection with any real estate investments we make, which increases the risk of loss associated with this type of investment.

We may finance the acquisition and origination of certain real estate-related investments with warehouse lines of credit and repurchase agreements. In addition, we may engage in various types of securitizations in order to finance our loan originations. Although the use of leverage may enhance returns and increase the number of investments that we can make, it may also substantially increase the risk of loss. There can be no assurance that leveraged financing will be available to us on favorable terms or that, among other factors, the terms of such financing will parallel the maturities of the underlying assets acquired. If alternative financing is not available, we may have to liquidate assets at unfavorable prices to pay off such financing. The return on our investments and cash available for distribution to our stockholders may be reduced to the extent that changes in market conditions cause the cost of our financing to increase relative to the income that we can derive from the assets we acquire.

Our debt service payments will reduce our cash available for distribution. We may not be able to meet our debt service obligations and, to the extent that we cannot, we risk the loss of some or all of our assets to foreclosure or sale to satisfy our debt obligations. If we utilize repurchase agreement financing and if the market value of the assets subject to a repurchase agreement declines, we may be required to provide additional collateral or make cash payments to maintain the loan to collateral value ratio. If we are unable to provide such collateral or cash repayments, we may lose our economic interest in the underlying assets. Further, credit facility providers and warehouse facility providers may require us to maintain a certain amount of cash reserves or to set aside unleveraged assets sufficient to maintain a specified liquidity position that would allow us to satisfy our collateral obligations. As a result, we may not be able to leverage our assets as fully as we would choose, which could reduce our return on investment. In the event that we are unable to meet these collateral obligations, our financial condition could deteriorate rapidly.

We may not be able to access financing sources on attractive terms, which could adversely affect our ability to execute our business plan.

We may finance our assets over the long-term through a variety of means, including repurchase agreements, credit facilities, issuances of commercial mortgage-backed securities and other structured financings. Our ability to execute this strategy will depend on various conditions in the markets for financing in this manner that are beyond our control, including lack of liquidity and greater credit spreads. We cannot be certain that these markets will remain an efficient source of long-term financing for our assets. If our strategy is not viable, we will have to find alternative forms of long-term financing for our assets, as secured revolving credit facilities and repurchase agreements may not accommodate long-term financing. This could subject us to more recourse indebtedness and the risk that debt service on less efficient forms of financing would require a larger portion of our cash flow, thereby reducing cash available for distribution to our stockholders and funds available for operations as well as for future business opportunities.

High mortgage rates or changes in underwriting standards may make it difficult for us to finance or refinance properties, which could reduce our cash flows from operations and the amount of cash distributions we can make.

If mortgage debt is unavailable at reasonable rates, we may not be able to finance our properties. If we place mortgage debt on a property, we run the risk of being unable to refinance part or all of the property subject to the mortgage debt when it becomes due or of being unable to refinance on favorable terms. If interest rates are higher when we refinance properties subject to mortgage debt, our income could be reduced. We may be unable to refinance or may only be able to partly refinance properties if underwriting standards, including loan to value ratios and yield requirements, among other requirements, are stricter than when we originally financed the properties. If any of these events occur, our cash flow could be reduced and/or we might have to pay down existing mortgages. This, in turn, would reduce cash available for distribution to our stockholders, could cause us to require additional capital and may hinder our ability to raise capital by issuing more stock or by borrowing more money.

Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to make distributions to our stockholders.

When providing financing, a lender may impose restrictions on us that affect our distribution and operating policies and our ability to incur additional debt. Loan agreements into which we enter may contain covenants that limit our ability to further mortgage a property or that prohibit us from discontinuing insurance coverage or replacing our advisor. These or other limitations would decrease our operating flexibility and our ability to achieve our operating objectives.

Increases in interest rates would increase the amount of our debt payments and limit our ability to pay distributions to our stockholders.

We have incurred significant amounts of variable rate debt. Increases in interest rates will increase the cost of that debt, which could reduce our cash flows from operations and the cash we have available to pay distributions to our stockholders. In addition, if we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments at times that may not permit realization of the maximum return on such investments.

In a period of rising interest rates, our interest expense could increase while the interest we earn on our fixed-rate assets would not change, which would adversely affect our profitability.

Our operating results will depend in large part on differences between the income from our assets, net of credit losses and financing costs. Income from our assets may respond more slowly to interest rate fluctuations than the cost of our borrowings. Consequently, changes in interest rates, particularly short-term interest rates, may significantly influence our net income. Increases in these rates will tend to decrease our net income and market value of our assets. Interest rate fluctuations resulting in our interest expense exceeding our interest income would result in operating losses for us and may limit our ability to make distributions to our stockholders. We have incurred debt and increases in interest rates will increase the cost of that debt, which could reduce our cash flow from operations and the cash we have available for distribution to our stockholders. In addition, if we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments at times that may not permit realization of the maximum return on such investments.

Risks related to variable‑rate indebtedness could increase the amount of our debt payments and therefore negatively impact our operating results.

Our debt may be subject to the fluctuation of market interest rates such as SOFR, Prime rate, and other benchmark rates. Should such interest rates increase, our variable rate debt service payments may also increase, reducing cash available for distributions. Furthermore, if we need to refinance existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments at times given the property may not support the same level of loan proceeds which may not permit realization of the maximum return on such investments. Additionally, as it relates to any real estate assets that we may own, an increase in interest rates may negatively impact activity in the consumer market and reduce consumer purchases, which could adversely affect us.

We have broad authority to incur debt and high debt levels could hinder our ability to make distributions and decrease the value of our stockholders’ investment.

Our charter limits our total liabilities to 75% of the cost (before deducting depreciation or other noncash reserves) of our tangible assets; however, we may exceed that limit if the majority of the conflicts committee of our board of directors approves each borrowing in excess of our charter limitation and we disclose such borrowings to our stockholders in our next quarterly report with an explanation from the conflicts committee of the justification for the excess borrowing. As of December 31, 2023, our borrowings and other liabilities were both approximately 71% of the cost (before depreciation and other noncash reserves) and book value (before depreciation) of our tangible assets, respectively. High debt levels would cause us to incur higher interest charges and higher debt service payments and may also be accompanied by restrictive covenants. These factors could limit the amount of cash we have available to distribute and could result in a decline in the value of our stockholders’ investment.

Changes in the value of Israeli currency may materially and adversely affect our results of operations and financial condition.

In February 2020, Pacific Oak SOR BVI issued 254.1 million Israeli new shekels of Series B Bonds to Israeli investors pursuant to a public offering registered with the Israel Securities Authority. The Series B Bonds have principal installment payments equal to 33.33% of the face amount of the Series B Bonds on January 31st of each year from 2024 to 2026. Pacific Oak SOR BVI issued additional Series B Bonds subsequent to the initial issuance and as of December 31, 2023, 1.2 billion Israeli new shekels (approximately $321.7 million as of December 31, 2023) were outstanding. The Series B Bonds have an equal level of security, pari passu, amongst themselves and between them and the initial Series B Bonds without any right of precedence or preference between any of them. Subsequent to December 31, 2023, we made the first Series B Bonds installment payment.

In July 2023, Pacific Oak SOR BVI issued 340.3 million Israeli new shekels of Series C Bonds to Israeli investors pursuant to offerings registered with the Israeli Securities Authority. Pacific Oak SOR BVI issued additional Series C Bonds subsequent to the initial issuance and as of December 31, 2023, 360.0 million Israeli new shekels (approximately $99.5 million as of December 31, 2023) were outstanding. The Series C Bonds have an equal level of security, pari passu, amongst themselves and between them and the initial Series C Bonds without any right of precedence or preference between any of them. The Series C Bonds are collateralized by real estate held for investment (specified lands in Park Highlands and Richardson).

As a result, we are subject to foreign currency risk due to potential fluctuations in exchange rates between Israeli new shekels and U.S. Dollars. More specifically, a significant change in the value of the Israeli new shekels may have an adverse effect on our results of operations and financial condition. We may attempt to mitigate this foreign currency risk by using derivative contracts.

The deed of trust that governs the bonds issued to Israeli investors includes restrictive covenants that may adversely affect our operations, which could limit our ability to make distributions to our stockholders or fund redemptions.

The deed of trust that governs the terms of the bonds issued to Israeli investors contains various restrictive covenants. Such restrictive covenants may prohibit us from making certain investments, selling properties or taking certain other actions that our board of directors otherwise believes to be in our best interests. Such restrictions may adversely affect our operations and limit our ability to make distributions to our stockholders or fund redemptions. Under the deed of trust that governs the Series B Bonds, Pacific Oak SOR BVI must meet financial covenants such as (i) a minimum equity of $475 million; (ii) a maximum debt to capital of 75%; (iii) a minimum adjusted net operating income of $35.0 million for the trailing twelve months and (iv) the volume of development projects should not exceed 10% of the total adjusted balance sheet. Additionally, under the deed of trust that governs the Series C Bonds, Pacific Oak SOR BVI must meet financial covenants such as (i) a minimum equity of $450 million; (ii) a maximum debt to capital of 75%; and (iii) a maximum loan to collateral ratio of 75%. A violation of any of the foregoing financial covenants constitute an event of default, result in an increase of the interest rate of the bonds and cause the bonds to become immediately due and payable.

In certain cases, financings for our investments may be recourse to us.

Generally, commercial real estate financings are structured as nonrecourse to the borrower. However, lenders customarily will require that a creditworthy parent entity enter so-called “recourse carveout” guarantees. For example, a lender might require guarantees from the guarantors for the completion of tenant improvements, payment of the guarantor’s obligation, or against certain bad acts. In addition, certain guarantees typically provide that the loan will be a full personal recourse obligation of the guarantor, for certain actions.

We have limited liquidity relative to our current and anticipated needs, which may limit our ability to retain certain investments and to make new investments.

As of December 31, 2023, we had $289.0 million of debt obligations scheduled to mature over the period from January 1, 2024 through December 31, 2024. Certain of these debt obligations have extension options if we comply with certain debt covenants that may include one or a combination of the following ratios: debt-to-value, debt yield and debt service coverage. In order to satisfy obligations as they mature, we plan to utilize extension options available in the respective loan agreements, may seek to refinance certain debt instruments, may market one or more properties for sale or may negotiate a turnover of one or more secured properties back to the related mortgage lender. We believe that with these options we have sufficient cash on hand and availability to address our debt maturities and capital needs scheduled to mature over the period January 1, 2024 through December 31, 2024. However, tighter financial conditions, higher interest rates and lower asset values may make it more difficult to refinance our loans or to sell assets on favorable terms. In recent years, we have accessed debt capital through the Israeli capital markets, but that source of debt capital may not be available in the future because of changing conditions, such as the recently escalated conflict between Israel and Hamas. We will decide on a case by case basis whether to repay or refinance each of these loans, based on factors such as our available liquidity and when the loan is due, the terms offered, if any, for refinancing, and the value of our equity in the property relative to the outstanding debt balance. It is possible we may choose

not to repay or refinance some of the maturing loans, which would ultimately result in losing possession of the underlying property. Because of our limited liquidity relative to our needs, we may be limited in our ability to retain certain investments and to make new investments, which may have an adverse impact on our financial performance, our ability to make distributions and the value of our shares of common stock. We may be forced to sell an asset on unfavorable terms to improve our liquidity situation and meet our future liquidity needs.

Federal Income Tax Risks

Failure to qualify as a REIT would reduce our net earnings available for investment or distribution.

Our qualification as a REIT will depend upon our ability to meet requirements regarding our organization and ownership, distributions of our income, the nature and diversification of our income and assets and other tests imposed by the Internal Revenue Code. If we fail to qualify as a REIT for any taxable year after electing REIT status, we will be subject to federal income tax on our taxable income at corporate rates (currently, 21% rate). In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year in which we lost our REIT status. Losing our REIT status would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability. In addition, distributions to stockholders would no longer qualify for the dividends-paid deduction and we would no longer be required to pay distributions. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable tax.

Failure to qualify as a REIT would subject us to U.S. federal income tax, which would reduce the cash available for distribution to our stockholders.

We believe that we have operated and will continue to operate in a manner that will allow us to continue to qualify as a REIT for federal income tax purposes, commencing with the taxable year ended December 31, 2010. However, the U.S. federal income tax laws governing REITs are extremely complex, and interpretations of the U.S. federal income tax laws governing qualification as a REIT are limited. Qualifying as a REIT requires us to meet various tests regarding the nature of our assets and our income, the ownership of our outstanding stock, and the amount of our distributions on an ongoing basis. Accordingly, we cannot be certain that we will be successful in operating so we can remain qualified as a REIT. While we intend to continue to operate so that we will qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, including the tax treatment of certain investments we may make, and the possibility of future changes in our circumstances, no assurance can be given that we will so qualify for any particular year. If we fail to qualify as a REIT in any calendar year and we do not qualify for certain statutory relief provisions, we would be required to pay U.S. federal income tax on our taxable income at regular corporate rates, and distributions to our stockholders would not be deductible by us in determining our taxable income. In such a case, we might need to borrow money or sell assets to pay that tax. Our payment of income tax would decrease the amount of our income available for distribution to our stockholders. Furthermore, if we fail to maintain our qualification as a REIT and we do not qualify for certain statutory relief provisions, we no longer would be required to distribute substantially all of our REIT taxable income to our stockholders. Unless our failure to qualify as a REIT were excused under federal tax laws, we would be disqualified from taxation as a REIT for the four taxable years following the year during which qualification was lost.

Our stockholders may have current tax liability on distributions they elect to reinvest in our common stock.

If our stockholders participated in our dividend reinvestment plan, prior to its suspension as of March 28, 2023, they will be deemed to have received, and for U.S. federal income tax purposes will be taxed on, the amount reinvested in shares of our common stock to the extent the amount reinvested was not a tax-free return of capital. In addition, our stockholders will be treated for U.S. federal income tax purposes as having received an additional distribution to the extent the shares are purchased at a discount to fair market value, if any. As a result, unless our stockholders are tax-exempt entities, they may have to use funds from other sources to pay their tax liability on the value of the shares of common stock received.

Even if we qualify as a REIT for U.S. federal income tax purposes, we may be subject to federal, state, local or other tax liabilities that reduce our cash flow and our ability to pay distributions to our stockholders.

Even if we qualify as a REIT for U.S. federal income tax purposes, we may be subject to some federal, state and local taxes on our income or property. For example:

•In order to qualify as a REIT, we must distribute annually at least 90% of our REIT taxable income to our stockholders (which is determined without regard to the dividends-paid deduction or net capital gain). To the extent that we satisfy the distribution requirement but distribute less than 100% of our REIT taxable income and our net capital gain, we will be subject to federal corporate income tax on the undistributed income.

•We will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions we pay in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.

•If we elect to treat property that we acquire in connection with a foreclosure of a mortgage loan or certain leasehold terminations as “foreclosure property,” we may avoid the 100% tax on the gain from a resale of that property, but the income from the sale or operation of that property may be subject to corporate income tax at the highest applicable rate.

•If we sell an asset, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business, our gain would be subject to the 100% “prohibited transaction” tax unless such sale were made by one of our taxable REIT subsidiaries or the sale met certain “safe harbor” requirements under the Internal Revenue Code.

•Any domestic taxable REIT subsidiary, or TRS, of ours will be subject to U.S. federal corporate income tax on its income, and on any non-arm’s-length transactions between us and any TRS, for instance, excessive rents charged to a TRS could be subject to a 100% tax. We may be subject to tax on income from certain activities conducted as a result of taking title to collateral.

•We may be subject to state or local income, property and transfer taxes, such as mortgage recording taxes.

REIT distribution requirements could adversely affect our ability to execute our business plan.

We generally must distribute annually at least 90% of our REIT taxable income, subject to certain adjustments and excluding any net capital gain, in order for U.S. federal corporate income tax not to apply to earnings that we distribute. To the extent that we satisfy this distribution requirement but distribute less than 100% of our REIT taxable income (and any net capital gain), we will be subject to U.S. federal corporate income tax on undistributed amounts. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws. We also may decide to retain net capital gain we earn from the sale or other disposition of our property and pay U.S. federal income tax directly on such income. In that event, our stockholders would be treated as if they earned that income and paid the tax on it directly. However, stockholders that are tax-exempt, such as charities or qualified pension plans, would have no benefit from their deemed payment of such tax liability unless they file U.S. federal income tax returns and thereon seek a refund of such tax. We also will be subject to corporate tax on any undistributed taxable income. We intend to make distributions to our stockholders to comply with the REIT requirements of the Internal Revenue Code.

From time to time, we may generate taxable income greater than our income for financial reporting purposes, or our taxable income may be greater than our cash flow available for distribution to stockholders (for example, where a borrower defers the payment of interest in cash pursuant to a contractual right or otherwise). If we do not have other funds available in these situations, we could be required to borrow funds, sell investments at disadvantageous prices or find another alternative source of funds to pay distributions sufficient to enable us to pay out enough of our taxable income to satisfy the REIT distribution requirements and to avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce our equity. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.

To maintain our REIT status, we may be forced to forego otherwise attractive business or investment opportunities, which may delay or hinder our ability to meet our investment objectives and reduce our stockholders’ overall return.

To qualify as a REIT, we must satisfy certain tests on an ongoing basis concerning, among other things, the sources of our income, nature of our assets and the amounts we distribute to our stockholders. We may be required to pay distributions to stockholders at times when it would be more advantageous to reinvest cash in our business or when we do not have funds readily available for distribution. Compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits and reduce the value of our stockholders’ investment.

If our operating partnership fails to maintain its status as a partnership or a disregarded entity for U.S. federal income tax purposes, its income would be subject to taxation and our REIT status would be terminated.

We currently intend to maintain the status of our operating partnership as a disregarded entity or a partnership for U.S. federal income tax purposes. During periods in which our operating partnership is treated as a disregarded entity, our operating partnership will not be subject to U.S. federal income tax on its income. Rather, its income will be attributed to us as the sole owner for U.S. federal income tax purposes of the operating partnership. However, during periods in which our operating partnership has more than one owner, if the Internal Revenue Service (“IRS”) were to successfully challenge the status of our operating partnership as a partnership, it would potentially be taxable as a corporation. In such event, this would reduce the amount of distributions that our operating partnership could make to us. This would also result in our losing REIT status and becoming subject to a corporate level tax on our own income. This would substantially reduce our cash available to pay distributions and the return on a stockholder’s investment. In addition, if any of the entities through which our operating partnership owns its properties, in whole or in part, loses its characterization as a partnership for U.S. federal income tax purposes, the underlying entity would become subject to taxation as a corporation, thereby reducing distributions to our operating partnership and jeopardizing our ability to maintain REIT status.

Potential characterization of distributions or gain on sale may be treated as unrelated business taxable income to tax-exempt investors.

If (i) all or a portion of our assets are subject to the rules relating to taxable mortgage pools, (ii) we are a “pension-held REIT,” (iii) a tax-exempt stockholder has incurred debt to purchase or hold our common stock, or (iv) the residual Real Estate Mortgage Investment Conduit interests, or REMICs, we buy (if any) generate “excess inclusion income,” then a portion of the distributions to and, in the case of a stockholder described in clause (iii), gains realized on the sale of common stock by such tax-exempt stockholder may be subject to U.S. federal income tax as unrelated business taxable income under the Internal Revenue Code.

The tax on prohibited transactions will limit our ability to engage in transactions that would be treated as sales for U.S. federal income tax purposes.

A REIT’s net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of assets, other than foreclosure property, deemed held primarily for sale to customers in the ordinary course of business. We might be subject to this tax if we were to dispose of loans in a manner that was treated as a sale of the loans for U.S. federal income tax purposes. Therefore, in order to avoid the prohibited transactions tax, we may choose not to engage in certain sales of loans at the REIT level and may limit the structures we utilize for our securitization transactions, even though the sales or structures might otherwise be beneficial to us.

It may be possible to reduce the impact of the prohibited transaction tax by conducting certain activities through taxable REIT subsidiaries. However, to the extent that we engage in such activities through taxable REIT subsidiaries, the income associated with such activities may be subject to full corporate income tax.

Complying with REIT requirements may force us to liquidate otherwise attractive investments.

To qualify as a REIT, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified REIT real estate assets, including certain mortgage loans and residential and commercial mortgage-backed securities. The remainder of our investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer, no more than 20% (25% for taxable years before 2018) of the value of our total assets can be represented by securities of one or more taxable REIT subsidiaries and no more than 25% of the value of our total assets can be represented by “non-qualified publicly offered REIT debt instruments.” If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate from our portfolio otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.

Liquidation of assets may jeopardize our REIT qualification.

To qualify as a REIT, we must comply with requirements regarding our assets and our sources of income. If we are compelled to liquidate our investments to repay obligations to our lenders, we may be unable to comply with these requirements, ultimately jeopardizing our qualification as a REIT, or we may be subject to a 100% tax on any resultant gain if we sell assets that are treated as dealer property or inventory.

Complying with REIT requirements may limit our ability to hedge effectively.

The REIT provisions of the Internal Revenue Code may limit our ability to hedge our assets and operations. Under these provisions, any income that we generate from transactions intended to hedge our interest rate, inflation and/or currency risks will be excluded from gross income for purposes of the REIT 75% and 95% gross income tests if the purpose of the instrument is to (i) hedge interest rate risk on liabilities incurred to carry or acquire real estate, (ii) hedge risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the REIT 75% or 95% gross income tests, or (iii) manage risk with respect to the termination of certain prior hedging transactions described in (i) and/or (ii) above and, in each case, such instrument is properly identified under applicable Treasury Regulations. Income from hedging transactions that do not meet these requirements will generally constitute nonqualifying income for purposes of both the REIT 75% and 95% gross income tests. As a result of these rules, we may have to limit our use of hedging techniques that might otherwise be advantageous, which could result in greater risks associated with interest rate or other changes than we would otherwise incur.

Our ownership of and relationship with our taxable REIT subsidiaries will be limited and a failure to comply with the limits would jeopardize our REIT status and may result in the application of a 100% excise tax.

A REIT may own up to 100% of the stock of one or more taxable REIT subsidiaries. A taxable REIT subsidiary may earn income that would not be qualifying income if earned directly by the parent REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a taxable REIT subsidiary. A corporation of which a taxable REIT subsidiary directly or

indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a taxable REIT subsidiary. Overall, no more than 20% (25% for taxable years before 2018) of the value of a REIT’s assets may consist of stock or securities of one or more taxable REIT subsidiaries. A domestic taxable REIT subsidiary will pay federal, state and local income tax at regular corporate rates on any income that it earns. In addition, the taxable REIT subsidiary rules limit the deductibility of interest paid or accrued by a taxable REIT subsidiary to its parent REIT to assure that the taxable REIT subsidiary is subject to an appropriate level of corporate taxation. The rules also impose a 100% excise tax on certain transactions between a taxable REIT subsidiary and its parent REIT that are not conducted on an arm’s-length basis. We cannot assure our stockholders that we will be able to comply with the 20% value limitation on ownership of taxable REIT subsidiary stock and securities on an ongoing basis so as to maintain REIT status or to avoid application of the 100% excise tax imposed on certain non-arm’s length transactions.

If any hotel managers that we may engage do not qualify as “eligible independent contractors,” or if our hotel is not a “qualified lodging facility,” we will fail to qualify as a REIT.

Rent paid by a lessee that is a “related party tenant” of ours generally will not be qualifying income for purposes of the two gross income tests applicable to REITs, but an exception is provided for leases of “qualified lodging facilities” to a TRS so long as the hotel is managed by an “eligible independent contractor” and certain other requirements are satisfied. We expect to lease all or substantially all hotels to the TRS lessee, which is a disregarded subsidiary that is intended to qualify as a TRS. We expect that the TRS lessee will engage hotel managers, including our affiliated property manager and third-party property managers that are intended to qualify as “eligible independent contractors.” Among other requirements, in order to qualify as an eligible independent contractor, the hotel manager must not own, directly or through its equity owners, more than 35% of our outstanding stock, and no person or group of persons can own more than 35% of our outstanding stock and the equity interests of the hotel manager, taking into account certain ownership attribution rules. The ownership attribution rules that apply for purposes of these 35% thresholds are complex and monitoring actual and constructive ownership of our stock by our hotel managers and their owners may not be practical. Accordingly, there can be no assurance that these ownership levels will not be exceeded.

In addition, for a hotel management company to qualify as an eligible independent contractor, such company or a related person must be actively engaged in the trade or business of operating “qualified lodging facilities” (as defined below) for one or more persons not related to the REIT or its TRS at each time that such company enters into a hotel management contract with a TRS or its TRS lessee. No assurances can be provided that any hotel managers that we may engage will in fact comply with this requirement in the future. Failure to comply with this requirement would require us to find other managers for future contracts, and if we hired a management company without knowledge of the failure, it could jeopardize our status as a REIT.

Finally, each property that we lease to our TRS lessee must be a “qualified lodging facility.” A “qualified lodging facility” is a hotel, motel, or other establishment more than one-half of the dwelling units in which are used on a transient basis, including customary amenities and facilities, provided that no wagering activities are conducted at or in connection with such facility by any person who is engaged in the business of accepting wagers and who is legally authorized to engage in such business at or in connection with such facility. The REIT provisions of the Code provide only limited guidance for making determinations under the requirements for qualified lodging facilities, and there can be no assurance that these requirements will be satisfied.

The ability of our board of directors to revoke our REIT qualification without stockholder approval may subject us to U.S. federal income tax and reduce distributions to our stockholders.

Our charter provides that our board of directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT. While we intend to elect and qualify to be taxed as a REIT, we may not elect to be treated as a REIT or may terminate our REIT election if we determine that qualifying as a REIT is no longer in our best interests. If we cease to be a REIT, we would become subject to U.S. federal income tax on our taxable income and would no longer be required to distribute most of our taxable income to our stockholders, which may have adverse consequences on our total return to our stockholders and on the market price of our common stock.

Dividends payable by REITs do not qualify for the reduced tax rates.

In general, the maximum tax rate for dividends payable to domestic stockholders that are individuals, trusts and estates is 20%. Dividends payable by REITs, however, are generally not eligible for this reduced rate; provided under current law, individuals may be able to deduct 20% of income received as ordinary REIT dividends until 2026, thus reducing the maximum effective U.S. federal income tax rate on such dividend to 29.6%. In addition, Treasury Regulations impose a minimum holding period for the 20% deduction that was not set forth in the Internal Revenue Code. Under the Treasury Regulations, in order for a REIT dividend with respect to a share of REIT stock to be treated as a qualified REIT dividend, the U.S. stockholder (i) must have held the share for more than 45 days during the 91-day period beginning on the date which is 45 days before the date on which such share becomes ex-dividend with respect to such dividend and (ii) cannot have been under an obligation to make

related payments with respect to positions in substantially similar or related property, e.g., pursuant to a short sale. While this tax treatment does not adversely affect the taxation of REITs or dividends paid by REITs, the more favorable rates applicable to regular corporate dividends could cause investors who are individuals, trusts or estates to perceive investments in REITs to be relatively less attractive than investments in stock of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common stock.

If the IRS were to successfully recast our Israeli bond offerings as equity issuances rather than borrowings, our REIT qualification could be threatened.

We have structured our Israeli bond offerings to be viewed for U.S. federal income tax purposes as a borrowing by us via disregarded entities. If the IRS were to successfully recast our Israeli bond offerings as equity issuances rather than borrowings, our REIT qualification could be threatened.

Qualifying as a REIT involves highly technical and complex provisions of the Internal Revenue Code.

Qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our REIT qualification. Our continued qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. In addition, our ability to satisfy the requirements to qualify as a REIT depends in part on the actions of third parties over which we have no control or only limited influence, including in cases where we own an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes.

The taxation of distributions to our stockholders can be complex; however, distributions that we make to our stockholders generally will be taxable as ordinary income, which may reduce their anticipated returns from an investment in us.

Distributions that we make to our taxable stockholders to the extent of our current and accumulated earnings and profits (and not designated as capital gain dividends or qualified dividend income) generally will be taxable as ordinary income. However, a portion of our distributions may (i) be designated by us as capital gain dividends generally taxable as long-term capital gain to the extent that they are attributable to net capital gain recognized by us, (ii) be designated by us as qualified dividend income generally to the extent they are attributable to dividends we receive from non-REIT corporations, such as our taxable REIT subsidiaries, or (iii) constitute a return of capital generally to the extent that they exceed our current and accumulated earnings and profits as determined for U.S. federal income tax purposes. A return of capital distribution is not taxable but has the effect of reducing the basis of a stockholder’s investment in our common stock.

We may be required to pay some taxes due to actions of a taxable REIT subsidiary which would reduce our cash available for distribution to stockholders.

Any net taxable income earned directly by a taxable REIT subsidiary, or through entities that are disregarded for U.S. federal income tax purposes as entities separate from our taxable REIT subsidiaries, will be subject to federal and possibly state corporate income tax. In this regard, several provisions of the laws applicable to REITs and their subsidiaries ensure that a taxable REIT subsidiary will be subject to an appropriate level of U.S. federal income taxation. For example, a taxable REIT subsidiary may be limited in its ability to deduct certain interest payments made to an affiliated REIT. In addition, the REIT has to pay a 100% penalty tax on some payments that it receives or on some deductions taken by a taxable REIT subsidiary if the economic arrangements between the REIT, the REIT's customers, and the taxable REIT subsidiary are not comparable to similar arrangements between unrelated parties. Finally, some state and local jurisdictions may tax some of our income even though as a REIT we are not subject to U.S. federal income tax on that income because not all states and localities follow the U.S. federal income tax treatment of REITs. To the extent that we and our affiliates are required to pay federal, state and local taxes, we will have less cash available for distributions to stockholders.

We may distribute our common stock in a taxable distribution, in which case stockholders may sell shares of our common stock to pay tax on such distributions, and stockholders may receive less in cash than the amount of the dividend that is taxable.

We may make taxable distributions that are payable in cash and common stock. The IRS has issued private letter rulings to other REITs treating certain distributions that are paid partly in cash and partly in stock as taxable distributions that would satisfy the REIT annual distribution requirement and qualify for the dividends paid deduction for U.S. federal income tax purposes. Those rulings may be relied upon only by taxpayers to whom they were issued, but we could request a similar ruling from the IRS. Accordingly, it is unclear whether and to what extent we will be able to make taxable distributions payable in cash and common stock. If we made a taxable dividend payable in cash and common stock, taxable stockholders receiving such distributions will be required to include the dividend as taxable income to the extent of our current and accumulated earnings and profits, as determined for U.S. federal income tax purposes. As a result, stockholders may be required to pay income tax with respect to such distributions in excess of the cash distributions received. If a U.S. stockholder sells the common stock that it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount recorded in earnings with respect to the dividend, depending on the market price of our common stock at the time of the sale. Furthermore, with respect to

certain non-U.S. stockholders, we may be required to withhold U.S. federal income tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in common stock.

Investments in other REITs and real estate partnerships could subject us to the tax risks associated with the tax status of such entities.

We may invest in the securities of other REITs and real estate partnerships. Such investments are subject to the risk that any such REIT or partnership may fail to satisfy the requirements to qualify as a REIT or a partnership, as the case may be, in any given taxable year. In the case of a REIT, such failure would subject such entity to taxation as a corporation, may require such REIT to incur indebtedness to pay its tax liabilities, may reduce its ability to make distributions to us, and may render it ineligible to elect REIT status prior to the fifth taxable year following the year in which it fails to so qualify. In the case of a partnership, such failure could subject such partnership to an entity level tax and reduce the entity’s ability to make distributions to us. In addition, such failures could, depending on the circumstances, jeopardize our ability to qualify as a REIT.

Non-U.S. stockholders will be subject to U.S. federal withholding tax and may be subject to U.S. federal income tax on distributions received from us and upon the disposition of our shares.

Subject to certain exceptions, distributions received from us will be treated as dividends of ordinary income to the extent of our current or accumulated earnings and profits. Such dividends ordinarily will be subject to U.S. withholding tax at a 30% rate, or such lower rate as may be specified by an applicable income tax treaty, unless the distributions are treated as “effectively connected” with the conduct by the non-U.S. stockholder of a U.S. trade or business. Pursuant to the Foreign Investment in Real Property Tax Act of 1980, or FIRPTA, capital gain distributions attributable to sales or exchanges of “U.S. real property interests,” or USRPIs, generally (subject to certain exceptions for “qualified foreign pension funds” and certain “qualified shareholders”) will be taxed to a non-U.S. stockholder (other than a qualified foreign pension plan, entities wholly owned by a qualified foreign pension plan and certain publicly traded foreign entities) as if such gain were effectively connected with a U.S. trade or business unless FIRPTA provides an exemption. However, a capital gain dividend will not be treated as effectively connected income if (i) the distribution is received with respect to a class of stock that is regularly traded on an established securities market located in the United States and (ii) the non-U.S. stockholder does not own more than 10% of the class of our stock at any time during the one-year period ending on the date the distribution is received. We do not anticipate that our shares will be “regularly traded” on an established securities market for the foreseeable future, and therefore, this exception is not expected to apply.

Gain recognized by a non-U.S. stockholder upon the sale or exchange of our common stock generally will not be subject to U.S. federal income taxation unless such stock constitutes a USRPI under FIRPTA (subject to specific FIRPTA exemptions for certain non-U.S. stockholders). Our common stock will not constitute a USRPI so long as we are a “domestically-controlled qualified investment entity.” A domestically-controlled qualified investment entity includes a REIT if at all times during a specified testing period, less than 50% in value of such REIT’s stock is held directly or indirectly by non-U.S. stockholders. Proposed Treasury Regulations issued on December 29, 2022 (the “Proposed Regulations”) would modify the existing Treasury Regulations relating to the determination of whether we will be a domestically controlled REIT by providing a look through rule for our stockholders that are non-publicly traded partnerships, REITs, regulated investment companies, or domestic “C” corporations owned 25% or more directly or indirectly by foreign persons (“foreign-owned domestic corporations”) and by treating qualified foreign pension funds as foreign persons for this purpose. Although the Proposed Regulations are intended to be effective for transactions occurring on or after the date they are finalized, the preamble to the Proposed Regulations states that the IRS may challenge contrary positions that are taken before the Proposed Regulations are finalized. Moreover, the Proposed Regulations, as currently drafted, would apply to determine whether a REIT was domestically controlled for the entire five-year testing period prior to any disposition of our common stock, rather than applying only to the portion of the testing period beginning on or after the Proposed Regulations are finalized. The Proposed Regulations relating to foreign-owned domestic corporations are inconsistent with prior tax guidance. We cannot predict if or when or in what form the Proposed Regulations will be finalized or what our composition of investors that are treated as domestic under these final regulations will be at the time of enactment. Proposed Treasury Regulations issued on December 29, 2022 (the “Proposed Regulations”) would modify the existing Treasury Regulations relating to the determination of whether we will be a domestically controlled REIT by providing a look through rule for our stockholders that are non-publicly traded partnerships, REITs, regulated investment companies, or domestic “C” corporations owned 25% or more directly or indirectly by foreign persons (“foreign-owned domestic corporations”) and by treating qualified foreign pension funds as foreign persons for this purpose. Although the Proposed Regulations are intended to be effective for transactions occurring on or after the date they are finalized, the preamble to the Proposed Regulations states that the IRS may challenge contrary positions that are taken before the Proposed Regulations are finalized. Moreover, the Proposed Regulations, as currently drafted, would apply to determine whether a REIT was domestically controlled for the entire five-year testing period prior to any disposition of our common stock, rather than applying only to the portion of the testing period beginning on or after the Proposed Regulations are finalized. The Proposed Regulations relating to foreign-owned domestic corporations are inconsistent with prior tax guidance. We cannot predict if or when or in

what form the Proposed Regulations will be finalized or what our composition of investors that are treated as domestic under these final regulations will be at the time of enactment.

Proposed Treasury Regulations issued on December 29, 2022 (the “Proposed Regulations”) would modify the existing Treasury Regulations relating to the determination of whether we will be a domestically controlled REIT by providing a look through rule for our stockholders that are non-publicly traded partnerships, REITs, regulated investment companies, or domestic “C” corporations owned 25% or more directly or indirectly by foreign persons (“foreign-owned domestic corporations”) and by treating qualified foreign pension funds as foreign persons for this purpose. Although the Proposed Regulations are intended to be effective for transactions occurring on or after the date they are finalized, the preamble to the Proposed Regulations states that the IRS may challenge contrary positions that are taken before the Proposed Regulations are finalized. Moreover, the Proposed Regulations, as currently drafted, would apply to determine whether a REIT was domestically controlled for the entire five-year testing period prior to any disposition of our common stock, rather than applying only to the portion of the testing period beginning on or after the Proposed Regulations are finalized. The Proposed Regulations relating to foreign-owned domestic corporations are inconsistent with prior tax guidance. We cannot predict if or when or in what form the Proposed Regulations will be finalized or what our composition of investors that are treated as domestic under these final regulations will be at the time of enactment. We believe, but cannot assure stockholders, that we will be a domestically-controlled qualified investment entity.

Even if we do not qualify as a domestically-controlled qualified investment entity at the time a non-U.S. stockholder sells or exchanges our common stock, gain arising from such a sale or exchange would not be subject to U.S. taxation under FIRPTA as a sale of a USRPI if: (a) our common stock is “regularly traded,” as defined by applicable Treasury Regulations, on an established securities market, and (b) such non-U.S. stockholder owned, actually and constructively, 10% or less of our common stock at any time during the five-year period ending on the date of the sale. However, it is not anticipated that our common stock will be “regularly traded” on an established market. We encourage stockholders to consult their tax advisors to determine the tax consequences applicable to them if they are non-U.S. stockholders.

Our charter limits the number of shares a person may own, which may discourage a takeover that could otherwise result in a premium price paid to stockholders.

Our charter, with certain exceptions, authorizes our board of directors to take such actions as are necessary and desirable to preserve our qualification as a REIT. To help us comply with the REIT ownership requirements of the Internal Revenue Code, among other purposes, our charter prohibits a person from directly or constructively owning more than 9.8% in value of the aggregate of the outstanding shares of our stock of any class or series or more than 9.8% in value or number of shares, whichever is more restrictive, of the aggregate of the outstanding shares of our common stock, unless exempted (prospectively or retroactively) by our board of directors. This restriction may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might otherwise provide a premium price for holders of our shares of common stock.

We may be subject to adverse legislative or regulatory tax changes.

At any time, the U.S. federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be amended. We cannot predict when or if any new U.S. federal income tax law, regulation or administrative interpretation, or any amendment to any existing U.S. federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation or interpretation may take effect retroactively. We and our stockholders could be adversely affected by any such change in, or any new, U.S. federal income tax law, regulation or administrative interpretation. You are urged to consult with your tax advisor regarding the effect of potential future changes to the federal tax laws on an investment in our shares of common stock.

Retirement Plan Risks

If stockholders fail to meet the fiduciary and other standards under the Employee Retirement Income Security Act of 1974, as amended, or “ERISA,” or the Code as a result of an investment in our stock, they could be subject to criminal and civil penalties.

There are special considerations that apply to employee benefit plans subject to ERISA (such as profit-sharing, section 401(k) or pension plans) and other retirement plans or accounts subject to Section 4975 of the Code (such as an IRA) or any entity whose assets include such assets (each a “Benefit Plan”) that are investing in our shares. If stockholders are investing the assets of such a plan or account in our common stock, they should satisfy themselves that:

•the investment is consistent with their fiduciary and other obligations under ERISA and the Code;

•the investment is made in accordance with the documents and instruments governing the plan or IRA, including the plan’s or account’s investment policy;

•the investment satisfies the prudence and diversification requirements of Sections 404(a)(1)(B) and 404(a)(1)(C) of ERISA and other applicable provisions of ERISA and the Code;

•the investment in our shares, for which no trading market may exist, is consistent with the liquidity needs of the plan or IRA;

•the investment will not produce an unacceptable amount of “unrelated business taxable income” for the plan or IRA;

•the stockholders will be able to comply with the requirements under ERISA and the Code to value the assets of the plan or IRA annually; and

•the investment will not constitute a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.

With respect to the annual valuation requirements described above, we expect to provide an estimated value of our net assets per share annually to those fiduciaries (including IRA trustees and custodians) who request it. Although this estimate will be based upon determinations of the NAV of our shares in accordance with our valuation procedures, no assurance can be given that such estimated value will satisfy the applicable annual valuation requirements under ERISA and the Code. The Department of Labor or the Internal Revenue Service may determine that a plan fiduciary or a fiduciary acting for an IRA is required to take further steps to determine the value of our common shares. In the absence of an appropriate determination of value, a plan fiduciary or a fiduciary acting for an IRA may be subject to damages, penalties or other sanctions.

Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA and the Code may result in the imposition of civil and criminal penalties and can subject the fiduciary to claims for damages or for equitable remedies, including liability for investment losses. In addition, if an investment in our shares constitutes a non-exempt prohibited transaction under ERISA or the Code, the fiduciary or IRA owner who authorized or directed the investment may be subject to the imposition of excise taxes with respect to the amount invested. Additionally, the investment transaction may have to be undone. In the case of a prohibited transaction involving an IRA owner, the IRA may be disqualified as a tax-exempt account and all of the assets of the IRA may be deemed distributed and subjected to tax. ERISA plan fiduciaries and IRA owners should consult with counsel before making an investment in our shares.

If our assets are deemed to be plan assets, our advisor and we may be exposed to liabilities under Title I of ERISA and the Code.

In some circumstances where an ERISA plan holds an interest in an entity, the assets of the entity are deemed to be ERISA plan assets unless an exception applies. This is known as the “look-through rule.” Under those circumstances, the obligations and other responsibilities of plan sponsors, plan fiduciaries and plan administrators, and of parties in interest and disqualified persons, under Title I of ERISA and Section 4975 of the Code, as applicable, may be applicable, and there may be liability under these and other provisions of ERISA and the Code. We believe that our assets should not be treated as plan assets because the shares should qualify as “publicly-offered securities” that are exempt from the look-through rules under applicable Treasury Regulations. We note, however, that because certain limitations are imposed upon the transferability of shares so that we may qualify as a REIT, and perhaps for other reasons, it is possible that this exemption may not apply. If that is the case, and if our advisor or we are exposed to liability under ERISA or the Code, our performance and results of operations could be adversely affected. Prior to making an investment in us, stockholders should consult with their legal and other advisors concerning the impact of ERISA and the Code on this investment and our performance.

We do not intend to provide investment advice to any potential investor for a fee. However, we, our advisor and our respective affiliates receive certain fees and other consideration disclosed herein in connection with an investment. If it were determined we provided a Benefit Plan investor with investment advice for a fee, it could give rise to a determination that we constitute an investment advice fiduciary under ERISA. Such a determination could give rise to claims that our fee arrangements constitute non-exempt prohibited transactions under ERISA or the Code and/or claims that we have breached a fiduciary duty to a Benefit Plan investor. Adverse determinations with respect to ERISA fiduciary status or non-exempt prohibited transactions could result in significant civil penalties and excise taxes.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

ITEM 1C.    CYBERSECURITY

Risk Management and Strategy

We and our advisor have processes for assessing, identifying, and managing material risks from cybersecurity threats. These processes are integrated into our overall risk management systems as they have been designed to fit within and complement the enterprise-wide risk assessment framework as implemented by our management and our advisor and as overseen by our board of directors. These processes also include overseeing and identifying risks from cybersecurity threats associated with the use of third-party service providers.

Our management and our advisor are responsible for establishing and monitoring the integrity and effectiveness of our controls and other procedures, which are designed to ensure that all information required to be disclosed is recorded, processed, summarized and reported accurately and on a timely basis, and all such information is accumulated and communicated to management and the audit committee, as appropriate, to allow for timely decisions regarding such disclosures. The controls and procedures subject to the board’s oversight include processes related to managing material risks from cybersecurity threats. Accordingly, our cybersecurity processes have been integrated into our overall processes.

In the last three fiscal years, cybersecurity threats have not materially affected us, including our business strategy, results of operations or financial condition. See also, Item 1A, “Risk Factors—Risks Related to an Investment in Us—We face risks associated with security breaches through cyber-attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems.”

Governance

The audit committee oversees, among other things, a system of internal controls, including internal controls designed to assess, identify, and manage material risks from cybersecurity threats. The audit committee is composed of all of our independent directors.

Our advisor utilizes a team of dedicated external IT professionals, which leads enterprise-wide cybersecurity strategy, policy, standards, architecture, and processes. The IT professionals provide periodic reports to our board of directors, our advisor and its affiliates, as well as our Chief Executive Officer and other members of our senior management as appropriate. These reports include updates on our cybersecurity risks and threats, the status of projects to strengthen our information security systems, assessments of the information security program, and the emerging threat landscape. Our program is regularly evaluated by our advisor and external experts with the results of those reviews reported to senior management and the board of directors. We also actively engage with key vendors, industry participants, and intelligence and law enforcement communities as part of our continuing efforts to evaluate and enhance the effectiveness of our information security policies and procedures.

ITEM 2.    PROPERTIES

As of December 31, 2023, we consolidated nine office complexes, encompassing, in the aggregate, approximately 3.2 million rentable square feet, one residential home portfolio consisting of 2,182 residential homes, 2 apartment properties containing 609 units, one hotel property with 196 rooms, four investments in undeveloped land with approximately 581 developable acres, one office/retail development property and held an interest in three investments in unconsolidated entities. The following table provides summary information regarding our properties and investments in unconsolidated entities as of December 31, 2023:

Property<br>Location of Property	Date Acquired	Property Type	Rentable Square Feet	Occupancy	Ownership %
Richardson Office<br><br>Richardson, TX	11/23/2011	Office	428,030	55.9%	100.0%
Park Centre<br><br>Austin, TX	03/28/2013	Office	205,096	54.8%	100.0%
Crown Pointe<br><br>Dunwoody, GA	02/14/2017	Office	509,792	62.6%	100.0%
The Marq<br><br>Minneapolis, MN	03/01/2018	Office	522,656	83.5%	100.0%
Eight & Nine Corporate Centre<br><br>Franklin, TN	06/08/2018	Office	315,299	90.8%	100.0%
Georgia 400 Center<br><br>Alpharetta, GA	05/23/2019	Office	429,768	66.6%	100.0%
Lincoln Court<br><br>Campbell, CA	10/05/2020	Office	123,849	71.7%	100.0%
Oakland City Center<br><br>Oakland, CA	10/05/2020	Office	368,032	60.9%	100.0%
Madison Square<br><br>Phoenix, AZ	10/05/2020	Office	281,916	63.1%	90.0%
Residential Homes Portfolio<br><br>Multiple Locations	Multiple	Residential	3,148,547	93.0%	100.0%
Lofts at NoHo Commons<br><br>North Hollywood, CA	10/05/2020	Apartment	224,755	94.5%	90.0%
1180 Raymond<br><br>Newark, NJ	08/20/2013	Apartment	268,648	96.8%	100.0%
Q&C Hotel<br><br>New Orleans, LA	10/05/2020	Hotel	—	N/A	90.0%
Richardson Land I<br><br>Richardson, TX	11/23/2011	Undeveloped Land	—	N/A	100.0%
Richardson Land II<br><br>Richardson, TX	09/04/2014	Undeveloped Land	—	N/A	100.0%
Park Highlands Land I<br><br>North Las Vegas, NV	12/30/2011	Undeveloped Land	—	N/A	100.0%
Park Highlands Land II<br><br>North Las Vegas, NV	12/10/2013	Undeveloped Land	—	N/A	100.0%
210 West 31st Street<br><br>New York, NY	10/05/2020	Office/Retail	—	N/A	80.0%
110 William Street (Unconsolidated)<br><br>New York, NY	N/A	Office	928,157	32.4%	(1)
353 Sacramento Street (Unconsolidated)<br><br>San Francisco, CA	N/A	Office	284,751	47.0%	55.0%
Pacific Oak Opportunity Zone Fund I (Unconsolidated)<br><br>Multiple Locations	N/A	Apartment	310,218	94.5%	46.0%
Total			8,349,514

_____________________

(1) We hold common and preferred interests in the 110 William Joint Venture and are entitled to profit participation interests based on a tiered waterfall calculation which may not be reflective of our economic interest in the entity.

Portfolio Lease Expiration

The following table reflects the lease expiration of our consolidated office complexes as of December 31, 2023:

Year of Expiration	Number of Leases<br>Expiring	Annualized Base Rent<br><br>(in thousands) (1)		% of Portfolio Annualized Base Rent<br>Expiring		Leased Rentable Square Feet <br>Expiring	% of Portfolio Rentable Square Feet<br>Expiring
2024	58	$	7,331	12.3	%	251,340	10.4	%
2025	81	13,743		23.0	%	452,670	18.8	%
2026	58	9,345		15.6	%	339,514	14.1	%
2027	44	5,778		9.7	%	195,393	8.1	%
2028	30	5,472		9.2	%	247,170	10.2	%
2029	32	5,812		9.7	%	220,684	9.1	%
2030	15	5,772		9.7	%	383,386	15.9	%
Thereafter	59	6,544		10.8	%	322,099	13.4	%
Total	377	$	59,797	100	%	2,412,256	100	%

_____________________

(1) Annualized base rent represents annualized contractual base rental income as of December 31, 2023, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.

ITEM 3.    LEGAL PROCEEDINGS

From time to time, we are party to legal proceedings that arise in the ordinary course of our business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by government agencies.

ITEM 4.    MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Stockholder Information

As of March 28, 2024, we had 103.3 million shares of common stock outstanding held by a total of approximately 17,000 stockholders. The number of stockholders is based on the records of SS&C GIDS, Inc., who serves as our transfer agent.

Market Information

No public market currently exists for our shares of common stock, and we currently have no plans to list our shares on a national securities exchange. Until our shares are listed, if ever, our stockholders may not sell their shares unless the buyer meets applicable suitability and minimum purchase requirements. In addition, our charter prohibits the ownership of more than 9.8% of our stock, unless exempted by our board of directors. Consequently, there is the risk that our stockholders may not be able to sell their shares at a time or price acceptable to them.

On November 30, 2023, our board of directors approved an estimated value per share of our common stock of $8.03 based on the estimated value of our assets less the estimated value of our liabilities, or net asset value, divided by the number of shares outstanding, all as of September 30, 2023. There have been no material changes between September 30, 2023 and November 30, 2023 to the net values of our assets and liabilities that materially impacted the overall estimated value per share. We are providing this estimated value per share to assist broker-dealers that participated in our initial public offering in meeting their customer account statement reporting obligations under National Association of Securities Dealers Conduct Rule 2340 as required by the Financial Industry Regulatory Authority (“FINRA”). This valuation was performed in accordance with the provisions of and also to comply with Practice Guideline 2013–01, Valuations of Publicly Registered Non-Listed REITs, issued by the Institute for Portfolio Alternatives (“IPA”) in April 2013.

November 30, 2023 Valuation

Our conflicts committee, composed of all of our independent directors, is responsible for the oversight of the valuation process, including the review and approval of the valuation process and methodologies used to determine our estimated value per share, the consistency of the valuation and appraisal methodologies with real estate industry standards and practices and the reasonableness of the assumptions used in the valuations and appraisals. The estimated value per share was based upon the recommendation and valuation prepared by our advisor. Our advisor’s valuation of our consolidated investments in real estate properties and two of our unconsolidated entity investments in real estate properties was based on valuations performed by third-party valuation firms. Our advisor’s valuation of its other unconsolidated entity investment, valued at $36.2 million or $0.35 per share, was based on our advisor’s estimate of the unit value for a fund in which we own units and which is sponsored by an affiliate of our advisor. The aforementioned third-party valuations represented appraisals for our consolidated investments in real estate properties and two of our unconsolidated joint ventures, except for our consolidated residential home portfolio consisting of 2,449 homes which was valued at the total of individual home values generated by the third-party valuation firm’s proprietary automated valuation models. The appraisals were performed by Kroll, LLC (“Kroll”), except for the undeveloped land which was appraised by Colliers International Valuation & Advisory Services, LLC (“Colliers”). Valuation of the residential home portfolio was performed by HouseCanary, Inc. (“HouseCanary”). Kroll, Colliers and HouseCanary, each an independent third-party valuation firm, also prepared appraisal/valuation reports, summarizing key inputs and assumptions, for each of the real estate properties they respectively valued. Our advisor performed valuations with respect to our real estate-related investments, one of its unconsolidated entity investments, cash, other assets, mortgage debt and other liabilities. The methodologies and assumptions used to determine the estimated value of our assets and the estimated value of our liabilities are described further below.

Our advisor used the valuations from the third-party valuation firms, an advisor adjustment downward to the appraised value for one of the properties to reflect our advisor’s judgment that there is the potential to incur higher tenant-required costs at the property where a large lease is currently being negotiated, and our advisor’s estimated values for other assets and liabilities to calculate and recommend an estimated value per share of our common stock. Upon (i) the conflicts committee’s receipt and review of our advisor’s valuation report, including our advisor’s summary of the appraisal/valuation reports prepared by Kroll, Colliers and HouseCanary, and (ii) the conflicts committee’s review of the reasonableness of our estimated value per share resulting from our advisor’s valuation process, and (iii) in light of other factors considered by the conflicts committee and the conflicts committee’s own extensive knowledge of our assets and liabilities, the conflicts committee concluded that the estimated value per share proposed by our advisor was reasonable and recommended to the board of directors that it adopt $8.03 as the estimated value per share of our common stock. At the special meeting of the board of directors, the board of directors unanimously agreed to accept the recommendation of the conflicts committee and approved $8.03 as the estimated value of our common stock, which determination is ultimately and solely the responsibility of the board of directors.

The table below sets forth the calculation of our estimated value per share as of November 30, 2023, as well as the calculation of our prior estimated value per share as of December 2, 2022:

	November 30, 2023<br>Estimated Value per Share		December 2, 2022<br><br>Estimated Value per Share (1)		Change in Estimated Value per Share
Real estate properties (2)	$	15.66	$	17.52	$	(1.86)
Real estate equity securities (3)	0.26		0.61		(0.35)
Cash	0.75		0.82		(0.07)
Investments in unconsolidated entities (4)	1.44		1.67		(0.23)
Other assets	0.61		0.65		(0.04)
Mortgage debt (5)	(6.19)		(6.92)		0.73
Series B Bonds (6)	(2.67)		(2.94)		0.27
Series C Bonds (7)	(0.87)		—		(0.87)
Advisor participation fee liability (8)	(0.07)		(0.06)		(0.01)
Other liabilities	(0.78)		(0.57)		(0.21)
Noncontrolling Series A Preferred Stock (9)	—		(0.16)		0.16
Non-controlling interest (10)	(0.11)		(0.12)		0.01
Estimated value per share	$	8.03	$	10.50	$	(2.47)
Estimated enterprise value premium	None assumed		None assumed		None assumed
Total estimated value per share	$	8.03	$	10.50	$	(2.47)

_____________________

(1) The December 2, 2022 estimated value per share was approved by the board of directors; for more information, see our Current Report on Form 8-K filed with the SEC on December 8, 2022.

(2) The decrease in the estimated value of real estate properties was primarily due to decreases in property fair values and property dispositions.

(3) The decrease in real estate equity securities was primarily due to decreases in securities values as well as securities dispositions.

(4) The decrease in investments in unconsolidated entities was primarily due to property value declines.

(5) The decrease in mortgage debt was primarily due to repayments including those upon asset sales.

(6) Amount relates to Series B Bonds issued in Israel on February 16, 2020, November 1, 2021, November 8, 2021, and May 2, 2022. The decrease is due to a decrease in the quoted bond price on the Tel Aviv Stock Exchange.

(7) Amount relates to Series C Bonds issued in Israel in July 2023. The increase is due to the bond issuance, and an increase in the quoted bond price on the Tel Aviv Stock Exchange.

(8) Represents the potential participation fee payable to our advisor as it relates to the operations or assets of our subsidiary, PORT.

(9) Represents the redemption value plus accrued unpaid dividends on the Series A cumulative convertible redeemable preferred stock issued by PORT on November 6, 2019. The preferred stock was redeemed at the redemption value plus accrued unpaid dividends in November 2022.

(10) The decrease in non-controlling interests was primarily due to non-controlling interest distributions and a decline in non-controlling interest values related to property value declines.

The change in our estimated value per share from the previous estimate was primarily due to the items listed below. The changes are not equal to the change in values of each asset and liability group presented in the table above due to real estate property acquisitions, dispositions, debt financings and other factors, which caused the value of certain asset or liability groups to change with no impact to our fair value of equity or the overall estimated value per share.

