10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________________________

 FORM 10-Q

______________________________________________________

(Mark One)

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

For the quarterly period ended September 30, 2020

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

______________________________________________________

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

(Exact Name of Registrant as Specified in Its Charter)

______________________________________________________

Maryland		26-3842535
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
11766 Wilshire Blvd., Suite 1670
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) for the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	N/A	N/A

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

As of November 11, 2020, there were 98,198,922 outstanding shares of common stock of Pacific Oak Strategic Opportunity REIT, Inc.

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

FORM 10-Q

September 30, 2020

INDEX 

PART I.	FINANCIAL INFORMATION		2
	Item 1.	Financial Statements	2
		Consolidated Balance Sheets as of September 30, 2020 (unaudited) and December 31, 2019	2
		Consolidated Statements of Operations (unaudited) for the Three and Nine Months Ended September 30, 2020 and 2019	3
		Consolidated Statements of Equity (unaudited) for the Three and Nine Months Ended September 30, 2020 and 2019	4
		Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2020 and 2019	6
		Condensed Notes to Consolidated Financial Statements as of September 30, 2020 (unaudited)	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	52
	Item 4.	Controls and Procedures	53
PART II.	OTHER INFORMATION		54
	Item 1.	Legal Proceedings	54
	Item 1A.	Risk Factors	54
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54
	Item 3.	Defaults upon Senior Securities	56
	Item 4.	Mine Safety Disclosures	56
	Item 5.	Other Information	57
	Item 6.	Exhibits	58
SIGNATURES			60

1

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

	September 30, 2020		December 31, 2019
	(unaudited)
Assets
Real estate held for investment, net	$	822,498	$	759,479
Real estate equity securities	84,365		81,439
Total real estate and real estate-related investments, net	906,863		840,918
Cash and cash equivalents	77,617		76,492
Restricted cash	11,721		12,002
Investments in unconsolidated entities	69,686		78,276
Rents and other receivables, net	19,607		16,593
Above-market leases, net	2,732		2,973
Prepaid expenses and other assets	15,174		13,988
Total assets	$	1,103,400	$	1,041,242
Liabilities, mezzanine equity and equity
Notes and bonds payable, net	$	758,075	$	673,663
Accounts payable and accrued liabilities	15,579		21,329
Due to affiliates	6,449		1,635
Below-market leases, net	2,504		3,180
Other liabilities	19,745		19,801
Redeemable common stock payable	262		829
Restricted stock payable	15,506		16,320
Total liabilities	818,120		736,757
Commitments and contingencies (Note 15)
Mezzanine equity
Restricted stock	12,089		12,089
Noncontrolling Series A Cumulative Convertible Redeemable Preferred Stock	15,233		15,008
Redeemable noncontrolling interest	3,001		—
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, 69,225,016 and 65,866,765 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively	693		659
Additional paid-in capital	553,129		553,170
Cumulative distributions and net income	(299,589)		(277,196)
Total Pacific Oak Strategic Opportunity REIT, Inc. stockholders’ equity	254,233		276,633
Noncontrolling interests	724		755
Total equity	254,957		277,388
Total liabilities, mezzanine equity and equity	$	1,103,400	$	1,041,242

See accompanying condensed notes to consolidated financial statements.

2

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share amounts)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenues:
Rental income	$	23,871	$	21,669	$	67,808	$	59,879
Other operating income	888		1,317		2,722		4,219
Interest income from real estate debt securities	—		—		—		369
Dividend income from real estate equity securities	2,986		2,296		5,339		4,414
Total revenues	27,745		25,282		75,869		68,881
Expenses:
Operating, maintenance, and management costs	7,888		8,156		22,258		21,254
Real estate taxes and insurance	3,791		3,278		10,570		9,556
Asset management fees to affiliates	2,426		2,093		6,867		5,954
General and administrative expenses	1,960		2,038		6,302		5,586
Foreign currency transaction loss (gain), net	445		5,344		(12,338)		10,634
Depreciation and amortization	9,470		9,239		27,417		25,276
Interest expense	6,274		7,359		19,055		21,776
Total expenses	32,254		37,507		80,131		100,036
Other income (loss):
Gain from remeasurement of prior equity interest	2,009		—		2,009		—
Income from NIP	—		—		52		—
Equity in income (loss) of unconsolidated entities	519		(419)		1,512		6,677
Casualty-related gain	—		—		51		(506)
Other interest income	19		536		297		1,862
(Loss) gain on real estate equity securities	(6,527)		3,845		(21,620)		19,304
Change in subordinated performance fee due upon termination to affiliate	1,121		—		814		—
Gain on sale of real estate	—		10,559		—		18,128
Loss on extinguishment of debt	—		(6)		—		(861)
Total other (loss) income, net	(2,859)		14,515		(16,885)		44,604
Net (loss) income	(7,368)		2,290		(21,147)		13,449
Net loss (income) attributable to noncontrolling interests	43		(1,518)		115		(2,145)
Net loss attributable to redeemable noncontrolling interest	23		—		23		—
Preferred stock dividends	(191)		—		(788)		—
Net (loss) income attributable to common stockholders	$	(7,493)	$	772	$	(21,797)	$	11,304
Net (loss) income per common share, basic and diluted	$	(0.11)	$	0.01	$	(0.32)	$	0.17
Weighted-average number of common shares outstanding, basic and diluted	69,225,212		66,326,646		68,179,046		66,564,532

See accompanying condensed notes to consolidated financial statements.

3

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONSOLIDATED STATEMENTS OF EQUITY

For the Three Months Ended September 30, 2020 and 2019

(unaudited)

(dollars in thousands)

	Common Stock			Additional Paid-in Capital		Cumulative Distributions and Net Income (Loss)		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
	Shares	Amounts
Balance, June 30, 2020	69,225,617	$	693	$	553,129	$	(292,096)	$	261,726	$	795	$	262,521
Net loss	—	—		—		(7,493)		(7,493)		(43)		(7,536)
Transfers from redeemable common stock	—	—		6		—		6		—		6
Redemptions of common stock	(601)	—		(6)		—		(6)		—		(6)
Distribution to noncontrolling interest	—	—		—		—		—		(28)		(28)
Balance, September 30, 2020	69,225,016	$	693	$	553,129	$	(299,589)	$	254,233	$	724	$	254,957
	Common Stock			Additional Paid-in Capital		Cumulative Distributions and Net Income (Loss)		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
	Shares	Amounts
Balance, June 30, 2019	66,342,855	$	663	$	547,767	$	(247,603)	$	300,827	$	1,325	$	302,152
Net income	—	—		—		772		772		1,518		2,290
Issuance of common stock	27,434	—		271		—		271		—		271
Transfers from redeemable common stock	—	—		2,040		—		2,040		—		2,040
Redemption of common stock	(245,571)	(2)		(2,324)		—		(2,326)		—		(2,326)
Distributions declared	—	—		—		(570)		(570)		—		(570)
Other offering costs	—	—		(4)		—		(4)		—		(4)
Distributions to noncontrolling interests	—	—		—		—		—		(1,969)		(1,969)
Balance, September 30, 2019	66,124,718	$	661	$	547,750	$	(247,401)	$	301,010	$	874	$	301,884

4

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONSOLIDATED STATEMENTS OF EQUITY

For the Nine Months Ended September 30, 2020 and 2019

(unaudited)

(dollars in thousands)

	Common Stock			Additional Paid-in Capital		Cumulative Distributions and Net Income (Loss)		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
	Shares	Amounts
Balance, December 31, 2019	65,866,765	$	659	$	553,170	$	(277,196)	$	276,633	$	755	$	277,388
Net loss	—	—		—		(21,797)		(21,797)		(115)		(21,912)
Issuance of common stock	24,645	—		262		—		262		—		262
Transfers from redeemable common stock	—	—		567		—		567		—		567
Redemptions of common stock	(78,131)	—		(830)		—		(830)		—		(830)
Distributions declared	—	—		—		(596)		(596)		—		(596)
Other offering costs	—	—		(6)		—		(6)		—		(6)
Issuance of restricted stock	3,411,737	34		(34)		—		—		—		—
Noncontrolling interests contributions	—	—		—		—		—		112		112
Distribution to noncontrolling interest	—	—		—		—		—		(28)		(28)
Balance, September 30, 2020	69,225,016	$	693	$	553,129	$	(299,589)	$	254,233	$	724	$	254,957
	Common Stock			Additional Paid-in Capital		Cumulative Distributions and Net Income (Loss)		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
	Shares	Amounts
Balance, December 31, 2018	66,822,861	$	668	$	547,770	$	(256,984)	$	291,454	$	2,510	$	293,964
Net income	—	—		—		11,304		11,304		2,145		13,449
Issuance of common stock	84,248	1		834		—		835		—		835
Transfers from redeemable common stock	—	—		6,577		—		6,577		—		6,577
Redemption of common stock	(782,391)	(8)		(7,425)		—		(7,433)		—		(7,433)
Distributions declared	—	—		—		(1,721)		(1,721)		—		(1,721)
Other offering costs	—	—		(6)		—		(6)		—		(6)
Noncontrolling interests contributions	—	—		—		—		—		12		12
Distributions to noncontrolling interests	—	—		—		—		—		(3,793)		(3,793)
Balance, September 30, 2019	66,124,718	$	661	$	547,750	$	(247,401)	$	301,010	$	874	$	301,884

See accompanying condensed notes to consolidated financial statements.

5

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

	Nine Months Ended September 30,
	2020		2019
Cash Flows from Operating Activities:
Net (loss) income	$	(21,147)	$	13,449
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Change in subordinated performance fee due upon termination to affiliate	(814)		—
Casualty-related loss	—		506
Gain from remeasurement of prior equity interest	(2,009)		—
Equity in income of unconsolidated entities	(1,151)		(6,677)
Depreciation and amortization	27,417		25,276
Loss (gain) on real estate equity securities	21,620		(19,304)
Gain on sale of real estate	—		(18,128)
Loss on extinguishment of debt	—		861
Unrealized loss on interest rate caps	10		50
Deferred rent	(2,559)		(3,213)
Amortization of above- and below-market leases, net	(435)		(856)
Amortization of deferred financing costs	2,481		2,683
Accretion of interest income on real estate debt securities	—		(13)
Amortization of premium on bond and notes payable	14		(73)
Foreign currency transaction (gain) loss, net	(12,338)		10,634
Changes in assets and liabilities:
Rents and other receivables	(566)		(2,164)
Prepaid expenses and other assets	(2,286)		(4,527)
Accounts payable and accrued liabilities	(3,471)		(559)
Due to affiliates	182		8
Other liabilities	(142)		(97)
Net cash provided by (used in) operating activities	4,806		(2,144)
Cash Flows from Investing Activities:
Acquisitions of real estate, net of cash acquired	(19,034)		(90,266)
Improvements to real estate	(15,946)		(25,833)
Proceeds from sales of real estate, net	—		43,164
Insurance proceeds received for property damages	—		438
Contributions to unconsolidated entities	(1,708)		(5,050)
Distributions of capital from unconsolidated entities	1,225		8,051
Purchase of interest rate cap	(6)		(28)
Investment in real estate equity securities	(35,510)		(10,015)
Proceeds from the sale of real estate equity securities	10,964		24,076
Proceeds from principal repayment on real estate debt securities	—		7,750
Proceeds from disposition of foreign currency collars	14,125		—
Funding of development obligations	—		(134)
Net cash used in investing activities	(45,890)		(47,847)
Cash Flows from Financing Activities:
Proceeds from notes and bonds payable	104,143		84,268
Principal payments on notes and bonds payable	(57,611)		(73,250)
Payments of deferred financing costs	(2,438)		(1,121)
Payments to redeem common stock	(830)		(7,433)
Payment of prepaid other offering costs	(606)		(2)
Distributions paid	(334)		(886)
Preferred dividends paid	(563)		—
Noncontrolling interest contributions	112		12
Distributions to noncontrolling interests	(28)		(3,793)
Other financing proceeds, net	—		1,822
Net cash provided by financing activities	41,845		(383)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	83		2,367
Net increase (decrease) in cash, cash equivalents and restricted cash	844		(48,007)
Cash, cash equivalents and restricted cash, beginning of period	88,494		162,727
Cash, cash equivalents and restricted cash, end of period	$	89,338	$	114,720

See accompanying condensed notes to consolidated financial statements.

6

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(unaudited)

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 was externally managed by KBS Capital Advisors LLC (“KBS Capital Advisors”), an affiliate of the Company, pursuant to an advisory agreement the Company renewed with KBS Capital Advisors on October 7, 2019. KBS Capital Advisors conducted the Company’s operations and managed its portfolio of real estate and other real estate-related investments. On October 31, 2019, KBS Capital Advisors ceased to serve as the Company’s advisor or have any advisory responsibility to the Company immediately following the filing of the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2019 (filed November 8, 2019) with the Securities and Exchange Commission (the “SEC”). On November 1, 2019, the Company entered into an advisory agreement with Pacific Oak Capital Advisors, LLC (the “Advisor”), which was renewed on November 1, 2020. The advisory agreement is currently effective through November 1, 2021; however the Company or the Advisor may terminate the advisory agreement without cause or penalty upon providing 60 days’ written notice. The terms of the advisory agreement are consistent with those of the advisory agreement that was previously in effect with KBS Capital Advisors, except as discussed in Note 10.

On February 19, 2020, the Company, Pacific Oak SOR II, LLC, an indirect subsidiary of the Company (“Merger Sub”), and Pacific Oak Strategic Opportunity REIT II, Inc. (“POSOR II”) entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to the Merger Agreement, on October 5, 2020, POSOR II merged with and into Merger Sub (the “Merger”), with Merger Sub surviving the Merger (the “Surviving Entity”), such that following the Merger, the Surviving Entity continued as an indirect subsidiary of the Company. In accordance with the applicable provisions of the Maryland General Corporation Law, the separate existence of POSOR II ceased. At the effective time of the Merger, each issued and outstanding share of POSOR II’s common stock converted into the right to receive 0.9643 shares of the Company's common stock.

On January 8, 2009, the Company 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 (the “Offering”), 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 continues to offer shares under its dividend reinvestment plan.

The Company sold 56,584,976 shares of common stock in its primary offering for gross offering proceeds of $561.7 million. As of September 30, 2020, the Company had sold 6,851,969 shares of common stock under its dividend reinvestment plan for gross offering proceeds of $76.5 million. Also, as of September 30, 2020, the Company had redeemed 23,897,205 shares for $286.3 million. As of September 30, 2020, the Company had issued 25,976,746 shares of common stock in connection with special dividends. Additionally, on December 29, 2011 and October 23, 2012, the Company 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. On March 27, 2020, the Company issued 3,411,737 restricted shares of its common stock (the “Restricted Stock”) to KBS Capital Advisors pursuant to a Restricted Stock Agreement, dated as of March 27, 2020 (the “Restricted Stock Agreement”).

7

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

On March 2, 2016, Pacific Oak SOR BVI 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 “Series A Debentures”) at an annual interest rate not to exceed 4.25%. On March 1, 2016, Pacific Oak SOR BVI commenced the institutional tender of the Series A Debentures and accepted application for 842.5 million Israeli new Shekels. On March 7, 2016, Pacific Oak SOR BVI commenced the public tender of the Series A Debentures and accepted 127.7 million Israeli new Shekels.  In the aggregate, Pacific Oak SOR 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 SOR BVI issued the Series A Debentures on March 8, 2016.

In connection with the above-referenced offering, on March 8, 2016, the Operating Partnership assigned to Pacific Oak SOR BVI all of its interests in the subsidiaries through which the Company indirectly owns all of its real estate and real estate-related investments. The Operating Partnership owns all of the issued and outstanding equity of Pacific Oak SOR BVI.  As a result of these transactions, the Company now holds all of its real estate and real estate-related investments indirectly through Pacific Oak SOR BVI.

On February 16, 2020, Pacific Oak SOR BVI issued 254.1 million Israeli new Shekels (approximately $74.1 million as of February 16, 2020) of Series B debentures (the “Series B Debentures”) to Israeli investors pursuant to a public offering registered with the Israel Securities Authority. The Series B Debentures bears interest at the rate of 3.93% per year. The 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.

As of September 30, 2020, the Company consolidated six office properties, one office portfolio consisting of four office buildings and 14 acres of undeveloped land, one apartment property, three investments in undeveloped land with approximately 1,000 developable acres, one residential home portfolio consisting of 1,769 single-family homes and owned six investments in unconsolidated entities and three investments in real estate equity securities.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 2019. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the SEC.

Principles of Consolidation and Basis of Presentation

The accompanying unaudited consolidated financial statements and condensed notes thereto have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the FASB Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods. Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

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, 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 are eliminated in consolidation.

8

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

Liquidity

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. As further discussed in Note 7, the Company has significant debt coming due over the next 12-month period. In order to satisfy obligations as they mature, management plans 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. Based upon these plans, management believes it will have sufficient liquidity 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 7 for further discussion.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

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 and capital improvements and replacements.

Redeemable Common Stock

The Company limits the dollar value of shares that may be redeemed under the share redemption program. During the nine months ended September 30, 2020, the Company had redeemed $0.8 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 September 2020 redemption date, except for 5,938,443 shares totaling $60.0 million due to the limitations under the share redemption program. The Company recorded $0.3 million and $0.8 million of redeemable common stock payable on the Company’s balance sheet as of September 30, 2020 and December 31, 2019, respectively, related to unfulfilled redemption requests received in good order under the share redemption program. Based on the eleventh amended and restated share redemption program, the Company has fully exhausted all redemption amounts for the remainder of 2020, including shares that are redeemed in connection with a stockholders’ death, “qualifying disability” or “determination of incompetence”. Effective beginning with the month of February 2020, the Company suspended (a) redemptions requested under the share redemption program in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence”, until the Company and POSOR II file with the SEC a registration statement on Form S-4 containing a Joint Proxy Statement/Prospectus for the Merger, and (b) all other redemptions under the share redemption program until after the Merger closes. The Form S-4 was filed on June 15, 2020 with the SEC and the Merger closed on October 5, 2020.

Segments

The Company has invested in opportunistic real estate, non-performing loans, other real estate-related assets and single-family homes. In general, the Company intends to hold its investments in opportunistic real estate, non-performing loans and other real estate-related assets for capital appreciation. Traditional performance metrics of opportunistic real estate, non-performing loans 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, non-performing loans and other real estate-related assets as similar investments. Substantially all of its revenue and net income (loss) is from opportunistic real estate, non-performing loans and other real estate-related assets, and therefore, the Company currently recognizes two reportable business segment consisting of strategic opportunity properties and related investments and single-family homes. The Company owns single-family homes in 17 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.

9

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

Per Share Data

The Company applies the two-class method when computing its earnings per share. Net income per share for each class of stock is calculated by assuming all of the Company’s net income (loss) is distributed to each class of stock based on their contractual rights.

Unvested restricted stock that contains non-forfeitable rights to distributions (whether paid or unpaid) are considered participating securities and are included in the computation of earnings per share.

Basic earnings (loss) per share of common stock is calculated by dividing net income (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. Potential common shares consist of unvested restricted stock, using the more dilutive of either the two-class method or the treasury stock method.

The noncontrolling Series A convertible redeemable preferred shares of Pacific Oak Residential Trust, Inc. (“PORT”) are not included as the preferred shares are convertible contingent on the common stock of PORT being publicly traded. If PORT common stock becomes publicly traded, the per-share earnings of PORT will be included in the Company’s EPS computations based on the consolidated holdings of PORT. See Note 14, “PORT Preferred Stock” for more information.

The Company’s unvested Restricted Stock have been included in the calculation of basic and diluted earnings per share for the three and nine months ended September 30, 2020, as the restriction is not contingent on any conditions except the passage of time.

Distributions declared per share were $0.0086 during the nine months ended September 30, 2020 and $0.0086 and $0.0258 during the three and nine months ended September 30, 2019. There were no distributions declared for the three months ended September 30, 2020.

Square Footage, Occupancy and Other Measures

Any references to square footage, 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 financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board.

10

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

Recently Issued Accounting Standards Updates

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments (“ASU No. 2016-13”). ASU No. 2016-13 affects entities holding financial assets and net investments in leases that are not accounted for at fair value through net income. The amendments in ASU No. 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. ASU No. 2016-13 also amends the impairment model for available-for-sale debt securities. An entity will recognize an allowance for credit losses on available-for-sale debt securities as a contra-account to the amortized cost basis rather than as a direct reduction of the amortized cost basis of the investment, as is currently required. ASU No. 2016-13 also requires new disclosures. For financial assets measured at amortized cost, an entity will be required to disclose information about how it developed its allowance for credit losses, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes. For financing receivables and net investments in leases measured at amortized cost, an entity will be required to further disaggregate the information it currently discloses about the credit quality of these assets by year of the asset’s origination for as many as five annual periods. For available-for-sale debt securities, an entity will be required to provide a roll-forward of the allowance for credit losses and an aging analysis for securities that are past due. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which clarified that receivables from operating leases are not within the scope of Topic 326 and instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842. The Company adopted ASU No. 2016-13 on January 1, 2020 and it did not have a material effect on its financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848). ASU No. 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU No. 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the six months ended September 30, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. For the period from January 1, 2020 (the earliest date the Company may elect to apply ASU No. 2020-04) through September 30, 2020, the Company did not have any contract modifications that meet the criteria described above, specifically contract modifications that have been modified from LIBOR to an alternative reference rate. The Company’s loan agreements, derivative instruments, and certain lease agreements use LIBOR as the current reference rate. For eligible contract modifications, the Company expects to adopt the temporary optional expedients described in ASU No. 2020-04. The optional expedients for hedging relationships described in ASU No. 2020-04 are not expected to have an impact to the Company, as the Company has elected to not designate its derivative instruments as a hedge.

In April 2020, the FASB issued a FASB Staff Q&A related to Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic (the “Topic 842 Q&A”) which focused on the application of lease guidance for concessions related to the effects of the COVID-19 pandemic. In this Q&A document, the FASB staff will allow entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how those concessions would be accounted for under Topic 842, Leases, ("Topic 842") as though enforceable rights and obligations for those qualifying concessions existed. The Company adopted this guidance and did not have any material lease concessions related to the effects of the COVID-19 pandemic that had a material impact to the Company’s consolidated balance sheet as of September 30, 2020 or consolidated statement of operations for the nine months ended September 30, 2020.

11

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

3. REAL ESTATE HELD FOR INVESTMENT

As of September 30, 2020, the Company owned six office properties and one office portfolio consisting of four office buildings and 14 acres of undeveloped land, encompassing, in the aggregate, approximately 3.0 million rentable square feet. As of September 30, 2020, these properties were 80% occupied. In addition, as of the September 30, 2020, the Company owned one residential home portfolio consisting of 1,769 single-family homes and encompassing approximately 1.6 million rental square feet and one apartment property, containing 317 units and encompassing approximately 0.3 million rentable square feet, which was 91% and 87% occupied, respectively. The Company also owned three investments in undeveloped land with approximately 1,000 developable acres. The following table summarizes the Company’s real estate held for investment as of September 30, 2020 and December 31, 2019, respectively (in thousands):

	September 30, 2020		December 31, 2019
Land	$	193,602	$	175,317
Buildings and improvements	689,202		618,974
Tenant origination and absorption costs	27,984		30,569
Total real estate, cost	910,788		824,860
Accumulated depreciation and amortization	(88,290)		(65,381)
Total real estate, net	$	822,498	$	759,479

12

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

The following table provides summary information regarding the Company’s real estate held for investment as of September 30, 2020 (in thousands):

Property	Date Acquired or Foreclosed on	City	State	Property Type	Land		Building and Improvements		Tenant Origination and Absorption		Total Real Estate, at Cost		Accumulated Depreciation and Amortization		Total Real Estate, Net		Ownership %
Richardson Portfolio:
Palisades Central I	11/23/2011	Richardson	TX	Office	$	1,037	$	13,035	$	—	$	14,072	$	(4,194)	$	9,878	90.0	%
Palisades Central II	11/23/2011	Richardson	TX	Office	810		22,016		—		22,826		(6,496)		16,330		90.0	%
Greenway I	11/23/2011	Richardson	TX	Office	561		2,456		—		3,017		(1,176)		1,841		90.0	%
Greenway III	11/23/2011	Richardson	TX	Office	702		3,960		—		4,662		(1,584)		3,078		90.0	%
Undeveloped Land	11/23/2011	Richardson	TX	Undeveloped Land	3,134		—		—		3,134		—		3,134		90.0	%
Total Richardson Portfolio					6,244		41,467		—		47,711		(13,450)		34,261
Park Highlands (1)	12/30/2011	North Las Vegas	NV	Undeveloped Land	36,817		—		—		36,817		—		36,817		100.0%(1)
Park Centre	03/28/2013	Austin	TX	Office	3,251		34,766		—		38,017		(8,066)		29,951		100.0	%
1180 Raymond	08/20/2013	Newark	NJ	Apartment	8,292		39,231		—		47,523		(8,857)		38,666		100.0	%
Park Highlands II (1)	12/10/2013	North Las Vegas	NV	Undeveloped Land	27,854		—		—		27,854		—		27,854		100.0%(1)
Richardson Land II	09/04/2014	Richardson	TX	Undeveloped Land	3,418		—		—		3,418		—		3,418		90.0	%
Crown Pointe	02/14/2017	Dunwoody	GA	Office	22,590		69,663		3,618		95,871		(13,987)		81,884		100.0	%
The Marq	03/01/2018	Minneapolis	MN	Office	10,387		81,976		3,551		95,914		(9,618)		86,296		100.0	%
City Tower	03/06/2018	Orange	CA	Office	13,930		137,780		6,713		158,423		(16,780)		141,643		100.0	%
Eight & Nine Corporate Centre	06/08/2018	Franklin	TN	Office	17,401		58,011		4,518		79,930		(6,639)		73,291		100.0	%
Georgia 400 Center	05/23/2019	Alpharetta	GA	Office	11,431		73,841		7,368		92,640		(6,426)		86,214		100.0	%
Single-Family Homes Portfolio	Multiple	Multiple	Multiple	Home	31,987		152,467		2,216		186,670		(4,467)		182,203		96.1%(2)
					$	193,602	$	689,202	$	27,984	$	910,788	$	(88,290)	$	822,498

_____________________

(1) The Company owns 100% of the common members’ equity of Park Highlands and Park Highlands II. On September 7, 2016 and January 8, 2019, a subsidiary of the Company that owns a portion of Park Highlands and Park Highlands II, sold 820 units of 10% Class A non-voting preferred membership units for $0.8 million and 1,927 units of 10% Class A2 non-voting preferred membership units for $1.9 million, respectively, to accredited investors. The amount of the Class A and A2 non-voting preferred membership units raised, net of offering costs, is included in other liabilities on the accompanying consolidated balance sheets.

(2) As of September 30, 2020, the Company owned 96.1% of the equity of the single-family homes portfolio. All of these single-family homes are held by PORT OP, LP (“PORT OP”). PORT, a wholly owned subsidiary of the Company, owns 96.1% of the equity in PORT OP. PORT OP qualifies as a VIE and the Company is the primary beneficiary. In addition, PORT has authorized and issued preferred stock. See Note 14V, “PORT Preferred Stock” for more information.

13

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

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 September 30, 2020, the leases, excluding options to extend and apartment leases and single-family homes, which have terms that are generally one year or less, had remaining terms of up to 12.9 years with a weighted-average remaining term of 4.4 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 were both $4.3 million as of September 30, 2020 and December 31, 2019.

During the three and nine months ended September 30, 2020, the Company recognized deferred rent from tenants of $2.6 million and $0.9 million, respectively, net of lease incentive amortization. During the three and nine months ended September 30, 2019, the Company recognized deferred rent from tenants of $3.2 million and $1.0 million, respectively, net of lease incentive amortization. As of September 30, 2020 and December 31, 2019, the cumulative deferred rent receivable balance, including unamortized lease incentive receivables, was $16.7 million and $13.6 million, respectively, and is included in rents and other receivables on the accompanying balance sheets. The cumulative deferred rent balance included $3.3 million and $3.1 million of unamortized lease incentives as of September 30, 2020 and December 31, 2019, respectively.

As of September 30, 2020, the future minimum rental income from the Company’s properties, excluding apartment leases and single-family homes, under non-cancelable operating leases was as follows (in thousands):

October 1, 2020 through December 31, 2020	$	14,056
2021	57,171
2022	50,817
2023	42,545
2024	36,856
Thereafter	92,949
	$	294,394

As of September 30, 2020, the Company’s commercial real estate properties were leased to approximately 235 tenants over a diverse range of industries and geographic areas. The Company’s highest tenant industry concentrations (greater than 10% of annualized base rent) were as follows:

Industry	Number of Tenants	Annualized Base Rent (1) (in thousands)		Percentage of Annualized Base Rent
Insurance	25	$	7,256	11.8	%
Computer Systems Design	25	7,088		11.5	%
Health Care and Social Assistance	15	6,769		11.0	%
		$	21,113	34.3	%

_____________________

(1) Annualized base rent represents annualized contractual base rental income as of September 30, 2020, 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.

14

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

No other tenant industries accounted for more than 10% of annualized base rent. No material tenant credit issues have been identified at this time. During the three and nine months ended September 30, 2020, the Company recorded adjustments to rental income of $0.4 million and $1.1 million, respectively, for lease payments that were deemed not probable of collection. During the three and nine months ended September 30, 2019, the Company recorded adjustments to rental income of $0.2 million and $0.4 million, respectively, for lease payments that were deemed not probable of collection.

Geographic Concentration Risk

As of September 30, 2020, the Company’s real estate investments in Georgia and California represented 15.7% and 12.9%, 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 Georgia and California 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.

Recent Acquisitions

Battery Point Trust Inc. Acquisition

On July 1, 2020, the Company acquired, through its subsidiaries, Battery Point Trust Inc., a Maryland corporation (“Battery Point”). Battery Point is a real estate investment trust that owns 559 single-family rental homes throughout the Midwestern and Southeastern United States. The Company recorded this acquisition as an asset acquisition and the relative fair value of Battery Point's real estate assets were recorded as: $11.1 million to land, $44.6 million to building and improvements and $0.5 million to tenant origination and absorption costs. The Company also assumed a $36.6 million mortgage loan and $16.0 million of A-3 Preferred Units, which were eliminated in consolidation.

All of these assets are held by the Company through its subsidiary, PORT OP (formerly known as Reven Housing REIT OP, L.P.).

The Company acquired Battery Point by acquiring all the 1,000,000 outstanding shares of Battery Point common stock from BPT Holdings, LLC (“BPT Holdings”), a wholly owned subsidiary of the Advisor. The Advisor is the Company’s external advisor and is owned and controlled by Keith D. Hall, the Company’s Chief Executive Officer and a director, and Peter M. McMillan, the Company’s President and Chairman of the Board. In exchange, BPT Holdings received 510,816 common equity units in PORT OP, approximately 4.5% of the outstanding common equity units, as of July 1, 2020. The value of the interests exchanged was estimated by the participants at approximately $3.0 million. The common equity units issued to BPT Holdings are redeemable after one year at the request of BPT Holdings for all or a portion of the common equity units at a redemption price equal to and in the form of cash based on the unit price of PORT. The following table summarizes the redeemable non-controlling interest activity related to the BPT Holdings for the nine months ended September 30, 2020 (in thousands):

Issuance of PORT OP Units	$	3,024
Net loss attributable to redeemable noncontrolling interest	(23)
September 30, 2020	$	3,001

Prior to the acquisition date, the Company accounted for its investment in the Battery Point A-3 Preferred Units as an equity investment without a readily determinable fair value. The acquisition-date carrying value of the previous equity interest was $14.0 million and is included in the measurement of the consideration transferred. The Company recognized a gain of $2.0 million as a result of remeasuring its prior equity interest in the Battery Point A-3 Preferred Units held before the acquisition. The gain is included in the line item “Gain from remeasurement of prior equity interest” in the consolidated statement of operations. As a result of the Battery Point acquisition, the Company’s 640,000 shares of Battery Point Series A-3 Preferred Units were eliminated in consolidation.

