NOTES AND BONDS PAYABLE

12 Months Ended

Dec. 31, 2019

As of December 31, 2019 and December 31, 2018, 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 December 31, 2019		Book Value as of December 31, 2018		Contractual Interest Rate as of December 31, 2019 ⁽¹⁾	Interest Rate at December 31, 2019 ⁽¹⁾	Payment Type ⁽³⁾	Maturity Date ⁽²⁾
Richardson Portfolio Mortgage Loan	$	36,000	$	36,000	One-Month LIBOR + 2.50%	4.19%	Interest Only	11/01/2021
Park Centre Mortgage Loan ⁽⁴⁾	21,970		8,404		One-Month LIBOR + 1.75%	3.44%	Interest Only	06/27/2022
Burbank Collection Mortgage Loan	—		10,716		⁽⁵⁾	⁽⁵⁾	⁽⁵⁾	⁽⁵⁾
1180 Raymond Mortgage Loan	30,250		30,637		One-Month LIBOR + 2.25%	3.96%	Principal & Interest	06/01/2020
1180 Raymond Bond Payable	6,080		6,280		6.50%	6.50%	Principal & Interest	09/01/2036
424 Bedford Mortgage Loan ⁽⁶⁾	—		23,710		⁽⁶⁾	⁽⁶⁾	⁽⁶⁾	⁽⁶⁾
Pacific Oak SOR (BVI) Holdings, Ltd. Series A Debentures	224,746		259,516		4.25%	4.25%	⁽⁷⁾	03/01/2023
Crown Pointe Mortgage Loan ⁽⁸⁾	51,171		51,171		One-Month LIBOR + 2.60%	4.29%	Interest Only	2/13/2020 ⁽⁸⁾
125 John Carpenter Mortgage Loan ⁽⁹⁾	—		53,204		⁽⁹⁾	⁽⁹⁾	⁽⁹⁾	⁽⁹⁾
City Tower Mortgage Loan	89,000		89,000		One-Month LIBOR + 1.55%	3.24%	Interest Only	03/05/2021
Marquette Plaza Mortgage Loan	53,408		50,800		One-Month LIBOR + 1.55%	3.24%	Interest Only	06/06/2021
Eight & Nine Corporate Centre Mortgage Loan	43,880		43,880		One-Month LIBOR + 1.60%	3.29%	Interest Only	06/08/2021
Georgia 400 Center Mortgage Loan	59,690		—		One-Month LIBOR + 1.55%	3.24%	Interest Only	05/22/2023
PORT Mortgage Loan 1	51,362		—		4.74%	4.74%	Interest Only	10/01/2025
PORT Mortgage Loan 2	10,523		—		4.72%	4.72%	Interest Only	03/01/2026
Total Notes and Bonds Payable principal outstanding	678,080		663,318
Net Premium/(Discount) on Notes and Bonds Payable ⁽¹⁰⁾	783		198
Deferred financing costs, net	(5,200)		(8,044)
Total Notes and Bonds Payable, net	$	673,663	$	655,472

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⁽¹⁾ Contractual interest rate represents the interest rate in effect under the loan as of December 31, 2019. The interest rate is calculated as the actual interest rate in effect as of December 31, 2019 (consisting of the contractual interest rate and contractual floor rates), using interest rate indices at December 31, 2019, where applicable.

⁽²⁾ Represents the initial maturity date or the maturity date as extended as of December 31, 2019; subject to certain conditions, the maturity dates of certain loans may be extended beyond the date shown.

⁽³⁾Represents the payment type required under the loan as of December 31, 2019. Certain future monthly payments due under this loan also include amortizing principal payments. For more information of the Company’s contractual obligations under its notes and bonds payable, see five-year maturity table below.

⁽⁴⁾On June 27, 2019, the Company closed on the refinancing of the Park Centre Mortgage Loan.