	Change in Estimated Value per Share
December 2, 2022 estimated value per share	$	10.50
Changes to estimated value per share
Investments
Real estate	(1.04)
Investments in unconsolidated entities	(0.55)
Investments in equity securities	(0.22)
Leasing costs & capital expenditures on real estate	(0.30)
Total change related to investments	(2.11)
Operating cash flows (1)	(0.13)
Foreign currency loss	(0.12)
Property selling and financing costs (2)	(0.18)
Advisor disposition fees (3)	(0.01)
Mortgage debt	(0.02)
Series B and C Bonds	0.09
Other	0.01
Total change in estimated value per share	$	(2.47)
November 30, 2023 estimated value per share	$	8.03

_____________________

(1) Operating cash flow reflects modified funds from operations (“MFFO”) attributable to common stockholders, adjusted for our share of (i) deducts for capitalized interest expense, real estate taxes and insurance and (ii) add backs for deferred financing cost amortization. We compute MFFO in accordance with the definition included in the practice guideline issued by the IPA in November 2010.

(2) Property selling, acquisition and financing costs include approximately (i) $8.6 million, or $0.08 per share, for income tax payable related to our land sales out of a taxable REIT subsidiary in the year ending September 20, 2023, (ii) $3.5 million, or $0.03 per share, for selling costs, and (iii) $5.1 million, or $0.05 per share, for financing costs including the issuance costs related to our Series C Bonds issued in July 2023.

(3) Advisor fees were $1.0 million or $0.01 per share.

As with any valuation methodology, the methodologies used are based upon a number of estimates and assumptions that may not be accurate or complete. Different parties using different assumptions and estimates could derive a different estimated value per share, and these differences could be significant. The estimated value per share is not audited and does not represent the fair value of our assets less the fair value of our liabilities according to U.S. generally accepted accounting principles, nor does it represent a liquidation value of our assets and liabilities or the price at which our shares of common stock would trade at on a national securities exchange. The estimated value per share does not reflect a discount for the fact that we are externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated value per share also does not take into account estimated disposition costs and fees for real estate properties that are not under contract to sell, debt prepayment penalties that could apply upon the prepayment of certain of our debt obligations, the impact of restrictions on the assumption of debt or hedging costs which may be incurred upon the termination of certain of our hedges prior to expiration.

Methodology

Our goal for the valuation was to arrive at a reasonable and supportable estimated value per share, using a process that was designed to be in compliance with the IPA Valuation Guidelines and using what we and our advisor deemed to be appropriate valuation methodologies and assumptions. The following is a summary of the real estate valuation engagements as well as the methodologies, assumptions and estimates used to value our assets and liabilities:

Real Estate

Independent Valuation Firm

Kroll(1) was selected by our advisor and approved by our conflicts committee to appraise all of our consolidated real estate properties, 110 William Street, and 353 Sacramento, but excluding our investments in undeveloped land and the residential home portfolio. Colliers(2) was selected by our advisor and approved by our conflicts committee to appraise our investments in undeveloped land (hereinafter the properties appraised by Kroll and Colliers are the “Appraised Properties”). HouseCanary(3) was selected by our advisor and approved by our conflicts committee to provide a value for our residential home portfolio using

its proprietary automated valuation models. HouseCanary’s values were not appraisals and should not be construed as appraisals. Kroll and Colliers are engaged in the business of appraising commercial real estate properties, and HouseCanary is engaged in the business of real estate valuations, data, and analytics and none are affiliated with us or our advisor. The compensation we pay to Kroll, Colliers, and HouseCanary is based on the scope of work and not on the values of our real estate properties. In preparing their valuation reports, Kroll, Colliers, and HouseCanary did not, and were not requested to, inspect or otherwise evaluate the physical conditions of our properties or solicit third-party indications of interest for our properties or common stock in connection with possible purchases thereof or the acquisition of all or any part of us.

_____________________

(1) Kroll is actively engaged in the business of appraising commercial real estate properties similar to those owned by us in connection with public securities offerings, private placements, business combinations and similar transactions. We engaged Kroll to deliver appraisal reports for all of our consolidated investments in real estate properties, 110 William Street and 353 Sacramento, but excluding our investments in undeveloped land and the residential home portfolio, and Kroll received fees upon the delivery of such reports. In addition, we have agreed to indemnify Kroll against certain liabilities arising out of this engagement. In the six years prior to the date of this filing, Kroll and its affiliates have provided a number of commercial real estate, appraisal and valuation services for us and/or our affiliates and have received fees in connection with such services. Kroll and its affiliates may from time to time in the future perform other commercial real estate, appraisal and valuation services for us and our affiliates in transactions related to the properties that are the subjects of the appraisals, so long as such other services do not adversely affect the independence of the applicable Kroll appraiser as certified in the applicable appraisal reports.

(2) Colliers is actively engaged in the business of appraising commercial real estate properties similar to those owned by us in connection with public securities offerings, private placements, business combinations and similar transactions. We engaged Colliers to deliver appraisal reports for certain of our investments in undeveloped land and Colliers received fees upon the delivery of such reports. In addition, we have agreed to indemnify Colliers against certain liabilities arising out of this engagement. Colliers and its affiliates are engaged in the ordinary course of business in many areas related to commercial real estate and related services. Colliers and its affiliates may from time to time in the future perform other commercial real estate, appraisal, valuation and financial advisory services for us and our affiliates in transactions related to the properties that are the subjects of the appraisals, so long as such other services do not adversely affect the independence of the applicable Colliers appraiser as certified in the applicable appraisal reports.

(3) HouseCanary is actively engaged in the business of real estate valuation, data, and analytics related to homes similar to those owned by us. We engaged HouseCanary to provide a valuation for each of the residential homes in our portfolio, and HouseCanary received fees upon the delivery of its valuation report. HouseCanary’s proprietary automated valuation models generate value estimates based on multiple factors, but are not guarantees of property value, characteristics or condition. HouseCanary’s valuations were provided to assist our advisor in calculating the estimated value per share of our common stock. HouseCanary did not make an independent determination as to whether its valuation methodology was suitable for such purpose or calculate or participate in the calculation of the estimated value per share. In addition, we have agreed to indemnify HouseCanary against certain liabilities arising out of this engagement. HouseCanary is engaged in the ordinary course of business in many areas related to real estate and related services. HouseCanary and its affiliates may from time to time in the future perform other valuation and advisory services for us related to the properties that are the subjects of the valuation report, so long as such other services do not adversely affect the independence of HouseCanary.

Kroll, Colliers, and HouseCanary collected all reasonably available material information that each deemed relevant and took into account customary real estate valuation and financial considerations and procedures as each deemed relevant in valuing our real estate properties. Kroll relied in part on property-level information provided by our advisor, including (i) property historical and projected operating revenues and expenses; (ii) property lease agreements; and (iii) information regarding recent or planned capital expenditures. Colliers was provided with land surveys and development plans and relied in part on such information. HouseCanary was provided with property addresses, purchase prices and dates, and certain characteristics for each of our homes and relied in part on such information. Kroll, Colliers, and HouseCanary relied on the information supplied or otherwise made available by us and our advisor to be accurate and complete, prepared in good faith, and to reflect the best currently available estimates and judgments of ours and our advisor, and did not independently verify any such information. In addition, Kroll, Colliers, and HouseCanary relied on us or our advisor to inform them if any information previously provided became inaccurate or needed updating during the course of their engagements or if there were any exceptions to the typical assumptions that we have clear and marketable title to each real estate property, that no title defects exist, that any improvements were made in accordance with law, that no hazardous materials are present or were present previously, that no deed restrictions exist, and that no changes to zoning ordinances or regulations governing use, density or shape are pending or being considered. Kroll, Colliers, and HouseCanary did not independently verify any such information.

For the appraisals, Kroll and Colliers performed the appraisals in accordance with the Code of Ethics and the Uniform Standards of Professional Appraisal Practice, or USPAP, the real estate appraisal industry standards created by The Appraisal Foundation, as well as the requirements of the state where each real property is located. Each appraisal was reviewed, approved and signed by an individual with the professional designation of MAI (Member of the Appraisal Institute). The use of the appraisal reports is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. In the appraisals, and as outlined in the appraisal reports, Kroll and Colliers necessarily made numerous assumptions as of various points in time and with respect to general business, economic, and regulatory conditions, industry performance, and other matters, many of which are beyond Kroll’s and Colliers’ control and our control.

For the residential home portfolio valuation, HouseCanary generated an estimated value for each individual home using its proprietary automated valuation models built to leverage machine learning algorithms and an extensive database that may include MLS information, county assessor records, mortgage and other public records, sales history for a subject property and its surrounding neighborhood, real estate market trends, and macro and local economic and housing data. Each individual home was assigned the HouseCanary value, an estimated value generated by HouseCanary’s proprietary automated valuation model, unless the dataset available did not meet specified criteria. In those cases, the individual home was assigned an indexed value,

an estimated value calculated by multiplying a property's last third-party valuation by a price change factor from HouseCanary’s Home Price Index. For our residential home portfolio valuation by HouseCanary, approximately 79% of the individual homes were assigned the automated valuation model value and 21% were assigned the indexed value as of September 30, 2023. HouseCanary’s valuations were not appraisals and should not be construed as appraisals and were based on computer models developed by HouseCanary which utilize data believed to be reliable but there can be no guarantee that the data is reliable, accurate, or complete.

Although Kroll, Colliers, and HouseCanary considered any comments received from us or our advisor to their valuations, ultimately the valuations were determined by Kroll, Colliers, and HouseCanary. The valuations were necessarily estimates, and the price at which our properties may actually be sold could differ materially from the valuations. The valuations were necessarily based on assumptions, analyses, opinions, and conclusions reflecting the general business, economic, financial and other circumstances and conditions, and data in existence as of or prior to the date of the valuations. Material change in assumptions, circumstances, conditions, matters, or data after the date of the valuations, or discovery after the date of the valuations that data which had been considered reliable and which had been utilized was in fact unreliable, inaccurate, or incomplete, may affect such valuations. The Kroll, Colliers, and HouseCanary engagement letters and the valuation reports contain qualifications and limitations that qualify the analyses, opinions, and conclusions reflected in the valuations. The valuations are addressed solely to us to assist our advisor in calculating and recommending an updated estimated value per share of our common stock, and Kroll, Colliers, and HouseCanary have not made independent determinations as to whether the valuations are suitable for such a purpose. The valuations are not addressed to the public and may not be relied upon by any other person to establish an estimated value per share of our common stock and do not constitute a recommendation to any person to purchase or sell any shares of our common stock. Kroll, Colliers, and HouseCanary were responsible only for the valuation services outlined in their engagement letters, and were not responsible for, did not calculate, and did not participate in the determination of the estimated value per share of our common stock.

The foregoing is a summary description of the engagements, standard assumptions, qualifications and limitations that generally apply to the Kroll, Colliers, and HouseCanary valuations.

Real Estate Valuation

As of September 30, 2023, we owned nine office complexes, encompassing, in the aggregate, approximately 3.2 million rentable square feet and these properties were 70% occupied. In addition, we owned one residential home portfolio consisting of 2,449 residential homes, and two apartment properties containing 609 units, which were 95% and 92% occupied, respectively. We also owned one hotel property with 196 rooms, four investments in undeveloped land with approximately 658 developable acres and one office/retail development property. Our consolidated real estate properties had a total estimated value of $1.6 billion as of September 30, 2023. These properties had a total cost basis of $1,428.0 million as of September 30, 2023, which is the total of acquisition prices of $1,261.8 million, $16.6 million for the acquisition of minority interests in entities, $137.4 million in capital expenditures, leasing commissions and tenant improvements since inception and $12.2 million of acquisition fees and expenses. Our consolidated real estate value compared to this cost basis represents an increase of approximately 13.4%.

We obtained appraisals for each of the consolidated real estate properties except for the residential home portfolio which was valued as described above. Our consolidated Appraised Properties had a total appraised value of $1,171.6 million, and our consolidated residential home portfolio had a total estimated value of $448.4 million.

For the appraisals, Kroll and Colliers used various methodologies, as appropriate, such as the direct capitalization approach, discounted cash flow analyses and sales comparison approach. Kroll relied primarily on 10-year discounted cash flow analyses for the final valuations of each of the real estate properties (which exclude undeveloped land) and Colliers relied primarily on the sales comparison approach for the final valuations of the undeveloped land that it appraised. Kroll calculated the discounted cash flow value of our real estate properties (which exclude undeveloped land) using property-level cash flow estimates, terminal capitalization rates and discount rates that fall within ranges they believe would be used by similar investors to value the properties we own based on recent comparable market transactions adjusted for unique property and market-specific factors. Colliers relied primarily on the sales comparison approach and estimated the value of the undeveloped land based on the most applicable recent comparable market transactions. For the valuation of the residential home portfolio as described above, the HouseCanary valuations were the individual home values using its proprietary automated valuation models.

The following table summarizes the key assumptions that were used to value the consolidated Appraised Properties and residential homes:

	Range in Values	Weighted-Average Basis
Consolidated Appraised Properties (Excluding Undeveloped Land and Office/Retail Development Property)
Terminal capitalization rate	5.00% to 8.25%	7.23%
Discount rate	6.75% to 10.00%	8.51%
Net operating income compounded annual growth rate (1)	1.82% to 16.68%	6.65%
Undeveloped Land
Price per acre (2)	$480,000 to $991,000	$494,000
Office/Retail Development Property
Price per FAR (Floor area ratio) (3)	$575 to $625	$625
Residential Homes
Price per square foot	$21.91 to $312.86	$127.57

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(1) The net operating income compounded annual growth rates (“CAGRs”) reflect both the contractual and market rents and reimbursements (in cases where the contractual lease period is less than the valuation period) net of expenses over the valuation period. The range of CAGRs shown is the constant annual rate at which the net operating income is projected to grow to reach the net operating income in the final year of the hold period for each of the properties.

(2) The weighted-average price per acre was primarily driven by our investments in undeveloped land with approximately 632 developable acres located in North Las Vegas, Nevada. The weighted-average price per acre for these four investments in undeveloped land was approximately $480,000.

(3) Price per FAR is before deducting for the ground lease liability and estimated demolition costs, and the range in values reflects different development scenarios.

While we believe that Kroll’s, Colliers’, and HouseCanary’s assumptions and inputs are reasonable, a change in these assumptions and inputs would significantly impact the estimated values of our real estate properties and, thus, its estimated value per share. As of September 30, 2023, certain of our real estate assets have non-stabilized occupancies. Appraisals may provide a sense of the value of the investment, but any appraisal of the property will be based on numerous estimates, judgments and assumptions that significantly affect the appraised value of the underlying property. An appraisal of a non-stabilized property, in particular, involves a high degree of subjectivity due to high vacancy levels and uncertainties with respect to future market rental rates and timing of lease-up and stabilization. Accordingly, different assumptions may materially change the appraised value of the property. The table below illustrates the impact on the estimated value per share if the terminal capitalization rates or discount rates were adjusted by 25 basis points, and assuming all other factors remain unchanged, with respect to the consolidated Appraised Properties referenced in the table above (excluding undeveloped land and the office/retail development property). Additionally, the table below illustrates the impact on the estimated value per share if the terminal capitalization rates or discount rates for these properties were adjusted by 5% in accordance with the IPA guidance:

	Increase (Decrease) on the Estimated Value per Share due to
	Decrease of 25 basis points		Increase of 25 basis points		Decrease of 5%		Increase of 5%
Terminal capitalization rates	$	0.19	$	(0.17)	$	0.25	$	(0.27)
Discount rates	0.17		(0.16)		0.25		(0.28)

The table below illustrates the impact on the estimated value per share if the price per acre of the investments in undeveloped land was adjusted by 5%:

	Increase (Decrease) on the Estimated Value per Share due to
	Decrease of 5%		Increase of 5%
Price per acre	$	(0.16)	$	0.16

The table below illustrates the impact on the estimated value per share if the price per FAR of the investment in the office/retail development property was adjusted by 5%:

	Increase (Decrease) on the Estimated Value per Share due to
	Decrease of 5%		Increase of 5%
Price per FAR	$	(0.01)	$	0.01

The table below illustrates the impact on the estimated value per share if the price per square foot of the residential home portfolio was adjusted by 5%:

	Increase (Decrease) on the Estimated Value per Share due to
	Decrease of 5%		Increase of 5%
Price per square foot	$	(0.22)	$	0.22

Investments in Unconsolidated Entities

As of September 30, 2023, we held three investments in unconsolidated entities including: 110 William Street, 353 Sacramento, and Pacific Oak Opportunity Zone Fund I.

110 William Street is an office property containing 928,157 rentable square feet located in New York, New York. We hold a 77.5% preferred equity interest and a 100% common equity interest in a joint venture that owns 110 William Street. The appraised value of 110 William Street as provided by Kroll was $386.4 million. The advisor used the appraised value provided by Kroll and the advisor’s estimated fair values of other assets and liabilities, to calculate the amount that we would receive in a hypothetical liquidation of the real estate and the other assets and liabilities based on the profit participation thresholds contained in the joint venture agreement. The resulting amount was the fair value assigned to our interests in this unconsolidated joint venture. As of September 30, 2023, the carrying value and estimated fair value of our investment in this unconsolidated joint venture were $43.7 million and $99.8 million, respectively.

Kroll relied on a 10-year discounted cash flow analysis for the final valuation of 110 William Street. The terminal capitalization rate, discount rate and CAGR used in the discounted cash flow model to arrive at the appraised value were 5.75%, 6.50% and 14.41%, respectively.

353 Sacramento is an office building containing 284,751 rentable square feet located in San Francisco, California and we hold a 55% interest in a joint venture that owns 353 Sacramento. The appraised value of 353 Sacramento as provided by Kroll was $121.5 million. The Advisor used the appraised value provided by Kroll along with the Advisor’s estimated fair values of other assets and liabilities, to calculate the amount that we would receive in a hypothetical liquidation of the real estate and the other assets and liabilities based on the profit participation thresholds contained in the joint venture agreement. The resulting amount was the fair value assigned to our 55% interest in this unconsolidated joint venture. As of September 30, 2023, the carrying value and estimated fair value of our investment in this unconsolidated joint venture were $0 and $13.2 million, respectively. Our carrying value for this investment is $0 due to impairment charges recorded during the year ending September 30, 2023.

Kroll relied on a 10-year discounted cash flow analysis for the final valuation of 353 Sacramento. The terminal capitalization rate, discount rate and CAGR used in the discounted cash flow model to arrive at the appraised value were 7.50%, 9.00% and 10.91%, respectively.

The table below illustrates the impact on the estimated value per share if the terminal capitalization rates or discount rates were adjusted by 25 basis points, and assuming all other factors remain unchanged, with respect to 110 William Street and 353 Sacramento. Additionally, the table below illustrates the impact on the estimated value per share if the terminal capitalization rates or discount rates for 110 William Street and 353 Sacramento were adjusted by 5% in accordance with the IPA guidance:

	Increase (Decrease) on the Estimated Value per Share due to
	Decrease of 25 basis points		Increase of 25 basis points		Decrease of 5%		Increase of 5%
Terminal capitalization rates	$	0.08	$	(0.08)	$	0.10	$	(0.09)
Discount rates	0.06		(0.06)		0.09		(0.08)

We also hold 124 Class A Units of Pacific Oak Opportunity Zone Fund I, LLC, approximately 46%, and the units were valued by our advisor based on our advisor’s estimated unit value for the fund. As of September 30, 2023, the carrying value and estimated fair value of our investment in this unconsolidated entity were $23.9 million and $36.2 million, respectively, with the latter equal to $0.35 per share. If the per-unit price were adjusted by 5%, it would impact the estimated value per share value by $0.02.

Real Estate Equity Securities

As of September 30, 2023, we owned investments in two real estate equity securities: 64,165,352 shares of common units of Keppel Pacific Oak US REIT and 6,915,089 shares of Franklin Street Properties Corp. The fair values of these real estate equity securities were based on quoted prices in an active market on a major stock exchange. The fair value and carrying value of our real estate equity securities was $26.9 million.

Notes Payable

The estimated fair values of our notes payable are calculated using a discounted cash flow analysis, but they do not equal the book value in accordance with GAAP. For the discounted cash flow analysis, the contractual cash flows were discounted by estimated market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio and type of collateral.

As of September 30, 2023 the GAAP fair value and carrying value of our notes payable were $640.2 million and $653.3 million, respectively. The weighted-average discount rate applied to the future estimated debt payments, which have a weighted-average remaining term of 2.0 years, was approximately 8.09%. The table below illustrates the impact on our estimated value per share if the discount rates were adjusted by 25 basis points, and assuming all other factors remain unchanged, with respect to our notes payable. Additionally, the table below illustrates the impact on the estimated value per share if the discount rates were adjusted by 5% in accordance with the IPA guidance:

	Increase (Decrease) on the Estimated Value per Share due to
	Decrease of 25 basis points		Increase of 25 basis points		Decrease of 5%		Increase of 5%
Discount rates	$	(0.03)	$	0.03	$	(0.04)	$	0.04

Series B and C Bonds

Our Series B and Series C Bonds are publicly traded on the Tel-Aviv Stock Exchange. The estimated values of our Series B and Series C Bonds are based on the quoted bond prices as of September 30, 2023 on the Tel-Aviv Stock Exchange of 91.07% of face value for Series B and 103.08% for Series C (including accrued interest expense), and foreign currency exchange rates as of September 30, 2023. As of September 30, 2023, the estimated fair value and carrying value of our Series B and C Bonds were $380.0 million and $365.9 million, respectively.

Non-controlling Interests

In determining the fair value, we considered the various profit participation thresholds in each of the entities that must be measured in determining the fair value of our non-controlling interest liability. We used the real estate valuations provided by Kroll, Colliers and HouseCanary and calculated the amount that the non-controlling interests would receive in a hypothetical liquidation of the underlying real estate properties (including all current assets and liabilities) at their current estimated values and the payoff of any related debt at its fair value, based on agreements. The estimated payment to the non-controlling interests were then reflected as the non-controlling interest liability in our calculation of its estimated value per share.

Participation Fee Potential Liability Calculation

Our potential incentive fee payable to our advisor is estimated to be $0 in the estimated share value as of November 30, 2023. Our advisor is entitled to receive an incentive fee in an amount equal to the amount by which (A) 15.0% of our net cash flows, whether from continuing operations, net sale proceeds or otherwise, which remain after our stockholders have received, together as a collective group, aggregate distributions (including distributions that may constitute a return of capital for federal income tax purposes) sufficient to provide (i) a return of their net invested capital, or the amount calculated by multiplying the total number of shares purchased by stockholders by the issue price (except that all shares issued to stockholders of POSOR II in connection with the Merger are deemed to have been purchased by such stockholders at the effective time of the Merger and at a price of $10.63 per share), reduced by any amounts to repurchase shares pursuant to our share redemption program, and (ii) a 7.0% per year cumulative, non-compounded return on such net invested capital from our inception, exceeds (B) $33.8 million which equals (i) the estimated share value effective November 12, 2018 and used in the determination of the number of restricted stock units originally issued, times (ii) the number of restricted stock units originally issued, to our former advisor, in connection with its termination on October 31, 2019. Net sales proceeds means the net cash proceeds realized by us after deduction of all expenses incurred in connection with a sale, including disposition fees paid to our advisor. The 7.0% per year cumulative, noncompounded return on net invested capital from our inception is calculated on a daily basis. In making this calculation, the net invested capital is reduced to the extent distributions in excess of a cumulative, noncompounded, annual return of 7.0% are paid (from whatever source), except to the extent such distributions would be required to supplement prior distributions paid in order to achieve a cumulative, noncompounded, annual return of 7.0% (invested capital is only reduced as described in this sentence; it is not reduced simply because a distribution constitutes a return of capital for federal income tax purposes). The 7.0% per year cumulative, noncompounded return is not based on the return provided to any individual stockholder. Accordingly, it is not necessary for each of our stockholders to have received any minimum return in order for our

advisor to participate in our net cash flows. In fact, if our advisor is entitled to participate in our net cash flows, the returns of our stockholders will differ, and some may be less than a 7.0% per year cumulative, noncompounded return. This fee is payable only if we are not listed on an exchange. For purposes of determining the estimated value per share, our advisor calculated the potential liability related to this incentive fee based on a hypothetical liquidation of the assets and liabilities at their estimated fair values, after considering the impact of any potential closing costs and fees related to the disposition of real estate properties.

Our potential incentive fee payable to PORA, an affiliate of our advisor, is estimated to be $7.1 million in the estimated share value as of November 30, 2023. For a description of the advisor and its affiliate incentive fee, please refer to our Current Report on Form 8-K filed with the SEC on September 12, 2022.

Other Assets and Liabilities

The carrying values of a majority of our other assets and liabilities are considered to equal their fair value due to their short maturities or liquid nature. Certain balances, such as straight-line rent receivables, lease intangible assets and liabilities, accrued capital expenditures, deferred financing costs, unamortized lease commissions and unamortized lease incentives, have been eliminated for the purpose of the valuation due to the fact that the value of those balances were already considered in the valuation of the related asset or liability. The Advisor has also excluded redeemable common stock as temporary equity does not represent a true liability to us and the shares that this amount represents are included in our total outstanding shares of common stock for purposes of calculating the estimated value per share of our common stock.

Different parties using different assumptions and estimates could derive a different estimated value per share, and these differences could be significant. The value of our shares will fluctuate over time in response to developments related to individual assets in our portfolio and the management of those assets and in response to the real estate and finance markets.

Limitations of Estimated Value Per Share

As mentioned above, we are providing this estimated value per share to assist broker dealers that participated in our initial public offering in meeting their customer account statement reporting obligations. This valuation was performed in accordance with the provisions of and also to comply with IPA valuation guidelines. The estimated value per share set forth above first appeared on the December 31, 2023 customer account statements that were mailed in January 2024. As with any valuation methodology, the methodologies used are based upon a number of estimates and assumptions that may not be accurate or complete. Different parties with different assumptions and estimates could derive a different estimated value per share. The estimated value per share is not audited and does not represent the fair value of our assets less the fair value of our liabilities according to GAAP.

Accordingly, with respect to the estimated value per share, we can give no assurance that:

•a stockholder would be able to resell his or her shares at this estimated value per share;

•a stockholder would ultimately realize distributions per share equal to our estimated value per share upon liquidation of our assets and settlement of our liabilities or a sale of our company;

•our shares of common stock would trade at the estimated value per share on a national securities exchange;

•an independent third-party appraiser or other third-party valuation firm would agree with our estimated value per share; or

•the methodology used to calculate our estimated value per share would be acceptable to FINRA or for compliance with ERISA reporting requirements.

Further, the estimated value per share as of November 30, 2023 is based on the estimated value of our assets less the estimated value of our liabilities divided by the number of shares outstanding, all as of September 30, 2023. As of September 30, 2023, there were 103,439,698 shares issued and outstanding. The value of our shares will fluctuate over time in response to developments related to individual assets in our portfolio and the management of those assets and in response to the real estate and finance markets. Currently, U.S. commercial real estate values are impacted by a lack of transaction volume and general uncertainty in the real estate capital markets, increasing the uncertainty of current valuations. The estimated value per share does not reflect a discount for the fact that we are externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated value per share does not take into account estimated disposition costs and fees, debt prepayment penalties that could apply upon the prepayment of certain of our debt obligations or the impact of restrictions on the assumption of debt. The estimated value per share does consider any participation or incentive fees that would be due to the advisor based on the aggregate net asset value of ours which would be payable in a hypothetical liquidation of us as of the valuation date in accordance with the terms of our advisory agreement. We currently expect to utilize our advisor and/or an independent valuation firm to update the estimated value per share no later than December 2024.

Historical Estimated Values per Share

The historical reported estimated values per share of our common stock approved by our board of directors are set forth below:

Estimated Value per Share	Effective Date of Valuation	Filing with the Securities and Exchange Commission
$10.50	December 2, 2022	Current Report on Form 8-K, filed December 8, 2022
$10.68	December 2, 2021	Current Report on Form 8-K, filed December 8, 2021
$9.68	December 4, 2020	Current Report on Form 8-K, filed December 10, 2020
$10.63	December 17, 2019	Current Report on Form 8-K, filed December 19, 2019
$9.91	November 12, 2018	Current Report on Form 8-K, filed November 15, 2018
$11.50	December 7, 2017	Current Report on Form 8-K, filed December 13, 2017
$14.81	December 8, 2016	Current Report on Form 8-K, filed December 15, 2016
$13.44	December 8, 2015	Current Report on Form 8-K, filed December 10, 2015
$12.24	December 9, 2014	Current Report on Form 8-K, filed December 11, 2014
$11.27	March 25, 2014	Current Report on Form 8-K, filed March 27, 2014

Distribution Information

We declare distributions when our board of directors determines we have sufficient cash flow from operations, investment activities and/or strategic financings. We expect to fund distributions from interest and rental income on investments, the maturity, payoff or settlement of those investments and from strategic sales of loans, properties and other assets.

As a REIT, we will generally have to hold our assets for two years in order to meet the safe harbor to avoid a 100% prohibited transactions tax, unless such assets are held through a TRS or other taxable corporation. In certain instances, we may sell properties outside of the safe harbor period and still be exempt from the 100% prohibited transaction tax because such properties were not held as “inventory.” Our board of directors intends to declare distributions quarterly depending on cash flow from our investments. Our board of directors may also declare distributions to the extent we have asset sales.

To maintain our qualification as a REIT, we must make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). If we meet the REIT qualification requirements, we generally will not be subject to federal income tax on the income that we distribute to our stockholders each year. In general, we anticipate making distributions to our stockholders of at least 100% of our REIT taxable income so that none of our income is subject to federal income tax. Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board of directors deems relevant.

Our distribution policy is not to pay distributions from sources other than cash flow from operations, investment activities and strategic financings. However, our organizational documents do not restrict us from paying distributions from any source and do not restrict the amount of distributions we may pay from any source, including proceeds from the issuance of securities, third-party borrowings, advances from our advisor or sponsors or from our advisor’s deferral of its fees under the advisory agreements. Distributions paid from sources other than current or accumulated earnings and profits may constitute a return of capital. From time to time, we may generate taxable income greater than our taxable income for financial reporting purposes, or our taxable income may be greater than our cash flow available for distribution to stockholders. In these situations, we may make distributions in excess of our cash flow from operations, investment activities and strategic financings to satisfy the REIT distribution requirement described above. In such an event, we would look first to other third-party borrowings to fund these distributions.

We have not established a minimum distribution level, and our charter does not require that we make distributions to our stockholders. There were no distributions declared during the years ended December 31, 2023 and 2022.

Unregistered Sales of Equity Securities

During the year ended December 31, 2023, we did not sell any equity securities that were not registered under the Securities Act of 1933, as amended, other than as previously reported in our quarterly reports on Form 10-Q.

Share Redemption Program

We have adopted a share redemption program that may enable stockholders to sell their shares to us in limited circumstances.

Pursuant to the share redemption program there are several limitations on our ability to redeem shares:

•Unless the shares are being redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence” (each as defined under the share redemption program), we may not redeem shares until the stockholder has held the shares for one year.

•During any calendar year, we may redeem no more than 5% of the weighted-average number of shares outstanding during the prior calendar year.

•We have no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency.

•During any calendar year, we may redeem only the number of shares that we can purchase with the amount of net proceeds from the sale of shares under our dividend reinvestment plan during the prior calendar year; provided, however, that this limit may be increased or decreased by us upon ten business days’ notice to our stockholders. To the extent that we redeem less than the number of shares that we can purchase in any calendar year with the amount of net proceeds from the sale of shares under our dividend reinvestment plan during the prior calendar year plus any additional funds approved by us, such excess capacity to redeem shares during any calendar year shall be added to our capacity to otherwise redeem shares during the subsequent calendar year. We indefinitely suspended the dividend reinvestment plan as of March 28, 2023. Furthermore, during any calendar year, once we have received requests for redemptions, whether in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence”, or otherwise, that if honored, and when combined with all prior redemptions made during the calendar year, would result in the amount of remaining funds available for the redemption of additional shares in such calendar year being $1.0 million or less, the last $1.0 million of available funds shall be reserved exclusively for shares being redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence.” To the extent that, in the last month of any calendar year, the amount of redemption requests in connection with a stockholder’s death, “qualifying disability or “determination of incompetence” is less than the amount of available funds reserved for such redemptions in accordance with the previous sentence, any excess funds may be used to redeem shares not in connection with a stockholder’s death, “qualifying disability or “determination of incompetence” during such month.

•We may not redeem more than $3.0 million of shares in a given quarter (excluding shares redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence”). To the extent that, in a given fiscal quarter, we redeem less than the sum of (a) $3.0 million of shares (excluding shares redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence”) and (b) any excess capacity carried over to such fiscal quarter from a prior fiscal quarter as described below, any remaining excess capacity to redeem shares in such fiscal quarter will be added to our capacity to otherwise redeem shares (excluding shares redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence”) during succeeding fiscal quarter. We may increase or decrease this limit upon ten business days’ notice to stockholders.

•In addition to the capacity from the point above, during the year ended December 31, 2023, we made available $6.0 million for redemptions in connection with a stockholder's death, “qualifying disability”, or “determination of incompetence”. As of December 31, 2023, $2.2 million remained available for redemptions in connection with a stockholder's death, “qualifying disability”, or “determination of incompetence”. Unless an additional amount is approved by us for redemption, in 2024, we may redeem no more than $2.2 million of shares in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence”.

We may amend, suspend or terminate the program upon ten business days’ notice to our stockholders. We may provide notice to our stockholders by including such information in a Current Report on Form 8-K or in our annual or quarterly reports, all publicly filed with the SEC, or by a separate mailing to our stockholders.

During the year ended December 31, 2023, we fulfilled redemption requests eligible for redemption under our share redemption program and received in good order and funded redemptions under our share redemption program with the net proceeds from our dividend reinvestment plan and cash on hand. We redeemed shares pursuant to our share redemption program as follows:

Month	Total Number<br><br>of Shares Redeemed	Average Price<br><br>Paid Per Share (1)		Approximate Dollar Value of Shares Available<br>That May Yet Be Redeemed Under the Program
January 2023	75,025	$	10.50	(2)
February 2023	25,954	$	10.50	(2)
March 2023	42,806	$	10.50	(2)
April 2023	47,885	$	10.50	(2)
May 2023	47,410	$	10.50	(2)
June 2023	66,907	$	10.50	(2)
July 2023	15,552	$	10.50	(2)
August 2023	120,188	$	10.50	(2)
September 2023	50,658	$	10.50	(2)
October 2023	32,270	$	10.50	(2)
November 2023	56,172	$	10.50	(2)
December 2023	40,608	$	8.03	(2)
Total	621,435

_____________________

(1) On November 30, 2023 our board of directors approved an estimated value per share of our common stock of $8.03. The change in the redemption price became effective for the December 2023 redemption date and is effective until the estimated value per share is updated. We expect to update our estimated value per share no later than December 2023.

(2) We limit the dollar value of shares that may be redeemed under the program as described above. During the year ended December 31, 2023, we redeemed $6.4 million of common stock under the program, which represented shares in connection with redemption requests made upon a stockholder’s death, “qualifying disability” or “determination of incompetence”. Based on the Twelfth Amended and Restated Share Redemption Program, we have $2.2 million available for redemptions during 2024, subject to the limitations described above. To the extent extra capacity is available with respect to redemptions in the last month of 2023, such capacity will be made available for redemption of shares other than in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence.”

ITEM 6.    [RESERVED]

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our accompanying consolidated financial statements and the notes thereto. Also, see “Forward-Looking Statements” preceding Part I of this Annual Report on Form 10-K.

Overview

We were formed on October 8, 2008 as a Maryland corporation, elected to be taxed as a REIT beginning with the taxable year ended December 31, 2010 and intend to operate in such manner. The advisory agreement with our advisor is currently effective through November 1, 2024; however, we or our advisor may terminate the advisory agreement without cause or penalty upon providing 60 days’ written notice.

Our advisor manages our day-to-day operations and our portfolio of investments. Our advisor also has the authority to make all of the decisions regarding our investments, except for our residential home portfolio. Our residential home portfolio, held through PORT is managed by an affiliate of our advisor. The advisory duties are subject to the limitations in our charter and the direction and oversight of our board of directors. Our advisor also provides asset-management, marketing, investor-relations and other administrative services on our behalf. We have sought to invest in and manage a diverse portfolio of real estate-related loans, opportunistic real estate, real estate-related debt and equity securities, and other real estate-related investments. We conduct our business primarily through our operating partnership, of which we are the sole general partner.

On January 8, 2009, we filed a registration statement on Form S-11 with the SEC to offer a minimum of 250,000 shares and a maximum of 140,000,000 shares of common stock for sale to the public, of which 100,000,000 shares were registered in our primary offering and 40,000,000 shares were registered under our dividend reinvestment plan. We ceased offering shares of common stock in our primary offering on November 14, 2012. We sold 56,584,976 shares of common stock in the primary offering for gross offering proceeds of $561.7 million. On October 5, 2020, Pacific Oak Strategic Opportunity REIT II, Inc. (“POSOR II”) merged with an indirect subsidiary of ours (the “Merger”). At the effective time of the Merger, each issued and outstanding share of POSOR II’s common stock converted into 0.9643 shares of our common stock or 28,973,906 shares. As of March 28, 2023 we indefinitely suspended offering shares of common stock under the dividend reinvestment plan to minimize

administrative costs. Also as of December 31, 2023, we had redeemed 27,951,857 of the shares sold in our offering for $324.1 million and had issued 36,398,447 shares of common stock in connection with special dividends. Additionally, on December 29, 2011 and October 23, 2012, we issued 220,994 shares and 55,249 shares of common stock, respectively, for $2.0 million and $0.5 million, respectively, in private transactions exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933, as amended.

In February 2020, Pacific Oak SOR BVI issued 254.1 million Israeli new shekels of Series B Bonds (the “Series B Bonds”) to Israeli investors pursuant to a public offering registered with the Israel Securities Authority. The Series B Bonds have principal installment payments equal to 33.33% of the face amount of the Series B Bonds on January 31st of each year from 2024 to 2026. Pacific Oak SOR BVI issued additional Series B Bonds subsequent to the initial issuance and as of December 31, 2023, 1.2 billion Israeli new shekels (approximately $321.7 million as of December 31, 2023) were outstanding. The Series B Bonds have an equal level of security, pari passu, amongst themselves and between them and the initial Series B Bonds without any right of precedence or preference between any of them. Subsequent to December 31, 2023, we the made the first Series B Bonds installment payment.

In July 2023, Pacific Oak SOR BVI issued 340.3 million Israeli new shekels of Series C Bonds to Israeli investors pursuant to offerings registered with the Israeli Securities Authority. Pacific Oak SOR BVI issued additional Series C Bonds subsequent to the initial issuance and as of December 31, 2023, 360.0 million Israeli new shekels (approximately $99.5 million as of December 31, 2023) were outstanding. The Series C Bonds have an equal level of security, pari passu, amongst themselves without any right of precedence or preference between any of them. The Series C Bonds are collateralized by real estate held for investment (specified lands in Park Highlands and Richardson).

As of December 31, 2023, we consolidated nine office complexes, encompassing, in the aggregate, approximately 3.2 million rentable square feet and these properties were 68% occupied. In addition, we owned one residential home portfolio consisting of 2,182 residential homes, and two apartment properties containing 609 units, which were 93% and 96% occupied, respectively. We also owned one hotel property with 196 rooms, 4 investments in undeveloped land with approximately 581 developable acres, and one office/retail development property, and held an interest in three investments in unconsolidated entities and two investments in real estate equity securities.

Market Outlook - Real Estate and Real Estate Finance Markets

Volatility in global financial markets and changing political environments can cause fluctuations in the performance of the U.S. commercial and residential real estate markets. Possible future declines in rental rates, slower or potentially negative net absorption of leased space and expectations of future rental concessions, including free rent to renew tenants early, to retain tenants who are up for renewal or to attract new tenants, may result in decreases in cash flows from investment properties. Increases in the cost of financing due to higher interest rates may cause difficulty in refinancing debt obligations prior to or at maturity or at terms as favorable as the terms of existing indebtedness. Further, increases in interest rates would increase the amount of our debt payments on our variable rate debt to the extent the interest rates on such debt are not limited by interest rate caps. Market conditions can change quickly, potentially negatively impacting the value of real estate investments. Management continuously reviews our investment and debt financing strategies to optimize our portfolio and the cost of our debt exposure.

Liquidity and Capital Resources

Our principal demand for funds during the short and long-term is and will be for the acquisition of real estate and real estate-related investments, payment of operating expenses, capital expenditures and general and administrative expenses, payments under debt obligations, redemptions and purchases of our common stock and payments of distributions to stockholders. As of December 31, 2023, we have had five primary sources of capital for meeting our cash requirements:

•Proceeds from the primary portion of our initial public offering;

•Proceeds from our dividend reinvestment plan;

•Debt financing, including bond offerings in Israel;

•Proceeds from the sale of real estate and real estate-related investments; and

•Cash flow generated by our real estate and real estate-related investments.

We sold 56,584,976 shares of common stock in the primary portion of our initial public offering for gross offering proceeds of $561.7 million. We ceased offering shares in the primary portion of our initial public offering on November 14, 2012. As of March 28, 2023, we indefinitely suspended offering shares of common stock under the dividend reinvestment plan to minimize administrative costs. To date, we have invested all of the net proceeds from our initial public offering in real estate and real estate-related investments. We intend to use our cash on hand, proceeds from asset sales, proceeds from debt financing, cash flow generated by our real estate operations and real estate-related investments as our primary sources of immediate and long-term liquidity.

Our investments in real estate generate cash flow in the form of rental revenues and tenant reimbursements, which are reduced by operating expenditures and corporate general and administrative expenses. Cash flow from operations from our real estate investments is primarily dependent upon the occupancy levels of our properties, the net effective rental rates on our leases, the collectibility of rent and operating recoveries from our tenants and how well we manage our expenditures. As of December 31, 2023, our office complexes were collectively 68% occupied, our residential home portfolio was 93% occupied and our apartment properties were collectively 96% occupied.

Investments in real estate equity securities generate cash flow in the form of dividend income. As of December 31, 2023, we had two investments in real estate equity securities outstanding with a total carrying value of $41.6 million.

Under our charter, we are required to limit our total operating expenses to the greater of 2% of our average invested assets or 25% of our net income for the four most recently completed fiscal quarters, as these terms are defined in our charter, unless the conflicts committee has determined that such excess expenses were justified based on unusual and non-recurring factors. Operating expenses for the four fiscal quarters ended December 31, 2023 did not exceed the charter-imposed limitation.

For the year ended December 31, 2023, our cash needs for capital expenditures, additional strategic investment ventures, redemptions of common stock and debt servicing were met with proceeds from dispositions of real estate and real estate-related investments, proceeds from debt financing, and cash on hand. Operating cash needs during the same period were met through cash flow generated by our real estate and real estate-related investments and cash on hand. As of December 31, 2023, we had outstanding debt obligations in the aggregate principal amount of $1.0 billion, with a weighted-average remaining term of 2.0 years. As of December 31, 2023, we had $289.0 million of debt obligations scheduled to mature over the period from January 1, 2024 through December 31, 2024. Of these debt obligations $18.0 million have extension options if we comply with certain debt covenants that may include one or a combination of the following ratios: debt-to-value, debt yield and debt service coverage. In order to satisfy obligations as they mature, we plan to utilize extension options available in the respective loan agreements, may seek to refinance certain debt instruments, may market one or more properties for sale or may negotiate a turnover of one or more secured properties back to the related mortgage lender. In order to utilize extension options, we may be subject to debt covenant requirements that may include one or a combination of the following ratios: debt-to-value, debt yield, minimum equity requirements, and debt service coverage. We have also agreed to fund expenditures and improvements to the 110 William Joint Venture of $105.0 million. As of December 31, 2023, the outstanding amount to be paid under this commitment is approximately $76.7 million. Based upon these plans, we believe we will have sufficient liquidity to continue as a going concern. There can be no assurance as to the certainty or timing of any of our plans.

We plan to meet these obligations primarily through a combination of one or more of cash on hand, asset sales, extension options (if available), refinancings (whether with the same lender or different lenders) and issuing additional debt. We believe that with these options we have sufficient cash on hand and availability to address our debt maturities and capital needs scheduled to mature over the period December 31, 2023 through December 31, 2024. However, tighter financial conditions, higher interest rates and lower asset values may make it more difficult to refinance our loans or to sell assets on favorable terms. In recent years, we have accessed debt capital through the Israeli capital markets, but that source of debt capital may be limited in the future because of changing conditions such as the recently escalated conflict between Israel and Hamas. Our mortgage loans are primarily non-recourse to us, meaning the lender’s recourse is to take possession of the underlying property. It is possible we may choose not to repay or refinance some of the maturing loans, which would ultimately result in losing possession of the underlying property.

Following December 31, 2023 and through our date of filing, we have used proceeds to repay Series B bonds as we made the first principal installment payment of 388.1 million Israeli new shekels (approximately $106.6 million as of January 31, 2024). We have also increased our liquidity by borrowing $20.0 million in new debt related to one office property, entered into a purchase and sale agreement that is expected to generate positive cash flow over the next 18 months and engaged in discussions with the lending community to improve our liquidity.

We have elected to be taxed as a REIT and intend to operate as a REIT. To maintain our qualification as a REIT, we are required to make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (computed without regard to the dividends paid deduction and excluding net capital gain). Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board of directors deems relevant. We have not established a minimum distribution level.

Guarantee Agreements

As of December 31, 2023 and as part of the 110 William Joint Venture debt and equity restructuring, we became the guarantor for certain guarantees related to the 110 William Joint Venture, including guaranteeing: all debt servicing costs and timely debt payments, completion for the construction and development of tenant improvement work, funding related to the Capital Commitments (as defined below), and recourse obligations. The related debt has an initial maturity of July 5, 2026 and guarantee amounts are due upon occurrence of any one triggering event.

As of December 31, 2023 and as part of the Georgia 400 Mortgage Loan and Lincoln Court Mortgage Loan, we guarantee the payment of $22.8 million, whereby we would be required to make guaranteed payments in the event that we turned the property over to the lender.

Cash Flows used in Operating Activities

As of December 31, 2023, we consolidated nine office complexes, encompassing, in the aggregate, approximately 3.2 million rentable square feet and these properties were 68% occupied. In addition, we owned one residential home portfolio consisting of 2,182 residential homes, and two apartment properties containing 609 units, which were 93% and 96% occupied, respectively. We also owned one hotel property with 196 rooms, 4 investments in undeveloped land with approximately 581 developable acres, and one office/retail development property, and held an interest in three investments in unconsolidated entities and two investments in real estate equity securities. During the year ended December 31, 2023, net cash used in operating activities was $24.3 million. The increase in net cash used in operating activities during the year ended December 31, 2023 was primarily due to an increase of cash paid for interest of $20.2 million and income taxes paid of $11.5 million. We expect that our cash flows from operating activities will increase in future periods as a result of leasing additional space that is currently unoccupied and anticipated future acquisitions of real estate and real estate-related investments. However, our cash flows from operating activities may decrease to the extent that we dispose of additional assets.

In addition to making investments in accordance with our investment objectives, we use or have used our capital resources to make certain payments to our advisor and our dealer manager. During our offering stage, these payments included payments to our dealer manager for selling commissions and dealer manager fees related to sales in our primary offering and payments to our dealer manager and our advisor for reimbursement of certain organization and other offering expenses related both to the primary offering and the dividend reinvestment plan. During our acquisition and development stage, we have continued to make payments to our advisor in connection with the selection and origination or purchase of investments, the management of our assets and costs incurred by our advisor in providing services to us as well as for any dispositions of assets (including the discounted payoff of non-performing loans).

The advisory agreement with our advisor has a one-year term but may be renewed for an unlimited number of successive one-year periods upon the mutual consent of our advisor and our conflicts committee.

Among the fees payable to our advisor is an asset management fee. With respect to investments in loans and any investments other than real property, the asset management fee is a monthly fee calculated, each month, as one-twelfth of 0.75% (increased to 1.0% effective November 1, 2023), of the lesser of (i) the amount actually paid or allocated to acquire or fund the loan or other investment, inclusive of fees and expenses related thereto and the amount of any debt associated with or used to acquire or fund such investment and (ii) the outstanding principal amount of such loan or other investment, plus the fees and expenses related to the acquisition or funding of such investment, as of the time of calculation. With respect to investments in real property, the asset management fee is a monthly fee equal to one-twelfth of 0.75% (increased to 1.0% effective November 1, 2023), of the sum of the amount paid or allocated to acquire the investment, plus the cost of any subsequent development, construction or improvements to the property, and inclusive of fees and expenses related thereto and the amount of any debt associated with or used to acquire such investment. In the case of investments made through joint ventures, the asset management fee will be determined based on our proportionate share of the underlying investment, inclusive of our proportionate share of any fees and expenses related thereto. Due to the increase of the asset management fee percentage, we expect asset management fees to increase in future periods.

Investments made in or through PORT are excluded from the calculation of the asset management fee we pay to our advisor. In addition to other fees described in the advisory agreement between PORT and PORA, PORT pays PORA a quarterly asset management fee equal to 0.25% (1.0% annually) on the aggregate value of PORT’s assets, as determined in accordance with PORT’s valuation guidelines, as of the end of each quarter.

Cash Flows from Investing Activities

Net cash provided by investing activities was $47.8 million for the year ended December 31, 2023 and primarily consisted of the following:

•Proceeds from sale of real estate of $116.3 million primarily related to the disposal of approximately 186 acres of Park Highlands land, a vacant building within the Madison Square office complex and 274 residential homes;

•Contributions to an unconsolidated entity of $31.4 million;

•Net cash paid on foreign currency derivatives of $30.2 million, as a result of purchase of foreign currency derivatives of $103.6 million and partially offset by proceeds from the disposition of foreign currency derivatives of $73.4 million;

•Improvements to real estate of $24.1 million; and

•Proceeds from the sale of real estate equity securities of $13.9 million.

Cash Flows used in Financing Activities

Net cash used in financing activities was $25.1 million for the year ended December 31, 2023 and consisted primarily of the following:

•$18.2 million of net cash used for principal payments on notes payable of $111.2 million, primarily related to the $47.9 million repayment of a matured mortgage loan and $23.1 million principal repayments due to the disposition of real estate properties. This was partially offset by proceeds from notes and bonds payable of $98.5 million, primarily related to $97.5 million from the Series C Bonds issuances. Additionally, we made payments of deferred financing costs of $5.4 million; and

•$6.4 million of cash used for redemptions of common stock.

In order to execute our investment strategy, we utilize secured debt and we may, to the extent available, utilize unsecured debt, to finance a portion of our investment portfolio. Management remains vigilant in monitoring the risks inherent with the use of debt in our portfolio and is taking actions to ensure that these risks, including refinancing and interest risks, are properly balanced with the benefit of using leverage. There is no limitation on the amount we may borrow for any single investment. Our charter does not limit us from incurring debt until our aggregate borrowings would exceed 300% of our net assets, which approximates aggregate liabilities of 75% of the cost of our tangible assets (before deducting depreciation or other non-cash reserves); however, we may exceed that limit if a majority of the conflicts committee approves each borrowing in excess of our charter limitation and we disclose such borrowing to our common stockholders in our next quarterly report with an explanation from the conflicts committee of the justification for the excess borrowing. As of December 31, 2023, our borrowings and other liabilities were both approximately 71% of the cost (before depreciation and other noncash reserves) and book value (before depreciation) of our tangible assets, respectively.

In February 2020, Pacific Oak SOR BVI issued 254.1 million Israeli new shekels of the Series B Bonds to Israeli investors pursuant to a public offering registered with the Israel Securities Authority. The Series B Bonds have principal installment payments equal to 33.33% of the face amount of the Series B Bonds on January 31st of each year from 2024 to 2026. Pacific Oak SOR BVI issued additional Series B Bonds subsequent to the initial issuance and as of December 31, 2023, 1.2 billion Israeli new shekels (approximately $321.7 million as of December 31, 2023) were outstanding. The additional Series B Bonds have an equal level of security, pari passu, amongst themselves and between them and the initial Series B Bonds, without any right of precedence or preference between any of them. Subsequent to December 31, 2023, we made the first Series B Bonds installment payment.

In July 2023, Pacific Oak SOR BVI issued 340.3 million Israeli new shekels of the Series C Bonds to Israeli investors pursuant to offerings registered with the Israeli Securities Authority. Pacific Oak SOR BVI issued additional Series C Bonds subsequent to the initial issuance and as of December 31, 2023, 360.0 million Israeli new shekels (approximately $99.5 million as of December 31, 2023) were outstanding. The Series C Bonds have an equal level of security, pari passu, amongst themselves without any right of precedence or preference between any of them. The Series C Bonds are collateralized by real estate held for investment (specified land in Park Highlands and Richardson).

Contractual Commitments and Contingencies

The following is a summary of our contractual obligations as of December 31, 2023 (in thousands):

			Payments Due During the Years Ending December 31,
Contractual Obligations	Total		2024		2025-2026		2027-2028		Thereafter
Outstanding debt obligations (1)	$	1,045,821	$	289,025	$	756,796	$	—	$	—
Interest payments on outstanding debt obligations (2)	101,361		52,277		49,084		—		—
Finance lease obligations (3)	53,316		360		789		792		51,375
Funding commitment (4)	76,672		(4)		(4)		—		—
Development obligations (5)	11,870		11,870		—		—		—

_____________________

(1) Amounts include principal payments based on the outstanding principal amounts, maturity dates and foreign currency rates in effect at December 31, 2023.

(2) Projected interest payments are based on the outstanding principal amounts, maturity dates, foreign currency rates and interest rates in effect at December 31, 2023.

(3) Amounts are related to a leasehold interest expiring on 2114.

(4) In July 2023, the 110 William Joint Venture entered into debt and equity restructuring agreements and as a result, we committed to funding up to $105.0 million to the 110 William Joint Venture in exchange for 77.5% of preferred interest in the joint venture. The determination of our pace and timing remains uncertain, potentially extending beyond the year 2024.

(5) Amounts are development obligations related to previous sales of Park Highlands land.

Results of Operations

Overview

As of December 31, 2023, we consolidated nine office complexes, encompassing, in the aggregate, approximately 3.2 million rentable square feet and these properties were 68% occupied. In addition, we owned one residential home portfolio consisting of 2,182 residential homes, and two apartment properties containing 609 units, which were 93% and 96% occupied, respectively. We also owned one hotel property with 196 rooms, four investments in undeveloped land with approximately 581 developable acres, and one office/retail development property, held an interest in three investments in unconsolidated entities and two investments in real estate equity securities.

Our results of operations for the year ended December 31, 2023 may not be indicative of those in future periods due to acquisition and disposition activities. Additionally, the occupancy in our office complexes has not been stabilized. As of December 31, 2023, our office complexes were collectively 68% occupied, our residential home portfolio was 93% occupied and our apartment properties were collectively 96% occupied. However, due to the amount of near-term lease expirations, we do not put significant emphasis on annual changes in occupancy (positive or negative) in the short run. Our underwriting and valuations are generally more sensitive to “terminal values” that may be realized upon the disposition of the assets in the portfolio and less sensitive to ongoing cash flows generated by the portfolio in the years leading up to an eventual sale. There are no guarantees the occupancy of our assets will increase, or that we will recognize a gain on the sale of our assets. In general, we expect that our income and expenses related to our portfolio will increase in future periods as a result of leasing additional space and acquiring additional assets but decrease due to disposition activity.

Comparison of the year ended December 31, 2023 versus the year ended December 31, 2022 (dollars in thousands):

	For the Years Ended December 31,				Increase (Decrease)		Percentage Change		Change Due to Acquisitions/Dispositions (1)	Change Due to Investments Held Throughout Both Periods (2)
	2023		2022
Rental income	$	128,068	$	121,859	$	6,209	5	%
Hotel revenues	9,153		30,749		(21,596)		(70)	%	(20,983)	(613)
Other operating income	4,315		3,859		456		12	%	(10)	466
Dividend income from real estate equity securities	3,880		5,591		(1,711)		(31)	%	(399)	(1,312)
Operating, maintenance, and management costs	45,699		44,317		1,382		3	%	658	724
Real estate taxes and insurance	28,300		21,132		7,168		34	%	3,885	3,283
Hotel expenses	6,944		19,252		(12,308)		(64)	%	(12,669)	361
Asset management fees to affiliate	15,415		13,678		1,737		13	%	1,852	(115)
General and administrative expenses	10,476		10,700		(224)		(2)	%	n/a	n/a
Foreign currency transaction loss (gain), net	18,712		(29,038)		47,750		(164)	%	n/a	n/a
Depreciation and amortization	47,868		51,930		(4,062)		(8)	%	824	(4,886)
Interest expense, net	68,216		48,130		20,086		42	%	(532)	20,618
Impairment charges on real estate and related intangibles	64,849		18,493		46,356		251	%	n/a	n/a
Impairment charges on goodwill	4,488		8,098		(3,610)		(45)	%	n/a	n/a
Loss from unconsolidated entities, net	(54,758)		(8,019)		(46,739)		583	%	—	(46,739)
Other interest income	2,907		228		2,679		1,175	%	n/a	n/a
Loss on real estate equity securities, net	(4,598)		(51,943)		47,345		91	%	n/a	n/a
Gain on sale of real estate	82,099		46,513		35,586		(77)	%	35,586	—
Gain on extinguishment of debt	—		2,367		(2,367)		(100)	%	n/a	n/a
Gain from consolidation of previously unconsolidated entity	—		18,742		(18,742)		(100)	%	(18,742)	—
Income tax provision	(6,576)		(4,924)		(1,652)		34	%	(1,652)	—

All values are in US Dollars.