15

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

Single-Family Home Acquisitions

On May 28, 2020, the Company acquired a single-family home portfolio consisting of 196 homes in Chicago, Illinois. The seller is not affiliated with the Company or the Advisor. The purchase price was $17.3 million, which includes $0.4 million of capitalized acquisition costs. The Company recorded this acquisition as an asset acquisition and recorded $3.4 million to land, $13.6 million to building and improvements and $0.3 million to tenant origination and absorption costs.

On July 29, 2020, the Company, through a wholly owned subsidiary of PORT OP, acquired a single-family home portfolio consisting of 12 homes in Alabama, Arkansas, and Illinois. The portfolio was purchased from DayMark Financial Acceptance LLC, an entity affiliated with the Advisor. The acquisition fee was waived for this acquisition. The purchase price was $1.0 million, which includes $10,000 of capitalized acquisition costs. The Company recorded this acquisition as an asset acquisition and recorded $0.2 million to land and $0.8 million to building and improvements.

On August 14, 2020, the Company, through a wholly owned subsidiary of PORT OP, acquired a single-family home portfolio consisting of 11 homes in Memphis, Tennessee. The seller is not affiliated with the Company or the Advisor. The purchase price was $1.0 million, which includes $8,000 of capitalized acquisition costs. The Company recorded this acquisition as an asset acquisition and recorded $0.2 million to land, $0.8 million to building and improvements and $11,000 to tenant origination and absorption costs.

Sale of Real Estate

As of September 30, 2020 and December 31, 2019, the Company had recorded contract liabilities of $3.1 million related to deferred proceeds received from the buyers of the Park Highlands prior year land sales and another developer for the value of land that was contributed to a master association that is consolidated by the Company, which was included in other liabilities on the accompanying consolidated balance sheets.

4. TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES

As of September 30, 2020 and December 31, 2019, the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities (excluding fully amortized assets and liabilities and accumulated amortization) were as follows (in thousands):

	Tenant Origination and Absorption Costs				Above-Market Lease Assets				Below-Market Lease Liabilities
	September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019
Cost	$	27,984	$	30,569	$	3,499	$	3,714	$	(4,122)	$	(4,958)
Accumulated Amortization	(11,861)		(10,223)		(767)		(741)		1,618		1,778
Net Amount	$	16,123	$	20,346	$	2,732	$	2,973	$	(2,504)	$	(3,180)

Increases (decreases) in net income as a result of amortization of the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities for the three and nine months ended September 30, 2020 and 2019 were as follows (in thousands):

	Tenant Origination and Absorption Costs				Above-Market Lease Assets				Below-Market Lease Liabilities
	For the Three Months Ended September 30,				For the Three Months Ended September 30,				For the Three Months Ended September 30,
	2020		2019		2020		2019		2020		2019
Amortization	$	(1,625)	$	(2,000)	$	(74)	$	(101)	$	194	$	421

16

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

	Tenant Origination and Absorption Costs				Above-Market Lease Assets				Below-Market Lease Liabilities
	For the Nine Months Ended September 30,				For the Nine Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019		2020		2019
Amortization	$	(4,965)	$	(5,324)	$	(241)	$	(303)	$	676	$	1,159

Additionally, as of September 30, 2020 and December 31, 2019, the Company had recorded tax abatement intangible assets, net of amortization, on real estate held for investment, which are included in prepaid expenses and other assets in the accompanying balance sheets, of $0.5 million and $1.0 million, respectively. During both of the three and nine months ended September 30, 2020 and 2019, the Company recorded amortization expense of $0.1 million and $0.5 million, respectively, related to tax abatement intangible assets. As of September 30, 2020, the tax abatement intangible assets had a remaining amortization period of 0.9 years.

5. REAL ESTATE EQUITY SECURITIES

As of September 30, 2020, the Company owned three investments in real estate equity securities. The following table sets forth the number of shares owned by the Company and the related carrying value of the shares as of September 30, 2020 and December 31, 2019 (dollars in thousands):

	September 30, 2020			December 31, 2019
Real Estate Equity Security	Number of Shares Owned	Total Carrying Value		Number of Shares Owned	Total Carrying Value
Keppel Pacific Oak US REIT	64,165,352	$	46,520	64,165,352	$	50,049
Franklin Street Properties Corp.	5,211,021	19,072		2,773,729	23,743
Plymouth Industrial REIT, Inc.	1,521,276	18,773		415,841	7,647
	70,897,649	$	84,365	67,354,922	$	81,439

During the nine months ended September 30, 2020, the Company purchased 1,722,751 shares of common stock of Plymouth Industrial REIT, Inc. (NYSE Ticker: PLYM) for an aggregate purchase price of $21.6 million and also purchased 2,437,292 shares of Franklin Street Properties Corp., (NYSE Ticker: FSP) for an aggregate purchase price of $14.0 million. During the nine months ended September 30, 2020, the Company sold 617,316 shares of common stock of Plymouth Industrial REIT for an aggregate sale price of $11.0 million.

The following summarizes the portion of gain and loss for the period related to real estate equity securities held during the three and nine months ended September 30, 2020 and 2019 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net (loss) gain recognized during the period on real estate equity securities	$	(6,527)	$	3,845	$	(21,620)	$	19,304
Less net gain recognized during the period on real estate equity securities sold during the period	—		—		(711)		(3,397)
Unrealized (loss) gain recognized during the reporting period on real estate equity securities held at the end of the period	$	(6,527)	$	3,845	$	(22,331)	$	15,907

During the three and nine months ended September 30, 2020, the Company recognized $2.8 million and $4.4 million, respectively, of dividend income from real estate equity securities. During the three and nine months ended September 30, 2019, the Company recognized $2.2 million and $4.3 million, respectively, of dividend income from real estate equity securities.

17

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

6. REAL ESTATE SOLD

During the year ended December 31, 2019, the Company disposed of one office building, one retail property and one apartment property. There were no dispositions during the nine months ended September 30, 2020.

On November 12, 2013, the Company, through an indirect wholly owned subsidiary, and EE 424 Bedford OM, LLC entered into an agreement to form a joint venture (the “424 Bedford Joint Venture”), and on January 31, 2014, the 424 Bedford Joint Venture acquired an apartment building containing 66 units in Brooklyn, New York (“424 Bedford”). On January 11, 2019, the 424 Bedford Joint Venture sold 424 Bedford to a purchaser unaffiliated with the Company or the Advisor, for $43.8 million before closing costs and credits. The carrying value of 424 Bedford as of the disposition date was $34.0 million, which was net of $5.3 million of accumulated depreciation and amortization. The Company recognized a gain on sale of $7.6 million related to the disposition of 424 Bedford.

On December 12, 2012, the Company, through an indirect wholly owned subsidiary, and Goldstein Planting Partners, LLC and its affiliate entered into a joint venture agreement (the “Burbank Collection Joint Venture”), and on December 12, 2012, the Burbank Collection Joint Venture acquired a Class A retail property containing 39,428 rentable square feet located in Burbank, California (the “Burbank Collection”). On July 19, 2019, the Burbank Collection Joint Venture sold the Burbank Collection to a purchaser unaffiliated with the Company or the Advisor for $25.9 million before closing costs. The carrying value of the Burbank Collection as of the disposition date was $14.7 million, which was net of $2.6 million of accumulated depreciation and amortization. The Company recognized a gain on sale of $10.5 million related to the disposition of the Burbank Collection.

On November 1, 2019, the Company, through an indirect wholly owned subsidiary, sold 125 John Carpenter to KORE 125 John Carpenter, LLC, a wholly owned subsidiary of the Keppel Pacific Oak US REIT, previously known as Keppel-KBS US REIT, a newly formed Singapore real estate investment trust (the “SREIT”). The sale price, net of closing credits, of 125 John Carpenter was $99.8 million, before third-party closing costs of approximately $0.2 million and excluding any disposition fees payable to the Company's then-current external advisor. Prior to the sale of 125 John Carpenter, the Company owned 56,979,352 common units of the SREIT, representing a 6.89% ownership interest. On October 29, 2019, the Company purchased 7,186,000 common units of the SREIT for $5.2 million in connection with a private placement to institutional and other investors, maintaining its 6.89% ownership interest. The Company recognized a gain on sale of $16.0 million related to the disposition of 125 John Carpenter.

18

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

The operations of these properties and gain on sales are included in continuing operations on the accompanying statements of operations. The following table summarizes certain revenue and expenses related to these properties for the three and nine months ended September 30, 2020 and 2019 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenues
Rental income	$	—	$	3,443	$	138	$	10,566
Other operating income	—		254		40		828
Total revenues	$	—	$	3,697	$	178	$	11,394
Expenses
Operating, maintenance, and management costs	$	—	$	1,042	$	86	$	3,030
Real estate taxes and insurance	—		710		—		2,110
Asset management fees to affiliate	—		250		—		784
Depreciation and amortization	—		1,183		—		3,784
Interest expense	—		596		—		2,086
Total expenses	$	—	$	3,781	$	86	$	11,794

19

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

7. NOTES AND BONDS PAYABLE

As of September 30, 2020 and December 31, 2019, the Company’s notes and bonds payable consisted of the following (dollars in thousands):

	Book Value as of September 30, 2020		Book Value as of December 31, 2019		Contractual Interest Rate as of September 30, 2020 (1)	Effective Interest Rate at September 30, 2020 (1)	Payment Type (3)	Maturity Date (2)
Richardson Portfolio Mortgage Loan	$	36,000	$	36,000	One-Month LIBOR + 2.50%	2.65%	Interest Only (3)	11/01/2021
Park Centre Mortgage Loan	21,970		21,970		One-Month LIBOR + 1.75%	1.90%	Interest Only	06/27/2022
1180 Raymond Mortgage Loan	29,948		30,250		One-Month LIBOR + 2.50% (7)	3.50%	Principal & Interest	12/01/2021
1180 Raymond Bond Payable	5,930		6,080		6.50%	6.50%	Principal & Interest	09/01/2036
Pacific Oak SOR (BVI) Holdings, Ltd. Series A Debentures (4)	169,927		224,746		4.25%	4.25%	(4)	03/01/2023
Pacific Oak SOR (BVI) Holdings, Ltd. Series B Debentures (4)	74,159		—		3.93%	3.93%	(4)	01/31/2026
Crown Pointe Mortgage Loan	53,254		51,171		One-Month LIBOR + 2.60%	2.75%	Principal & Interest	02/13/2021
City Tower Mortgage Loan	94,167		89,000		One-Month LIBOR + 1.55%	1.70%	Interest Only	03/05/2021
The Marq Mortgage Loan	58,331		53,408		One-Month LIBOR + 1.55%	1.70%	Interest Only	06/06/2021
Eight & Nine Corporate Centre Mortgage Loan	47,066		43,880		One-Month LIBOR + 1.60%	1.75%	Interest Only	06/08/2021
Georgia 400 Center Mortgage Loan	59,690		59,690		One-Month LIBOR + 1.55%	1.70%	Interest Only	05/22/2023
PORT Mortgage Loan 1	51,362		51,362		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 Mortgage Loan 3	12,000		—		5.00% (5)	5.00%	Interest Only	03/31/2021
Battery Point Trust Mortgage Loan	38,743		—		One-Month LIBOR + 2.50% (7)	3.50%	Interest Only	03/20/2022
Total Notes and Bonds Payable principal outstanding	763,070		678,080
Net premium on Notes and Bonds Payable (6)	175		783
Deferred financing costs, net	(5,170)		(5,200)
Total Notes and Bonds Payable, net	$	758,075	$	673,663

_____________________

(1) Contractual interest rate represents the interest rate in effect under the loan as of September 30, 2020. Effective interest rate is calculated as the actual interest rate in effect as of September 30, 2020 (consisting of the contractual interest rate and contractual floor rates), using interest rate indices at September 30, 2020, where applicable.

(2) Represents the initial maturity date or the maturity date as extended as of September 30, 2020; 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 September 30, 2020. 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) See “ – Israeli Bond Financing” below.

(5) Contractual interest is 5.0% through November 30, 2020 and 6.5% from December 1, 2020 through March 31, 2021.

(6) 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 premium/discount is amortized over the remaining life of the notes and bonds payable.

(7) The mortgage loans have a LIBOR floor of 1%.

20

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

During the three and nine months ended September 30, 2020, the Company incurred $6.3 million and $19.1 million, respectively, of interest expense. Included in interest expense for the three and nine months ended September 30, 2020 was $0.8 million and $2.5 million, respectively, of amortization of deferred financing costs. Additionally, during the three and nine months ended September 30, 2020, the Company capitalized $0.7 million and $2.4 million, respectively of interest related to its investments in undeveloped land and an investment in unconsolidated entity.

During the three and nine months ended September 30, 2019, the Company incurred $7.4 million and $21.8 million, respectively, of interest expense. Included in interest expense for the three and nine months ended September 30, 2019 was $0.9 million and $2.6 million, respectively, of amortization of deferred financing costs. Additionally, during the three and nine months ended September 30, 2019, the Company capitalized $0.7 million and $2.1 million, respectively of interest related to its investments in undeveloped land.

As of September 30, 2020 and December 31, 2019, the Company’s interest payable was $2.3 million and $4.8 million, respectively.

The following is a schedule of maturities, including principal amortization payments, for all notes and bonds payable outstanding as of September 30, 2020 (in thousands):

October 1, 2020 through December 31, 2020	$	507
2021	387,178
2022	117,595
2023	116,587
2024	24,990
Thereafter	116,213
	$	763,070

As of November 13, 2020, the Company had a total of $357.9 million of debt obligations scheduled to mature over the next 12 months. On October 5, 2020, the Company assumed the debt obligations of POSOR II upon the close of the Merger, of which $155.1 million is scheduled to mature over the next 12 months. The Company and POSOR II have extension options with respect to $350.9 million of the debt obligations outstanding that is 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 we will be able to meet these requirements. All of the Company’s debt obligations are generally non-recourse, subject to certain limited guaranty payments, except for the Company’s Series A Debentures and Series B Debentures. The Company plans to utilize available extension options or refinance the notes 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. There can be no assurance as to the certainty or timing of any such transactions.

The Company’s notes payable contain financial debt covenants. As of September 30, 2020, the Company was in compliance with all of these debt covenants.

21

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

Israeli Bond Financing

On March 2, 2016, Pacific Oak SOR 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 the Series A Debentures at an annual interest rate not to exceed 4.25%. On March 1, 2016, Pacific Oak SOR BVI commenced the institutional tender of the Series A Debentures and accepted application for 842.5 million Israeli new Shekels. On March 7, 2016, Pacific Oak SOR BVI commenced the public tender of the Debentures and accepted 127.7 million Israeli new Shekels.  In the aggregate, Pacific Oak SOR 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 SOR BVI issued the Debentures on March 8, 2016. The terms of the Series A Debentures require five equal annual installment principal payments on March 1st of each year from 2019 to 2023.

On February 16, 2020, Pacific Oak SOR 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 deeds of trust that govern the Series A Debentures and Series B Debentures contain various financial covenants. As of September 30, 2020, the Company was in compliance with all of these financial debt covenants.

8. 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 and foreign currency exchange rate movements. The primary goal of the Company’s risk management practices related to interest rate risk is to prevent changes in interest rates from adversely impacting the Company’s ability to achieve its investment return objectives. The Company does not enter into derivatives for speculative purposes.

The Company enters into foreign currency collars to mitigate its exposure to foreign currency exchange rate movements on its bonds payable outstanding denominated in Israeli new Shekels. A foreign currency collar consists of a purchased call option to buy and a sold put option to sell Israeli new Shekels. A foreign currency collar guarantees that the exchange rate of the currency will not fluctuate beyond the range of the options’ strike prices.

The following table summarizes the notional amount and other information related to the Company’s foreign currency collars as of September 30, 2020 and December 31, 2019. The notional amount is an indication of the extent of the Company’s involvement in each instrument at that time, but does not represent exposure to credit, interest rate or market risks (currency in thousands):

	September 30, 2020		December 31, 2019		Strike Price	Trade Date	Maturity Date
Derivative Instruments	Number of Instruments	Notional Amount	Number of Instruments	Notional Amount
Derivative instruments not designated as hedging instruments
Foreign currency collar	—	—	—	—	3.70 - 3.82 ILS - USD	03/17/2020	9/16/2020 (1)
Foreign currency collar	—	—	—	—	3.5875 - 3.725 ILS - USD	03/16/2020	9/16/2020 (1)
Foreign currency collar	—	—	1	776,182 ILS	3.38 - 3.4991 ILS - USD	11/25/2019	02/26/2020

____________________

(1) On July 29, 2020, the Company terminated the foreign currency collars and as a result received $14.1 million.

22

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

The Company enters into interest rate caps to mitigate its exposure to rising interest rates on its variable rate notes payable. The values of interest rate caps are primarily impacted by interest rates, market expectations about interest rates, and the remaining life of the instrument. In general, increases in interest rates, or anticipated increases in interest rates, will increase the value of interest rate caps. As the remaining life of an interest rate cap decreases, the value of the instrument will generally decrease towards zero.

The Company enters into interest rate caps to mitigate its exposure to rising interest rates on its variable rate notes payable. The values of interest rate caps are primarily impacted by interest rates, market expectations about interest rates, and the remaining life of the instrument. In general, increases in interest rates, or anticipated increases in interest rates, will increase the value of interest rate caps. As the remaining life of an interest rate cap decreases, the value of the instrument will generally decrease towards zero.

As of September 30, 2020, the Company had entered into three interest rate caps, which were not designated as a hedging instruments. The following table summarizes the notional amounts and other information related to the Company’s derivative instruments as of September 30, 2020. The notional amount is an indication of the extent of the Company’s involvement in the instrument at that time, but does not represent exposure to credit, interest rate or market risks (dollars in thousands):

Derivative Instrument	Effective Date	Maturity Date	Notional Value		Reference Rate
Interest rate cap	04/02/2018	03/05/2021	$	77,513	One-month LIBOR at 3.50%
Interest rate cap	06/21/2019	05/22/2023	$	51,252	One-month LIBOR at 4.00%
Interest rate cap	02/12/2020	02/16/2021	$	46,875	One-month LIBOR at 3.00%

The following table sets forth the fair value of the Company’s derivative instruments as well as their classification on the consolidated balance sheets as of September 30, 2020 and December 31, 2019 (dollars in thousands):

		September 30, 2020			December 31, 2019
Derivative Instruments	Balance Sheet Location	Number of Instruments	Fair Value		Number of Instruments	Fair Value
Derivative instruments not designated as hedging instruments
Interest rate caps	Prepaid expenses and other assets	3	$	8	3	$	12
Foreign currency collars	Prepaid expenses and other assets (Other liabilities)	—	$	—	1	$	(179)

The change in fair value of foreign currency collars that are not designated as cash flow hedges are recorded as foreign currency transaction gains or losses in the accompanying consolidated statements of operations. During the three months ended September 30, 2020, the Company recognized a $2.2 million gain related to the foreign currency collars, which is shown combined with $2.6 million of foreign currency transaction loss in the accompanying consolidated statements of operations as foreign currency transaction loss, net. During the nine months ended September 30, 2020, the Company recognized a $14.3 million gain related to the foreign currency collars, which is shown combined with $2.0 million of foreign currency transaction loss in the accompanying consolidated statements of operations as foreign currency transaction gain, net. On July 29, 2020, the Company terminated the foreign currency collars and as a result received $14.1 million.

During the three months ended September 30, 2019, the Company recognized a $0.4 million gain related to the foreign currency collars, which is shown net against $5.7 million of foreign currency transaction loss in the accompanying consolidated statements of operations as foreign currency transaction loss, net. During the nine months ended September 30, 2019, the Company recognized a $4.6 million gain related to the foreign currency collars, which is shown net against $15.2 million of foreign currency transaction loss in the accompanying consolidated statements of operations as foreign currency transaction loss, net.

23

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

9. FAIR VALUE DISCLOSURES

The following were the face values, carrying amounts and fair values of the Company’s financial instruments as of September 30, 2020 and December 31, 2019, which carrying amounts do not approximate the fair values (in thousands):

	September 30, 2020						December 31, 2019
	Face Value		Carrying Amount		Fair Value		Face Value		Carrying Amount		Fair Value
Financial liabilities (Level 3):
Notes and bond payable	$	518,984	$	517,731	$	524,259	$	453,334	$	451,743	$	455,849
Financial liabilities (Level 1):
Pacific Oak SOR (BVI) Holdings, Ltd. Series A Debentures	$	169,927	$	168,190	$	158,620	$	224,746	$	221,920	$	229,877
Pacific Oak SOR (BVI) Holdings, Ltd. Series B Debentures	$	74,159	$	72,154	$	60,325	$	—	$	—	$	—

Disclosure of the fair value of financial instruments 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 September 30, 2020, the Company measured the following assets at fair value (in thousands):

			Fair Value Measurements Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring Basis:
Real estate equity securities	$	84,365	$	84,365	$	—	$	—
Asset derivative - interest rate caps	$	8	$	—	$	8	$	—

As of December 31, 2019, the Company measured the following assets and liabilities at fair value (in thousands):

			Fair Value Measurements Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring Basis:
Real estate equity securities	$	81,439	$	81,439	$	—	$	—
Asset derivative - interest rate caps	$	12	$	—	$	12	$	—
Liability derivative - foreign currency collar	$	(179)	$	—	$	(179)	$	—

10. RELATED PARTY TRANSACTIONS

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 since November 1, 2019. Messrs. Hall and McMillan are also two of the Company’s executive officers and directors.

24

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

In addition, along with Charles J. Schreiber, Jr., Keith D. Hall and Peter McMillan III control and indirectly own KBS Holdings LLC (“KBS Holdings”), the Company’s sponsor prior to November 1, 2019. KBS Holdings is the sole owner of KBS Capital Advisors, the Company’s advisor prior to November 1, 2019, and KBS Capital Markets Group LLC, the entity that acted as the dealer manager of the Company’s now-terminated primary initial public offering.

From the Company’s inception through October 31, 2019, KBS Capital Advisors provided day-to-day management of the Company’s business. The advisory agreement with KBS Capital Advisors terminated on October 31, 2019, and the Company hired the Advisor under substantially the same terms on November 1, 2019. The advisory agreement with the Advisor has a one-year term subject to an unlimited number of successive one-year renewals upon the mutual consent of the parties.

Pursuant to the terms of these agreements, summarized below are the related-party costs incurred by the Company for the three and nine months ended September 30, 2020 and 2019, respectively, and any related amounts payable as of September 30, 2020 and December 31, 2019 (in thousands):

	Incurred								Payable as of
	Three Months Ended September 30,				Nine Months Ended September 30,				September 30, 2020		December 31, 2019
Expensed	2020		2019		2020		2019
Asset management fees	$	2,426	$	2,093	$	6,867	$	5,954	$	2,538	$	1,498
Property management fees (1)	114		—		114		—		—		—
Reimbursable operating expenses (2)	56		79		148		251		—		—
Disposition fees (3)	—		233		—		627		—		—
Change in subordinated performance fee due upon termination to affiliate (4)	(1,121)		—		(814)		—		(3)		(3)
Capitalized
Acquisition fees on real estate equity securities	—		—		122		—		—		—
Acquisition fee on real estate	—		—		171		897		—		—
Acquisition fee on investment in unconsolidated entities	—		—		—		50		—		137
Investment in PORT II (5)	—		—		—		—		3,911		—
	$	1,475	$	2,405	$	6,608	$	7,779	$	6,449	$	1,635

_____________________

(1) Property management fees are for single-family homes under Battery Point and paid to DayMark. These fees are included in the line item “Operating, maintenance, and management cost” in the consolidated statement of operations.

(2) The relevant advisor may seek reimbursement for certain employee costs under the relevant advisory agreement. The Company has reimbursed the relevant advisor for the Company’s allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to the Company. These amounts totaled $65,000 and $198,000 for the three and nine months ended September 30, 2019, respectively, and were the only employee costs reimbursed under the advisory agreement during these periods. There were no employee cost reimbursements during 2020. The Company will not reimburse for employee costs in connection with services for which the Advisor earns acquisition, origination or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries or benefits the Advisor or its affiliates may pay to the Company’s executive officers. In addition to the amounts above, the Company reimburses the Advisor for certain of the Company’s direct costs incurred from third parties that were initially paid by the Advisor on behalf of the Company.

(3) Disposition fees with respect to real estate sold are included in the gain on sale of real estate in the accompanying consolidated statements of operations.

(4) Change in estimate of fees payable to KBS Capital Advisors due to the termination of the former advisory agreement with KBS Capital Advisors. See “Subordinated Performance Fee Due Upon Termination to KBS Capital Advisors”, below, for more details.

(5) During the nine months ended September 30, 2020, the Company, through a subsidiary of PORT OP, invested $5.0 million in PORT II OP LP (“PORT II OP”), of which $3.9 million was payable. See "PORT II" below for more details.

25

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

Battery Point Restructuring

On October 28, 2016, the Company, through an indirect wholly owned subsidiary, agreed to invest up to $25,000,000 in Battery Point Trust, LLC (“Battery Point LLC”) through the purchase of Series B Preferred Equity Units (the “Series B Preferred Units”). On May 12, 2017, the Company and Battery Point LLC agreed to limit the Company’s investment to $17,500,000 worth of Series B Preferred Units. The Company invested the full $17,500,000 in stages. During 2018, $4,500,000 was repaid to the Company. On June 29, 2018, Battery Point LLC was converted into Battery Point Trust, Inc. (“Battery Point”) and the Company’s Series B Preferred Units were converted into Series B Preferred Shares (the “Series B Preferred Shares”). The Series B Preferred Shares are entitled to the same rights and protections as were the Series B Preferred Units. The Series B Preferred Shares pay a quarterly dividend of 12% and had an outside maturity date of October 28, 2019.

On March 20, 2019, the Company, through an indirect wholly owned subsidiary, entered into a redemption agreement for the Battery Point Series B Preferred Shares. The redemption agreement resulted in the redemption of 13,000 Series B Preferred Units with a per-unit price of $1,000. The Company received $8.6 million, of which $0.9 million relates to accrued interest and an exit fee. In addition, the Company received 210,000 Battery Point Series A-3 Preferred Units with a per-unit price of $25.

On March 20, 2019, Pacific Oak Battery Point Holdings, LLC (“Pacific Oak BP”), a wholly owned subsidiary of the Advisor, a real estate asset management company formed in 2019, and its family of companies (collectively, “Pacific Oak”), acquired all the common equity interests in BPT Holdings, LLC (“Battery Point Holdings”). Battery Point Holdings owns (a) the common stock in Battery Point, (b) all the service entities that provide advisory, servicing and property management services to Battery Point Holdings generally named “DayMark”, and (c) 40% of additional DayMark entities that purchase, renovate, lease and sell single-family residential homes to Battery Point. As owner of Battery Point Holdings, Pacific Oak is responsible for funding the ongoing operations of Battery Point Holdings and its subsidiaries. The affiliated DayMark service entities are paid annual asset management fees equal to 1.5% of the gross asset value of Battery Point, annual property management fees equal to 8% of tenants’ rents received by Battery Point, and acquisition fees of 1% of the gross purchase price of properties acquired. The affiliated DayMark service entities also receive fees from tenants upon execution of leases and a 1% commission from sellers of properties into the program, if it acts as the broker for the seller. During the year ended December 31, 2019, the Company purchased additional 430,000 shares of Battery Point Series A-3 Preferred Units for an aggregate amount of $10.8 million.

On July 1, 2020, the Company acquired, through its subsidiaries, Battery Point. The Company acquired Battery Point by acquiring all the 1,000,000 outstanding shares of Battery Point common stock from Battery Point Holdings, a wholly owned subsidiary of the Advisor. In exchange, BPT Holdings received 510,816 common equity units in PORT OP, approximately 4.5% of the outstanding common equity units as of July 1, 2020. The value of the interests exchanged was estimated by the participants at approximately $3.0 million. As a result of the Battery Point acquisition, the Company’s 640,000 shares of Battery Point Series A-3 Preferred Units were eliminated in consolidation.

Prior to the acquisition date, the Company accounted for its investment in the Battery Point A-3 Preferred Units as an equity-method investment. The acquisition-date carrying value of the previous equity interest was $14.0 million and is included in the measurement of the consideration transferred. The Company recognized a gain of $2.0 million as a result of remeasuring its prior equity interest in the Battery Point A-3 Preferred Units held before the acquisition. The gain is included in the line item “Gain from remeasurement of prior equity interest” in the consolidated statement of operations.

26

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

Pacific Oak Opportunity Zone Fund I

During the year ended December 31, 2019, the Company acquired 91 Class A Units for $20.6 million in the Pacific Oak Opportunity Zone Fund I, LLC (“Pacific Oak Opportunity Zone Fund I”). Pacific Oak Opportunity Zone Fund I is sponsored by Pacific Oak Holding. The Advisor is entitled to certain fees in connection with the fund. The fund 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. Pacific Oak is also entitled to certain distributions paid by the Pacific Oak Opportunity Zone Fund I after the Class A Members have received their preferred return. These fees and distributions have been waived for the Company’s $20.6 million investment. In addition, a side letter agreement between the Advisor and Pacific Oak Opportunity Zone Fund I was executed on February 28, 2020 and stipulates that any asset management fees allocable to the Company and waived by the Advisor for Pacific Oak Opportunity Zone Fund I and shall be distributed to the Company. During the nine months ended September 30, 2020, the Company recorded $0.5 million of waived asset management fees recorded as equity in income of unconsolidated entities, of which $0.1 million was a receivable as of September 30, 2020.

PORT II

During the nine months ended September 30, 2020, the Company has contributed $5.0 million in PORT II OP, a wholly owned subsidiary of Pacific Oak Residential Trust II, Inc. ("PORT II"). On August 31, 2020, PORT II entered into an advisory agreement (as subsequently amended and restated on October 9, 2020, “PORT II Advisory Agreement”) with Pacific Oak Residential Advisors, LLC (“PORA”), an affiliate of the Advisor. Pursuant to the PORT II Advisory Agreement, PORT II has engaged PORA to act as its external advisor with respect to PORT II’s operations and assets. Because the Company has separately engaged the Advisor to manage its operations and assets, including its interests in PORT II, on November 12, 2020, the Company and the Advisor agreed to amend their advisory agreement to provide that PORT II’s operations and assets will be managed by PORA and not by the Advisor. In addition, the amendment provides that the Advisor will rebate or offset its fees under its advisory agreement with the Company to the extent of the Company’s indirect economic interest in fees paid by PORT II to PORA (which will be based on the Company’s indirect ownership of PORT II OP, which is the operating partnership of PORT II and the entity ultimately responsible for PORT II’s administrative expenses).

On August 31, 2020, PORT II entered into a property management agreement with DMH Realty, LLC (“DMH”), an affiliate of POCA and PORA. Pursuant to the property management agreement, PORT II will pay to DMH a base fee equal to the following: (a) for all rent collections up to $50 million per year, 8%; (b) for all rent collections in excess of $50 million per year, but less than or equal to $75 million per year, 7%; and (c) for all rent collections in excess of $75 million per year, 6%. PORT II will also pay DMH market-based leasing fees that will depend on the type of tenant, shared fees equal to 100% of any application fees collected and 50% of any insufficient funds fees, late fees and certain other fees collected. DMH may also perform additional services at rates that would be payable to unrelated parties.

PORT II is a newly-organized Maryland corporation formed and sponsored by the Advisor to acquire, own and operate single family homes as rental properties as well as to acquire and own other interests, including mortgages on or securities related to single family homes. The Company has contributed $5 million in capital to PORT II OP. The Company made its investment through PORT OP, of which the Company owns 96.1% of the equity as of November 13, 2020.