⁽⁵⁾ On July 19, 2019, in connection with the disposition of the Burbank Collection, the Burbank Collection Joint Venture repaid the $10.6 million outstanding principal balance due under the Burbank Collection Mortgage Loan.

⁽⁶⁾ On January 11, 2019, in connection with the disposition of 424 Bedford, the buyer assumed the mortgage loan secured by 424 Bedford with an outstanding principal balance of $23.7 million.

⁽⁷⁾ See “ - Israeli Bond Financing” below.

⁽⁸⁾ Subsequent to December 31, 2019, the Company extended the maturity of the Crown Pointe Mortgage Loan to February 13, 2021.

⁽⁹⁾ On November 1, 2019, in connection with the disposition of 125 John Carpenter, the Company repaid the $53.2 million outstanding principal balance due under the 125 John Carpenter Mortgage Loan.

⁽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, 2019, 2018 and 2017, the Company incurred $28.8 million, $31.1 million and $37.1 million of interest expense, respectively. Included in interest expense for the years ended December 31, 2019, 2018 and 2017, was $3.6 million, $3.6 million and $4.4 million of amortization of deferred financing costs, respectively. Additionally, during the years ended December 31, 2019, 2018 and 2017, the Company capitalized $2.7 million, $2.6 million and $2.3 million of interest, respectively, to its investments in undeveloped land.

As of December 31, 2019 and 2018, the Company’s interest payable was $4.8 million and $5.2 million, respectively.

The following is a schedule of maturities, including principal amortization payments, for all notes and bonds payable outstanding as of December 31, 2019 (in thousands):


2020	$	137,958
2021	278,554
2022	78,396
2023	116,132
2024	270
Thereafter	66,770
	$	678,080

The Company’s notes payable contain financial debt covenants. As of December 31, 2019, the Company was in compliance with all of these debt covenants.

Israeli Bond Financing

On March 2, 2016, Pacific Oak Strategic Opportunity BVI, a wholly owned subsidiary of the Company, filed a final prospectus with the Israel Securities Authority for a proposed offering of up to 1,000,000,000 Israeli new Shekels of Series A debentures (the “Debentures”) at an annual interest rate not to exceed 4.25%. On March 1, 2016, Pacific Oak Strategic Opportunity BVI commenced the institutional tender of the Debentures and accepted application for 842.5 million Israeli new Shekels. On March 7, 2016, Pacific Oak Strategic Opportunity BVI commenced the public tender of the Debentures and accepted 127.7 million Israeli new Shekels. In the aggregate, Pacific Oak Strategic Opportunity BVI accepted 970.2 million Israeli new Shekels (approximately $249.2 million as of March 8, 2016) in both the institutional and public tenders at an annual interest rate of 4.25%. Pacific Oak Strategic Opportunity BVI issued the Debentures on March 8, 2016. The terms of the Debentures require five equal annual installment principal payments on March 1st of each year from 2019 to 2023. On March 1, 2019, the Company paid the first principal installment payment of 194.0 million Israeli new Shekels (approximately $53.6 million as of March 1, 2019). As of December 31, 2019, the Company had one foreign currency collar for an aggregate notional amount of $776.2 million Israeli new Shekels to hedge its exposure to foreign currency exchange rate movements. See note 9, “Derivative Instruments” for a further discussion on the Company’s foreign currency collar.

On February 16, 2020, Pacific Oak Strategic Opportunity BVI issued 254.1 million Israeli new Shekels (approximately $74.1 million as of February 16, 2020) of Series B debentures to Israeli investors pursuant to a public offering registered with the Israel Securities Authority. The Series B Debentures will bear interest at the rate of 3.93% per year. The Series B Debentures have principal installment payments equal to 33.33% of the face amount of the Series B Debentures on January 31st of each year from 2024 to 2026.

The deed of trust that governs the terms of the Debentures contains various financial covenants. As of December 31, 2019, the Company was in compliance with all of these financial debt covenants.