_____________________

(1) Represents the dollar amount increase (decrease) for the year ended December 31, 2023 compared to the year ended December 31, 2022 attributable to the real estate and real estate-related investments acquired, repaid or disposed on or after January 1, 2022.

(2) Represents the dollar amount increase (decrease) for the year ended December 31, 2023 compared to the year ended December 31, 2022 with respect to real estate and real estate-related investments owned by us during the entirety of both periods presented.

Rental income increased to $128.1 million for the year ended December 31, 2023 from $121.9 million for the year ended December 31, 2022. The increase was primarily due to the consolidation of Pacific Oak Residential Trust II, Inc. on July 1, 2022, which increased our residential homes segment by 588 homes. This resulted in an increase of approximately $8.3 million of rental income for the year ended December 31, 2023 and the occupancy rates and income within the residential homes segment remained consistent for the years ended December 31, 2023 and 2022. Additionally, the average occupancy rate and rental income per square foot for our strategic opportunistic properties remained consistent for the years ended December 31, 2023 and 2022. We expect rental income to increase in future periods as a result of new lease activity and to the extent we acquire additional properties, but to decrease to the extent we dispose of properties or from naturally expiring lease terminations.

Hotel revenues and expenses decreased to $9.2 million and $6.9 million, respectively for the year ended December 31, 2023 from $30.7 million and $19.3 million, respectively, for the year ended December 31, 2022, primarily as a result of the disposition of the Springmaid Beach Resort in September 2022, which accounted for approximately $21.0 million of hotel revenues and $12.7 million of hotel expenses during the year ended December 31, 2022.

Dividend income from real estate equity securities decreased to $3.9 million for the year ended December 31, 2023 from $5.6 million for the year ended December 31, 2022. The decrease was primarily due to the sale of our real estate equity securities during the year ended December 31, 2023 and a decrease in dividend yield on securities held. We expect dividend income from real estate equity securities to decrease in future periods to the extent we continue to sell our real estate equity securities or experience decreases in the dividend yield.

Foreign currency transaction loss (gain), net decreased to a $18.7 million loss for the year ended December 31, 2023 from a $29.0 million gain for the year ended December 31, 2022, primarily due to the outstanding Series B and C Bonds being denominated in Israeli new shekels and the results of our foreign currency derivatives transactions. We expect to recognize foreign transaction gains and losses due to changes in the value of the U.S. dollar relative to the Israeli new shekel which may be offset from foreign currency derivative hedges outstanding in future periods.

Interest expense, net increased to $68.2 million for the year ended December 31, 2023 from $48.1 million for the year ended December 31, 2022, primarily due to the increase in the weighted-average variable rate to 7.9% as of December 31, 2023 from 6.6% as of December 31, 2022. Additionally, the weighted-average fixed rate increased to 4.8% as of December 31, 2023 from 4.1% as of December 31, 2022, primarily due to the debt issued in connection with the Series C Bonds of $99.5 million with a fixed interest rate of 9.0%. We anticipate interest expense will increase in 2024 as a result of higher average market interest rates over the next twelve months on our variable-rate debt as interest rates are expected to plateau and then start to decrease at a slower rate compared to how quickly they increased throughout 2023. Our interest expense in future periods will vary based on: interest rates on variable rate debt, the amount of interest capitalized, level of future borrowings, interest rate derivative instruments, foreign currency denominated debt, and the impact of refinancing efforts.

Impairment charges on real estate and related intangibles increased to $64.8 million for the year ended December 31, 2023 from $18.5 million for the year ended December 31, 2022, which primarily consisted of writing down the carrying value of three strategic opportunistic properties due to increases in the discount and terminal cap rate assumptions and decreases in projected cash flows resulting in approximately $59.9 million of impairment, and impairment of approximately $5.0 million due to changes in sales comparisons.

During the year ended December 31, 2023, we recognized impairment charges on goodwill of $4.5 million on one strategic opportunistic property and one hotel based on the decline in projected cash flows and the determination of appropriate discount and terminal capitalization rates. During the year ended December 31, 2022, we recognized impairment charges of $8.1 million on two strategic opportunistic properties and one hotel.

Loss from unconsolidated entities, net increased to $54.8 million for the year ended December 31, 2023 from $8.0 million for the year ended December 31, 2022, primarily related to the increase in loss from the 353 Sacramento Joint Venture of $44.0 million for the year ended December 31, 2023 from $4.7 million for the year ended December 31, 2022. The increase in loss is primarily due to an impairment charge on the 353 Sacramento Joint Venture of $14.8 million and increases in our share of interest expense and impairment charges on real estate of $3.5 million and $22.7 million, respectively. The increase in loss from unconsolidated entities, net, was partially offset by the increase in income from the 110 William Joint Venture to $11.7 million for the year ended December 31, 2023 from a loss of $1.7 million for the year ended December 31, 2022. The increase in income was primarily due to recognizing a gain on extinguishment of debt of $71.6 million, and was partially offset by our share of accumulated losses recognized of $60.1 million.

Loss on real estate equity securities, net decreased to $4.6 million for the year ended December 31, 2023 from $51.9 million for the year ended December 31, 2022, primarily related to the decrease in unrealized loss on real estate equity securities to $10.1 million for the year ended December 31, 2023 from $51.9 million for the year ended December 31, 2022. The decrease was partially offset by a realized gain on real estate equity securities sold of $5.5 million for the year ended December 31, 2023 and there were no realized gains or losses on real estate equity securities for the year ended December 31, 2022. The unrealized and realized gains and losses represented the change in the fair value of our real estate equity securities during these periods.

For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, please refer to Item 7 of Part II, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on March 30, 2023 and is incorporated herein by reference.

Funds from Operations, Modified Funds from Operations and Adjusted Modified Funds from Operations

We believe that funds from operations (“FFO”) is a beneficial indicator of the performance of an equity REIT. We compute FFO in accordance with the current National Association of Real Estate Investment Trusts (“NAREIT”) definition. FFO represents net income, excluding gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), impairment losses on real estate assets, depreciation and amortization of real estate assets, and adjustments for unconsolidated partnerships and joint ventures. In addition, we elected the option to exclude mark-to-market changes in value recognized on equity securities in the calculation of FFO. We believe FFO facilitates comparisons of operating performance between periods and among other REITs. However, our computation of FFO may not be comparable to other REITs that do not define FFO in accordance with the NAREIT definition or that interpret the current NAREIT definition differently than we do. Our management believes that historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and provides a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities.

Changes in accounting rules have resulted in a substantial increase in the number of non-operating and non-cash items included in the calculation of FFO. As a result, our management also uses modified funds from operations (“MFFO”) as an indicator of our ongoing performance as well as our dividend availability. MFFO excludes from FFO: amounts relating to straight-line rent and amortization of above- and below-market intangible lease assets and liabilities; amortization of discounts and premiums on bonds and notes payable; Unrealized gain or loss from interest rate caps; and mark-to-market foreign currency transaction adjustments. We compute MFFO in accordance with the definition of MFFO included in the practice guideline issued by the Institute for Portfolio Alternatives (“IPA”) in November 2010 as interpreted by management. Our computation of MFFO may not be comparable to other REITs that do not compute MFFO in accordance with the current IPA definition or that interpret the current IPA definition differently than we do.

In addition, our management uses an adjusted MFFO (“Adjusted MFFO”) as an indicator of our ongoing performance, as well as our dividend sustainability. Adjusted MFFO provides adjustments to reduce MFFO related to operating expenses that are capitalized with respect to certain of our investments in undeveloped land and to increase MFFO related to subordinated performance fee due upon termination to affiliate.

We believe that MFFO and Adjusted MFFO are helpful as measures of ongoing operating performance because they exclude costs that management considers more reflective of investing activities and other non-operating items included in FFO. Management believes that excluding acquisition costs, prior to our early adoption of ASU No. 2017-01 on January 1, 2017, from MFFO and Adjusted MFFO provides investors with supplemental performance information that is consistent with management’s analysis of the operating performance of the portfolio over time, including periods after our acquisition stage. MFFO and Adjusted MFFO also exclude non-cash items such as straight-line rental revenue. Additionally, we believe that MFFO and Adjusted MFFO provide investors with supplemental performance information that is consistent with the performance indicators and analysis used by management, in addition to net income and cash flows from operating activities as defined by GAAP, to evaluate the sustainability of our operating performance. MFFO provides comparability in evaluating the operating performance of our portfolio with other non-traded REITs which typically have limited lives with short and defined acquisition periods and targeted exit strategies. MFFO, or an equivalent measure, is routinely reported by non-traded REITs, and we believe often used by analysts and investors for comparison purposes.

FFO, MFFO and Adjusted MFFO are non-GAAP financial measures and do not represent net income as defined by GAAP. Net income as defined by GAAP is the most relevant measure in determining our operating performance because FFO, MFFO and Adjusted MFFO include adjustments that investors may deem subjective, such as adding back expenses such as

depreciation and amortization and the other items described above. Accordingly, FFO, MFFO and Adjusted MFFO should not be considered as alternatives to net income as an indicator of our current and historical operating performance. In addition, FFO, MFFO and Adjusted MFFO do not represent cash flows from operating activities determined in accordance with GAAP and should not be considered an indication of our liquidity. We believe FFO, MFFO and Adjusted MFFO, in addition to net income and cash flows from operating activities as defined by GAAP, are meaningful supplemental performance measures.

Although MFFO includes other adjustments, the exclusion of straight-line rent, the amortization of above- and below-market leases, the amortization of discounts and closing costs, acquisition fees and expenses (as applicable), mark to market foreign currency transaction adjustments, extinguishment of debt, and gains from consolidation of unconsolidated entities are the most significant adjustments for the periods presented. We have excluded these items based on the following economic considerations:

•Adjustments for straight-line rent. These are adjustments to rental revenue as required by GAAP to recognize contractual lease payments on a straight-line basis over the life of the respective lease. We have excluded these adjustments in our calculation of MFFO to more appropriately reflect the current economic impact of our in-place leases, while also providing investors with a useful supplemental metric that addresses core operating performance by removing rent we expect to receive in a future period or rent that was received in a prior period;

•Amortization of above- and below-market leases. Similar to depreciation and amortization of real estate assets and lease related costs that are excluded from FFO, GAAP implicitly assumes that the value of intangible lease assets and liabilities diminishes predictably over time and requires that these charges be recognized currently in revenue. Since market lease rates in the aggregate have historically risen or fallen with local market conditions, management believes that by excluding these charges, MFFO provides useful supplemental information on the realized economics of the real estate;

•Loss or gain on extinguishment of debt. A loss or gain on extinguishment of debt, which includes prepayment fees related to the extinguishment of debt, represents the difference between the carrying value of any consideration transferred to the lender in return for the extinguishment of a debt and the net carrying value of the debt at the time of settlement. We have excluded the loss or gain from extinguishment of debt in our calculation of MFFO because these losses or gains do not impact the current operating performance of our investments and do not provide an indication of future operating performance;

•Amortization of premium or discount on bonds and notes payable. These are adjustments to interest expense as required by GAAP to recognize bond and notes payable discount and premiums on a straight-line basis over the life of the respective bond or notes payable. We have excluded these adjustments in our calculation of MFFO to appropriately reflect the current economic impact of our bond and notes payable and related interest expense;

•Unrealized gain or loss from interest rate caps. These adjustments include unrealized gains from mark-to-market adjustments on interest rate caps. The change in fair value of interest rate caps not designated as a hedge are non-cash adjustments recognized directly in earnings and are included in interest expense. We have excluded these adjustments in our calculation of MFFO to more appropriately reflect the economic impact of our interest rate cap agreements; and

•Mark-to-market foreign currency transaction adjustments. The U.S. Dollar is our functional currency. Transactions denominated in currency other than our functional currency are recorded upon initial recognition at the exchange rate on the date of the transaction. After initial recognition, monetary assets and liabilities denominated in foreign currency are remeasured at each reporting date into the foreign currency at the exchange rate on that date. In addition, we have entered into foreign currency collars and foreign currency options that results in a foreign currency transaction adjustment. These amounts can increase or reduce net income. We exclude them from MFFO to more appropriately present the ongoing operating performance of our real estate investments on a comparative basis.

•Gain from consolidation of previously unconsolidated entity. The gain was recognized as part of a consolidation process of a previously unconsolidated entity, where we became the primary beneficiary. We excluded the gain from MFFO to more appropriately present the ongoing operating performance of our real estate investments on a comparative basis.

Adjusted MFFO includes adjustments to reduce MFFO primarily related to: income tax provision, impairment of goodwill, as well as real estate taxes, property insurance, and financing costs which are capitalized with respect to certain of our investments in undeveloped land.

Our calculation of FFO, which we believe is consistent with the calculation of FFO as defined by NAREIT, is presented in the following table, along with our calculations of MFFO and Adjusted MFFO, for the years ended December 31, 2023, 2022 and 2021 (in thousands). No conclusions or comparisons should be made from the presentation of these periods.

	For the Year Ended December 31,
	2023		2022		2021
Net loss attributable to common stockholders	$	(144,151)	$	(43,242)	$	(10,955)
Depreciation and amortization	47,868		51,930		58,871
Impairment charges on real estate and related intangibles	64,849		18,493		10,971
Gain on sale of real estate (1)	(82,099)		(46,513)		(30,261)
Loss (gain) on real estate equity securities	4,598		51,943		(28,632)
Adjustments for noncontrolling interests - consolidated entities (2)	(1,194)		(2,375)		(2,858)
Adjustments for investments in unconsolidated entities (3)	59,560		(5,460)		1,479
FFO attributable to common stockholders	(50,569)		24,776		(1,385)
Straight-line rent and amortization of above- and below-market leases	(767)		(3,590)		(3,166)
Transaction and related costs	—		—		2,984
Amortization of net premium/discount on bonds and notes payable	4,354		4,784		2,721
(Gain) loss on extinguishment of debt	—		(2,367)		4,757
Unrealized (gain) loss on interest rate caps	(165)		(1,530)		11
Foreign currency transaction loss (gain), net	18,712		(29,038)		7,445
Gain from consolidation of previously unconsolidated entity	—		(18,742)		—
Adjustments for noncontrolling interests - consolidated entities (2)	(14)		(108)		(161)
Adjustments for investments in unconsolidated entities (3)	(5,322)		3,135		1,213
MFFO attributable to common stockholders	(33,771)		(22,680)		14,419
Other capitalized operating expenses (4)	(4,611)		(3,128)		(2,647)
Impairment charges on goodwill	4,488		8,098		2,808
Income tax provision	6,576		4,924		—
Subordinated performance fee due upon termination to affiliate	—		—		1,678
Adjusted MFFO attributable to common stockholders	$	(27,318)	$	(12,786)	$	16,258

_____________________

(1) Reflects an adjustment to eliminate loss or gain on sale of real estate, which includes undepreciated land sales.

(2) Reflects adjustments to eliminate the noncontrolling interest holders’ share of the adjustments to convert our net loss attributable to common stockholders to FFO, MFFO and Adjusted MFFO.

(3) Reflects adjustments to add back our noncontrolling interest share of the adjustments to convert our net loss attributable to common stockholders to FFO, MFFO and Adjusted MFFO for our equity investments in unconsolidated entities.

(4) Reflects real estate taxes, property insurance and financing costs that are capitalized with respect to certain of our investments in undeveloped land. During the periods in which we are incurring costs necessary to bring these investments to their intended use, certain normal recurring operating costs are capitalized in accordance with GAAP and not reflected in our net loss, FFO and MFFO.

FFO, MFFO and Adjusted MFFO may also be used to fund all or a portion of certain capitalizable items that are excluded from FFO, MFFO and Adjusted MFFO, such as tenant improvements, building improvements and deferred leasing costs. We expect FFO, MFFO and Adjusted MFFO to improve in future periods to the extent that we continue to lease up vacant space and acquire additional assets. We expect FFO, MFFO and Adjusted MFFO to decrease as a result of dispositions.

Critical Accounting Policies and Estimates

Below is a discussion of the accounting policies that management considers critical in that they involve significant management judgments and assumptions, require estimates about matters that are inherently uncertain and because they are important for understanding and evaluating our reported financial results. These judgments will affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses.

Real Estate

Real Estate Acquisition Valuation

In accordance with the guidance for business combinations, we evaluate and record the acquisition of income-producing real estate or real estate that will be used for the production of income as a business combination or an asset acquisition. If substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset or group of similar identifiable assets, then the set is not a business. For purposes of this test, land and buildings can be combined along with the intangible assets for any in-place leases and accordingly, most acquisitions of investment properties would not meet the definition of a business and would be accounted for as an asset acquisition. To be considered a business, a set must include an input and a substantive process that together significantly contributes to the ability to create an output. All assets acquired and liabilities assumed in a business combination are measured at their acquisition date fair values. For asset acquisitions, the cost of the acquisition is allocated to individual assets and liabilities on a relative fair value basis. Acquisition costs associated with business combinations are expensed as incurred. Acquisition costs associated with asset acquisitions are capitalized.

Intangible assets include the value of in-place leases, which represents the estimated value of the net cash flows of the in-place leases to be realized, as compared to the net cash flows that would have occurred had the property been vacant at the time of acquisition and subject to lease-up. Acquired in-place lease value will be amortized to expense over the average remaining terms of the respective in-place leases, including any below-market renewal periods.

We assess the acquisition date fair values of all tangible assets, identifiable intangibles and assumed liabilities using methods similar to those used by independent appraisers, generally utilizing a discounted cash flow analysis that applies appropriate discount and/or capitalization rates and available market information. Estimates of future cash flows are based on a number of factors, including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it were vacant.

We record above-market and below-market in-place lease values for acquired properties based on the present value (using a discount that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of above-market in-place leases and for the initial term plus any extended term for any leases with below-market renewal options. We amortize any recorded above-market or below-market lease values as a reduction or increase, respectively, to rental income over the remaining non-cancelable terms of the respective lease, including any below-market renewal periods.

We estimate the value of tenant origination and absorption costs by considering the estimated carrying costs during hypothetical expected lease up periods, considering current market conditions. In estimating carrying costs, we include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods.

We amortize the value of tenant origination and absorption costs to depreciation and amortization expense over the remaining non-cancelable terms of the leases.

Estimates of the fair values of the tangible assets, identifiable intangibles and assumed liabilities require us to make significant assumptions to estimate market lease rates, property-operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods, and the number of years the property will be held for investment. The use of inappropriate assumptions would result in an incorrect valuation of our acquired tangible assets, identifiable intangibles and assumed liabilities, which would impact the amount of our net income.

Direct investments in undeveloped land or properties without leases in place at the time of acquisition are accounted for as an asset acquisition and not as a business combination. Acquisition fees and expenses are capitalized into the cost basis of an asset acquisition. Additionally, during the time in which we are incurring costs necessary to bring these investments to their intended use, certain costs such as legal fees, real estate taxes and insurance and financing costs are also capitalized.

Impairment of Real Estate and Related Intangibles

We continually monitor events and changes in circumstances that could indicate that the carrying amounts of our real estate and related intangibles may not be recoverable or realized. When indicators of potential impairment suggest that the carrying value of real estate and related intangibles may not be recoverable, we assess the recoverability by estimating whether we will recover the carrying value of the real estate and related intangibles through its undiscounted future cash flows and its eventual disposition. If, based on this analysis, we do not believe that we will be able to recover the carrying value of the real estate and related intangibles, we would record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangibles. Consequently, we recognized impairment charges of $64.8 million during the year ended December 31, 2023 for changes to the fair value of the real estate and related intangibles impairment testing purposes.

Projecting future cash flows involves estimating expected future operating income and expenses related to the real estate and its related intangibles as well as market and other trends. Using inappropriate assumptions to estimate cash flows could result in incorrect fair values of the real estate and its related intangibles and could result in the overstatement of the carrying values of our real estate and related intangibles and an overstatement of our net income.

Impairment of Goodwill

We continually assess whether there has been a triggering event requiring a review of goodwill. Independent appraisal valuations were performed as of September 30, 2023 for the underlying properties and we updated projected cash flows for real estate held in certain reporting units. The appraisals and projected cash flow decline represented a triggering event in the fourth quarter of 2023 to the estimated fair value of goodwill. Consequently, we recognized impairment charges of $4.5 million for changes to the fair value of the reporting unit for goodwill impairment testing purposes.

We concluded that the estimated fair value for all of the other reporting units with goodwill substantially exceeded their related carrying values and no further impairment was necessary as of December 31, 2023.

The carrying value of each reporting unit for the purpose of the goodwill impairment test is determined by considering the reporting units’ appraisals, 3-year NOI projections and other macroeconomic factors related to the reporting units. In estimating the fair value of reporting units, we applied a combination of the market approach and the income approach. Under the market approach, consideration is given to price to projected appraised value for similarly comparable real estate assets and prices paid in recent transactions that have occurred in its geographical area. Under the income approach, a discount rate is applied that reflects the risk and uncertainty related to the reporting unit’s projected net operating income, which was determined by our asset management team. In determining the estimated fair value, we relied upon the latest 3-year NOI projections, which included significant management assumptions and estimates based on our view of current and future economic conditions. Estimates of our future earnings potential, and that of the reporting units, involve considerable judgment, including management’s view on future changes in market cycles, the return-to-work environment, the anticipated result of the office sector, competitive factors and assumptions concerning the market conditions.

We engaged the services of an independent valuation specialist to assist in the valuation of certain reporting units. The results of the impairment evaluation of each reporting unit’s goodwill would be significantly impacted by adverse changes in the underlying parameters used in the valuation process. If actual outcomes or the future outlook adversely differ from management’s best estimates of the key economic assumptions and associated cash flows applied in the valuation of the reporting unit, we could potentially incur material impairment charges in the future.

Impairment of Investment in Unconsolidated Entities

We evaluate quarterly whether the current carrying value of investments accounted for using the equity method has an other-than-temporary impairment (“OTTI”). An OTTI occurs when the estimated fair value of an investment is below the carrying value and the difference is determined to not be recoverable in the near term. First, we consider both qualitative and quantitative evidence of whether there may be indicators of a loss in investment value below carrying value. After considering the weight of available evidence, if it is determined that there is an indication of loss in investment value, we would perform a fair value analysis. If the resulting fair value is less than the carrying value, we would determine if this loss in value is OTTI, and we would recognize any OTTI in the income statement as an impairment. Our exposure to OTTI in these investments is limited to the amount of our equity investment. This evaluation requires significant judgment regarding, but not limited to, the severity and duration of the impairment; the ability and intent to hold the investment until recovery; financial condition, liquidity, specific events, and other factors. During the year ended December 31, 2023, we recorded an OTTI loss related to one investment in unconsolidated entity of $14.8 million, primarily due to weakening market conditions of the geographic area.

Subsequent Events

We evaluate subsequent events up until the date the consolidated financial statements are issued.

Series B Bonds Payment

On January 31, 2024, we 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 our 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.

Eight & Nine Corporate Centre Loan

On January 12, 2024, we 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.

Park Highlands Land

On March 10, 2024, we, through indirect wholly owned subsidiaries, entered into a purchase and sale agreement for the sale of Park Highlands undeveloped land 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 we will complete the sale. The purchaser is not affiliated with us or our advisor.

Sale of Real Estate Equity Securities

Subsequent to December 31, 2023, we sold a partial interest in one of our investment in real estate equity securities for gross sale proceeds of approximately $14.3 million.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Overview

Our profitability and the value of our investment portfolio may be adversely affected during any period as a result of interest rate changes, foreign currency changes, and financial market changes. In order to limit the effects of changes in interest rates and foreign currency on our operations, we may utilize a variety of foreign currency hedging strategies such as cross currency swaps, collars, forward contracts, puts or calls. Additionally, certain of these strategies may cause us to fund a margin account periodically to offset changes in interest and foreign currency rates which may also reduce the funds available for payments to holders of our common stock.

Interest Rate Risk

We are exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity, fund distributions and to fund the refinancing of our real estate investment portfolio and operations. We may also be exposed to the effects of changes in interest rates as a result of the acquisition and origination of mortgage, mezzanine, bridge and other loans and the acquisition of real estate securities. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs. We may manage interest rate risk by maintaining a ratio of fixed rate, long-term debt such that floating rate exposure is kept at an acceptable level. In addition, we may utilize a variety of financial instruments, including interest rate caps, floors, and swap agreements, in order to limit the effects of changes in interest rates on our operations.

When we use these types of derivatives to hedge the risk of interest-earning assets or interest-bearing liabilities, we may be subject to certain risks, including the risk that losses on a hedge position will reduce the funds available for payments to holders of our common stock and that the losses may exceed the amount we invested in the instruments.

Conversely, movements in interest rates on variable rate debt would change our future earnings and cash flows but would not significantly affect the fair value of those instruments. However, changes in required risk premiums would result in changes in the fair value of floating rate instruments. Based on interest rates as of December 31, 2023, if interest rates were 100 basis points higher or lower during the 12 months ending December 31, 2023, interest expense on our variable rate debt would increase or decrease by $2.5 million and $4.1 million, respectively.

The table below summarizes the notional amounts and average strike rates derivative instruments and outstanding principal balance and the weighted average interest rates for our notes and bonds payable for each category based on the

maturity dates as of December 31, 2023 (dollars in thousands):

	Maturity Date																		Total Value
	2024			2025			2026			2027			2028			Thereafter						Fair Value
Assets
Interest rate caps, notional amount	$	153,541		$	—		$	—		$	—		$	—		$	—		$	153,541			$	1,236
Strike rate (1)	2.5% to 4.0%			—		%	—		%	—		%	—		%	—		%	2.5% to 4.0%
Liabilities
Notes and Bonds Payable, principal outstanding
Fixed rate - notes payable	$	17,961		$	34,966		$	163,004		$	—		$	—		$	—		$	215,931			$	206,538
Average interest rate (2)	4.6		%	4.7		%	4.0		%	—		%	—		%	—		%	4.3		%
Fixed rate - Series B Bonds	$	107,241		$	107,241		$	107,242		$	—		$	—		$	—		$	321,724			$	296,380
Average interest rate (2)	3.9		%	3.9		%	3.9		%	—		%	—		%	—		%	3.9		%
Fixed rate - Series C Bonds	$	—		$	—		$	99,461		$	—		$	—		$	—		$	99,461			$	102,664
Average interest rate (2)	—		%	—		%	9.0		%	—		%	—		%	—		%	9.0		%
Variable rate - notes payable	$	163,823		$	96,448		$	148,434		$	—		$	—		$	—		$	408,705			$	405,188
Average interest rate (2)	7.7		%	8.0		%	8.2		%	—		%	—		%	—		%	7.9		%

_____________________

(1) The strike rate caps one-month SOFR on the applicable notional amount.

(2) Average interest rate is the weighted-average interest rate. Weighted-average interest rate as of December 31, 2023 is calculated as the actual interest rate in effect at December 31, 2023 (consisting of the contractual interest rate and the effect of contractual floor rates, if applicable), using interest rate indices at December 31, 2023, where applicable.

Foreign Currency Exchange Risk

We are also exposed to the effects of foreign currency changes, primarily the Israeli new shekels, with respect to the 3.93% Series B Bonds and the 9.0% Series C Bonds issued to investors in Israel. Accordingly, changes in exchange rates, and in particular a strengthening of the Israeli new shekels, have in the past, and may in the future, negatively affect our debt, interest, and foreign currency results as expressed in U.S. dollars.

As of December 31, 2023, we held 67.7 million Israeli new shekels and 91.5 million Israeli new shekels in cash and restricted cash, respectively. In addition, as of December 31, 2023, we had bonds outstanding and the related interest payable in the amounts of 1.5 billion Israeli new shekels and 19.2 million Israeli new shekels, respectively. Foreign currency exchange rate risk is the possibility that our financial results could be better or worse than planned because of changes in foreign currency exchange rates. Based solely on the remeasurement for the year ended December 31, 2023, if foreign currency exchange rates were to increase or decrease by 10%, our net income would increase or decrease by approximately $35.1 million and $43.0 million, respectively, for the same period. The foreign currency transaction income or loss as a result of the change in foreign currency exchange rates does not take into account any gains or losses on our foreign currency collar as a result of such change, which would reduce our foreign currency exposure.

We have experienced and will continue to experience fluctuations in our net income as a result of transaction gains or losses related to remeasuring debt and financial instrument balances. At this time, we have not entered into, but in the future, we may enter into, derivatives or other financial instruments in an attempt to hedge our foreign currency exchange risk. It is difficult to predict the effect hedging activities would have on our results of operations. Foreign currency exchange loss, net of $18.7 million and $7.4 million were recognized during the years ended December 31, 2023 and 2021, respectively. Foreign currency exchange gain, net of $29.0 million was recognized during the year ended December 31, 2022. We may manage foreign currency exchange risk by maintaining a ratio of foreign rate denominated cash and restricted cash such that foreign currency rate exposure is kept at an acceptable level.

Financial Market Risk

We are exposed to financial market risk with respect to our real estate equity securities. Financial market risk is the risk that we will incur economic losses due to adverse changes in our real estate equity security prices. Our exposure to changes in real estate equity security prices is a result of our investment in these types of securities. Market prices are subject to fluctuation and, therefore, the amount realized in the subsequent sale of an investment may significantly differ from the reported market value. Fluctuation in the market prices of a real estate equity security may result from any number of factors, including perceived changes in the underlying fundamental characteristics of the issuer, the relative price of alternative investments, interest rates, default rates and general market conditions. In addition, amounts realized in the sale of a particular security may be affected by the relative quantity of the real estate equity security being sold. We do not currently engage in derivative or other hedging transactions to manage our real estate equity security price risk. As of December 31, 2023, we owned real estate equity securities with a book value of $41.6 million. Based solely on the prices of real estate equity securities for the twelve

months ended December 31, 2023, if prices were to increase or decrease by 10%, our net income would increase or decrease, respectively, by approximately $4.2 million.

For a discussion of the interest rate risks related to the current capital and credit markets, see Part I, Item 1A, “Risk Factors.”

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See the Index to Financial Statements at page F-1 of this Annual Report on Form 10-K.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information we are required to disclose in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosure.

Our management, with the participation of our CEO and our CFO, who are our principal executive officer and principal financial officer, respectively, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act, as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our CEO and CFO concluded that, as of December 31, 2023, our disclosure controls and procedures were not effective as a result of a material weakness in our internal control over financial reporting (“ICFR”) discussed below.

Notwithstanding the identified material weakness described below, our management, including our CEO and CFO, does not believe that this deficiency had an adverse effect on our reported operating results or financial condition, and has concluded that our financial statements and other financial information included in this Annual Report and other periodic filings present fairly, in all material respects, our financial condition, results of operations, and cash flows for the periods presented in accordance with generally accepted accounting principles in the United States.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. The design of any disclosure controls and procedures is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate ICFR (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act). Our management assessed the effectiveness of our ICFR as of December 31, 2023, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013 framework). Based on our assessment under this framework, our management concluded that our ICFR was not effective as of December 31, 2023, due to the material weakness described below. A material weakness is a deficiency, or a combination of deficiencies, in ICFR, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Our management identified a material weakness in the design and operation of our management review controls and the completeness and accuracy of information used in the execution of those controls, related to the accounting treatment for complex capital structures involving non-pro rata profit or loss allocations for our investments in unconsolidated entities, under generally accepted accounting principles in the United States.

This material weakness did not result in any material misstatements to our consolidated financial statements or any changes to previously filed financial statements.

Remediation Efforts with Respect to Material Weakness

We are developing a comprehensive plan to remediate this material weakness as soon as possible. The remediation actions will include consultations with external accounting experts for non-recurring, significant, and/or unusual transactions. We believe that these actions will remediate the material weakness. The weakness will not be considered remediated, however, until the application controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of this material weakness will be completed prior to the end of 2024.

Changes in Internal Control Over Financial Reporting

Except for the material weakness and remediation efforts described above, there were no changes in our ICFR during the quarter ended December 31, 2023 that materially affected, or which are reasonably likely to materially affect, our ICFR.

ITEM 9B.    OTHER INFORMATION

None.

ITEM 9C.    DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

We will file a definitive Proxy Statement for our 2024 Annual Meeting of Stockholders (the “2024 Proxy Statement”) with the SEC, pursuant to Regulation 14A, not later than 120 days after the end of our fiscal year. Accordingly, certain information required by Part III has been omitted under General Instruction G(3) to Form 10-K. Only those sections of the 2024 Proxy Statement that specifically address the items required to be set forth herein are incorporated by reference.

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Code of Conduct and Ethics

We have adopted a Code of Conduct and Ethics that applies to all of our executive officers and directors, including but not limited to, our principal executive officer, principal financial officer and principal accounting officer. Our Code of Conduct and Ethics can be found at https://pacificoakcapital.com/capital-markets/offerings/reit.

The other information required by this Item is incorporated by reference to our 2024 Proxy Statement.

ITEM 11.    EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference to our 2024 Proxy Statement.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item is incorporated by reference to our 2024 Proxy Statement.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by this Item is incorporated by reference to our 2024 Proxy Statement.

ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item is incorporated by reference to our 2024 Proxy Statement.

ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)    Financial Statement Schedules

See the Index to the Consolidated Financial Statements at page F-1 of this report.

The following financial statement schedule is included herein at pages F-38 through F-40 of this report:

Schedule III - Real Estate Properties and Accumulated Depreciation and Amortization

(b)    Exhibits

Ex.	Description
3.1	Second Articles of Amendment and Restatement, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed February 4, 2010
3.2	Articles of Amendment, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed November 1, 2019
3.3	Articles of Amendment, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed December 23, 2019
3.4	Fourth Amended and Restated Bylaws, incorporated by reference to Exhibit 3.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 2022, filed March 30, 2023
4.1	Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates), incorporated by reference to Exhibit 4.2 to Pre-Effective Amendment No. 1 to the Company’s Registration Statement on Form S-11, Commission File No. 333-156633, filed February 25, 2009
4.2	Fifth Amended and Restated Dividend Reinvestment Plan, incorporated by reference to Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed May 14, 2015
4.3	Description of Capital Stock, incorporated by reference to Exhibit 4.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed March 26, 2020
10.1	Advisory Agreement, by and between the Company and Pacific Oak Capital Advisors, LLC, effective as of November 1, 2023, incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed January 16, 2024
10.2	Advisory Agreement among Pacific Oak Residential Trust, Inc., PORT OP LP, Pacific Oak Residential Advisors, LLC, Pacific Oak Capital Advisors, LLC, Keith D. Hall, and Peter McMillan III, dated September 9, 2022, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 12, 2022
10.3	Amended and Restated Management Agreement by and between Pacific Oak Residential Trust, Inc., and DMH Realty, LLC, dated September 9, 2022, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed September 12, 2022
10.4	Amended and Restated Dealer Manager Agreement by and between Pacific Oak Residential Trust, Inc., and Pacific Oak Capital Markets, LLC, dated January 13, 2023, incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 10-K filed March 30, 2023
10.5	Restricted Stock Agreement among the Company, KBS Capital Advisors LLC and Pacific Oak Capital Advisors, LLC, incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, filed May 22, 2020
10.6	Agreement of Lease between the City of New York Department of Citywide Administrative Services, 1 Center Street, 20th Floor North, New York, New York 10007 & 110 William Property Investors III, LLC c/o Savanna, 430 Park Avenue, 12th Floor, New York, NY 10022, dated June 27, 2023, incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, filed August 14, 2023
10.7	Supplemental Building Loan Agreement between 110 William Property Investors III, LLC, as Borrower, Lenders Signatory Hereto from Time to Time, as Lenders, and Deutsche Pfandbriefbank AG as Administrative Agent and Lender, dated July 5, 2023, Agreement of Lease between the City of New York Department of Citywide Administrative Services, 1 Center Street, 20th Floor North, New York, New York 10007 & 110 William Property Investors III, LLC c/o Savanna, 430 Park Avenue, 12th Floor, New York, NY 10022, dated June 27, 2023, incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, filed August 14, 2023
Ex.	Description
---	---
10.8	Amended and Restated Limited Liability Company Agreement of Pacific Oak SOR SREF III 110 William, LLC (f/k/a KBS SOR SREF III 110 William, LLC), effective as of July 5, 2023, incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, filed August 14, 2023
10.9	Amended and Restated Senior Loan Agreement dated as of July 5, 2023, between 110 William Property Investors III, LLC, as Borrower, Lenders Signatory Hereto from Time to Time, as Lenders, and Deutsche Pfandbriefbank AG, as Administrative Agent and Lender, incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 filed August 14, 2023
10.10	Guaranty of Interest and Carry Costs as of July 5, 2023 by Pacific Oak SOR Properties, LLC, incorporated by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 filed August 14, 2023
10.11	Completion Guaranty as of July 5, 2023 by Pacific Oak SOR Properties, LLC, incorporated by reference to Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, filed August 14, 2023
10.12	Funding Guaranty as of July 5, 2023 by Pacific Oak SOR Properties, LLC, incorporated by reference to Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 filed August 14, 2023
10.13	Guaranty of Recourse Obligations as of July 5, 2023 by Pacific Oak SOR Properties, LLC, incorporated by reference to Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 filed August 14, 2023
10.14	Membership Interest Purchase Agreement as of July 5, 2023 by and between Pacific Oak SOR 110 William JV, LLC (f/k/a KBS SOR 110 William JV, LLC), SREF III 110 William JV, LLC, and Pacific Oak SOR SREF III 110 William, LLC (f/k/a KBS SOR SREF III 110 William, LLC), incorporated by reference to Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q for the three months ended June 30, 2023 for the quarter ended June 30, 2023 filed August 14, 2023
10.15	Amended and Restated Guaranty Agreement as of August 28, 2023 by Pacific Oak SOR Properties, LLC, incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, filed November 14, 2023
10.16	Amended and Restated Loan Agreement by and among 1180 Raymond Urban Renewal, LLC, Pacific Oak SOR Austin Suburban Portfolio, LLC, Pacific Oak SOR II Oakland City Center, LLC, Pacific Oak SOR Marquette Plaza, LLC, as Borrower, Bank of America, N.A., as Administrative Agent, and the Other Financial Institutions Party Hereto, dated August 28, 2023, incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 filed November 14, 2023
10.17	Deed of Trust between Pacific Oak SOR (BVI) Holdings Ltd. And Reznik Paz Nevo Trusts Ltd., dated February 12, 2020
10.18	Amendment No. 1 to Restricted Stock Agreement, dated as of September 1, 2021, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly report on Form 10-Q for the quarter ended September 30, 2021
21.1	Subsidiaries of the Company
23.1	Consent of Ernst & Young LLP
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1	Twelfth Amended and Restated Share Redemption Program, incorporated by reference to Exhibit 99.5 to the Company's Current Report on Form 8-K filed December 4, 2020
99.2	Amendment No. 1 to the Twelfth Amended and Restated Share Redemption Program, incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed August 6, 2021
99.3	Consent of Colliers International Valuation of Advisory Services, LLC
99.4	Consent of Kroll, LLC
Ex.	Description
---	---
99.5	Consent of HouseCanary, Inc.
101.INS	Inline XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID:42)	F-2
Consolidated Balance Sheets as of December 31, 2023and 2022	F-4
Consolidated Statements of Operations for the Years Ended December 31, 2023, 2022and 2021	F-5
Consolidated Statements of Equity for the Years Ended December 31, 2023, 2022and 2021	F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022and 2021	F-7
Notes to Consolidated Financial Statements	F-8
Financial Statement Schedule
Schedule III - Real Estate Assets and Accumulated Depreciation and Amortization	F-38

All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Pacific Oak Strategic Opportunity REIT, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Pacific Oak Strategic Opportunity REIT, Inc. (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a), Schedule III - Real Estate Assets and Accumulated Depreciation and Amortization (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

F-2

	Real estate impairment
Description of the Matter	The Company’s real estate held for investment and related intangibles totaled $1.1 billion as of December 31, 2023. As more fully described in Note 2 to the consolidated financial statements, the Company monitors if there are indicators of potential impairment which suggest that the carrying value of real estate and related intangible assets and liabilities may not be recoverable. If indicators are present, the Company tests for recoverability by comparing the expected future undiscounted cash flows to the carrying amount of the asset group. If, based on this analysis, the assets are not believed to be recoverable, an impairment loss is recognized for the difference between the estimated fair value and the carrying amount. For the year ended December 31, 2023, the Company recorded $64.8 million of impairment related to its real estate held for investment and related intangibles.<br><br><br><br>Auditing the Company’s real estate impairment assessment was challenging due to the high degree of subjectivity in evaluating management’s identification of indicators of potential impairments and the resulting measurement of impairment when the investment is not deemed recoverable. In particular, the impairment indicators were based on qualitative and quantitative factors for the specific real estate investments. Such factors include, but were not limited to, assessment of management’s intended hold period and disposition strategy, a significant decrease in the market price of a real estate investment, a significant decline in expected operating cash flows, current industry and market trends. Management’s impairment measurement is sensitive to significant assumptions such as market comparables, discount rates, capitalization rates, and revenue growth rates, all of which are affected by expectations about future market or economic conditions.
How We Addressed the Matter in Our Audit	We performed audit procedures to test management’s identification of events or changes in circumstances that might indicate that the carrying amount of a real estate investment might not be recoverable, and to test management’s assessment of the severity of such indicators for each real estate investment. Such procedures include, among others, obtaining evidence to corroborate management’s judgments and searching for contrary evidence such as significant declines in operating results, market and economic trends, disposition strategies, natural disasters, or market effects. To test management’s assessment of fair value of the real estate determined to be impaired, we performed audit procedures that included, among others, assessing the methodologies used, testing the significant assumptions discussed above and the underlying data used by the Company in the analysis. We compared the significant assumptions used by management to current industry and economic trends and other relevant factors. As part of our procedures, we involved our valuation specialists to evaluate management’s judgments as compared to market support.
	110 William Joint Venture restructuring
Description of the Matter	As more fully described in Note 8 to the consolidated financial statements, the Company’s unconsolidated entity, 110 William Joint Venture, entered into debt and equity restructuring agreements, which included, among others, the mezzanine debt being exchanged for a preferred equity interest. The exchange resulted in a gain on extinguishment of debt of $71.6 million for 110 William Joint Venture, which the Company recorded as a loss from unconsolidated entities, net, on the consolidated statement of operations. <br><br>Our audit procedures related to 110 William Joint Ventures’ gain on extinguishment of debt were designed to address the risk related to the significant subjectivity required in the accounting for the transaction. Management’s fair value measurement of the preferred equity interest exchanged is sensitive to significant assumptions such as discount rates, terminal capitalization rates, and market discount rates for preferred stock, all of which are affected by expectations about future market or economic conditions.
How We Addressed the Matter in Our Audit	We performed audit procedures to test the fair value of 110 William Joint Ventures’ preferred equity interest exchanged. Such procedures include, among others, assessing the methodologies used, testing the significant assumptions discussed above and the underlying data used by the Company in the analysis. We compared the significant assumptions used by management to current industry and economic trends and other relevant factors. As part of our procedures, we involved our valuation specialists to evaluate management’s judgments as compared to market support.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2008.

Irvine, California

April 1, 2024

F-3

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	December 31,
	2023		2022
Assets
Real estate held for investment, net	$	1,094,754	$	1,185,286
Real estate held for sale, net	—		34,118
Real estate equity securities	41,609		60,153
Total real estate and real estate-related investments, net	1,136,363		1,279,557
Cash and cash equivalents	99,160		97,931
Restricted cash	56,049		61,113
Investments in unconsolidated entities	45,901		70,842
Rents and other receivables, net	22,500		21,518
Prepaid expenses and other assets	27,222		22,848
Goodwill	948		5,436
Total assets	$	1,388,143	$	1,559,245
Liabilities and equity
Notes and bonds payable related to real estate held for investment, net	$	1,028,683	$	1,027,150
Notes payable related to real estate held for sale, net	—		17,559
Notes and bonds payable, net	1,028,683		1,044,709
Accounts payable and accrued liabilities	30,409		25,231
Due to affiliates	7,902		2,799
Other liabilities	55,571		67,475
Redeemable common stock payable	2,214		2,638
Total liabilities	1,124,779		1,142,852
Commitments and contingencies (Note 10)
Equity
Pacific Oak Strategic Opportunity REIT, Inc. stockholders’ equity
Preferred stock, $.01 par value; 10,000,000 shares authorized, no shares issued and outstanding	—		—
Common stock, $.01 par value; 1,000,000,000 shares authorized, 103,310,648 and 103,932,083 shares issued and outstanding as of December 31, 2023 and 2022, respectively	1,033		1,039
Additional paid-in capital	901,049		907,044
Cumulative distributions and net loss	(639,933)		(495,782)
Total Pacific Oak Strategic Opportunity REIT, Inc. stockholders’ equity	262,149		412,301
Noncontrolling interests	1,215		4,092
Total equity	263,364		416,393
Total liabilities and equity	$	1,388,143	$	1,559,245

See accompanying notes to consolidated financial statements.

F-4

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share data)

	Years Ended December 31,
	2023			2022		2021
Revenues:
Rental income	$	128,068		$	121,859	$	123,436
Hotel revenues	9,153			30,749		30,806
Other operating income	4,315			3,859		4,027
Dividend income from real estate equity securities	3,880			5,591		9,658
Total revenues	145,416			162,058		167,927
Expenses:
Operating, maintenance, and management	45,699			44,317		42,519
Real estate taxes and insurance	28,300			21,132		20,768
Hotel expenses	6,944			19,252		20,990
Asset management fees to affiliate	15,415			13,678		14,012
General and administrative expenses	10,476			10,700		9,853
Foreign currency transaction loss (gain), net	18,712			(29,038)		7,445
Depreciation and amortization	47,868			51,930		58,871
Interest expense, net	68,216			48,130		40,510
Impairment charges on real estate and related intangibles	64,849			18,493		10,971
Impairment charges on goodwill	4,488			8,098		2,808
Total expenses	310,967			206,692		228,747
Other (loss) income:
Loss from unconsolidated entities, net	(54,758)			(8,019)		(1,373)
Other interest income	2,907			228		221
(Loss) gain on real estate equity securities, net	(4,598)			(51,943)		28,632
Gain on sale of real estate	82,099			46,513		30,261
Gain (loss) on extinguishment of debt	—			2,367		(4,757)
Gain from consolidation of previously unconsolidated entity	—			18,742		—
Transaction and related costs	—			—		(2,984)
Subordinated performance fee due upon termination to affiliate	—			—		(1,678)
Total other income, net	25,650			7,888		48,322
Net loss before income taxes	(139,901)			(36,746)		(12,498)
Income tax provision	(6,576)			(4,924)		—
Net loss	(146,477)			(41,670)		(12,498)
Net loss (income) attributable to noncontrolling interests	2,326			(530)		2,310
Net loss attributable to redeemable noncontrolling interest	—			81		146
Preferred stock dividends	—			(1,123)		(913)
Net loss attributable to common stockholders	$	(144,151)	,	$	(43,242)	$	(10,955)
Net loss per common share, basic and diluted	$	(1.39)		$	(0.44)	$	(0.11)
Weighted-average number of common shares outstanding, basic and diluted	103,642,866			103,522,696		96,967,983

See accompanying notes to consolidated financial statements.

F-5

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(dollars in thousands, except share amounts)

				Additional Paid-in Capital		Cumulative Distributions and Net Loss		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
	Common Stock
	Shares	Amounts
Balance, December 31, 2020	98,054,582	$	979	$	831,295	$	(325,720)	$	506,554	$	13,158	$	519,712
Net loss	—	—		—		(10,955)		(10,955)		(2,310)		(13,265)
Transfers from redeemable common stock, net	—	—		180		—		180		—		180
Redemptions of common stock	(3,329,064)	(32)		(30,986)		—		(31,018)		—		(31,018)
Distributions declared	—	—		—		(11,016)		(11,016)		—		(11,016)
Other offering costs	—	—		(15)		—		(15)		—		(15)
Repurchase and change in classification of restricted stock	(584,267)	(6)		21,123		—		21,117		—		21,117
Noncontrolling interest contribution	—	—		—		—		—		183		183
Noncontrolling interests buyout	—	—		(3,157)		—		(3,157)		(662)		(3,819)
Balance, December 31, 2021	94,141,251	$	941	$	818,440	$	(347,691)	$	471,690	$	10,369	$	482,059
Net (loss) income	—	—		—		(43,242)		(43,242)		530		(42,712)
Stock distribution issued	10,421,149	104		98,999		(99,103)		—		—		—
Adjustment to redemption value of redeemable noncontrolling interest	—	—		—		(3,946)		(3,946)		—		(3,946)
Adjustment to redemption value of noncontrolling cumulative convertible redeemable preferred stock	—	—		—		(1,800)		(1,800)		—		(1,800)
Transfers to redeemable common stock payable, net	—	—		(1,954)		—		(1,954)		—		(1,954)
Redemptions of common stock	(630,317)	(6)		(6,010)		—		(6,016)		—		(6,016)
Acquisition of noncontrolling interest	—	—		—		—		—		1,125		1,125
Noncontrolling interest contributions	—	—		—		—		—		300		300
Noncontrolling interests distributions	—	—		(2,431)		—		(2,431)		(8,232)		(10,663)
Balance, December 31, 2022	103,932,083	$	1,039	$	907,044	$	(495,782)	$	412,301	$	4,092	$	416,393
Net loss	—	—		—		(144,151)		(144,151)		(2,326)		(146,477)
Transfers from redeemable common stock, net	—	—		424		—		424		—		424
Redemptions of common stock	(621,435)	(6)		(6,419)		—		(6,425)		—		(6,425)
Noncontrolling interests distributions	—	—		—		—		—		(1,094)		(1,094)
Noncontrolling interests contributions	—	—		—		—		—		543		543
Balance, December 31, 2023	103,310,648	$	1,033	$	901,049	$	(639,933)	$	262,149	$	1,215	$	263,364

See accompanying notes to consolidated financial statements.

F-6

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Years Ended December 31,
	2023		2022		2021
Cash Flows from Operating Activities:
Net loss	$	(146,477)	$	(41,670)	$	(12,498)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Impairment charges on real estate and related intangibles	64,849		18,493		10,971
Loss from unconsolidated entities, net	54,758		8,019		1,373
Depreciation and amortization	47,868		51,930		58,871
Loss (gain) on real estate equity securities	4,598		51,943		(28,632)
Gain on sale of real estate	(82,099)		(46,513)		(30,261)
Unrealized (gain) loss on interest rate caps	(165)		(1,530)		11
Deferred rent	(176)		(2,582)		(1,890)
Amortization of above- and below-market leases, net	(255)		(1,007)		(1,278)
Amortization of deferred financing costs and debt discount and premium, net	9,572		8,511		5,878
Foreign currency transaction loss (gain), net	18,712		(29,038)		7,445
Impairment charges on goodwill	4,488		8,098		2,808
Gain from consolidation of previously unconsolidated entity	—		(18,742)		—
(Gain) loss on extinguishment of debt	—		(2,367)		4,757
Subordinated performance fee due upon termination to affiliate	—		—		1,678
Changes in assets and liabilities:
Rents and other receivables, net	(575)		2,589		1,363
Prepaid expenses and other assets	(3,271)		(2,069)		(1,670)
Accounts payable and accrued liabilities	3,807		(3,159)		(207)
Due to affiliates	4,622		198		(975)
Other liabilities	(4,601)		10,748		(1,716)
Net cash (used in) provided by operating activities	(24,345)		11,852		16,028
Cash Flows from Investing Activities:
Improvements to real estate	(24,081)		(31,110)		(19,038)
Proceeds from sales of real estate, net of deposits applied	116,318		151,178		194,711
Purchase of interest rate caps	(1,236)		(556)		(18)
Contributions to unconsolidated entities	(31,428)		(23,780)		(10,539)
Distribution of capital from an unconsolidated entity	1,144		569		—
(Payments on) proceeds from foreign currency derivatives, net	(30,209)		(984)		1,198
Proceeds from the sale of real estate equity securities	13,946		—		14,439
Proceeds for development obligations	12,005		—		6,203
Funding for development obligations	(8,689)		(7,934)		—
Acquisitions of real estate, net of cash acquired	—		(6,689)		(4,818)
Cash and restricted cash received upon consolidation of previously unconsolidated entity	—		1,834		—
Advances to affiliate	—		(1,200)		(7,040)
Proceeds from advances due from affiliates	—		8,239		—
Escrow deposits for pending real estate sales	—		17,000		—
Net cash provided by investing activities	47,770		106,567		175,098
Cash Flows from Financing Activities:
Proceeds from notes and bonds payable	98,502		188,106		358,931
Principal and related payments on notes payable	(111,243)		(192,268)		(473,133)
Payments of deferred financing costs	(5,416)		(4,770)		(8,463)
Payments to redeem common stock	(6,425)		(6,007)		(31,018)
Noncontrolling interests contributions	543		300		183
Noncontrolling interests distributions	(1,094)		(9,538)		—
Payments to repurchase restricted stock	—		—		(5,656)
Payment of prepaid other offering costs	—		—		(227)
Payment for redeemable noncontrolling interests	—		(6,687)		—
Distributions paid	—		(11,016)		—
Preferred dividends paid	—		(1,123)		(913)
Acquisition of noncontrolling interest	—		(1,125)		(3,819)
Payments to redeem noncontrolling cumulative convertible redeemable preferred stock	—		(16,934)		—
Other financing proceeds, net	—		—		2,367
Net cash used in financing activities	(25,133)		(61,062)		(161,748)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(2,127)		(3,744)		1,734
Net (decrease) increase in cash, cash equivalents and restricted cash	(3,835)		53,613		31,112
Cash, cash equivalents and restricted cash, beginning of period	159,044		105,431		74,319
Cash, cash equivalents and restricted cash, end of period	$	155,209	$	159,044	$	105,431

See accompanying notes to consolidated financial statements.

F-7

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(in thousands)

Reconciliation of cash, cash equivalents and restricted cash were as follows:

	Years Ended December 31,
	2023		2022		2021
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	99,160	$	97,931	$	84,172
Restricted cash	56,049		61,113		21,259
Total cash, cash equivalents and restricted cash	$	155,209	$	159,044	$	105,431

Supplemental cash flow and significant noncash transactions disclosures were as follows:

	Years Ended December 31,
	2023		2022		2021
Supplemental Disclosure of Cash Flow Information:
Interest paid, net of capitalized interest of $3,748, $2,529, and $2,055 for the years ended December 31, 2023, 2022, and 2021, respectively	$	58,884	$	38,663	$	34,240
Income taxes paid	11,500		—		—
Supplemental Disclosure of Significant Noncash Transactions:
Assets acquired in the consolidation of PORT II	—		137,569		—
Liabilities assumed in the consolidation of PORT II	—		85,096		—
Accrued improvements to real estate	4,108		3,827		2,660
Accrued development obligations	11,213		7,896		11,870
Redeemable common stock payable	2,214		2,638		684
Deposit applied to sale of real estate	7,528		—		—
Dividends declared, but not yet paid	—		—		11,016
PPP notes forgiveness	—		2,367		1,500
Adjustment to redemption value of redeemable noncontrolling interest	—		3,946		—
Adjustment to redemption value of noncontrolling cumulative convertible redeemable preferred stock	—		1,800		—

See accompanying notes to consolidated financial statements.