27

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

Subordinated Performance Fee Due Upon Termination to KBS Capital Advisors

The Company and KBS Capital Advisors agreed to terminate their advisory agreement effective October 31, 2019. In connection with that agreement, the Company agreed to pay KBS Capital Advisors a subordinated performance fee due upon termination in the form of Restricted Stock, to be paid to KBS Capital Advisors upon the filing of its Annual Report on Form 10-K for the year ended December 31, 2019. The number of Restricted Stock to be awarded has been set at 3,411,737 shares and was issued on March 27, 2020. This termination payout value to KBS Capital Advisors (the “KBS Termination Fee Value”) was determined based on the Company’s performance from inception through September 30, 2018. In other words, it was based on the Company’s participation fee potential liability to KBS Capital Advisors calculated with respect to the November 12, 2018 estimated value per share. As a result, when the Company hired the Advisor as the Company’s new advisor on November 1, 2019, the Company agreed to a participation fee that was based on the Company’s performance from September 30, 2018. The Restricted Stock vests on November 1, 2021. Within 60 days from vesting of the Restricted Stock, the Company will redeem 50% of the Restricted Stock, with the amount of the cash payment per share determined based on the then most recent net asset value of the shares (which shall not be more than six months old). The remaining vested Restricted Stock (the “Remaining Shares”) shall not be eligible for redemption under the Company’s share redemption program unless the Company has satisfied all outstanding redemption requests from other stockholders, provided that (a) this restriction may be waived in certain situations, such as upon a change of control of the Company and (b) notwithstanding the foregoing, within 60 days after November 1, 2024, the Company shall be required to redeem any Remaining Shares, separate and outside of any general stockholder share redemption program, at the then most recent net asset value per share (which shall not be more than six months old), provided that such outstanding shares are owned or controlled by Charles J. Schreiber, Jr. or the estate of Peter M. Bren, and provided further that pursuant to this clause (b) the Company will only be required to redeem that number Remaining Shares which, when added to any previously redeemed Remaining Shares owned or controlled by Charles J. Schreiber, Jr. or the estate of Peter M. Bren, does not exceed two-thirds of the total number of Remaining Shares.

The Company also agreed with KBS Capital Advisors and the Advisor that with respect to any fiscal quarter that any matter related to the award of Restricted Stock results in a company expense that falls within the definition of Total Operating Expenses (as defined in the Company’s charter), if Total Operating Expenses for the four consecutive fiscal quarters then ended exceed the 2%/25% Guidelines (as defined in the Company’s charter), then the Company’s conflicts committee will determine an Excess Amount (as defined in the Company’s charter) is justified, based on unusual and non-recurring factors that it deems sufficient, in an amount sufficient (a) to allow the portion of Total Operating Expenses for the four consecutive fiscal quarters then ended comprised of the Restricted Stock expenses to be paid or incurred by the Company without reimbursement by the Advisor (as defined in the Company’s charter) and (b) to allow any other portion of Total Operating Expenses for the four consecutive fiscal quarters then ended to be paid or incurred by the Company without reimbursement by the Advisor, to the extent such portion alone (i.e., that portion of Total Operating Expenses exclusive of the Restricted Stock expenses) would not have exceeded the 2%/25% Guidelines.

28

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

11. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

As of September 30, 2020 and December 31, 2019, the Company’s investments in unconsolidated joint ventures were composed of the following (dollars in thousands):

	Number of Properties as of September 30, 2020			Investment Balance at
Joint Venture		Location	Ownership %	September 30, 2020		December 31, 2019
NIP Joint Venture	—	—	—	$	—	$	1,225
110 William Joint Venture	1	New York, New York	60.0%	—		—
353 Sacramento Joint Venture	1	San Francisco, California	55.0%	43,790		42,214
Battery Point Series A-3 Preferred Units	N/A	N/A	N/A	—		13,991
Pacific Oak Opportunity Zone Fund I	3	Various	N/A	20,891		20,846
PORT II OP LP	7	Southaven, Mississippi	N/A	5,005		—
				$	69,686	$	78,276

Investment in National Industrial Portfolio Joint Venture

On May 18, 2012, the Company, through an indirect wholly owned subsidiary, entered into a joint venture (the “NIP Joint Venture”) with OCM NIP JV Holdings, L.P. and HC KBS NIP JV, LLC (“HC-KBS”). The NIP Joint Venture has invested in a portfolio of industrial properties. The Company made an initial capital contribution of $8.0 million, which represents less than a 5.0% ownership interest in the NIP Joint Venture as of September 30, 2020.

Prior to January 17, 2018, KBS REIT I, an affiliate of KBS Capital Advisors, was a member of HC-KBS and had a participation interest in certain future potential profits generated by the NIP Joint Venture.  However, KBS REIT I did not have any equity interest in the NIP Joint Venture. On January 17, 2018, KBS REIT I assigned its participation interest in the NIP Joint Venture to one of the other joint venture partners in the NIP Joint Venture. None of the other joint venture partners are affiliated with the Company or the Advisor.

During the nine months ended September 30, 2020, the NIP Joint Venture sold the remaining properties. During the nine months ended September 30, 2020, the Company received a distribution of $1.3 million related to its investment in the NIP Joint Venture and the Company recognized $0.1 million as income distribution and $1.2 million as a return of capital from the NIP Joint Venture. During the nine months ended September 30, 2019, the Company received a distribution of $0.3 million related to its investment in the NIP Joint Venture, which is reflected as a return of capital from the NIP Joint Venture.

Investment in 110 William Joint Venture

On December 23, 2013, the Company, through an indirect wholly owned subsidiary, entered into an agreement with SREF III 110 William JV, LLC (the “110 William JV Partner”) to form a joint venture (the “110 William Joint Venture”). On May 2, 2014, the 110 William Joint Venture acquired an office property containing 928,157 rentable square feet located on approximately 0.8 acres of land in New York, New York (“110 William Street”). Each of the Company and the 110 William JV Partner hold a 60% and 40% ownership interest in the 110 William Joint Venture, respectively.

The Company exercises significant influence over the operations, financial policies and decision making with respect to the 110 William Joint Venture but significant decisions require approval from both members. Accordingly, the Company has accounted for its investment in the 110 William Joint Venture under the equity method of accounting. Income, losses, contributions and distributions are generally allocated based on the members’ respective equity interests.

29

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

As of September 30, 2020 and December 31, 2019, the book value of the Company’s investment in the 110 William Joint Venture was $0. During the nine months ended September 30, 2019, the 110 William Joint Venture made a $7.8 million distribution to the Company and a $5.2 million distribution to the 110 William JV Partner funded with proceeds from the 110 William refinancing (discussed below). The distribution exceeded the book value of the Company’s investment in the 110 William Joint Venture, and the Company recorded the $7.8 million distribution as a gain included in equity in income of unconsolidated joint ventures during the nine months ended September 30, 2019. This gain was recorded because the Company determined that the distribution is not refundable and it does not have an implicit or explicit commitment to fund the 110 William Joint Venture. During the nine months ended September 30, 2019, the Company suspended the equity method of accounting and the Company will not record the Company's share of losses and will not record the Company's share of any subsequent income for the 110 William Joint Venture until the Company’s share of net income exceeds the gain recorded and the Company’s share of the net losses not recognized during the period the equity method was suspended. During the nine months ended September 30, 2020, the Company did not record equity in income from the 110 William Joint venture.

Summarized financial information for the 110 William Joint Venture follows (in thousands):

	September 30, 2020		December 31, 2019
Assets:
Real estate assets, net of accumulated depreciation and amortization	$	247,304	$	242,430
Other assets	43,178		35,747
Total assets	$	290,482	$	278,177
Liabilities and equity:
Notes payable, net	$	312,664	$	292,221
Other liabilities	8,257		10,664
Partners’ deficit	(30,439)		(24,708)
Total liabilities and equity	$	290,482	$	278,177

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenues	$	10,005	$	9,274	$	26,604	$	26,975
Expenses:
Operating, maintenance, and management	2,096		2,367		5,994		6,818
Real estate taxes and insurance	1,935		1,818		5,580		5,248
Depreciation and amortization	3,139		2,946		8,721		8,449
Interest expense	4,125		4,084		12,093		12,816
Total expenses	11,295		11,215		32,388		33,331
Total other income	12		34		50		105
Net loss	$	(1,278)	$	(1,907)	$	(5,734)	$	(6,251)
Company’s share of net loss (1)	$	(767)	$	(1,144)	$	(3,440)	$	(3,751)

_____________________

(1) During the three and nine months ended September 30, 2019, the Company recorded $0 and $0.3 million of net losses in equity in income of unconsolidated entities and suspended the recording of the Company’s remaining share of net losses. During the three and nine months ended September 30, 2020, the Company did not record equity in income of unconsolidated entities.

30

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

Investment in 353 Sacramento Joint Venture

On July 6, 2017, the Company, through an indirect wholly owned subsidiary, entered into an agreement with the Migdal Members to form a joint venture (the “353 Sacramento Joint Venture”). On July 6, 2017, the Company sold a 45% equity interest in an entity that owns an office building containing 284,751 rentable square feet located on approximately 0.35 acres of land in San Francisco, California (“353 Sacramento”) to the Migdal Members. The sale resulted in 353 Sacramento being owned by the 353 Sacramento Joint Venture, in which the Company indirectly owns 55% of the equity interests and the Migdal Members indirectly own 45% in the aggregate of the equity interests.

The Company exercises significant influence over the operations, financial policies and decision making with respect to the 353 Sacramento Joint Venture but significant decisions require approval from both members. Accordingly, the Company has accounted for its investment in the 353 Sacramento Joint Venture under the equity method of accounting. Income, losses, contributions and distributions are generally allocated based on the members’ respective equity interests.

Summarized financial information for the 353 Sacramento Joint Venture follows (in thousands):

	September 30, 2020		December 31, 2019
Assets:
Real estate assets, net of accumulated depreciation and amortization	$	183,176	$	180,592
Other assets	18,434		21,822
Total assets	$	201,610	$	202,414
Liabilities and equity:
Notes payable, net	$	115,500	$	115,280
Other liabilities	7,507		11,193
Partners’ capital	78,603		75,941
Total liabilities and equity	$	201,610	$	202,414

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenues	$	5,520	$	3,933	$	15,771	$	12,278
Expenses:
Operating, maintenance, and management	932		923		2,450		2,693
Real estate taxes and insurance	755		700		2,235		2,095
Depreciation and amortization	1,894		1,718		5,135		4,849
Interest expense	948		1,420		3,290		4,286
Total expenses	4,529		4,761		13,110		13,923
Net income (loss)	$	991	$	(828)	$	2,661	$	(1,645)
Company’s equity in income (loss) of unconsolidated joint venture	$	583	$	(419)	$	1,576	$	(798)

31

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

Battery Point Series A-3 Preferred Units

Beginning October 28, 2016, the Company invested in Battery Point Series B Preferred Units and on March 20, 2019, the Company, through an indirect wholly owned subsidiary, entered into a redemption agreement for the Battery Point Series B Preferred Units. The redemption agreement resulted in the redemption of the Company’s entire investment of 13,000 Series B Preferred Units with a per-unit price of $1,000 with an aggregate outstanding principal balance of $13.0 million. The Company received a principal paydown of $7.7 million plus accrued interest and an exit fee.  In addition, the Company received 210,000 shares of Battery Point Series A-3 Preferred Units with a per-unit price of $25 with an aggregate face amount of $5.3 million. The Battery Point Series A-3 Preferred Units are entitled to a monthly dividend based on an annual rate of 7.5%. The annual dividend rate increases to 10% for the Battery Point Series A-3 Preferred Units not redeemed by February 28, 2020 and to 11% for the Battery Point Series A-3 Preferred Units not redeemed by February 28, 2021. On each monthly dividend payment date, Battery Point has the obligation to use 20% of the net proceeds of any and all future equity capital raising to redeem the Series A-3 Preferred Units. The Battery Point Series A-3 Preferred Units are redeemable at any time by Battery Point and holders of Series A-3 Preferred Shares may elect to redeem their units beginning on February 28, 2021, subject to Battery Point’s board of directors’ determination that the company has sufficient cash.

During the year ended December 31, 2019, the Company purchased additional 430,000 shares of Battery Point Series A-3 Preferred Units for an aggregate amount of $10.8 million.

On July 1, 2020, the Company acquired, through its subsidiaries, Battery Point. As a result of the Battery Point acquisition, the Company’s 640,000 shares of Battery Point Series A-3 Preferred Units were eliminated in consolidation. During the nine months ended September 30, 2020 and 2019, the Company received distributions of $0.9 million and $0.2 million, respectively, which were recognized as dividend income from real estate equity securities.

Prior to the acquisition of Battery Point, the Company accounted for its investment in the Battery Point A-3 Preferred Units as an equity-method investment. The acquisition-date carrying value of the previous equity interest was $14.0 million and is included in the measurement of the consideration transferred. The Company recognized a gain of $2.0 million as a result of remeasuring its prior equity interest in the Battery Point A-3 Preferred Units held before the acquisition. The gain is included in the line item “Gain from remeasurement of prior equity interest” in the consolidated statement of operations.

Investment in Pacific Oak Opportunity Zone Fund I

During the year ended December 31, 2019, the Company acquired 91 Class A Units for $20.6 million in Pacific Oak Opportunity Zone Fund I. As of December 31, 2019, the book value of the Company’s investment in Pacific Oak Opportunity Zone Fund I was $20.8 million, which includes $0.2 million of acquisition fees. As of September 30, 2020, Pacific Oak Opportunity Zone Fund I consolidated three joint ventures with real estate under development. As of September 30, 2020, the Company has concluded that Pacific Oak Opportunity Zone Fund I qualifies as a VIE because there is insufficient equity at risk to finance the entity’s activities and the entity is structured with non-substantive voting rights. The Company concluded it is not the primary beneficiary of this VIE since it does not have the power to direct the activities that most significantly impact the entity’s economic performance and will account for its investment under the equity method of accounting.  

The Company’s maximum exposure to loss as a result of its involvement with this VIE is limited to the carrying value of the investment in Pacific Oak Opportunity Zone Fund I which totaled $20.9 million as of September 30, 2020. During both of the three and nine months ended September 30, 2020, the Company recorded $0.6 million of net loss in equity in income of unconsolidated entities.

32

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

12. SUPPLEMENTAL CASH FLOW AND SIGNIFICANT NONCASH TRANSACTION DISCLOSURES

Supplemental cash flow and significant noncash transaction disclosures were as follows (in thousands):

	Nine Months Ended September 30,
	2020		2019
Supplemental Disclosure of Cash Flow Information:
Interest paid, net of capitalized interest of $2,368 and $2,079 for the nine months ended September 30, 2020 and 2019, respectively	$	18,945	$	21,981
Supplemental Disclosure of Significant Noncash Transactions:
Accrued improvements to real estate	2,393		3,414
Mortgage loan assumed by buyer in connection with sale of real estate	—		23,663
Redeemable common stock payable	262		3,423
Distributions paid to common stockholders through common stock issuances pursuant to the dividend reinvestment plan	262		835
Redemption of Series B Preferred Units in exchange for Series A-3 Preferred Units	—		2,992
Accrued preferred dividends	226		—
Assets and liabilities assumed in connection with Battery Point acquisition:			—
Real estate	56,148		—
Notes payable	36,003		—
Other assets	21		—
Other liabilities	355		—
Redeemable non-controlling interest	3,024		—
Series A-3 preferred units payable	16,000		—

13. REPORTING SEGMENTS

The Company recognizes two reporting segments for the three and nine months ended September 30, 2020 and consists of strategic opportunistic properties and related investments and single-family homes. Corporate related costs are allocated to each respective segment. The selected financial information for the two reporting segments for the three months ended September 30, 2020 is as follows (in thousands):

	Three Months Ended September 30, 2020
	Strategic Opportunistic Properties		Single-Family Homes		Total
Total revenues	$	22,548	$	5,197	$	27,745
Total expenses	(26,285)		(5,969)		(32,254)
Total other (loss) income	(2,863)		4		(2,859)
Net loss	$	(6,600)	$	(768)	$	(7,368)

33

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

	Nine Months Ended September 30, 2020
	Strategic Opportunistic Properties		Single-Family Homes		Total
Total revenues	$	64,752	$	11,117	$	75,869
Total expenses	(66,928)		(13,203)		(80,131)
Total other (loss) income	(16,939)		54		(16,885)
Net loss	$	(19,115)	$	(2,032)	$	(21,147)

Total assets related to the two reporting segments as of September 30, 2020 and December 31, 2019 are as follows (in thousands):

	September 30, 2020
	Strategic Opportunistic Properties		Single-Family Homes		Total
Total assets	$	915,931	$	187,469	$	1,103,400
	December 31, 2019
	Strategic Opportunistic Properties		Single-Family Homes		Total
Total assets	$	921,917	$	119,325	$	1,041,242

14. PORT PREFERRED STOCK

A wholly owned subsidiary of the Company, PORT, has authorized and issued preferred stock. The Company has elected to use the measurement method described under ASC 480-10-S99-3A, paragraph 15(b), resulting in the preferred stock being classified in mezzanine equity and measured based on the estimated future redemption value as of September 30, 2020.

On November 6, 2019, PORT issued 15,000 shares out of its available 25,000,000 shares of Series A Cumulative Convertible Redeemable Preferred Stock for gross proceeds of $1,000 per share resulting in net proceeds of $15.0 million before issuance costs. The shares provide for an annual dividend of 6% payable quarterly, which increases to 12% if all shares are not redeemed by the Company immediately following the redemption date. However, the 12% dividend rate does not apply until the aggregate number of shares selected for redemption do not constitute 10% or more of all outstanding shares. The shares may be redeemed by the holders beginning on November 4, 2021 for $1,000 per share plus all accrued but unpaid dividends through the redemption date, or after November 4, 2022 for $1,120 per share plus all accrued but unpaid dividends through the redemption date. In addition, after November 4, 2020, the shares are redeemable at the Company’s option, at any time or from time to time, at a redemption price of $1,120 per share plus unpaid accrued dividends. Additionally, if the common shares of PORT are publicly traded, the holder may elect to convert its preferred shares into PORT common shares based on a value of the preferred shares of $1,120 per share plus unpaid accrued dividends, and a conversion price of the common shares as stated in the agreement.

On November 22, 2019, PORT issued 125 shares of its Series B Cumulative Redeemable Preferred Stock for gross proceeds of $1,000 per share resulting in net proceeds of $0.1 million after issuance costs. The shares provide for an annual dividend of 12.5% payable semiannually. The shares may be redeemed by the holders for $1,050 per share until December 31, 2021 and for $1,000 per share thereafter.

34

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

The following is a reconciliation of PORT’s noncontrolling cumulative convertible redeemable preferred stock for the nine months ended September 30, 2020:

	Series A Preferred Stock			Series B Preferred Stock
	Shares	Amounts		Shares	Amounts
Balance, December 31, 2019	15,000	$	14,909	125	$	99
Dividends Available Upon Redemption	—	781		—	7
Dividends Paid	—	(556)		—	(7)
Balance, September 30, 2020	15,000	$	15,134	125	$	99

15. COMMITMENTS AND CONTINGENCIES

Economic Dependency

The Company is dependent on the Advisor 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 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 September 30, 2020. 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.

COVID-19

During the nine months ended September 30, 2020 and subsequent periods, efforts to slow the spread of the COVID-19 virus have had a significant impact on the U.S. economy. The Company continues to follow the policies described in Note 2 to the Consolidated Financial Statements contained in our 2019 Annual Report on Form 10-K, including those related to impairments of real estate assets and investments in unconsolidated affiliates and collectability assessments on operating lease receivables. While our current analyses did not result in any material adjustments to amounts as of and during the nine months ended September 30, 2020, circumstances related to the COVID-19 pandemic may result in recording impairments, lease modifications and changes to collectability assessments in future periods.

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.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1.     Financial Statements (continued)

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2020

(unaudited)

16. SUBSEQUENT EVENTS

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

Merger

On October 5, 2020, pursuant to the Merger Agreement, POSOR II merged with and into Merger Sub, with Merger Sub surviving as an indirect subsidiary of the Company (the “Merger”). At such time, in accordance with the applicable provisions of the Maryland General Corporation Law (the “MGCL”) and the Maryland Limited Liability Company Act, the separate existence of POSOR II ceased. At the effective time of the Merger, each issued and outstanding share of POSOR II’s common stock (or a fraction thereof), $0.01 par value per share, converted into 0.9643 shares of the Company’s common stock, $0.01 par value per share, or 28,973,906 shares of the Company’s common stock. The combined company after the Merger retains the name “Pacific Oak Strategic Opportunity REIT, Inc.” The Merger is intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended. The Company acquired two hotel properties, three office properties, one apartment building, one consolidated joint venture to develop one office/retail property, two real estate equity securities and two investments in unconsolidated entities. Additionally, the Company assumed $331.8 million of loans related to the acquired properties. Pro forma revenues and earnings have not been presented as the initial accounting for the transaction is incomplete as of the date of the consolidated financial statements are issued. The Company is in process of assessing the fair value of the acquired tangible assets, liabilities assumed and any applicable intangible assets and liabilities for this business combination.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the accompanying financial statements of Pacific Oak Strategic Opportunity REIT, Inc. and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to Pacific Oak Strategic Opportunity REIT, Inc., a Maryland corporation, and, as required by context, Pacific Oak Strategic Opportunity Limited Partnership, a Delaware limited partnership, which we refer to as the “Operating Partnership,” and to their subsidiaries.

Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q 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 to conduct our operations and eventually dispose of our investments.

•Because our new advisor, Pacific Oak Capital Advisors, was recently formed, it could face challenges with employee hiring and retention, information technology, vendor relationships, and funding; if Pacific Oak Capital Advisors faces challenges in performing its obligations to us, it could negatively impact our ability to achieve our investment objectives.

•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 face potential business disruptions due to the recent global outbreak of COVID-19 (Coronavirus). The virus has significantly disrupted economic markets and impacted commercial activity worldwide, including the US, and the prolonged economic impact is uncertain. Our tenants and potential tenants of the properties we own could be adversely affected by the disruption to business caused by the virus.

•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.

•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 former or current 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 former or current 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 former or current 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.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

•We cannot predict with any certainty how much, if any, of our dividend reinvestment plan proceeds will be available for general corporate purposes, including, but not limited to, the redemption of shares under our share redemption program, future funding obligations under any real estate loans receivable we acquire, the funding of capital expenditures on our real estate investments or the repayment of debt. If such funds are not available from the dividend reinvestment plan offering, then we may have to use a greater proportion of our cash flow from operations to meet these cash requirements, which would reduce cash available for distributions and could limit our ability to redeem shares under our share redemption program.

•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 our Annual Report on Form 10-K for the year ended December 31, 2019 and Part II, Item 1A of this Quarterly Report on Form 10-Q and our Quarterly Report on Form 10-Q for the three months ended March 31, 2020, each as filed with the Securities and Exchange Commission (the “SEC”).

Overview

We were 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 intend to operate in such manner. KBS Capital Advisors LLC (“KBS Capital Advisors”) was our advisor. On October 31, 2019, KBS Capital Advisors ceased to serve as our advisor or have any advisory responsibility to us immediately following the filing of our Quarterly Report on Form 10-Q for the period ending September 30, 2019 (filed on November 8, 2019) with the SEC. On November 1, 2019, we entered into a new advisory agreement with Pacific Oak Capital Advisors, LLC (“Pacific Oak Capital Advisors”), which was renewed on November 1, 2020. The advisory agreement is currently effective through November 1, 2021; however we or the Advisor may terminate the advisory agreement without cause or penalty upon providing 60 days' written notice. The terms of the advisory agreement are consistent with those of the advisory agreement that was previously in effect with KBS Capital Advisors, except as described in Note 10.

As our advisor, Pacific Oak Capital Advisors manages our day-to-day operations and our portfolio of investments. Pacific Oak Capital Advisors also has the authority to make all of the decisions regarding our investments, subject to the limitations in our charter and the direction and oversight of our board of directors. Pacific Oak Capital Advisors 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 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. We continue to offer shares of common stock under the dividend reinvestment plan. As of September 30, 2020, we had sold 6,851,969 shares of common stock under the dividend reinvestment plan for gross offering proceeds of $76.5 million. Also as of September 30, 2020, we had redeemed 23,897,205 of the shares sold in our offering for $286.3 million. As of September 30, 2020, we had issued 25,976,746 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.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

On March 2, 2016, Pacific Oak SOR (BVI) Holdings, Ltd. (“Pacific Oak SOR BVI”), our wholly owned subsidiary, 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 “Series A Debentures”) at an annual interest rate not to exceed 4.25%. On March 1, 2016, Pacific Oak SOR BVI commenced the institutional tender of the Series A Debentures and accepted application for 842.5 million Israeli new Shekels. On March 7, 2016, Pacific Oak SOR BVI commenced the public tender of the Series A Debentures and accepted 127.7 million Israeli new Shekels.  In the aggregate, Pacific Oak SOR 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 SOR BVI issued the Series A Debentures on March 8, 2016. The terms of the Series A Debentures require five equal principal installment payments annually on March 1st of each year from 2019 to 2023.

On January 22, 2020, we filed a registration statement on Form S-11 with the SEC to offer up to $1 billion in additional shares of our common stock. This new registration statement contemplates a proposed conversion of our company to a perpetual-life net asset value or “NAV” REIT that offers and sells shares of our common stock continuously through a number of distribution channels in ongoing public offerings, and seeks to provide increased liquidity to current and future stockholders through an expansion of our current share redemption program.

On February 16, 2020, Pacific Oak SOR BVI issued 254.1 million Israeli new Shekels (approximately $74.1 million as of February 16, 2020) of Series B debentures (the “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.

On February 19, 2020, we, Pacific Oak SOR II, LLC, an indirect subsidiary of ours (“Merger Sub”), and Pacific Oak Strategic Opportunity REIT II, Inc. (“POSOR II”) entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to the Merger Agreement, on October 5, 2020, POSOR II merged with and into Merger Sub (the “Merger”), with Merger Sub surviving the Merger (the “Surviving Entity”), such that following the Merger, the Surviving Entity continued as an indirect subsidiary of ours. In accordance with the applicable provisions of the Maryland General Corporation Law, the separate existence of POSOR II ceased. At the effective time of the Merger, each issued and outstanding share of POSOR II’s common stock converted into the right to receive 0.9643 shares of our common stock.

As of September 30, 2020, we consolidated six office properties, one office portfolio consisting of four office buildings and 14 acres of undeveloped land, one apartment property and three investments in undeveloped land with approximately 1,000 developable acres, one residential home portfolio consisting of 1,769 single-family homes and owned six investments in unconsolidated joint ventures and three 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 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. To the extent there are increases in the cost of financing due to higher interest rates, this may cause difficulty in refinancing debt obligations 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.

During the first, second, and third quarter of 2020 and subsequent periods, efforts to slow the spread of the COVID-19 virus have had a significant impact on the U.S. economy. While our current analyses did not result in any material adjustments to amounts as of and during the nine months ended September 30, 2020, circumstances related to the COVID-19 pandemic may result in recording impairments, lease modifications and changes to collectability assessments in future periods. The extent to which COVID-19 impacts our business, operations and financial results will depend on numerous evolving factors, many of which are not within management’s control, and that we are unable to predict at this time, including but not limited to: the duration and scope of the pandemic; the pandemic’s impact on current and future economic activity; and the actions of governments, businesses and individuals in response to the COVID-19 pandemic.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

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. While we expect to have sufficient liquidity to meet our obligations for the foreseeable future, the COVID-19 pandemic and associated responses could adversely impact our future cash flows and financial condition. To date, we have had six 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;

•Proceeds from our public bond offering in Israel;

•Debt financing;

•Proceeds from the sale of real estate and the repayment of 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. We continue to offer shares of common stock under the dividend reinvestment plan. As of September 30, 2020, we had sold 6,851,969 shares of common stock under the dividend reinvestment plan for gross offering proceeds of $76.5 million. 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 and proceeds from our dividend reinvestment plan 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 September 30, 2020, our office properties were collectively 80% occupied, our residential home portfolio was 91% occupied and our apartment property was 87% occupied. As of October 2020, we collected 97.3% of total charged rent for the month of September.

Investments in real estate equity securities generate cash flow in the form of dividend income, which is reduced by asset management fees. As of September 30, 2020, we had three investments in real estate equity securities outstanding with a total carrying value of $84.4 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 of our board of directors has determined that such excess expenses were justified based on unusual and non-recurring factors. Operating expense reimbursements for the four fiscal quarters ended September 30, 2020 exceeded the charter imposed limitation; however, the conflicts committee determined that the relationship of our operating expenses to our average invested assets was justified given that we chose to terminate our advisory agreement with our prior external advisor and were contractually obligated to pay them a performance fee due upon termination.

For the nine months ended September 30, 2020, our cash needs for capital expenditures, redemptions of common stock and debt servicing were met with proceeds from dispositions of real estate, real estate equity securities and undeveloped land, proceeds from debt financing, proceeds from our dividend reinvestment plan 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 September 30, 2020, we had outstanding debt obligations in the aggregate principal amount of $763.1 million, with a weighted-average remaining term of 1.9 years.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

As of November 13, 2020, we had a total of $357.9 million of debt obligations scheduled to mature over the next 12 months. On October 5, 2020, we assumed the debt obligations of POSOR II upon the close of the Merger, of which $155.1 million is scheduled to mature over the next 12 months. We and POSOR II have extension options with respect to $350.9 million of the debt obligations outstanding that is scheduled to mature over the next 12 months; however, we 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 we will be able to meet these requirements. All of our debt obligations are generally non-recourse, subject to certain limited guaranty payments, except for our Series A Debentures and Series B Debentures. We plan to utilize available extension options or refinance the notes payable. We may also choose to market the properties for sale or may negotiate a turnover of the secured properties back to the related mortgage lender. There can be no assurance as to the certainty or timing of any such transactions.

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.

Cash Flows from Operating Activities

As of September 30, 2020, we consolidated six office properties, one office portfolio consisting of four office buildings and 14 acres of undeveloped land, one apartment property, one residential home portfolio consisting of 1,769 single-family homes and three investments in undeveloped land with approximately 1,000 developable acres and owned six investments in unconsolidated joint ventures and three investments in real estate equity securities. During the nine months ended September 30, 2020, net cash provided by operating activities was $4.8 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.

Cash Flows from Investing Activities

Net cash used in investing activities was $45.9 million for the nine months ended September 30, 2020 and primarily consisted of the following:

•Investment in real estate equity securities of $35.5 million;

•Acquisition of real estate of $19.0 million;

•Improvements to real estate of $15.9 million;

•Proceeds from the disposition of foreign currency collars of $14.1 million;

•Proceeds from the sale of real estate equity securities of $11.0 million;

•Contribution to unconsolidated entities of $1.7 million; and

•Distribution of capital from unconsolidated entities of $1.2 million.

Cash Flows from Financing Activities

Net cash provided by financing activities was $41.8 million for the nine months ended September 30, 2020 and consisted primarily of the following:

•$44.1 million of net cash provided by debt and other financings as a result of proceeds from notes payable of $104.1 million, partially offset by principal payments on notes and bonds payable of $57.6 million and payments of deferred financing costs of $2.4 million;

•$0.8 million of cash used for redemptions of common stock;

•$0.6 million of offering costs paid in connection with a potential offering;

•$0.6 million of cash used for preferred dividends;

•$0.3 million of net cash distributions to stockholders, after giving effect to distributions reinvested by stockholders of $0.3 million; and

•$0.1 million of proceeds from noncontrolling interest contributions.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

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 limits our total liabilities such that our total liabilities may not exceed 75% of the cost of our tangible assets; 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 September 30, 2020, our borrowings and other liabilities were both approximately 70% of the cost (before depreciation and other noncash reserves) and the book value (before depreciation) of our tangible assets.

In March 2016, we, through a wholly-owned subsidiary, issued 970.2 million Israeli new Shekels (approximately $249.2 million as of March 8, 2016) in 4.25% bonds to investors in Israel pursuant to a public offering registered in Israel. The bonds have a seven year term, with principal payable in five equal annual installments from 2019 to 2023.