F-8

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

1.    ORGANIZATION

Pacific Oak Strategic Opportunity REIT, Inc. (the “Company”) was formed on October 8, 2008 as a Maryland corporation and elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2010. The Company conducts its business primarily through Pacific Oak SOR (BVI) Holdings, Ltd. (“Pacific Oak SOR BVI”), a private company limited by shares according to the British Virgin Islands Business Companies Act, 2004, which was incorporated on December 18, 2015 and is authorized to issue a maximum of 50,000 common shares with no par value. Upon incorporation, Pacific Oak SOR BVI issued one certificate containing 10,000 common shares with no par value to Pacific Oak Strategic Opportunity Limited Partnership (the “Operating Partnership”), a Delaware limited partnership formed on December 10, 2008. The Company is the sole general partner of, and owns a 0.1% partnership interest in, the Operating Partnership. Pacific Oak Strategic Opportunity Holdings, LLC (“REIT Holdings”), a Delaware limited liability company formed on December 9, 2008, owns the remaining 99.9% interest in the Operating Partnership and is its sole limited partner. The Company is the sole member and manager of REIT Holdings.

Subject to certain restrictions and limitations, the business of the Company is externally managed by Pacific Oak Advisors, LLC (the “Advisor”), an affiliate of the Company, pursuant to an advisory agreement (the “Advisory Agreement”) which is currently effective through November 1, 2024; however, the Company or the Advisor may terminate the Advisory Agreement without cause or penalty upon providing 60 days’ written notice. The Advisor conducts the Company’s operations and manages its portfolio of real estate and other real estate-related investments, with the exception of the Company’s residential home portfolio. The Company’s residential home portfolio, held through its subsidiary Pacific Oak Residential Trust, Inc. (“PORT”), is managed by an affiliate of the Advisor.

On January 8, 2009, the Company filed a registration statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) to offer a minimum of 250,000 shares and a maximum of 140,000,000 shares of common stock for sale to the public, of which 100,000,000 shares were registered in a primary offering and 40,000,000 shares were registered to be sold under the Company’s dividend reinvestment plan. The SEC declared the Company’s registration statement effective on November 20, 2009. The Company ceased offering shares of common stock in its primary offering on November 14, 2012 and suspended offering shares under its dividend reinvestment plan as of March 28, 2023.

The Company sold 56,584,976 shares of common stock in its primary offering for gross offering proceeds of $561.7 million. As of March 28, 2023, the Company indefinitely suspended offering shares of common stock under the dividend reinvestment plan to minimize administrative costs. On October 5, 2020, Pacific Oak Strategic Opportunity REIT II, Inc. ("POSOR II") merged with an indirect subsidiary of the Company (the “Merger”). At the effective time of the Merger, each issued and outstanding share of POSOR II’s common stock converted into 0.9643 shares of the Company’s common stock or 28,973,906 shares. Also, as of December 31, 2023, the Company had redeemed 28,573,292 shares for $330.5 million. As of December 31, 2023, the Company had issued 36,398,447 shares of common stock in connection with special dividends.

As of December 31, 2023, the Company consolidated nine office complexes, one residential home portfolio consisting of 2,182 residential homes, two apartment properties containing 609 units, one hotel property with 196 rooms, four investments in undeveloped land with approximately 581 developable acres, one office/retail development property, held an interest in three investments in unconsolidated entities and held two investments in real estate equity securities.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company, REIT Holdings, the Operating Partnership, Pacific Oak SOR BVI and their direct and indirect wholly owned subsidiaries, and joint ventures in which the Company has a controlling interest and VIEs in which the Company is the primary beneficiary. All significant intercompany balances and transactions were eliminated in consolidation.

The consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification and the rules and regulations of the SEC.

F-9

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

Liquidity

The Company generally finances its real estate investments using notes payable that are typically structured as non-course secured mortgages with maturities of approximately three to five years, with short term extension options available upon the Company meeting certain debt covenants. Additionally, the Company has issued Series B and C bonds in Israel to finance its real estate investments and has maturities of approximately three to six years. Each reporting period management evaluates the Company’s ability to continue as a going concern by evaluating conditions and events, including assessing the liquidity needs to satisfy upcoming debt obligations and the ability to satisfy debt covenant requirements. The Company has $289.0 million of debt obligations coming due within one year following the report issuance date. On January 31, 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 its Series B bonds. In order to satisfy obligations as they mature, management will evaluate its options and may seek to utilize extension options (if available) in the respective loan agreements, may make partial loan repayments to meet debt covenant requirements, may seek to refinance certain debt instruments, may sell real estate equity securities to convert to cash to make principal payments, may market one or more properties for sale or may negotiate a turnover of one or more secured properties back to the related mortgage lender and remit payment for any associated loan guarantee. Historically, the Company has successfully refinanced debt instruments or utilized extension options in order to satisfy debt obligations as they come due and has not negotiated a turnover of a secured property back to a lender, though the Company may utilize such option if necessary. In addition, the Company has also agreed to fund expenditures and improvements to the 110 William joint venture of $105.0 million, of which $76.6 million is outstanding as of December 31, 2023. The Company plans to fund this obligation primarily through the combination of one or more: cash on hand, asset sales, debt refinancing or issuing additional debt. Based upon these plans, and the plans described above, management believes it will have sufficient liquidity to satisfy its obligations as they come due and to continue as a going concern. There can be no assurance as to the certainty or timing of any of management’s plans. Refer to Note 5 for further discussion.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions, including fair value estimates for real estate, which affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

Reclassifications

Certain amounts in the accompanying consolidated balance sheets have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of the prior period. During the year ended December 31, 2023, the Company disposed of a vacant building within the Madison Square office complex in Phoenix, Arizona (“Madison Square School”) and 274 residential homes. As a result, certain assets and liabilities were reclassified to held for sale in the accompanying consolidated balance sheets for all periods presented.

Revenue Recognition

Lessor Accounting

The Company recognizes minimum rent, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectibility is determined to be probable and records amounts expected to be received in later years as deferred rent receivable. In accordance with Topic 842, tenant reimbursements for property taxes and insurance are included in the single lease component of the lease contract (the right of the lessee to use the leased space) and therefore are accounted for as variable lease payments and are recorded as rental income in the accompanying consolidated statements of operations. In addition, the Company adopted the practical expedient available under Topic 842 to not separate nonlease components from the associated lease component and instead to account for those components as a single component if the nonlease components otherwise would be accounted for under the revenue recognition standard (Topic 606) and if certain conditions are met, specifically related to tenant reimbursements for common area maintenance which would otherwise be accounted for under the revenue recognition standard. The Company believes the two conditions have been met for tenant reimbursements for common area maintenance as (i) the timing and pattern of transfer of the nonlease components and associated lease components are the same and (ii) the lease component would be classified as an operating lease. Accordingly, tenant reimbursements for common area maintenance are also accounted for as variable lease payments and recorded as rental income in the accompanying consolidated statements of operations.

If the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or the Company. When the Company is the owner of the tenant improvements, the tenant is

F-10

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance (including amounts that can be taken in the form of cash or a credit against the tenant’s rent) that is funded is treated as a lease incentive and amortized as a reduction of revenue over the lease term.

The Company leases apartment units and residential homes under operating leases with terms generally for one year or less. Generally, credit investigations will be performed for prospective residents and security deposits will be obtained. The Company recognizes rental revenue, net of concessions, on a straight-line basis over the term of the lease, when collectibility is determined to be probable.

The Company makes a determination of whether the collectibility of the lease payments in an operating lease is probable. If the Company determines the lease payments are not probable of collection, the Company would fully reserve for any contractual lease payments, deferred rent receivable, and variable lease payments and would recognize rental income at the lesser of (1) on a straight-line basis or (2) cash received. These changes to the Company’s collectibility assessment are reflected as an adjustment to rental income.

The Company, as a lessor, records costs to negotiate or arrange a lease that would have been incurred regardless of whether the lease was obtained, such as legal costs incurred to negotiate an operating lease, as an expense and classify such costs as operating, maintenance, and management expense in the accompanying consolidated statements of operations.

Hotel Revenues

The Company recognizes revenue for hotels as hotel revenue when earned. Revenues are recorded net of any sales or occupancy tax collected from the Company’s guests. Additionally, some of the Company’s hotel rooms are booked through independent internet travel intermediaries. If the guest pays the independent internet travel intermediary directly, revenue for the room is booked by the Company at the price the Company sold the room to the independent internet travel intermediary, less any discount or commission paid. If the guest pays the Company directly, revenue for the room is booked by the Company on a gross basis. The Company participates in frequent guest programs sponsored by the brand owners of the Company’s hotels and the Company expenses the charges associated with those programs, as incurred. Hotel operating revenues are disaggregated in Note 3 into the categories of rooms revenue, food, beverage and convention services revenue, campground revenue and other revenue to demonstrate how economic factors affect the nature, amount, timing, and uncertainty of revenue and cash flows.

Room revenue is generated through contracts with customers whereby the customer agrees to pay a daily rate for the right to use a hotel room. The Company’s contract performance obligations are fulfilled at the end of the day that the customer is provided the room and revenue is recognized daily at the contract rate. The Company records contract liabilities in the form of advanced deposits when a customer or group of customers provides a deposit for a future stay at the Company’s hotels. Advanced deposits for room revenue are included in the balance of other liabilities on the consolidated balance sheets. Advanced deposits are recognized as revenue at the time of the guest’s stay.

Food, beverage and convention revenue is generated through contracts with customers whereby the customer agrees to pay a contract rate for restaurant dining services or convention services. The Company’s contract performance obligations are fulfilled at the time that the meal is provided to the customer or when the convention facilities and related dining amenities are provided to the customer. The Company recognizes food and beverage revenue upon the fulfillment of the contract with the customer. The Company records contract liabilities in the form of advanced deposits when a customer or group of customers provides a deposit for a future banquet event at the Company’s hotels. Advanced deposits for food and beverage revenue are included in the balance of other liabilities on the consolidated balance sheets. Advanced deposits for banquet services are recognized as revenue following the completion of the banquet services.

Real Estate Investments

Real Estate Acquisition Valuation

F-11

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

The Company records the acquisition of income-producing real estate or real estate that will be used for the production of income as a business combination or an asset acquisition. If substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset or group of similar identifiable assets, then the set is not a business. For purposes of this test, land and buildings can be combined along with the intangible assets for any in-place leases and accordingly, most acquisitions of investment properties would not meet the definition of a business and would be accounted for as an asset acquisition. To be considered a business, a set must include an input and a substantive process that together significantly contributes to the ability to create an output. All assets acquired and liabilities assumed in a business combination are measured at their acquisition-date fair values. For asset acquisitions, the cost of the acquisition is allocated to individual assets and liabilities on a relative fair value basis. Acquisition costs associated with business combinations are expensed as incurred. Acquisition costs associated with asset acquisitions are capitalized.

Intangible assets include the value of in-place leases, which represents the estimated value of the net cash flows of the in-place leases to be realized, as compared to the net cash flows that would have occurred had the property been vacant at the time of acquisition and subject to lease-up. Acquired in-place lease value will be amortized to expense over the average remaining terms of the respective in-place leases, including any below-market renewal periods.

The Company assesses the acquisition date fair values of all tangible assets, identifiable intangibles and assumed liabilities using methods similar to those used by independent appraisers, generally utilizing a discounted cash flow analysis that applies appropriate discount and/or capitalization rates and available market information and/or replacement cost data. Estimates of future cash flows are based on a number of factors, including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it were vacant.

The Company records the fair value of debt assumed in an acquisition based on management’s estimates of current market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio, type of collateral and other credit enhancements.

Estimates of the fair values of the tangible assets, identifiable intangibles and assumed liabilities require the Company to make significant assumptions to estimate market lease rates or average daily rates, property-operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods, revenue and expense growth rates, occupancy, and net operating margin.

The Company records the fair value of noncontrolling interests based on the estimated noncontrolling interests’ share of fair values of the net assets of the underlying entities, adjusted for lack of marketability and control discount.

Direct investments in undeveloped land or properties without leases in place at the time of acquisition are accounted for as an asset acquisition. Acquisition fees and expenses are capitalized into the cost basis of an asset acquisition. Additionally, during the time in which the Company is incurring costs necessary to bring these investments to their intended use, certain costs such as legal fees, real estate taxes and insurance and financing costs are also capitalized.

Depreciation and Amortization

Real estate costs related to the acquisition and improvement of properties are capitalized and depreciated over the expected useful life of the asset on a straight-line basis. Repair and maintenance costs are charged to expense as incurred and significant replacements and betterment are capitalized. Repair and maintenance costs include all costs that do not extend the useful life of the real estate asset. The Company considers the period of future benefit of an asset to determine its appropriate useful life. Expenditures for tenant improvements are capitalized and amortized over the shorter of the tenant’s lease term or expected useful life. The Company anticipates the estimated useful lives of its assets by class to be generally as follows:

Buildings	25-40 years
Building improvements	10-40 years
Tenant improvements	Shorter of lease term or expected useful life
Tenant origination and absorption costs	Remaining term of related leases, including below-market renewal periods
Real estate subsidies & tax abatements	Remaining term of agreement
Furniture, fixtures & equipment	3-12 years

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PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

Impairment Charges on Real Estate and Related Intangibles

The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate and related intangibles may not be recoverable or realized. Such indicators of potential impairment may include an assessment of management's intended hold period and disposition strategy, a significant decrease in market price, expected future undiscounted cash flows, current industry and market trends and other factors including bona fide purchase offers received from third parties in making this assessment. When indicators of potential impairment suggest that the carrying value of real estate and related intangibles may not be recoverable, the Company assesses the recoverability by estimating whether the Company will recover the carrying value of the real estate and related intangibles through its undiscounted future cash flows and its eventual disposition. If, based on this analysis, the Company does not believe that it will be able to recover the carrying value of the real estate and related intangibles, the Company would record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangibles. The Company recorded an impairment loss of $64.8 million, $18.5 million, and $11.0 million on its real estate and related intangibles during the years ended December 31, 2023, 2022, and 2021, respectively. See Note 6 for further discussion.

Projecting future cash flows involves estimating expected future operating income and expenses related to the real estate and its related intangibles as well as market and other trends. Using inappropriate assumptions to estimate cash flows could result in incorrect fair values of the real estate and its related intangibles and could result in the overstatement of the carrying values of the Company’s real estate and related intangibles and an overstatement of its net income.

Real Estate Held for Sale

The Company generally considers real estate to be “held for sale” when the following criteria are met: (i) management commits to a plan to sell the property, (ii) the property is available for sale immediately, (iii) the property is actively being marketed for sale at a price that is reasonable in relation to its current fair value, (iv) the sale of the property within one year is considered probable and (v) significant changes to the plan to sell are not expected. Real estate that is held for sale and its related assets are classified as real estate held for sale and assets related to real estate held for sale, respectively, for all periods presented in the accompanying consolidated balance sheets. Notes payable and other liabilities related to real estate held for sale are classified as notes payable related to real estate held for sale and liabilities related to real estate held for sale, respectively, for all periods presented in the accompanying consolidated balance sheets. Real estate classified as held for sale is no longer depreciated and is reported at the lower of its carrying value or its estimated fair value less estimated costs to sell. Operating results and related gains on sale of properties that were disposed of or classified as held for sale in the ordinary course of business are included in continuing operations in the accompanying consolidated statements of operations.

Sale of Real Estate

The Company’s sales of real estate would be considered a sale of a nonfinancial asset. The Company determines it does not have a controlling financial interest in the entity that holds the asset and the arrangement meets the criteria to be accounted for as a contract, the Company would derecognize the asset and recognize a gain or loss on the sale of the real estate when control of the underlying asset transfers to the buyer. See Note 4 for further discussion.

Real Estate Equity Securities

These investments are carried at their estimated fair value based on quoted market prices for the security, net of any discounts for restrictions on the sale of the security. Transaction costs that are directly attributable to the acquisition of real estate equity securities are capitalized to its cost basis.

For the year ended December 31, 2023, the Company recognized a realized gain on real estate equity securities of $5.5 million and an unrealized loss on real estate equity securities of $10.1 million. For the year ended December 31, 2022, the Company did not recognize realized gains or losses on real estate equity securities and recognized an unrealized loss on real estate equity securities of $51.9 million. For the year ended December 31, 2021, the Company recognized a realized gain on real estate equity securities of $3.0 million and an unrealized gain on real estate equity securities of $25.6 million.

Dividend Income from Real Estate Equity Securities

Dividend income from real estate equity securities is recognized on an accrual basis based on eligible shares as of the ex-dividend date.

F-13

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

Goodwill

Goodwill represents the excess of consideration paid over the fair value of underlying identifiable net assets of the business acquired. The Company's goodwill has an indeterminate life and is not amortized, but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company takes a qualitative approach to consider whether an impairment of goodwill exists prior to quantitatively determining the fair value of the reporting unit in step one of the impairment test. The Company performs its annual assessment on October 1st. The Company recorded impairment charges on goodwill of $4.5 million, $8.1 million and $2.8 million for the years ended December 31, 2023, 2022 and 2021, respectively. See Note 6 for further discussion.

Investments in Unconsolidated Entities

The Company uses the equity method of accounting for investments in unconsolidated entities that qualify as VIEs where the Company is not the primary beneficiary and other entities that the Company does not control, but has the ability to exercise significant influence over the operating and financial policies of the investee. The Company recognizes its share of the ongoing income or loss from the unconsolidated entities as equity in income or loss from unconsolidated entities in the consolidated statements of operations.

The Company evaluates the investments for both qualitative and quantitative events or changes in circumstances that indicate there may be an other-than-temporary impairment. The amount of loss recognized is the excess of the investment’s carrying amount over its estimated fair value. The aforementioned factors are taken into consideration as a whole by management in determining the valuation of our equity method investments.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents may include cash and short-term investments. Cash and cash equivalents were stated at cost, which approximates fair value. There were no restrictions on the use of the Company’s cash and cash equivalents as of December 31, 2023 and 2022.

The Company’s cash and cash equivalents balance exceeded federally insurable limits as of December 31, 2023. The Company monitors the cash balances in its operating accounts and adjusts the cash balances as appropriate; however, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, the Company has experienced no loss or lack of access to cash in its operating accounts.

Interest Income from Cash and Cash Equivalents

The Company recognizes interest income on its cash and cash equivalents as it is earned and records such amounts as other interest income.

Restricted Cash

Restricted cash is comprised of lender impound reserve accounts on the Company’s borrowings for security deposits, property taxes, insurance, debt service obligations, capital improvements and replacements, and escrow deposits for future real estate sales.

Deferred Financing Costs

Deferred financing costs represent commitment fees, loan fees, legal fees and other third-party costs associated with obtaining financing and are presented on the balance sheets as a direct deduction from the carrying value of the associated debt liability. These costs are amortized over the terms of the respective financing agreements using the effective interest method. Unamortized deferred financing costs are generally expensed when the associated debt is refinanced or repaid before maturity unless specific rules are met that would allow for the carryover of such costs to the refinanced debt. Deferred financing costs incurred before an associated debt liability is recognized are included in prepaid and other assets on the balance sheets. Costs incurred in seeking financing transactions that do not close are expensed in the period in which it is determined that the financing will not close.

Fair Value Measurements

The Company measures certain assets and liabilities at fair value on a recurring basis. In addition, the Company measures other assets and liabilities at fair value on a non-recurring basis. Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

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PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

The GAAP fair value framework uses a three-tiered approach. Fair value measurements were classified and disclosed in one of the following three categories:

•Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

•Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

•Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

When available, the Company utilizes quoted market prices from an independent third-party source to determine fair value and classifies such items in Level 1 or Level 2.

The Company would classify items as Level 3 in instances where the market for a financial instrument is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When the Company determines that the market for a financial instrument owned by the Company is illiquid or when market transactions for similar instruments do not appear orderly, the Company uses several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and establishes a fair value by assigning weights to the various valuation sources. Additionally, when determining the fair value of liabilities in circumstances in which a quoted price in an active market for an identical liability is not available, the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach.

Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.

The Company considers the following factors to be indicators of an inactive market: (i) there are few recent transactions, (ii) price quotations are not based on current information, (iii) price quotations vary substantially either over time or among market makers (for example, some brokered markets), (iv) indexes that previously were highly correlated with the fair values of the asset or liability are demonstrably uncorrelated with recent indications of fair value for that asset or liability, (v) there is a significant increase in implied liquidity risk premiums, yields, or performance indicators (such as delinquency rates or loss severities) for observed transactions or quoted prices when compared with the Company’s estimate of expected cash flows, considering all available market data about credit and other nonperformance risk for the asset or liability, (vi) there is a wide bid-ask spread or significant increase in the bid-ask spread, (vii) there is a significant decline or absence of a market for new issuances (that is, a primary market) for the asset or liability or similar assets or liabilities, and (viii) little information is released publicly (for example, a principal-to-principal market).

The Company considers the following factors to be indicators of non-orderly transactions: (i) there was not adequate exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities under current market conditions, (ii) there was a usual and customary marketing period, but the seller marketed the asset or liability to a single market participant, (iii) the seller is in or near bankruptcy or receivership (that is, distressed), or the seller was required to sell to meet regulatory or legal requirements (that is, forced), and (iv) the transaction price is an outlier when compared with other recent transactions for the same or similar assets or liabilities.

Redeemable Common Stock

The Company has adopted a share redemption program that may enable stockholders to sell their shares to the Company in limited circumstances.

Pursuant to the share redemption program there are several limitations on the Company’s ability to redeem shares:

F-15

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

•Unless the shares are being redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence” (each as defined under the share redemption program), the Company may not redeem shares until the stockholder has held the shares for one year.

•During any calendar year, the Company may redeem only the number of shares that the Company can purchase with the amount of net proceeds from the sale of shares under its dividend reinvestment plan during the prior calendar year; provided, however, that this limit may be increased or decreased by us upon ten business days’ notice to the Company’s stockholders. To the extent that the Company redeems less than the number of shares that the Company can purchase in any calendar year with the amount of net proceeds from the sale of shares under the Company’s dividend reinvestment plan during the prior calendar year plus any additional funds approved by the Company, such excess capacity to redeem shares during any calendar year shall be added to the Company’s capacity to otherwise redeem shares during the subsequent calendar year. We indefinitely suspended the dividend reinvestment plan as of March 28, 2023. Furthermore, during any calendar year, the Company may redeem no more than 5% of the weighted-average number of shares outstanding during the prior calendar year.

•The Company has no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency.

•During any calendar year, once the Company has received requests for redemptions, whether in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence”, or otherwise, that if honored, and when combined with all prior redemptions made during the calendar year, would result in the amount of remaining funds available for the redemption of additional shares in such calendar year being $1.0 million or less, the last $1.0 million of available funds shall be reserved exclusively for shares being redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence.” To the extent that, in the last month of any calendar year, the amount of redemption requests in connection with a stockholder’s death, “qualifying disability or “determination of incompetence” is less than the amount of available funds reserved for such redemptions in accordance with the previous sentence, any excess funds may be used to redeem shares not in connection with a stockholder’s death, “qualifying disability or “determination of incompetence” during such month.

•The Company may not redeem more than $3.0 million of shares in a given quarter (excluding shares redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence”). To the extent that, in a given fiscal quarter, the Company redeems less than the sum of (a) $3.0 million of shares (excluding shares redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence”) and (b) any excess capacity carried over to such fiscal quarter from a prior fiscal quarter as described below, any remaining excess capacity to redeem shares in such fiscal quarter will be added to our capacity to otherwise redeem shares (excluding shares redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence”) during succeeding fiscal quarter. The Company may increase or decrease this limit upon ten business days’ notice to stockholders.

•In addition to the capacity from the bullet above, during the year ended December 31, 2023, the Company’s board of directors has made available $6.0 million for redemptions in connection with a stockholder's death, “qualifying disability”, or “determination of incompetence”.

Except for redemptions made upon a stockholder’s death, “qualifying disability” or “determination of incompetence”, the price at which the Company will redeem shares is 95% of the Company’s most recent estimated value per share as of the applicable redemption date. Upon the death, “qualifying disability” or “determination of incompetence” of a stockholder, the redemption price continued to be equal to the Company’s most recent estimated value per share.

The Company’s board of directors may amend, suspend or terminate the share redemption program with ten business days’ notice to its stockholders. The Company may provide this notice by including such information in a Current Report on Form 8-K or in the Company’s annual or quarterly reports, all publicly filed with the SEC, or by a separate mailing to its stockholders.

The Company records amounts that were redeemable under the share redemption program as redeemable common stock payable in the accompanying consolidated balance sheets because the shares will be mandatorily redeemable at the option of the holder and therefore their redemption will be outside the control of the Company.

The Company classifies as liabilities financial instruments that represent a mandatory obligation of the Company to redeem shares. The Company’s redeemable common shares are contingently redeemable at the option of the holder. When the

F-16

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

Company determines it has a mandatory obligation to repurchase shares under the share redemption program, it will reclassify such obligations from temporary equity to a liability based upon their respective settlement values.

The Company limits the dollar value of shares that may be redeemed under the program as described above. During the year ended December 31, 2023, the Company had redeemed $6.4 million of common stock under the share redemption program. The Company processed all redemption requests received in good order and eligible for redemption through the December 31, 2023 redemption date, except for 14,054,271 shares totaling $107.2 million due to the limitations described above. The Company recorded $2.2 million and $2.6 million of redeemable common stock payable on the Company’s balance sheets as of December 31, 2023 and 2022, respectively, related to unfulfilled redemption requests received in good order under the share redemption program. Based on the twelfth amended and restated share redemption program, the Company has $2.2 million available for redemptions during 2024, subject to the limitations described above.

Related Party Transactions

Pursuant to its advisory agreements with the Advisor and its affiliates, the Company is obligated to pay the Advisor and its affiliates specified fees upon the provision of certain services related to the investment of funds in real estate and real estate-related investments, management of the Company’s investments and for other services (including, but not limited to, the disposition of investments). The Company is or was obligated to reimburse the Advisor for acquisition and origination expenses and certain operating expenses incurred on behalf of the Company or incurred in connection with providing services to the Company. In addition, the Advisor is entitled to certain other fees, including an incentive fee upon achieving certain performance goals, as detailed in the applicable advisory agreement. See Note 7 for further details.

The Company records all related party fees as incurred, subject to any limitations described in the advisory agreement. The Company had not incurred any subordinated participation in net cash flows or subordinated incentive listing fees payable to the Advisor through December 31, 2023.

Foreign Currency Transactions

The U.S. Dollar is the Company’s functional currency. Transactions denominated in currency other than the Company’s functional currency were recorded upon initial recognition at the exchange rate on the date of the transaction. After initial recognition, monetary assets and liabilities denominated in foreign currency were remeasured at each reporting date into the foreign currency at the exchange rate on that date. Exchange rate differences, other than those accounted for as hedging transactions, were recognized as foreign currency transaction gain or loss in the accompanying consolidated statements of operations.

Derivative Instruments

The Company enters into derivative instruments for risk management purposes to hedge its exposure to cash flow variability caused by changing interest rates on its variable rate notes payable. Additionally, the Company enters into derivative instruments such as cross currency swaps, puts or calls for risk management purposes to hedge its exposure to variability in foreign currency exchange rates of the Israeli new shekel versus the U.S. Dollar. Pursuant to these agreements, the Company may deposit collateral with a counterparty and may pay a fee equal to a fixed percentage of the value of the underlying security (notional amount). The Company may be required to deposit additional collateral equal to the unrealized appreciation or depreciation on the underlying asset. The Company records these derivative instruments at fair value as prepaid expenses and other assets in the accompanying consolidated balance sheets. The changes in fair value for derivative instruments that were not designated as a hedge or that did not meet the hedge accounting criteria were recorded as interest expense or foreign currency transaction gain or loss in the accompanying consolidated statements of operations.

Income Taxes

The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company’s annual REIT taxable income to its stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax to the extent it distributes qualifying dividends to its stockholders. The Company conducts certain business activities through taxable REIT subsidiaries. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially and adversely affect the

F-17

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

Company’s net income or loss and net cash available for distribution to stockholders. However, the Company intends to organize and operate in such a manner as to qualify for treatment as a REIT.

The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases, and for net operating loss, capital loss and tax credit carryforwards. The deferred tax assets and liabilities are measured using the enacted income tax rates in effect for the year in which those temporary differences are expected to be realized or settled. The effect on the deferred tax assets and liabilities from a change in tax rates is recognized in earnings in the period when the new rate is enacted. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of all available evidence, including the future reversals of existing taxable temporary differences, future projected taxable income and tax planning strategies. Valuation allowances are provided if, based upon the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements. Neither the Company nor its subsidiaries have been assessed interest or penalties by any major tax jurisdictions. The Company’s evaluations were performed for all open tax years through December 31, 2023. As of December 31, 2023, returns for the calendar year 2019 through 2022 remain subject to examination by major tax jurisdictions.

The Company’s hotel property is leased to a wholly-owned taxable REIT subsidiary, which in turn contracts with an independent hotel management company that manages the day-to-day operations of the Company’s hotel. Lease revenue generated from the taxable REIT subsidiary is eliminated in consolidation.

Segments

The Company operates in three reportable business segments: opportunistic real estate and real estate-related investments, residential homes, and hotel, which is how the Company's management manages the business. In general, the Company intends to hold its investments in opportunistic real estate and other real estate-related assets for capital appreciation. Traditional performance metrics of opportunistic real estate and other real estate-related assets may not be meaningful as these investments are generally non-stabilized and do not provide a consistent stream of interest income or rental revenue. These investments exhibit similar long-term financial performance and have similar economic characteristics. These investments typically involve a higher degree of risk and do not provide a constant stream of ongoing cash flows. As a result, the Company’s management views opportunistic real estate and other real estate-related assets as similar investments and aggregated into one reportable business segment. The Company owns residential homes in 18 markets and are all aggregated into one reportable business segment due to the homes being stabilized, having high occupancy rates and have similar economic characteristics. Additionally, the Company owned one hotel as of December 31, 2023 and is a separate reportable business segment due to the nature of the hotel business with short-term stays.

Per Share Data

The Company applies the two-class method when computing its basic and diluted earnings per share. Net loss is allocated to the unvested restricted stock payable outstanding during each year, as the restricted stock contains non-forfeitable rights to distributions and is therefore considered a participating security. The Company's unvested restricted stock payable have been included in the calculation of basic and diluted earnings per share for the years ended December 31, 2023, 2022 and 2021, as the restriction is not contingent on any conditions except the passage of time. Potential common shares consist of unvested restricted stock, using the more dilutive of either the two-class method or the treasury stock method.

Basic and diluted loss per share of common stock is calculated by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock issued and outstanding during such period. Diluted earnings (loss) per share of common stock is computed based on the weighted-average number of shares of common stock outstanding during each period, plus potential common shares considered outstanding during the period, as long as the inclusion of such awards is not anti-dilutive.

The following table summarizes the computation of basic and diluted net loss per common share for the years ended December 31, 2023, 2022 and 2021 (in thousands, except per share data):

F-18

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

	Year Ended December 31,
	2023		2022		2021
Numerator:
Net loss	$	(146,477)	$	(41,670)	$	(12,498)
Net loss (income) attributable to noncontrolling interests	2,326		(530)		2,310
Net loss attributable to redeemable noncontrolling interest	—		81		146
Preferred stock dividends	—		(1,123)		(913)
Adjustment to redemptions value of noncontrolling cumulative convertible redeemable preferred stock	—		(1,800)		—
Net loss attributable to common stockholders (for net loss per common share, basic and diluted)	$	(144,151)	$	(45,042)	$	(10,955)
Denominator:
Weighted-average number of common shares outstanding, basic and diluted	103,642,866		103,522,696		96,967,983
Net loss per common share, basic and diluted	$	(1.39)	$	(0.44)	$	(0.11)

Square Footage, Occupancy and Other Measures

Any references to square footage, acreage, occupancy or annualized base rent are unaudited and outside the scope of the Company’s independent registered public accounting firm’s review of the Company’s consolidated financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board.

Recently Issued Accounting Standards Updates

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance in this update is effective for all public entities for fiscal years beginning after December 15, 2023, with early adoption permitted. The Company is currently evaluating the effect the adoption of this ASU may have on the Company’s disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which improves income tax disclosure requirements, primarily through disclosure requirements in specified categories with respect to the reconciliation of the effective tax rates. The guidance in this update is effective for all public entities for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect the adoption of this ASU may have on the Company’s disclosures.

3.     REAL ESTATE HELD FOR INVESTMENT

As of December 31, 2023, the Company consolidated nine office complexes, encompassing, in the aggregate, approximately 3.2 million rentable square feet and these properties were 68% occupied. In addition, the Company owned one residential home portfolio consisting of 2,182 residential homes, and two apartment properties containing 609 units, which were 93% and 96% 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. The following table summarizes the Company’s real estate held for investment as of December 31, 2023 and 2022, respectively (in thousands):

	December 31, 2023		December 31, 2022
Land	$	253,342	$	264,537
Buildings and improvements	991,667		1,033,318
Tenant origination and absorption costs	17,080		27,644
Total real estate, cost	1,262,089		1,325,499
Accumulated depreciation and amortization	(167,335)		(140,213)
Total real estate, net	$	1,094,754	$	1,185,286

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PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

Operating Leases

Certain of the Company’s real estate properties are leased to tenants under operating leases for which the terms and expirations vary. As of December 31, 2023, the leases, excluding options to extend apartment leases and residential home leases, which have terms that are generally one year or less, had remaining terms of up to 16.7 years with a weighted-average remaining term of 3.3 years. Some of the leases have provisions to extend the lease agreements, options for early termination after paying a specified penalty and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires a security deposit from tenants in the form of a cash deposit and/or a letter of credit. The amount required as a security deposit varies depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash and assumed in real estate acquisitions related to tenant leases are included in other liabilities in the accompanying consolidated balance sheets and totaled $5.9 million and $6.5 million as of December 31, 2023 and 2022, respectively.

During the years ended December 31, 2023, 2022 and 2021, the Company recognized deferred rent from tenants of $0.2 million, $2.6 million, and $1.9 million, respectively, net of lease incentive amortization. As of December 31, 2023 and 2022, the cumulative deferred rent receivable balance, including unamortized lease incentive receivables, was $19.1 million and $18.3 million, respectively, and is included in rents and other receivables, net in the accompanying consolidated balance sheets. The cumulative deferred rent receivable balance included $2.5 million and $2.8 million of unamortized lease incentives as of December 31, 2023 and 2022, respectively.

As of December 31, 2023, the future minimum rental income from the Company’s office complexes, under non-cancelable operating leases was as follows (in thousands):

2024	$	59,242
2025	52,291
2026	39,590
2027	31,985
2028	25,035
Thereafter	48,942
	$	257,085

Hotel

The following table provides detailed information regarding the Company’s hotel revenues for its two hotel properties (the Springmaid Beach Resort was sold on September 1, 2022) for the years ended December 31, 2023, 2022 and 2021 (in thousands):

	Year Ended December 31,
	2023		2022		2021
Hotel revenues:
Room	$	7,981	$	23,834	$	22,889
Other	1,172		6,915		7,917
Hotel revenues	$	9,153	$	30,749	$	30,806

Contract Liabilities

The following table summarizes the Company’s contract liabilities, which are comprised of: hotel advanced deposits, deferred proceeds received from the buyers of the Park Highlands land sales, and value of Park Highlands land that was contributed to a master association, which are included in other liabilities in the accompanying consolidated balance sheets, as of December 31, 2023 and 2022 (in thousands):

	December 31, 2023		December 31, 2022
Contract liabilities	$	23,783	$	23,904
Revenue and other income recognized in the period from:
Amounts included in contract liabilities at the beginning of the period	$	16,192	$	9,215

F-20

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

Geographic Concentration Risk

As of December 31, 2023, the Company’s real estate investments in California and Georgia represented 18.9% and 10.8%, respectively, of the Company’s total assets. As a result, the geographic concentration of the Company’s portfolio makes it particularly susceptible to adverse economic developments in the California and Georgia real estate markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for office space resulting from the local business climate, could adversely affect the Company’s operating results and its ability to make distributions to stockholders.

Impairment of Real Estate

During the year ended December 31, 2023, the Company recorded impairment charges on real estate in the aggregate of $64.8 million, to write down the carrying value of three strategic opportunistic properties to their estimated fair values due to increases in the discount and terminal cap rate assumptions, decreases in projected cash flows, and changes in sales comparisons.

During the year ended December 31, 2022, the Company recorded impairment charges on real estate in the aggregate of $18.5 million, to write down the carrying value of two strategic opportunistic properties to their estimated fair value due to a change in the projected hold period and related decrease in projected cash flows. Additionally, the Company determined that based on the amended sale price of one hotel, the book value was not recoverable and the Company wrote down the carrying value of the hotel by $2.5 million.

During the year ended December 31, 2021, the Company recorded impairment charges on real estate in the aggregate of $11.0 million, to write down the carrying value of two strategic opportunistic properties to their estimated fair value due to increases in the discount and terminal cap rate assumptions and changes in sales comparisons.

PORT II Consolidation

On July 1, 2022 (“consolidation date”), the Company became the primary beneficiary of Pacific Oak Residential Trust II, Inc. (“PORT II”), a related party and consolidated PORT II into the Company's financial statements. As of July 1, 2022, PORT II owned 588 residential homes. The following table summarizes the components of the PORT II and the gain recognized by the Company (in thousands):

PORT II's assets and liabilities, based upon fair values as determined by the Company, as follows:
Assets:
Real estate held for investment, net	$	135,096
Cash and cash equivalents	1,473
Restricted cash	361
Prepaid expenses and other assets	639
Total Assets	137,569
Liabilities:
Notes payable, net	(82,646)
Accounts payable and accrued liabilities	(804)
Due to affiliates	(147)
Other liabilities	(1,499)
Total Liabilities	(85,096)
Noncontrolling interest	(1,125)
Elimination of the Company’s investment in PORT II	(32,606)
Gain from consolidation of previously unconsolidated entity	$	18,742

F-21

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

Tenant Origination and Absorption Costs

As of December 31, 2023 and 2022, the Company’s tenant origination and absorption costs (included in real estate held for investment, net) were as follows (in thousands):

	Tenant Origination and<br>Absorption Costs
	December 31, 2023		December 31, 2022
Cost	$	17,080	$	27,995
Accumulated Amortization	(10,049)		(13,987)
Net Amount	$	7,031	$	14,008

During the years ended December 31, 2023, 2022 and 2021, the Company recognized tenant origination and absorption cost amortization expense of $5.0 million, $9.9 million, and $15.2 million, respectively.

The remaining unamortized balance for these outstanding intangible assets and liabilities as of December 31, 2023 will be amortized for the years ending December 31 as follows (in thousands):

	Tenant Origination and <br>Absorption Costs
2024	$	(2,739)
2025	(1,782)
2026	(807)
2027	(352)
2028	(261)
Thereafter	(1,090)
	$	(7,031)
Weighted-Average Remaining Amortization Period	4.7 years

F-22

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

4.    REAL ESTATE DISPOSITIONS

During the year ended December 31, 2023, the Company disposed of Madison Square School, 186 developable acres of undeveloped land and 274 residential homes. During the year ended December 31, 2022, the Company disposed of two office buildings, one hotel and approximately 67 developable acres of undeveloped land. During the year ended December 31, 2021, the Company disposed of one office building and approximately 193 developable acres of undeveloped land. As a result of the dispositions, certain assets and liabilities were reclassified to held for sale in the accompanying consolidated balance sheets and gains from the dispositions are recorded as gain on sale of real estate in the accompanying consolidated statements of operations. The purchasers were not affiliated with the Company nor the Advisor.

During the year ended December 31, 2023, the Company sold 274 residential homes, from the Company’s residential homes segment, for proceeds of $37.2 million, net of closing costs and adjustments. The Company recognized a gain on sale of real estate of $5.6 million related to the disposition. In connection with the sales, the Company repaid $17.6 million of the outstanding principal balance due under secured mortgage loans.

In October 2023, the Company sold approximately 115 developable acres of Park Highlands undeveloped land, from the Company’s strategic opportunistic properties segment, for proceeds of $46.7 million, net of closing costs and credits of $9.3 million for future development obligations and before deposits of $7.5 million. The Company recognized a pre-tax gain on sale of real estate of $43.7 million related to the disposition. In addition, the land parcels were held and sold through one of the Company’s taxable REIT subsidiaries (“TRS”) for certain tax planning purposes and to ensure preservation of the Company’s REIT status. For purposes of the determination of U.S. federal and state income taxes, the Company’s TRS record current or deferred income taxes based on differences (both permanent and timing) between the determination of their taxable income and net income under GAAP. In connection with the Park Highlands sales, the Company recorded an income tax provision of $3.3 million at the TRS level. There were no state taxes related to this disposition.

In May 2023, the Company sold the Madison Square School, from the Company’s strategic opportunistic properties segment, for proceeds of $6.4 million, before closing costs and credits of $0.3 million. The Company recognized a gain on sale of real estate of $3.3 million related to the disposition. Subsequent to the sale, the Madison Square office complex had three office buildings remaining.

In February 2023, the Company sold approximately 71 developable acres of undeveloped land in Park Highlands, from the Company’s strategic opportunistic properties segment, for proceeds of $34.5 million, net of closing costs and credits of $1.9 million for future development obligations. The Company recognized a pre-tax gain on sale of real estate of $29.5 million related to the disposition in the accompanying consolidated statements of operations. In addition, the land parcels were held and sold through one of the Company’s TRS for certain tax planning purposes and to ensure preservation of the Company’s REIT status. In connection with the Park Highlands sales, the Company recorded an income tax provision of $3.3 million at the TRS level. There were no state taxes related to this disposition.

In November 2022, the Company sold approximately 67 developable acres of Park Highlands undeveloped land, from the Company’s strategic opportunistic properties segment, for $55.0 million, before closing costs and credits. The Company recognized a pre-tax gain on sale of $42.8 million related to the land sale. In addition, the land parcels were held and sold through one of the Company’s TRS for certain tax planning purposes and to ensure preservation of the Company’s REIT status. In connection with the Park Highlands sale, the Company recorded an income tax provision of $4.9 million at the TRS level. There were no state taxes related to this disposition.

In September 2022, the Company sold the Springmaid Beach Resort, from the Company’s hotel segment for $91.0 million, before closing costs and credits. The carrying value of the Springmaid Beach Resort as of the disposition date was $87.2 million, which was net of $3.4 million of accumulated depreciation and amortization and $2.5 million of impairment charges. In connection with the sale of the Springmaid Beach Resort, the Company repaid $53.0 million of the outstanding principal balance due under the mortgage loan secured by the Springmaid Beach Resort and $1.3 million of the proceeds were held for contingent repairs related to the property.

In January 2022, the Company sold two office buildings related to the Richardson Office portfolio, from the Company’s strategic opportunistic properties segment and containing 141,950 rentable square feet in Richardson, Texas (“Greenway Buildings”) for $11.0 million, before closing costs and credits. The carrying value of the Greenway Buildings as of the disposition date was $5.6 million, which was net of $3.2 million of accumulated depreciation and amortization. In connection with the sale of the Greenway Buildings, the Company repaid $9.1 million of the outstanding principal balance due under the mortgage loan secured by the Greenway Buildings. The Company recognized a gain on sale of $3.6 million related to the disposition of the Greenway Buildings, net of closing costs and adjustments.

F-23

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

In July 2021, the Company sold an office building containing 435,177 rentable square feet located on approximately 4.92 acres of land in Orange, California (“City Tower”), from the Company’s strategic opportunistic properties segment for $150.5 million, before closing costs and credits. The carrying value of City Tower as of the disposition date was $145.1 million, which was net of $20.5 million of accumulated depreciation and amortization. In connection with the sale of City Tower, the Company repaid $98.1 million of the outstanding principal balance due under the mortgage loan secured by City Tower. The Company recognized a gain on sale of $0.1 million, as well as a $0.1 million loss on extinguishment of debt related to the disposition of City Tower.

In June 2021, the Company sold approximately 193 developable acres of Park Highlands undeveloped land, from the Company’s strategic opportunistic properties segment for an aggregate sales price, net of closing credits, of $50.4 million, excluding closing costs. The Company recognized a gain on sale of $30.0 million related to the land sale, which is net of deferred profit of $2.6 million related to proceeds received from the purchaser for the value of land that was contributed to a master association which is consolidated by the Company.

The following table reconciles the U.S. federal statutory income tax rate to our effective income tax rate for the transaction’s taxable gain:

	Year Ended December 31,
	2023		2022		2021
U.S. federal statutory income tax rate	21	%	21	%	21	%
Net capital loss carryforwards utilized	—	%	(3)	%	—	%
Change in valuation allowance	—	%	(1)	%	(21)	%
Effective rate	21	%	17	%	—	%

There was no real estate held for sale as of December 31, 2023 and 2022, except where the Company retrospectively reclassified 2022 real estate as held for sale due to 2023 disposition activity. The operations of real estate properties sold and gain or losses on sales are included in continuing operations in the accompanying consolidated statements of operations. The following table summarizes certain revenues and expenses related to these properties for the years ended December 31, 2023, 2022 and 2021 (in thousands):

	Years Ended December 31,
	2023		2022		2021
Revenues
Rental income	$	4,216	$	4,105	$	4,666
Hotel revenues	—		20,983		25,202
Other operating income	—		17		144
Total revenues	$	4,216	$	25,105	$	30,012
Expenses
Operating, maintenance, and management	$	1,265	$	1,436	$	2,486
Real estate taxes and insurance	1,346		917		1,163
Hotel expenses	—		12,669		16,301
Asset management fees to affiliate	523		774		1,082
Depreciation and amortization	1,079		2,126		3,403
Interest expense, net	1,147		4,734		6,378
Total expenses	$	5,360	$	22,656	$	30,813

F-24

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

5.     NOTES AND BONDS PAYABLE

As of December 31, 2023 and December 31, 2022, the Company’s notes and bonds payable, including notes payable related to real estate held for sale, consisted of the following (dollars in thousands):

	Book Value as of <br>December 31, 2023		Book Value as of <br>December 31, 2022		Contractual Interest Rate as of December 31, 2023 (1)	Interest Rate at December 31, 2023 (1)	Payment Type (2)	Maturity Date (3)
Richardson Office Mortgage Loan	$	12,209	$	18,844	SOFR +3.50%	8.84%	Principal & Interest	11/01/2024
Series B Bonds (4)	321,724		331,213		3.93%	3.93%	(4)	01/31/2026
Series C Bonds (4)	99,461		—		9.00%	9.00%	(4)	06/30/2026
Crown Pointe Mortgage Loan	54,738		53,758		SOFR + 2.30%	7.64%	Interest Only	04/01/2025
Georgia 400 Center Mortgage Loan (6)	40,184		44,129		SOFR + 1.55%	6.89%	Interest Only	05/22/2024
PORT Mortgage Loan 1	34,967		51,302		4.74%	4.74%	Interest Only	10/01/2025
PORT Mortgage Loan 2	10,523		10,523		4.72%	4.72%	Interest Only	03/01/2026
PORT MetLife Loan	59,091		60,000		3.90%	3.90%	Interest Only	04/10/2026
PORT II Metlife Loan	93,388		93,701		3.99%	3.99%	Interest Only	04/10/2026
Q&C Hotel Mortgage Loan	24,579		24,784		SOFR + 3.50%	8.84%	Principal & Interest	1/31/2024 (5)
Lincoln Court Mortgage Loan (6)	33,310		35,314		SOFR + 3.25%	8.59%	Interest Only	08/07/2025
Lofts at NoHo Commons Mortgage Loan	68,451		71,536		SOFR + 2.18% (7)	7.52%	Interest Only	09/09/2024
Madison Square Mortgage Loan	17,962		17,964		4.63%	4.63%	Interest Only	10/07/2024
Four Pack Mortgage Loan (8)	175,234		—		BSBY + 2.75%	8.18%	Principal & Interest	09/01/2026
Oakland City Center Mortgage Loan (8)	—		87,000		(8)	(8)	(8)	(8)
Park Centre Mortgage Loan (8)	—		26,233		(8)	(8)	(8)	(8)
1180 Raymond Mortgage Loan (8)	—		31,070		(8)	(8)	(8)	(8)
The Marq Mortgage Loan (8)	—		60,796		(8)	(8)	(8)	(8)
Eight & Nine Corporate Centre Mortgage Loan (9)	—		47,945		(9)	(9)	(9)	(9)
Total Notes and Bonds Payable principal outstanding	1,045,821		1,066,112
Deferred financing costs and debt discount and premium, net (10)	(17,138)		(21,403)
Total Notes and Bonds Payable, net	$	1,028,683	$	1,044,709

_____________________

(1) Contractual interest rate represents the interest rate in effect under the loan as of December 31, 2023. The interest rate was calculated as the actual interest rate in effect as of December 31, 2023 (consisting of the contractual interest rate and contractual floor rates), using interest rate indices such as Secured Overnight Financing Rate (“SOFR”) or Bloomberg Short Term Bank Yield (“BSBY”) as of December 31, 2023, where applicable.

(2) Represents the payment type required under the loan as of December 31, 2023. Certain future monthly payments due under this loan also include amortizing principal payments.

(3) Represents the initial maturity date or the maturity date as extended as of December 31, 2023; subject to certain conditions, the maturity dates of certain loans may be extended beyond the date shown. For more information of the Company’s contractual obligations under its notes and bonds payable, see five-year maturity table below.

(4) See “Israeli Bond Financings” below.

(5) Subsequent to December 31, 2023, the Company extended the maturity date of this mortgage loan to April 30, 2024.

(6) The Company’s notes and bonds payable are generally non-recourse. These mortgage loans have guarantees over certain balances whereby the Company would be required to make guaranteed payments in the event that the Company turned the property over to the lender. As of December 31, 2023, the guaranteed amount in the aggregate was $22.8 million.

(7) The variable rate is at the higher of one-month SOFR or 1.75%, plus 2.18%.

(8) The Company refinanced and consolidated four of its mortgage loans into one loan (the “Four Pack Mortgage Loan”) and is cross-collateralized by the associated properties: Park Centre, 1180 Raymond, The Marq, and Oakland City Center. The Four Pack Mortgage Loan has an initial maturity of September 1, 2026 with two 1-year extension options, monthly amortization payments of $0.7 million and a $10.0 million paydown due December 1, 2024. The Company made a principal paydown of $10.0 million on the Four Park Mortgage Loan on December 1, 2023.

(9) This loan was repaid during the year ended December 31, 2023. Subsequent to December 31, 2023, the Company obtained a new mortgage loan on this property. See Note 11 for further discussion.

(10) Represents the unamortized premium/discount on notes and bonds payable due to the above- and below-market interest rates when the debt was assumed. The discount/premium is amortized over the remaining life of the notes and bonds payable.

During the years ended December 31, 2023, 2022 and 2021, the Company incurred $68.2 million, $48.1 million, and $40.5 million of interest expense, net, respectively. Included in interest expense, net for the years ended December 31, 2023,

F-25

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

2022 and 2021, was $9.6 million, $8.5 million, and $5.9 million, respectively of amortization of deferred financing costs and debt discount and premium, net. Additionally, during the years ended December 31, 2023, 2022 and 2021, the Company capitalized $3.7 million, $2.5 million, and $2.1 million of interest, respectively, to its investments in undeveloped land.

As of December 31, 2023 and 2022, the Company’s interest payable was $9.0 million and $9.1 million, respectively.

The following is a schedule of maturities, including principal amortization payments, for all notes and bonds payable outstanding as of December 31, 2023 (in thousands):

2024	$	289,025
2025	238,655
2026	518,141
2027	—
2028	—
Thereafter	—
	$	1,045,821

As of December 31, 2023, the Company had $289.0 million of debt obligations scheduled to mature over the period from January 1, 2024 through December 31, 2024. The Company has extension options with respect to $18.0 million of the debt obligations outstanding that are scheduled to mature over the next 12 months; however, the Company cannot exercise these options if not then in compliance with certain financial covenants in the loans without making a cash payment and there is no assurance that the Company will be able to meet these requirements. All of the Company’s debt obligations are generally non-recourse, subject to certain limited guaranty payments, as outlined in the table above, except for the Company’s Series B and C Bonds. The Company plans to utilize available extension options or seek to refinance the notes and bonds payable. The Company may also choose to market the properties for sale or may negotiate a turnover of the secured properties back to the related mortgage lender.

Debt Covenant Compliance

The Company’s notes and bonds payable contain various financial debt covenants, including debt-to-value, debt yield, minimum equity requirements, and debt service coverage ratios. As of December 31, 2023, the Company was in compliance with all of these debt covenants with the exception that the Georgia 400 Center Mortgage Loan, Q&C Hotel Mortgage Loan, Madison Square Mortgage Loan, and Lincoln Court Mortgage Loan were not in compliance with the debt service coverage requirement. As a result of such non-compliance, the Company is required to provide a cash sweep for the Georgia 400 Center Mortgage Loan and Lincoln Court Mortgage Loan, and the remaining loans are at-risk of cash sweeps and/or principal pay downs if in non-compliance.

Israeli Bond Financings

In July 2023, Pacific Oak SOR BVI issued 340.3 million Israeli new shekels of Series C bonds (the “Series C Bonds”) to Israeli investors pursuant to offerings registered with the Israeli Securities Authority. Pacific Oak SOR BVI issued additional Series C Bonds subsequent to the initial issuance and as of December 31, 2023, 360.0 million Israeli new shekels (approximately $99.5 million as of December 31, 2023) were outstanding. The Series C Bonds have an equal level of security, pari passu, amongst themselves without any right of precedence or preference between any of them. The Series C Bonds are collateralized by real estate held for investment (specified lands in Park Highlands and Richardson).

In February 2020, Pacific Oak SOR BVI issued 254.1 million Israeli new shekels of Series B bonds (the “Series B Bonds”) to Israeli investors pursuant to a public offering registered with the Israel Securities Authority. The Series B Bonds have principal installment payments equal to 33.33% of the face amount of the Series B Bonds on January 31st of each year from 2024 to 2026. Pacific Oak SOR BVI issued additional Series B Bonds subsequent to the initial issuance and as of December 31, 2023, 1.2 billion Israeli new shekels (approximately $321.7 million as of December 31, 2023) were outstanding. The Series B Bonds have an equal level of security, pari passu, amongst themselves and between them and the initial Series B Bonds without any right of precedence or preference between any of them. Subsequent to December 31, 2023, the Company made the first Series B Bonds installment payment. See Note 11 for further discussion.

The deeds of trust that govern the terms of the Series B and C Bonds contain various financial covenants. As of December 31, 2023, the Company was in compliance with all of these financial debt covenants.

F-26

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

6.     FAIR VALUE DISCLOSURES

The following were the face values, carrying amounts and fair values of the Company’s financial liabilities as of December 31, 2023 and 2022, (in thousands):

	December 31, 2023						December 31, 2022
	Face Value		Carrying Amount		Fair Value		Face Value		Carrying Amount		Fair Value
Financial liabilities (Level 3):
Notes payable	$	624,636	$	620,262	$	611,725	$	734,899	$	728,433	$	716,813
Financial liabilities (Level 1):
Pacific Oak SOR BVI Series B Bonds	$	321,724	$	312,458	$	296,380	$	331,213	$	316,276	$	304,758
Pacific Oak SOR BVI Series C Bonds	$	99,461	$	95,963	$	102,664	$	—	$	—	$	—

Disclosure of the fair value of assets and liabilities is based on pertinent information available to the Company as of the period end and requires a significant amount of judgment. This has made the estimation of fair values difficult and, therefore, both the actual results and the Company’s estimate of value at a future date could be materially different.

As of December 31, 2023, the Company measured the following assets at fair value (in thousands):

			Fair Value Measurements Using
	Total		Quoted Prices in Active Markets for Identical Assets<br>(Level 1)		Significant Other Observable Inputs<br>(Level 2)		Significant Unobservable Inputs<br>(Level 3)
Recurring Basis:
Real estate equity securities	$	41,609	$	41,609	$	—	$	—
Asset derivative - interest rate caps (1)	$	1,236	$	—	$	1,236	$	—
Asset derivative - foreign currency collar (1)	$	3,655	$	—	$	3,655	$	—
Nonrecurring Basis:
Impaired real estate (2)	$	193,529	$	—	$	—	$	193,529

_____________________

(1) Interest rate caps and foreign currency collars are included in prepaid expenses and other assets, respectively, in the accompanying consolidated balance sheets.

(2) Amount represents the fair value for a real estate asset impacted by impairment charges during the year ended December 31, 2023, as of the date that the fair value measurement was made. The carrying value for the real estate asset may have subsequently increased or decreased from the fair value reflected due to activity that has occurred since the measurement date.

During the year ended December 31, 2023, three of the Company’s real estate properties were impaired and written down to their estimated fair value. Two of the real estate properties were measured based on an income approach with the significant unobservable inputs used in evaluating the estimated fair value of these properties, which are discount rates between 8.75% to 9.0% and terminal cap rates between 8.0% to 8.25%, and one real estate property was measured at its estimated value based on a sales comparison approach.

The fair value of the Company's real estate was measured using significant unobservable inputs (Level 3) for the year ended December 31, 2023, which included terminal capitalization rates and discount rates.

F-27

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

As of December 31, 2022, the Company measured the following assets and liabilities at fair value (in thousands):

			Fair Value Measurements Using
	Total		Quoted Prices in Active Markets <br>for Identical Assets<br>(Level 1)		Significant Other Observable Inputs<br>(Level 2)		Significant Unobservable Inputs<br>(Level 3)
Recurring Basis:
Real estate equity securities	$	60,153	$	60,153	$	—	$	—
Asset derivative - interest rate caps (1)	$	2,267	$	—	$	2,267	$	—
Liability derivative - foreign currency collar (1)	$	3,115	$	—	$	3,115	$	—
Nonrecurring Basis:
Impaired real estate (2)	$	212,800	$	—	$	—	$	212,800

_____________________

(1) Interest rate caps and foreign currency collars are included in prepaid expenses and other assets and other liabilities, respectively, in the accompanying consolidated balance sheets.

(2) Amount represents the fair value for a real estate asset impacted by impairment charges during the year ended December 31, 2022, as of the date that the fair value measurement was made. The carrying value for the real estate asset may have subsequently increased or decreased from the fair value reflected due to activity that has occurred since the measurement date.

During the year ended December 31, 2022, two of the Company’s real estate properties were impaired and written down to their estimated fair value. One real estate property was based on an income approach with the significant unobservable inputs used in evaluating the estimated fair value of these properties, which include a discount rate of 6.75% and a terminal cap rate of 6.00%, and one real estate property was measured at its estimated value based on a sales comparison approach.

Goodwill Impairment

During the year ended December 31, 2023, the Company determined that based on the decline in projected cash flows and the determination of appropriate discount and terminal capitalization rates for one strategic opportunistic property and one hotel, it was more likely than not that the fair value of the reporting units was less than the carrying value. During the year ended December 31, 2023, the Company recorded impairment charges on goodwill of $4.5 million in the accompanying consolidated statements of operations.

During the year ended December 31, 2022, the Company determined that based on the sale of one hotel and a decline in projected cash flows for one strategic opportunistic property, it was more likely than not that the fair value of the reporting units were less than the carrying value. The resulting real estate impairment charge on the strategic opportunistic property and the sale of one hotel, resulted in the fair value of the reporting units to be below fair value and the entirety of the goodwill associated with the reporting units to be written off. During the year ended December 31, 2022, the Company recorded impairment charges on goodwill of $8.1 million in the accompanying consolidated statements of operations.

The following table summarizes the goodwill impairment activity during years ended December 31, 2023 and 2022 (in thousands):

	Gross Goodwill		Accumulated Impairment		Net Goodwill
Balance, December 31, 2021	$	16,342	$	(2,808)	$	13,534
Impairment charges on goodwill	—		(8,098)		(8,098)
Balance, December 31, 2022	$	16,342	$	(10,906)	$	5,436
Impairment charges on goodwill	—		(4,488)		(4,488)
Balance, December 31, 2023	$	16,342	$	(15,394)	$	948

F-28

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

7.     RELATED PARTY TRANSACTIONS

Pacific Oak Capital Advisors, LLC

As described further below, the Company has entered into agreements with certain affiliates pursuant to which they provide services to the Company. Keith D. Hall and Peter McMillan III control and indirectly own Pacific Oak Holding Group, LLC (“Pacific Oak Holding”), the Company’s sponsor since November 1, 2019. Pacific Oak Holding is the sole owner of the Advisor, the Company’s advisor since November 1, 2019. Messrs. Hall and McMillan are also two of the Company’s executive officers and directors.

Subject to certain restrictions and limitations, the business of the Company is externally managed by the Advisor pursuant to the Advisory Agreement. The Advisory Agreement is effective through November 1, 2024; however, the Company or the Advisor may terminate the Advisory Agreement without cause or penalty upon providing 60 days’ written notice. The Advisor conducts the Company’s operations and manages its portfolio of real estate and other real estate-related investments, except with respect to the Company’s residential home portfolio.

Acquisition and Origination Fees

The Company records the Advisor fee for an acquisition and origination fee equal to 1.0% of the cost of investments acquired, or the amount funded by the Company to acquire or originate mortgage, mezzanine, bridge or other loans, including any acquisition and origination expenses related to such investments and any debt attributable to such investments.

Asset Management Fee

With respect to investments in loans and any investments other than real estate, the Company records the asset management fee, each month, calculated as one-twelfth of 0.75%, and has increased to one-twelfth of 1.0%, effective November 1, 2023 of the lesser of (i) the amount paid or allocated to acquire or fund the loan or other investment, inclusive of acquisition and origination fees and expenses related thereto and the amount of any debt associated with or used to acquire or fund such investment and (ii) the outstanding principal amount of such loan or other investment, plus the acquisition and origination fees and expenses related to the acquisition or funding of such investment, as of the time of calculation.

With respect to investments in real estate, the Company records the monthly asset management fee equal to one-twelfth of 0.75%, and has increased to one-twelfth of 1.0%, effective November 1, 2023 of the amount paid or allocated to acquire the investment, including the cost of subsequent capital improvements, inclusive of acquisition fees and expenses related thereto and the amount of any debt associated with or used to acquire such investment.

In the case of investments made through joint ventures, the asset management fee is determined based on the Company’s proportionate share of the underlying investment, inclusive of the Company’s proportionate share of any fees and expenses related thereto.

Disposition Fee

For substantial assistance in connection with the sale of properties or other investments, excluding investments in PORT or made through PORT, the Company calculates the fee to the Advisor or its affiliates as 1.0% of the contract sales price of each property or other investment sold; provided, however, in no event may the disposition fees paid to the Advisor, its affiliates and unaffiliated third parties exceed 6.0% of the contract sales price.

Subordinated Participation in Net Cash Flows (payable only if the Company is not listed on a national exchange)

After investors in the Company’s offerings have received, together as a collective group, aggregate distributions (including distributions that may constitute a return of capital for federal income tax purposes) sufficient to provide (i) a return of their net invested capital, or the amount calculated by multiplying the total number of shares purchased by stockholders by the issue price, reduced by any amounts to repurchase shares pursuant to the Company’s share redemption program, (ii) a 7.0% per year cumulative, noncompounded return on such net invested capital, and (iii) $36.3 million, which is the grant date value of the restricted stock issued to the Company’s former advisor, in connection with its termination on October 31, 2019 (the “KBS Termination Fee Payout”), the Advisor is entitled to receive 15.0% of the Company’s net cash flows, whether from continuing operations, net sale proceeds or otherwise. Net sales proceeds means the net cash proceeds realized by the Company after deduction of all expenses incurred in connection with a sale, including disposition fees paid to the Advisor. The 7.0% per year cumulative, noncompounded return on net invested capital is calculated on a daily basis. In making this calculation, the net invested capital is reduced to the extent distributions in excess of a cumulative, noncompounded, annual return of 7.0% are paid (from whatever source), except to the extent such distributions would be required to supplement prior distributions paid in order

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PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

to achieve a cumulative, noncompounded, annual return of 7.0% (invested capital is only reduced as described in this sentence; it is not reduced simply because a distribution constitutes a return of capital for federal income tax purposes). The 7.0% per year cumulative, noncompounded return is not based on the return provided to any individual stockholder. Accordingly, it is not necessary for each of the Company’s stockholders to have received any minimum return in order for the Advisor to participate in the Company’s net cash flows. In fact, if the Advisor is entitled to participate in the Company’s net cash flows, the returns of the Company’s stockholders will differ, and some may be less than a 7.0% per year cumulative, noncompounded return. This fee is payable only if the Company is not listed on an exchange.

Subordinated Incentive Listing Fee (payable only if the Company is listed on a national exchange)

Upon listing the Company’s common stock on a national securities exchange, the Advisor is entitled to a fee equal to 15.0% of the amount by which the market value of the Company’s outstanding stock plus distributions paid by the Company (including distributions that may constitute a return of capital for federal income tax purposes) prior to listing exceeds the aggregate of (i) the sum of the Company’s stockholders’ net invested capital, or the amount calculated by multiplying the total number of shares purchased by stockholders by the issue price, reduced by any amounts to repurchase shares pursuant to the Company’s share redemption program, and the amount of cash flow necessary to generate a 7.0% per year cumulative, noncompounded return on such amount and (ii) the KBS Termination Fee Payout. The 7.0% per year cumulative, noncompounded return on net invested capital is calculated on a daily basis. In making this calculation, the net invested capital is reduced to the extent distributions in excess of a cumulative, noncompounded, annual return of 7.0% are paid (from whatever source), except to the extent such distributions would be required to supplement prior distributions paid in order to achieve a cumulative, noncompounded, annual return of 7.0% (invested capital is only reduced as described in this sentence; it is not reduced simply because a distribution constitutes a return of capital for federal income tax purposes). The 7.0% per year cumulative, noncompounded return is not based on the return provided to any individual stockholder. Accordingly, it is not necessary for each of the Company’s stockholders to have received any minimum return in order for the Advisor to receive the listing fee. In fact, if the Advisor is entitled to the listing fee, the returns of the Company’s stockholders will differ, and some may be less than a 7.0% per year cumulative, noncompounded return.

Subordinated Performance Fee Due Upon Termination

If the Advisory Agreement is terminated or not renewed, other than for cause, the Advisor is entitled to receive a participation fee equal to (A) 15.0% of the Company’s net cash flows, whether from continuing operations, net sale proceeds or otherwise, after the Company’s stockholders have received, together as a collective group, aggregate distributions (including distributions that may constitute a return of capital for federal income tax purposes) sufficient to provide (i) a return of their net invested capital, or the amount calculated by multiplying the total number of shares purchased by stockholders by the issue price, reduced by any amounts to repurchase shares pursuant to the Company’s share redemption program, and (ii) a 7.0% per year cumulative, noncompounded return on such net invested capital from the Company’s inception, less (B) the KBS Termination Fee Payout. Net sales proceeds means the net cash proceeds realized by the Company after deduction of all expenses incurred in connection with a sale, including disposition fees paid to the Advisor. The 7.0% per year cumulative, noncompounded return on net invested capital from the Company’s inception is calculated on a daily basis. In making this calculation, the net invested capital is reduced to the extent distributions in excess of a cumulative, noncompounded, annual return of 7.0% are paid (from whatever source), except to the extent such distributions would be required to supplement prior distributions paid in order to achieve a cumulative, noncompounded, annual return of 7.0% (invested capital is only reduced as described in this sentence; it is not reduced simply because a distribution constitutes a return of capital for federal income tax purposes). The 7.0% per year cumulative, noncompounded return is not based on the return provided to any individual stockholder. Accordingly, it is not necessary for each of the Company’s stockholders to have received any minimum return in order for the Advisor to participate in the Company’s net cash flows. In fact, if the Advisor is entitled to participate in the Company’s net cash flows, the returns of the Company’s stockholders will differ, and some may be less than a 7.0% per year cumulative, noncompounded return. This fee is payable only if the Company is not listed on an exchange.

Pacific Oak Residential Advisors, LLC

Effective September 1, 2022, the Company entered into an advisory agreement (the “PORT Advisory Agreement”) with Pacific Oak Residential Advisors, LLC (“PORA”), an affiliate of the Advisor, pursuant to which PORA will act as a product specialist with respect to the Company’s residential home portfolio, held through a wholly owned subsidiary. The PORT Advisory Agreement has an initial two-year term and may be renewed for additional one-year terms.

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PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

Pursuant to the PORT Advisory Agreement, the Company will pay PORA: (1) an acquisition fee equal to 1.0% of the cost of each asset which consists of the price paid for the asset plus any amounts funded or budgeted at the time of acquisition for capital expenditures; (2) a quarterly asset management fee equal to 0.25% (1.0% annually) on the aggregate value of the Company’s residential home portfolio assets, as determined in accordance with the Company’s valuation guidelines, as of the end of each quarter; and (3) disposition fee equal to 1.0% of the contract sales price of the residential homes sold, provided, however, in no event may the disposition fees paid to PORA, its affiliates and unaffiliated third parties exceed 6.0% of the contract sales price. In the case of investments made through a joint venture, the acquisition fee will be based on the Company’s proportionate share of the joint venture.

DMH Realty, LLC

Effective September 1, 2022, PORT entered into a property management agreement with DMH Realty, LLC (“DMH Realty”), an affiliate of the Advisor for the Company’s residential home portfolio (the “PORT Property Management Agreement”). The PORT Property Management Agreement has an initial two-year term and may be renewed for additional one-year terms. Pursuant to the PORT Property Management Agreement, the Company will pay DMH Realty a property management fee equal to the following: (a) 8% of Collected Rental Revenues, as defined below, up to $50.0 million per annum; (b) 7% of Collected Rental Revenues in excess of $50.0 million per annum, but less than or equal to $75.0 million per annum; and (c) 6% of Collected Rental Revenues in excess of $75.0 million per annum, “Collected Rental Revenues” means the amount of rental revenue actually collected for each property per the terms of the lease pertaining to each property (including lease breakage fees) or pursuant to any early termination buyouts, but excluding other income items, fees or revenue collected by DMH Realty, including but not limited to: application fees, insufficient funds fees, late fees, move-in fees, pet fees, and security deposits (except to the extent applied to rent per the terms of the lease pertaining to any property).

Pacific Oak Capital Markets, LLC

On September 9, 2022, the Company, through PORT, commenced a private offering of up to $500 million of common stock in a primary offering and up to $50 million of common stock under its distribution reinvestment plan (the “Private Offering”). PORT engaged Pacific Oak Capital Markets, LLC (“POCM”), an affiliate of the Advisor, PORA and DMH Realty, to be the dealer manager for the Private Offering, pursuant to a dealer manager agreement effective as of September 9, 2022, which was subsequently amended and restated as of January 13, 2023 to reflect the creation of a $5.0 million escrow arrangement (the “PORT Dealer Manager Agreement”). Pursuant to the PORT Dealer Manager Agreement, with respect to Class A shares, PORT will generally pay POCM: (1) selling commissions equal to up to 6.0% of the net asset value (“NAV”) of each share sold in the primary offering, which POCM may reallow in part or in full to participating broker-dealers; (2) a dealer manager fee equal to up to 1.5% of the NAV of each share sold in the primary offering, which POCM may reallow in part or in full to participating broker-dealers; and (3) a placement agent fee equal to up to 1.5% of the NAV of each share sold in the primary offering. With respect to Class T shares, PORT will generally pay POCM: (1) selling commissions equal to up to 3.0% of the NAV of each share sold in the primary offering, which POCM may reallow in part or in full to participating broker-dealers; (2) a dealer manager fee equal to up to 0.75% of the NAV of each share sold in the primary offering, which POCM may reallow in part or in full to participating broker-dealers; and (3) a placement agent fee equal to up to 0.75% of the NAV of each share sold in the primary offering. PORT will not pay any selling commissions, dealer manager or placement agent fees in connection with the sale of shares under the distribution reinvestment plan. PORT will incur an organization and offering expense fee equal to 0.5% of the NAV of each share sold in the Private Offering to help fund the reimbursement to the sponsor. The Private Offering will terminate on or before the earlier of December 31, 2024, unless extended or the date on which all of the primary offering shares are sold. As of December 31, 2023, no fees were incurred related to this arrangement with POCM.

Pursuant to the terms of these agreements, summarized below are the related-party costs incurred by the Company for the years ended December 31, 2023, 2022 and 2021, respectively, and any related amounts payable as of December 31, 2023 and

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PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

2022 (in thousands):

	Incurred During the Year Ended December 31,						Payable as of <br>December 31,
	2023		2022		2021		2023		2022
Expensed
Asset management fees to affiliate	$	15,415	$	13,678	$	14,012	$	6,855	$	2,618
Property management fees (1)	2,883		1,267		479		153		181
Disposition fees (2)	1,255		1,294		1,196		—		—
Capitalized
Acquisition fees on real estate (3)	—		67		20		—		—
Acquisition fee on investment in unconsolidated entities	—		—		46		—		—
Reimbursable offering costs (4)	894		—		—		894		—
	$	20,447	$	16,306	$	15,753	$	7,902	$	2,799

_____________________

(1) Property management fees related to DMH Realty are recorded as operating, maintenance, and management expenses in the accompanying consolidated statements of operations.

(2) Disposition fees with respect to real estate properties sold are recorded as a component of the gain or loss on sale of real estate in the accompanying consolidated statements of operations.

(3) Acquisition fees associated with asset acquisitions are capitalized, while costs associated with business combinations are expensed as incurred.

(4) Reimbursable offering costs to the Advisor related to the Private Offering are capitalized and recorded as prepaid expenses and other assets in the accompanying consolidated balance sheet.

Pacific Oak Opportunity Zone Fund I

The Advisor is entitled to certain fees in connection with the fund. Pacific Oak Opportunity Zone Fund I will pay an acquisition fee equal to 1.5% of the purchase price of each asset (including any debt incurred or assumed and significant capital improvement costs budgeted as of the date of acquisition) with a purchase price less than or equal to $25.0 million plus 1.0% of the purchase price in excess of $25.0 million; a quarterly asset management fee equal to 0.25% of the total purchase price of all assets (including any debt incurred or assumed and significant capital improvement costs budgeted as of the date of acquisition) as of the end of the applicable quarter; and a financing fee equal to 0.5% of the original principal amount of any indebtedness they incur (reduced by any financing fee previously paid with respect to indebtedness being refinanced). In the case of investments made through joint ventures, the fees above will be determined based on the Company’s proportionate share of the investment. During the years ended December 31, 2023, 2022 and 2021, the Company recorded $0.5 million, $0.4 million, and $0.6 million of waived asset management fees recorded as equity in income of unconsolidated entities, respectively.

PORT II

On July 1, 2022, the Company, through PORT OP, made a tender offer to purchase 76,735 shares of Pacific Oak Residential Trust II, Inc. (“PORT II”) common stock held by unrelated parties for a price of $14.66 per share. As a result, the Company determined that it became the primary beneficiary of PORT II, which resulted in the consolidation of PORT II into the Company’s consolidated financial statements. On July 29, 2022, the Company consummated the transactions with the unrelated parties and owned 100% of PORT II.

Effective September 1, 2022, the PORT II Advisory Agreement and the PORT II property management agreement were terminated.

PORT OP LP Share Redemption

On June 24, 2022, the Company’s board of directors authorized and approved the redemption of the 510,816 Special Common Units of PORT OP LP, a consolidated subsidiary of the Company (“PORT OP”), representing approximately 3.20% interest, held by BPT Holdings, LLC (“BPT Holdings”), a subsidiary of the Advisor, for a price of $13.09 per unit. In July 2022, the Company redeemed the Special Common Units of PORT OP for $6.7 million. Following the redemption, the Company owned 100% of PORT OP.

Loan to 353 Sacramento Joint Venture

During the year ended December 31, 2021, the Company funded $7.0 million to the 353 Sacramento Joint Venture for the mortgage loan refinancing fees and was subsequently repaid during the year ended December 31, 2022.

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PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

110 William Joint Venture

In July 2023, the 110 William Joint Venture entered into debt and equity restructuring agreements (the “Restructuring Agreements”) and as a result, the Company committed to funding up to $105.0 million (“Capital Commitments”) to the 110 William Joint Venture in exchange for 77.5% of preferred interest. Additionally, Pacific Oak SOR Properties, LLC, an indirect subsidiary of the Company entered into various guarantee agreements as part of the Restructuring Agreements. Refer to Notes 8 and 10 for further discussion.

8.     INVESTMENTS IN UNCONSOLIDATED ENTITIES

As of December 31, 2023 and 2022, the Company’s investments in unconsolidated entities were composed of the following (dollars in thousands):

	Number of Properties at December 31, 2023						December 31,
Joint Venture		Location		Ownership %		2023				2022
110 William Joint Venture (1)	1		New York, New York		(1)		$	22,314	(1)		$	—
Pacific Oak Opportunity Zone Fund I (2)	4		Various		46.0%		23,587				25,669
353 Sacramento Joint Venture	1		San Francisco, California		55.0%		—		(3)		45,173
							$	45,901			$	70,842

_____________________

(1) See “110 William Joint Venture Restructuring”, below.

(2) The maximum exposure to loss as a result of the Company’s investment in the Pacific Oak Opportunity Zone Fund I is limited to the carrying amount of the investment.

(3) The Company suspended the equity method of accounting, and will not record the Company's share of losses and any subsequent income for the 353 Sacramento Joint Venture, until the Company’s share of net gain recorded exceeds net losses not recognized during the period the equity method was suspended. Additionally, during the year ended December 31, 2023, the Company impaired the investment in the 353 Sacramento Joint Venture. See “Impairment of Investments in Unconsolidated Entities”, below and Note 6 for further discussion.

Summarized financial information for investments in unconsolidated entities are as follows (in thousands):

	December 31,
	2023		2022
Assets:
Real estate held for investment, net	$	411,028	$	471,503
Total assets	468,002		546,142
Liabilities:
Notes payable related to real estate held for investment, net	410,563		490,302
Total liabilities	427,794		501,860
Total equity	$	40,207	$	44,281			For the Years Ended December 31,
---	---	---	---	---	---	---
	2023		2022		2021
Total revenues	$	42,002	$	46,518	$	44,901
Operating loss	(123,045)		(41,923)		(30,548)
Net loss	$	(51,401)	$	(41,664)	$	(30,499)

110 William Joint Venture Restructuring

The 110 William Joint Venture is governed by an amended and restated limited liability company agreement, dated July 5, 2023. The Company exercises significant influence over the operations, financial policies, and decision-making with respect to the 110 William Joint Venture. Significant decisions that may impact the 110 William Joint Venture, its subsidiaries, or its assets, require both partners in which the Company and one other institutional investor each has representatives.

As a result of the Restructuring Agreements, the Company acquired the 40% common interest from the previous joint venture partner in exchange for contingent consideration. Additionally, as a result of the Capital Commitments, the Company acquired a 77.5% of preferred interest in the 110 William Joint Venture. During the year ended December 31, 2023, the Company made capital contributions in the 110 William Joint Venture of $31.4 million, of which $28.3 million funded the

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PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

Capital Commitments and as of December 31, 2023, $76.7 million remains to be funded. Additionally, the Company, through an indirect subsidiary, entered into various guarantee agreements as part of the Restructuring Agreements.

In connection with the Restructuring Agreements, certain of the 110 William Joint Venture obligations, in the form of mezzanine debt with an unrelated party, were exchanged for preferred interest by and between the unrelated party and the 110 William Joint Venture. The carrying value of the debt was $89.0 million, which was exchanged in a non-cash transaction for 22.5% of preferred interest. This resulted in a gain on the extinguishment of debt of $71.6 million recognized at the time of exchange as calculated using discounted cash flows at a market interest rate. Significant assumptions included discount and terminal capitalization rates, as well as the market discount rate for preferred stock.

The Company is typically entitled to proportionate profit participation interests. However, since the previous joint venture partner exchanged their interest for $1, the Company realized 100% of the gain on the extinguishment of debt due to the absence of another investor benefiting from the exchange. Therefore, the Company was the only entity with any financial interest in the realization of the gain on the extinguishment of debt.

Immediately following the Restructuring Agreements, through the 110 William Joint Venture, the Company is entitled to preferred distributions until certain return targets are achieved. Once these return targets are achieved, based on a tiered waterfall calculation which may not be reflective of the Company's economic interest in the entity, distributions will be allocated 90% to the Company and 10% to the other investor.

As a result of the Restructuring Agreements, including the realization of the gain on the extinguishment of debt and funding of the Capital Commitments, the Company resumed the equity method of accounting. Prior to resuming the equity method of accounting, the Company had unrecognized prior period losses of $60.1 million.

353 Sacramento Joint Venture Impairment

During the year ended December 31, 2023, the carrying amount of 353 Sacramento Joint Venture was impaired by $14.8 million, primarily due to weakening market conditions of the geographic area. There were no impairments of investments in unconsolidated entities during the years ended December 31, 2022 and 2021.

Additionally, during the year ended December 31, 2023, the 353 Sacramento Joint Venture was measured at the estimated value of the Company’s ownership calculated based on a hypothetical liquidation of the net assets, discounted for lack of marketability and control. The Company used a discount rate of 8.75% and a cap rate of 7.0% to estimate the fair value of the real estate, an interest rate adjustment of 0.15% to estimate the fair value of the debt, a discount rate of 20% for lack of marketability, and a discount rate of 20% for lack of control. The one investment in unconsolidated entity was not measured as of December 31, 2023.

The fair value of the Company's real estate was measured using significant unobservable inputs (Level 3) for the year ended December 31, 2023, which included terminal capitalization rates and discount rates.

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PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

9.    REPORTING SEGMENTS

The Company recognizes three reporting segments for the years ended December 31, 2023, 2022, and 2021, and consists of strategic opportunistic properties and real estate-related investments (“strategic opportunistic properties”), residential homes, and hotel. All corporate related costs are included in the strategic opportunistic properties segment to align with how financial information is presented to the Company's Chief Executive Officer and President, who are also the chief operating decision maker (the “CODM”). The CODM makes key operating decisions, evaluates financial results and manages the Company’s business based on the selected financial information. The selected financial information for the reporting segments for the years ended December 31, 2023, 2022 and 2021 is as follows (in thousands):

	Year Ended December 31, 2023
	Strategic Opportunistic Properties		Residential Homes		Hotel		Total
Total revenues	$	98,463	$	37,800	$	9,153	$	145,416
Total expenses	(251,801)		(47,943)		(11,223)		(310,967)
Total other income, net	19,813		5,701		136		25,650
Net loss before income taxes	$	(133,525)	$	(4,442)	$	(1,934)	$	(139,901)
	Year Ended December 31, 2022
	Strategic Opportunistic Properties		Residential Homes		Hotel		Total
Total revenues	$	102,179	$	29,130	$	30,749	$	162,058
Total expenses	(140,162)		(35,022)		(31,508)		(206,692)
Total other (loss) income, net	(12,646)		18,158		2,376		7,888
Net (loss) income before income taxes	$	(50,629)	$	12,266	$	1,617	$	(36,746)
	Year Ended December 31, 2021
	Strategic Opportunistic Properties		Residential Homes		Hotel Properties		Total
Total revenues	$	115,167	$	21,954	$	30,806	$	167,927
Total expenses	(172,215)		(25,979)		(30,553)		(228,747)
Total other income, net	46,959		74		1,289		48,322
Net (loss) income	$	(10,089)	$	(3,951)	$	1,542	$	(12,498)

Total assets related to the three reporting segments as of December 31, 2023 and 2022 are as follows (in thousands):

	December 31, 2023
	Strategic Opportunistic Properties		Residential Homes		Hotel		Total
Total assets (1)	$	1,024,555	$	315,957	$	47,631	$	1,388,143
Goodwill (1)	948		—		—		948

_____________________

(1) During the year ended December 31, 2023, the Company recorded impairment charges on goodwill of $3.3 million and $1.2 million related to the Strategic Opportunistic Properties and Hotel segments, respectively.

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PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

	December 31, 2022
	Strategic Opportunistic Properties		Residential Homes		Hotel Properties		Total
Total assets (1)	$	1,173,481	$	333,128	$	52,636	$	1,559,245
Goodwill (1)	4,220		—		1,216		5,436

_____________________

(1) During the year ended December 31, 2022, the Company recorded impairment charges on goodwill of $5.5 million and $2.6 million related to the Strategic Opportunistic Properties and Hotel Properties segments, respectively.

10.    COMMITMENTS AND CONTINGENCIES

Lease Obligations

As of December 31, 2023 and 2022, the Company’s lease and rights to a leasehold interest with respect to 210 West 31st Street, which was accounted for as a finance lease, are included in the accompanying consolidated balance sheets as follows:

	December 31,
	2023			2022
Right-of-use asset (included in real estate held for investment, net, in thousands)	$	6,391		$	7,281
Lease obligation (included in other liabilities, in thousands)	9,537			9,446
Remaining lease term	90.0 years			91.0 years
Discount rate	4.8		%	4.8		%

As of December 31, 2023, the Company had a leasehold interest expiring on 2114. Future minimum lease payments owed by the Company under the finance lease as of December 31, 2023 are as follows (in thousands):

2024	$	360
2025	393
2026	396
2027	396
2028	396
Thereafter	51,375
Total expected minimum lease obligations	53,316
Less: Amount representing interest (1)	(43,779)
Present value of net minimum lease payments (2)	$	9,537

_____________________

(1) Interest includes the amount necessary to reduce the total expected minimum lease obligations to present value calculated at the Company’s incremental borrowing rate at acquisition.

(2) The present value of net minimum lease payments are presented in other liabilities in the accompanying consolidated balance sheets.

Capital Commitments

As of December 31, 2023, the Company had a future funding commitment of $76.7 million related to the Capital Commitments to the 110 William Joint Venture. Such amounts are payable as incurred and therefore, no accrual is recognized as of December 31, 2023. See Note 8 for further discussion.

Guarantee Agreements

As of December 31, 2023 and as part of the Restructuring Agreements, the Company, became the guarantor for certain guarantees related to the 110 William Joint Venture, including guaranteeing: all debt servicing costs and timely debt payments, completion for the construction and development of tenant improvement work, funding related to the Capital Commitments, and recourse obligations. The related debt has an initial maturity of July 5, 2026 and guarantee amounts are due upon occurrence of any one triggering event.

As of December 31, 2023 and as part of the Georgia 400 Mortgage Loan and Lincoln Court Mortgage Loan, the Company guarantees the payment of $22.8 million, whereby the Company would be required to make guaranteed payments in the event that the Company turned the property over to the lender.

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PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2023

Economic Dependency

The Company is dependent on the Advisor and its affiliates for certain services that are essential to the Company, including the identification, evaluation, negotiation, origination, acquisition and disposition of investments; management of the daily operations of the Company’s investment portfolio; and other general and administrative responsibilities. In the event that the Advisor and its affiliates is unable to provide these services, the Company will be required to obtain such services from other sources.

Environmental

As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. Although there can be no assurance, the Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations as of December 31, 2023. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s properties, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the properties could result in future environmental liabilities.

Legal Matters

From time to time, the Company is a party to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on the Company’s results of operations or financial condition, which would require accrual or disclosure of the contingency and the possible range of loss. Additionally, the Company has not recorded any loss contingencies related to legal proceedings in which the potential loss is deemed to be remote.

11.     SUBSEQUENT EVENTS

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

Series B Bonds Payment

On January 31, 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 due on January 31, 2025 and 2026, respectively.

Eight & Nine Corporate Centre Loan

On January 12, 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.

Park Highlands Land

On March 10, 2024, the Company, through indirect wholly owned subsidiaries, entered into a purchase and sale agreement for the sale of Park Highlands undeveloped land 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.

Sale of Real Estate Equity Securities

Subsequent to December 31, 2023, the Company sold a partial interest in one of the Company’s investment in real estate equity securities for gross sale proceeds of approximately $14.3 million.

F-37

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

SCHEDULE III

REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION AND AMORTIZATION

December 31, 2023

(dollar amounts in thousands)

						Initial Cost to Company								Gross Amount at which Carried at Close of Period
Property	Property Type	Location	Ownership Percent	Encumbrances		Land		Building and Improvements (1)		Total		Cost Capitalized Subsequent to Acquisition (2)		Land		Building and Improvements (1)		Total (3)		Accumulated Depreciation and Amortization		Original Date of Construction	Date <br>Acquired or Foreclosed on
Richardson Office	Office	Richardson, TX	100.0%	$	12,208	$	1,847	$	25,745	$	27,592	$	13,490	$	1,847	$	39,235	$	41,082	$	(17,399)	1980/1985	11/23/2011
Madison Square	Office	Phoenix, AZ	90.0%	17,962		9,827		21,545		31,372		525		9,827		22,070		31,897		(5,039)		2003/2007/2008	10/05/2020
Park Centre	Office	Austin, TX	100.0%	(5)		3,251		27,941		31,192		7,050		3,251		34,991		38,242		(13,923)		2000	03/28/2013
Crown Pointe	Office	Dunwoody, GA	100.0%	54,738		22,590		62,610		85,200		15,416		22,590		78,026		100,616		(24,424)		1985/1989	02/14/2017
The Marq	Office	Minneapolis, MN	100.0%	(5)		10,387		75,878		86,265		14,589		10,387		90,467		100,854		(20,733)		1972	03/01/2018
Eight & Nine Corporate Centre	Office	Franklin, TN	100.0%	(6)		17,401		58,794		76,195		6,065		17,401		64,859		82,260		(15,297)		2007	06/08/2018
Georgia 400 Center	Office	Alpharetta, GA	100.0%	40,184		11,400		72,000		83,400		9,038		11,431		81,007		92,438		(16,644)		2001	05/23/2019
Lincoln Court	Office	Campbell, CA	100.0%	33,310		16,610		43,083		59,693		(16,884)		12,850		29,959		42,809		(725)		1985	10/05/2020
Oakland City Center	Office	Oakland, CA	100.0%	(5)		24,063		180,973		205,036		(88,009)		15,557		101,470		117,027		(1,222)		1985/1990	10/05/2020
1180 Raymond	Apartment	Newark, NJ	100.0%	(5)		8,292		37,651		45,943		3,275		8,292		40,926		49,218		(12,682)		1929	08/20/2013
Lofts at NoHo Commons	Apartment	North Hollywood, CA	90.0%	68,451		22,670		93,676		116,346		2,297		22,670		95,973		118,643		(10,462)		2007	10/05/2020
Q&C Hotel	Hotel	New Orleans, LA	90.0%	24,579		2,669		41,431		44,100		574		2,669		42,005		44,674		(4,040)		1913	10/05/2020
Park Highlands Land I	Undeveloped Land	North Las Vegas, NV	100.0%	(4)		15,710		—		15,710		18,497		34,207		—		34,207		—		N/A	12/30/2011
Park Highlands Land II	Undeveloped Land	North Las Vegas, NV	100.0%	(4)		6,087		—		6,087		7,133		13,220		—		13,220		—		N/A	12/10/2013
Richardson Land I	Undeveloped Land	Richardson, TX	100.0%	(4)		1,997		—		1,997		3,789		5,786		—		5,786		—		N/A	11/23/2011
Richardson Land II	Undeveloped Land	Richardson, TX	100.0%	(4)		3,096		—		3,096		322		3,418		—		3,418		—		N/A	09/04/2014
210 West 31st Street (6)	Office/Retail	New York, NY	80.0%	—		—		51,358		51,358		(15,758)		—		35,600		35,600		—		(7)	10/05/2020

F-38

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

SCHEDULE III

REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION AND AMORTIZATION (CONTINUED)

December 31, 2023

(dollar amounts in thousands)

				Initial Cost to Company								Gross Amount at which Carried at Close of Period
Description	Number of Homes	Ownership Percent	Encumbrances	Land		Building and Improvements (1)		Total		Cost Capitalized Subsequent to Acquisition (2)		Land		Building and Improvements (1)		Total (3)		Accumulated Depreciation and Amortization		Original Date of Construction	Date <br>Acquired or Foreclosed on
Residential Homes Portfolio:
Alabama Homes	188	100.0%	(8)	$	3,220	$	12,599	$	15,819	$	2,937	$	3,220	$	15,536	$	18,756	$	(1,982)	Various	Various
Arkansas Homes	23	100.0%	(8)	491		2,046		2,537		79		491		2,125		2,616		(200)		Various	Various
Delaware Homes	4	100.0%	(8)	179		750		929		44		179		794		973		(67)		Various	Various
Florida Homes	1	100.0%	(8)	26		154		180		(5)		26		149		175		(17)		Various	Various
Georgia Homes	70	100.0%	(8)	1,007		5,444		6,451		1,341		1,007		6,785		7,792		(798)		Various	Various
Iowa Homes	11	100.0%	(8)	165		684		849		7		165		691		856		(66)		Various	Various
Illinois Homes	310	100.0%	(8)	5,540		22,236		27,776		2,074		5,540		24,310		29,850		(2,707)		Various	Various
Indiana Homes	92	100.0%	(8)	1,886		7,855		9,741		410		1,886		8,265		10,151		(920)		Various	Various
Michigan Homes	330	100.0%	(8)	15,568		62,256		77,824		(822)		15,568		61,434		77,002		(5,673)		Various	Various
Mississippi Homes	25	100.0%	(8)	382		1,509		1,891		(140)		382		1,369		1,751		(25)		Various	Various
Missouri Homes	21	100.0%	(8)	343		1,424		1,767		95		343		1,519		1,862		(215)		Various	Various
North Carolina Homes	75	100.0%	(8)	1,833		7,652		9,485		364		1,833		8,016		9,849		(790)		Various	Various
Ohio Homes	224	100.0%	(8)	5,493		22,309		27,802		69		5,493		22,378		27,871		(1,941)		Various	Various
Oklahoma Homes	128	100.0%	(8)	2,569		13,906		16,475		1,868		2,569		15,774		18,343		(2,193)		Various	Various
South Carolina Homes	23	100.0%	(8)	670		2,804		3,474		151		670		2,955		3,625		(279)		Various	Various
Tennessee Homes	300	100.0%	(8)	8,329		34,232		42,561		2,267		8,329		36,499		44,828		(2,790)		Various	Various
Texas Homes	340	100.0%	(8)	9,848		38,568		48,416		3,243		9,848		41,811		51,659		(3,885)		Various	Various
Wisconsin Homes	17	100.0%	(8)	391		1,627		2,018		122		391		1,749		2,140		(198)		Various	Various
Total Residential Home Portfolio	2182		197,969	57,940		238,055		295,995		14,104		57,940		252,159		310,099		(24,746)
		Total Properties		$	235,837	$	1,030,740	$	1,266,577	$	(4,708)	$	253,342	$	1,008,747	$	1,262,089	$	(167,335)

____________________

(1) Building and improvements includes tenant origination and absorption costs.

(2) Costs capitalized subsequent to acquisition is net of write-offs of fully depreciated/amortized assets and impairment charges on real estate and related intangibles.

(3) The aggregate cost of real estate for federal income tax purposes was $1.7 billion (unaudited) as of December 31, 2023.

(4) As of December 31, 2023, specified lands in Park Highlands and Richardson serve as collateral for the Series C Bonds.

(5) These real estate investments, in aggregate, were under encumbrances of $175.2 million.

(6) Subsequent to December 31, 2023, the Company obtained a new mortgage loan on this property. See Note 11 for further discussion.

(7) 210 West 31st Street is a development office/retail property. The Company acquired the rights to a leasehold interest with respect to this property and the leasehold interest expires on January 31, 2114.

(8) The residential home portfolio, in aggregate, was under encumbrances of $198.0 million.

F-39

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

SCHEDULE III

REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION AND AMORTIZATION (CONTINUED)

December 31, 2023

(dollar amounts in thousands)

	2023		2022		2021
Real Estate Properties (1):
Balance at the beginning of the year	$	1,361,154	$	1,345,240	$	1,517,435
Acquisitions	—		142,118		4,838
Improvements	24,359		31,407		18,966
Write-off of fully depreciated and fully amortized assets	(5,332)		(9,454)		(5,956)
Dispositions	(43,303)		(111,186)		(175,691)
Impairments	(74,789)		(36,971)		(14,352)
Balance at the end of the year	$	1,262,089	$	1,361,154	$	1,345,240
Accumulated depreciation and amortization (1):
Balance at the beginning of the year	$	141,750	$	130,441	$	104,412
Depreciation and amortization expense	44,258		49,190		55,882
Write-off of fully depreciated and fully amortized assets	(5,332)		(10,442)		(5,956)
Dispositions	(3,545)		(6,531)		(20,516)
Impairments	(9,796)		(20,908)		(3,381)
Balance at the end of the year	$	167,335	$	141,750	$	130,441

____________________

(1) Amounts include real estate properties held for sale.

F-40

ITEM 16.    FORM 10-K SUMMARY

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California, on April 1, 2024.

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
By:	/s/ Keith D. Hall
	Keith D. Hall
	Chief Executive Officer and Director<br>(principal executive officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Name	Title	Date
/s/ KEITH D. HALL	Chief Executive Officer and Director<br>(principal executive officer)	April 1, 2024
Keith D. Hall
/s/ PETER MCMILLAN III	Chairman of the Board, President and Director	April 1, 2024
Peter McMillan III
/s/ MICHAEL A. BENDER	Chief Financial Officer<br>(principal financial officer)	April 1, 2024
Michael A. Bender
/s/ WILLIAM M. PETAK	Director	April 1, 2024
William M. Petak
/s/ LAURENT DEGRYSE	Director	April 1, 2024
Laurent Degryse
/s/ KENNETH G. YEE	Director	April 1, 2024
Kenneth G. Yee

seriesbdeedoftrust-asoff

Deed of Trust Prepared and signed on February 12, 2020 Between Pacific Oak SOR (BVI) Holdings Ltd. (formerly: KBS SOR (BVI) Holdings Ltd.) A foreign company from the British Virgin Islands whose registered office in the Virgin Islands is care of: Hauteville Trust (BVI) Limited, P.O. Box 348, Road Town, Tortola British Virgin Islands And its address in Israel for the purpose of this Deed of Trust and for the purpose of service of judicial documents is: at Shimonov & Co. – Law Firm 30, Haarbaa Street Tel Aviv, Haarbaa Tower, 34th floor, Tel: 03-6111000; Fax: 03-6133355 Contact persons: Attorneys Dudi Berland, Benjamin Ben Zimra and Ido Lachman (Hereinafter: the "Company") Of the first part; And Reznik Paz Nevo Trusts Ltd. Of 14 Yad Harutzim Street, Tel Aviv 67778 Tel: 03-6389200 Fax: 03-6289222 (Hereinafter, the "Trustee") Of the second part; Exhibit 10.17 - 2 - Section Subject Page Deed of Trust 1. Preamble, interpretation, and definitions 5 2. Issuance of the Debentures; Terms of issuance; Terms of Linkage, Pari Passu Debentures 9 3. Acquisition of Debentures by the Company and/or the Partnership and/or the REIT Fund and/or a related person and distribution of dividends 10 4. Issuance of additional Debentures 11 5. The Company’s undertakings 15 6. Securing the Debentures 32 7. Early redemption 37 7.1 Early redemption at the discretion of the TASE 37 7.2 Early redemption at the discretion of the Company 38 8. The right to declare the Debentures due and payable 40 9. Claims and proceedings by the Trustee 46 10. Receipts held in Trust 47 11. Power to demand payment to the holders through the Trustee 48 12 Power to withhold distribution of funds 49 13. Notice of distribution 49 14. Failure to pay for reasons out of the Company’s control 49 15. Receipt from the Debenture Holders and from the Trustee 51 16. Presentation of a Debenture to the Trustee; Registration with respect to partial payment 51 17. Investment of Funds 52 18. The Company’s undertakings to the Trustee 52 19. Additional undertakings 58 20. Agents 58 21. Other Agreements 59 22. Trusteeship reports 59 23. Remuneration of the Trustee and reimbursement of its expenses 60 24. Special powers 60 25. The Trustee’s power to engage agents 61 26. Indemnification of the Trustee 61 27. Notices 65 28. Waiver, settlement and alterations to the Deed of Trust 66 29. Register of Debenture Holders 67 30. Release 67 31. Appointment of Trustee; Trustee's Duties; Trustee's Powers; Termination of Trustee's Office 68 32. Meetings of Debenture Holders 70 33. Governing Law 70 34. Exclusive Jurisdiction 70 35. General 70 36. Trustee's Liability 70 37. Addresses 71 38. Magna Authorization 71 - 3 - Section Subject Page First Schedule Terms Overleaf 1. General 75 2. The Debentures 75 3. Terms of the Debentures (Series B) Offered under the Prospectus 75 4. Principal and Interest Payments on the Debentures (Series B) 77 5. Deferral of Dates 77 6. Securing of Debentures 78 7. Nonpayment for a Reason out of the Company's Control 78 8. Register of Debenture Holders 78 9. Splitting of Debenture Certificates 78 10. Transfer of Debentures 78 11. Early Redemption 79 12. Purchase of Debentures by the Company and/or a Related Person 79 13. Waiver, Settlement, and Changes to Deed of Trust 79 14. Meetings of Debenture Holders 79 15. Receipt from Debenture Holders 79 16. Immediate Repayment 79 17. Notices 79 18. Governing Law and Jurisdiction 79 19. Priority 80 Second Schedule Third Schedule Appendix 23 - 4 - Whereas the Board of Directors of the Company decided to approve the issuance of Debentures (Series B), under the terms of the Shelf Offering Report, as such term is defined in Section 1.5.6 below; Whereas on February 12, 2020 a Deed of Trust between the Company and the Trustee was signed in regard with Debentures (Series B); Whereas on January 27, 2020, S & P Global Ratings Maalot Ltd. (hereinafter: “Maalot”) announced the determination of an AA- rating, for a new Debentures series to be issued by the Company in the amount of up to NIS 400 million par value; Whereas the Company declares that as of the date of signing this Deed of Trust the Company is in compliance with all the terms of the Rating Agency (as such term is defined in Section 1.5.27 below) for the purpose of assigning the abovementioned rating to the Debentures (Series B); Whereas the Trustee declares that it is a private company limited in shares that was incorporated in Israel pursuant to the Companies Law, 1999, whose main purpose is to engage in Trusteeship activities; Whereas the Trustee has declared that there is no impediment under the Securities Law, 1968, or any other law, to prevent it from entering into this Deed of Trust with the Company and that it complies with the requirements and qualifications stipulated in the Securities Law to serve as trustee for holders of the Debentures (Series B) offered under the Shelf Prospectus; Whereas the Trustee declares that it has no personal interest in the Company and the Company declares that it has no personal interest in the Trustee; Whereas the Company declares that there is no impediment under any law (whether in Israel and/or outside Israel), and/or agreement to perform issuance of debentures and/or to enter into this Deed of Trust with the Trustee; Whereas the Company has received all the approvals by law and/or agreement to perform issuance of Debentures (Series B); Whereas the Debentures (Series B) will be listed for trade on the Tel Aviv Stock Exchange Ltd; Whereas the Company has applied to the Trustee to serve as Trustee for the holders of the Debentures (Series B) and the Trustee has agreed to sign this Deed of Trust and to act as the Trustee of the Debenture Holders (as they are defined above), all subject to and in accordance with the terms of this Deed of Trust; Now, therefore, it is agreed, declared and stipulated between the Parties as follows:

---

• 5 - 1. Preamble, Interpretation, and Definitions 1.1. The preamble to this Deed of Trust, the appendixes and schedules attached hereto constitute an integral part hereof. 1.2. The division of this Deed of Trust into sections as well as the section headings herein is for purposes of convenience and easement of reference only and shall not be used for the purpose of interpretation. 1.3. In this Deed of Trust, where the context so admits, the plural shall include the singular and vice versa, the masculine gender shall implicitly also refer to the feminine gender and vice versa, and any reference in the context to a person shall include a corporate body, all insofar as there is no other explicit. 1.4. With respect to any matter not mentioned in this Deed of Trust and in the event of a conflict between the provision of the Law that cannot be subject to contingency, and this Deed of Trust, the provisions of the Israeli Law that cannot be subject to contingency shall prevail. In the event of a conflict between the provisions set forth in the Shelf Offering Report in connection with this Deed of Trust and/or the Debentures, the provisions of this Deed of Trust shall prevail, and all subject to the articles and the instructions of the Stock Exchange. 1.5. In this Deed of Trust and in the Debentures, the following terms shall have the meaning set out opposite them, unless otherwise explicitly stated: 1.5.1. “This Deed” or the “Deed of Trust” – this Deed of Trust, with all the amendment that will be inserted from time to time, including the appendices and schedules attached thereto that constitute an integral part thereof; 1.5.2. “Tender” – the tender on the fixed annual interest rate on the Debentures (Series B) to be issued by the Company pursuant to the Shelf Prospectus and the First Offering Report; 1.5.3. “Debentures (Series B)” – Debentures (Series B) to be issued by the Company pursuant to the Shelf Offering Report, which the terms of them are detailed in this Deed of Trust and in the Bond Certificate; 1.5.4. “Debenture Series” – Registered Debentures at par value of NIS 1 each, the terms of which will be in accordance with this Deed and the Certificate of Debentures (Series B); 1.5.5. “Shelf Prospectus” – the Company’s shelf Prospectus bearing the date of November 28, 2019, which was published on November 29, 2019; 1.5.6. "Shelf Offering Report" – shelf offering report(s) which will be published pursuant to the shelf-prospectus, in accordance with the provisions of Article 23A (F) of the Securities Law, 5728-1968, in which all the particular details for the debentures offering (Series B) will be completed; 1.5.7. "First Offering Report" – a shelf offering report by virtue of which the Debentures (Series B) will be first issued; - 6 - 1.5.8. "2018 Report" – the Company's Periodic Report as of December 31, 2018, which was published on March 10, 2019; 1.5.9. “The Trustee” – Reznik Paz Nevo Trusts Ltd. and/or anyone serving from time to time as Trustee for the Debenture Holders pursuant to this Deed; 1.5.10. “Register of Debenture Holders” and/or “the Register” – the register of Debenture Holders as set forth in Section 29 of this Deed; 1.5.11. “Holder” and/or “Debenture Holder” – as this term is defined in the Securities Law; 1.5.12. "Debenture Certificate" – a debenture certificate the certification and wording of which appears in the First Schedule to this Deed; 1.5.13. “The Law” or “the Securities Law” – The Securities Law, 1968 and the regulations promulgated thereunder, as shall be in effect from time to time; 1.5.14. “The Companies Law” – the Companies Law, 1999 and the regulations promulgated thereunder, as shall be in effect from time to time; 1.5.15. “Business Day” or “Bank Business Day” – Any day on which the TASE Clearing House most of the banks in Israel are open for transactions; 1.5.16. “Trading Day” – the day on which transactions are performed on the TASE; 1.5.17. "Nominee Company" – the nominee company of Mizrahi Tefahot Bank. or a substitute nominee company provided that all the Company's securities will be registered under its name. 1.5.18. "Amount of the Principal" – the nominal value of the outstanding debentures; 1.5.19. "Stock Exchange" – the Tel Aviv Stock Exchange Ltd.; 1.5.20. "Dollar" – United States Dollar (USD); 1.5.21. “Special Resolution” – A resolution adopted at a general meeting of the holders of the Debentures (Series B), at which at least two holders of at least fifty (50%) of the nominal value of the outstanding Debentures (Series B) were present, in person or by proxy, or at an adjourned meeting, at which at least two Debenture Holders were present, in person or by proxy, holding at least twenty percent (20%) of such outstanding balance, and which was adopted (whether at the original meeting or at the adjourned meeting) by a majority of at least two thirds (2/3) of the nominal value of the outstanding Debentures (Series B), which is represented in the vote (except for the addressees). 1.5.22. “Ordinary Resolution” – A resolution adopted at a general meeting of the holders of the Debentures (Series B), at which two holders of at least 25% of the nominal value of the outstanding Debentures (Series B) were present in person or by proxy, or at an adjourned meeting at which all the number of participants attended, and - 7 - which was adopted (whether at the original meeting or at the adjourned meeting) by a majority of at least fifty percent (50%) of the nominal value of the outstanding Debentures (Series B) which is represented in the vote (except for the abstentions). It is clarified that in this Deed, unless specified otherwise, the resolution of the Bondholders meeting shall be accepted as an ordinary resolution. 1.5.23. “Conflicting Matter” – within its meaning in Section 9.38 of the Second Schedule to this Deed below; 1.5.24. The "Consolidated Circular" – the Circular of the Supervisor of the Capital Market, Insurance and Savings for Institutional Bodies, as may be valid from time to time1; 1.5.25. “Rating” – rating by a rating agency, as it is defined below; 1.5.26. In this Deed of Trust and in the Debentures, the rating shall have the meaning set forth in the table below: “AA“ ilAA as rated by Maalot or Aa2 as rated by Midroog or a rating equivalent to these ratings, which will be assigned by another Rating Agency which is rating or will rate the Debentures (Series B). “AA-“ ilAA- as rated by Maalot or Aa3 as rated by Midroog or a rating equivalent to these ratings, which will be assigned by another Rating Agency which is rating or will rate the Debentures (Series B). “A+” ilA+ as rated by Maalot or A1 as rated by Midroog or a rating equivalent to these ratings, which will be assigned by another Rating Agency which is rating or will rate the Debentures (Series B). "A" ilA as rated by Maalot or A2 as rated by Midroog or a rating equivalent to these ratings, which will be assigned by another Rating Agency which is rating or will rate the Debentures (Series B). “A-“ ilA- as rated by Maalot or A3 as rated by Midroog or a rating equivalent to these ratings, which will be assigned by another Rating Agency which is rating or will rate the Debentures (Series B). "BBB+ " ilBBB+ as rated by Maalot or Baa1 as rated by Midroog or a rating equivalent to these ratings, which will be assigned by another 1 http://mof.gov.il/hon/Information-entities/Pages/Codex.aspx - 8 - Rating Agency which is rating or will rate the Debentures (Series B). "BBB" ilBBB when rated by Maalot or Baa2 when rated by Midroog or a rating parallel to these ratings, determined by another rating company that rates the Debentures (Series B). “BBB-“ ilBBB- as rated by Maalot or Baa3 as rated by Midroog or a rating equivalent to these ratings, which will be assigned by another Rating Agency which is rating or will rate the Debentures (Series B). "BB+ " ilBB+ as rated by Maalot or Ba1 as rated by Midroog or a rating equivalent to these ratings, which will be assigned by another Rating Agency which is rating or will rate the Debentures (Series B). 1.5.27. “The Rating Agency” – Standard and Poors Maalot Ltd. (above and below – “Maalot”), Midroog Ltd. (above and below – “Midroog”), as applicable, or a Rating Agency, as it is defined in the Law for the Regulation of the activity of Credit Rating Companies -2014. 1.5.28. “Reporting Corporation” – as it is defined in the Securities Law. 1.5.29. “Reports Regulations” – The Securities Regulations (Periodic and Immediate Reports), 5730-1970. 1.5.30. “Financial Statements” – Annual or quarterly financial statements, audited or reviewed, of the Company which will be published in accordance with Securities Law and the regulations thereunder. 1.5.31. "Company Share Holder" or "Partnership" – Pacific Oak Strategic Opportunity Limited Partnership (formerly KBS Strategic Opportunity Limited Partnership). A Limited Partnership incorporated in Delaware State and is held in full ownership of the REIT under a chain of holdings. The Partnership holds the full (100%) issued and prepaid share capital of the Company. In the Company's opinion, there is no controlling shareholder in the Company, as such term is defined in the Securities Law. For further details, see Chapter 3 of the Shelf Prospectus. 1.5.32. "REIT Fund" – Pacific Oak Strategy Opportunity REIT, Inc. (formerly: KBS Strategy Opportunity REIT, Inc.), a corporation that incorporated in the State of Maryland and chose to be classified as a REIT fund (Real Estate Investment Trust) in accordance with the Internal Revenue Code of 1986). 1.5.33. "Management Company" – Pacific Oak Capital Advisors, LLC., a corporation that incorporated in the State of Delaware and which provides management, operating, financing and consulting services to the REIT Fund. The Management Company is fully controlled by Pacific Oak Holdings Group, LLC, and its final shareholders are Messrs. Keith Hall and Peter McMillan III who are the REIT Fund CEO and Director, and the REIT Fund