February 16, 2020, Pacific Oak SOR BVI issued 254.1 million Israeli new Shekels (approximately $74.1 million as of February 16, 2020) of the 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.

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 expect to continue 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).

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% 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% 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.

Contractual Commitments and Contingencies

The following is a summary of our contractual obligations as of September 30, 2020 (in thousands):

			Payments Due During the Years Ending December 31,
Contractual Obligations	Total		Remainder of 2020		2021-2022		2023-2024		Thereafter
Outstanding debt obligations (1)	$	763,070	$	507	$	504,772	$	141,577	$	116,214
Interest payments on outstanding debt obligations (2)	51,847		5,999		27,882		12,293		5,673

_____________________

(1) Amounts include principal payments only.

(2) Projected interest payments are based on the outstanding principal amounts, maturity dates, foreign currency rates and interest rates in effect at September 30, 2020. We incurred interest expense of $18.9 million, excluding amortization of deferred financing costs of $2.5 million and including interest capitalized of $2.4 million, for the nine months ended September 30, 2020.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Results of Operations

Overview

As of September 30, 2019, we consolidated seven office properties, one office portfolio consisting of four office buildings and 14 acres of undeveloped land, one retail property, one apartment property and three investments in undeveloped land with approximately 1,000 developable acres and owned five investments in unconsolidated joint ventures and three investments in real estate equity securities. As of September 30, 2020, we consolidated six office properties, one office portfolio consisting of four office buildings and 14 acres of undeveloped land, one apartment property and three investments in undeveloped land with approximately 1,000 developable acres, one residential home portfolio consisting of 1,769 single-family homes and owned six investments in unconsolidated joint ventures and three investments in real estate equity securities. Our results of operations for the three and nine months ended September 30, 2020 may not be indicative of those in future periods due to acquisition and disposition activities and COVID-19 related impacts. Additionally, the occupancy in our properties, excluding our residential home portfolio, has not been stabilized. As of September 30, 2020, our office properties were collectively 80% occupied, our residential home portfolio was 91% occupied and our apartment property was 87% occupied. However, due to the amount of near-term lease expirations, we do not put significant emphasis on quarterly 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 that occupancies 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 three months ended September 30, 2020 versus the three months ended September 30, 2019

The following table provides summary information about our results of operations for the three months ended September 30, 2020 and 2019 (dollar amounts in thousands):

	Three Months Ended September 30,				Increase (Decrease)		Percentage Change		$ Change Due to Acquisitions/ Dispositions (1)		$ Change Due to  Investments Held Throughout Both Periods (2)
	2020		2019
Rental income	$	23,871	$	21,669	$	2,202	10	%	$	1,662	$	540
Other operating income	888		1,317		(429)		(33)	%	(254)		(175)
Dividend income from real estate equity securities	2,986		2,296		690		30	%	690		—
Operating, maintenance, and management costs	7,888		8,156		(268)		(3)	%	367		(635)
Real estate taxes and insurance	3,791		3,278		513		16	%	435		78
Asset management fees to affiliates	2,426		2,093		333		16	%	280		53
General and administrative expenses	1,960		2,038		(78)		(4)	%	n/a		n/a
Foreign currency transaction loss, net	445		5,344		(4,899)		(92)	%	n/a		n/a
Depreciation and amortization	9,470		9,239		231		3	%	410		(179)
Interest expense	6,274		7,359		(1,085)		(15)	%	427		(1,512)
Gain from remeasurement of prior equity interest	2,009		—		2,009		100	%	n/a		2,009
Equity in income (loss) of unconsolidated entities	519		(419)		938		(224)	%	—		938
Other interest income	19		536		(517)		(96)	%	n/a		n/a
(Loss) gain on real estate equity securities	(6,527)		3,845		(10,372)		(270)	%	n/a		n/a
Gain on sale of real estate	—		10,559		(10,559)		(100)	%	(10,559)		—

_____________________

(1) Represents the dollar amount increase (decrease) for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 related to real estate and real estate-related investments acquired or disposed on or after October 1, 2019.

(2) Represents the dollar amount increase (decrease) for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 with respect to real estate and real estate-related investments owned by us during the entirety of both periods presented.

43

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Rental income increased from $21.7 million for the three months ended September 30, 2019 to $23.9 million for the three months ended September 30, 2020, primarily as a result of properties acquired in 2019 and 2020, increase in occupancy for properties held throughout both periods and partially offset by a decrease in rental rates and dispositions in 2019. The occupancy of our office properties, held throughout both periods increased from 79% as of September 30, 2019 to 80% as of September 30, 2020. Annualized base rent per square foot increased from $24.91 as of September 30, 2019 to $25.68 as of September 30, 2020 related to properties (excluding apartments and single-family homes) held throughout both periods. We expect rental income to increase in future periods as a result of leasing additional space and to the extent we acquire additional properties, but to decrease to the extent we dispose of properties.

Other operating income decreased from $1.3 million for the three months ended September 30, 2019 to $0.9 million for the three months ended September 30, 2020, primarily due to the sale of real estate assets subsequent to September 30, 2019. We expect other operating income to increase in future periods as a result of leasing additional space, increases in parking income as we stabilize properties and to the extent we acquire additional properties, but to decrease to the extent we dispose of properties.

Dividend income from real estate equity securities increased from $2.3 million for the three months ended September 30, 2019 to $3.0 million for the three months ended September 30, 2020, primarily as a result of the acquisition of real estate equity securities subsequent to September 30, 2019. We expect dividend income from real estate equity securities to vary in future periods as a result of the timing of dividends declared and investment activity.

Property operating costs decreased from $8.2 million for the three months ended September 30, 2019 to $7.9 million for the three months ended September 30, 2020 and real estate taxes and insurance increased from $3.3 million for the three months ended September 30, 2019 to $3.8 million for the three months ended September 30, 2020, primarily as a result of properties acquired in 2019 and 2020 and partially offset with properties disposed in 2019. We expect property operating costs and real estate taxes and insurance to increase in future periods to the extent we acquire additional properties, increasing occupancy of our real estate assets and general inflation, but to decrease to the extent we dispose of properties.

Asset management fees increased from $2.1 million for the three months ended September 30, 2019 to $2.4 million for the three months ended September 30, 2020, primarily as a result of properties acquired in 2019 and 2020, partially offset by properties disposed in 2019. We expect asset management fees to increase in future periods to the extent we acquire additional properties, but to decrease to the extent we dispose of properties.

General and administrative expenses remained consistent at $2.0 million for both of the three months ended September 30, 2019 and 2020. We expect general and administrative expenses to fluctuate in future periods based on investment and disposition activity as well as costs incurred to evaluate strategic transactions.

We recognized a $0.4 million foreign currency transaction loss, net for the three months ended September 30, 2020 and $5.3 million of foreign currency transaction loss, net, for the three months ended September 30, 2019, related to the debentures in Israel. These debentures are denominated in Israeli new Shekels and we expect to recognize foreign transaction gains and losses based on changes in foreign currency exchange rates. During the three months ended September 30, 2020, we recognized a $2.2 million gain related to the foreign currency collars and a $2.6 million foreign currency transaction loss in the accompanying consolidated statements of operations as foreign currency transaction loss, net. On July 29, 2020, we terminated the foreign currency collars and as a result received $14.1 million. During the three months ended September 30, 2019, we recognized a $0.4 million gain related to the foreign currency collar, which is shown net against $5.7 million of foreign currency transaction loss in the accompanying consolidated statements of operations as foreign currency transaction loss, net.

Depreciation and amortization increased from $9.2 million for the three months ended September 30, 2019 to $9.5 million for the three months ended September 30, 2020, primarily as a result of properties acquired in 2019 and 2020 and capital expenditures. We expect depreciation and amortization to increase in future periods as a result of owning the property acquired during 2019 for an entire period and to the extent we acquire additional properties, but to decrease as a result of amortization of tenant origination costs related to lease expirations and disposition of properties.

44

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Interest expense decreased from $7.4 million for the three months ended September 30, 2019 to $6.3 million for the three months ended September 30, 2020, primarily as a result of the paydown of debt on properties disposed in 2019 and the March 31, 2019 and 2020 Series A Debentures principal installment payments of 194.0 million Israeli new Shekels (approximately $53.6 million as of March 1, 2019 and $56.6 million as of March 1, 2020) and decreased one-month LIBOR rates during the three months ended September 30, 2020, partially offset by increased borrowings related to properties acquired in 2019 and 2020, issuance of Israel Series B Debentures of 254.1 million Israeli new Shekels on February 16, 2020 (approximately $74.1 million as of February 16, 2020). Excluded from interest expense was $0.7 million of interest capitalized to our investments in undeveloped land and an unconsolidated entity during both of the three months ended September 30, 2020 and 2019. Our interest expense in future periods will vary based on interest rate fluctuations, the amount of interest capitalized and our level of future borrowings, which will depend on the availability and cost of debt financing and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives and will decrease to the extent we dispose of properties and paydown debt, including annual principal installment payments on the Series A and Series B Debentures.

During the three months ended September 30, 2020, we recognized a $2.0 million gain from remeasurement of prior equity interest due to our acquisition of Battery Point.

Equity in income of unconsolidated joint ventures increased from loss of $0.4 million for the three months ended September 30, 2019 to income of $0.5 million for the three months ended September 30, 2020, primarily as a result of an increase in revenue due to new tenants for the 353 Sacramento joint venture and partially offset with a $0.3 million loss related to the Pacific Oak Opportunity Zone Fund I investment for the three months ended September 30, 2020.

Other interest income decreased from $0.5 million for the three months ended September 30, 2019 to $19,000 for the three months ended September 30, 2020, primarily as a result of decreased dividends from money market mutual funds due to our decreased investment balance in these funds.

Gain on real estate equity securities decreased from $3.8 million for the three months ended September 30, 2019 to $6.5 million loss for the three months ended September 30, 2020. We expect gains and losses on real estate equity securities to fluctuate in future periods as a result of changes in share prices of our investments in real estate equity securities.

During the three months ended September 30, 2019, we sold one retail property, which resulted in a gain on sale of $10.5 million. There were no material dispositions during the three months ended September 30, 2020.

45

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Comparison of the nine months ended September 30, 2020 versus the nine months ended September 30, 2019

The following table provides summary information about our results of operations for the nine months ended September 30, 2020 and 2019 (dollar amounts in thousands):

	Nine Months Ended September 30,				Increase (Decrease)		Percentage Change		$ Change Due to Acquisitions/ Dispositions (1)		$ Change Due to  Investments Held Throughout Both Periods (2)
	2020		2019
Rental income	$	67,808	$	59,879	$	7,929	13	%	$	4,389	$	3,540
Other operating income	2,722		4,219		(1,497)		(35)	%	(763)		(734)
Interest income from real estate debt securities	—		369		(369)		(100)	%	(369)		—
Dividend income from real estate equity securities	5,339		4,414		925		21	%	925		—
Operating, maintenance, and management costs	22,258		21,254		1,004		5	%	1,232		(228)
Real estate taxes and insurance	10,570		9,556		1,014		11	%	860		154
Asset management fees to affiliates	6,867		5,954		913		15	%	486		427
General and administrative expenses	6,302		5,586		716		13	%	n/a		n/a
Foreign currency transaction (gain) loss, net	(12,338)		10,634		(22,972)		(216)	%	n/a		n/a
Depreciation and amortization	27,417		25,276		2,141		8	%	1,698		443
Interest expense	19,055		21,776		(2,721)		(12)	%	827		(3,548)
Gain from remeasurement of prior equity interest	2,009		—		2,009		100	%	n/a		n/a
Equity in income (loss) of unconsolidated entities	1,512		6,677		(5,165)		(77)	%	—		(5,165)
Casualty-related gain	51		(506)		557		(110)	%	n/a		n/a
Other interest income	297		1,862		(1,565)		(84)	%	n/a		n/a
(Loss) gain on real estate equity securities	(21,620)		19,304		(40,924)		(212)	%	n/a		n/a
Gain on sale of real estate	—		18,128		(18,128)		(100)	%	(18,128)		—
Loss on extinguishment of debt	—		(861)		861		(100)	%	861		—

_____________________

(1) Represents the dollar amount increase (decrease) for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 related to real estate and real estate-related investments acquired or disposed on or after January 1, 2019.

(2) Represents the dollar amount increase (decrease) for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 with respect to real estate and real estate-related investments owned by us during the entirety of both periods presented.

Rental income increased from $59.9 million for the nine months ended September 30, 2019 to $67.8 million for the nine months ended September 30, 2020, primarily as a result of properties acquired in 2019 and 2020, an overall increase in rental rates and occupancy for properties held throughout both periods and partially offset by dispositions in 2019. The occupancy of our office properties, held throughout both periods increased from 79% as of September 30, 2019 to 80% as of September 30, 2020. Annualized base rent per square foot decreased from $24.91 as of September 30, 2019 to $25.68 as of September 30, 2020 related to properties (excluding apartments and single-family homes) held throughout both periods. We expect rental income to increase in future periods as a result of leasing additional space and to the extent we acquire additional properties, but to decrease to the extent we dispose of properties.

Other operating income decreased from $4.2 million for the nine months ended September 30, 2019 to $2.7 million for the nine months ended September 30, 2020, primarily as a result of properties disposed in 2019, decrease in overall parking revenue of $0.3 million and partially offset by properties acquired in 2019 and 2020. We expect other operating income to increase in future periods as a result of leasing additional space, increases in parking income as we stabilize properties and to the extent we acquire additional properties, but to decrease to the extent we dispose of properties.

Interest income from real estate debt securities was $0.4 million for the nine months ended September 30, 2019 and was redeemed on March 20, 2019.

Dividend income from real estate equity securities increased from $4.4 million for the nine months ended September 30, 2019 to $5.3 million for the nine months ended September 30, 2020, primarily as a result of the acquisition of real estate equity securities subsequent to September 30, 2019. We expect dividend income from real estate equity securities to vary in future periods as a result of the timing of dividends declared and investment activity.

46

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Property operating costs increased from $21.3 million for the nine months ended September 30, 2019 to $22.3 million for the nine months ended September 30, 2020 and real estate taxes and insurance increased from $9.6 million for the nine months ended September 30, 2019 to $10.6 million for the nine months ended September 30, 2020, primarily as a result of properties acquired in 2019 and 2020 and partially offset with properties disposed in 2019. We expect property operating costs and real estate taxes and insurance to increase in future periods to the extent we acquire additional properties, increasing occupancy of our real estate assets and general inflation, but to decrease to the extent we dispose of properties.

Asset management fees increased from $6.0 million for the nine months ended September 30, 2019 to $6.9 million for the nine months ended September 30, 2020, primarily as a result of properties acquired in 2019 and 2020, partially offset by properties disposed in 2019. We expect asset management fees to increase in future periods to the extent we acquire additional properties, but to decrease to the extent we dispose of properties.

General and administrative expenses increased from $5.6 million for the nine months ended September 30, 2019 to $6.3 million for the nine months ended September 30, 2020, primarily due to increased legal and advisory expenses related to the merger with Pacific Oak Strategic Opportunity REIT II. We expect general and administrative expenses to fluctuate in future periods based on investment and disposition activity as well as costs incurred to evaluate strategic transactions.

We recognized a $12.3 million foreign currency transaction gain, net for the nine months ended September 30, 2020 and $10.6 million of foreign currency transaction loss, net, for the nine months ended September 30, 2019, related to the debentures in Israel. These debentures are denominated in Israeli new Shekels and we expect to recognize foreign transaction gains and losses based on changes in foreign currency exchange rates. During the nine months ended September 30, 2020, we recognized a $14.3 million gain related to the foreign currency collars and a $2.0 million foreign currency transaction loss in the accompanying consolidated statements of operations as a foreign currency transaction gain, net. On July 29, 2020, we terminated the foreign currency collars and as a result received $14.1 million. During the nine months ended September 30, 2019, we recognized a $4.6 million gain related to the foreign currency collar, which is shown net against $15.2 million of foreign currency transaction loss in the accompanying consolidated statements of operations as foreign currency transaction loss, net.

Depreciation and amortization increased from $25.3 million for the nine months ended September 30, 2019 to $27.4 million for the nine months ended September 30, 2020, primarily as a result of properties acquired in 2019 and 2020 and capital expenditures. We expect depreciation and amortization to increase in future periods as a result of owning the property acquired during 2019 for an entire period and to the extent we acquire additional properties, but to decrease as a result of amortization of tenant origination costs related to lease expirations and disposition of properties.

Interest expense decreased from $21.8 million for the nine months ended September 30, 2019 to $19.1 million for the nine months ended September 30, 2020, primarily as a result of the paydown of debt on properties disposed in 2019 and the March 31, 2019 and 2020 Series A Debentures principal installment payments of 194.0 million Israeli new Shekels (approximately $53.6 million as of March 1, 2019 and $56.6 million as of March 1, 2020) and decreased one-month LIBOR rates during the nine months ended September 30, 2020, partially offset by increased borrowings related to properties acquired in 2019 and 2020, issuance of Israel Series B Debentures of 254.1 million Israeli new Shekels on February 16, 2020 (approximately $74.1 million as of February 16, 2020). Excluded from interest expense was $2.4 million and $2.1 million of interest capitalized to our investments in undeveloped land and an unconsolidated entity during the nine months ended September 30, 2020 and 2019, respectively. Our interest expense in future periods will vary based on interest rate fluctuations, the amount of interest capitalized and our level of future borrowings, which will depend on the availability and cost of debt financing and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives and will decrease to the extent we dispose of properties and paydown debt, including annual principal installment payments on the Series A and Series B Debentures.

During the nine months ended September 30, 2020, we recognized a $2.0 million gain from remeasurement of prior equity interest due to our acquisition of Battery Point.

Equity in income of unconsolidated joint ventures decreased from income of $6.7 million for the nine months ended September 30, 2019 to income of $1.5 million for the nine months ended September 30, 2020, primarily as a result of the $7.8 million distribution from the 110 William Joint Venture during the nine months ended September 30, 2019 and a $0.3 million loss related to the Pacific Oak Opportunity Zone Fund I investment during the nine months ended September 30, 2020. During the nine months ended September 30, 2019, we recorded $7.5 million equity in income from the 110 William Joint Venture, which includes a $7.8 million gain related to a distribution received, net of our share of net losses of $0.3 million. We ceased to record the 110 William Joint Venture under the equity method of accounting due to distributions received during the nine months ended September 30, 2019 exceeding our investment balance.

47

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Other interest income decreased from $1.9 million for the nine months ended September 30, 2019 to $0.3 million for the nine months ended September 30, 2020, primarily as a result of decreased dividends from money market mutual funds due to our decreased investment balance in these funds.

Gain on real estate equity securities was $19.3 million for the nine months ended September 30, 2019, which was made up of a $15.9 million unrealized gain on real estate securities held at September 30, 2019 and a $3.4 million realized gain on real estate securities sold during the nine months ended September 30, 2019. Loss on real estate equity securities was $21.6 million for the nine months ended September 30, 2020, which was made up of a $22.3 million unrealized gain on real estate securities held at September 30, 2020 and a $0.7 million realized loss on real estate securities sold during the nine months ended September 30, 2020. We expect gains and losses on real estate equity securities to fluctuate in future periods as a result of changes in share prices of our investments in real estate equity securities.

During the nine months ended September 30, 2019, we sold one apartment property that resulted in a gain on sale of $18.1 million. There were no material dispositions during the nine months ended September 30, 2020.

During the nine months ended September 30, 2019, we recognized loss on extinguishment of debt of $0.9 million related to debt repayments in connection with a real estate disposition.

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 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 U.S. Generally Accepted Accounting Principles (“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 sustainability. MFFO excludes from FFO: acquisition fees and expenses (to the extent that such fees and expenses have been recorded as operating expenses); adjustments related to contingent purchase price obligations; amounts relating to straight-line rents and amortization of above- and below-market intangible lease assets and liabilities; accretion of discounts and amortization of premiums on debt investments; amortization of closing costs relating to debt investments; impairments of real estate-related investments; mark-to-market adjustments included in net income; and gains or losses included in net income for the extinguishment or sale of debt or hedges. 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. 

48

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

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, mark to market foreign currency transaction adjustments and extinguishment of debt 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;

•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; and

•Loss on extinguishment of debt. A loss 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 from extinguishment of debt in our calculation of MFFO because these losses do not impact the current operating performance of our investments and do not provide an indication of future operating performance.

•Gain from measurement of prior equity interest. A gain from measurement of prior equity interest, represents a fair value gain on our previous investment in Battery Point Series A-3 Preferred Units that were eliminated during the acquisition of BPT Holdings. We have excluded the gain from measurement of prior equity interest in our calculation of MFFO because these gains do not impact the current operating performance of our investments and do not provide an indication of future operating performance.

49

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Adjusted MFFO includes adjustments to reduce MFFO related to real estate taxes, property insurance and financing costs which are capitalized with respect to certain of our investments in undeveloped land.  We have included adjustments for the costs incurred necessary to bring these investments to their intended use, as these costs are recurring operating costs that are capitalized in accordance with GAAP and not reflected in our net (loss) income, FFO and MFFO. In addition, adjusted MFFO includes an adjustment for casualty loss and fair value change of restricted stock payable. We believe excluding these items appropriately presents the ongoing operating performance of our real estate investments on a comparative basis.

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 three and nine months ended September 30, 2020 and 2019 (in thousands). No conclusions or comparisons should be made from the presentation of these periods.

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Net (loss) income attributable to common stockholders	$	(7,493)	$	772	$	(21,797)	$	11,304
Depreciation of real estate assets	6,233		5,121		17,601		14,403
Amortization of lease-related costs	3,237		4,118		9,816		10,873
Gain on sale of real estate (1)	—		(10,559)		—		(18,128)
Loss (gain) on real estate equity securities	6,527		(3,845)		21,620		(19,304)
Adjustments for noncontrolling interests - consolidated entities (2)	(141)		1,487		(286)		2,112
Adjustments for investments in unconsolidated entities (3)	2,158		1,569		4,618		(3,489)
FFO attributable to common stockholders	10,521		(1,337)		31,572		(2,229)
Straight-line rent and amortization of above- and below-market leases	(1,021)		(1,303)		(2,994)		(4,069)
Accretion of interest income on real estate debt securities	—		—		—		(13)
Amortization of net premium/discount on bond and notes payable	64		(27)		14		(73)
Loss on extinguishment of debt	—		6		—		861
Unrealized loss on interest rate caps	31		13		10		50
Mark-to-market foreign currency transaction loss (gain), net	445		5,344		(12,338)		10,634
Gain from remeasurement of prior equity interest	(2,009)		—		(2,009)		—
Adjustments for noncontrolling interests - consolidated entities (2)	(2)		19		9		(73)
Adjustments for investments in unconsolidated entities (3)	(892)		(1,344)		(3,044)		(4,350)
MFFO attributable to common stockholders	7,137		1,371		11,220		738
Other capitalized operating expenses (4)	(828)		(802)		(2,704)		(2,338)
Casualty-related (gain) loss	—		—		(51)		506
Adjustments for noncontrolling interests - consolidated entities (2)	—		—		—		(51)
Change in subordinated performance fee due upon termination to affiliate	(1,121)		—		(814)		—
Adjusted MFFO attributable to common stockholders	$	5,188	$	569	$	7,651	$	(1,145)

_____________________

(1) Reflects an adjustment to eliminate gain on sale of real estate.

(2) Reflects adjustments to eliminate the noncontrolling interest holders’ share of the adjustments to convert our net (loss) income 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) income attributable to common stockholders to FFO, MFFO and Adjusted MFFO for our equity investments in unconsolidated joint ventures.

(4) Reflects real estate taxes, property insurance and financing costs that are capitalized with respect to certain of our investments in undeveloped land and unconsolidated entity.  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) income, 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.

50

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Distributions

Common distributions declared, distributions paid and cash flows provided by operations were as follows for the first, second and third quarters of 2020 (in thousands, except per share amounts):

	Distribution Declared		Distributions Declared Per Share		Distributions Paid (1)						Cash Flows (Used In) Provided By Operations
Period					Cash		Reinvested		Total
First Quarter 2020	$	596	$	0.0086	$	305	$	262	$	567	$	(1,520)
Second Quarter 2020	—		—		29		—		29		5,616
Third Quarter 2020	—		—		—		—		—		710
	$	596	$	0.0086	$	334	$	262	$	596	$	4,806

On January 23, 2020, our board of directors authorized a distribution in the amount of $0.0086 per share of common stock to stockholders of record as of the close of business on January 29, 2020. We paid this distribution on January 29, 2020 and this was the only distribution declared during the first quarter of 2020.

For the nine months ended September 30, 2020, we paid aggregate distributions of $0.6 million, including $0.3 million of distributions paid in cash and $0.3 million of distributions reinvested through our dividend reinvestment plan. Our net loss attributable to common stockholders for the nine months ended September 30, 2020 was $22.3 million and our cash flows provided by operations were $4.8 million. Our cumulative distributions paid and net income attributable to common stockholders from inception through September 30, 2020 were $195.4 million and $147.5 million, respectively. We have funded our cumulative distributions paid, which includes net cash distributions and distributions reinvested by stockholders, with proceeds from debt financing of $18.7 million, gains from the dispositions of property of $83.4 million and cash provided by operations of $106.9 million. To the extent that we pay distributions from sources other than our cash flow from operations or gains from asset sales, we will have fewer funds available for investment in real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments, the overall return to our stockholders may be reduced and subsequent investors may experience dilution.

Critical Accounting Policies

Our consolidated interim financial statements have been prepared in accordance with GAAP and in conjunction with the rules and regulations of the SEC. The preparation of our financial statements requires 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. A discussion of the accounting policies that management considers critical in that they involve significant management judgments, assumptions and estimates is included in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC. There have been no significant changes to our policies during 2020.

51

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Subsequent Events

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

Merger

On October 5, 2020, pursuant to the Merger Agreement, POSOR II merged with and into Merger Sub, with Merger Sub surviving as an indirect subsidiary of ours (the “Merger”). At such time, in accordance with the applicable provisions of the Maryland General Corporation Law (the “MGCL”) and the Maryland Limited Liability Company Act, the separate existence of POSOR II ceased. At the effective time of the Merger, each issued and outstanding share of POSOR II’s common stock (or a fraction thereof), $0.01 par value per share, converted into 0.9643 shares of our common stock, $0.01 par value per share, or 28,973,906 shares of the our common stock. The combined company after the Merger retains the name “Pacific Oak Strategic Opportunity REIT, Inc.” The Merger is intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended. We acquired two hotel properties, three office properties, one apartment building, one consolidated joint venture to develop one office/retail property, two real estate equity securities and two investments in unconsolidated entities. Additionally, we assumed $331.8 million of loans related to the acquired properties. Pro forma revenues and earnings have not been presented as the initial accounting for the transaction is incomplete as of the date of the consolidated financial statements are issued. We are in process of assessing the fair value of the acquired tangible assets, liabilities assumed and any applicable intangible assets and liabilities for this business combination.

Item 3. Quantitative and Qualitative Disclosures about Market 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. We are also exposed to the effects of foreign currency changes in Israel with respect to the 4.25% and 3.93% bonds issued to investors in Israel in March 2016 and February 2020, respectively. Our profitability and the value of our investment portfolio may be adversely affected during any period as a result of interest rate changes and foreign currency changes. 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. In order to limit the effects of changes in foreign currency on our operations, we may utilize a variety of foreign currency hedging strategies such as cross currency swaps, forward contracts, puts or calls. 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 the risk that the losses may exceed the amount we invested in the instruments. Additionally, certain of these strategies may cause us to fund a margin account periodically to offset changes in foreign currency rates which may also reduce the funds available for payments to holders of our common stock.

As of September 30, 2020, we held 37.8 million Israeli new Shekels and 20.1 million Israeli new Shekels in cash and restricted cash, respectively. In addition, as of September 30, 2020, we had bonds outstanding and the related interest payable in the amounts of 836.2 million Israeli new Shekels and 3.7 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 nine months ended September 30, 2020, if foreign currency exchange rates were to increase or decrease by 10%, our net income would increase or decrease by approximately $20.8 million and $25.4 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.

52

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 3.     Quantitative and Qualitative Disclosures about Market Risk (continued)

We borrow funds at a combination of fixed and variable rates. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. As of September 30, 2020, the fair value of our Pacific Oak SOR (BVI) Holdings, Ltd. Series A and Series B Debentures was $158.6 million and $60.3 million, respectively, and the outstanding principal balance was $169.9 million and $74.2 million, respectively. As of September 30, 2020, excluding the Pacific Oak SOR (BVI) Holdings, Ltd. Series A and Series B Debentures, the fair value of our fixed rate debt was $88.3 million and the outstanding principal balance of our fixed rate debt was $79.8 million. The fair value estimate of our Pacific Oak SOR (BVI) Holdings, Ltd. Series A and Series B Debentures were calculated using the quoted bond price as of September 30, 2020 on the Tel Aviv Stock Exchange of 93.7 and 82 Israeli new Shekels, respectively. The fair value estimate of our fixed rate debt was calculated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loans were originated as of September 30, 2020. As we expect to hold our fixed rate instruments to maturity and the amounts due under such instruments would be limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that fluctuations in interest rates, and the resulting changes in fair value of our fixed rate instruments, would have a significant impact on our operations.

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. As of September 30, 2020, we had entered into three separate interest rate caps with an aggregate notional of $175.6 million which effectively limits our exposure to increases in one-month LIBOR above certain thresholds. Based on interest rates as of September 30, 2020, if interest rates were 100 basis points higher or lower during the 12 months ending September 30, 2021, interest expense on our variable rate debt would increase by $4.3 million or decrease by $0.5 million.

The weighted-average interest rates of our fixed rate debt and variable rate debt as of September 30, 2020 were 4.3% and 2.2%, respectively. The interest rate and weighted-average interest rate represent the actual interest rate in effect as of September 30, 2020 (consisting of the contractual interest rate and the effect of contractual floor rates, if applicable), using interest rate indices as of September 30, 2020 where applicable.

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 September 30, 2020, we owned real estate equity securities with a book value of $84.4 million. Based solely on the prices of real estate equity securities as of September 30, 2020, if prices were to increase or decrease by 10%, our net income would increase or decrease by approximately $8.4 million.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this report, management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based upon, and as of the date of, the evaluation, our principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in the reports we file and submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported as and when required. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

53

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

We are dependent on the third-party managers of our hotels.

We currently own two hotel properties. 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 our 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 hotels. Thus, independent hotel operators, under management agreements with our TRS, will control the daily operations of our hotels.

We depend on these independent management companies to adequately operate our hotels 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 hotels are 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 hotels. 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 the affected hotel.

If any hotel managers that we may engage do not qualify as “eligible independent contractors,” or if our hotels are not “qualified lodging facilities,” 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 hotels are managed by an “eligible independent contractor” and certain other requirements are satisfied. We expect to lease all or substantially all of our 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.

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

a)During the period covered by this Form 10-Q, we did not sell any equity securities that were not registered under the Securities Act of 1933, as amended.

b)Not applicable.

54

PART II. OTHER INFORMATION (CONTINUED)

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds (Continued)

c)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 the 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. 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.

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.

Effective beginning with the month of February 2020, we have suspended (a) redemptions requested under the share redemption program in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence”, until we and POSOR II file with the SEC a registration statement on Form S-4 containing a Joint Proxy Statement/Prospectus for the Merger, and (b) all other redemptions under the share redemption program until after the Merger closes. The Form S-4 was filed on June 15, 2020 with the SEC and the Merger closed on October 5, 2020.

55

PART II. OTHER INFORMATION (CONTINUED)

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds (Continued)

During the nine months ended September 30, 2020, 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 of Shares Redeemed	Average Price Paid Per Share (1)		Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program
January 2020	44,025	$	10.63	(2)
February 2020	—	$	—	(2)
March 2020	—	$	—	(2)
April 2020	—	$	—	(2)
May 2020	—	$	—	(2)
June 2020	33,505	$	10.63	(2)
July 2020	600	$	10.63	(2)
August 2020	—	$	—	(2)
September 2020	—	$	—	(2)
Total	78,130

_____________________

(1) On December 17, 2019, our board of directors approved an estimated value per share of our common stock of $10.63. The change in the redemption price became effective for the December 2019 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 2020.