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• 9 - President and Chair, respectively (hereinafter: the "Management Company Founders"). 1.6. As long as the Debentures are listed for trading in the Stock Exchange, where the TASE rules apply or will apply to any act pursuant to this Deed of Trust, the dates of the act and the manner of its execution shall be set in accordance with the TASE rules. It is hereby clarified that the execution of the said acts (including the event in which the TASE rules will be changed) shall not derogate from the agreements of the parties, in accordance with this Deed. 1.7. In the event of any conflict between the provisions of this Deed of Trust and the documents attached thereto, the provisions of the Deed of Trust shall prevail. The Company confirms and hereby declares that as of the date of the Deed, there is no conflict between the Deed of Trust and its related documents, and the provisions described in the First Offering Report in connection with this Deed, as well as in connection with the Debentures. 1.8. In the event that the debentures issuance is cancelled, for any reason, the validity of this Deed of Trust will expire. 1.9. Any reference made in this Deed to a number of Sections in the Law will be adjusted, mutatis mutandis, to the changes applicable by law, should there be any. 1.10. The actions of the Trustee are valid even if any flaw/defect has been found in its appointment or competence. 1.11. By signing the Deed of Trust, the Trustee is not expressing an opinion concerning the quality of the securities being offered or whether they are a worthwhile investment. 2. Issuance of the Debentures; Terms of Issuance; Terms of Linkage, Pari Passu Debentures 2.1. The Company undertakes that it will issue the Debentures (Series B) as described in the preamble to this Deed, and that the Debentures (Series B), which will be issued within the First Offering Report, will be listed for trade on the TASE, and the Company undertakes that the Debentures (Series B) will be traded during their lifetime on TASE. 2.2. The Company may issue the Debentures (Series B) including the following terms under the Shelf Prospectus, and subject to the publication of a shelf offering report, and at the Company's sole discretion: The Debentures (Series B) (hereinafter: the “Debentures”) will be registered by name, payable in three (3) yearly installments, on January 31 of each of the years from 2024 to 2026, in a manner that each of the first two payments shall constitute 33.33% of the total par value of the Debentures (Series B), and the third and final payment shall constitute 33.34% of the total par value of the Debentures (Series B). The Debentures shall bear a fixed annual (unlinked) interest at a rate which shall be published in the Shelf Offering Report (but subject to adjustments in the event of change in the rating of the Debentures (Series B) and/or non-compliance with the financial covenants as set forth in Sections 5.2 and 5.3 below, and also subject to adjustment for arrears interest (if any). The interest on the unpaid balance of the - 10 - principal of the Debentures (Series B) will be paid twice per year, on July 31, 2020, as well as on January 31 and July 31 of each of the years from 2021 to 2026, starting on July 31, 2020, and up to January 31, 2026 (inclusive). Except for the first interest period (as it is defined below), any interest rate payment will be for the six-month period that ended on the day prior to the date of payment (hereinafter – the “Interest Period”). The interest rate payable in respect of a specific interest period (except for the first interest period) (i.e. the period commencing on the date of payment of previous interest period and ending on the last day before the date of payment following commencement thereof) shall be calculated as the annual interest rate divided by two. The first interest payment is payable on July 31, 2020, for period starting on the first trading day after the date of the tender on the Debentures (Series B), and ending on July 30, 2020 (hereinafter – the “First Interest Period”), calculated on the basis of 365 days a year and based on the actual days in this period. The final interest payment will be paid on January 31, 2026, when the Debentures (Series B) are to be repaid in full. The Debentures (Series B) will not be linked (principal and interest) to any linkage basis. 2.3. The Company reserves the right to early redemption of the Debentures provided the terms set forth in Section 7 of this Deed are met. 2.4. The Debentures (Series B) shall rank pari passu among themselves, without any preference or priority of one over the other. 3. Acquisition of Debentures by the Company and/or the Partnership and/or the REIT Fund and/or a related person and distribution of dividends 3.1. The Company reserves its right, subject to the Law, to acquire the Debentures (Series B) at any time and from time to time, without prejudice to the duty to repay the outstanding Debentures (Series B). In the event of said acquisition, the Company shall notify the Trustee in writing, without derogating from the duty to submit an immediate report applicable thereto. In the event of acquisition by the Company as mentioned above, the acquired Debentures (Series B) will expire immediately, will be cancelled and delisted from trading and the Company may not re-issue these Debentures. In the event that the Debentures (Series B) are acquired by the Company, as part of the trading on the TASE, the Company shall apply to the TASE Clearing House to withdraw the Debentures so acquired, and all, unless otherwise determined by the provisions of the law prevailing at the time. Nothing in the foregoing shall derogate from the Company’s right to make an early redemption of the Debentures (Series B) as stated in Section 7 below. - 11 - 3.2. The REIT Fund (directly or indirectly) and/or the Partnership2 (directly or indirectly) and/or a subsidiary of the Company and/or a related company of the Company and/or an associate of the Company and/or a company controlled by one of them (directly or indirectly) (except for the Company itself with respect to which the provisions of Section 3.1 above shall apply) (hereinafter – “Related Entity”) may acquire and/or sell Debentures (Series B) at their discretion (and subject to any law), at any time and from time to time, including by means of an issuance by the Company, Debentures (Series B) that will be issued under the Deed of Trust. In the event of acquisition and/or sale as aforesaid by a subsidiary of the Related Entity, the Company shall file an immediate report to that effect. In accordance with the provisions of the law, the Debentures (Series B) that will be held by a Related Entity, as above, shall be deemed an asset of the Related Entity, and if they are listed for trading, they shall not be delisted from the TASE, and shall be transferrable as the other Debentures (Series B). The Debentures (Series B) owned by a Related Entity shall not confer on such Entity voting rights at a meeting of the holders of the Debentures (Series B) and may not be counted for purposes of determining the existence of a quorum at such meetings. The meetings of the holders will be conducted in accordance with the Second Schedule to the Deed of the Trust. A Related Entity will report to the Company, in as much as it is obligated by law to do so, on the acquisition of the Debentures (Series B). Regarding the obligation of the Company to provide the Trustee with certifications in connection with this section, see Section 18.21 below. 3.3. Nothing in the foregoing section shall bind the Company and/or a Related Entity or the holders of the Debentures (Series B) to acquire Debentures and/or sell the Debentures (Series B) in their possession. 3.4. As of the date of signing this Deed, the Company is not subject to any restriction with respect to the distribution of dividends or the buyback of its shares, except as specified in Section 5.11 below. 4. Issuance of additional Debentures 4.1. Subject to receipt of approval from TASE for the listing for trading, the Company may, from time to time, without requiring the approval of the Trustee and/or the Holders existing at that time, to issue additional Debentures (Series B) (whether by way of a private placement, or under a Prospectus, or in any other way), including to a Related Entity (as it is defined in Section 3.2 above), on such terms as it sees fit (the terms of the additional issued Debentures shall be identical to the terms of the outstanding Debentures (Series B)), (hereinafter: "Expansion of the Series"). However, in this case, the Trustee shall have the right to request an increase in the annual fees pro-rata to the expansion of the debenture series in the manner set out until the end of the Trust 2 As stated in Section 1.5.31 above (the Definitions Section), it shall be noted in this respect that the Controlling Shareholder of the Company is the Partnership which holds 100% of the Company's equity. The Partnership is held in an indirect and final chain of holding by the REIT Fund, which holds 100% (under indirect holding through additional companies) of the Partnership units. In the Company's opinion, there is no controlling interest in the Company, as the term is defined in the Securities Law. For further details, see Chapter 3 of the Shelf Prospectus. - 12 - period, and the Company gives its consent, in advance, by signing on this Deed to the increase of the Trustee fees, as mentioned above. The outstanding Debentures (Series B) on the date of Expansion of the Series of the additional Debentures (Series B) (from the date of issuance thereof) shall constitute one series for all intents and purposes. The Company shall apply to the TASE to list the additional Debentures (Series B) for trading as aforesaid, once they are issued. 4.2. Notwithstanding the aforesaid, the Expansion of the Debentures (Series B) shall be carried out provided all the terms set forth below are fulfilled: (a) the said Expansion of the Series does not adversely affect the rating of the Debentures (Series B) that were first issued based on this Deed of Trust, as it shall be at that time (namely, the rating preceding the Expansion of the Series); In this respect, it is clarified that in the event that the Debentures (Series B) would be rated by more than one rating agency, then the review of the rating for this section shall be carried out at any time, according to the higher rate; (b) in accordance with the latest financial statements published prior to the date of the Expansion of the Series, the Company is in compliance with the financial covenants set forth in Section 6.3 of this Deed and this is without taking into consideration the cure and waiting periods listed in Section 8.1 below; (c) on the Date of the Expansion of the Series, in accordance with the latest financial statements published prior to the expansion, and after prior consideration of the said expansion, the Company will be in compliance therewith also following the implementation of the Expansion of the Series;; (d) the Company has not violated any of its commitments to the holders of the Debentures (Series B), there is no cause for immediate repayment, as detailed in Section 8.1 below, and there is concern that such caused will exist;; (e) the Expansion of the Series does not impair the ability of the Company to repay the Debentures (Series B). 4.3. The Company will submit to the Trustee, at least three business days before making a tender for early commitments from classified investors (as the Company may choose to hold said tender in its sole discretion), and in any case (in the event that the Company decides to hold an auction for the public only) at least three business days before the actual Expansion of the Series, written certification signed by the chief financial officer of the Company, worded to satisfaction of the Trustee, on (1) the fulfillment of their terms specified in Section 4. 2, together with the relevant calculations on its compliance with the said provisions which are detailed in Subsections (b) above; and (2) confirmation that the aforesaid expansion does not harm the holders of the Debentures (Series B) and that the Board of Directors of the Company has examined the effect of the aforesaid Expansion of the Series and the ability of the Company to meet its obligations to the holders of the Debentures (Series B) prior to performing the aforesaid series expansion. In any event of the said Expansion of the Series, the Expansion of the Series will be subject to receipt of prior certification from the Rating Agency that the said Expansion of the Series will not affect the rating of the Debentures (Series B) in effect at that time. The certification of the Rating Agency will be published by the Company prior to the Expansion of the Series. In addition, the Company shall publish an immediate report, prior to the series expansion stating

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• 13 - whether the series expansion meets (or does not meet, as the case may be) the aforesaid terms. 4.4. This right of the Company does not exempt the Trustee from examining the said issuance, to the extent that such duty is imposed on the Trustee by law, and does not derogate from the rights of the Trustee and the Debenture Holders pursuant to this Deed, including their right to declare the Debentures due and payable as stated in Section 8 below. 4.5. The Debentures (Series B), including those that will be issued as part of an expansion of the Series as described above, shall rank pari passu among themselves, with respect to the Company’s obligations pursuant to the Debentures, without any preference or priority of one over the other. 4.6. If the discount rate set for the additional Debentures (Series B), if any, differs from the discount rate of the outstanding Debentures (Series B) at that time (including lack of discount, if relevant), the Company shall apply to the tax authority, prior to the expansion of the Debentures series, in order to obtain its approval that, for purposes of deducting withholding tax from the discount fees in respect of the Debentures (Series B), a uniform discount rate be determined for the Debentures (Series B) based on a formula that weighs the different discount rates in the series, if any (hereinafter – the “Weighted Discount Rate”). 4.7. In the event that such approval is obtained, the Company will calculate the Weighted Discount Rate in respect of all the Debentures (Series B), before the series expansion, and will publish an immediate report on the results of the issuance the uniform Weighted Discount Rate for the entire series, prior to the Expansion of the Series, and tax will be deducted on the dates of repayment of the Debentures (Series B), according to the Weighted Discount Rate and in accordance with the provisions of the law. In such a case, all other provisions of the law relating to the taxation of discount fees shall apply. If such approval is not obtained, the Company will publish an immediate report, immediately prior to the issuance of the additional Debentures (Series B), stating the highest discount rate in respect of that series. Withholding tax will be deducted upon the repayment of the Debentures (Series B), in line with the discount rate reported as aforesaid. 4.8. Therefore, there may be cases where the a deduction of withholding tax in respect of discount fees, at a rate higher than the discount rate set for the holders of Series B Debentures before the Expansion of the Series (hereinafter – “Excess Discount Fees”), and this will affect them unfavorably whether or not the tax authority approved a uniform discount rate for the Debenture (Series B). In this case, an assessee that held Debentures (Series B) prior to the aforesaid Expansion of the Series, up to the redemption of these Debentures (Series B), will be entitled to file a tax report with the tax authority and receive a tax return in the amount of the tax that was deducted from the Excess Discount Fees, provided he is entitled to such return under the law. 4.9. The Company may issue at any time, whether by way of a public issuance under a prospectus, or by any other way, and without requiring the approval of the Trustee and/or the Bondholders of the Debentures, debentures from other series beyond the - 14 - Debenture series (the "Other Series", or the "Additional Issuance"), including to a Related Entity (as it is defined in Section 3.2 above), under repayment terms, interest, linkage, repayment rate in case of dissolution and other terms, as the Company sees fit, and whether they are superior to the terms of Debentures (Series B), equal to them, or fall short of them. Despite the abovementioned, in the event that the Company will issue a series and/or other series of Debentures that will not be secured by any collateral the Debentures from other series will not have priority over the Debentures (Series B) in the event of the Company dissolution process. In addition, if the Company issues additional series which will be secured by liens, the Company shall not state in the relevant Deed of Trust that these debenture series have priority over the Debentures (Series B), except in the matter of assets which are secured by liens, and will deliver to the Trustee certification to that effect, as mentioned above, mutatis mutandis, prior to executing the issuance of the other series. Without derogating from the of the foregoing, the Company’s aforesaid rights do not diminish the Trustee’s right to examine the repercussions of the said issuance, and do not derogate from the rights of the Trustee and/or the Debenture Holders under this Deed, including their rights to declare the Debentures (Series B) due and payable as stated in Section 8 below. Subject to the provisions of any law, the Company shall inform the Trustee of additional issuances of Debentures a reasonable time before the issuance and will submit to the Trustee any report it published in connection therewith pursuant to any law. 4.10. Notwithstanding the abovementioned, any Additional Issuance shall be subject to the fulfillment of the following terms: (a) The Additional Issuance shall not damage the rating of Debentures (Series B) issued first according to this Deed, as such rating shall be on that date (i.e., the rating prior to the Additional Issuance); for the purpose of this section is shall be clarified that if the Debentures (Series B) shall be rated by more than one rating company, the examination of the rating for this section shall be done at any time, according to the higher rating of those rated; (b) As of the date of the Additional Issuance, the Company is in compliance with the Financial Covenants detailed in Section 6.3 of this Deed, without taking into account the remedy period and the waiting period listed in Section 8.1 below; (c) The company is not in breach of any of its undertakings for the holders of Debentures (Series B); (d) There is no grounds for immediate repayment as specified in Section 8.1 below; (e) The Additional Issuance shall not jeopardize the Company's ability to repay the Debentures (Series B); and (f) As of the date of the Additional Issuance, in accordance with the recent financial statements of the Company published prior to the date of the Additional Issuance, and after taking into account the retroactive execution of the Additional Issuance, the Company shall be in compliance with the Financial Covenants detailed above in Section 6.3 of this Deed. Prior to any issuance of additional series of debentures, the Company shall provide the following certificates and publish the following: - 15 - 1. The Company shall provide the Trustee with a written certificate signed by the Company's senior financial officer in regard to the fulfillment of all the terms listed above in Section 4.10, worded such that satisfies the Trustee, including a relevant calculation regarding the terms of subsections (b) and (f) above, no later than 4 days prior to the execution of the Additional Issuance, as well as a confirmation that the Additional Issuance is not preferable to the terms of Debentures (Series B) in dissolution, as specified in Section 4.9 above. 2. The Company shall publish a confirmation from all the rating companies existing at the time, according to which the said Additional Issuance shall not damage the rating of Debentures (Series B) issued first according to this Deed, as such rating shall be on that date. Without derogating the aforementioned, the said rights of the Company shall not diminish the Trustee's right to examine the consequences of such issuance, and shall not damage the rights of the Trustee and/or the Debentures Holders according to this Deed, including their right to call for immediate repayment of Debentures (Series B) as aforesaid in Section 8 above. Subject to the provisions of any law, the Company shall inform the Trustee of such additional issuances of Debentures a reasonable time before the issuance and shall provide the Trustee with any report it published in connection therewith pursuant to any law. 5. The Company’s undertakings 5.1. The Company hereby undertakes to pay, on the dates for payment specified in the Deed of Trust, all the principal and interest amounts (including arrears interest, if any, and additional interest in respect of a rating change and/or in respect of a breach of a financial covenant, if applicable) payable under the terms of the Debentures (Series B), and to comply with all the other terms and obligations imposed on it, pursuant to the terms of the Debentures (Series B) and under the terms of this Deed. 5.2. Adjustment of the interest rate to changes in the rating of Debentures (Series B): For the purpose of this section below it is clarified that in the event that the Debentures (Series B) would be rated by more than one Rating Agency, the examination of the rating for the purpose of adjusting the interest rate for the change in rating (if any) will be made, at all times, in accordance with the lower rating. The interest rate to be borne by the Debentures (Series B) shall be adjusted in respect of change in the rating of the Debentures (Series B), as specified below in this section: It should be clarified that if and to the extent that an adjustment of interest is required in accordance with the mechanism specified in this section above and in accordance with the mechanism specified in Section 5.3 below, then, in each event the maximum additional interest rate shall not exceed 1.25% above the interest rate which will be determined in the Tender. Arrears interest (if any), in accordance with - 16 - Section 4 (A) of the Terms Overleaf, will be added to the abovementioned rate and will not constitute part of it. Pursuant to this Section 5.2: The ratings as such are defined in the table in Section 1.5.26 above. "Base rating": Rating of AA-. For the avoidance of any doubt, it is clarified that the Base Rating is the rating given to the Company's Debentures (Series B) by the Rating Agency on the date of the Debentures (Series B) Issuance. "The Additional Interest Rate": an additional interest granted to the Debenture holders at a rate of 0.25% per annum for one (1) each notch under the Base Rating and up to a maximum additional interest of 1.25% per annum, at the most. A. If the rating of the Debentures (Series B) by the Rating Agency (in the event of the replacement of a Rating Agency, the Company will provide the Trustee with a comparison between the rating scale of the Rating Agency being replaced and the rating scale of the new Rating Agency) will be updated during any interest period, such that the rating determined for the Debentures (Series B) shall be one notch lower or more from the Base Rating, (hereinafter: the “Downgraded Rating”), the annual interest rate to be borne by the balance of the unpaid principal of the Debentures (Series B) shall be increased by the additional interest rate or by a portion of this rate (as mentioned above) in accordance with the notches set forth above, and this in respect of the period commencing from the date of publication of the new rating by the new Rating Agency until the full repayment of the balance of the outstanding principal of the Debentures (Series B) or until the date of the upgraded rating in accordance with Section 5.2(E) below. If the interest rate was raised previously in respect of deviations from the aforesaid financial covenants in Section 5.3 below, then the increase in the interest rate in respect of the aforesaid rating downgrade shall be limited such that the overall additional annual interest (except in the event that there is entitlement to arrears) with respect to a decline in rating and failure to comply with the financial covenants shall in no event exceed 1.25%. B. No later than one business day, from receipt of the notice of the Rating Agency with respect to the downgrading of the rating of the Debentures (Series B) to the downgraded rating as such is specified in Subsection A above, the Company shall publish an Immediate Report, in which the Company shall specify: (a) the downgrading of the rating, the downgraded rating, the rating report and the date of the start of the downgraded rating of the Debentures (Series B) (hereinafter: the “Date of the Rating Downgrade”); (b) the compliance/non-compliance thereof with the financial covenants specified in Section 5.3 below, in accordance with the latest reviewed or audited consolidated financial statement published prior to the date of the Immediate Report, and whether there has been a change in the interest in respect of the compliance/non-compliance thereof with the aforesaid financial covenants; (c) the exact interest rate to be borne by the principal balance of the Debentures (Series B) for the period from the start of the current interest period up to the Date of the Rating Downgrade (the interest rate will be calculated

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• 17 - in accordance with 365 days a year) (hereinafter: the "Original Interest" and the "Original Interest Period", respectively); (d) the interest rate to be borne by the principal balance of the Debentures (Series B) starting from Date of the Rating Downgrade up to the date of the actual payment of the next interest payment, namely, the Original Interest plus the additional interest rate per annum (the interest rate will be calculated in accordance with 365 days per year) (hereinafter: the “Amended Interest”), if the interest rate was not raised previously, if raised at all, in respect of deviations, if any, from the aforesaid financial covenants in Section 5.3 below, then the increase in the interest rate with respect to the aforesaid downgrade shall be limited such that the overall additional annual interest (except if entitlement to interest on arrears is established) with respect to a decline in rating and failure to comply with the financial covenants will not exceed 1.25% in any event; (e) the weighted interest rate to be paid by the Company to the holders of the Debentures (Series B) on the next interest payment date, deriving from the provisions of Subsections (C) and (D) above ; (f) the annual interest rate reflected in the weighted interest rate; (g) the annual interest rate and the semiannual interest rate (the semiannual interest rate shall be calculated as the annual interest divided by divided by two) for the forthcoming periods. C. If the date of the start of the downgraded rating of the Debentures (Series B) falls during the four days prior to the effective date for any interest payment and the termination thereof is on the date of the next interest payment and this effective date (hereinafter in this subsection: the "Rejection Period"), the Company shall pay to the holders of the Debentures (Series B) on the date of the next interest payment, the Original Interest rate, prior to the change only, wherein, if the interest rate was not raised previously in respect of deviations from the aforesaid financial covenants in Section 5.3 below, while the rate of interest derived from the additional interest at a rate equal to the additional interest rate for a year during the Rejection Period, will be paid at the next interest payment date. The Company will announce in an Immediate Report the exact interest rate payable on the next interest payment date. D. In the event of an amendment of the rating of the Debentures (Series B) by the Rating Agency such that it affects the interest rate to be borne by the Debentures (Series B) specified in Section 5.2 (A) above, or 5.2 (E) above, the Company will advise the Trustee of such in writing within one business day from the date of publication of the aforesaid Immediate Report. E. In the event that following the downgrading of the rating such that it affects the interest rate to be borne by the Debentures (Series B) specified in 5.2 (A) above, the Rating Agency will update the rating of the Debentures (Series B) with an upgraded rating and if the interest rate has not been increased previously with respect to deviations from the aforesaid financial covenants in Section 5.3 below, the interest rate will be reduced by notches of 0.25% per annum in case the rating of the Debentures (Series B) shall be reverted as specified below. - 18 - If the Rating Agency upgrades the rating for the Debentures (Series B) to a rating which is equal to or higher than the Base Rating (hereinafter: the "High Rating"), and if the interest rate was not raised previously due to deviation with respect to the aforesaid financial covenants in Section 5.3 below, then the rate of interest to be paid by the Company to the holders of the Debentures (Series B) shall be decrease, on the date of the relevant payment of the interest, in respect of the period in which the Debentures (Series B) were rated with a High Rating only, such that the interest rate to be borne by the outstanding balance of the principal of the Debentures (Series B) will be the interest rate which the Company will publish in an Immediate Report with regard to the results of the issuance, without any addition in respect of the downgrading specified in this Section 5.2 (and in any event, the interest to be borne by the Debentures will not be less than the interest rate which will be determined in the Tender). In such a case, the Company shall act in accordance with the provisions of Subsections (B) to (D) above, mutatis mutandis, deriving from the High Rating instead of the Downgraded Rating. It is clarified that the adjustment of the interest rate in respect of a change in the rating or as a result of non-compliance with financial covenants will be examined separately, without the one affecting the other, subject to the effect that the maximum accumulated interest in respect of the downgrading and in respect of non-compliance with financial covenants shall not exceed 1.25% per annum. The additional interest for non-compliance, if there was such non-compliance, in accordance with Section 5.3 below, shall continue to apply even in the event of an upgrade in rating. It is clarified that arrears interest, if any, shall be added to the interest rates stated above. F. If the Debentures (Series B) shall cease to be rated for a reason dependent on the Company (for example, but not only, due to non-compliance with the undertakings of the Company to the Rating Agency, including due to the non- payment of payments and/or reports which the Company has undertaken to provide to the Rating Agency) for a period exceeding 21 days prior to the final repayment thereof, a suspension of the rating will be considered a downgrading of the rating of the Debentures (Series B) such that the additional interest rate shall amount to 1.25%, subject to the limitation on increasing the maximum interest rate as specified as part of the beginning of this section and the provisions of Subsections (B) - (E) above shall apply accordingly, without derogating from the provisions of Section 8.1.14 below. For the avoidance of doubt, it is clarified that if the Debentures (Series B) cease to be rated prior to the final payment thereof, for a reason not dependent on the Company, this shall not affect the aforesaid interest rate in Subsection (A) above and the provisions of this Section 5.2 shall not apply. G. In the event that the Rating Agency will be replaced (even in the event where there is more than one Rating Agency) or that the Debentures (Series B) will cease to be rated by the Rating Agency, even if the debentures are being rated by more than one rating company, the Company shall publish and Immediate Report, - 19 - within one trading day from the date of the change, in which the Company shall inform of the circumstances of replacing the rating agency or suspending the rating, respectively. H. For the avoidance of doubt, it is clarified that: (1) a change in the rating outlook of the Debentures (Series B) will not entail a change in the interest rate on the Debentures (Series B) as stated in this section above; (2) as long as the Debentures (Series B) are rated by two Rating Agencies, Subsection (F) above will not apply unless the two rating companies cease to rate the Debentures (Series B). I. In the event of downgrading, the Company shall act in accordance with Sections 5.2 (A) and (B) above. If before the date of rate downgrading, there has been an increase in the interest rate in respect of a deviation from one or more than one financial covenant, based on the mechanism specified in Section 5.3 below, the change applicable to the interest rate in respect of the adjustment mechanism specified in this Section 5.2 will be restricted so that in any case the increase in the interest rate (if there is such increase) will not in the aggregate exceed by 1.25% the interest rate that will be determined in the Tender. Arrears interest, if applicable, will be added to the abovementioned interest. J. The Company undertakes to act, in as much as it is under its control, so that the Debentures (Series B) will be rated by a Rating Agency for the entire term of the Debentures (Series B) and for this purpose the Company undertakes to pay the Rating Agency the payments it has undertaken to pay the Rating Agency and to provide the Rating Agency with reasonable reports and information required thereby as part of the agreement between the Company and the Rating Agency. For this purpose, non-implementation of the payments the Company has undertaken to pay the Rating Agency and non-provision of the reasonable reports and information required by the Rating Agency as part of the agreement between the Company and the Rating Agency will be regarded as causes and circumstances which are under the control of the Company. The Company does not undertake not to replace the Rating Agency or not to terminate the agreement therewith during the period of the Debentures (Series B). In the event that the Company will replace the Rating Agency which at the time of the replacement is the sole Rating Agency rating the Debentures (Series B) and/or ceases the work of the Rating Agency (if it is not the sole Rating Agency), the Company undertakes that it shall notify the Trustee and the holders of Debentures of such within one trading day and shall state in its announcement the reasons for replacing the Rating Agency, and all of this no later than one trading day from the date of the said replacement and/or the date of the decision to cease the work of the rating agency, whichever is earlier. It should be clarified that the foregoing does not derogate from the right of the Company to replace the Rating Agency at any time or cease the work of the Rating Agency (if it is not the sole Rating Agency), at its sole discretion and for any reason it deems necessary. 5.3. Interest rate adjustment as a result of failure to comply with a Financial Covenant: - 20 - The interest rate on the Debentures (Series B) will be adjusted due to one breach or more than one of the Financial Covenants as set forth below: 1. The Consolidated Equity Capital of the Company (as this term is defined in Section 6.3 (1) below) (excluding minority rights) shall not be less than USD 500 million; 2. The Net Adjusted Financial Debt to net CAP (as these terms are defined in Section 6.3 (2) below) shall not exceed 72.5%; 3. The Adjusted NOI (as this term is defined in Section 6.3(3) below) shall not be less than USD 40 million. The financial covenants set forth in Subsections 1 to 2 above shall be referred to in this Section 5.3 above and below only collectively as the "Financial Covenants" and each of the aforementioned financial covenants shall be named: "the Financial Covenant". It is hereby clarified that if an adjustment of the interest rate is required in accordance with the mechanism described in this section above, and also in accordance with the mechanism specified in Section 5.2 above, then, in any case, the maximum additional interest rate will not be more than 1.25% above the interest rate determined in the Tender. Arrears interest, if applicable pursuant to Section 4(a) of the terms overleaf, will be added to the abovementioned interest and will not constitute part of it. “The Additional Interest Rate” – addition of interest in the rate of 0.5% for each breach of a financial covenant (separately and increase in the accumulated interest of up to 1% if the Company breached all the financial covenants at the same time); the interest rate will only be raised once due to the breach of any of the financial covenant, if any, and the interest rate will not be raised again if a breach of the same financial covenant continues. It is emphasized that in the event of downgrading the rating of the Debentures the annual interest rate has been raised pursuant to Section 5.2 above, then, in any case, the additional interest rate by virtue of that section, together with the additional interest rate by virtue of this Section 5.3, for breach of the financial covenants will not exceed 1.25% per annum. “The Breach Date” – the date of publication of the financial statements that point to the breach. A. If the Company breaches any of the financial covenants pursuant to the latest published audited and reviewed financial reports of the Company (hereinafter – “the Breach”), the annual interest on the outstanding principal amount of the Debentures (Series B) will increase by the Additional Interest Rate in respect of the Breach, above the interest rate in effect at the time, prior to the change, in respect of the period from the date of the Breach until the date of repayment of the outstanding principal amount of the Debentures (Series B) or until the date of publication of the Company’s financial statements pursuant to which the Company is in compliance with that financial covenant, whichever is earlier. If the interest rate was increased before that due to a rating downgrade due to as stated in Section 5.2 above, then the interest rate increase due to the breach of a

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• 21 - financial covenant as provided in this subsection, will be limited so that the total annual additional interest (except when there is entitlement to arrears) due to the rating downgrade and breach of financial covenants will not exceed 1.25% in any case. B. In the event of said breach, no later than one business day from the publication of the Company’s audited or reviewed financial statements (as applicable), the Company shall publish an immediate report stating the following: (a) failure to comply with the said undertaking and detailing the financial covenants on the date of publication of the financial statements; (b) the current rating of the Debentures (Series B) based on the last rating report that was published prior to the immediate report and whether the interest was adjusted, as per Section 5.2 above; (c) the accurate interest rate on the Debentures (Series B) for the period from the current interest rate period until the Date of the Breach (the interest will be calculated based on 365 days a year) (hereinafter – the “Original Interest Rate” and the “Original Interest Period”), respectively); (d) the interest rate on the outstanding Debentures (Series B) from the Date of the Breach until the date of the nearest interest payment, that is, the Original Interest Rate plus the Additional Interest Rate per year (the interest rate will be calculated based on 365 days a year) (hereinafter – the “Current Interest Rate”). If the interest rate was increased before that due to a rating downgrade as stated in Section 5. above, and/or due to breach of the financial covenants as provided in this subsection will be limited, so that the annual additional interest will not exceed 1.25% in any case; (e) the weighted interest rate payable by the Company to the holders of the Debentures (Series B) on the nearest interest payment date, which arises from the provisions of Subsection (c) and (d) above; (f) the annual interest rate arising from the weighted interest rate; (g) the annual interest rate and the semi-annual interest rate (the semi-annual interest rate will be calculated as the annual interest rate divided two) for the upcoming periods. C. If the Date of the Breach occurs during the period commencing four days prior to the record date for the payment of any interest and ending on the interest payment date that is nearest to the record date (hereinafter in this subsection: the “Deferral Period”), the Company shall pay the holders of the Debentures (Series B), on the nearest interest payment date, the Original Interest Rate (prior to the change) only, while the interest rate resulting from an increase at a rate equal to the Additional Interest Rate per year during the Deferral Period, will be paid on the next interest payment. The Company shall publish an immediate report stating the accurate interest rate payable on the next interest payment date. D. In the event of a breach of financial covenants which affects the interest rate on the Debentures (Series B) as stated above in Section 5.3(A) above or in Section 5.3(E) below, the Company shall notify the Trustee in writing within one business day from the date of publication of the financial statements, as aforesaid. E. For the avoidance of doubt, it is clarified that if after the breach, the Company will publish its audited or reviewed financial statements (as applicable), pursuant to which the Company will be in compliance with that financial covenant, then the - 22 - interest rate paid by the Company to the holders of the Debentures (Series B), on the relevant interest payment date, will decrease, in respect of the period commencing on the date of publication of the financial statements that point to its compliance with that financial covenant, so that the interest rate on the outstanding principal amount of the Debentures (Series B), provided the interest rate was not raised before that due to a rating downgrade of Debentures (Series B) as stated in Section 5.2 above, and/or due to breach of another financial covenant, will be the interest rate that shall be determined in the tender or another interest rate determined due to a downgrade in the rating of Debentures (Series B) as stated in Section 5.2 above, and/or due to breach of another financial covenant (and in any case, the interest rate on the Debentures will not be lower than the interest rate that will be determined in the Tender). In such case, the Company shall act in accordance with Subsections (B) to (D) above, mutatis mutandis, as the case may be, arising from the Company’s compliance with that financial covenant. It is clarified that the adjustment of the interest rate due to a change in the rating or due to breach of financial covenants will be examined separately without the one affecting the other, subject to the effect that the maximum accumulated interest in respect of the downgrading and in respect of non- compliance with financial covenants shall not exceed a cumulative 1.25% per annum. The additional interest for non-compliance, if there was such non- compliance, in accordance with Section 5.3 below, shall continue to apply even in the event of an upgrade in rating. It is clarified that arrears interest, if any, shall be added to the interest rates stated above. F. The examination as to whether the Company is in compliance with the financial covenants will be conducted on the date of publication of the Company’s financial statements and as long as the Debentures (Series B) are outstanding, in relation to the quarterly/annual financial statements which the Company published until that date. With respect to the undertaking of the Company for disclosure in connection with this section, see Section 5.11 below. For the avoidance of any doubt it is clarified that, subject to the aforesaid, the incremental interest rate payments arising from the rating downgrade as stated in Sections 5.2 above and/or as a result of the Company's failure to comply with the Financial Covenants as stated in Section 5.3 above are cumulative. Therefore, in the event of a rating downgrade and a breach of the financial covenants by the Company, the holders of the Debentures (Series B) will be entitled to an additional interest as aforesaid provided the annual interest rate increase due to rate downgrade and breach of financial covenants does not exceed 1.25%. It is further clarified that the arrears interest, if any, will be added to the interest rates stated above. 5.4. The Company undertakes that, in as much as it is within its power, it shall not carry out any actions that are likely to lead to disqualifying the REIT Fund as a real estate investment fund, as per the Internal Revenue Code of 1986. 5.5. Interest Cushion and Expense Cushion: - 23 - 5.5.1. Interest Cushion: A. The Company shall transfer an amount equal to the amount of one interest payment (that is, half-yearly interest amount), which is expected to be paid to the holders of the Debentures (Series B) (hereinafter: the "First Interest Cushion Amount") by the Trustee, by a transfer of the First Interest Cushion Amount from an account registered in the name of the issuance coordinator, in which the issuance of the proceeds is held to the interest cushion as such term is defined below. "Interest Cushion Account": an account to be opened by the Trustee, on the Trustee’s name, in trust for the holders of the Debentures (Series B), at one of the five major banks in Israel. Signatory rights in the Interest Cushion Account shall vest exclusively with the Trustee. All costs of opening, managing and closing the Interest Cushion Account shall apply to the Company. B. The Signatory rights in the Interest Cushion Account shall vest exclusively with the Trustee. Without derogating from the aforementioned in this subsection, the Trustee shall invest the funds in the Interest Cushion Account in accordance with the provisions of Section 17 of the Deed of Trust. C. On the 2nd of each calendar month after the date of any interest payment, and if it is not a business day then the following business day (hereinafter: the "Cushion Complementary Date"), if the amount deposited in the Interest Cushion Account is lower than the following amount of interest to be paid, the Company shall transfer to the Interest Cushion Account an amount equal to the amount required for completing the amount deposited in the Interest Cushion Account, on the Cushion Complementary Date, to the following amount of interest payment after the Cushion Complementary Date (hereinafter: the "Current Cushion Amount"), all within 4 business days of the Cushion Complementary Date. D. If on the Cushion Complementary Date, the amount deposited in the Interest Cushion Account is higher than the Current Cushion Amount at the time (hereinafter: the "Excessive Amount"), the Company may ask the Trustee to use the Excessive Amount in order to repay the Debentures' interest and/or principal on any payment date (and as long as the amount of interest and/or principal payment is higher than the Excessive Amount, after the Company has presented reference regarding transferring the remainder of payments for the listing authority). E. The Company shall provide the Trustee, shortly after the first issuance of the Debentures as well as on each Cushion Complementary Date, a calculation signed by the Chief Financial Officer of the Company regarding the Current Cushion Amount at the said time. - 24 - F. It is clarified that in the event that the Debenture Series (B) is expanded in the future, the Company shall transfer to the Interest Cushion Account, as a pre-requirement and prior to the transfer of the expansion proceeds to the Company, an amount equal to the amount required for completing the Current Cushion Amount following the said expansion date of the Series. G. It shall be clarified that in the event that an additional interest rate, as it is defined in Sections 5.2 and/or 5/3 above, would be applicable, the Company shall deposit in the Interest Cushion Account an amount equal to the amount required for completing the Current Cushion Amount following the said change in interest rate, all within 4 business days of publishing an immediate report regarding the said change in interest rate. H. It is clarified that failure to deposit the said amounts in the Interest Cushion Account, within 14 business days of the relevant date, constitutes grounds for an immediate declaration that the remaining outstanding Debentures (Series B) are due and payable, as described in Section 8.1.34 below. I. For the avoidance of doubt, it is hereby clarified that the Company's undertaking to transfer the said amounts to the Interest Cushion Account is not guaranteed in any mechanism that ensures that such an undertaking is executed. In case the Company fails to fulfill its undertakings to transfer the said amounts to the Interest Cushion Account, the Trustee shall have no ability to prevent such a breach, other than taking actions available to them by law and by this Deed of Trust by which to ex post facto force the Company to fulfill its obligations. J. On the final repayment date of the Debentures (Series B) all the amounts deposited in the Interest Cushion Account, except for the Expenses Cushion (net of expenses and commissions), shall be transferred by the Trustee directly to the listing authority in order to execute the said final payment, all pursuant to receiving an approval in advance from the Company regarding the amount required to consummate the said Debentures repayment and at the same time transferring it by the Company to the listing authority. This section will be regarded as an irrevocable instruction given by the Company to transfer the said amounts to the listing authority. K. It is hereby clarified, that the First Interest Cushion Amount, the Current Cushion Amount, and the Excessive Amount, including any revenues accumulated due to said amount (hereinafter: the "Interest Cushion Amounts"), will be held by the Trustee in trust for the holders of the Debentures (Series B) only, the Company shall not be entitled under any circumstances to receive these amounts, and the Company is hereby irrevocably wavering any right to the Interest Cushion Amounts and/or in their regard and/or in relation thereof.

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• 25 - L. The investment of the funds in the Interest Cushion Account by the Trustee shall be executed in accordance with the provisions of Section 17 of the Deed of Trust. M. The Company may, at its own discretion, transfer to the Trustee, instead of depositing the First Interest Cushion Amount, an autonomous unconditional irrevocable bank guarantee, given from an Israeli bank whose rating isn't lower than AA, which would be valid for up to 30 days after the final repayment date of the Debentures, in an amount or shall be valid for one year and be renewed annually such that, with respect to the latest period, it is valid for up to 30 days after the final repayment date of the debentures in an amount equal to the First Interest Amount (hereinafter: the "Bank Guarantee"), or to replace the amounts accumulated in the Interest Cushion Account with a Bank Guarantee in the amount of the Current Cushion Amount relevant to the date of such replacement. If the guarantee company has deposited the aforesaid annually renewable bank guarantee and if the Company has not provided an extension for the period of the bank guarantee or a new bank guarantee for an additional one year period, up to 14 days prior to the expiration of the bank guarantee, the Trustee shall confiscate the bank guarantee. N. If the Company has deposited such Bank Guarantee with the Trustee, all the instructions of this Section 5.5 shall apply in regard to the Bank Guarantee. Considering the above mentioned, in case the Company is required to broaden or narrow the amount of the Bank Guarantee in accordance with subsections C and/or D and/or F and/or G above, the Company shall deposit with the Trustee, in the dates determined in the said subsections, a Statement of Correction to the Bank Guarantee and/or a new bank guarantee, such that satisfies the Trustee, which would replace or added to the Bank Guarantee, as applicable. In the event that the Bank Guarantee shall be replaced with a new guarantee as abovementioned, the old guarantee shall be returned to the Company only after providing the said new guarantee. O. In the event that the Company wishes to execute a replacement of the First Interest Cushion Amount or the Current Cushion Amount with a Bank Guarantee, it shall give the Trustee an announcement in this regard, in addition to a calculation signed by the Chief Financial Officer of the Company regarding the Current Cushion Amount at the said time. Such replacement of the First Interest Cushion Amount or the Current Cushion Amount, as applicable, would be pursuant to the deposition of the Bank Guarantee, and the Trustee shall return to the Company the amount accumulated in the Interest Cushion Account after receiving a Bank Guarantee, such that satisfies the Trustee, in the amount equal to the First Cushion Amount or the Current Cushion Amount, as applicable. In regard to the Company's undertaking to provide the Trustee with certificates with respect to this section, see Section 18.20.4 below. - 26 - 5.5.2. Expense Cushion: A. Without derogating from the provisions of Section 26 of the Deed of Trust, and further to the provisions of section 5.5.1 above with regard to the interest cushion, an amount equal to USD 500 thousand out of the net proceeds of the offering shall be deposited in the Interest Cushion Account (as defined above), which will be used for the payment of current and administrative expenses of the Trustee in the event that Debentures (Series B) are put up for immediate repayment and/or if the Company has violated the provisions of the Deed of Trust (hereinafter and above: the "Expense Cushion"). The Expense Cushion may be deposited by way of cash deposit out of the said proceeds of the offering, all or some thereof, or by a bank guarantee, as the term is defined in Section 5.5.1 above, according to the Company's own discretion and subject to its notification to the Trustee, provided a sum of USD 100 thousand shall be maintained in this expense cushion, at any time. If the Expense Cushion includes a bank guarantee, then the instructions of Section 5.5.1 above shall apply for the bank guarantee, mutatis mutandis. B. The representative US Dollar/ New Israeli Shekel exchange rate for this purpose will be the representative exchange rate of the Central Israeli Bank as determined on the day of the Debentures (Series B) Public Tender. The amount of the Expense Cushion will be held in the Interest Cushion Account (as the term is defined in Section 5.5.1 above) until the date of the final and full repayment of Debentures (Series B). After receiving approval from the chief financial officer of the Company regarding the full repayment of Debentures (Series B), worded in a way that satisfies the Trustee's request, the Expense Cushion, whatever has not been used (plus any accrued earnings thereto), will be transferred to the Company in accordance with the details provided thereby. C. In the event that the amount of the Expense Cushion is insufficient to cover the expenses of the Trustee in connection with the immediate repayment of Debentures (Series B) and/or breach of the provisions of the Deed of Trust by the Company, the Trustee shall act in accordance with the provisions of Section 26 below. D. If the Expense Cushion is used, in whole or in part, the Company undertakes to complement the amount of the Expense Cushion up to the amount specified in Section 5.6 and this within 10 business days from the date on which the Company was requested to complement the said Expense Cushion. 5.6. Appointment of representative of the Company in Israel A. As long as there are outstanding Debentures (Series B), the Company undertakes that there will be a representative of the Company in Israel (hereinafter: the “Representative of the Company in Israel”) to which it will be possible to deliver court notices to the Company and/or to the officers thereof. Delivery of - 27 - court notices to the Representative of the Company in Israel shall be considered as valid and binding in connection with any claim and/or request by the Trustee and/or the holders of the Debentures (Series B) under this Deed of Trust. The Company shall be entitled to replace the Representative of the Company in Israel and the registered address from time to time, subject to Subsections B and C below. B. On the date of appointing/replacing the Company's Representative in Israel, the Company shall report the details thereof in an Immediate Report and will also deliver a notice to the Trustee with the details of the Company's Representative in Israel. In the event of appointing a new Representative, the Immediate Report and the Notice to Trustee shall also include the effective date of the appointment thereof. C. The Company undertakes that in the event of the replacement of the Representative of the Company in Israel, including resignation from office, the Company will appoint a Representative of the Company in Israel within a period not exceeding thirty (30) days. Until the appointment of the new representative as specified above, the address of the Company in Israel for the purpose of this Deed and for the purpose of the furnishing of court documents shall be the address of the replaced representative. D. The Company undertakes that a Representative of the Company in Israel shall serve until the full, final and exact settlement of the Debentures (Series B). E. As at the signing date of this Deed of Trust, the Company’s representative in Israel is U.S. Real Estate Representation Ltd. 5.7. Undertakings of the Company, Pacific Oak SOR Properties LLC, the REIT Fund3, and the officers of the Company The Company, Pacific Oak SOR Properties LLC, REIT Fund, and officers of the Company and of Pacific Oak SOR Properties LLC, present or future irrevocably undertakes and will irrevocably undertake (as applicable), the following: A. Not to raise claims against the application, validity or manner of implementation of Section 39A of the Securities Law; B. Not to raise any claims against the local authority of the Court in Israel with regard to proceedings launched by the Trustee and/or holders of the Debentures (Series B) of the Company. C. Not to raise any claims against the right of the holders of the Debentures (Series B) to file a derivative suit as well as a class action. D. In addition, in any agreement in which the Company engages indirectly with a third party, including its employees, it shall be determined that Israeli law will 3 The REIT Fund undertook that if the control in the Company is sold, it undertakes that the sale will be conditioned upon the new Controlling Shareholder taking its place in connection with the liabilities listed under this section, in connection with the REIT Fund. - 28 - apply to the said agreements, including that insolvency proceedings against the Company will only be filed in a court in Israel, and under the Israeli law. In this regard it is clarified that this obligation does not apply to engagements of the Company with third parties, related with engagements of affiliated companies of the Company, (as this term is defined in the Securities Regulations (Annual Financial Reports), 5770 – 2010) and shall not apply to hedging agreements in which the Company contracted with a third party, should such engagement occur. E. Not to object to any motion by the Trustee and/or holders of the Debentures (Series B) to be filed with a Court of Law in Israel to apply Israeli law with regard to any settlement, arrangement and insolvency, if filed, not to apply to any Court of Law outside Israel for protection against any proceeding launched by the Trustee and/or holders of the Debentures (Series B), not to object should a Court of Law in Israel seek to apply Israeli law with regard to any settlement, arrangement, and insolvency. F. Not to initiate bankruptcy proceedings under foreign law and not in non-Israeli jurisdiction Regarding this matter, it should be noted that if an insolvency process will be commenced upon, not according to the Israeli law, and in a foreign court, deriving from a foreign creditor, and Company will do its best to claim for an "improper forum", subject to any law. G. Not to raise claims against the authority of the Securities Authority and/or the Administrative Enforcement Committee in Israel in connection with monetary fines and/or administrative enforcement measures imposed thereon by the Securities Authority and/or the Administrative Enforcement Committee in Israel, under Chapter H3 and/or H4 of the Securities Law, and to uphold all of the resolutions of the Securities Authority and/or the Administrative Enforcement Committee in Israel, including, without derogating from the generality of the above, to pay any monetary fine and/or payments to injured parties from a breach imposed thereon (if any) and to take measures to remedy the breach and prevent its recurrence. H. Not to amend the articles of association of the Company with respect to those articles which have been applied to the articles of association of the Company in order to reflect the Securities Order (Replacing the Fourth Schedule to the Law), 5776-2016; I. As long as there are outstanding Debentures (Series B) of the Company, and subject to the current tax laws, the Company and its investee corporations, as at the date of the Offering Report, will not choose to be considered as corporations, but will continue to be considered transparent for US tax purposes. With respect to the undertaking of the Company for disclosure in connection with this section, see Section 5.11 below. J. It is hereby clarified that the undertakings in Sections a., b., c., e., f., and g. above will be assumed by each of the Company, Pacific Oak SOR Properties LLC, the REIT Fund, and the officers of the Company, while the rest of the undertakings shall be assumed as follows:

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• 29 - 1. Undertakings in Section d. above – shall be assumed by the Company and Pacific Oak SOR Properties LLC only. 2. Undertakings in Section h. above – shall be assumed by the REIT Fund only. 3. Undertakings in Section i. above – shall be assumed by the Company, Pacific Oak SOR Properties LLC and the REIT Fund only K. The Company shall cause Pacific Oak SOR Properties LLC, the REIT Fund and the officers of the Company, as of the date of the signing of this Deed, to sign irrevocable undertakings as set forth in this Section 5.8 above and to publish these undertakings within 5 business days from the date of completion of the first issuance of the Debentures (Series B). In addition, the Company undertakes that no later than 5 business days following the appointment of a new officer of the Company and/or the date of change in control of the Company, the said undertakings shall be signed and published by a new officer of the Company or the new controlling shareholder, as applicable. 5.8. Field of Operation: A. The Company undertakes that all the real estate properties held by the Company, directly and/or indirectly, through companies held thereby, will be in the United States; B. The Company undertakes that it will not change its main business activity during the life of the Debentures (Series B). It should be noted in this regard, that the main business activity of the Company and companies under its control on the date of the issuance is as specified in Section 1.F in Chapter A of the 2018 Report (as part of the income tax tests applicable to the REIT Fund so that it will be classified as a REIT fund). With respect to the Company's undertaking for disclosure, in connection with this section, see Section 5.11 below. 5.9. Distribution Restrictions: 5.9.1. The Company undertakes not to make any distribution (as such term is defined in the Companies Law) and not to declare, pay or distribute any dividend unless all the terms set forth below are met: A. The Consolidated Equity Capital of the Company (as this term is defined in Section 6.3(1) below) (excluding minority interests), according to the Company’s consolidated financial statements, which were published prior to the distribution date, less the distributed divided, shall not be less than USD 500 million (this amount will not be index-linked); B. The ratio of net Adjusted Financial Debt to net CAP (as such terms are defined in Section 6.3(2) below), shall not exceed 70%; C. The Adjusted NOI (as this term is defined in Section 6.3(3) below) shall not be less than USD 40 million; - 30 - D. There are no grounds for an immediate declaration that the Debentures (Series B) due and payable. E. On the date of the Board of Directors' decision on the distribution, there are no “Warning Signs” as the terms are defined below: "Warning Signs"4: (1) deficit in equity capital; (2) opinion or review by the independent auditor, as at the date of the financial statements, which draws attention to the Company's financial position; (3) deficit in the working capital, or deficit in the working capital during a period of twelve months coupled with an ongoing negative cash flow from current operations; (4) deficit in the working capital or deficit in the working capital during a period of twelve months, coupled with an ongoing negative cash flow from current operation, and the Company's Board of Directors has not determined that these do not indicate a liquidity problem in the Company; (5) opinion or review by the independent auditor, as at the date of the financial statements, which draws attention to significant doubts as to the Company’s ability to continue as a going concern; F. The Company is in compliance with all the financial undertakings stated in Section 6.3 below, as per the Company's consolidated financial statements, which were published before the date of distribution and the Company does not breach any of its undertakings to the Debenture holders (Series B). (the terms set forth in Sections (A) to (F) above shall be referred to collectively as: "the Distribution Restrictions"). 5.9.2. The Company will submit to the Trustee within two (2) business days after the distribution is approved by the Company’s Board of Directors and prior to the actual distribution, certification by the chief financial officer of the Company that the Company is in compliance with the Distribution Restrictions (as the term is defined in Section 5.9.1 above), including the relevant calculation (regarding the restrictions set forth in Section 5.9.1 (A) to (F) above), (worded in a manner that will satisfy the Trustee), as well as regarding the fulfillment of the following conditions: (1) the Company is in compliance with its obligations to the holders of the Debentures (Series B) in accordance with the provisions of the Deed of Trust; (2) the distribution does not impair the ability of the Company to repay the Company's Debentures (Series B); (3) no cause for immediate repayment as per Section 8.1 below has been created. It should be clarified that the dividend restrictions will also be checked prior to the distribution, based on the Company's consolidated financial reports which were published prior to the performance of the 4 The abovementioned definition is taken from Regulation 10(b)(14) to the Securities Regulations (Periodic and Immediate Reports), 1970. It should be noted that if the definition is altered as part of legislative amendments of any kind, the abovementioned definition will be revised accordingly, and with the necessary changes. - 31 - distribution, and also under the assumption that the distribution was implemented. 5.9.3. Despite the above mentioned in this Section 5.9, it should be noted and emphasized that the REIT Fund should meet the regulatory restriction of dividend distribution in the U.S., according to which the fund must distribute up to 100% of its taxable income to its shareholders, in order to be classified as such (as a REIT fund) and not pay tax at the level a REIT fund is entitled to and enjoy tax reliefs granted to REIT funds in the US, as specified in Appendix A to Chapter A of the 2018 Report (hereinafter: the "Distribution Obligation of a REIT Fund"). Further to the foregoing, it should be emphasized that in order to maintain the Distribution Obligation of a REIT Fund, dividend distributions in a Company intended to serve Distribution Obligation of a REIT Fund, will not be subject to the aforesaid dividend restriction and these distributions will be implemented as required to maintain the status of the REIT Fund and to comply with the Distribution Obligation of a REIT Fund. Shortly before distribution as per this Subsection 5.9.3, the Company shall deliver to the Trustee a confirmation from the senior financial officer of the Company to the effect that the said distribution complies with this Subsection 5.9.3. 5.10. Dedicated Disclosure: The Company undertakes to specify and/or approve and/or include in each of the Board of Directors' Reports attached to the Company's financial statements thereof, dedicated disclosures to the holders of the Debentures of the Company, including stating the numerical figures and providing the calculation to the Trustee, in a wording to its satisfaction and as applicable (unless explicitly specified differently), as follows: 5.10.1. For the purpose of Section 5.3 above: The Company shall specify the compliance or non-compliance thereof with each of the financial covenants (as specified in section 5.3 above). 5.10.2. For the purposes of Section 5.7(i) above, the Company shall include a disclosure on its compliance and the compliance of all its held corporations with the provisions of Section 5.7(i) above. It should be clarified that the Trustee does not have data which will enable it to verify that the Company and the said corporations comply with these undertakings and therefore, the Trustee will rely for that matter on disclosure in the reports of the Company and shall not perform any examination thereof. 5.10.3. For the purposes of Section 5.8 above, the Company shall include a disclosure on its compliance/non-compliance with the provisions of Section 5.9 above. 5.10.4. For the purposes of section 5.9 above: the Company will specify the compliance or non-compliance with the provisions of section 5.10 above. - 32 - 5.10.5. For the purposes of Sections 6.2.1, 6.2.2, and 6.2.4 below: The Company shall specify the compliance or non-compliance thereof with the said undertaking in Section 6.2.1 below of not creating a floating charge. It is clarified that the Trustee does not have data which will enable it to verify that the Company complies with these undertakings and therefore, the Trustee will rely for that matter on disclosure in the reports of the Company and the certifications detailed in this section above and shall not be requested to verify the correctness thereof. 5.10.6. For the purposes of Section 6.3 below: The Company shall detail in the notes for the financial statements, its compliance or non-compliance with any of the financial covenants (as defined in Section 6.3 below), including the numerical value of each of the financial covenants. 5.10.7. For the purpose of Section 6.4 below: The Company shall include disclosure regarding its compliance with the provisions of Section 6.4 below. 5.10.8. In this regard, the said disclosure standard shall remain the same from the execution date of this Deed and throughout the life of the Debentures (Series B), even if more lenient guidelines are publicized with regard to the standard existing at the time this Deed is signed. 6. Securing the Debentures 6.1. The Debentures (Series B) are not secured by any collaterals, liens or any other manner. For details regarding the Company's undertaking not to create a general current lien, see Section 6.2 below. By entering into this Deed of Trust, and by agreeing to act as Trustee for the Debenture Holders, the Trustee is not conveying his opinion, explicitly or implicitly, as to the Company’s ability to fulfill its obligations towards the Debenture Holders. For the avoidance of any doubt, it is clarified that the Trustee is under no obligation to examine, and the Trustee did not and will not examine, the need for providing collateral for securing payments to the Debenture Holders. The Trustee was not asked, and de facto did not and will not, conduct financial, accounting, or legal due diligence, as to the business circumstances of the Company or its Subsidiaries. The above shall not derogate from the Trustee’s obligations under any law and/or the Deed of Trust, and likewise shall not derogate from the Trustee’s obligation (to the extent that such an obligation exists by any law) to examine the effects of changes in the Company from the issuance date onwards, to the extent that they may have a detrimental effect on the Company’s ability to fulfill its commitments to the Holders of the Debenture (Series B). 6.2. Undertaking not to create floating charge: 6.2.1. The Company undertakes not to pledge all of its current or future properties and assets (held thereby directly only) to a general floating charge, without the prior approval of the meeting of holders of the Debentures (Series B) by ordinary resolution. It should be emphasized that the Company shall be