(2) We limit the dollar value of shares that may be redeemed under the program as described above. During the nine months ended September 30, 2020, we redeemed $0.8 million of common stock under the program, which represented all redemption requests received in good order and eligible for redemption through the September 2020 redemption date, except for the $60.0 million of shares in connection with redemption requests not made upon a stockholder’s death, “qualifying disability” or “determination of incompetence,” which redemption requests will be fulfilled subject to the limitations described above. Based on the Eleventh SRP, we have exhausted all available funds for redemptions in the remainder of 2020, including shares that are redeemed in connection with a stockholders’ death, “qualifying disability” or “determination of incompetence,” subject to the limitations described above.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

56

PART II. OTHER INFORMATION (CONTINUED)

Item 5. Other Information

PORT II

On August 31, 2020, Pacific Oak Residential Trust II, Inc. (“PORT II”), entered into an advisory agreement (as subsequently amended and restated on October 9, 2020, “PORT II Advisory Agreement”) with Pacific Oak Residential Advisors, LLC (“PORA”), an affiliate of the Advisor. Pursuant to the PORT II Advisory Agreement, PORT II has engaged PORA to act as its external advisor with respect to PORT II’s operations and assets.

Because the Company has separately engaged the Advisor to manage its operations and assets, including its interests in PORT II, on November 12, 2020, the Company and the Advisor agreed to amend their advisory agreement to provide that PORT II’s operations and assets will be managed by PORA and not by the Advisor. In addition, the amendment provides that the Advisor will rebate or offset its fees under its advisory agreement with the Company to the extent of the Company’s indirect economic interest in fees paid by PORT II to PORA (which will be based on the Company’s indirect ownership of PORT II OP LP (“PORT II OP”), which is the operating partnership of PORT II and the entity ultimately responsible for PORT II’s administrative expenses).

Previously, on August 31, 2020, PORT II entered into a property management agreement with DMH Realty, LLC (“DMH”), an affiliate of POCA and PORA. Pursuant to the property management agreement, PORT II will pay to DMH a base fee equal to the following: (a) for all rent collections up to $50 million per year, 8%; (b) for all rent collections in excess of $50 million per year, but less than or equal to $75 million per year, 7%; and (c) for all rent collections in excess of $75 million per year, 6%. PORT II will also pay DMH market-based leasing fees that will depend on the type of tenant, shared fees equal to 100% of any application fees collected and 50% of any insufficient funds fees, late fees and certain other fees collected. DMH may also perform additional services at rates that would be payable to unrelated parties.

PORT II is a newly-organized Maryland corporation formed and sponsored by the Advisor to acquire, own and operate single family homes as rental properties as well as to acquire and own other interests, including mortgages on or securities related to single family homes. The Company has contributed $5 million in capital to PORT II OP. The Company made its investment through PORT OP, of which the Company owns 96.1% of the equity as of November 13, 2020.

57

PART II. OTHER INFORMATION (CONTINUED)

Item 6. Exhibits

Ex.	Description
2.1	Agreement and Plan of Merger, dated as of February 19, 2020, by and among Pacific Oak Strategic Opportunity REIT, Inc., Pacific Oak SOR II, LLC and Pacific Oak Strategic Opportunity REIT II, Inc., incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed February 20, 2020
3.1	Second Articles of Amendment and Restatement, incorporated by reference to Exhibit 3.1 of 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 of 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	Third Amended and Restated Bylaws, incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed November 1, 2019
3.5	Amendment No.1 to Third Amended and Restated Bylaws, incorporate by reference to Exhibit 3.1 to the Company’s Current Report on 8-K filed July 10, 2020
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 filed May 14, 2015
10.1	Exchange Agreement, by and among Pacific Oak Residential Trust, Inc., PORT OP LP, Pacific Oak SOR Battery Point LLC, Battery Point Trust Inc., and BPT Holdings LLC, dated as of July 1, 2020, incorporated by reference to Exhibit 10.18 to the Company's Registration Statement on Form S-4/A filed July 15, 2020
10.2	Advisory Agreement, by and between the Company and Pacific Oak Capital Advisors, LLC, dated November 1, 2020
10.3	Amendment No. 1 to Advisory Agreement between the Company and Pacific Oak Capital Advisors, LLC, dated as of November 12, 2020
10.4	Advisory Agreement between Pacific Oak Residential Trust II, Inc. and Pacific Oak Residential Advisors, LLC, dated as of August 31, 2020
10.5	Amended and Restated Advisory Agreement between Pacific Oak Residential Trust II, Inc. and Pacific Oak Residential Advisors, LLC, dated as of October 9, 2020
10.6	Management Agreement between Pacific Oak Residential Trust II, Inc. and DMH Realty, LLC, dated as of August 31, 2020
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 created by Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002
99.1	Eleventh Amended and Restated Share Redemption Program, incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed December 7, 2018

58

PART II. OTHER INFORMATION (CONTINUED)

Item 6. Exhibits (Continued)

Ex.	Description
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).

59

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
Date:	November 13, 2020	By:	/S/ KEITH D. HALL
			Keith D. Hall
			Chief Executive Officer and Director
			(principal executive officer)
Date:	November 13, 2020	By:	/S/ MICHAEL A. BENDER
			Michael A. Bender
			Chief Financial Officer
			(principal financial officer)

60

EX-10.2

Exhibit 10.2

ADVISORY AGREEMENT

between

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

and

PACIFIC OAK CAPITAL ADVISORS, LLC

November 1, 2020

TABLE OF CONTENTS

Page

ARTICLE 1 - DEFINITIONS	1
ARTICLE 2 - APPOINTMENT	9
ARTICLE 3 - DUTIES OF THE ADVISOR	9
3.01 Organizational and Offering Services	9
3.02 Acquisition Services	9
3.03 Asset Management Services	10
3.04 Stockholder Services	13
3.05 Other Services	13
ARTICLE 4 - AUTHORITY OF ADVISOR	13
4.01 General	13
4.02 Powers of the Advisor	13
4.03 Approval by the Board	13
4.04 Modification or Revocation of Authority of Advisor	14
ARTICLE 5 - BANK ACCOUNTS	14
ARTICLE 6 – RECORDS AND FINANCIAL STATEMENTS	14
ARTICLE 7 - LIMITATION ON ACTIVITIES	15
ARTICLE 8 - FEES	15
8.01 Acquisition Fees	15
8.02 Asset Management Fees	16
8.03 Disposition Fees	16
8.04 Subordinated Share of Cash Flows	17
8.05 Subordinated Incentive Fee	17
8.06 Changes to Fee Structure	18
ARTICLE 9 - EXPENSES	18
9.01 General	18
9.02 Timing of and Limitations on Reimbursements	20
ARTICLE 10 – VOTING AGREEMENT	20
ARTICLE 11 - RELATIONSHIP OF ADVISOR AND COMPANY; OTHER ACTIVITIES OF THE ADVISOR	21
11.01 Relationship	21
11.02 Time Commitment	21
11.03 Investment Opportunities and Allocation	21
ARTICLE 12 - THE PACIFIC OAK NAME	21
ARTICLE 13 - TERM AND TERMINATION OF THE AGREEMENT	22
13.01 Term	22
13.02 Termination by Either Party	22
13.03 Payments on Termination and Survival of Certain Rights and Obligations	22
ARTICLE 14 - ASSIGNMENT	23

1

ARTICLE 15 - INDEMNIFICATION AND LIMITATION OF LIABILITY	23
15.01 Indemnification	23
15.02 Limitation on Indemnification	24
15.03 Limitation on Payment of Expenses	24
ARTICLE 16 - MISCELLANEOUS	24
16.01 Notices	24
16.02 Modification	25
16.03 Severability	25
16.04 Construction	25
16.05 Entire Agreement	25
16.06 Waiver	25
16.07 Gender	25
16.08 Titles Not to Affect Interpretation	25
16.09 Counterparts	25

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ADVISORY AGREEMENT

This Advisory Agreement, dated as of November 1, 2020 (the “Agreement”), is between Pacific Oak Strategic Opportunity REIT, Inc., a Maryland corporation (the “Company”), and Pacific Oak Capital Advisors, LLC, a Delaware limited liability company (the “Advisor”).

W I T N E S S E T H

WHEREAS, the Company desires to avail itself of the knowledge, experience, sources of information, advice, assistance and certain facilities available to the Advisor and to have the Advisor undertake the duties and responsibilities hereinafter set forth, on behalf of, and subject to the supervision of, the board of directors of the Company (the “Board”), all as provided herein; and

WHEREAS, the Advisor is willing to undertake to render such services, subject to the supervision of the Board, on the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

The following defined terms used in this Agreement shall have the meanings specified below:

“Acquisition Expenses” means any and all expenses, excluding the fee payable to the Advisor pursuant to Section 8.01, incurred by the Company, the Advisor or any Affiliate of either in connection with the selection, acquisition or development of any property, loan or other potential investment, whether or not acquired or originated, as applicable, including, without limitation, legal fees and expenses, travel and communications expenses, costs of appraisals, nonrefundable option payments on properties or other investments not acquired, accounting fees and expenses, title insurance premiums and miscellaneous expenses related to the selection, acquisition or development of any property, loan or other potential investment.

“Acquisition Fees” means the fee payable to the Advisor pursuant to Section 8.01 plus all other fees and commissions, excluding Acquisition Expenses, paid by any Person to any Person in connection with making or investing in any Property, Loan or other Permitted Investment or the purchase, development or construction of any Property by the Company. Included in the computation of such fees or commissions shall be any real estate commission, selection fee, Development Fee, Construction Fee, nonrecurring management fee, loan fees or points or any fee of a similar nature, however designated. Excluded shall be Development Fees and Construction Fees paid to Persons not Affiliated with the Advisor in connection with the actual development and construction of a Property.

“Advisor” means (i) Pacific Oak Capital Advisors, LLC, a Delaware limited liability company, or (ii) any successor advisor to the Company.

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“Affiliate” or “Affiliated” An Affiliate of another Person includes any of the following: (i) any Person directly or indirectly controlling, controlled by, or under common control with such other Person; (ii) any Person directly or indirectly owning, controlling, or holding with the power to vote 10% or more of the outstanding voting securities of such other Person; (iii) any legal entity for which such Person acts as an executive officer, director, trustee, or general partner; (iv) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held, with power to vote, by such other Person; and (v) any executive officer, director, trustee, or general partner of such other Person. An entity shall not be deemed to control or be under common control with an Advisor-sponsored program unless (i) the entity owns 10% or more of the voting equity interests of such program or (ii) a majority of the board of directors (or equivalent governing body) of such program is composed of Affiliates of the entity.

“Appraised Value” means the value according to an appraisal made by an Independent Appraiser.

“Asset Management Fee” shall have the meaning set forth in Section 8.02.

“Average Invested Assets” means, for a specified period, the average of the aggregate book value of the assets of the Company invested, directly or indirectly, in Properties, Loans and other Permitted Investments secured by real estate before reserves for depreciation or bad debts or other similar non-cash reserves, computed by taking the average of such values at the end of each month during such period.

“Board” means the board of directors of the Company, as of any particular time.

“Bylaws” means the bylaws of the Company, as amended from time to time.

“Cash from Financings” means the net cash proceeds realized by the Company from the financing of Properties, Loans or other Permitted Investments or from the refinancing of any Company indebtedness (after deduction of all expenses incurred in connection therewith).

“Cash from Sales and Settlements” means the net cash proceeds realized by the Company (i) from the sale, exchange or other disposition of any of its assets or any portion thereof after deduction of all expenses incurred in connection therewith and (ii) from the prepayment, maturity, workout or other settlement of any Loan or Permitted Investment or portion thereof after deduction of all expenses incurred in connection therewith. In the case of a transaction described in clause (i) (C) of the definition of “Sale” and (i)(B) of the definition of “Settlement,” Cash from Sales and Settlements means the proceeds of any such transaction actually distributed to the Company from the Joint Venture or partnership. Cash from Sales and Settlements shall not include Cash from Financings.

“Cash from Sales, Settlements and Financings” means the total sum of Cash from Sales and Settlements and Cash from Financings.

“Charter” means the articles of incorporation of the Company, as amended from time to time.

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“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.

“Company” means Pacific Oak Strategic Opportunity REIT, Inc., a corporation organized under the laws of the State of Maryland.

“Competitive Real Estate Commission” means a real estate or brokerage commission for the purchase or sale of property that is reasonable, customary, and competitive in light of the size, type, and location of the property.

“Conflicts Committee” shall have the meaning set forth in the Company’s Charter.

“Construction Fee” means a fee or other remuneration for acting as general contractor and/or construction manager to construct improvements, supervise and coordinate projects or to provide major repairs or rehabilitation on a Property.

“Contract Sales Price” means the total consideration received by the Company for the sale of a Property, Loan or other Permitted Investment.

“Cost of Loans and other Permitted Investments” means the sum of the cost of all Loans and Permitted Investments held, directly or indirectly, by the Company, calculated each month on an ongoing basis, and calculated as follows for each investment: the lesser of (i) the amount actually paid or allocated to acquire or fund the Loan or Permitted 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 Permitted Investment (plus the fees and expenses related to the acquisition or funding of such investment), as of the time of calculation. With respect to any Loan or Permitted Investment held by the Company through a Joint Venture or partnership of which it is, directly or indirectly, a partner, such amount shall be the Company’s proportionate share thereof.

“Cost of Real Estate Investments” means the sum of (i) with respect to Properties wholly owned, directly or indirectly, by the Company, the amount actually paid or allocated to the purchase, development, construction or improvement of Properties, inclusive of fees and expenses related thereto, plus the amount of any outstanding debt attributable to such Properties and (ii) in the case of Properties owned by any Joint Venture or partnership in which the Company or the Partnership is, directly or indirectly, a partner, the portion of the amount actually paid or allocated to the purchase, development, construction or improvement of Properties, inclusive of fees and expenses related thereto, plus the amount of any outstanding debt associated with such Properties that is attributable to the Company’s investment in the Joint Venture or partnership.

“Dealer Manager” means (i) Pacific Oak Capital Markets Group, LLC, a Delaware limited liability company, or (ii) any successor dealer manager to the Company.

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“Development Fee” means a fee for the packaging of a Property, including negotiating and approving plans, and undertaking to assist in obtaining zoning and necessary variances and necessary financing for the Property, either initially or at a later date.

“Director” means a member of the board of directors of the Company.

“Disposition Fee” shall have the meaning set forth in Section 8.03.

“Distributions” means any distributions of money or other property by the Company to owners of Shares, including distributions that may constitute a return of capital for federal income tax purposes.

“GAAP” means accounting principles generally accepted in the United States.

“Gross Proceeds” means the aggregate purchase price of all Shares sold for the account of the Company through an Offering, without deduction for Organization and Offering Expenses.

“KBS Advisory Agreement” means the advisory agreement between the Company and its prior advisor, KBS Capital Advisors LLC, dated October 7, 2019, which agreement terminated on October 31, 2019.

“Independent Appraiser” means a person or entity with no material current or prior business or personal relationship with the Advisor or the Directors, who is engaged to a substantial extent in the business of rendering opinions regarding the value of assets of the type held by the Company, and who is a qualified appraiser of real estate as determined by the Board. Membership in a nationally recognized appraisal society such as the American Institute of Real Estate Appraisers (M.A.I.) or the Society of Real Estate Appraisers (S.R.E.A.) shall be conclusive evidence of such qualification.

“Invested Capital” means the amount calculated by multiplying the total number of Shares purchased by Stockholders since Company inception by the issue price, reduced by any amounts paid by the Company to repurchase Shares since Company inception. For purposes of this definition, all Shares issued to stockholders of Pacific Oak Strategic Opportunity REIT II, Inc. (“SOR II”), in connection with the merger (the “Merger”) of SOR II with Pacific Oak SOR II, LLC (“Merger Sub”) pursuant to that certain Agreement and Plan of Merger among the Company, Merger Sub and SOR II, dated as of February 19, 2020, shall be deemed to have been purchased by Stockholders at the effective time of the Merger and at a price of $10.63 per Share.

“Joint Venture” means any joint venture, limited liability company or other Affiliate of the Company that owns, in whole or in part, on behalf of the Company any Properties, Loans or other Permitted Investments.

“Listed” or “Listing” shall have the meaning set forth in the Company’s Charter.

“Loans” means mortgage loans and other types of debt financing investments made by the Company or the Partnership, either directly or indirectly, including through ownership interests in a Joint Venture or partnership, including, without limitation, mezzanine loans, B-

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notes, bridge loans, convertible mortgages, wraparound mortgage loans, construction mortgage loans, loans on leasehold interests, and participations in such loans.

“Market Value” shall have the meaning set forth in Section 8.05.

“Merger” shall have the meaning set forth in the definition of “Invested Capital.”

“NASAA Guidelines” means the NASAA Statement of Policy Regarding Real Estate Investment Trusts as in effect on the date hereof.

“Net Income” means, for any period, the total revenues applicable to such period, less the total expenses applicable to such period excluding additions to reserves for depreciation, bad debts or other similar non-cash reserves; provided, however, Net Income for purposes of calculating total allowable Operating Expenses (as defined herein) shall exclude the gain from the sale of the Company’s assets.

“Offering” means any offering of Shares that is registered with the SEC, excluding Shares offered under any employee benefit plan.

“Operating Cash Flow” means Operating Revenue Cash Flows minus the sum of (i) Operating Expenses, (ii) all principal and interest payments on indebtedness and other sums paid to lenders, (iii) the expenses of raising capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such expenses and tax incurred in connection with the issuance, distribution, transfer, registration and Listing of the Shares, (iv) taxes, (v) incentive fees paid in compliance with Section IV.F. of the NASAA Guidelines and (vi) Acquisition Fees, Acquisition Expenses, real estate commissions on the resale of real property, and other expenses connected with the acquisition, disposition, and ownership of real estate interests, loans or other property (other than commissions on the sale of assets other than real property), such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property.

“Operating Expenses” means all costs and expenses incurred by the Company, as determined under GAAP, that in any way are related to the operation of the Company or to Company business, including fees paid to the Advisor, but excluding (i) the expenses of raising capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such expenses and tax incurred in connection with the issuance, distribution, transfer, registration and Listing of the Shares, (ii) interest payments, (iii) taxes, (iv) non-cash expenditures such as depreciation, amortization and bad loan reserves, (v) incentive fees paid in compliance with Section IV.F. of the NASAA Guidelines and (vi) Acquisition Fees, Acquisition Expenses, real estate commissions on the resale of real property, and other expenses connected with the acquisition, disposition, and ownership of real estate interests, loans or other property (other than commissions on the sale of assets other than real property), such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property.

“Operating Revenue Cash Flows” means the Company’s cash flow from ownership and/or operation of (i) Properties, (ii) Loans, (iii) Permitted Investments, (iv) short-term investments,

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and (v) interests in Properties, Loans and Permitted Investments owned by any Joint Venture or any partnership in which the Company or the Partnership is, directly or indirectly, a partner.

“Organization and Offering Expenses” means all expenses incurred by or on behalf of the Company in connection with or preparing the Company for registration of and subsequently offering and distributing its Shares to the public, whether incurred before or after the date of this Agreement, which may include but are not limited to, total underwriting and brokerage discounts and commissions (including fees of the underwriters’ attorneys); any expense allowance granted by the Company to the underwriter or any reimbursement of expenses of the underwriter by the Company; expenses for printing, engraving and mailing; compensation of employees while engaged in sales activity; charges of transfer agents, registrars, trustees, escrow holders, depositaries and experts; and expenses of qualification of the sale of the securities under Federal and State laws, including taxes and fees, accountants’ and attorneys’ fees.

“Partnership” means Pacific Oak Strategic Opportunity Limited Partnership, a Delaware limited partnership formed to own and operate Properties, Loans and other Permitted Investments on behalf of the Company.

“Permitted Investments” means all investments (other than Properties and Loans) in which the Company may acquire an interest, either directly or indirectly, including through ownership interests in a Joint Venture or partnership, pursuant to its Charter, Bylaws and the investment objectives and policies adopted by the Board from time to time, other than short-term investments acquired for purposes of cash management.

“Person” means an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c) (17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, or any government or any agency or political subdivision thereof, and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.

“Prior Advisor Performance Fee Value” means the value of the Subordinated Share of Cash Flows (as defined in the KBS Advisory Agreement) based on a hypothetical liquidation of the Company’s assets and liabilities at their then-current estimated values used in the 2018 NAV (as defined in the KBS Advisory Agreement) calculation, less any potential amounts to be paid as closing costs and fees related to the disposition of real property, all as determined and used in calculating the number of RSUs (as defined in the KBS Advisory Agreement) to be issued to KBS Capital Advisors LLC in connection with the termination of the KBS Advisory Agreement.

“Property” means any real property or properties transferred or conveyed to the Company or the Partnership, either directly or indirectly, including through ownership interests in a Joint Venture or partnership.

“Property Manager” means an entity that has been retained to perform and carry out at one or more of the Properties property-management services, excluding persons, entities or

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independent contractors retained or hired to perform facility management or other services or tasks at a particular Property, the costs for which are passed through to and ultimately paid by the tenant at such Property.

“REIT” means a “real estate investment trust” under Sections 856 through 860 of the Code.

“Sale” means any transaction or series of transactions whereby: (A) the Company or the Partnership sells, grants, transfers, conveys, or relinquishes its ownership of any Property, Loan or other Permitted Investment or portion thereof, including the transfer of any Property that is the subject of a ground lease, including any event with respect to any Property, Loan or other Permitted Investment that gives rise to a significant amount of insurance proceeds or condemnation awards, and including the issuance by one of the Company’s subsidiaries of any asset-backed securities or collateralized debt obligations as part of a securitization transaction; (B) the Company or the Partnership sells, grants, transfers, conveys, or relinquishes its ownership of all or substantially all of the interest of the Company or the Partnership in any Joint Venture or any partnership in which it is a partner; or (C) any Joint Venture or any partnership in which the Company or the Partnership is a partner, sells, grants, transfers, conveys, or relinquishes its ownership of any Property, Loan or other Permitted Investment or portion thereof, including any event with respect to any Property, Loan or other Permitted Investment that gives rise to insurance claims or condemnation awards, and including the issuance by such Joint Venture or any partnership or one of its subsidiaries of any asset-backed securities or collateralized debt obligations as part of a securitization transaction.

“SEC” means the United States Securities and Exchange Commission.

“Settlement” means the prepayment, maturity, workout or other settlement of any Loan or other Permitted Investment or portion thereof owned, directly or indirectly, by (A) the Company or the Partnership or (B) any Joint Venture or any partnership in which the Company or the Partnership is, directly or indirectly, a partner.

“Shares” means shares of common stock of the Company, par value $.01 per share.

“Stockholders” means the registered holders of the Shares.

“Stockholders’ 7% Return” means, as of any date, an aggregate amount equal to a 7% cumulative, non-compounded, annual return on Invested Capital (calculated like simple interest on a daily basis based on a three hundred sixty-five day year) since Company inception. For purposes of calculating the Stockholders’ 7% Return, Invested Capital shall be determined for each day during the period for which the Stockholders’ 7% Return is being calculated (i.e. although the calculation is performed since Company inception, it will take into account the specific dates that Shares were purchased by Stockholders or repurchased by the Company) and shall be calculated net of (1) Distributions of Operating Cash Flow since Company inception to the extent such Distributions of Operating Cash Flow provide a cumulative, non-compounded, annual return in excess of 7% since Company inception, as such amounts are computed on a daily basis based on a three hundred sixty-five day year and (2) Distributions of Cash from Sales,

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Settlements and Financings since Company inception, except to the extent such Distributions would be required to supplement Distributions of Operating Cash Flow in order to achieve a cumulative, non-compounded, annual return of 7% since Company inception, as such amounts are computed on a daily basis based on a three hundred sixty-five day year.

“Subordinated Incentive Fee” means the fee payable to the Advisor under certain circumstances if the Shares are Listed, as calculated in Section 8.05.

“Subordinated Incentive Fee Threshold” has the meaning set forth in Section 8.05.

“Subordinated Performance Fee Due Upon Termination” means a fee payable in the form of an interest bearing promissory note (the “Performance Fee Note”) in a principal amount equal to the amount, if any, by which (I) (1) 15% of the amount, if any, by which (a) the Appraised Value of the Company’s Properties at the Termination Date, less amounts of all indebtedness secured by the Company’s Properties, plus the fair market value of all other Loans, Permitted Investments and other assets of the Company at the Termination Date, less amounts of indebtedness related to such Loans and Permitted Investments, less any other secured or unsecured indebtedness or known liabilities at the Termination Date, plus total Distributions (excluding any stock dividend) from Company inception through the Termination Date exceeds (b) the sum of Invested Capital plus total Distributions required to be made to the stockholders in order to pay the Stockholders’ 7% Return from Company inception through the Termination Date less (2) any prior payment to the Advisor of a Subordinated Share of Cash Flows (the amount calculated under (b) is the “Termination Fee Threshold”) exceeds (II) the Prior Advisor Performance Fee. Interest on the Performance Fee Note will accrue beginning on the Termination Date at a rate deemed fair and reasonable by the Conflicts Committee. The Company shall repay the Performance Fee Note at such time as the Company completes the first Sale or Settlement after the Termination Date using Cash from Sales and Settlements. If the Cash from Sales and Settlements from the first Sale or Settlement after the Termination Date is insufficient to pay the Performance Fee Note in full, including accrued interest, then the Performance Fee Note shall be paid in part from the Cash from Sales and Settlements from the first Sale or Settlement, and in part from the Cash from Sales and Settlements from each successive Sale or Settlement until the Performance Fee Note is repaid in full, with interest. If the Performance Fee Note has not been paid in full within five years from the Termination Date, then the Advisor, its successors or assigns, may elect to convert the balance of the fee, including accrued but unpaid interest, into Shares at a price per Share equal to the average closing price of the Shares over the ten trading days immediately preceding the date of such election if the Shares are Listed at such time. If the Shares are not Listed at such time, the Advisor, its successors or assigns, may elect to convert the balance of the fee, including accrued but unpaid interest, into Shares at a price per Share equal to the fair market value for the Shares as determined by the Board based upon the Appraised Value of Company’s Properties on the date of election plus the fair market value of all other Loans and Permitted Investments of the Company on the date of election.

“Subordinated Share of Cash Flows” has the meaning set forth in Section 8.04.

“Subordinated Share of Cash Flows Threshold” has the meaning set forth in Section 8.04.

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“Termination Date” means the date of termination of the Agreement determined in accordance with Article 13 hereof.

“Termination Fee Threshold” has the meaning set forth in the definition of Subordinated Performance Fee Due Upon Termination.

“2%/25% Guidelines” means the requirement pursuant to the NASAA Guidelines that, in any period of four consecutive fiscal quarters, total Operating Expenses not exceed the greater of 2% of the Company’s Average Invested Assets during such 12-month period or 25% of the Company’s Net Income over the same 12-month period.

ARTICLE 2

APPOINTMENT

The Company hereby appoints the Advisor to serve as its advisor and asset manager on the terms and conditions set forth in this Agreement, and the Advisor hereby accepts such appointment.

ARTICLE 3

DUTIES OF THE ADVISOR

The Advisor is responsible for managing, operating, directing and supervising the operations and administration of the Company and its assets. The Advisor undertakes to use its best efforts to present to the Company potential investment opportunities, to make investment decisions on behalf of the Company subject to the limitations in the Company’s Charter, the direction and oversight of the Board and Section 4.03 hereof, and to provide the Company with a continuing and suitable investment program consistent with the investment objectives and policies of the Company as determined and adopted from time to time by the Board. Subject to the limitations set forth in this Agreement, including Article 4 hereof, and the continuing and exclusive authority of the Board over the management of the Company, the Advisor shall, either directly or by engaging an Affiliate or third party, perform the following duties:

3.01 Organizational and Offering Services. The Advisor shall perform all services related to the organization of the Company or any Offering or private sale of the Company’s securities, other than services that (i) are to be performed by the Dealer Manager, (ii) the Company elects to perform directly or (iii) would require the Advisor to register as a broker-dealer with the SEC or any state.

3.02 Acquisition Services.

(i) Serve as the Company’s investment and financial advisor and provide relevant market research and economic and statistical data in connection with the Company’s assets and investment objectives and policies;

(ii) Subject to Section 4 hereof and the investment objectives and policies of the Company: (a) locate, analyze and select potential investments; (b) structure and negotiate the terms and conditions of transactions pursuant to which investments in Properties,

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Loans and other Permitted Investments will be made; (c) acquire, originate and dispose of Properties, Loans and other Permitted Investments on behalf of the Company; (d) arrange for financing and refinancing and make other changes in the asset or capital structure of investments in Properties, Loans and other Permitted Investments; and (e) enter into leases, service contracts and other agreements for Properties, Loans and other Permitted Investments;

(iii) Perform due diligence on prospective investments and create due diligence reports summarizing the results of such work;

(iv) With respect to prospective investments presented to the Board, prepare reports regarding such prospective investments that include recommendations and supporting documentation necessary for the Directors to evaluate the proposed investments;

(v) Obtain reports (which may be prepared by the Advisor or its Affiliates), where appropriate, concerning the value of contemplated investments of the Company;

(vi) Deliver to or maintain on behalf of the Company copies of all appraisals obtained in connection with the Company’s investments; and

(vii) Negotiate and execute approved investments and other transactions, including prepayments, maturities, workouts and other settlements of Loans and other Permitted Investments.

3.03 Asset Management Services.

(i) Real Estate and Related Services:

(a) Investigate, select and, on behalf of the Company, engage and conduct business with (including enter contracts with) such Persons as the Advisor deems necessary to the proper performance of its obligations as set forth in this Agreement, including but not limited to consultants, accountants, lenders, technical advisors, attorneys, brokers, underwriters, corporate fiduciaries, escrow agents, depositaries, custodians, agents for collection, insurers, insurance agents, developers, construction companies, Property Managers and any and all Persons acting in any other capacity deemed by the Advisor necessary or desirable for the performance of any of the foregoing services;

(b) Negotiate and service the Company’s debt facilities and other financings;

(c) Monitor applicable markets and obtain reports (which may be prepared by the Advisor or its Affiliates) where appropriate, concerning the value of investments of the Company;

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(d) Monitor and evaluate the performance of each asset of the Company and the Company’s overall portfolio of assets, provide daily management services to the Company and perform and supervise the various management and operational functions related to the Company’s investments;

(e) Formulate and oversee the implementation of strategies for the administration, promotion, management, operation, maintenance, improvement, financing and refinancing, marketing, leasing and disposition of Properties, Loans and other Permitted Investments on an overall portfolio basis;

(f) Consult with the Company’s officers and the Board and assist the Board in the formulation and implementation of the Company’s financial policies, and, as necessary with respect to investment and borrowing opportunities presented to the Board, furnish the Board with advice and recommendations with respect to the making of investments consistent with the investment objectives and policies of the Company and in connection with any borrowings proposed to be undertaken by the Company;

(g) Oversee the performance by the Property Managers of their duties, including collection and proper deposits of rental payments and payment of Property expenses and maintenance;

(h) Conduct periodic on-site property visits to some or all (as the Advisor deems reasonably necessary) of the Properties to inspect the physical condition of the Properties and to evaluate the performance of the Property Managers;

(i) Review, analyze and comment upon the operating budgets, capital budgets and leasing plans prepared and submitted by each Property Manager and aggregate these property budgets into the Company’s overall budget;

(j) Coordinate and manage relationships between the Company and any Joint Venture partners; and

(k) Consult with the Company’s officers and the Board and provide assistance with the evaluation and approval of potential asset disposition, sale and refinancing opportunities that are presented to the Board.

(ii) Accounting and Other Administrative Services:

(a) Provide the day-to-day management of the Company and perform and supervise the various administrative functions reasonably necessary for the management of the Company;

(b) From time to time, or at any time reasonably requested by the Board, make reports to the Board on the Advisor’s performance of services to the Company under this Agreement;

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(c) Make reports to the Conflicts Committee each quarter of the investments that have been made by other programs sponsored by the Advisor or any of its Affiliates as well as any investments that have been made by the Advisor or any of its Affiliates directly;

(d) Provide or arrange for any administrative services and items, legal and other services, office space, office furnishings, personnel and other overhead items necessary and incidental to the Company’s business and operations;

(e) Provide financial and operational planning services;

(f) Maintain accounting and other record-keeping functions at the Company and investment levels, including information concerning the activities of the Company as shall be required to prepare and to file all periodic financial reports, tax returns and any other information required to be filed with the SEC, the Internal Revenue Service and any other regulatory agency;

(g) Maintain and preserve all appropriate books and records of the Company;

(h) Provide tax and compliance services and coordinate with appropriate third parties, including the Company’s independent auditors and other consultants, on related tax matters;

(i) Provide the Company with all necessary cash management services;

(j) Manage and coordinate with the transfer agent the dividend process and payments to Stockholders;

(k) Consult with the Company’s officers and the Board and assist the Board in evaluating and obtaining adequate insurance coverage based upon risk management determinations;

(l) Provide the Company’s officers and the Board with timely updates related to the overall regulatory environment affecting the Company, as well as managing compliance with such matters, including but not limited to compliance with the Sarbanes-Oxley Act of 2002;

(m) Consult with the Company’s officers and the Board relating to the corporate governance structure and appropriate policies and procedures related thereto;

(n) Perform all reporting, record keeping, internal controls and similar matters in a manner to allow the Company to comply with applicable law, including federal and state securities laws and the Sarbanes-Oxley Act of 2002;

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(o) Notify the Board of all proposed material transactions before they are completed; and

(p) Do all things necessary to assure its ability to render the services described in this Agreement.

3.04 Stockholder Services.

(i) Manage services for and communications with Stockholders, including answering phone calls, preparing and sending written and electronic reports and other communications;

(ii) Oversee the performance of the transfer agent and registrar;

(iii) Establish technology infrastructure to assist in providing Stockholder support and service; and

(iv) Consistent with Section 3.01, the Advisor shall perform the various subscription processing services reasonably necessary for the admission of new Stockholders.

3.05 Other Services. Except as provided in Article 7, the Advisor shall perform any other services reasonably requested by the Company (acting through the Conflicts Committee).

ARTICLE 4

AUTHORITY OF ADVISOR

4.01 General. All rights and powers to manage and control the day-to-day business and affairs of the Company shall be vested in the Advisor. The Advisor shall have the power to delegate all or any part of its rights and powers to manage and control the business and affairs of the Company to such officers, employees, Affiliates, agents and representatives of the Advisor or the Company as it may deem appropriate. Any authority delegated by the Advisor to any other Person shall be subject to the limitations on the rights and powers of the Advisor specifically set forth in this Agreement or the Charter.

4.02 Powers of the Advisor. Subject to the express limitations set forth in this Agreement and the continuing and exclusive authority of the Board over the management of the Company, the power to direct the management, operation and policies of the Company, including making, financing and disposing of investments, shall be vested in the Advisor, which shall have the power by itself and shall be authorized and empowered on behalf and in the name of the Company to carry out any and all of the objectives and purposes of the Company and to perform all acts and enter into and perform all contracts and other undertakings that it may in its sole discretion deem necessary, advisable or incidental thereto to perform its obligations under this Agreement.

4.03 Approval by the Board. Notwithstanding the foregoing, the Advisor may not take any action on behalf of the Company without the prior approval of the Board or duly authorized

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committees thereof if the Charter or Maryland General Corporation Law require the prior approval of the Board. If the Board or a committee of the Board must approve a proposed investment, financing or disposition or chooses to do so, the Advisor will deliver to the Board or committee, as applicable, all documents required by it to evaluate such investment, financing or disposition.

4.04 Modification or Revocation of Authority of Advisor. The Board may, at any time upon the giving of notice to the Advisor, modify or revoke the authority or approvals set forth in Article 3 and this Article 4 hereof; provided, however, that such modification or revocation shall be effective upon receipt by the Advisor and shall not be applicable to investment transactions to which the Advisor has committed the Company prior to the date of receipt by the Advisor of such notification.

ARTICLE 5

BANK ACCOUNTS

The Advisor may establish and maintain one or more bank accounts in its own name for the account of the Company or in the name of the Company and may collect and deposit into any such account or accounts, and disburse from any such account or accounts, any money on behalf of the Company, under such terms and conditions as the Board may approve, provided that no funds shall be commingled with the funds of the Advisor. The Advisor shall from time to time render appropriate accountings of such collections and payments to the Board and the independent auditors of the Company.

ARTICLE 6

RECORDS AND FINANCIAL STATEMENTS

The Advisor, in the conduct of its responsibilities to the Company, shall maintain adequate and separate books and records for the Company’s operations in accordance with GAAP, which shall be supported by sufficient documentation to ascertain that such books and records are properly and accurately recorded. Such books and records shall be the property of the Company and shall be available for inspection by the Board and by counsel, auditors and other authorized agents of the Company, at any time or from time to time during normal business hours. Such books and records shall include all information necessary to calculate and audit the fees or reimbursements paid under this Agreement. The Advisor shall utilize procedures to attempt to ensure such control over accounting and financial transactions as is reasonably required to protect the Company’s assets from theft, error or fraudulent activity. All financial statements that the Advisor delivers to the Company shall be prepared on an accrual basis in accordance with GAAP, except for special financial reports that by their nature require a deviation from GAAP. The Advisor shall liaise with the Company’s officers and independent auditors and shall provide such officers and auditors with the reports and other information that the Company so requests.

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ARTICLE 7

LIMITATION ON ACTIVITIES

Notwithstanding any provision in this Agreement to the contrary, the Advisor shall not take any action that, in its sole judgment made in good faith, would (i) adversely affect the ability of the Company to qualify or continue to qualify as a REIT under the Code, (ii) subject the Company to regulation under the Investment Company Act of 1940, as amended, (iii) violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over the Company, its Shares or its other securities, (iv) require the Advisor to register as a broker-dealer with the SEC or any state, or (v) violate the Charter or Bylaws. In the event an action that would violate (i) through (v) of the preceding sentence but such action has been ordered by the Board, the Advisor shall notify the Board of the Advisor’s judgment of the potential impact of such action and shall refrain from taking such action until it receives further clarification or instructions from the Board. In such event, the Advisor shall have no liability for acting in accordance with the specific instructions of the Board so given.

ARTICLE 8

FEES

8.01 Acquisition Fees. As compensation for the investigation, selection, sourcing and acquisition or origination (by purchase, investment or exchange) of Properties, Loans and other Permitted Investments, the Company shall pay an Acquisition Fee to the Advisor for each such investment (whether an acquisition or origination). With respect to the acquisition or origination of a Property, Loan or other Permitted Investment to be wholly owned, directly or indirectly, by the Company, the Acquisition Fee payable to the Advisor shall equal 1.0% of the sum of the amount actually paid or allocated to fund the acquisition, origination, development, construction or improvement of the Property, Loan or other Permitted Investment, inclusive of the Acquisition Expenses associated with such Property, Loan or other Permitted Investment and the amount of any debt associated with, or used to fund the investment in, such Property, Loan or other Permitted Investment. With respect to the acquisition or origination of a Property, Loan or other Permitted Investment through any Joint Venture or any partnership in which the Company or the Partnership is, directly or indirectly, a partner, the Acquisition Fee payable to the Advisor shall equal 1.0% of the portion of the amount actually paid or allocated to fund the acquisition, origination, development, construction or improvement of the Property, Loan or other Permitted Investment, inclusive of the Acquisition Expenses associated with such Property, Loan or other Permitted Investment, plus the amount of any debt associated with, or used to fund the investment in, such Property, Loan or other Permitted Investment that is attributable to the Company’s investment in such Joint Venture or partnership. Notwithstanding anything herein to the contrary, the payment of Acquisition Fees by the Company shall be subject to the limitations on Acquisition Fees contained in (and defined in) the Company’s Charter, and no Acquisition Fee shall be paid in connection with the Merger. The Advisor shall submit an invoice to the Company following the closing or closings of each acquisition or origination, accompanied by a computation of the Acquisition Fee. Generally, the Acquisition Fee payable to the Advisor shall be paid at the closing of the transaction upon receipt of the invoice by the Company. However, the Acquisition Fee may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor. All or any portion of the Acquisition Fees not taken as to any fiscal

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year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine.

8.02 Asset Management Fees.

(i) Except as provided in Section 8.02(ii) hereof, the Company shall pay the Advisor as compensation for the services described in Section 3.03 hereof a monthly fee (the “Asset Management Fee”) in an amount equal to one-twelfth of 0.75% of the sum of the Cost of Real Estate Investments and the Cost of Loans and other Permitted Investments. The Advisor shall submit a monthly invoice to the Company, accompanied by a computation of the Asset Management Fee for the applicable period. Generally, the Asset Management Fee payable to the Advisor shall be paid on the last day of such month, or the first business day following the last day of such month. However, the Asset Management Fee may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor. All or any portion of the Asset Management Fees not taken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine.

(ii) Notwithstanding anything contained in Section 8.02(i) to the contrary, a Property, Loan or other Permitted Investment that has suffered an impairment in value, reduction in cash flow or other negative circumstances may either be excluded from the calculation of the Cost of Real Estate Investments or the Cost of Loans and other Permitted Investments or included in such calculation at a reduced value that is recommended by the Advisor and the Company’s management and then approved by a majority of the Company’s independent directors, and the resulting change in the Asset Management Fee with respect to such an investment will be applicable upon the earlier to occur of the date on which (i) such investment is sold, (ii) such investment is surrendered to a Person other than the Company, its direct or indirect wholly owned subsidiary or a Joint Venture or partnership in which the Company has an interest, (iii) the Advisor determines that it will no longer pursue collection or other remedies related to such investment, or (iv) the Advisor recommends a revised fee arrangement with respect to such investment.

8.03 Disposition Fees. If the Advisor or any of its Affiliates provide a substantial amount of services (as determined by the Conflicts Committee) in connection with a Sale, the Advisor or such Affiliate shall receive a fee at the closing (the “Disposition Fee”) equal to 1% of the Contract Sales Price; provided, however, that if in connection with such Sale commissions are paid to third parties other than the Advisor or its Affiliates, the fee paid to the Advisor or any of its Affiliates may not exceed the commissions paid to such unaffiliated third parties; and provided further that no Disposition Fee shall be payable to the Advisor for any Sale if such Sale involves the Company selling all or substantially all of its assets in one or more transactions designed to effectuate a business combination transaction (as opposed to a Company liquidation, in which case the Disposition Fee would be payable if the Advisor or an Affiliate provides a substantial amount of services as provided above). The payment of any Disposition Fees by the Company shall be subject to the limitations contained in the Company’s Charter. Any Disposition Fee payable under this Section 8.03 may be paid in addition to commissions paid to

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non-Affiliates, provided that the total commissions (including such Disposition Fee) paid to all Persons by the Company for each Sale shall not exceed an amount equal to the lesser of (i) 6% of the aggregate Contract Sales Price of each Property, Loan or other Permitted Investment or (ii) the Competitive Real Estate Commission for each Property, Loan or other Permitted Investment. The Advisor shall submit an invoice to the Company following the closing or closings of each disposition, accompanied by a computation of the Disposition Fee. Generally, the Disposition Fee payable to the Advisor shall be paid at the closing of the transaction upon receipt of the invoice by the Company. However, the Disposition Fee may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor. All or any portion of the Disposition Fees not taken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine.

8.04 Subordinated Share of Cash Flows. The Subordinated Share of Cash Flows shall be payable to the Advisor in an amount equal to the amount, if any, by which (I) 15% of Operating Cash Flow and Cash from Sales, Settlements and Financings remaining after the Stockholders have received Distributions of Operating Cash Flow and of Cash from Sales, Settlements and Financings since Company inception such that the owners of all outstanding Shares have received Distributions since Company inception in an aggregate amount equal to the sum of the Stockholders’ 7% Return and Invested Capital, exceeds (II) the Prior Advisor Performance Fee Value.

When determining whether the above threshold (the “Subordinated Share of Cash Flows Threshold”) has been met:

(A)    Any stock dividend since Company inception shall not be included as a Distribution; and

(B)    Distributions since Company inception paid on Shares redeemed by the Company (and thus no longer included in the determination of Invested Capital), shall not be included as a Distribution.

Following Listing, no Subordinated Share of Cash Flows will be paid to the Advisor.

If the Subordinated Share of Cash Flows is payable to the Advisor, the Advisor shall submit a monthly invoice to the Company, accompanied by a computation of the total amount of the Subordinated Share of Cash Flows for the applicable period. Generally, the Subordinated Share of Cash Flows payable to the Advisor shall be paid on the last day of such month, or the first business day following the last day of such month. However, the Subordinated Share of Cash Flows may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor. All or any portion of the Subordinated Share of Cash Flows not taken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine.

8.05 Subordinated Incentive Fee. Upon Listing, the Advisor shall be entitled to the Subordinated Incentive Fee in an amount equal to the amount, if any, by which (I) 15% of the amount by which (i) the market value of the outstanding Shares of the Company, measured by

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taking the average closing price or the average of the bid and asked price, as the case may be, over a period of 30 days during which the Shares are traded, with such period beginning 180 days after Listing (the “Market Value”), plus the total of all Distributions paid to Stockholders (excluding any stock dividends) from Company inception until the date that Market Value is determined, exceeds (ii) the sum of (A) 100% of Invested Capital and (B) the total Distributions required to be paid to the Stockholders in order to pay the Stockholders’ 7% Return from Company inception through the date Market Value is determined (the sum of (A) and (B) is the “Subordinated Incentive Fee Threshold”) exceeds (II) the Prior Advisor Performance Fee Value. The Company shall have the option to pay such fee in the form of cash, Shares, a promissory note or any combination of the foregoing. The Subordinated Incentive Fee will be reduced by the amount of any prior payment to the Advisor of a Subordinated Share of Cash Flows. In the event the Subordinated Incentive Fee is paid to the Advisor following Listing, no other performance fee will be paid to the Advisor. In addition, the Subordinated Incentive Fee may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor. All or any portion of the Subordinated Incentive Fee not taken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine.

8.06 Changes to Fee Structure. The Advisor and the Company shall not agree to reduce the Subordinated Share of Cash Flows Threshold, the Subordinated Incentive Fee Threshold or the Termination Fee Threshold without the approval of Stockholders holding a majority of the Shares. In the event of Listing, the Company and the Advisor shall negotiate in good faith to establish a fee structure appropriate for a perpetual-life entity.

ARTICLE 9

EXPENSES

9.01 General. In addition to the compensation paid to the Advisor pursuant to Article 8 hereof, the Company shall pay directly or reimburse the Advisor for all of the expenses paid or incurred by the Advisor or its Affiliates on behalf of the Company or in connection with the services provided to the Company pursuant to this Agreement, including, but not limited to:

(i) All Organization and Offering Expenses; provided, however, that the Company shall not reimburse the Advisor to the extent such reimbursement would cause the total amount spent by the Company on Organization and Offering Expenses to exceed 15% of the Gross Proceeds raised as of the date of the reimbursement and provided further that within 60 days after the end of the month in which an Offering terminates, the Advisor shall reimburse the Company to the extent the Company incurred Organization and Offering Expenses exceeding 15% of the Gross Proceeds raised in the completed Offering; the Company shall not reimburse the Advisor for any Organization and Offering Expenses that are not fair and commercially reasonable to the Company, and the Advisor shall reimburse the Company for any Organization and Offering Expenses that are not fair and commercially reasonable to the Company;

(ii) Acquisition Fees and Acquisition Expenses incurred in connection with the selection and acquisition of Properties, Loans and other Permitted Investments, including such expenses incurred related to assets pursued or considered but not ultimately acquired

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by the Company, provided that, notwithstanding anything herein to the contrary, the payment of Acquisition Fees and Acquisition Expenses by the Company shall be subject to the limitations contained in the Company’s Charter;

(iii) The actual out-of-pocket cost of goods and services used by the Company and obtained from entities not Affiliated with the Advisor;

(iv) Interest and other costs for borrowed money, including discounts, points and other similar fees;

(v) Taxes and assessments on income or Properties, taxes as an expense of doing business and any other taxes otherwise imposed on the Company and its business, assets or income;

(vi) Out-of-pocket costs associated with insurance required in connection with the business of the Company or by its officers and Directors;

(vii) Expenses of managing, improving, developing, operating and selling Properties, Loans and other Permitted Investments owned, directly or indirectly, by the Company, as well as expenses of other transactions relating to such Properties, Loans and other Permitted Investments, including but not limited to prepayments, maturities, workouts and other settlements of Loans and other Permitted Investments;

(viii) All out-of-pocket expenses in connection with payments to the Board and meetings of the Board and Stockholders;

(ix) Personnel and related employment costs incurred by the Advisor or its Affiliates in performing the services described in Article 3 hereof, including but not limited to reasonable salaries and wages, benefits and overhead of all employees directly involved in the performance of such services, provided that, other than reimbursement of travel and communications expenses, no reimbursement shall be made for compensation of such employees of the Advisor or its Affiliates to the extent that such employees perform services for which the Advisor receives Acquisition Fees or Disposition Fees;

(x) Out-of-pocket expenses of providing services for and maintaining communications with Stockholders, including the cost of preparation, printing, and mailing annual reports and other Stockholder reports, proxy statements and other reports required by governmental entities;

(xi) Audit, accounting and legal fees, and other fees for professional services relating to the operations of the Company and all such fees incurred at the request, or on behalf of, the Board, the Conflicts Committee or any other committee of the Board;

(xii) Out-of-pocket costs for the Company to comply with all applicable laws, regulations and ordinances;

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(xiii) Expenses connected with payments of Distributions made or caused to be made by the Company to the Stockholders;

(xiv) Expenses of organizing, redomesticating, merging, liquidating or dissolving the Company or of amending the Charter or the Bylaws; and

(xv) All other out-of-pocket costs incurred by the Advisor in performing its duties hereunder.

9.02 Timing of and Additional Limitations on Reimbursements.

(i) Expenses incurred by the Advisor on behalf of the Company and reimbursable pursuant to this Article 9 shall be reimbursed no less than monthly to the Advisor. The Advisor shall prepare a statement documenting the expenses of the Company during each quarter and shall deliver such statement to the Company within 45 days after the end of each quarter.

(ii) The Company shall not reimburse the Advisor at the end of any fiscal quarter for Operating Expenses that in the four consecutive fiscal quarters then ended (the “Expense Year”) exceed (the “Excess Amount”) the greater of 2% of Average Invested Assets or 25% of Net Income (the “2%/25% Guidelines”) for such year unless the Conflicts Committee determines that such excess was justified, based on unusual and nonrecurring factors that the Conflicts Committee deems sufficient. If the Conflicts Committee does not approve such excess as being so justified, any Excess Amount paid to the Advisor during a fiscal quarter shall be repaid to the Company. If the Conflicts Committee determines such excess was justified, then, within 60 days after the end of any fiscal quarter of the Company for which total reimbursed Operating Expenses for the Expense Year exceed the 2%/25% Guidelines, the Advisor, at the direction of the Conflicts Committee, shall cause such fact to be disclosed to the Stockholders in writing (or the Company shall disclose such fact to the Stockholders in the next quarterly report of the Company or by filing a Current Report on Form 8-K with the SEC within 60 days of such quarter end), together with an explanation of the factors the Conflicts Committee considered in determining that such excess expenses were justified. The Company will ensure that such determination will be reflected in the minutes of the meetings of the Board. All figures used in the foregoing computation shall be determined in accordance with GAAP applied on a consistent basis.

ARTICLE 10

VOTING AGREEMENT

The Advisor agrees that, with respect to any Shares now or hereinafter owned by it, the Advisor will not vote or consent on matters submitted to the stockholders of the Company regarding (i) the removal of the Advisor or any Affiliate of the Advisor, (ii) any transaction between the Company and the Advisor or any of its Affiliates, (iii) the election of directors of the Company or (iv) the approval or termination of any contract with the Advisor or any Affiliate of

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the Advisor. This voting restriction shall survive until such time that the Advisor is both no longer serving as such and is no longer an Affiliate of the Company.

ARTICLE 11

RELATIONSHIP OF ADVISOR AND COMPANY;

OTHER ACTIVITIES OF THE ADVISOR

11.01 Relationship. The Company and the Advisor are not partners or joint venturers with each other, and nothing in this Agreement shall be construed to make them such partners or joint venturers. Nothing herein contained shall prevent the Advisor from engaging in other activities, including, without limitation, the rendering of advice to other Persons (including other REITs) and the management of other programs advised, sponsored or organized by the Advisor or its Affiliates. Nor shall this Agreement limit or restrict the right of any manager, director, officer, employee or equityholder of the Advisor or its Affiliates to engage in any other business or to render services of any kind to any other Person. The Advisor may, with respect to any investment in which the Company is a participant, also render advice and service to each and every other participant therein. The Advisor shall promptly disclose to the Board the existence of any condition or circumstance, existing or anticipated, of which it has knowledge, that creates or could create a conflict of interest between the Advisor’s obligations to the Company and its obligations to or its interest in any other Person.

11.02 Time Commitment. The Advisor shall, and shall cause its Affiliates and their respective employees, officers and agents to, devote to the Company such time as shall be reasonably necessary to conduct the business and affairs of the Company in an appropriate manner consistent with the terms of this Agreement. The Company acknowledges that the Advisor and its Affiliates and their respective employees, officers and agents may also engage in activities unrelated to the Company and may provide services to Persons other than the Company or any of its Affiliates.

11.03 Investment Opportunities and Allocation. The Advisor shall be required to use commercially reasonable efforts to present a continuing and suitable investment program to the Company that is consistent with the investment policies and objectives of the Company, but neither the Advisor nor any Affiliate of the Advisor shall be obligated generally to present any particular investment opportunity to the Company even if the opportunity is of character that, if presented to the Company, could be taken by the Company.

ARTICLE 12

THE PACIFIC OAK NAME

The Advisor and its Affiliates have a proprietary interest in the name “Pacific Oak.” The Advisor hereby grants to the Company a non-transferable, non-assignable, non-exclusive royalty-free right and license to use the name “Pacific Oak” during the term of this Agreement. Accordingly, and in recognition of this right, if at any time the Company ceases to retain the Advisor or one of its Affiliates to perform advisory services for the Company, the Company will, promptly after receipt of written request from the Advisor, cease to conduct business under or use the name “Pacific Oak” or any derivative thereof and the Company shall change its name and

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the names of any of its subsidiaries to a name that does not contain the name “Pacific Oak” or any other word or words that might, in the reasonable discretion of the Advisor, be susceptible of indication of some form of relationship between the Company and the Advisor or any its Affiliates. At such time, the Company will also make any changes to any trademarks, servicemarks or other marks necessary to remove any references to the word “Pacific Oak.” Consistent with the foregoing, it is specifically recognized that the Advisor or one or more of its Affiliates has in the past and may in the future organize, sponsor or otherwise permit to exist other investment vehicles (including vehicles for investment in real estate) and financial and service organizations having “Pacific Oak” as a part of their name, all without the need for any consent (and without the right to object thereto) by the Company.

ARTICLE 13

TERM AND TERMINATION OF THE AGREEMENT

13.01 Term. This Agreement shall have an initial term of one year from November 1, 2020 and may be renewed for an unlimited number of successive one-year terms upon mutual consent of the parties. The Company (acting through the Conflicts Committee) will evaluate the performance of the Advisor annually before renewing this Agreement, and each such renewal shall be for a term of no more than one year. Any such renewal must be approved by the Conflicts Committee.

13.02 Termination by Either Party. This Agreement may be terminated upon 60 days written notice without cause or penalty by either the Company (acting in sole discretion and authority of the Conflicts Committee) or the Advisor. The provisions of Articles 1, 10, 12, 13, 15 and 16 shall survive termination of this Agreement.

13.03 Payments on Termination and Survival of Certain Rights and Obligations. Payments to the Advisor pursuant to this Section 13.03 shall be subject to the 2%/25% Guidelines to the extent applicable.

(i) After the Termination Date, the Advisor shall not be entitled to compensation for further services hereunder except it shall be entitled to receive from the Company within 30 days after the effective date of such termination (A) all unpaid reimbursements of expenses and all earned but unpaid fees payable to the Advisor prior to termination of this Agreement and (B) the Subordinated Performance Fee Due Upon Termination, provided that (1) no Subordinated Performance Fee Due Upon Termination will be due or paid if the Company has paid or is obligated to pay the Subordinated Incentive Fee (2) no Subordinated Performance Fee Due Upon Termination will be due or paid if this Agreement is terminated by the Company for cause.

(ii) The Advisor shall promptly upon termination:

(a) pay over to the Company all money collected pursuant to this Agreement, if any, after deducting any accrued compensation and reimbursement for its expenses to which it is then entitled;

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(b) deliver to the Board a full accounting, including a statement showing all payments collected by it and a statement of all money held by it, covering the period following the date of the last accounting furnished to the Board;

(c) deliver to the Board all assets and documents of the Company then in the custody of the Advisor; and

(d) cooperate with the Company to provide an orderly transition of advisory functions.

ARTICLE 14

ASSIGNMENT

This Agreement may be assigned by the Advisor to an Affiliate with the consent of the Conflicts Committee. The Advisor may assign any rights to receive fees or other payments under this Agreement without obtaining the approval of the Board. This Agreement shall not be assigned by the Company without the consent of the Advisor, except in the case of an assignment by the Company to a corporation or other organization that is a successor to all of the assets, rights and obligations of the Company, in which case such successor organization shall be bound hereunder and by the terms of said assignment in the same manner as the Company is bound by this Agreement.

ARTICLE 15

INDEMNIFICATION AND LIMITATION OF LIABILITY

15.01 Indemnification. Except as prohibited by the restrictions provided in this Section 15.01, Section 15.02 and Section 15.03, the Company shall indemnify, defend and hold harmless the Advisor and its Affiliates, including their respective officers, directors, equity holders, partners and employees, from all liability, claims, damages or losses arising in the performance of their duties hereunder, and related expenses, including reasonable attorneys’ fees, to the extent such liability, claims, damages or losses and related expenses are not fully reimbursed by insurance. Any indemnification of the Advisor may be made only out of the net assets of the Company and not from Stockholders.

Notwithstanding the foregoing, the Company shall not indemnify the Advisor or its Affiliates for any loss, liability or expense arising from or out of an alleged violation of federal or state securities laws by such party unless one or more of the following conditions are met: (i) there has been a successful adjudication on the merits of each count involving alleged material securities law violations as to the particular indemnitee; (ii) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee; or (iii) a court of competent jurisdiction approves a settlement of the claims against a particular indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the SEC and of the published position of any state securities regulatory authority in which securities of the Company were offered or sold as to indemnification for violations of securities laws.

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15.02 Limitation on Indemnification. Notwithstanding the foregoing, the Company shall not provide for indemnification of the Advisor or its Affiliates for any liability or loss suffered by any of them, nor shall any of them be held harmless for any loss or liability suffered by the Company, unless all of the following conditions are met:

(i)    The Advisor or its Affiliates have determined, in good faith, that the course of conduct that caused the loss or liability was in the best interests of the Company.

(ii)    The Advisor or its Affiliates were acting on behalf of or performing services for the Company.

(iii)    Such liability or loss was not the result of negligence or misconduct by the Advisor or its Affiliates.

    15.03 Limitation on Payment of Expenses. The Company shall pay or reimburse reasonable legal expenses and other costs incurred by the Advisor or its Affiliates in advance of the final disposition of a proceeding only if (in addition to the procedures required by the Maryland General Corporation Law, as amended from time to time) all of the following are satisfied: (a) the proceeding relates to acts or omissions with respect to the performance of duties or services on behalf of the Company, (b) the legal proceeding was initiated by a third party who is not a stockholder or, if by a stockholder acting in his or her capacity as such, a court of competent jurisdiction approves such advancement and (c) the Advisor or its Affiliates undertake to repay the amount paid or reimbursed by the Company, together with the applicable legal rate of interest thereon, if it is ultimately determined that the particular indemnitee is not entitled to indemnification.

ARTICLE 16

MISCELLANEOUS

16.01 Notices. Any notice, report or other communication required or permitted to be given hereunder shall be in writing unless some other method of giving such notice, report or other communication is required by the Charter, the Bylaws or is accepted by the party to whom it is given, and shall be given by being delivered by hand or by overnight mail or other overnight delivery service to the addresses set forth herein:

To the Company or the Board:

Pacific Oak Strategic Opportunity REIT, Inc.

11150 Santa Monica Blvd

Los Angeles, CA 90025

To the Advisor:

Pacific Oak Capital Advisors, LLC

11150 Santa Monica Blvd

Los Angeles, CA 90025

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Either party may at any time give notice in writing to the other party of a change in its address for the purposes of this Section 16.01.

16.02 Modification. This Agreement shall not be changed, modified, terminated or discharged, in whole or in part, except by an instrument in writing signed by both parties hereto, or their respective successors or permitted assigns, and any change or modification to this Agreement must be in accordance with Section 8.06 hereof, to the extent applicable.

16.03 Severability. The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.

16.04 Construction. The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware.

16.05 Entire Agreement. This Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing.

16.06 Waiver. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

16.07 Gender. Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.

16.08 Titles Not to Affect Interpretation. The titles of Articles and Sections contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof.

16.09 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.

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[The remainder of this page is intentionally left blank.

Signature page follows.]

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    IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of

the date and year first above written.

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
	By:	/s/ Keith D. Hall
		Keith D. Hall, Chief Executive Officer
PACIFIC OAK CAPITAL ADVISORS, LLC
	By:	Pacific Oak Holding Group, LLC, sole Member
			By:	/s/ Peter McMillan III
				Peter McMillan III, Member
			By:	/s/ Keith D. Hall
				Keith D. Hall, Member

[Signature Page to Advisory Agreement of Pacific Oak Strategic Opportunity REIT, Inc.]

EAST\176508542.2

EX-10.3

Exhibit 10.3

AMENDMENT NO. 1

TO THE

ADVISORY AGREEMENT

    This amendment no. 1 (the “Amendment”) to the Advisory Agreement dated as of November 1, 2020 (the “Advisory Agreement”) between Pacific Oak Strategic Opportunity REIT, Inc., a Maryland corporation (the “Company”), and Pacific Oak Capital Advisors, LLC, a Delaware limited liability company (the “Advisor”), is entered as of November 12, 2020. Capitalized terms used herein but not defined shall have the meaning set forth in the Advisory Agreement.

    WHEREAS, Pacific Oak Residential Trust II, Inc. (“PORT II”), an entity in which the Company has an indirect economic interest, entered into an advisory agreement (“PORT II Advisory Agreement”) with Pacific Oak Residential Advisors, LLC (“PORA”), an affiliate of the Advisor;

    WHEREAS, pursuant to the PORT II Advisory Agreement, PORT II has engaged PORA to act as its external advisor with respect to PORT II’s operations and assets;

    WHEREAS, the Company and the Advisor desire to amend the terms of Advisory Agreement in connection with PORT II’s entry into the PORT II Advisory Agreement with PORA.

    NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto agree as follows:

1. Management of PORT II Operations and Assets. Notwithstanding anything to the contrary in the Advisory Agreement, POCA will not be responsible for managing the operations or assets of PORT II. PORA will manage the operations and assets of PORT II pursuant to the PORT II Advisory Agreement. All references to the power, authority, responsibility and duties of POCA with respect to the Company in the Advisory Agreement shall be deemed to exclude PORT II, its operations and its assets.

2. Rebate or Offset of Fees. The Advisor will rebate or offset its fees under the Advisory Agreement to the extent of the Company’s indirect economic interest in fees paid by PORT II to PORA (which will be based on the Company’s indirect ownership in PORT II OP LP, which is the operating partnership of PORT II and the entity ultimately responsible for PORT II’s administrative expenses).