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• 33 - permitted to pledge its property, in whole or in part, in specific pledges (including a floating charge on specific property/properties), without obtaining the consent of the holders of the Debentures (Series B) thereto. The Company clarifies that as of the date of the signing of this Deed, the Company has not created and has not undertaken to create a general floating charge as stated above. 6.2.2. For the avoidance of doubt, it is hereby clarified that Subsidiaries of the Company are entitled to pledge the properties thereof, in whole or in part, under any charge (including a floating charge on their entire property) and in any manner, without the need to obtain the consent of the meeting of the holders of the Debentures (Series B). 6.2.3. The Company will furnish to the Trustee no later than 5 days after the signing of this Deed an opinion from an attorney specializing in the laws of the British Virgin Islands applicable to the Company, in accordance with which there is no legal obligation in the British Virgin Islands to record a negative lien as specified in Section 6.2 above in any registry conducted under British Virgin Islands law. The Company shall furnish the Trustee each January 31 of each year with an authorization of an attorney specializing in the relevant law applicable to the Company a whereby as at December 31 of prior calendar year, the Company, did not register in its registers and/or in any other registry conducted under the relevant law any floating charge in favor of any party contrary to their undertakings in Section 6.2.1. A certification from the register conducted under the relevant law will be enclosed with such authorizations. In addition, the Company shall furnish the Trustee on the January 31 of every year, a confirmation signed by a senior officer of the Company to the effect that the Company has not created nor committed to create a general floating charge in favor of any party contrary to its undertaking in Section 6.2.1. The Company shall be entitled to sell, lease, assign, give or transfer in any way whatsoever, all or part of the assets thereof, to any person it deems fit, without requiring the approval of the Trustee and/or the Debenture Holders (Series B), as the case may be, subject to the provisions of section 8.1.15 below. 6.2.4. With respect to the undertakings of the Company for disclosure in connection with this section, see Section 5.10 above. 6.2.5. It is clarified that the Trustee does not have data which will enable it to verify that the Company is in compliance with the undertakings thereof detailed in this Section 6.2, and therefore, the in order to examine the compliance of the Company with the provisions of this Section 6.2, Trustee will rely for that matter on the Company's reports and the certifications detailed in this section above and shall not be requested to verify the correctness thereof. 6.3. Financial covenants - 34 - Until the date of the full and final payment of the debt pursuant to the terms of the Debentures (Series B) and fulfillment of all the Company’s other obligations to the holders of the Debentures (Series B) pursuant to this Deed and the terms of the Debentures (Series B), the Company shall comply at any time with the financial covenants set forth below (hereinafter and above "the Financial Covenants"): (1) The Consolidated Equity Capital of the Company (excluding minority interests) will not be less than USD 475 million (this amount will not be index-linked) (hereinafter – the “Equity Covenant” or the “Minimum Equity”). "Consolidated Equity of the Company": The Company's equity according to the consolidated Financial Statements of the Company, including shareholder loans subordinate to the Debentures, if any. i.e., owners' loans meeting the following conditions: (a) their maturity is after the final payment of the debentures; (b) the loans are inferior in their maturity compared to the debentures, including in the event of dissolution. (2) The Net Adjusted Financial Debt ratio to the net CAP shall not exceed 75% (hereinafter: "Ratio of Debt to CAP Covenant" or "Ratio of Debt to Maximum CAP"). "Net Adjusted Financial Debt" – shall mean a debt carrying short and long term interest from banks and financial institutions, as well as from institutions the main activity of which is granting loans, plus debt carrying interest in favor of the holders of debentures issued by the Company, net of cash and cash equivalents and net of short-term investments and loans provided, the repayable date of which shall not exceed three years from the date of the relevant balance sheet, marketable securities and deposits (including properties with restrictions, except for pledged deposits provided against guarantees), all based on the consolidated financial statements of the Company, plus the proportionate consolidation of the net financial debt in affiliated companies and in the Company’s jointly controlled companies. "Net CAP" – shall mean adjusted net financial debt in addition to the Consolidated Equity Capital of the Company (including minority rights). (3) The Adjusted NOI (as this term is defined below) shall not be less than USD 35 million (hereinafter: "Minimum NOI Covenant" or "Minimum Adjusted NOI"). "Adjusted NOI”: the Company's income from rent (in the recent four quarters), including interest revenues stemming from providing loans by the Company in consolidation (including revenues stemming from purchased loans), and incomes, including distributions, stemming to the Company from investments in REIT funds or other corporations, net of property rental costs (in the recent four quarters), plus the share of the Company in the Adjusted NOI of affiliated companies and jointly controlled companies (proportionate consolidation). It is clarified that upon purchasing one or more rental property and/or consummation of a property in construction and/or property donation during the period and/or the provision of loans by the Company in a consolidated manner (including revenues - 35 - stemming from loans purchased by the Company) and/or additional investment in REIT funds or other corporations, the Adjusted NOI of the property or properties or loan(s) or investment(s) shall be in accordance with the extent of the adjusted NOI from the date of acquisition and/or completion of an property in construction and/or contribution of the property and/or the provision or purchase of the loan and/or the performance of the investment and until the date of the relevant financial report in the annual articles of association. For the avoidance of doubt, it should be clarified that upon the sale or subtraction of one or more properties the aforesaid articles of association will not be performed for the adjusted NOI for the period prior to the sale date. (4) The volume of development projects of the Company in consolidation (including the Company's share in jointly controlled companies, and in associated companies), shall not exceed 10% of the total adjusted balance sheet of the Company (as defined below) (hereinafter: a " Ratio of Development Project Volume to Total Adjusted Balance Sheet Covenant" or: "Ratio of Development Project Volume to Maximum Total Adjusted Balance Sheet"); "Volume of Development Projects of the Company" in this Subsection 6.3(4) (a) means – the cost of the investment (as opposed to the fair value) of the Company in projects, for which construction has started, as at the date of the relevant financial statements and a temporary certificate of occupancy has not yet been received. It should be clarified that development and refurbishing works done in the Company's existing income-producing properties will not be included in the scope of the definition of "Volume of Development Projects of the Company". "Adjusted Balance Sheet" in this Subsection 6.3(4)(a) means – the total consolidated balance sheet of the Company plus the share of the Company in affiliated and jointly controlled companies. The examination regarding the Company’s compliance with each of the financial Covenants in Subsections (1) to (4) above will be conducted on the date of publication of the Company’s financial statements and as long as there are outstanding Debentures (Series B), in relation to the quarterly/annual financial statements which the Company would have published until that date (in this Section 6.3 below: "Examination Date"). With respect to the undertaking of the Company for disclosure in connection with this section, see Section 5.11 above. With respect to the undertaking of the Company to provide authorizations to the Trustee in connection with this section, see Section 18.20 below. If the Company’s equity drops below the Minimum Equity and/or the ratio of the debt to the CAP exceeds the ratio of the debt to the maximum CAP and/or the Adjusted NOI is less than the Adjusted Minimum NOI and/or the Ratio of Development Project Volume to the Total Balance Sheet exceeded the ratio of Development Project Volume to the Total Maximum Balance Sheet, on any examination date, as applicable, the Company shall notify the Trustee of such in writing and report this data and the meaning of this data by means of an immediate report via the Magna system, no later - 36 - than one business day after the publication of the financial statements (quarterly and annual). For purposes of this section, reporting via the Magna system will not be considered reporting to the Trustee. Failure to comply with the Equity Covenant for two consecutive quarters and/or failure to comply with the debt to CAP ratio covenant for two consecutive quarters and/or the Adjusted NOI is less than the Minimum Adjusted NOI for two consecutive quarters and/or the ratio of the Development Project Volume to the Total Balance Sheet exceeded of the ratio of Development Project Volume to the Maximum Balance Sheet for two consecutive quarters, shall constitute grounds for declaring the outstanding balance of the Debentures (Series B) due and payable, as specified in Section 8.1.12 below. It is clarified that, for the purpose of this Deed, in the event of a change in the accounting standards applied to the Company, as opposed to those applied to the Company on the date of signing this Deed (hereinafter: the “Existing Standards" and the "New Standards", respectively) in such a manner as to affect the results of the calculation of any of the financial covenants specified in this Deed, the Company’s compliance with the financial standards set forth in this Deed shall be examined only in accordance with the existing accounting standards and if there are any disparities between the aforementioned calculation and a calculation in accordance with the New Standards, the material items, from which the above-mentioned disparities arise, shall be specified. 6.4. The Company undertakes that as long as the Company does not comply with any of the financial covenants set forth in Section 6.3 above, it will not assume any financial debt with a right of recourse to the Company, except for a financial debt from the partnership or the REIT which will be subordinate to the Debentures (Series B) of the Company, both in terms of the Company’s insolvency and in terms of the repayment date (namely, if the repayment date is after the final repayment date of the debentures and it is not permitted to place them for immediate repayment prior to the debentures). Furthermore, so long as the Company does not comply with the financial covenants set forth in Section 6.3 above, the Company shall not assume any financial debt with a right of recourse to the Company (non-recourse), unless the debt was made for the purpose of remedying the failure to comply with the financial covenants or for the purpose of repayment on account of a principal or interest of the Debentures (Series B), in whole or in part. The undertaking stated in this Section 6.4 shall not derogate from the undertaking in Section 6.5 below and subject thereto. If the Company does not comply with any of the financial covenants and in the period during which the Company does not comply with any of the financial covenants as stated above, the Company shall include a disclosure in the financial reports, as applicable, as part of the dedicated disclosure to the debenture holders, regarding its compliance with the obligations in Section 6.3 above. Additionally, throughout the aforementioned period, of the Company were to assume such a financial debt, the Company shall deliver an approval, signed by the senior financial officer, worded to the satisfaction of the Trustee, according to which: (1) if it is a recourse debt to the Company - that the debt is to the controlling shareholder of the Company and that it is

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• 37 - subordinate to the Debentures, as stated above; or (2) if the debt is non-recourse to the Company - that the debt was made for the purpose of remedying the failure to comply with the financial covenants or for the purpose of repayment of the aforementioned Debentures. The Trustee shall rely on the office holder’s approval and on the Company’s disclosure in the aforementioned statements and shall not be required to conduct any further inspections. 6.5. The Company undertakes that it will not take credit from non-Israeli financial institutions and will not grant pledges to non-Israeli financial institutions, except for credit facilities that may be provided by US financial institutions for the purpose of implementing hedging transactions on the exchange rate of the shekel against the dollar in relation to the Debentures to be issued by the Company and this will be done by granting specific pledges to secure such credit facilities. With respect to the undertaking of the Company for disclosure in connection with this section, see Section 5.10 above. With respect to the undertaking of the Company to provide authorizations to the Trustee in connection with this section, see Section 18.20.6 below. 7. Early redemption 7.1. Early redemption at the discretion of the TASE If the Tel Aviv Stock Exchange decides to delist the Debentures from trading because the value of public holdings of Debentures falls below the amount prescribed in the TASE Regulations regarding delisting, the Company shall act as follows: A. Within 45 days from the date of the TASE Board of Directors resolution to delist the Debentures, the Company will announce an early redemption date on which the holder may redeem the Debentures. B. The early redemption date with regard to the Debentures will not take place no less than seventeen (17) days from the date of publication of the announcement and no later than forty-five (45) days from said date, but not during the period between the Effective Date for the payment of Interest and the actual date of payment thereof. C. On the early redemption date, the Company will redeem the Debentures of the Holders of which requested the redemption thereof, in accordance with the balance of the nominal value thereof and the addition of interest that has accrued on the principal until the actual redemption date (the interest will be calculated on the basis of 365 days per year). D. The setting of an early redemption date as aforesaid is without prejudice to the rights of redemption as stipulated in the Debentures, for those Holders of the Debentures who do not redeem them on the early redemption date as aforesaid, but the Debentures will be delisted from the TASE, and the resulting tax implications will apply thereto. - 38 - Early redemption of the Debentures as aforesaid, will not grant to a Debenture Holder who redeems the same as stated the right to the payment of interest in respect of the period after the redemption date. The Company will publish notice of the earliest redemption date in an immediate report. The said notice will also detail the proceeds of the early redemption. 7.2. Early redemption at the discretion of the Company 7.2.1. The Company may, at its sole discretion, to perform early redemption, fully or partially, of the Debentures (Series B), commencing 60 days have passed after the date of the listing thereof on the TASE in which case the following provisions shall apply, all subject to the guidelines of the Securities Authority and the provisions of the TASE Rules and Regulations as shall be in effect on the relevant date: 7.2.2. The frequency of early redemptions shall be limited to one per quarter. 7.2.3. If an early redemption was scheduled for a quarter with a pre-scheduled interest payment, or partial redemption payment or final redemption payment, the early redemption will occur on the date designated for such payment. For purposes of this section, “quarter” shall mean any of the following periods: January-March, April-June, July – September, October – December. 7.2.4. The minimum amount of early redemption of Debentures shall not be less than NIS 1 million. Notwithstanding the aforesaid, the Company may make an early redemption of Debentures totaling less than NIS 1 million provided the frequency of the redemptions a year will be limited to one. 7.2.5. Any early redemption amount will be paid on a pro-rata basis to the holders of the Debentures (Series B) at the par value of the Debentures (Series B) held. 7.2.6. Upon the Company’s Board of Directors’ resolution to make an early redemption as aforesaid, the Company shall publish an immediate report with a copy to the Trustee no less than seventeen (17) days and no more than forty- five (45) days prior to the early redemption date. In said immediate report, the Company will publish the early redemption amount of the principal and the interest accrued on the principal until the early redemption date, in accordance with the following provisions. The early redemption date shall not occur in the period between the record date for interest payment in respect of the Debentures (Series B) and the actual interest payment date. 7.2.7. Early redemption will not be made for a portion of the Debentures (Series B) if the last redemption amount is less than NIS 3.2 million 7.2.8. On the date of partial early redemption, as the case may be, the Company will pay to the Debenture Holders (Series B), the interest accrued only on the part of the partial early redemption, and not for the entire outstanding balance. If an additional interest is paid due to early redemption, the additional interest will be paid on the par value that was redeemed on the early redemption only. - 39 - On the date of a partial early redemption, should there be one, the Company shall give notice in an immediate report of: (1) the percentage of the partial redemption in terms of the unpaid balance; (2) the percentage of the full redemption in terms of the original series; (3) the interest rate of the full redemption on the redeemed part; (4) the percentage of the interest rate that will be paid in the partial redemption, calculated in respect of the unpaid balance; (5) an update of the percentage of the partial redemptions that remain, in terms of the original series; (6) the record date for eligibility to receive an early redemption of the debenture principal that shall be twelve days (12) prior to the date set for the early redemption. 7.2.9. The amounts payable to the holders of the Debentures (Series B) in the event of early redemption, shall be the higher of: (1) the market value of the Debentures (Series B), offered for early redemption, which will be determined based on the average closing price of the Debentures (Series B) in the thirty (30) trading days prior to the date of the Board of Directors’ resolution regarding an early redemption. If the early redemption date falls on the date of the interest payment for the debentures, a sum equal to the sum of the interest paid on this date for the debentures will be deducted from the said average price ; (2) the liability value of the outstanding Debentures (Series B) called for early redemption, that is, the principal plus interest, until the actual early redemption date; (3) the balance of cash flow of the Debentures (Series B) called for early redemption (principal plus interest), discounted at the government bond yield (as defined below) plus 1.5% per annum. The discounting of the Debentures (Series B) that are called for early redemption will be calculated from the early redemption date to the last repayment date scheduled for the Debentures (Series B) which are called for early redemption. For purposes of this section – “Government Bond Yield” means the average yield to maturity (gross) in the seven business day period that ends two business days before the date of the notice of early redemption notice, of three series of government bonds in shekel not linked to the index, bearing a fixed interest rate, whose average life is the closest to the average life of the Debentures on the relevant date, i.e. one series with the nearest high average duration of the Debentures (Series B) on the relevant date, and one series below the average duration of the Debentures (Series B) on the relevant date whose weight will reflect the average duration of the Debentures on the relevant. For example: if the average duration of the Government A Debentures is four years, the average duration of Government B Debentures is two years and the average duration of the loan balance is 3.5 years, the yield will be calculated as follows: 4x + 2(1-x) = 3.5 X = the yield weight of the Government A Bonds. - 40 - X = the yield weight of the Government B Bonds. According to the calculation, the annual return of the Government A Debentures will be weighted at a rate of seventy-five percent (75%) of the “return” and the annual rate of the Government B Debentures will be weighted at a rate of twenty-five percent (25%) of the “return.” In the case of payment of additional interest following early repayment, the additional interest will only be paid on the par value repaid early. 7.2.10. The Company shall furnish to the Trustee, within five business days from the date of the resolution of the Board of Directors, a certification by the Company's' auditing CPA regarding the calculation of the early repayment amount, worded in a manner that will satisfy the Trustee. 8. The right to declare the Debentures due and payable 8.1. Upon the occurrence of one or more of the cases listed in this section below, the provisions of Section 8.2 below will apply, as relevant: 8.1.1. If the Company will not repay any payment it will receive pursuant to the Debentures or under the Deed of Trust or will not comply with any of the other material undertakings made to the holders, and the Company has not cured such default within 5 business days. 8.1.2. If the Company applies for initiation of proceedings, as it is defined in the Insolvency Law and Rehabilitation Law, 2018 (hereinafter: "The Insolvency Law") or if any similar order is issued in accordance with the provisions of the Insolvency Law, or if the Company files a request for a settlement or arrangement with the creditors of the Company under Article 350 of the Companies Law (or in accordance with the provisions of the Insolvency Law, or if such an order is granted against the Company or if the Company offers its creditors in another manner a settlement or arrangement as aforesaid, due to its inability to meet its obligations on time, or a similar procedure has been conducted by the Company or towards the Company by the law applicable to the Company. With respect to this section, the abovementioned orders which were filed by any third party with the consent of the Company shall be deemed as orders filed by the Company. 8.1.3. If such an application to initiate proceedings as mentioned above or an application under Article 350 of the Companies Law is submitted against the Company (not with the Company's consent), or a similar proceeding pursuant to the foreign law applicable to the Company, against the Company (not with the Company’s consent) which was not dismissed or canceled within 45 days from the date of submission thereof, if submitted in Israel (hereinafter in this subsection only: the "Remedy Period"), or a similar procedure has been conducted by the Company or towards the Company by the law applicable to the Company. It should be clarified that the remedy period in respect of such

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• 41 - application which will be submitted outside Israel will be 45 days from the date of its submission. 8.1.4. If the Company adopts a valid resolution for the liquidation thereof (other than liquidation for the purpose of a merger with another company as specified in Section 8.1.17 below), or a final liquidation order has been made by the court and/or if a trustee has been appointed for the Company, as defined in the Insolvency Law, or another office holder of similar characteristics, or a similar resolution has been made or a similar office holder has been appointed by the Company and/or towards the Company, in accordance with the Insolvency Law, or by the law applicable to the Company. 8.1.5. If a temporary liquidation order or a similar order per the applicable law has been granted or a similar order per the applicable law, and/or a temporary trustee has been appointed, as part of an order to initiate proceedings, as these terms are defined in the Insolvency Law, or a similar office holder who will be appointed by the applicable law, and/or any judicial decision of a similar nature has been rendered, and such order or decision were not dismissed or canceled within 45 days of the date of issuing the order or rendering the decision, as the case may be. Notwithstanding the aforesaid, the Company will not be provided any remedy period with respect to applications made or orders issued, as the case may be, by the Company or with its consent. 8.1.6. If an application has been filed for receivership or the appointment of a receiver (temporary or permanent) or any similar office holder who will be appointed by the applicable law for the Company or for a Material Property of the Company (as the term is defined below), or if an order has been issued for the appointment of a temporary receiver or a similar office holder who will be appointed by the applicable law, which was not dismissed or canceled within 45 days of the date of filing the application or issuing the order, as the case may be; or – if an order has been filed for a permanent receiver for the Company or for a Material Property of the Company (as the term is defined below) a similar order as per the applicable law. Notwithstanding the foregoing, the Company will not receive any cure period with respect to the requests or orders submitted or given, as the case may be, by the Company or with its consent. In this Deed: “Material Property of the Company” shall mean - a property or a number of cumulative properties of the Company or corporations held by the Company (according to the Company’s holdings percentage), the value of which, in accordance with the Company’s latest consolidated financial statements (audited or reviewed), on the date of an event, exceeds 45% of the total consolidated assets of the Company under these financial statements. 8.1.7. If an attachment is imposed or if an act of execution is carried out or a similar procedure as per the applicable law, in connection with a Material Property of the Company (as this term is defined in Section 8.1.6 above), and the - 42 - attachment is not rescinded, or the action is not cancelled, as the case may be, within 45 (forty-five) days following the imposition or execution thereof, as the case may be. Notwithstanding the foregoing, the Company will not be granted any remedy period in relation to the applications filed or orders issued, as the case may be, by the Company or with its consent. 8.1.8. If there is a real concern that the Company will not meet, or that the Company has failed to meet, its material obligations toward the holders of the Debentures (Series B). It is clarified that among the material obligations of the Company are included among other things the amounts of payments to the holders and the dates of the payments. 8.1.9. If the Company terminated or announced its intent to terminate the payment of its debts or ceased or announced its intent to cease to manage its business affairs, as they shall be from time to time. 8.1.10. If there was material deterioration in the Company’s business compared to its condition on the date of the initial offering of the Debentures (Series B) and there is a real concern that the Company would not be able to repay the Debentures (Series B) on time. 8.1.11. If an actual immediate repayment arose in another series of Debentures issued by the Company, which is listed for trading on a stock exchange (hereinafter in this section: “the Other Series”), or in another debt of the Company, the liability value of which exceeds 15% of the Company's total property listed in the consolidated balance sheet according to the recently published financial statements (audited or unaudited), or a debt of an affiliated company, in which the product of the holdings (in the final chain) in the said company of the value of the liability exceeds 15% of the Company's total property listed in the consolidated balance sheet according to the recently published financial statements (audited or unaudited) (hereinafter: “the Other Debt”). A non- recourse loan to a borrower, or a part thereof, shall for this purpose not be considered as Other Debt, as stated above. In this respect, it should be noted that in connection with another debt, for which the Company's liability was a result of a guarantee provided for the repayment of the said debt, the cause mentioned in Section 8.1.11 will be created only if the following conditions exist: (1) The Company's guarantee for debt repayment is not limited in amount or it is limited to an amount which is higher than the amount of the other debt (as defined above); and (2) the Company was requested to repay at least an amount which is higher than or equal to the said debt; if the above- mentioned conditions exist then the said cause shall apply, and this is from the date the Company was requested to pay the other debt in effect and not from the date of requesting immediate repayment, if these dates differ. 8.1.12. If the Company has not met any of the financial covenants in Sections 6.3 (1) until (4) (inclusive) above during two consecutive quarters. 8.1.13. If the Company performs a distribution contrary to the dividend limitation provisions, as set forth in Section 5.9 above; - 43 - 8.1.14. If the rating of the Debentures (Series B) by the Rating Agency will be reduced to a rating that is lower than BBB or a parallel rating. In the event that the Rating Agency is replaced, the Company shall submit to the Trustee a comparison between the rating scale of the replaced Rating Agency and the rating scale of the new Rating Agency. For purposes of this section below, it is emphasized that in the event that the Debentures (Series B) would be rated by more than one Rating Agency, the review of the rating with respect to the grounds for immediate repayment shall be conducted, any time, based on the lower rating. 8.1.15. If the Company sells to another / others the Bulk of the Company’s assets during two consecutive calendar quarters, and the prior consent of the Debentures (Series B) holders to the said sale is not received in a special resolution. For the purpose of this subsection – “Sale to Another” – sale to any third party, excluding a sale to corporations fully held by the Company, as well as excluding a sale the majority of the revenues thereof shall be used by the Company, within a period of six months after the date of completing the sale transaction, for the purchase of other property/properties characterized appropriately to the Company's field of business, as such shall be on the date of said sale; “Bulk of the Company’s Properties” – a property or a combination of several properties, the value and/or aggregate value of which (as applicable) in the last consolidated financial statements published prior to the occurrence of the relevant event exceeds 50% of the value of its properties in the consolidated balance sheet, based on the said financial statements. 8.1.16. If the Company breaches any of its undertakings in Section 5.10 above. 8.1.17. If a merger of the Company was performed without the prior approval of the holders of the Debentures (Series B) by a special resolution, unless the recipient entity (as applicable) warrants to the holders of the Debentures (Series B), including by means of the Trustee, at least 10 business days before the date of the merger, that there is no reasonable concern that because of the merger the recipient entity will not be able to meet its obligations to the holders of the Debentures (Series B). Nothing in this section shall derogate from the other grounds for immediate repayment that are granted to the Debenture Holders pursuant to Section 8.1 above and below. In addition, commencing a period of 30 days prior to the date of the planned merger, all the grounds enumerated in Section 8.1 shall also apply to the recipient entity as if it were the Company. With regard to sections the provisions of which arise from the Company’s financial statements, the review shall be conducted in relation to the financial statements of the recipient entity as these will be following the merger. - 44 - 8.1.18. If trading in the Debentures (Series B) on the TASE was suspended by the TASE, except for suspension on the grounds of ambiguity as stated in the fourth part of the TASE Regulations, and 60 days have elapsed from the date of suspension during which the suspension was not cancelled. 8.1.19. If the Company is wound up or liquidated for any reason whatsoever. 8.1.20. If the Company commits a fundamental breach of the terms of the Debentures (Series B) or the Deed of Trust, and if it turns out that a material representation of the Company’s representations in the Debentures or the Deed of Trust is incorrect or incomplete, and the Company has failed to remedy such breach within 7 business days of the date of receiving the notice. 8.1.21. If the Debentures (Series B) will cease to be rated for a period exceeding 60 days following reasons or circumstances under the control of the Company (in this regard, the non-performance of payments that the Company undertook to pay the Rating agency and the failure to provide reports and information reasonably required by the Rating agency within the engagement between the Company and Rating agency will be considered to be reasons and circumstances under the Company’s control). 8.1.22. If the Company expands the series of Debentures (Series B) or issues an additional debenture series, in violation of the provisions of Section 4 of the Deed of Trust. 8.1.23. If the Company ceases to be a Reporting Corporation, as it is defined in Section 1 of the Securities Law. 8.1.24. If the Company does not publish a financial statement as is it required to publish under any law or under the provisions of the Deed, within 30 days of the final date for the publication thereof as required. 8.1.25. If the Debentures (Series B) are delisted from the TASE. 8.1.26. If the Company breaches its commitment not to pledge all of its assets with a general floating pledge as stated in Section 6.2 above. 8.1.27. If the Company is no longer 100% held (indirectly, by chain) by the REIT Fund. 8.1.28. Upon the occurrence of any other event that constitutes a material breach and/or may cause material harm to the rights of the debenture holders. 8.1.29. If the Company takes a financial debt or credit contrary to the stated in Section 6 above, as applicable. 8.1.30. If a “Going Concern” comment is registered in the financial statements of the Company for a period of two consecutive quarters. 8.1.31. If any of the events specified in section 8.1.2 to 8.1.5 above occurred with respect to the Partnership and/or the REIT Fund.

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• 45 - 8.1.32. If the REIT Fund acts in the Company operating segment (as described in Section 5.8 above) not through the Company, and without the consent of the Debenture Holders (Series B) granted by Special Resolution. 8.1.33. If the Company does not meet its undertaking specified in Section 5.4 above; 8.1.34. If the Company does not comply with the undertakings specified in section 5.6 above; 8.1.35. If the Company breaches any of its undertakings detailed in Section 5.5 above, in connection with the expense cushion or in connection with the interest cushion. 8.2. In the event of one of the instances set out in Sections 8.1.1 above the following provisions shall apply, as applicable: 8.2.1. Upon the occurrence of any of the events specified in Section 8.1 above, the Trustee shall be obligated to convene a general meeting of the holders of the Debentures (Series B), the date of which shall be 21 days after the date of invitation thereof (or a shorter date in accordance with the provisions of Section 8.2.5 below), and whose agenda will include a resolution regarding the immediate repayment of the outstanding balance of the Debentures (Series B) upon the occurrence of any of the events specified in Section 8.1 above, as applicable. The convening notice will specify that if the Company shall act in a manner that will eliminate and/or put an end to the event specified in Section 8.1 above for which the general meeting was convened, until the date of the general meeting, the convening of the general meeting of debenture holder will be canceled. 8.2.2. The holders’ resolution to declare the Debentures (Series B) due and payable shall be adopted at a meeting attended by holders of at least fifty percent (50%) of the nominal value of the outstanding Debentures (Series B), by a majority of holders of the outstanding par value of the Debentures participating in the vote or such majority at an adjourned meeting attended by holders of at least twenty (20%) of the aforesaid outstanding nominal value. 8.2.3. If as of the date of the meeting, any of the events specified in Section 8.1 above has not been cancelled or removed, and a resolution in the meeting of the Debentures (Series B) has been adopted in the manner stipulated in Section 8.2.2 above, the Trustee will be obligated, within a reasonable period of time and no later than two business days, to declare the outstanding balance of the Debentures (Series B) 8.2.4. A copy of the notice for convening the said meeting will be sent by the Trustee to the Company and the notice of a meeting shall constitute a prior written warning to the Company of the Trustee's intent to declare the Debentures due and payable as aforesaid. 8.2.5. The Trustee may, at its discretion, reduce the period of 21 days specified in Section 8.2.1 above if he deems it necessary to protect the rights of the holders - 46 - 8.2.6. The Trustee and/or the Holders will not call the Debentures for immediate repayment, until after the Company is provided within notice of its intention to do so; however, they will be entitled not to provide the Company with any notice if there is a concern that furnishing the notice will harm the possibility of calling the Debentures for immediate repayment. 8.2.7. If any of the subsections of Section 8.1 above stipulate a reasonable period in which the Company may take action or make a decision that will remove the grounds for immediate repayment, the Trustee or the holders may declare the Debentures due and payable as stated in Section 8, only if the period stipulated as aforesaid has elapsed and the grounds have not been removed; however, the Trustee may reduce the said period if it is of the opinion that it could materially prejudice the rights of the Holders. 8.2.8. For the avoidance of doubt, nothing in Section 8.2 above shall derogate from the powers of the Trustee to declare the Debentures (Series B) due and payable, at its discretion. 8.2.9. If the Company acts, at its sole discretion, to appoint an urgent representation of Bondholders (Series B) in the event of foreseen non-compliance with one or more of the financial covenants, the provisions stipulated in the Third Schedule to the Deed of Trust must be followed. 8.2.10. For the avoidance of doubt, it is clarified that the immediate repayment shall be based on the nominal value of the outstanding Debentures (Series B), including interest accrued on the principal amount, (and arrears interest, if applicable) while the interest will be calculated for the period beginning after the final day in respect of which interest was paid and ending on the immediate repayment date (the calculation of the interest for a portion of the year will be based on 365 days a year). 8.2.11. For the avoidance of doubt, it is clarified that the right of immediate repayment as aforesaid and/or declaring the Debentures due and payable shall not impair or prejudice any other or additional remedy available to the holders of the Debentures (Series B) or to the Trustee under the terms of the Debentures (Series B) and the provisions of this Deed or pursuant to any law and the decision not to call the Debentures due and payable upon the occurrence of any of the events listed in Section 8.1 above, shall not constitute a waiver of the rights of the Debenture Holders or the Trustee, as stated. 9. Claims and proceedings by the Trustee 9.1. In addition to any provision herein and as an independent authority, the Trustee may, at its discretion and without giving notice, adopt all such proceedings, including legal proceedings and applications for orders, as it finds fit and subject to the provisions of any law, to protect the rights of the holders of the Debentures (Series B) and enforce the Company’s duty to meet another obligation under the Deed of Trust. Nothing in the foregoing shall prejudice and/or derogate from the Trustee’s right to institute legal - 47 - and/or other proceedings, even if the Debentures (Series B) have not been declared due and payable, all with a view to protecting the holders of the Debentures (Series B) and/or for purposes of issuing any order with regard to Trusteeship matters and subject to the provisions of any law. Notwithstanding the provisions of this section, it is clarified that the right to declare the Debentures due and payable will arise only in accordance with the provisions of Section 8 above and not by virtue of this section. 9.2. Subject to the provisions of the Deed of Trust, the Trustee is entitled, but not obliged, to convene at any time, a general meeting of the holders of Debentures (Series B) in order to discuss and/or receive its instructions on any matter relating to the Deed of Trust. 9.3. Any time the Trustee is obligated under the terms of the Deed of Trust to take any action, including instituting proceedings or filing claims at the request of the holders of Debentures (Series B) as stated in this section, the Trustee is entitled, at its sole discretion, to delay the execution of any said action until such time as it receives instructions from the general meeting of the Debentures (Series B) holders in an ordinary resolution and/or instructions from the court how to act provided that the convening of the meeting or petition to the court takes place at the first possible date. For the avoidance of doubt, it is clarified that the Trustee is not entitled to delay the taking of actions or proceedings as stated in the case in which the delay may harm the rights of the Debentures (Series B) holders. 9.4. The Trustee may, subject to the provisions of Section 28 below, waive the same terms that it sees fit for upholding all or part of the undertakings of the Company. 9.5. The Trustee may, before taking any legal proceedings, convene a meeting of Bondholders (Series B) in order for the Holders to decide which proceedings to take to exercise their rights under this Deed, in an ordinary decision. Additionally, the Trustee may also again convene meetings of the Bondholders (Series B) for the receipt of instructions with respect to managing the proceedings as stated, in an ordinary resolution, provided that convening the meeting takes place on the first possible date under the provisions of the Second Schedule of the Deed of Trust and the delay of proceedings does not risk the rights of the Holders 10. Receipts held in Trust All the funds held by the Trustee, except for its fees, expenses, and repayment of any debt to it, in any way whatsoever, including but not only in consequence of declaring the Debentures due and payable, and/or as a result of proceedings instituted by it, if any, against the Company, shall be held by the Trustee in trust and shall be used for such purposes and according to the order of priorities as follows: First – for the settlement of all expenses, payments, levies, and obligations incurred by the Trustee, imposed on it, or caused in the course or in consequence of acts to execute the trust or otherwise, with respect to the terms of the Deed of Trust, including its fee (provided the Trustee does not receive its fee from the Company or from the Debenture Holders). Second – for the payment of any other amount pursuant to the “undertaking to indemnify” (as this term is defined in Section 26.1.6 below); Third – for the payment to the - 48 - holders of the Debentures from Series B who incurred payments pursuant to Section 26.4.2 below; The balance will be used, unless decided otherwise, in advance, and in a special resolution of a meeting of the holders of the Debentures (Series B), for such purposes and according to the following priorities: (a) First – to pay to the Debenture Holders the arrears of the interest due to them under the terms of the Debentures (Series B), pari passu and pro rata to the sums of principal payable to each of them, without preference or priority with respect to any of them; (b) Second - to pay to the holders of the Debentures (Series B) the arrears of the principal under the terms of the Debentures pari passu and pro rata to the amount of the principal in arrears payable to each of them, under the terms of the debentures, pari passu and pro rata to the sums of the principal in arrears, owed to them, without preference or priority with respect to any of them; (c) Third – to pay to the holders of the Debentures (Series B) the amounts of the interest owed to them under the terms of the Debentures held by them pari passu, whose payment date has not yet occurred, and pro rata to the sums payable to each of them, without preference as to the time priority of the issuance of the Debentures (Series B) by the Company or otherwise; (d) Fourth – to pay to the holders of the Debentures (Series B) the amounts of the principal owed to them under the terms of the Debentures they hold, pari passu, whether or not such amounts for the principal have become due and pro rata to the sums owed to them, without any preference as to the time priority of the issuance of the Debentures (Series B) by the Company or otherwise; (e) The surplus, if any, shall be paid by the Trustee to the Company or its successors, as applicable. Withholding tax will be deducted from the payments to the holders of the Debentures (Series B), to the extent that there is a requirement to deduct withholding tax under any law. It is clarified that if the Company was required to incur any of the expenses but failed to do so, the Trustee shall act to collect said amounts from the Company and if it succeeds in obtaining them they will be held by it in trust and will be used for the purposes and according to the order of priorities specified in this section. 11. Power to demand payment to the holders through the Trustee The Trustee may instruct the Company to transfer to the Trustee some of the payment which the Company is required to pay the Holders (hereinafter in this section: the "Relevant Payment") for the purpose of financing the proceedings and/or expenses and/or the Trustee’s fees pursuant to this Deed (hereinafter in this section: the "Sum of Financing") provided that Company did not bear the Sum of Financing itself and/or deposited the Sum of Financing with the Trustee in advance. The Company shall transfer the Sum of Financing to the Trustee no later than the date of the execution of the Relevant Payment. The Company is not entitled to refuse to act in accordance with said notice and it shall be deemed to have fulfilled its obligations to the Holders if it proves that it has transferred the full Sum of Financing to the Trustee as aforesaid. It should be noted that the financing amount shall only be deducted from the interest payments (and none from the principal).

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• 49 - Until no later than four trading days before the record date to perform the Relevant Payment of which the Sum of Financing will be deducted an Immediate Report will be published, detailing the Sum of Financing, its designation, and the updated sums of interest and interest rate that will be paid to the holders in accordance with the Relevant Payment. In addition, the Company shall specify in the said Immediate Report that the Sum of Financing that will be transferred to the Trustee will be considered as a payment to the Debenture Holders, for all intents and purposes. The Sum of Financing that the Trustee will be allowed to instruct the Company to give over as aforementioned in this section, and provided that there was not prior holders decision with this regard (including decision regarding commencing proceedings and/or taking action for which the Sum of Financing is needed) will be limited at NIS 500,000 (VAT added). Nothing in the foregoing shall relieve the Company of its obligation to incur the expenses and fees as aforesaid where it is required to incur them under this Deed or pursuant to any law. In addition, nothing in the foregoing shall derogate from the Trustee’s duty to act reasonably to obtain the Sum of Financing due to the Holders from the Company. 12. Power to withhold distribution of funds Notwithstanding the provisions of Section 10 above, in the event that the monetary sum obtained in consequence of the institution of proceedings as aforesaid, which at any time is available for distribution, as set out in Section 10 above, is less than NIS 1 million, the Trustee shall not be obligated to distribute same, and it may invest such sum, in whole or in part, in such investments as are permitted. Where such investments, including accruals thereon, together with other funds received by the Trustee, total such amount as is sufficient to pay the aforementioned amount, the Trustee shall pay the same to the Holders in accordance with the order of priorities set out in Section 10 above. In the event that by the earlier of either the date of payment of the interest and/or principal or a reasonable period of time after receipt of the monetary amount, the Trustee does not have a sufficient sum to pay at least NIS 1 million, the Trustee may distribute the funds held by it to the Debenture Holders. Notwithstanding the foregoing in this Section 12 above, the holders of the Debentures (Series B), according to the resolution adopted by them, may instruct the Trustee to pay them the distributable funds obtained by the Trustee as set forth in Section 10 above, even if the sum total is less than NIS 1 million even if the time for payment of principal and/or interest has not arrived under the terms of the Debentures, subject to the provisions of the TASE Regulations and its guidelines as shall be in effect at the time. Notwithstanding the foregoing, the Trustee’s fees and the Trustee’s expenses will paid from the said funds when they become due (with respect to the expenses already paid to the Trustee, the Trustee will be reimbursed for said expenses immediately when the funds are obtained by the Trustee) even if the amounts obtained by the Trustee are less than NIS 1 million. 13. Notice of distribution The Trustee shall give notice to the holders of the Debentures (Series B) of the date and the place of effecting any payment of the installments set out in Sections 10 and 12 above, in a - 50 - prior 14 days' notice to be delivered to them in the manner designated in Section 27 below. After the date designated in the notice, the holders of the Debentures (Series B) shall be entitled to interest thereon at the rate designated in the Debentures, only in respect of the outstanding balance of the principal (if any), after deduction of the amount paid, as aforesaid. 14. Failure to pay for reasons out of the Company’s control 14.1. Any amount due to the holders of the Debentures (Series B) which was not paid on the date prescribed for its payment, for a reason that is out of the Company’s control, while the Company was willing and able to pay said amount in full and on time (hereinafter: the "Impediment", shall cease to bear interest from the date designated for its payment and the holders of the Debentures (Series B) will only be entitled to the amount he was entitled to on the date prescribed for repayment thereof on account of the principal or the interest. 14.2. The Company shall deposit with the Trustee, on the earliest possible date after the date designated for payment and no later than 14 days of the date designated for payment, the sum of the installment not paid in a timely fashion, as set out in Section 14.1 above, and shall give notice in writing according to the addresses available to it, if any, to the holders of the Debentures (Series B), of such deposit, and such deposit shall be deemed as settlement of such installment, and, in the event of settlement of everything owing for the Debenture, also as redemption of the Debentures (Series B) by the Company. The above will not derogate from the Company’s obligations to bear the fees and expenses of the Trustee, all in accordance with the provisions of this Deed. 14.3. Any amount held by the Trustee in trust for the holders shall be deposited by the Trustee in a bank and held by it, in its name or on its behalf, at its discretion, in permitted investments as set forth in Section 17 below. If the Trustee did same it will owe the holders, in respect of said amounts, only the proceeds from the disposal of the investments less the expenses related to said investments, including for the management of the Trust Account and less its fees and mandatory payments, and it shall pay same to the holders against such certifications as shall be required by it to its satisfaction. Once the Trustee receives notice from the holder that such Impediment has been lifted, the Trustee shall transfer to the holder all the funds accumulated in the deposit as a result of the disposal of the investment, net of all the reasonable expenses including the Trust Account management fees and net of its fees and any applicable tax under the law. Payment shall be effected against the presentation of certifications, which are acceptable by the Trustee, regarding the holder’s right to receipt thereof. 14.4. The Trustee shall hold such funds and shall invest them according to the provisions of Section 17 below, up to the end of one year from the final settlement date of the Debentures (Series B). After such date, the Trustee shall return such amounts to the Company, including profits arising from their investment, less its reasonable expenses and less its fees and other expenses which were expended in accordance with the provisions of this Deed (such as payment to service providers, etc.), and the Company shall hold such amounts in trust for the holders of the Debentures (Series B) that are entitled to such sum for a period of up to seven (7) years from the date of final - 51 - repayment of the Debentures (Series B), and with respect to the sums transferred to it by the Trustee, as aforesaid, the provisions of Subsection 14.3 above shall apply to it, mutatis mutandis. Funds that are not claimed from the Company by the holders of the Debentures (Series B) at the end of seven years (7) from the date of final repayment of Debentures (Series B), shall be transferred to the Company’s possession, after 30 days from the date of delivering a written notice to the said holders by the Company, according to the addresses in its possession, if any, and it may use the remaining funds for any purpose whatsoever, all in accordance with the statutes of limitation. As soon as the amounts as returned to the Company the Trustee will not owe the holders of the Debentures (Series B) any payment in respect of the amounts held by it as aforesaid. 14.5. The Company shall confirm to the Trustee, in writing, the return of the amounts as stated in Section 14.4 above and the receipt thereof on behalf of the holders of the Debentures (Series B), and shall indemnify the Trustee for any claim and/or expense and/or damage of any type whatsoever incurred by it, in consequence of, and due to, the transfer of the funds as aforesaid, unless the Trustee has acted negligently, in bad faith or maliciously. 15. Receipt from the Debenture Holders and from the Trustee 15.1. A receipt from a holder of the Debentures (Series B) or written confirmation by the TASE member of the transfer for any payment on account of the principal and the interest paid to him by the Trustee, in connection with the Debenture, shall serve as absolute exemption of the Trustee in connection with the performance of the payment of the sums designated in the receipt. 15.2. A receipt from the Trustee as to the deposit of the amounts of the principal and the interest with it, for the benefit of the holders of the Debentures (Series B), shall be deemed as a receipt from the holders of the Debentures (Series B) for purposes of the provisions of Section 15.1 above, with respect to the exemption of the Company in connection with the performance of the payment of the sums designated in the receipt. 15.3. Funds distributed as aforesaid in Sections 10 and 12 above, shall be deemed as payment on account of the repayment of the Debentures (Series B). 16. Presentation of a Debenture to the Trustee; Registration with respect to partial payment 16.1. The Trustee is entitled to request the holders of the Debentures (Series B) to present, to the Trustee, upon the payment of any interest or partial payment of principal and interest, the Debenture certificates (Series B) in respect of which the payments are made. The holder of the Debenture (Series B) will be required to present said Debenture certificate provided this will not obligate the holders of the Debentures (Series B) to incur any payment and/or expenses and/or impose any responsibility and/or liability on the holders of the Debentures (Series B). 16.2. The Trustee may register, in the Debenture (Series B) certificate, a note with respect to the sums paid as aforesaid and as to the date of payment thereof. - 52 - 16.3. The Trustee may, in any special case, at its discretion, waive the presentation of a debenture certificate (Series B), after an indemnity undertaking and/or sufficient security, to its satisfaction, has been given to it by the holders of the Debentures (Series B), for damages liable to be caused due to failure to register such note, all as it deems fit. 16.4. Notwithstanding the aforesaid, the Trustee may, at its discretion, keep records in any other manner, with respect to such partial payments. 17. Investment of Funds All funds which the Trustee may invest under this Deed of Trust, shall be invested by it, in accounts of one of the four leading banks in Israel, provided the bank’s rating does not drop below AA, in its name or to its order, provided it invests the funds in bank deposits, treasury bills issued by the Bank of Israel and/or government bonds issued by the Bank of Israel. If the Trustee did same it will owe the holders, in respect of said amounts, only the proceeds from the disposal of the investments less its fees and expenses, less the fees and expenses related to the said investment and the management of the trust accounts and less the mandatory payments that apply to the Trust Account, and with respect to the remainder of said funds, the Trustee shall act in accordance with the provisions of Sections 12 and/or 14 above, as the case may be. 18. The Company’s undertakings to the Trustee The Company hereby undertakes to the Trustee, and the Debenture Holders so long as the Debentures (Series B) have not been repaid in full, as follows: 18.1. To continue to conduct the Company’s business in an efficient and appropriate manner. 18.2. To maintain orderly books of account in accordance with accepted accounting principles, to maintain the books and documents used as their references (including deeds of pledge, mortgage, accounts, and receipts) in its offices, and to allow the Trustee and any authorized representative of the Trustee to review, no later than 5 business days from the date of request of the Trustee, to be coordinated in advance with the Company, any book and/or document, as aforesaid, which the Trustee requests to review. In this context, an authorized representative of the Trustee means a person designated by the Trustee for the purpose of such review, by means of a written notice on the part of the Trustee, to be given to the Company prior to the review as aforesaid, subject to an undertaking of confidentiality as specified in the provisions of Section 31.12 below. To the extent possible, considering the nature and circumstances of the matter, the Company shall act to enable the right of inspection, as stated in this section above, in Israel, including the transfer of materials via any medium 18.3. To notify the Trustee in writing, as soon as reasonably possible, and no later than one business day after learning, of any event of imposition of an attachment and/or an

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• 53 - execution action carried out on a Material Property of the Company(as this term is defined in Section 8.1 above), and in the event of appointment of a receiver, a special administrator and/or temporary or permanent liquidator and/or a Trustee for a Material Property of the Company (as this term is defined in Section 8.1 above), a, who were appointed as part of a motion for suspension of proceedings pursuant to Section 350 of the Companies Law and/or any other similar office holder against the Company, and to take, at its expense, all measures required to remove such attachment or to cancel the receivership, liquidation or administration, as the case may be. 18.4. To advise the Trustee in writing, immediately upon the Company learning of, no later than one trading day: (1) the occurrence of any of the events set out in the subsections of Section 8.1 above; (2) probable concern by the Company that one or more of the cases enumerated in the subsections of Section 8.1 above may occur. The provisions of this section and all of its subsections shall be implemented by the Company without taking into account the securities treatment and waiting period set forth in Section 8.1 above, if any. 18.5. To deliver to the Trustee a signed written notice by the chief financial officer of the Company, no later than 5 business days from the date of the Trustee's request, of the performance of any payment to the Debenture Holders and the remaining amounts which the Company owes, on that date, to the Debenture Holders, after the performance of the above payment. 18.6. To deliver to the Trustee, immediately upon receipt thereof, any report that it is required to submit to the Securities Authority, an immediate report via the Magna system and any report or information that will be published (in full) by the Company on the Magna system shall be deemed to have been delivered to the Trustee. Notwithstanding the aforesaid, at the Trustee’s request, the Company shall deliver to the Trustee a printed copy of the report or information as aforesaid. 18.7. To deliver to the Trustee copies of notices and invitations issued by the Company and/or the Trustee to the Debenture Holders, as stated in Section 27 of this Deed. 18.8. To cause the chief financial officer of the Company to provide the Trustee and/or such persons as he may instruct, not later than 10 business days of the demand of the Trustee, any explanation, document, calculation or information regarding the Company, its business and/or assets, which shall be reasonably required, at the Trustee’s discretion, for the purpose of reviews conducted by the Trustee to protect the Debenture Holders. 18.9. To invite the Trustee to attend general meetings (whether annual general meetings or extraordinary general meetings of shareholders of the Company) of shareholders of the Company (with no participation or voting rights) that shall take place in Israel. The publication of an invitation to a general meeting of shareholders of the Company via the Magna system shall be deemed as invitation of the Trustee for purposes of this section. For as long as the Company is a debenture company as defined in the Companies Law - to provide the Trustee with signed minutes of shareholders meetings within one business day of the date of signing said minutes. - 54 - 18.10. As long as the Debentures (Series B) have not been repaid in full, to provide the Trustee with the following reports: 18.10.1.1. Audited annual financial statements of the Company, and reviewed quarterly financial statements of the Company, no later than the dates designated therefor in accordance with the Securities Law, even if the Company ceased to be a Reporting Corporation. 18.10.1.2. If and as long as the Company is a public company, as it is defined in the Companies Law – a copy of each document transmitted by the Company to its shareholders or to the Debentures Holders and details of any information transmitted to them by the Company by other means, including any report submitted by law to the Securities Authority (immediate reports), immediately upon its publication. As long as the Company is a private company that is a debenture company – to provide the Trustee with a copy of each document transmitted by the Company to the Debentures Holders and details of any information transmitted to them by the Company by other means, including any report submitted by law to the Securities Authority (immediate reports), immediately upon its publication. 18.10.1.3. To provide the Trustee, at its first written request, with written confirmation signed by an accountant that the payments to the debenture holders were made on time, and the balance of the par value of the Debentures in circulation. 18.10.1.4. If the Company ceased to be a Reporting Corporation, the Company shall provide with the Trustee, in addition to the provisions of Sections 18.3 to 18.10 above and Section 18.11 below, annual, quarterly and immediate reports, as specified below, signed by the CEO and the Chief Financial Officer of the Company, as well as additional reports as such are required in accordance with the provisions of the Consolidated Circular, as the case may be: (a) An annual report that includes the information specified in Appendix 5.2.4.8 to Chapter 4 of Part II (Management of Investment Assets and Provision of Credit) Title 5 (Principles of Business Management) of the Consolidated Circular, no later than 60 days from the date in which the Company would have been required to publish its financial statements had it been a Reporting Corporation; (b) A quarterly report that includes the information specified in Appendix 5.2.4.9 to Chapter 4 of Part II (Management of Investment Assets and Provision of Credit) Title 5 (Principles of Business Management) of the Consolidated Circular no later than 30 days from the date in which the Company would have been required to publish its financial statements had it been a Reporting Corporation; (c) An immediate report upon the occurrence of any of the events specified in Appendix 5.2.4.10 to Chapter 4 of Part II (Management - 55 - of Investment Assets and Provision of Credit) Title 5 (Principles of Business Management) of the Consolidated Circular. The report will be published on the date in which the Company would have been required to report the event pursuant to Regulation 30(B) of the Reports Regulations or any regulation that replaces it. 18.11. To deliver to the Trustee, upon his request, a declaration and/or declarations and/or documents and/or details and/or additional information on the Company (including explanations, documents, and calculations regarding the Company, its business or assets) and to instruct its accountant and its legal consultants to do same, upon reasonable request in writing by the Trustee, and this - no later than 10 business days from the date of request by the Trustee, if, in the Trustee’s reasonable opinion, the information is required by the Trustee to exercise the powers and authority of the Trustee and/or his representative under the Deed of Trust, including information that could be essential in protecting the rights of the Debenture Holders provided the Trustee acted in good faith, and subject to the confidentiality undertaking, as stated in Section 31.12 below. 18.12. To deliver to the Trustee all the reports or notices as specified in Section 35J of the Law. 18.13. No later than 7 business days after the publication of the Company’s annual or quarterly financial statements, as the case may be, the Company shall furnish to the Trustee a written detailed confirmation, worded in a manner that will satisfy his request, signed by the chief financial officer, with the addition of an active Excel file, regarding the Company’s compliance or noncompliance with any of the financial covenants set forth in Section 6.4 of this Deed, together, with the detailed relevant calculation in connection with each financial covenant. 18.14. No later than 7 business days after the publication of the Company’s quarterly financial statements, and as long as this Deed of Trust is in effect, the Company shall furnish to the Trustee, a written confirmation by the Company, signed by authorized signatories on its behalf as well as its Chairman of the Board of Directors and/or general manager, that during the period from the date of the Deed and/or the date of the previous confirmation delivered to the Trustee, whichever is later, and until the date of the confirmation, the Company was not in violation of this Deed and the terms of the Debentures (Series B), unless it expressly states otherwise. 18.15. On April 10 of each year, for the previous calendar year, and as long as this Deed of Trust is in effect, the Company shall deliver to the Trustee, a written confirmation signed by the chief financial officer of the Company with regard to interest payments and/or payments on account of the principal, in connection with the Debentures (Series B), which became due prior to the date of confirmation, and the date of payment, and the balance of nominal value of outstanding Debentures (Series B) as of the date of confirmation; as well as confirmation by a director of the Company and by its general manager, that on the year ended December 31 the Company was not in breach of the terms and restrictions stipulated in the Deed of Trust (including specific terms and restrictions in the Deed and in the Debentures, which the Trustee shall ask the - 56 - Company to address in the confirmation), unless expressly stated otherwise in the said confirmation. 18.16. Inform the Trustee in writing of any change in its name or address, no later than two trading days from date of the implementation of the change. It is clarified that reporting via MAGNA system will constitute a reporting to the Trustee, for the purposes of this section. 18.17. The Trustee may instruct the Company to report forthwith on the Magna system, in the Trustee’s name, any report the wording of which shall be delivered in writing by the Trustee to the Company, and the Company shall be obligated to report the same forthwith. 18.18. The Trustee will keep in confidence all information provided thereto under this section, will not disclose it to another and will not make any use thereof, unless its disclosure or use is required for the purpose of fulfilling its role as Trustee according to the Law, according to the Deed of Trust, or according to a court order, or for protection of the rights of the Debenture Holders 18.19. The Company shall notify the Trustee of non-compliance with any foreign covenant as soon as possible and no later than 2 business days from the day in which the Company’s non-compliance with the foreign covenant began or within 2 business days from the date on which it was notified by an associate of the non-compliance with any foreign covenant, as the case may be, and the expected repercussions of such non- compliance pursuant to the Company’s agreements with such entity. It is clarified that if the Company fails to comply with a foreign covenant and a grace period is provided for the purpose of compliance with the foreign covenant, such grace period shall not be deemed, for purposes of this section only, as compliance with the covenant and the Company shall notify the Trustee of non-compliance with the foreign covenant as aforesaid. For purposes of this section – “Foreign covenant” – a material financial covenant of the Company and of an affiliated company of the Company, pursuant to an agreement with a financial institution or with another entity that provided material credit to the Company, and to the affiliated company. “Material financial covenant” – a financial covenant in respect of which non- compliance constitutes grounds for declaring the debt due and payable. “Material credit” – credit that constitutes at least 10% of the total of the Consolidated Equity Capital of the Company (including minority interest). For the purposes of an affiliated company – credit, the amount of which multiplied by the Company’s percentage holding (through a chain of holdings) constitutes at least 10% of the Company’s consolidated Equity Capital (including minority interests). Notwithstanding the provisions of Section 27 below, the Company shall give the Trustee written notice of non-compliance with the foreign covenant in addition to any immediate report that the Company will publish on the matter, if any.