3. Titles Not to Affect Interpretation. The titles of Sections contained in this Amendment are for convenience only, and they neither form a part of this Amendment nor are they to be used in the construction or interpretation hereof.

4. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Amendment shall become

binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.

Signature page follows.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of

the date and year first above written.

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
	By:	/s/ Keith D. Hall
		Keith D. Hall, Chief Executive Officer
PACIFIC OAK CAPITAL ADVISORS, LLC
	By:	Pacific Oak Holding Group, LLC, sole Member
			By:	/s/ Peter McMillan III
				Peter McMillan III, Member
			By:	/s/ Keith D. Hall
				Keith D. Hall, Member

EX-10.4

Exhibit 10.4

ADVISORY AGREEMENT

between

PACIFIC OAK RESIDENTIAL TRUST II, INC.

and

PACIFIC OAK RESIDENTIAL ADVISORS, LLC

August 31, 2020

Table of Contents

Page

ARTICLE 1 DEFINITIONS	1
ARTICLE 2 APPOINTMENT	8
ARTICLE 3 DUTIES OF THE ADVISOR	8
3.01    Organizational and Offering Services	8
3.02    Acquisition Services	9
3.03    Asset Management Services	9
ARTICLE 4 AUTHORITY OF ADVISOR	12
4.01    General	12
4.02    Powers of the Advisor	12
4.03    Approval by the Board	12
4.04    Modification or Revocation of Authority of Advisor	12
ARTICLE 5 BANK ACCOUNTS	13
ARTICLE 6 RECORDS AND FINANCIAL STATEMENTS	13
ARTICLE 7 LIMITATION ON ACTIVITIES	13
ARTICLE 8 FEES	14
8.01    Acquisition Fees	14
8.02    Asset Management Fees	14
8.03    Incentive Fees	14
8.04    Calculation of Incentive Fees	14
ARTICLE 9 EXPENSES	15
9.01    General	15
9.02    Timing of and Additional Limitations on Reimbursements	16
ARTICLE 10 VOTING AGREEMENT	16
ARTICLE 11 RELATIONSHIP OF ADVISOR AND COMPANY;
OTHER ACTIVITIES OF THE ADVISOR	17
11.01    Relationship	17
11.02    Time Commitment	17
ARTICLE 12 THE PACIFIC OAK NAME	17
ARTICLE 13 CHANGE OF CONTROL	18
13.01    Change of Control	18
ARTICLE 14 TERM AND TERMINATION OF THE AGREEMENT	18
14.01    Term	18
14.02    Termination by Either Party	18
14.03    Payments on Termination and Survival of Certain Rights and Obligations	18
ARTICLE 15 ASSIGNMENT	19
ARTICLE 16 INDEMNIFICATION AND LIMITATION OF LIABILITY	19
16.01    Indemnification	19
16.02    Limitation on Payment of Expenses	19
ARTICLE 17 MISCELLANEOUS	20
17.01    Notices	20
17.02    Modification	20

Table of Contents

(continued)

Page

17.03    Severability	20
17.04    Construction	20
17.05    Entire Agreement	21
17.06    Waiver	21
17.07    Gender	21
17.08    Titles Not to Affect Interpretation	21
17.09    Counterparts	21

ADVISORY AGREEMENT

This Advisory Agreement, dated as of August 31, 2020 (the “Agreement”), is between Pacific Oak Residential Trust II, Inc., a Maryland corporation (the “Company”), and Pacific Oak Residential Advisors, LLC, a Delaware limited liability company (the “Advisor”).

W I T N E S S E T H

WHEREAS, the Company desires to avail itself of the knowledge, experience, sources of information, advice, assistance and certain facilities available to the Advisor and to have the Advisor undertake the duties and responsibilities set forth herein; and

WHEREAS, the Advisor is willing to undertake to render these services on the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto agree:

ARTICLE 1.

DEFINITIONS

The following defined terms used in this Agreement shall have the meanings specified below:

“Acquisition Expenses” means any and all expenses, excluding the fees payable to the Advisor pursuant to Section 8.01, incurred by the Company, the Partnership, the Advisor or any of their Affiliates in connection with the selection, acquisition or development of any Property, or other Residential Asset, whether or not acquired, as applicable, including, without limitation, legal fees and expenses, travel and communications expenses, costs of appraisals, due diligence, nonrefundable option payments on assets not acquired, accounting fees and expenses, title insurance premiums and miscellaneous expenses related to the selection, acquisition or development of any Property or other potential investment.

“Acquisition Fees” means the fee payable to the Advisor pursuant to Section 8.01 plus all other fees and commissions, excluding Acquisition Expenses, paid by any Person to any Person in connection with investing in Residential Assets. Included in the computation of such fees or commissions shall be any real estate commission, selection fee, nonrecurring management fee, loan fees or points or any fee of a similar nature, however designated. Excluded shall be development fees and construction fees paid to Persons not Affiliated with the Advisor in connection with the actual development and construction of a Property. The Advisor shall not be entitled to more than one Acquisition Fee for each Property.

“Advisor” means (i) Pacific Oak Residential Advisors, LLC, a Delaware limited liability company; or (ii) any successor advisor to the Company.

“Affiliate” or “Affiliated” shall have the meaning set forth in the Company’s Charter.

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“Appraised Value” means the value according to an appraisal made by an Independent Appraiser.

“Board of Directors” or “Board” means persons holding such office, as of any particular time, under the Charter, whether they be the Directors named therein or additional or successor Directors.

“Bylaws” means the bylaws of the Company, as amended from time to time.

“Cash from Financings” means the net cash proceeds realized by the Company from the financing of Properties or other Permitted Investments or from the refinancing of any Company indebtedness (after deduction of all expenses incurred in connection therewith).

“Cash from Sales and Settlements” means the net cash proceeds realized by the Company (i) from the sale, exchange or other disposition of any of its assets or any portion thereof after deduction of all expenses incurred in connection therewith and (ii) from the prepayment, maturity, workout, restructuring or other settlement of any Permitted Investment or portion thereof after deduction of all expenses incurred in connection therewith. In the case of a transaction described in clause (C) of the definition of “Sale” and (B) of the definition of “Settlement,” Cash from Sales and Settlements means the proceeds of any such transaction actually distributed to the Company from the Joint Venture. Cash from Sales and Settlements shall not include Cash from Financings.

“Cause” means (a) if the Company or the Advisor materially breaches any provision of this Agreement and the breach continues for a period of thirty days after written notice thereof by the non-breaching party specifying the breach and requesting that the breach be remedied in the thirty-day period or (b) a Change of Control.

“Change of Control” means the occurrence of any of the following: (i) any “person” (within the meaning of Section 13(d) of the Exchange Act, as enacted and in force on the date hereof) is or becomes the “beneficial owner” (as that term is defined in Rule 13d-3, as enacted and in force on the date hereof, under the Exchange Act) of securities of the Company representing more than 50% of the combined voting power of the Company’s securities then outstanding; (ii) there occurs a merger, consolidation or other reorganization of the Company which is not approved by the Board of Directors; (iii) there occurs a sale, exchange, transfer or other disposition of substantially all the assets of the Company to another Person, which disposition is not approved by the Board of Directors; or (iv) there occurs a contested proxy solicitation of the Stockholders that results in the contesting party electing candidates to a majority of the Board of Directors’ positions next up for election.

“Change of Control Termination Notice” shall have the meaning set forth in Section 13 of this Agreement.

“Charter” means the articles of incorporation of the Company under Title 2 of the Corporations and Associations Article of the Annotated Code of Maryland, as amended from time to time.

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“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.

“Common Shares” means the shares of common stock of the Company, par value $.01 per share.

“Company” means Pacific Oak Residential Trust II, Inc., a corporation organized under the laws of the State of Maryland.

“Cost of Residential Assets” means the sum of (i) with respect to Residential Assets wholly owned, directly or indirectly, by the Company, the amount actually paid for the purchase of each Residential Asset, including fees and expenses related thereto (but excluding any Acquisition Fees paid or payable to the Advisor or its affiliates under this Agreement), plus amounts funded or budgeted at the time of acquisition for capital expenditures for the development, construction or improvement of Residential Assets and (ii) in the case of Residential Assets owned by any Joint Venture in which the Company or the Partnership is, directly or indirectly, a co-venturer for capital expenditures the amount that is attributable to the Company’s investment in the Joint Venture. The Cost of Residential Assets is computed without regard to whether any portion of the cost is funded using debt financing secured by, or attributable to, the Residential Asset.

“Dealer Manager” means (i) Arete Wealth Management, or (ii) any successor dealer manager to the Company.

“Director” means a member of the Board of Directors of the Company.

“Distributions” means any distributions (which shall not include stock dividends) of money or other property by the Company to owners of Common Shares, including distributions that may constitute a return of capital for federal income tax purposes.

“GAAP” means accounting principles generally accepted in the United States.

“Gross Investment Amount” means the amount equal to the product of the total number of Common Shares purchased by Stockholders by the issue price, reduced by: (1) distributions designated by our board as being funded from the proceeds of sales, financing or refinancing of our assets; and (2) distributions of operating cash flow to the extent such distributions of operating cash flow provide a cumulative, non-compounded annual return in excess of the Stockholders’ 7% Return; and (3) the total number of shares repurchased by the Company (excluding the number of shares issued as stock dividends and subsequently repurchased by the Company) multiplied by the repurchase price.

“Group” shall mean a group of Persons within the meaning of Section 13(d)(3) of the Exchange Act of 1934, as amended.

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“Independent Appraiser” means an appraiser chosen by a registered appraisal management company meeting the requirements of that term as defined within the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended, and otherwise acceptable to the Board.

“Joint Venture” means any arrangement between the Company or any Affiliate including the Partnership on the one hand and a third party on the other hand pursuant to which the Company and the third party invest in Residential Assets or other Permitted Investments.

“Listed” or “Listing” shall have the meaning set forth in the Company’s Charter.

“Market Value” means: (i) in the case of a listing, the value of the outstanding Common Shares of the Company measured by taking the average closing price or the average of the bid and asked price, as the case may be, over a period of 30 days during which the Common Shares are traded, with such period beginning 180 days after listing.

“Merger” means any business combination, merger, reorganization or share exchange involving the Company or its subsidiaries into or with another corporation or other legal person (the “Acquiror”) and as a result of such transaction, less than a majority of the outstanding voting securities or other capital interests of the surviving, resulting or acquiring corporation or other legal person are owned in the aggregate by those who were Stockholders immediately prior to such transaction (other than the Acquiror or its Affiliates if they owned Common Shares immediately prior to such transaction).

“Merger Consideration Amount” means: (i) in the case of a Merger in which the consideration consists solely of cash, the total consideration to be received by holders of Common Shares outstanding immediately prior to the closing of the Merger; (ii) in the case of a Merger in which the consideration consists of securities traded on a national securities exchange, the product of (x) the number of shares of such securities received by the Stockholders at the closing of the Merger and (y) the market value of such securities, measured by taking the average closing price or the average of the bid and asked price, as the case may be, over a period of 20 consecutive days during which such securities are traded, with such 20-trading day period ending on the trading day prior to the closing date of the Merger; (iii) in the case of a Merger in which the consideration consist of securities that are not traded on a national securities exchange, the value ascribed to such securities in the merger agreement; and (iv) in the case of a Merger in which the consideration is some combination of that described above, the sum of clauses (i) through (iii), as applicable.

“MGCL” means Titles 1 through 3 of the Maryland General Corporation Law, as amended from time to time.

“Net Cash Flow” means for the applicable measuring period, the aggregate of the Company’s Operating Cash Flow plus any Cash Flow from Financings and Cash from Sales and Settlements, all without duplication.

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“Net Income” means, for any period, the total revenues applicable to such period, less the total expenses applicable to such period excluding additions to reserves for depreciation, bad debts or other similar non-cash reserves, all calculated in accordance with GAAP; provided, however, Net Income for purposes of calculating total allowable Operating Expenses (as defined herein) shall exclude the gain from the sale of the Company’s assets.

“Operating Cash Flow” means Operating Revenue minus the sum of: (i) Operating Expenses; (ii) all principal and interest payments on indebtedness and other sums paid to lenders; (iii) the expenses of raising capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such expenses and tax incurred in connection with the issuance, distribution, transfer, registration and Listing of the Common Shares;(iv) taxes; and (vi) Acquisition Fees, Acquisition Expenses, real estate commissions on the resale of Property, and other expenses connected with the acquisition, disposition, and ownership of Residential Assets or other Permitted Investments (other than commissions on the sale of assets other than Property), such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of Property.

“Operating Expenses” means all costs and expenses incurred by the Company, as determined under GAAP, that in any way are related to the operation of the Company or to Company business, including fees paid to the Advisor, but excluding: (i) all principal and interest payments on indebtedness and other sums paid to lenders; (ii) the expenses of raising capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such expenses and tax incurred in connection with the issuance, distribution, transfer, registration and Listing of the Common Shares; (iii) taxes; (iv) Acquisition Fees, Acquisition Expenses, real estate commissions on the resale of Property, and other expenses connected with the acquisition, disposition, and ownership of Residential Assets or other Permitted Investments (other than commissions on the sale of assets other than Property), such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of Property; and (v) non-cash expenditures such as depreciation, amortization and bad loan reserves.

“Operating Revenue” means the Company’s cash receipts from ownership or operation of: (i) Properties; (ii) SFH Interests; (iii) other Permitted Investments; and (iv) the Company’s direct or indirect proportionate share of any cash from any Joint Venture in which the Company or the Partnership is, directly or indirectly, a co-venturer; provided that Operating Revenue shall not include Cash from Sales and Settlements.

“Organization and Offering Expenses” means all expenses incurred by or on behalf of the Company in connection with any offering of its Common Shares, whether incurred before or after the date of this Agreement, which may include but are not limited to, total underwriting or placement agent fees, brokerage discounts and commissions (including fees of counsel to the underwriter or placement agent); any expense allowance granted by the Company to the underwriter or placement agent or any reimbursement of expenses of the underwriter, placement agent, Sponsor or Advisor by the Company; expenses for printing, engraving and mailing; charges of transfer agents, registrars, trustees, escrow holders, depositaries and experts; and

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expenses of qualification of the sale of the securities under federal and state laws, including taxes and fees and the fees and expenses of accountants and attorneys.

“Partnership” means PORT II OP LP, a Delaware limited partnership formed to own and operate investments in Residential Assets and other Permitted Investments on behalf of the Company.

“Permitted Investments” means all investments in which the Company may acquire an interest, either directly or indirectly, including Properties, SFH Interests and short-term investments acquired for purposes of cash management, and including ownership interests in a Joint Venture.

“Person” means an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c) (17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, or any government or any agency or political subdivision thereof, and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.

“Private Offering” or “Offering” means an offering of Common Shares or other equity securities pursuant to a Private Placement Memorandum, other than a private offering of shares under a distribution reinvestment plan.

“Private Placement Memorandum” means a confidential private placement memorandum, as supplemented, pursuant to which the Company offers its Common Shares or other equity securities.

“Property” or “Properties” means any real property or properties transferred or conveyed to the Company or the Partnership, either directly or indirectly, or any real property acquired, transferred or conveyed to a Joint Venture in which the Company is, directly or indirectly, a co-venturer.

“Property Manager” means an entity that has been retained to perform and carry out property-management services at one or more of the Properties.

“REIT” means a “real estate investment trust” under Sections 856 through 860 of the Code.

“Residential Assets” means Single Family Homes, and SFH Interests.

“Sale” means any transaction or series of related transactions whereby: (A) the Company, directly or indirectly, including through the Partnership sells, grants, transfers, conveys, or relinquishes its ownership of any Property, or other Permitted Investment or portion thereof, including the transfer of any Property that is the subject of a ground lease, and including any event with respect to any Property or other Permitted Investment that gives rise to a significant

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amount of insurance proceeds or condemnation awards, and including the issuance by one of the Company’s subsidiaries of any asset-backed securities or collateralized debt obligations as part of a securitization transaction; (B) the Company, directly or indirectly, including through the Partnership, sells, grants, transfers, conveys, or relinquishes its ownership of all or substantially all of the interest in any Joint Venture in which it is, directly or indirectly, a co-venturer; or (C) any Joint Venture in which the Company, directly or indirectly, through the Partnership is, a co-venturer, sells, grants, transfers, conveys, or relinquishes its ownership of any Property or other Permitted Investment or portion thereof, including any event with respect to any Property or other Permitted Investment that gives rise to insurance claims or condemnation awards, and including the issuance by the Joint Venture or one of its subsidiaries of any asset-backed securities or collateralized debt obligations as part of a securitization transaction.

“SEC” means the United States Securities and Exchange Commission.

“Single Family Homes” means a residential building consisting of one to four units.

“SFH Interest” means securities or other interests that generate cash flow derived from Single Family Homes such as mortgages secured by Single Family Homes, subordinated, mezzanine or bridge loans made to owners or investors in Single Family Homes and other related structured investments.

“Sponsor” means Pacific Oak Capital Advisors, LLC, a Delaware limited liability company.

“Stockholders” means the record holders of the Common Shares or any other series of class of stock of the Company.

“Stockholders’ 7% Return” means, as of any date, an aggregate amount equal to a 7% cumulative, non-compounded, annual return on Gross Investment Amount (calculated on a daily basis, decompounded assuming a three hundred sixty-five day year, and applied assuming a three hundred sixty-five day year. For purposes of calculating the Stockholders’ 7% Return, Gross Investment Amount shall be determined for each day during the period for which the Stockholders’ 7% Return is being calculated, including a daily adjustment to reflect shares repurchased or redeemed by the Company (excluding shares issued as stock dividends and subsequently repurchased by the Company).

“Subordinated Incentive in Net Cash Flows” means a fee payable to our Advisor equal to 20% of the excess Net Cash Flow for the applicable period, whether from continuing operations, net sales proceeds, net financing proceeds, or otherwise over an amount sufficient to pay stockholders: (1) a return of their Gross Investment Amount; and (2) the Stockholders’ 7% Return regardless of the source used to pay the stockholders 7% Return including distributions that may constitute a return of capital for federal income tax purposes.

“Subordinated Incentive Fee” means a fee payable to our Advisor upon a merger or listing of the Common Shares on a national securities exchange equal to 20% of the amount by which, in the case of a Listing, the Market Value of our outstanding Common Shares or in the

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case of a Merger, the Merger Consideration, without any adjustment for the incentive fee, plus the total of all distributions paid by us on the Common Shares from inception until the date Market Value or Merger Consideration is determined (regardless of the source used to fund the distributions and including distributions that may constitute a return of capital for federal income tax purposes) exceeds: (1) the Gross Investment Amount; plus (2) the amount of distributions necessary to pay the Stockholders’ 7% return through the date the Market Value or Merger Consideration is determined.

“Subordinated Incentive Fee Due on Termination” means a fee payable to our Advisor if the advisory agreement is terminated (unless terminated for “cause” by the Company), equal to: 20% of the amount, if any, by which the sum of (a) the value of our Properties and all other assets at the termination date as reflected on an appraisal made by an independent appraiser, less amounts of all third-party indebtedness or any other liability secured by our Properties or other third-party indebtedness, plus total distributions paid through the termination date plus (b) the amount necessary to pay the Stockholders’ 7% return through the termination date exceeds the Gross Investment Amount. No fee shall be due and payable if the Company terminates for “cause.”

“Termination Date” means the date of termination of the Agreement determined in accordance with Article 14 hereof.

ARTICLE 2.

APPOINTMENT

The Company hereby appoints the Advisor to serve as its advisor on the terms and conditions set forth in this Agreement, and the Advisor hereby accepts such appointment.

ARTICLE 3.

DUTIES OF THE ADVISOR

The Advisor is responsible for managing, operating, directing and supervising the operations and administration of the Company and its assets. The Advisor undertakes to use its reasonable best efforts to present the Company potential investment opportunities, to make investment decisions on behalf of the Company subject to the direction and oversight of the Board and Section 4.03 hereof, and to provide the Company with a continuing and suitable investment program consistent with the investment objectives and policies of the Company as determined and adopted from time to time by the Board. Subject to the limitations set forth in this Agreement, including Article 4 hereof, and the continuing and exclusive authority of the Board over the management of the Company, the Advisor shall, either directly or by engaging an Affiliate or third party, perform the following duties:

a.Organizational and Offering Services

. The Advisor shall perform all services related to the organization of the Company or any Offering, other than services that (i) are to be performed by the Dealer Manager, (ii) the

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Company elects to perform directly or (iii) would require the Advisor to register as a broker-dealer with the SEC or any state.

b.Acquisition Services

.

(i)Provide the Company with relevant market research and economic and statistical data in connection with the Company’s assets and investment objectives and policies;

(ii)Subject to Section 4 hereof and the investment objectives and policies of the Company: (a) locate, analyze and select potential investments; (b) structure and negotiate the terms and conditions of transactions pursuant to which investments in Residential Assets and other Permitted Investments will be made; (c) cause the Company to, directly or indirectly, acquire, Residential Assets and other Permitted Investments; (d) arrange for financing and refinancing and make other changes in the asset or capital structure of investments in Residential Assets and other Permitted Investments; and (e) enter into leases, service contracts and other agreements for Residential Assets and other Permitted Investments, or to engage an approved Property Manager;

(iii)Perform due diligence on prospective investments;

(iv)Prepare reports regarding prospective investments that include recommendations and supporting documentation necessary for the Directors to evaluate the proposed investments;

(v)Obtain reports (which may be prepared by the Advisor or its Affiliates), where appropriate, concerning the value of contemplated investments of the Company; and

(vi)Deliver to or maintain on behalf of the Company copies of all appraisals obtained in connection with the Company’s investments.

c.Asset Management Services

.

(i)Real Estate and Related Services:

(1)Investigate, select and, on behalf of the Company, engage and conduct business with (including enter contracts with) such Persons as the Advisor deems necessary to the proper performance of its obligations as set forth in this Agreement, including but not limited to consultants, accountants, lenders, technical advisors, attorneys, brokers, underwriters, corporate fiduciaries, escrow agents, depositaries, custodians, agents for collection, insurers, insurance agents, developers, construction companies, Property Managers and any and all Persons acting in any other capacity deemed by the Advisor necessary or desirable for the performance of any of the foregoing services;

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(2)Negotiate any borrowings that the Company, directly or indirectly, makes and to cause the Company or the underlying borrower to pay any amounts due on the borrowings;

(3)Monitor applicable markets and obtain reports (which may be prepared by the Advisor or its Affiliates) where appropriate, concerning the value of investments of the Company;

(4)Monitor and evaluate the performance of each asset of the Company and the Company’s overall portfolio of assets, provide daily management services to the Company and perform and supervise the various management and operational functions related to the Company’s investments;

(5)Formulate and oversee the implementation of strategies for the administration, promotion, management, operation, maintenance, improvement, financing and refinancing, marketing, leasing and disposition of Residential Assets and other Permitted Investments on an overall portfolio basis;

(6)Consult with the Company’s officers and the Board and assist the Board in formulating and implementing the Company’s financial policies, and, as necessary with respect to investment and borrowing opportunities presented to the Board, furnish the Board with advice and recommendations with respect to the making of investments consistent with the investment objectives and policies of the Company and in connection with any borrowings proposed to be undertaken by the Company;

(7)Oversee and evaluate the performance by the Property Manager(s) of their duties, including collection and proper deposits of rental payments and payment of Property expenses and maintenance;

(8)Conduct periodic on-site property visits to some or all (as the Advisor deems reasonably necessary) of the Properties to inspect the physical condition of the Properties;

(9)Review, analyze and comment upon the operating budgets, capital budgets and leasing plans prepared and submitted by each Property Manager and aggregate these property budgets into the Company’s overall budget;

(10)Coordinate and manage relationships between the Company and any co-venturers; and

(11)Consult with the Company’s officers and the Board and provide assistance with the evaluation and approval of potential asset disposition, sale and refinancing opportunities.

(ii)Accounting and Other Administrative Services:

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(1)Provide the day-to-day management of the Company and perform and supervise the various administrative functions reasonably necessary for the management of the Company;

(2)From time to time, or at any time reasonably requested by the Board, make reports to the Board on the Advisor’s performance of services to the Company under this Agreement;

(3)Provide or arrange for any administrative services and items, legal and other services, office space, office furnishings, personnel and other overhead items necessary and incidental to the Company’s business and operations;

(4)Provide financial and operational planning services;

(5)Maintain accounting and other record-keeping functions at the Company and investment levels, including information concerning the activities of the Company as shall be required to prepare and to file all periodic financial reports, tax returns and any other information required to be filed with the Internal Revenue Service and any other regulatory agency;

(6)Maintain and preserve all appropriate books and records of the Company;

(7)Provide services necessary to ensure the Company’s compliance with the rules and regulations REIT, including any asset, income and shareholder testing, and addressing with the Board, if necessary, any actions required to maintain REIT compliance;

(8)Provide tax and compliance services and coordinate with appropriate third parties, including the Company’s independent auditors and other consultants, on related tax matters;

(9)Provide the Company with all necessary cash management services;

(10)Manage and coordinate with the transfer agent payment of dividends and other distributions to Stockholders;

(11)Consult with the Company’s officers and the Board and assist the Board in evaluating and obtaining necessary insurance coverage based upon risk management determinations;

(12)Provide the Company’s officers and the Board with timely updates related to the overall regulatory environment affecting the Company, as well as managing compliance with such matters;

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(13)Consult with the Company’s officers and the Board relating to the corporate governance structure and appropriate policies and procedures related thereto;

(14)Perform all reporting, record keeping, internal controls and similar matters in a manner to allow the Company to comply with applicable law;

(15)Notify the Board of all proposed material transactions before they are completed; and

(16)Do all things necessary to assure its ability to render the services described in this Agreement.

ARTICLE 4.

AUTHORITY OF ADVISOR

a.General

. All rights and powers to manage and control the day-to-day business and affairs of the Company shall be vested in the Advisor. The Advisor shall have the power to delegate all or any part of its rights and powers to manage and control the business and affairs of the Company to such officers, employees, Affiliates, agents and representatives of the Advisor or the Company as it may deem appropriate. Any authority delegated by the Advisor to any other Person shall be subject to the limitations on the rights and powers of the Advisor specifically set forth in this Agreement or the Charter.

b.Powers of the Advisor

. Subject to the express limitations set forth in this Agreement and the continuing and exclusive authority of the Board over the management of the Company, the power to direct the management, operation and policies of the Company, including making, financing and disposing of investments, shall be vested in the Advisor, which shall have the power by itself and shall be authorized and empowered on behalf and in the name of the Company to carry out any and all of the objectives and purposes of the Company and to perform all acts and enter into and perform all contracts and other undertakings that it may in its sole discretion deem necessary, advisable or incidental thereto to perform its obligations under this Agreement.

c.Approval by the Board

. Notwithstanding the foregoing, the Advisor may not take any action on behalf of the Company without the prior approval of the Board or duly authorized committees thereof if the Charter or the MGCL require the prior approval of the Board. If the Board or a committee of the Board must approve a proposed investment, financing or disposition or chooses to do so, the Advisor will deliver to the Board or committee, as applicable, all documents required by it to evaluate such investment, financing or disposition.

d.Modification or Revocation of Authority of Advisor

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. The Board may, at any time upon the giving of notice to the Advisor, modify or revoke the authority or approvals set forth in Article 3 and this Article 4 hereof; provided, however, that such modification or revocation shall be effective upon receipt by the Advisor and shall not be applicable to investment transactions to which the Advisor has committed the Company prior to the date of receipt by the Advisor of such notification.

ARTICLE 5.

BANK ACCOUNTS

The Advisor may establish and maintain one or more bank accounts in its own name for the account of the Company or in the name of the Company and may collect and deposit into any such account or accounts, and disburse from any such account or accounts, any money on behalf of the Company, under such terms and conditions as the Board may approve, provided that no funds shall be commingled with the funds of the Advisor. The Advisor shall from time to time render appropriate accountings of such collections and payments to the Board and the independent auditors of the Company.

ARTICLE 6.

RECORDS AND FINANCIAL STATEMENTS

The Advisor, in the conduct of its responsibilities to the Company, shall maintain adequate and separate books and records for the Company’s operations, which shall be supported by sufficient documentation to ascertain that such books and records are properly and accurately recorded. Such books and records shall be the property of the Company and shall be available for inspection by the Board and by counsel, auditors and other authorized agents of the Company or persons with rights to inspect the books and records, at any time or from time to time during normal business hours. Such books and records shall include all information necessary to calculate and audit the fees paid or reimbursements made under this Agreement. The Advisor shall utilize procedures to attempt to ensure such control over accounting and financial transactions as is reasonably required to protect the Company’s assets from theft, error or fraudulent activity. All financial statements that the Advisor delivers to the Company for distribution to Stockholders shall be prepared on an accrual basis in accordance with GAAP, except for special financial reports that by their nature require a deviation from GAAP. The Advisor shall liaise with the Company’s officers and independent auditors and shall provide such officers and auditors with the reports and other information that the Company so requests.

ARTICLE 7.

LIMITATION ON ACTIVITIES

Notwithstanding any provision in this Agreement to the contrary, the Advisor shall not take any action that, in its sole judgment made in good faith, would (i) adversely affect the ability of the Company to qualify or continue to qualify as a REIT under the Code, (ii) subject the Company to regulation under the Investment Company Act of 1940, as amended, (iii) violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over the Company, its Common Shares or its other securities, (iv) require the

13

Advisor to register as a broker-dealer with the SEC or any state, or (v) violate the Charter or Bylaws.

ARTICLE 8.

FEES

a.Acquisition Fees

. As compensation for the investigation, selection, sourcing and acquisition or origination (by purchase, investment or exchange) of Residential Assets and other Permitted Investments, the Company shall pay the Advisor an Acquisition Fee for each such investment equal to 1.0% of the Cost of Residential Assets for any given transaction. With respect to the acquisition of any Residential Asset or other Permitted Investment through any Joint Venture in which the Company is, directly or indirectly, a partner, member or stockholder the Acquisition Fee payable to the Advisor shall equal 1.0% of each investment in the Joint Venture. The Advisor shall submit an invoice to the Company following the closing or closings of each investment. Generally, the Acquisition Fee payable to the Advisor shall be paid at the closing of the transaction upon receipt of the invoice by the Company. The Advisor may, in its discretion, waive or defer any Acquisition Fee, in whole or in part, in its sole discretion. All or any portion of the Acquisition Fees deferred shall not bear interest and may be paid by the Company in the Joint Venture in such other fiscal year as the Advisor shall determine.

b.Asset Management Fees

. As compensation for the services described in Section 3.03 the Company shall pay the Advisor an asset management fee equal to 0.25% quarterly (1% annually) on the carrying value of the Company’s total assets. For these purposes, the carrying value of the Company’s total assets shall be equal to the value reported on the Company’s balance sheet for the quarter most recently ended. The Advisor shall submit an invoice to the Company, accompanied by a computation of the fees for the applicable period. Generally, the Asset Management Fee payable to the Advisor shall be paid on the last day of such month, or the first business day following the last day of such month.

c.Incentive Fees

. Upon an event triggering the applicable fee below, and subject to the terms of each incentive fee, the Company shall pay (without duplication) to the Advisor the following Incentive Fees:

(i)Subordinated Incentive in Net Cash Flows;

(ii)Subordinated incentive fee; and

(iii)Subordinated Incentive Fee Due on Termination.

d.Calculation of Incentive Fees

14

. In all cases above the Stockholders’ 7% Return is calculated like simple interest on a daily basis in the manner described below. In making this calculation, Gross Investment Amount is determined for each day during the period for which the Stockholders’ 7% Return is being calculated, including a daily adjustment to reflect any shares repurchased by the Company. The Stockholders’ 7% Return is not based on the return provided to any individual stockholder but rather is based on total distributions paid on all outstanding shares relative to total Gross Investment Amount. Accordingly, it is not necessary for each stockholder to have received any minimum return in order for the Advisor to be paid any of the incentive fees described above in 8.03(i)-(iii).