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• 57 - 18.20. The Company undertakes to provide to the Trustee the following authorizations, as applicable: 18.20.1 Regarding Section 3.2 above: If an Associated Person (as defined in Section 3.2 above) should purchase and/or sell Company debentures, the Company shall deliver to the Trustee, on demand, the list of Associated Persons and the quantities held thereby on the date on which the Trustee requests it, in accordance with the reports received, as mentioned above, from Associated Persons, and that have been reported in the MAGNA system by the Company. It is clarified that reporting in the MAGNA system shall constitute a report to the Trustee, for the purpose of this Section. 18.20.2 With respect to the authorizations required for the Expansion of a Series or the issuance of a new series, see Section 4.3 and 4.11 above. 18.20.3 No later than 15 days after the date of issuance of Debenture (Series B) in accordance with the Shelf Prospectus report and/or after the date of Series Expansion, the Company shall provide the Trustee with a true certified copy of the Debenture Certificate. 18.20.4 For the purpose of Section 5.5 above: Around the time of the first issuance of the debentures as well as on any date of interest completion, the Company shall provide the Trustee with a calculation signed by the Company's senior financial officer in regard to the current amount of interest cushion as of that date (as such term is defined in Section 5.5.1 above). 18.20.5 With respect to the authorizations required to make a distribution, see Section 5.9 above. 18.20.6 For the purpose of Section 6.2.3 above: the Company will provide the Trustee no later than 5 days after signing this Deed with the opinion of an attorney specializing in the laws of the British Virgin Islands applicable to the Company, in accordance with which there is no legal obligation in the British Virgin Islands to record a negative pledge as specified in Section 6.2 above in accordance with the laws of the British Virgin Islands. the Company will provide the Trustee, on January 31 of each year, with an authorization from an attorney specializing in the relevant law applicable to the Company, in accordance with which as at the date of December 31 of the ending calendar year, the Company did not record in the registers thereof and/or any other registry conducted under the relevant law, any pledge in favor of a party contrary to its undertaking thereof in Section 6.2.1 above. To the authorization of the attorney shall be attached a certificate from the register conducted in this matter in accordance with the law applicable to the Company. 18.20.7 With respect to Section 6.5 above: the Company will provide the Trustee with approval from the senior office holder in the Company’s financial department, at the end of April of each year, that the Company has complied with its liabilities under Section 6.5 above regarding taking credit from non- Israeli financial institutes. - 58 - 18.20.8 With respect to Section 6.3 above: the Company shall provide the Trustee with authorization from the senior financial officer in the Company, together with the relevant calculations in an active Excel file, with respect to the compliance with the financial covenants in Section 6.3 above, no later than 7 business days from the date of publication of the financial statements of the Company. The Company undertakes to inform the Trustee and the holders of the Company’s Debentures (Series B) regarding any breach of liability to any financial creditor, and it shall not constitute grounds for immediate repayment, without derogating from the provisions of Section 8.1 above. 19. Additional undertakings 19.1. To the extent that the Debentures are declared due and payable, as defined in Section 8 above, the Company shall perform, from time to time and any time it is required by the Trustee, all the reasonable acts to enable the exercise of the powers vested in the Trustee, and in particular, the Company shall take the following actions, no later than seven business days from the date of request by the Trustee: 19.1.1. To pay the Debenture Holders and the Trustee all of the amounts owed to them under the terms of the Deed of Trust, whether the charge date for them has transpired or otherwise (“acceleration”), within seven days from the date of notice of the Trustee to the Company. 19.1.2. Make the statements and/or sign all the documents and/or execute and/or cause the execution of all the necessary or required actions by law, in order to validate the exercise of the powers and authority of the Trustee and/or its representative under this Deed of Trust. 19.1.3. Give all the notices, instructions and orders that the Trustee considers beneficial and requires the same for the purpose of implementing the provisions of the Deed of Trust. 19.2. For purposes of this section – a signed written notice by the Trustee, confirming that an action required by it, within its powers, is a reasonable action, shall constitute prima facie evidence. 20. Agents 20.1. The Company hereby irrevocably appoints the Trustee as its agent, to execute and carry out in its name and in its stead, all the actions that it will be required to carry out under the terms of this Deed, and in general to act in its name in relation to the actions that the Company is obligated to carry out under this Deed and has not carried out or to exercise some of the powers it holds, and to appoint any other person as the Trustee deems fit to perform its duties under this Deed, provided the Company has not carried out the actions it is required to carry out under the terms of this Deed within a - 59 - reasonable period of time as determined by the Trustee, as of the date of the Trustee’s instruction, and provided it acted reasonably. 20.2. An appointment as stated in Section 20.1 above shall not obligate the Trustee to take any action and the Company hereby exempts the Trustee and its representatives in the event that they do not take any action, and the Company hereby waives any claim toward the Trustee and its representatives in respect of any damage that was incurred or may be incurred to the Company directly or indirectly, in respect of that, on the basis of any action that was not taken by the Trustee and its representatives as aforesaid. 21. Other Agreements Subject to the provisions of the Law and the restrictions imposed on the Trustee under the law, the fulfillment of its role as Trustee, under this Deed, or its very status as Trustee, shall not prevent the Trustee from entering into various agreements with the Company, or entering into transactions with the Company in the ordinary course of its business. It should be noted that the Trustee will not be able to enter into an agreement with the Company as aforesaid if this creates a conflict of interest with its tenure as Trustee for the Debenture (Series B) Holders. 22. Trusteeship reports 22.1. The Trustee shall be required to submit a report with regard to the acts performed by it in accordance with the provisions of Section 35H (1) of the Securities Law. 22.2. Until June 30 of each year the Trustee shall prepare an annual report on trust affairs (hereinafter – “the Annual Reports”). The annual report shall include a report of irregular events in connection with the Trusteeship that occurred in the past year. 22.3. The Trustee will publish (itself or through the Company at the Trustee’s request) the annual report on the Magna system. 22.4. If the Trustee learns of a material breach of the terms of this Deed and/or the terms of the Debentures (Series B) of the Company, on the part of the Company, as from public reports issued by the Company or the Company’s notice to the Trustee pursuant to Section 18.4 above, it will notify the holders of the Debentures (Series B) of such breach and the steps taken by the Trustee to prevent it or to enforce the Company’s compliance with the obligations, as the case may be. Such duty shall not apply if this is an event that was published by the Company under the law. Such duty of the Trustee is subject to its knowledge of the said breach. 22.5. Upon the request of the Holders of over five percent (5%) of the balance of the par value of the Debentures (Series B), the Trustee will deliver to the Holders data and details with respect to the expenses thereof in connection with the trust at the subject of the Deed of Trust. 22.6. The Trustee will be obliged to submit a report of the activities it has performed under the provisions of Chapter E1 of the law by a reasonable request of the holders of at least ten percent (10%) of the outstanding nominal balance of the Debentures within - 60 - a reasonable time from the date of the request, subject to the confidentiality undertakings of the Trustee to the Company as specified in Article 35j (D) of the Law. 22.7. As of the signing of this Deed, the Trustee declares that it is insured with professional liability insurance in the amount of NIS 40 million for the period (hereinafter: the “Coverage Amount”). If before the full payment of the Debentures (Series B), the coverage amount is reduced from the amount of NIS 32 million for any reason, the Trustee will update the Company no later than seven business days from the date on which it was made aware of the said reduction from the insurer in order to publish an immediate report on the matter. The provisions of this section will apply by the date of the entry into force of the Regulations to the Securities Law that address the obligation for the Trustee’s insurance coverage. After the entry to force of the Regulations as stated, the Trustee will be required to update the Company only in the case in which the Trustee does not meet the requirements of the Regulations. 22.8. The Trustee will update the Company of any report submitted under this Section 22, inasmuch as this does not harm the holders' rights. 23. Remuneration of the Trustee and reimbursement of its expenses The Company shall pay the Trustee a fee as specified in Appendix 23 of this Deed. 24. Special powers 24.1. The Trustee will be entitled to deposit all the deeds and documents which evidence, represent and/or specify its right under this Deed including in connection with any asset held by it at the time, in a safe and/or at another place it may choose, with any banker and/or bank and/or with an attorney. 24.2. The Trustee may, as part of the execution of the Trust affairs under this Deed, to enlist the opinion and/or advice of any attorney, accountant, appraiser, assessor, surveyor, mediator or other specialist (hereinafter – “the Consultants”) and to act in accordance with its conclusions, whether such opinion or advice has been prepared at the request of the Trustee and/or at the Company, and the Trustee shall not be responsible for any loss or damage caused in consequence of any act and/or omission performed by it, on the basis of such advice or opinion, unless a peremptory judgment has determined that the Trustee has acted with gross negligence and/or in bad faith and/or maliciously. The Company shall incur the expenses of employing the Consultants who are appointed as aforesaid, provided, insofar as necessary under the circumstances of the matter and to the extent that this shall not prejudice the rights of the holders, that the Trustee gives the Company prior notice of its intent to obtain such expert opinion or advice. 24.3. Any such advice and/or opinion may be given, forwarded or received by means of a letter, telegram, facsimile and/or any other electronic means for transmission of information, and the Trustee shall not be responsible for any acts performed by it on the basis of any advice and/or opinion and/or information transmitted in one of the

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• 61 - aforesaid manners, notwithstanding that it contained errors and/or was not authentic, unless such errors could have been detected under a reasonable examination. 24.4. Subject to any law, the Trustee shall not be obligated to inform any party of the signing of the Deed of Trust and may not intervene in any way whatsoever in the management of the Company or its affairs, unless it is pursuant to the authority vested in the Trustee under this Deed. Nothing stated in this section shall limit the Trustee in the actions it is required to perform under the Deed of Trust. 24.5. The Trustee shall use the trust, powers, authorizations, and authorities conferred on it under this Deed, at its absolute discretion and subject to the other provisions of this Deed. In doing so, it shall not be responsible for any damage and/or loss and/or expense caused to the Company and/or the Debenture Holders and/or which they will have to incur in consequence of any act and/or omission performed by the Trustee, including as a result of errors in judgment, unless a peremptory judgment has determined that the Trustee has acted with negligence or in bad faith or maliciously or in violation of the provisions of this Deed, all subject to and in accordance with the statutory provisions. 24.6. Unless explicitly set forth otherwise in the Law or the provisions of this Deed of Trust, the Trustee is not required to act in a manner which is not expressly detailed in this Deed of Trust so that any information, including about the Company and/or in connection with the Company's ability to meet its obligations to Bondholders, comes to its attention, and this is not its role. 25. The Trustee’s power to engage agents The Trustee may, as part of the management of trust affairs, appoint an attorney or other agent/s to act in its stead, inasmuch it shall not harm the rights of the Debentures (Series B) Holders, in order to perform or participate in the performance of special acts to be performed with respect to the trust and pay a fee to any such agent, and, without derogating from the generality of the foregoing, institution of legal proceedings. The Trustee shall also be entitled to pay, at the Company’s expense, the fees of any such agent including by deducting the payment from the funds received by it and the Company shall reimburse the Trustee immediately upon its first request for any such expense, all provided the Trustee gave the Company advance notice regarding the appointment of agents as aforesaid insofar as it is possible under the circumstances and to the extent that this will not prejudice the rights of the holders. It is clarified that the appointment of said agent shall not release the Trustee from any responsibility for its actions and for the actions of its agents. 26. Indemnification of the Trustee 26.1. The Company and the debenture holders (on the relevant effective date as provided in Section 26.6 of the Deed of Trust, each in respect of their undertaking as provided in Section 26.4 of the Deed of Trust) hereby undertake to indemnify the Trustee and all its officers, employees and any proxy or expert who appoints or will be appointed by - 62 - the Trustee as per the provisions of this Deed of Trust and/or per resolution made in the meeting of the Debentures (Series B) holders, based on the provisions of this Deed of Trust (hereinafter: "parties entitled to indemnification"): 26.1.1. For any damage and/or loss and/or for any monetary charge under any judgment (for which no stay of execution was granted) or under any completed settlement (and insofar as the settlement relates to the Company, the Company gave its agreement thereto), arising from actions that were performed by the parties entitled to indemnification or which they are required to perform under the provisions of this Deed and/or by law and/or by order of a competent authority and/or in accordance with any statute and/or upon the demand of the holders of Debentures (Series B) and/or upon the Company's demand and/or under their role according to this Deed; and 26.1.2. For the fee of the parties entitled to indemnification and expenses which they incurred and/or are about to incur, and for any damage and/or loss caused to them due to actions which they performed or are required to perform under the provisions of this Deed and/or by law and/or by order of a competent authority and/or in accordance with any statute and/or upon the demand of the holders of Debentures (Series B) and/or upon the Company's demand and/or in connection with the exercise of powers and authorizations conferred by this Deed and in connection with all kinds of legal proceedings, opinions of lawyers and other experts, negotiations, discussions, expenses, claims and demands relating to any matter and/or thing done and/or not done in any way in connection with the subject matter hereof and/or under their role according to this Deed. All the above on condition that: 26.1.3. The parties entitled to indemnification do not demand to be indemnified in advance in a matter that cannot be delayed (without prejudice to their right to retroactive indemnification); 26.1.4. It was not determined in a peremptory rule that the parties entitled to indemnification acted in bad faith and the action was done outside the framework of their duties, not in accordance with the statutory provisions and/or not in accordance with this Deed of Trust; 26.1.5. It was not determined in a peremptory rule that the parties entitled to indemnification were negligent; 26.1.6. It was not determined in a peremptory rule that the parties entitled to indemnification acted maliciously; The indemnification rights under this Section 26.1 are hereinafter referred to as the "Indemnification Right" Or the “Indemnification Undertaking”. It is agreed that in the event it is alleged against the parties entitled to indemnification that: (1) they acted in bad faith, or outside the framework of their duties, or not in accordance with the statutory provisions or the Deed of Trust; and/or (2) were negligent; and/or (3) acted with malice – the parties - 63 - entitled to indemnification shall be entitled, immediately upon demand, to payment of the amount of the Indemnification Undertaking. However, where it has been determined in a peremptory rule that the parties entitled to indemnification did in fact act in the manner alleged against them as set forth above, they shall refund the amounts of the Indemnification Undertaking that were paid to them. 26.2. Without derogating from the compensation rights granted to the Trustee by law and subject to the provisions of this Deed and/or the Company's obligations under this Deed, the parties entitled to indemnification may be indemnified out of the monies received by the Trustee from proceedings instituted by it, with respect to obligations which they assumed, with respect to reasonable expenses which they incurred in connection with the performance of the trust or in connection with such actions as in their opinion were required for said performance and/or in connection with the exercise of the powers and authorizations conferred by this Deed and in connection with all kinds of legal proceedings, opinions of lawyers and other experts, negotiations, discussions, claims and demands relating to any matter and/or thing done and/or not done in any way in connection with the subject matter hereof, and the Trustee may withhold the monies held by it and pay out of them the amounts necessary for the payment of such indemnification. All the above amounts shall have priority over the rights of the holders of Debentures (Series B), subject to any statutory provisions and provided that the Trustee acted in good faith and in accordance with the duties imposed on it by any statute and by this Deed. For purposes of this section, an action of the Trustee that was approved by the Company and/or the debenture holders shall be deemed an action that was reasonably required. 26.3. Without derogating from the validity of the indemnification undertaking in Section 26.1 above, where the Trustee is obligated by the terms of the Deed of Trust and/or by law and/or by order of a competent authority and/or in accordance with any statute and/or upon the demand of the holders of Debentures (Series B) and/or upon the Company's demand to do any action, including but not limited to the institution of proceedings or the filing of claims upon the demand of the holders of Debentures (Series B), the Trustee may abstain from taking any such action until it receives from the Company, to its satisfaction, a monetary deposit in the amount required to cover the indemnification undertaking (hereinafter: "the financing cushion"), with first priority, and in the event that the Company does not deposit the full amount of the financing cushion within the time it was required to do so by the Trustee, the Trustee shall address to the holders of Debentures (Series B) which held Debentures (Series B) on the effective date (as provided in Section 26.6 below) a request to deposit the financing cushion with it, each according to their proportionate share (as this term is defined hereinafter). If the holders of Debentures (Series B) do not actually deposit the full amount of the required financing cushion, the Trustee shall not be obligated to take the relevant action or institute the relevant proceedings. The foregoing shall not exempt the Trustee from taking any urgent action required to prevent material harm to the rights of the holders of Debentures (Series B). - 64 - The Trustee is authorized to determine the amount of the financing cushion, and it shall be entitled to act again to create an additional financing cushion, from time to time, in an amount to be determined by it. It is clarified that the payment by the holders under this section will not release the Company from its obligation to bear the aforesaid payment. The Trustee, at its sole discretion, may make use of the funds deposited in the Financing Cushion for the execution of actions or use of relevant proceedings. 26.4. The indemnification undertaking: 26.4.1. Shall apply to the Company in case of: (1) actions that were performed according to the Trustee's judgment and/or in accordance with any statute and/or that were required to be performed under the terms of this Deed of Trust or for protecting the rights of the debenture holders (including due to a holder's demand required for such protection) and/or if the indemnification right arose by virtue of this Deed; and (2) actions that were performed and/or that were required to be performed upon the Company's demand. 26.4.2. Shall apply to holders on the effective date (as provided in Section 26.6 of the Deed of Trust) in case of: (1) the indemnification right arose as per the demand of the Debenture Holders (excluding an indemnification right arising from the demand of the Holders for the protection of the Debenture Holders' rights); and (2) nonpayment by the Company of the amount of the indemnification right due from it under Section 26.3 of the Deed of Trust (subject to the provisions of Section 26.6 of the Deed of Trust) provided the persons entitled to indemnification have taken the reasonable steps given the circumstances required for the collection of the said amounts from the Company. It is clarified that payment in accordance with this subsection (2) above shall not derogate from the Company's obligation to bear the indemnification undertaking in accordance with the provisions of Section 26.4.1. 26.5. If the Company fails to pay the full amount required to cover the indemnification undertaking, and/or does not deposit the full amount of the financing cushion, as the case may be, and/or if the indemnification obligation applies to the holders by virtue of the provisions of Section 26.4.2 above, and/or if the holders were called upon to deposit the amount of the financing cushion under Section 26.3 above, provided the persons entitled to indemnification have taken the reasonable steps given the circumstances required for the collection of the said amounts from the Company, the following provisions shall apply: 26.5.1. The monies shall be collected in the following manner: 26.5.1.1 First – The amount shall be financed out of the amounts of interest and if the funds of the interest from the principal which the Company is required to pay to the holders of Debentures (Series B) after the date of the required action will not be sufficient, and the provisions of Section 11 above shall apply.

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• 65 - 26.5.1.2 Second – If in the Trustee's opinion the amounts deposited in the financing cushion are not enough to cover the indemnification undertaking, the holders on the effective date (as provided in Section 26.6 above) shall deposit, each according to their proportionate share (as this term is defined) the missing amount with the Trustee. "Proportionate share" means: The proportion of the Debentures (Series B) held by the holder on the relevant effective date as provided in Section 26.6 above out of the nominal amount in circulation on that date. It is clarified that the calculation of the proportionate share shall remain fixed even if after that date there is a change in the par value of the Debentures held by the holder. It is clarified that the debenture holders who are liable to cover expenses as provided in this section above, may bear expenses as provided in this section above, beyond their proportionate share, and in such case, the order of priorities as provided in Section 10 of this Deed shall apply to the reimbursement of the amounts. 26.6. The effective date for determining the obligation of a holder in respect of the indemnification undertaking and/or payment of the financing cushion is as follows: 26.6.1. If the indemnification undertaking and/or payment of the financing cushion is required pursuant to a resolution or an urgent action necessary to prevent material harm to the rights of the holders of Debentures (Series B), without a prior resolution of the meeting of holders of Debentures (Series B) – the effective date for the obligation shall be the end of the trading day on the day when the action was taken or the resolution was adopted, and if that day is not a trading day, then the previous trading day. 26.6.2. If the indemnification undertaking and/or payment of the financing cushion are required pursuant to a resolution of a meeting of holders of Debentures (Series B) – the effective date for the obligation shall be the effective date for participation in the meeting (as such date was specified in the notice of invitation) and shall also apply to a Holder who has not participated in the meeting. 26.7. The payment by the holders in place of the Company of any amount that is due from the Company under this Section 26, shall not release the Company from its obligation to bear such payment. The Trustee will act to refund such monies as stated that were paid by the Holders in place of the Company, from the Company. 26.8. Regarding priority in reimbursing holders who bore payments under this section out of the receipts held by the Trustee, see Section 10 above. 27. Notices Any notice by the Company and/or the Trustee to the debenture holders shall be given as follows: - 66 - 27.1. By reporting on the Magna system of the Securities Authority (the Trustee may instruct the Company and the Company shall be obligated to make immediately on the Magna system, on the Trustee's behalf, any report in the wording provided in writing by the Trustee to the Company); and solely in the cases specified below, in addition, by the publication of a notice in two daily newspapers with a wide distribution published in Hebrew in Israel: (a) any arrangement or settlement under Section 350 of the Companies Law; (b) any merger. Any notice published or sent as stated, shall be deemed to have been delivered to the debenture holders on the day of its publication as stated (on the Magna system or in the press, as the case may be). 27.2. Any notice or demand by the Trustee to the Company or by the Company to the Trustee may be delivered by a letter sent by registered mail to the address specified in the Deed of Trust, or to another address of which one party has notified the other in writing (including an email address), or by sending by fax or by messenger, and any such notice or demand shall be deemed to have been received by the other party: (1) if sent by registered mail – at the end of three business days from the date of its delivery to the Trustee as per the postal records; (2) if sent by fax (together with a telephone verification of receipt) – at the end of one business day from the day of its sending; (3) if sent by messenger – upon its delivery by the messenger at the address or upon its presentation to the addressee for acceptance, as the case may be; (4) and if sent by email – at the end of one business day from the day of its sending. 28. Waiver, settlement and alterations to the Deed of Trust Subject to any statutory provisions, including the articles and instructions of TASE, except with respect to the payments dates under the Debentures, the interest rate (including arrears interest), adjustments of interest arising from non-compliance with the financial covenants and a change in rating, undertakings of the Company in connection with the financial covenants and their breach, undertakings of the Company in connection with a distribution, undertakings of the Company related to failure to create a floating charge, provisions related to the expansion of a series, provisions related to the law applicable to this Deed, provisions related to the Expenses Cushion, undertaking to appoint a representative in Israel, provisions related to limitations for the performance of transactions with controlling shareholders, grounds for calling for immediate repayment, undertaking of a negative pledge, provisions regarding the Expense Cushion, provisions regarding the appointment of a representative in Israel and reports that the Company must provide the Trustee (hereinafter jointly: the “Undertakings of the Company that Cannot be Conditioned Upon”), the Trustee may, from time to time and at any time, when the same, in its opinion, does not harm the rights of the debenture holders (Series B), to waive any breach or non-fulfillment of any of the terms of the Debentures or non-fulfillment of any of the terms of the Deed of Trust by the Company.. Subject to any statutory provisions, including the articles and instructions of TASE, and with the prior approval of the debenture holders in a special resolution, the Trustee may, whether before or after the principal of the Debentures (Series B) has come due, settle with the Company regarding any right or claim of the holders of Debentures (Series B), waive any right or claim of the holders of Debentures (Series B) or any of them against the Company under the Deed of - 67 - Trust and the Debentures (Series B), and agree with the Company on any arrangement with respect to their rights, including waiving any right or claim of the holders of the Debentures (Series B), against the Company pursuant to this Deed. If the Trustee settled with the Company, waived any right or claim of the holders of Debentures (Series B) or agreed with the Company on any arrangement with respect to the rights of the holders of Debentures (Series B), after it received the prior approval of the meeting of holders of Debentures (Series B) as provided above, the Trustee shall be exempt from liability in respect of such action, as it was approved by the general meeting, provided the Trustee did not breach its fiduciary duty and did not act in bad faith or willfully or in negligence in the implementation of the resolution of the general meeting. Without derogating from the foregoing, subject to any statutory provisions, including the articles and instructions of TASE, the Company and the Trustee may, whether before or after the principal of the Debentures has come due, modify the Deed of Trust including its appendices (including an alteration to the terms of the Debentures (Series B), if either of the following is fulfilled: (a) If the Trustee is convinced that the alteration does not harm the debenture holders (except for the Undertakings of the Company that Cannot be Conditioned Upon, as defined in this section above and excluding a change of the identity of the Trustee or its fees in the Deed of Trust, for the appointment of a Trustee in the place of the Trustee whose services has ended – for which the Trustee cannot agree to any changes and/or waive them. (b) The alteration was approved by the holders of Debentures (Series B) in a special resolution. The Company shall deliver to the debenture holders a notice by means of an immediate report via the Securities Authority’s Internet site (the Magna system), regarding any alteration as above, immediately after it was made. Whenever the Trustee exercises its right under this section, it may require the holders of Debentures (Series B) to deliver the debenture certificates to it or to the Company for recording therein a caveat regarding any settlement, waiver, alteration or amendment as stated, and the Company shall record such a caveat at the Trustee's request. If the Trustee exercises its right under this section, it shall give the holders of Debentures (Series B) written notice to that effect within a reasonable time. 29. Register of Debenture Holders 29.1. The Company shall maintain and manage at its registered office a register of holders of Debentures (Series B), in accordance with the Securities Law, which shall be open to inspection by any person. 29.2. The Company shall not be obligated to record in the register of holders of Debentures (Series B) any notice concerning an explicit, implicit or presumed trust, or a pledge or charge of any nature and kind, or any equitable right, claim or offset or any other right, in connection with the Debentures (Series B). The Company shall only recognize the - 68 - title of the person in whose name the Debentures were registered. The legal heirs, administrators of the estate or executors of the will of the registered owner and any person becoming entitled to Debentures due to the bankruptcy of any registered owner (and in the case of a corporation – due to its liquidation) shall be entitled to be registered as the holder, after producing proofs which in the opinion of the Company's managers suffice to establish his right to be registered as a debenture holder. 30. Release Upon proof to the Trustee's satisfaction that all the Debentures (Series B) were paid or redeemed or upon the Company's depositing in trust with the Trustee amounts sufficient for the full and final redemption of the Debentures in accordance with the provisions of this Deed, and upon proof to the Trustee's satisfaction that its entire fee and all the expenses incurred by the Trustee and/or its proxies in connection with its activity under the Deed of Trust and in accordance with its instructions were fully paid to it, the Trustee shall be obligated, upon the Company's first demand, to act with the monies deposited with it in respect of Debentures (Series B) whose redemption was not demanded in accordance with the terms of this Deed. 31. Appointment of Trustee; Trustee's Duties; Trustee's Powers; Termination of Trustee's Office 31.1. The Company hereby appoints the Trustee as Trustee for the holders of Debentures (Series B) only, pursuant to the provisions of Section 35B of the Securities Law. 31.2. The term of the appointment of the Trustee shall be until the date of convening of a holders' meeting in accordance with the provisions of Section 35B (a1) of the Securities Law. 31.3. From the effective date of this Deed of Trust, the Trustee's duties shall be in accordance with any statute and this Deed. 31.4. The Trustee shall act in accordance with the provisions of the Securities Law. 31.5. The Trustee shall represent the holders of Debentures (Series B) in any matter arising from the Company's obligations towards them, and for this purpose, it may act to realize the rights vested in the holders by law or by the Deed of Trust. 31.6. The Trustee may institute any proceeding to protect the holders' rights in accordance with any statute and the provisions set forth in this Deed of Trust. 31.7. The Trustee may appoint agents as set forth in Section 25 of this Deed. 31.8. The Trustee's actions shall be valid even if a defect is discovered in its appointment or capacity. 31.9. The Trustee's signature on this Deed of Trust does not constitute an expression of its opinion regarding the quality of the offered securities or the profitability of investing in them.

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• 69 - 31.10. The Trustee is not obligated to notify any party of the signing of this Deed. The Trustee may not intervene in any way in the management of the Company's business or interests, and this is not included among its duties. Nothing stated in this section shall restrict the Trustee in any action it is required to perform in accordance with the provisions of this Deed. 31.11. Subject to any statutory provisions, the Trustee is not obligated and does not have a responsibility to act in a manner not provided for explicitly in this Deed of Trust, so that any information, including about the Company and/or in connection with the Company's ability to meet its obligations towards the debenture holders, comes to its attention. 31.12. Subject to any statutory provisions and the provisions of this Deed of Trust, by signing this Deed the Trustee undertakes to keep confidential any information provided to it by the Company, not to disclose it to another and not to use it in any way, unless such disclosure or use is required for the fulfillment of its function in accordance with the Securities Law, the Deed of Trust or a court order. Said duty of confidentiality shall also apply to any proxy of the Trustee (including any consultant, representative, etc.). It is clarified that the transfer of information to the debenture holders for the purpose of reaching a decision relating to their rights under the debenture or for the purpose of reporting on the Company's condition does not constitute a violation of said confidentiality undertaking. 31.13. The Trustee is entitled to rely on the framework of its Trusteeship with respect to any written document, including any letter of instruction, notice, request, consent or approval, purporting to be signed or issued by any person or entity who the Trustee believes in good faith to have signed or issued it. 31.14. The provisions of the Securities Law shall apply to the termination of the office of the Trustee. 31.15. Upon the expiration of the office of the Trustee, a new Trustee shall be appointed in its place in the holders' meeting. 31.16. Notwithstanding the foregoing, a holders' resolution to terminate the office of the Trustee and replace it with another Trustee shall be passed at a meeting at which holders of 50% of the nominal value of outstanding Debentures from Series B, or at an adjourned meeting at which holders of at least 10% of such balance are present, by a majority of 75%. 31.17. Subject to any statutory provisions, the Trustee whose office has expired shall continue in office up to the appointment of another Trustee. The Trustee shall transfer to the new Trustee all the documents and amounts that accumulated with it in connection with the trust under the Deed of Trust for Series B and shall sign any document required for this purpose. Any new Trustee shall have the same powers, duties, and authorities and shall be able to act in all respects as if it had been appointed as the Trustee from the outset. 31.18. The Company shall issue an immediate report in the event of the Trustee's resignation and/or the appointment of another Trustee. - 70 - 31.A. It is hereby clarified that the end of the Trustee's term of office does not derogate from the rights, claims or demands that the Company and/or the bondholders (Series B) will have towards the Trustee, if any, the cause of which is prior to the date of termination of his tenure as trustee, and this does not relieve the Trustee of any liability under any law. Furthermore, the end of the Trustee’s term shall not derogate from its rights, claims or assertions that the Trustee may have towards the Company and/or the debenture holders, if any, insofar as the cause thereof occurred prior to the date of termination of the end of his term of office as a Trustee, and this does not release the Company and/or the debenture holders of any liability by virtue of any law. 32. Meetings of Debenture Holders Meetings of holders of Debentures (Series B) shall be conducted as provided in the Second Schedule to this Deed. 33. Governing Law The law governing the Deed of Trust, its additions and its appendices, including the Debentures, is the Israeli law. In any matter not referred to in this Deed and in case of a contradiction between the statutory provisions that cannot be conditioned upon and this Deed, the parties shall act in accordance with the provisions of the Israeli law only. 34. Exclusive Jurisdiction The sole court with jurisdiction to consider matters related to this Deed, its schedules and its appendices and the debenture appended hereto shall be the competent court in Tel Aviv-Jaffa. For details of the undertaking of the Company, Pacific Oak SOR Properties LLC, the REIT Fund, and officers of the Company, see Section 5.8 above. 35. General Without derogating from the other provisions of this Deed and the Debentures (Series B), any waiver, time extension, relaxation, silence or inaction ("waiver") on the part of the Trustee with respect to the non-fulfillment or partial or incorrect fulfillment of any of the undertakings towards the Trustee under this Deed and the Debentures (Series B), shall not be deemed as the Trustee's waiver of any right but only as consent limited to the particular occasion on which it was given. Without derogating from the other provisions of this Deed and the Debentures (Series B), any change in the undertakings towards the Trustee requires the Trustee's prior written consent. Any other consent, whether verbal or by way of waiver and inaction or other than in writing, shall not be deemed consent at all. The Trustee's rights under this agreement are autonomous and independent of each other and are in addition to any existing and/or future right of the Trustee by law and/or agreement (including this Deed and the Debenture (Series B)). - 71 - 36. Trustee's Liability 36.1. Notwithstanding any statutory provision and any provision of the Deed of Trust, if the Trustee acted for the fulfillment of its duties in good faith and within a reasonable time and clarified the facts which a reasonable Trustee would have clarified in the circumstances of the case, then it shall not be responsible for the damage caused, unless a peremptory judgment has determined that the Trustee acted with gross negligence. It is clarified that if a contradiction arises between the provision of this section and any other provision of the Deed of Trust, the provision of this section shall prevail. 36.2. If the Trustee acted in good faith and without negligence in accordance with the provisions of Section 35H (d2) or 35H (d3) of the Law, it shall not be liable for the performance of such action. 37. Addresses The parties' addresses shall be as set out in the preamble to this Deed, or any other address regarding which a suitable written notice is given to the other party. 38. Magna Authorization In accordance with the provisions of the Securities Regulations (Electronic Signature and Reporting), 5763-2003, the Trustee hereby authorizes the person authorized for that purpose by the Company to report electronically to the Securities Authority regarding this Deed of Trust.

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• 73 - Pacific Oak SOR (BVI) Holdings LLC First Schedule Certificate of Debenture (Series B) Registered Debentures (Series B), bearing fixed (unlinked) annual interest at a rate to be determined in a tender (hereinafter: "the Interest") are repayable in three (3) yearly installments, on January 31 of each of the years from 2024 to 2026, such that each of the first two payments shall constitute 33.33% of the total par value of the Debentures (Series B) and the third and final payment shall constitute 33.34% of the total par value of the Debentures (Series B). The first principal payment shall be paid on January 31, 2024, whereas the final principal payment shall be paid on January 31, 2026. The interest on the outstanding balance of the principal of the Debentures (Series B) shall be paid twice per year, on January 31 and on July 31 of each of the years from 2020 to 2020, starting on July 31, 2020, and up to January 31, 2026 (inclusive). Except for the first interest period (as it is defined below), any interest rate payment will be for the six- month period ended on the day prior to the date of payment. Registered Debenture (Series B) No. 1 Par value NIS __________ Fixed annual interest at a rate of __%. 1. This certificate attests that Pacific Oak SOR (BVI) Holdings LTD. ("the Company") will pay in three installments to Mizrahi Tefahot Bank Nominee Company Ltd or to the registered holder of this debenture ("Holder of Debenture (Series B)") on January 31 of each of the years from 2024- 2026, such that each of the first two payments shall constitute 33.33% of the total par value of the Debentures (Series B) and the third and final payment shall constitute 33.34% of the total par value of the Debentures (Series B), all in accordance with the rest of the terms set forth in the Deed of Trust and in the Terms Overleaf. Notwithstanding the aforesaid, the final installment of principal and the final installment of interest will be paid against the delivery of the certificates of the Debentures (Series B) to the Company on the final payment date (namely, January 31, 2026) at the Company's registered office or at another place as notified by the Company. Such notice of the Company will be published no later than five (5) business days before the final payment date. 2. The Debentures (Series B) are issued in accordance with a deed of trust ("Deed of Trust") dated February 12, 2020 signed between the Company and Reznik Paz Nevo Trusts Ltd. ("the Trustee"). 3. All the Debentures (Series B) will rank pari passu with one another with respect to the Company's obligations as per Debentures (Series B), without one having a preferred right or priority over another. 4. This Debenture (Series B) is issued subject to the terms set out overleaf, the terms set out in the - 74 - Deed of Trust and the shelf prospectus. Signed under the Company's affixed seal on ___________ By: Authorized signatory ____________________ Authorized signatory ____________________ I, the undersigned, Adv. ____, certify that this debenture certificate has been duly signed by Pacific Oak SOR (BVI) Holdings Ltd., in accordance with its articles, through Mr. ___________ and its signature thereof binds on the Company for the purposes of this debenture. ____, Adv. - 75 - Terms Overleaf 1. General In this Debenture (Series B), the terms below shall have the meaning set out next to them, and terms for which no meaning is provided below shall have the meaning given to them in the Deed of Trust: "Business Day" or "Bank Business Day" Any day on which the TASE Clearing House and most banks in Israel are open for the execution of transactions. "the Debenture Series" Registered Debentures of NIS1 par value each, the terms of which shall be in accordance with the Deed of Trust, the Debenture (Series B) certificate and the Shelf Offering Report, as such are defined in the Deed of Trust, pursuant to which they shall be issued. "Principal" The par value of the outstanding Debentures (Series B). "Special Resolution" A resolution adopted in a general meeting of holders of Debentures (Series B) at which at least two debenture holders holding at least 50% of the par value of the outstanding Debentures (Series B) are present in person or by proxy, or in an adjourned meeting at which at least two debenture holders holding at least 20% of the balance of said par value are present in person or by proxy, by a majority (whether in the original meeting or in the adjourned meeting) of at least two thirds (2/3) of the par value of the outstanding Debentures (Series B) represented in the vote. "the Nominee Company" The Mizrahi Tefahot Bank nominee Company Ltd, or a nominee company replacing it, provided that all the securities of the Company listed for trading will be registered under its name. "Trading Day" A day on which transactions are executed on the Tel Aviv Stock Exchange Ltd. "the TASE Clearing House" The Tel Aviv Stock Exchange Clearing House Ltd. 2. The Debentures For details regarding the Debentures (Series B), see Section 2 of the Deed of Trust. 3. Terms of the Debentures (Series B) Offered under the Prospectus (a) Registered Debentures (Series B) of NIS 1 par value each. The Debentures (Series B) shall be repayable in three (3) yearly installments, on January 31 of each of the years from 2024 to 2026, (inclusive), such that the first two payments shall constitute 33.33% - 76 - of the total par value of the Debentures (Series B) and the third and final payment shall constitute 33.34% of the total par value of the Debentures (Series B). The first principal payment shall be paid on January 31, 2024, whereas the final principal payment shall be paid on January 31, 2026. (b) The outstanding balance of the principal of the Debentures (Series B) shall bear fixed annual interest at a rate to be determined in a tender (subject to adjustments in the event of a change in the rating of the Debentures (Series B)5 and/or noncompliance with a financial covenant as set forth in Sections 5.2 and 5.3 of the Deed of Trust and/or arrears interest, if any). (c) The Debentures (Series B) shall not be linked to any index or any linkage basis. (d) The interest on the Debentures (Series B) shall be paid twice per year, on January 31 and July 31 of each of the years from 2020 to 2026, starting on July 31, 2020, and up to January 31, 2026 (inclusive). Except for the first interest period (as it is defined below), any interest rate payment will be for the six-month period ended on the day prior to the date of payment (hereinafter: "the Interest Period"). (e) The first payment of principal of the Debentures (Series B) shall be made on April 31, 2024, and the final principal payment shall be made on January 31, 2026. The first payment of interest on the Debentures (Series B) shall be made on July 31, 2020, for the period commencing on the first trading day after the tender date of the Debentures (Series B), and ending on the last day before the first interest payment date (namely, on July 30, 2020) (hereinafter: "the First Interest Period"), calculated according to the actual days in that period based on 365 days in a year. The interest rate payable for a particular interest period (excluding the first interest period) (i.e. the period commencing on the payment day of the previous interest period and ending on the last day before the next payment date after the commencement thereof) shall be calculated at the annual interest rate divided by two (hereinafter: "the Semiannual Interest Rate"). The Company shall publish in an immediate report regarding the results of the issuance, the first interest rate, the annual interest rate, and the semiannual interest rate. (f) The payments on account of the principal of and interest on the Debentures (Series B) shall be made to any party holding the Debentures (Series B) on January 19 (in respect of the payments due on January 31) and on July 19 (in respect of the payments due on July 31) of each of the years from 2020 until 2026 (inclusive, as applicable), except for the final payment which will be made on January 31, 2026 (it is clarified that the first interest payment will be made on July 31, 2020). Notwithstanding the foregoing, the final payment of principal and interest shall be made against the delivery of the certificates of the Debentures (Series B) to the Company on the final payment date (January 31, 2026) at the Company's registered office or at any other place as notified by the Company. Such notice of the Company shall be published no later than five (5) business days before the final payment date. 5 It is clarified that as long as the Debentures (Series B) are rated by more than one rating agency, the examination of the rating for the purpose of adjusting the interest rate to a change in the rating (should there be any such change) shall be done, at all times, according to the lower rating among them.

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• 77 - (g) It is hereby clarified that anyone who is not counted among the debenture holders on any of the payment dates specified in Subsection (f) above shall not be entitled to payment for the period commencing before that date. 4. Principal and Interest Payments on the Debentures (Series B) (a) Any payment on account of principal and/or interest delayed more than seven (7) days after the date set for payment thereof under the terms of the debenture, for a reason within the Company's control, shall bear arrears interest, as hereinafter defined, from the date set for payment to the date of actual payment thereof. In this regard, the rate of arrears interest shall be an addition of 3% on the rate of interest on the Debentures as provided in Section 3(b) above, all on an annual basis (hereinafter: "arrears interest"). The Company shall give notice of the arrears interest rate that accumulated (if at all) and on the precise interest rate for the period which includes the interest rate specified by the Tender plus arrears interest and of such payment date in an immediate report, two (2) trading days before the date of actual payment. In this regard, payment on account of principal and/or interest that was not deposited with the Trustee in accordance with Section 14.2 of the Deed Trust, will be deemed as an unmade payment for a reason dependent on the Company. (b) The payment to the entitled persons shall be made by check or by a bank transfer and/or through the TASE Clearing House to the credit of the bank account of the holders of Debentures (Series B). If the Company is unable, for any reason beyond its control, to pay any amount to the persons entitled thereto, the provisions of Section 7 below shall apply. (c) Any holder of a Debenture (Series B) who so wishes, may notify the Company of the details of the bank account for crediting the payments to that holder under the Debentures (Series B) as stated, or of a change in the details of said account or in his address, as the case may be, in a notice sent by registered mail to the Company. The Company shall be required to act in accordance with the holder's notice of change after the expiration of 15 business days from the day on which the Company received such notice. (d) If a debenture holder who is registered in the register of holders failed to give the Company timely notice of the details of the bank account to which payments under the debenture should be transferred to him, any such payment shall be made in a check sent by registered mail to his last address recorded in the register of holders. The sending of a check to an entitled person by registered mail as stated shall be deemed in all respects as payment of the amount specified thereon on the date of mailing thereof, subject to the check being deposited in the bank and actually cashed. 5. Deferral of Dates If the date specified for making any payment of principal and/or interest falls on a day that is not a business day, the payment date shall be deferred to the business day immediately - 78 - following that day, with no additional payment, and the "effective date" for determining entitlement to redemption and interest shall not be changed by reason thereof. 6. Securing of Debentures See Section 6 of the Deed of Trust. 7. Nonpayment for a Reason out of the Company's Control As to nonpayment for a reason out of the Company's control, see the provisions of Section 14 of the Deed of Trust. 8. Register of Debenture Holders As to the register of holders of Debentures (Series B), see Section 29 of the Deed of Trust. 9. Splitting of Debenture Certificates (a) In respect of Debentures (Series B) registered in the name of one holder, one certificate shall be issued to the holder or, at his request several certificates shall be issued to him in a reasonable quantity (the certificates discussed in this section are hereinafter referred to as "the certificates"). (b) Any debenture certificate may be split into several debenture certificates with a total par value equal to the nominal amount of the certificate it is proposed to split, provided such certificates are only issued in a reasonable quantity and in full New Shekels. The split shall be made against delivery of the relevant debenture certificate to the Company at its registered office for the performance of the split, together with a written request to make the split, signed by the registered holder. All the costs entailed in the split, including taxes and levies, if any, shall be borne by the party requesting the split. 10. Transfer of Debentures The Debentures are transferrable with respect to the full amount of the nominal principal, and also a part thereof, provided it is in whole shekels. Any transfer of the Debentures shall be made by a deed of transfer drawn up in the accepted form, duly signed by the registered holder or his legal representatives and by the transferee or his legal representatives, which shall be delivered to the Company at its registered office together with the certificates of the Debentures which are being transferred on the basis thereof as well as any other reasonable proof as requested by the Company in evidence of the transferor's right to transfer them. If any tax or other mandatory payment applies to the deed of transfer of the Debentures, the Company shall be given reasonable proof of the payment thereof. The Company's articles as relating to the transfer and endorsement of fully paid-up shares shall apply, mutatis mutandis, as the case may be, to the transfer and endorsement of the Debentures. If only a part of the amount of the nominal principal in a debenture certificate is transferred, the debenture certificate shall first be split, as - 79 - provided in Section 9 below, into the number of debenture certificates necessitated thereby, such that the total of the amounts of the nominal principal in those debenture certificates is equal to the amount of the nominal principal of such debenture certificate. Following the fulfillment of all the above stated conditions, the transfer shall be recorded in the Register, and the Company may demand that a caveat regarding such transfer be recorded on the transferred debenture certificate that is to be transferred to the transferee, or that a new debenture certificate be issued to him in its stead, and the transferee shall be subject to all the conditions set forth in the transferred debenture certificate, such that the term "holder" where it appears shall be deemed to refer to the "transferee," and the transferee shall be regarded as the "holder" for purposes of the Deed of Trust. 11. Early Redemption As to early redemption of the Debentures at the initiative of the TASE and as to early redemption at the Company's initiative, see Section 7 of the Deed of Trust. 12. Purchase of Debentures by the Company and/or a Related Person As to the purchase of the Debentures, see Section 3 of the Deed of Trust. 13. Waiver, Settlement, and Changes to Deed of Trust As to waiver, settlement, and changes to the Deed of Trust see Section 28 of the Deed of Trust. 14. Meetings of Debenture Holders General meetings of the holders of Debentures (Series B) shall convene and be conducted in the manner provided in the Second Schedule to the Deed of Trust. 15. Receipt from Debenture Holders As to receipts from the debenture holders, see Section 15 of the Deed of Trust. 16. Immediate Repayment As to immediate repayment of the Debentures, see Section 8 of the Deed of Trust. 17. Notices As to notices, see Section 27 of the Deed of Trust. 18. Governing Law and Jurisdiction As to the governing law and jurisdiction, see Sections 33 and 34 of the Deed of Trust. - 80 - 19. Priority In case of a contradiction between this schedule and the Deed of Trust, the provisions of the Deed of Trust shall prevail. It is hereby clarified that as of the date of the Deed, there is no contradiction between the provisions described in this Schedule and the provisions described in the Deed of Trust ***

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exhibit211pacificoakorgc

Exhibit 21.1 PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC. List of Subsidiaries as of April 1, 2024 Pacific Oak Strategic Opportunity Holdings LLC Pacific Oak SOR Acquisition XXX, LLC Pacific Oak Strategic Opportunity Limited Partnership Pacific Oak SOR Crown Pointe, LLC Pacific Oak SOR (BVI) Holdings, Ltd. Pacific Oak SOR Properties, LLC Pacific Oak SOR Acquisition XXXIII, LLC Pacific Oak SOR II Holdings, LLC Pacific Oak SOR Marquette Plaza, LLC Pacific Oak SOR II, LLC Pacific Oak Strategic Opportunity Holdings II LLC Pacific Oak SOR Park Highlands TRS, LLC Pacific Oak Strategic Opportunity Limited Partnership II Pacific Oak SOR Acquisition XXII, LLC Pacific Oak SOR US Properties II LLC Pacific Oak SOR Park Highlands II JV, LLC Pacific Oak SOR Park Highlands II, LLC Pacific Oak SOR Acquisition VIII, LLC Pacific Oak SOR Acquisition VII, LLC Pacific Oak SOR Richardson Portfolio JV, LLC Pacific Oak SOR Park Highlands JV, LLC Pacific Oak SOR Richardson Holdings, LLC Pacific Oak SOR Park Highlands, LLC Pacific Oak SOR Palisades III, LLC Pacific Oak SOR TRS Services, LLC Pacific Oak SOR Richardson Acquisition I, LLC Pacific Oak SOR Tule Springs Owner TRS, LLC Pacific Oak SOR Palisades I, LLC Pacific Oak SOR Acquisition XXXVI, LLC Pacific Oak SOR Palisades II, LLC Pacific Oak SOR Tule Springs Village 1 Phase 4 Remainder Parcels Owner, LLC Pacific Oak SOR Greenway I, LLC Pacific Oak SOR Acquisition XXXVII, LLC Pacific Oak SOR Greenway III, LLC Pacific Oak SOR Tule Springs Village 2 Parcels Owner, LLC Pacific Oak SOR Acquisition X, LLC Pacific Oak SOR Debt Holdings II LLC Pacific Oak SOR CMBS Owner, LLC Pacific Oak Finance LLC Pacific Oak SOR Equity Holdings X LLC Pacific Oak SOR Acquisition XI, LLC Pacific Oak SOR X Acquisition I, LLC 1180 Raymond Urban Renewal, LLC Pacific Oak SOR Battery Point, LLC Pacific Oak SOR X Acquisition II, LLC Pacific Oak SOR Acquisition XVIII, LLC Pacific Oak SOR Pac Oak Opp Zone Fund I, LLC Pacific Oak SOR Austin Suburban Portfolio, LLC SOR X Acquisition III, LLC SOR Port Holdings, LLC Pacific Oak SOR Acquisition XXV, LLC Pacific Oak Residential Trust, Inc. Pacific Oak SOR 110 William JV, LLC PORT OP GP, LLC Pacific Oak SOR SREF III 110 William, LLC PORT OP LP 110 William Junior Mezz III, LLC BPDM Owner 2020-1 LLC 110 William Mezz III, LLC BPDM Properties 2020-1 LLC 110 William Property Investors III, LLC POTN Owner 2020-1 LLC POTN Properties 2020-1 LLC CA Capital Management Services III, LLC Reven Housing Funding Manager 2, LLC Reven Housing Funding 2, LLC Pacific Oak SOR Acquisition XXVII, LLC Reven Housing Funding Manager, LLC Pacific Oak SOR Richardson Land JV, LLC Reven Housing Funding 1, LLC Pacific Oak SOR Richardson Holdings II, LLC Reven Housing REIT TRS, LLC Pacific Oak SOR Palisades IV, LLC Reven Housing Memphis, LLC Reven Housing Birmingham, LLC Pacific Oak SOR Acquisition XXXIV, LLC BPPO Owner 2020-1 LLC Pacific Oak SOR 8 and 9 Corporate Centre, Inc. BPPO Properties 2020-1 LLC Pacific Oak Residential Trust II, Inc. Pacific Oak SOR Acquisition XXXV, LLC PORT II OP LP Pacific Oak SOR Georgia 400 Center, LLC PORT II Owner 2020-1 LLC PORT II Properties 2020-1 LLC Pacific Oak SOR Acquisition XXIX, LLC Battery Point Trust Inc. Pacific Oak SOR 353 Sacramento Street, LLC Battery Point Residential GP LLC 2 Battery Point Receivables LLC Pacific Oak SOR II Acquisition VIII, LLC Battery Point Residential LP Pacific Oak SOR II Grace Court JV, LLC BPDM Owner 2018-1 LLC Pacific Oak SOR II/Verus Grace Court, LLC BPDM Properties 2018-1 LLC Pacific Oak SOR/VERUS 800 Adams, LLC Battery Point Financial, LLC Pacific Oak/VERUS GC Phoenix, LLC BPDM Owner 2018-2 LLC Pacific Oak/VERUS Armory and Land, LLC BPDM Properties 2018-2 LLC Pacific Oak SOR Non-US Properties II LLC Pacific Oak Battery Point Holdings, LLC Pacific Oak SOR II Debt Holdings II, LLC BPT Holdings, LLC Pacific Oak SOR II Debt Holdings II X, LLC Pacific Oak Residential, Inc. Pacific Oak SOR II Non-US Debt X LLC DayMark Financial Investor Trust Pacific Oak SOR II Investam LLC DayMark Financial Acceptance, LLC Pacific Oak SOR II Investam II LLC Pacific Oak Residential Advisors, LLC DayMark Depositor LLC DMH Realty, LLC DayMark Assurance LLC Pacific Oak SOR II Acquisition I, LLC Pacific Oak SOR II Myrtle Beach JV, LLC Pacific Oak SOR II IC Myrtle Beach Property LLC IC Myrtle Beach Mezz, LLC IC Myrtle Beach LLC Pacific Oak SOR II TRS Holdings, LLC Pacific Oak SOR II Myrtle Beach TRS JV, LLC Pacific Oak SOR II IC Myrtle Beach Operations LLC IC Myrtle Beach Operations Mezz, LLC IC Myrtle Beach Operations LLC Pacific Oak SOR II Q&C TRS JV, LLC Pacific Oak SOR II Q&C Operations JV, LLC Pacific Oak SOR II Q&C Operations, LLC Pacific Oak SOR II Acquisition II, LLC Pacific Oak SOR II Q&C JV, LLC Pacific Oak SOR II Q&C Property JV, LLC Pacific Oak SOR II Q&C Property, LLC Pacific Oak SOR II Acquisition IV, LLC Pacific Oak SOR II Lincoln Court, LLC Pacific Oak SOR II Acquisition V, LLC Pacific Oak SOR II Lofts at NoHo Commons JV, LLC Pacific Oak SOR II Lofts at NoHo Commons, LLC NoHo Commons Pacific Owner LLC Pacific Oak SOR II Acquisition VI, LLC Pacific Oak SOR II 210 West 31st Street JV, LLC Pacific Oak SOR II 210 West 31st Street, LLC 210 West 31st Street Owner, LLC Pacific Oak SOR II Acquisition VII, LLC Pacific Oak SOR II Oakland City Center, LLC

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Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement (Post-Effective Amendment No. 12 to Form S-11 on Form S-3 No. 333-156633) of Pacific Oak Strategic Opportunity REIT, Inc. and in the related Prospectus of our report dated April 1, 2024, with respect to the consolidated financial statements and schedule of Pacific Oak Strategic Opportunity REIT, Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2023.

/s/ Ernst & Young LLP

Irvine, California

April 1, 2024

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Exhibit 31.1

Certification of Chief Executive Officer pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Keith D. Hall, certify that:

1.I have reviewed this annual report on Form 10-K of Pacific Oak Strategic Opportunity REIT, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)     Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)     Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	April 1, 2024	By:	/s/ Keith D. Hall
			Keith D. Hall
			Chief Executive Officer and Director
			(principal executive officer)

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Exhibit 31.2

Certification of Chief Financial Officer pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Michael A. Bender, certify that:

1.I have reviewed this annual report on Form 10-K of Pacific Oak Strategic Opportunity REIT, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)     Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	April 1, 2024	By:	/s/ Michael A. Bender
			Michael A. Bender
			Chief Financial Officer
			(principal financial officer)

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Exhibit 32.1

Certification pursuant to 18 U.S.C. Section 1350,

as Adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 10-K of Pacific Oak Strategic Opportunity REIT, Inc. (the “Registrant”) for the year ended December 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Keith D. Hall, Chief Executive Officer and Director of the Registrant, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge and belief:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date:	April 1, 2024	By:	/s/ Keith D. Hall
			Keith D. Hall
			Chief Executive Officer and Director
			(principal executive officer)

Document

Exhibit 32.2

Certification pursuant to 18 U.S.C. Section 1350,

as Adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 10-K of Pacific Oak Strategic Opportunity REIT, Inc. (the “Registrant”) for the year ended December 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Michael A. Bender, the Chief Financial Officer of the Registrant, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge and belief:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date:	April 1, 2024	By:	/s/ Michael A. Bender
			Michael A. Bender
			Chief Financial Officer
			(principal financial officer)

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Exhibit 99.3

CONSENT OF INDEPENDENT VALUATION EXPERT

We hereby consent to the reference to our name and description of our role in the valuation process of certain commercial real estate assets of Pacific Oak Strategic Opportunity REIT, Inc. (the “Company”) being included or incorporated by reference into the Company’s Registration Statement on Form S-3 (File No. 333-156633) and the related prospectus, included therein, by being filed on an Annual Report on Form 10-K for the fiscal year ended December 31, 2023. In giving this consent, we do not admit that we are within the category of persons whose consent is required by Section 7 of the Securities Act of 1933, as amended.

April 1, 2024	/s/ Colliers International Valuation of Advisory Services, LLC
	Colliers International Valuation of Advisory Services, LLC

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Exhibit 99.4

CONSENT OF INDEPENDENT VALUATION EXPERT

We hereby consent to the reference to our name and description of our role in the valuation process of certain commercial real estate assets of Pacific Oak Strategic Opportunity REIT, Inc. (the “Company”) being included or incorporated by reference into the Company’s Registration Statement on Form S-3 (File No. 333-156633) and the related prospectus, included therein, by being filed on an Annual Report on Form 10-K for the fiscal year ended December 31, 2023. In giving this consent, we do not admit that we are within the category of persons whose consent is required by Section 7 of the Securities Act of 1933, as amended.

April 1, 2024	/s/ Kroll, LLC
	Kroll, LLC

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Exhibit 99.5

CONSENT OF INDEPENDENT VALUATION EXPERT

We hereby consent to the reference to our name and description of our role in the valuation process of certain residential real estate assets of Pacific Oak Strategic Opportunity REIT, Inc. (the “Company”) being included or incorporated by reference into the Company’s Registration Statement on Form S-3 (File No. 333-156633) and the related prospectus, included therein, by being filed on an Annual Report on Form 10-K for the fiscal year ended December 31, 2023. In giving this consent, we do not admit that we are within the category of persons whose consent is required by Section 7 of the Securities Act of 1933, as amended; nor do we consent to, adopt or otherwise express any views as to the accuracy or completeness of any other representations in the referenced documents.

April 1, 2024	/s/ HouseCanary, Inc.
	HouseCanary, Inc.