ARTICLE 9.

EXPENSES

a.General

. In addition to the compensation paid to the Advisor pursuant to Article 8 hereof, the Company shall pay directly or reimburse the Advisor for up to $500,000 of Organization and Offering Expenses incurred by the Advisor or its Affiliates in connection with the Offering of $200 million of Common Shares commenced on August 31, 2020 and for all of the third-party expenses paid or incurred by the Advisor or its Affiliates on behalf of the Company or in connection with the services provided to the Company pursuant to this Agreement; provided, however, neither the Advisor nor any of its Affiliates shall be entitled to any reimbursement for any cost or expenses for salaries and benefits of persons employed by the Advisor or its Affiliates who perform services for the Company or in any way related to the overhead or operations of the Advisor or its Affiliates. The third-party expenses for which payment or reimburse will be allowed include, but are not limited to:

(i)Acquisition Expenses incurred in connection with the selection and acquisition of Residential Assets and other Permitted Investments, including expenses incurred related to assets pursued or considered but not ultimately acquired by the Company;

(ii)The cost of goods and services used by the Company and obtained from third parties other than the Advisor or its Affiliates;

(iii)Interest and other costs for borrowed money, including discounts, points and other similar fees;

(iv)Taxes and assessments on income or Properties, taxes as an expense of doing business and any other taxes otherwise imposed on the Company and its business, assets or income;

(v)All expenses, except expenses incurred by any Property Manager affiliated with the Advisor, of managing, improving, developing, operating and selling Residential Assets and other Permitted Investments owned, directly or indirectly, by the Company, as well as expenses of other transactions relating to the Residential Assets and other Permitted Investments;

15

(vi)All expenses in connection with payments to the Board and meetings of the Board and Stockholders;

(vii)Expenses of providing services for and maintaining communications with Stockholders, including the cost of preparing, printing, and mailing annual reports and other Stockholder reports, proxy statements and other reports required by governmental entities;

(viii)Out-of-pocket costs associated with insurance required in connection with the business of the Company or by its officers and directors;

(ix)Audit, accounting and legal fees, and other fees for professional services relating to the operations of the Company and all such fees incurred at the request, or on behalf of, the Board or any committee of the Board;

(x)Expenses for the Company to comply with all applicable laws, regulations and ordinances;

(xi)Expenses connected with payments of Distributions and stock dividends made or caused to be made by the Company to the Stockholders;

(xii)Expenses of merging, liquidating or dissolving the Company or of amending the Charter or the Bylaws; and

(xiii)All other third-party out-of-pocket costs incurred by the Advisor in performing its duties hereunder.

b.Timing of and Additional Limitations on Reimbursements

.

(i)Expenses incurred by the Advisor on behalf of the Company and reimbursable to the Advisor pursuant to this Article 9 shall be reimbursed upon delivery by the Advisor to the Board of a statement documenting the reimbursable expenses for the prior quarter; provided that the statement shall be delivered within 45 days after the end of each quarter.

ARTICLE 10.

VOTING AGREEMENT

The Advisor agrees that, with respect to any Common Shares now or hereinafter owned by it, the Advisor will not vote or consent on matters submitted to the Stockholders of the Company regarding (i) the removal of the Advisor or any Affiliate of the Advisor, (ii) any transaction between the Company and the Advisor or any of its Affiliates, (iii) the election of directors of the Company or (iv) the approval or termination of any contract with the Advisor or any Affiliate of the Advisor. This voting restriction shall survive until such time that the Advisor is both no longer serving as such and is no longer an Affiliate of the Company.

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ARTICLE 11.

RELATIONSHIP OF ADVISOR AND COMPANY;

OTHER ACTIVITIES OF THE ADVISOR

a.Relationship

. The Company and the Advisor are not partners or joint venturers with each other, and nothing in this Agreement shall be construed to make them partners or joint venturers. This Agreement shall not limit or restrict the right of any manager, director, officer, employee or equity holder of the Advisor or its Affiliates to engage in any other business or to render services of any kind to any other Person; provided that neither the Advisor nor its affiliates shall render services similar to those be rendered hereunder to any person or entity in the business of acquiring, owning and managing single family homes (which consist of one to four unit dwellings) and other single family residential assets including securities whose value is derived from or based on investments in single family homes. The Advisor may, with respect to any investment in which the Company is a participant, also render advice and service to each and every other participant therein. The Company acknowledges that the Advisor provides services, as sub-advisor, to Pacific Oak Residential Trust, Inc. The Advisor shall promptly disclose to the Board the existence of any additional condition or circumstance, existing or anticipated, of which it has knowledge that creates or could create a conflict of interest between the Advisor’s obligations to the Company and its obligations to or its interest in any other Person.

b.Time Commitment

. The Advisor shall, and shall cause its Affiliates and their respective employees, officers and agents to, devote to the Company such time as shall be reasonably necessary to conduct the business and affairs of the Company in an appropriate manner consistent with the terms of this Agreement. The Company acknowledges that the Advisor and its Affiliates and their respective employees, officers and agents may also engage in activities unrelated to the Company and may provide services to Persons other than the Company or any of its Affiliates.

ARTICLE 12.

THE PACIFIC OAK NAME

The Advisor and its Affiliates have a proprietary interest in the name “Pacific Oak.” The Advisor hereby grants to the Company a non-transferable, non-assignable, non-exclusive royalty-free right and license to use the name “Pacific Oak” during the term of this Agreement. Accordingly, and in recognition of this right, if at any time the Company ceases to retain the Advisor or one of its Affiliates to perform advisory services for the Company, the Company will, promptly after receipt of written request from the Advisor, cease to conduct business under or use the name “Pacific Oak” or any derivative thereof and the Company shall change its name and the names of any of its subsidiaries to a name that does not contain the name “Pacific Oak” or any other word or words that might, in the reasonable discretion of the Advisor, be susceptible of indication of some form of relationship between the Company and the Advisor or any of its Affiliates. At such time, the Company will also make any changes to any trademarks, service marks or other marks necessary to remove any references to the word “Pacific Oak.” Consistent

17

with the foregoing, it is specifically recognized that the Advisor or one or more of its Affiliates has in the past and may in the future organize, sponsor or otherwise permit to exist other investment vehicles (including vehicles for investment in real estate) and financial and service organizations having “Pacific Oak” as a part of their name, all without the need for any consent (and without the right to object thereto) by the Company.

ARTICLE 13.

CHANGE OF CONTROL

a.Change of Control

. Notwithstanding any other provisions of this Agreement to the contrary, in the event of a Change of Control of the Company, either the Company or the Advisor shall have the right, subject to the Company’s and the Partnership’s right to assign this Agreement in accordance with Section 15, upon sixty (60) days prior written notice to the other (the “Change of Control Termination Notice”), to terminate this Agreement. If the Advisor or the Company so elects to terminate this Agreement pursuant to this Section 13, the Termination Date shall be the date specified in the Change of Control Termination Notice, but in any event no later than thirty (30) days after the Change of Control of the Company.

ARTICLE 14.

TERM AND TERMINATION OF THE AGREEMENT

a.Term

. This Agreement shall be effective as of August 31, 2020 (with respect to the Company and its predecessors in interests) and shall have a term of five years and may be renewed for two successive five-year terms upon mutual consent of the parties. The Company will evaluate the performance of the Advisor before renewing this Agreement, and each such renewal shall be for a term of no more than five years. Any such renewal must be approved by the Board of Directors.

b.Termination by Either Party

. This Agreement may be terminated for Cause upon 60 days written notice by either the Company or the Advisor. The provisions of Articles 1, 10, 12, 14, 16 and 17 shall survive termination of this Agreement.

c.Payments on Termination and Survival of Certain Rights and Obligations

.

(i)After the Termination Date, the Advisor shall not be entitled to compensation for further services hereunder except it shall be entitled to receive from the Company within 30 days after the effective date of such termination (a) all unpaid reimbursements of expenses and all earned but unpaid fees payable to the Advisor prior to termination of this Agreement and (b) any incentive fees due under Section 8.03 hereunder Notwithstanding

18

the foregoing, no incentive fee will be paid if this Agreement is terminated for Cause by the Company in accordance with Section 14.02 following an event described in clause (a) of the definition of Cause.

(ii)The Advisor shall promptly upon termination:

(1)pay over to the Company all monies, if any, after deducting any accrued fees and reimbursement for its expenses to which it is then entitled;

(2)deliver to the Board a full accounting, including a statement showing all payments collected by it and a statement of all money held by it, covering the period following the date of the last accounting furnished to the Board;

(3)deliver to the Board all documents including, but not limited to those related to the Company’s assets then in the custody of the Advisor; and

(4)cooperate with the Company to provide an orderly transition of advisory functions.

ARTICLE 15.

ASSIGNMENT

This Agreement may be assigned by the Advisor to an Affiliate with the consent of the Board. This Agreement shall not be assigned by the Company without the consent of the Advisor, except in the case of an assignment by the Company to a corporation or other organization that is a successor to all of the assets, rights and obligations of the Company, in which case such successor organization shall be bound hereunder and by the terms of the assignment in the same manner as the Company is bound by this Agreement.

ARTICLE 16.

INDEMNIFICATION AND LIMITATION OF LIABILITY

a.Indemnification

. The Company shall, to the fullest extent to which the Company many indemnify its directors under the MGCL, indemnify, defend and hold harmless the Advisor and its Affiliates, including their respective officers, directors, partners, agents and employees, from all liability, claims, damages or losses arising in the performance of their duties hereunder, and related expenses, including reasonable attorneys’ fees, incurred by these persons or entities to the extent such liability, claims, damages or losses and related expenses are not fully reimbursed by insurance.

b.Limitation on Payment of Expenses

. The Company shall pay or reimburse the reasonable legal expenses and other costs incurred by the Advisor or its Affiliates in advance of the final disposition of a proceeding subject to the limitations and requirements set forth in the MGCL.

19

ARTICLE 17.

MISCELLANEOUS

a.Notices

. Any notice, report or other communication required or permitted to be given hereunder shall be in writing unless some other method of giving such notice, report or other communication is required by the Charter, the Bylaws or is accepted by the party to whom it is given, and shall be given by being delivered by hand or by overnight mail or other overnight delivery service to the addresses set forth herein:

To the Company or the Board:

Pacific Oak Residential Trust II, Inc.

3200 Park Center Drive

Suite 600

Costa Mesa, CA 92626

Email: mbender@pac-oak.com

Attention: Michael Bender

To the Advisor:

Pacific Oak Residential Advisors, LLC

11246 Alumni Way

Jacksonville, FL 32246

Email: jhealey@pac-oak.com; Mgough@pac-oak.com

Attention: Jeremy Healey and Michael Gough

Either party may at any time give notice in writing to the other party of a change in its address for the purposes of this Section 17.01.

b.Modification

. This Agreement shall not be changed, modified, terminated or discharged, in whole or in part, except by an instrument in writing signed by both parties hereto, or their respective successors or permitted assigns.

c.Severability

. The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.

d.Construction

20

. The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware.

e.Entire Agreement

. This Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing.

f.Waiver

. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

g.Gender

. Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.

h.Titles Not to Affect Interpretation

. The titles of Articles and Sections contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof.

i.Counterparts

. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.

[The remainder of this page is intentionally left blank. Signature page follows.]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written.

PACIFIC OAK RESIDENTIAL TRUST II, INC.
By:	/s/ T. Jeremiah Healey
Name:	T. Jeremiah Healey
Title:	President and Chief Executive Officer
PACIFIC OAK RESIDENTIAL ADVISORS, LLC
By:	/s/ T. Jeremiah Healey
Name:	T. Jeremiah Healey
Title:	Authorized Signatory

[Signature Page to Advisory Agreement]

EX-10.5

Exhibit 10.5

AMENDED AND RESTATED

ADVISORY AGREEMENT

between

PACIFIC OAK RESIDENTIAL TRUST II, INC.

and

PACIFIC OAK RESIDENTIAL ADVISORS, LLC

October 9, 2020

Table of Contents

Page

ARTICLE 1 DEFINITIONS	1
ARTICLE 2 APPOINTMENT	8
ARTICLE 3 DUTIES OF THE ADVISOR	8
3.01    Organizational and Offering Services	9
3.02    Acquisition Services	9
3.03    Asset Management Services	9
ARTICLE 4 AUTHORITY OF ADVISOR	12
4.01    General	12
4.02    Powers of the Advisor	12
4.03    Approval by the Board	13
4.04    Modification or Revocation of Authority of Advisor	13
ARTICLE 5 BANK ACCOUNTS	13
ARTICLE 6 RECORDS AND FINANCIAL STATEMENTS	13
ARTICLE 7 LIMITATION ON ACTIVITIES	14
ARTICLE 8 FEES	14
8.01    Acquisition Fees	14
8.02    Asset Management Fees	14
8.03    Incentive Fees	14
8.04    Calculation of Incentive Fees	15
ARTICLE 9 EXPENSES	15
9.01    General	15
9.02    Timing of and Additional Limitations on Reimbursements	16
ARTICLE 10 VOTING AGREEMENT	17
ARTICLE 11 RELATIONSHIP OF ADVISOR AND COMPANY;	17
OTHER ACTIVITIES OF THE ADVISOR	17
11.01    Relationship	17
11.02    Time Commitment	17
ARTICLE 12 THE PACIFIC OAK NAME	17
ARTICLE 13 CHANGE OF CONTROL	18
13.01    Change of Control	18
ARTICLE 14 TERM AND TERMINATION OF THE AGREEMENT	18
14.01    Term	18
14.02    Termination by Either Party	18
14.03    Payments on Termination and Survival of Certain Rights and Obligations	19
ARTICLE 15 ASSIGNMENT	19
ARTICLE 16 INDEMNIFICATION AND LIMITATION OF LIABILITY	19
16.01    Indemnification	19
16.02    Limitation on Payment of Expenses	20
ARTICLE 17 MISCELLANEOUS	20
17.01    Notices	20
17.02    Modification	21

Table of Contents

(continued)

Page

17.03    Severability	21
17.04    Construction	21
17.05    Entire Agreement	21
17.06    Waiver	21
17.07    Gender	21
17.08    Titles Not to Affect Interpretation	21
17.09    Counterparts	22

AMENDED AND RESTATED ADVISORY AGREEMENT

This Amended and Restated Advisory Agreement, dated as of October 9, 2020 (this “Agreement”), is between Pacific Oak Residential Trust II, Inc., a Maryland corporation (the “Company”), and Pacific Oak Residential Advisors, LLC, a Delaware limited liability company (the “Advisor”).

W I T N E S S E T H

WHEREAS, the Company desires to avail itself of the knowledge, experience, sources of information, advice, assistance and certain facilities available to the Advisor and to have the Advisor undertake the duties and responsibilities set forth herein; and

WHEREAS, the Advisor is willing to undertake to render these services on the terms and conditions hereinafter set forth.

WHEREAS, the parties entered into the Advisory Agreement on August 31, 2020 (the “Original Agreement”).

WHEREAS, the parties desire to amend and restate the Original Agreement in its entirety with this Agreement.

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto agree:

ARTICLE 1.

DEFINITIONS

The following defined terms used in this Agreement shall have the meanings specified below:

“Acquisition Expenses” means any and all expenses, excluding the fees payable to the Advisor pursuant to Section 8.01, incurred by the Company, the Partnership, the Advisor or any of their Affiliates in connection with the selection, acquisition or development of any Property, or other Residential Asset, whether or not acquired, as applicable, including, without limitation, legal fees and expenses, travel and communications expenses, costs of appraisals, due diligence, nonrefundable option payments on assets not acquired, accounting fees and expenses, title insurance premiums and miscellaneous expenses related to the selection, acquisition or development of any Property or other potential investment.

“Acquisition Fees” means the fee payable to the Advisor pursuant to Section 8.01 plus all other fees and commissions, excluding Acquisition Expenses, paid by any Person to any Person in connection with investing in Residential Assets. Included in the computation of such fees or commissions shall be any real estate commission, selection fee, nonrecurring management fee, loan fees or points or any fee of a similar nature, however designated. Excluded shall be development fees and construction fees paid to Persons not Affiliated with the Advisor in

1

connection with the actual development and construction of a Property. The Advisor shall not be entitled to more than one Acquisition Fee for each Property.

“Advisor” means (i) Pacific Oak Residential Advisors, LLC, a Delaware limited liability company; or (ii) any successor advisor to the Company.

“Affiliate” or “Affiliated” shall have the meaning set forth in the Company’s Charter.

“Appraised Value” means the value according to an appraisal made by an Independent Appraiser.

“Board of Directors” or “Board” means persons holding such office, as of any particular time, under the Charter, whether they be the Directors named therein or additional or successor Directors.

“Bylaws” means the bylaws of the Company, as amended from time to time.

“Cash from Financings” means the net cash proceeds realized by the Company from the financing of Properties or other Permitted Investments or from the refinancing of any Company indebtedness (after deduction of all expenses incurred in connection therewith).

“Cash from Sales and Settlements” means the net cash proceeds realized by the Company (i) from the sale, exchange or other disposition of any of its assets or any portion thereof after deduction of all expenses incurred in connection therewith and (ii) from the prepayment, maturity, workout, restructuring or other settlement of any Permitted Investment or portion thereof after deduction of all expenses incurred in connection therewith. In the case of a transaction described in clause (C) of the definition of “Sale” and (B) of the definition of “Settlement,” Cash from Sales and Settlements means the proceeds of any such transaction actually distributed to the Company from the Joint Venture. Cash from Sales and Settlements shall not include Cash from Financings.

“Cause” means (a) if the Company or the Advisor materially breaches any provision of this Agreement and the breach continues for a period of thirty days after written notice thereof by the non-breaching party specifying the breach and requesting that the breach be remedied in the thirty-day period or (b) a Change of Control.

“Change of Control” means the occurrence of any of the following: (i) any “person” (within the meaning of Section 13(d) of the Exchange Act, as enacted and in force on the date hereof) is or becomes the “beneficial owner” (as that term is defined in Rule 13d-3, as enacted and in force on the date hereof, under the Exchange Act) of securities of the Company representing more than 50% of the combined voting power of the Company’s securities then outstanding; (ii) there occurs a merger, consolidation or other reorganization of the Company which is not approved by the Board of Directors; (iii) there occurs a sale, exchange, transfer or other disposition of substantially all the assets of the Company to another Person, which disposition is not approved by the Board of Directors; or (iv) there occurs a contested proxy

2

solicitation of the Stockholders that results in the contesting party electing candidates to a majority of the Board of Directors’ positions next up for election.

“Change of Control Termination Notice” shall have the meaning set forth in Section 13 of this Agreement.

“Charter” means the articles of incorporation of the Company under Title 2 of the Corporations and Associations Article of the Annotated Code of Maryland, as amended from time to time.

“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.

“Common Shares” means the shares of common stock of the Company, par value $.01 per share.

“Company” means Pacific Oak Residential Trust II, Inc., a corporation organized under the laws of the State of Maryland.

“Cost of Residential Assets” means the sum of (i) with respect to Residential Assets wholly owned, directly or indirectly, by the Company, the amount actually paid for the purchase of each Residential Asset, including fees and expenses related thereto (but excluding any Acquisition Fees paid or payable to the Advisor or its affiliates under this Agreement), plus amounts funded or budgeted at the time of acquisition for capital expenditures for the development, construction or improvement of Residential Assets and (ii) in the case of Residential Assets owned by any Joint Venture in which the Company or the Partnership is, directly or indirectly, a co-venturer for capital expenditures the amount that is attributable to the Company’s investment in the Joint Venture. The Cost of Residential Assets is computed without regard to whether any portion of the cost is funded using debt financing secured by, or attributable to, the Residential Asset.

“Dealer Manager” means (i) Arete Wealth Management, or (ii) any successor dealer manager to the Company.

“Director” means a member of the Board of Directors of the Company.

“Distributions” means any distributions (which shall not include stock dividends) of money or other property by the Company to owners of Common Shares, including distributions that may constitute a return of capital for federal income tax purposes.

“GAAP” means accounting principles generally accepted in the United States.

“Gross Investment Amount” means the amount equal to the product of the total number of Common Shares purchased by Stockholders by the issue price, reduced by: (1) distributions designated by our board as being funded from the proceeds of sales, financing or refinancing of

3

our assets; and (2) distributions of operating cash flow to the extent such distributions of operating cash flow provide a cumulative, non-compounded annual return in excess of the Stockholders’ 7% Return; and (3) the total number of shares repurchased by the Company (excluding the number of shares issued as stock dividends and subsequently repurchased by the Company) multiplied by the repurchase price.

“Group” shall mean a group of Persons within the meaning of Section 13(d)(3) of the Exchange Act of 1934, as amended.

“Independent Appraiser” means an appraiser chosen by a registered appraisal management company meeting the requirements of that term as defined within the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended, and otherwise acceptable to the Board.

“Joint Venture” means any arrangement between the Company or any Affiliate including the Partnership on the one hand and a third party on the other hand pursuant to which the Company and the third party invest in Residential Assets or other Permitted Investments.

“Listed” or “Listing” shall have the meaning set forth in the Company’s Charter.

“Market Value” means: (i) in the case of a listing, the value of the outstanding Common Shares of the Company measured by taking the average closing price or the average of the bid and asked price, as the case may be, over a period of 30 days during which the Common Shares are traded, with such period beginning 180 days after listing.

“Merger” means any business combination, merger, reorganization or share exchange involving the Company or its subsidiaries into or with another corporation or other legal person (the “Acquiror”) and as a result of such transaction, less than a majority of the outstanding voting securities or other capital interests of the surviving, resulting or acquiring corporation or other legal person are owned in the aggregate by those who were Stockholders immediately prior to such transaction (other than the Acquiror or its Affiliates if they owned Common Shares immediately prior to such transaction).

“Merger Consideration Amount” means: (i) in the case of a Merger in which the consideration consists solely of cash, the total consideration to be received by holders of Common Shares outstanding immediately prior to the closing of the Merger; (ii) in the case of a Merger in which the consideration consists of securities traded on a national securities exchange, the product of (x) the number of shares of such securities received by the Stockholders at the closing of the Merger and (y) the market value of such securities, measured by taking the average closing price or the average of the bid and asked price, as the case may be, over a period of 20 consecutive days during which such securities are traded, with such 20-trading day period ending on the trading day prior to the closing date of the Merger; (iii) in the case of a Merger in which the consideration consist of securities that are not traded on a national securities exchange, the value ascribed to such securities in the merger agreement; and (iv) in the case of a Merger in which the consideration is some combination of that described above, the sum of clauses (i) through (iii), as applicable.

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“MGCL” means Titles 1 through 3 of the Maryland General Corporation Law, as amended from time to time.

“Net Cash Flow” means for the applicable measuring period, the aggregate of the Company’s Operating Cash Flow plus any Cash Flow from Financings and Cash from Sales and Settlements, all without duplication.

“Net Income” means, for any period, the total revenues applicable to such period, less the total expenses applicable to such period excluding additions to reserves for depreciation, bad debts or other similar non-cash reserves, all calculated in accordance with GAAP; provided, however, Net Income for purposes of calculating total allowable Operating Expenses (as defined herein) shall exclude the gain from the sale of the Company’s assets.

“Operating Cash Flow” means Operating Revenue minus the sum of: (i) Operating Expenses; (ii) all principal and interest payments on indebtedness and other sums paid to lenders; (iii) the expenses of raising capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such expenses and tax incurred in connection with the issuance, distribution, transfer, registration and Listing of the Common Shares;(iv) taxes; and (vi) Acquisition Fees, Acquisition Expenses, real estate commissions on the resale of Property, and other expenses connected with the acquisition, disposition, and ownership of Residential Assets or other Permitted Investments (other than commissions on the sale of assets other than Property), such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of Property.

“Operating Expenses” means all costs and expenses incurred by the Company, as determined under GAAP, that in any way are related to the operation of the Company or to Company business, including fees paid to the Advisor, but excluding: (i) all principal and interest payments on indebtedness and other sums paid to lenders; (ii) the expenses of raising capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such expenses and tax incurred in connection with the issuance, distribution, transfer, registration and Listing of the Common Shares; (iii) taxes; (iv) Acquisition Fees, Acquisition Expenses, real estate commissions on the resale of Property, and other expenses connected with the acquisition, disposition, and ownership of Residential Assets or other Permitted Investments (other than commissions on the sale of assets other than Property), such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of Property; and (v) non-cash expenditures such as depreciation, amortization and bad loan reserves.

“Operating Revenue” means the Company’s cash receipts from ownership or operation of: (i) Properties; (ii) SFH Interests; (iii) other Permitted Investments; and (iv) the Company’s direct or indirect proportionate share of any cash from any Joint Venture in which the Company or the Partnership is, directly or indirectly, a co-venturer; provided that Operating Revenue shall not include Cash from Sales and Settlements.

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“Organization and Offering Expenses” means all expenses incurred by or on behalf of the Company in connection with any offering of its Common Shares, whether incurred before or after the date of this Agreement, which may include but are not limited to, total underwriting or placement agent fees, brokerage discounts and commissions (including fees of counsel to the underwriter or placement agent); any expense allowance granted by the Company to the underwriter or placement agent or any reimbursement of expenses of the underwriter, placement agent, Sponsor or Advisor by the Company; legal fees; due diligence expenses; marketing expenses; expenses for printing, engraving and mailing; charges of transfer agents, registrars, trustees, escrow holders, depositaries and experts; and expenses of qualification of the sale of the securities under federal and state laws, including taxes and fees and the fees and expenses of accountants and attorneys.

“Other Organization and Offering Expenses” means all Organization and Offering Expenses excluding total underwriting or placement agent fees, brokerage discounts and commissions.

“Partnership” means PORT II OP LP, a Delaware limited partnership formed to own and operate investments in Residential Assets and other Permitted Investments on behalf of the Company.

“Permitted Investments” means all investments in which the Company may acquire an interest, either directly or indirectly, including Properties, SFH Interests and short-term investments acquired for purposes of cash management, and including ownership interests in a Joint Venture.

“Person” means an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c) (17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, or any government or any agency or political subdivision thereof, and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.

“Private Offering” or “Offering” means an offering of Common Shares or other equity securities pursuant to a Private Placement Memorandum, other than a private offering of shares under a distribution reinvestment plan.

“Private Placement Memorandum” means a confidential private placement memorandum, as amended or supplemented, pursuant to which the Company offers its Common Shares or other equity securities.

“Property” or “Properties” means any real property or properties transferred or conveyed to the Company or the Partnership, either directly or indirectly, or any real property acquired, transferred or conveyed to a Joint Venture in which the Company is, directly or indirectly, a co-venturer.

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“Property Manager” means an entity that has been retained to perform and carry out property-management services at one or more of the Properties.

“REIT” means a “real estate investment trust” under Sections 856 through 860 of the Code.

“Residential Assets” means Single Family Homes, and SFH Interests.

“Sale” means any transaction or series of related transactions whereby: (A) the Company, directly or indirectly, including through the Partnership sells, grants, transfers, conveys, or relinquishes its ownership of any Property, or other Permitted Investment or portion thereof, including the transfer of any Property that is the subject of a ground lease, and including any event with respect to any Property or other Permitted Investment that gives rise to a significant amount of insurance proceeds or condemnation awards, and including the issuance by one of the Company’s subsidiaries of any asset-backed securities or collateralized debt obligations as part of a securitization transaction; (B) the Company, directly or indirectly, including through the Partnership, sells, grants, transfers, conveys, or relinquishes its ownership of all or substantially all of the interest in any Joint Venture in which it is, directly or indirectly, a co-venturer; or (C) any Joint Venture in which the Company, directly or indirectly, through the Partnership is, a co-venturer, sells, grants, transfers, conveys, or relinquishes its ownership of any Property or other Permitted Investment or portion thereof, including any event with respect to any Property or other Permitted Investment that gives rise to insurance claims or condemnation awards, and including the issuance by the Joint Venture or one of its subsidiaries of any asset-backed securities or collateralized debt obligations as part of a securitization transaction.

“SEC” means the United States Securities and Exchange Commission.

“Single Family Homes” means a residential building consisting of one to four units.

“SFH Interest” means securities or other interests that generate cash flow derived from Single Family Homes such as mortgages secured by Single Family Homes, subordinated, mezzanine or bridge loans made to owners or investors in Single Family Homes and other related structured investments.

“Sponsor” means Pacific Oak Capital Advisors, LLC, a Delaware limited liability company.

“Stockholders” means the record holders of the Common Shares or any other series of class of stock of the Company.

“Stockholders’ 7% Return” means, as of any date, an aggregate amount equal to a 7% cumulative, non-compounded, annual return on Gross Investment Amount (calculated on a daily basis, decompounded assuming a three hundred sixty-five day year, and applied assuming a three hundred sixty-five day year. For purposes of calculating the Stockholders’ 7% Return, Gross Investment Amount shall be determined for each day during the period for which the Stockholders’ 7% Return is being calculated, including a daily adjustment to reflect shares

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repurchased or redeemed by the Company (excluding shares issued as stock dividends and subsequently repurchased by the Company).

“Subordinated Incentive in Net Cash Flows” means a fee payable to our Advisor equal to 20% of the excess Net Cash Flow for the applicable period, whether from continuing operations, net sales proceeds, net financing proceeds, or otherwise over an amount sufficient to pay stockholders: (1) a return of their Gross Investment Amount; and (2) the Stockholders’ 7% Return regardless of the source used to pay the stockholders 7% Return including distributions that may constitute a return of capital for federal income tax purposes.

“Subordinated Incentive Fee” means a fee payable to our Advisor upon a merger or listing of the Common Shares on a national securities exchange equal to 20% of the amount by which, in the case of a Listing, the Market Value of our outstanding Common Shares or in the case of a Merger, the Merger Consideration, without any adjustment for the incentive fee, plus the total of all distributions paid by us on the Common Shares from inception until the date Market Value or Merger Consideration is determined (regardless of the source used to fund the distributions and including distributions that may constitute a return of capital for federal income tax purposes) exceeds: (1) the Gross Investment Amount; plus (2) the amount of distributions necessary to pay the Stockholders’ 7% return through the date the Market Value or Merger Consideration is determined.

“Subordinated Incentive Fee Due on Termination” means a fee payable to our Advisor if the advisory agreement is terminated (unless terminated for “cause” by the Company), equal to: 20% of the amount, if any, by which the sum of (a) the value of our Properties and all other assets at the termination date as reflected on an appraisal made by an independent appraiser, less amounts of all third-party indebtedness or any other liability secured by our Properties or other third-party indebtedness, plus total distributions paid through the termination date plus (b) the amount necessary to pay the Stockholders’ 7% return through the termination date exceeds the Gross Investment Amount. No fee shall be due and payable if the Company terminates for “cause.”

“Termination Date” means the date of termination of the Agreement determined in accordance with Article 14 hereof.

ARTICLE 2.

APPOINTMENT

The Company hereby appoints the Advisor to serve as its advisor on the terms and conditions set forth in this Agreement, and the Advisor hereby accepts such appointment.

ARTICLE 3.

DUTIES OF THE ADVISOR

The Advisor is responsible for managing, operating, directing and supervising the operations and administration of the Company and its assets. The Advisor undertakes to use its reasonable best efforts to present the Company potential investment opportunities, to make

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investment decisions on behalf of the Company subject to the direction and oversight of the Board and Section 4.03 hereof, and to provide the Company with a continuing and suitable investment program consistent with the investment objectives and policies of the Company as determined and adopted from time to time by the Board. Subject to the limitations set forth in this Agreement, including Article 4 hereof, and the continuing and exclusive authority of the Board over the management of the Company, the Advisor shall, either directly or by engaging an Affiliate or third party, perform the following duties:

a.Organizational and Offering Services

. The Advisor shall perform all services related to the organization of the Company or any Offering, other than services that (i) are to be performed by the Dealer Manager, (ii) the Company elects to perform directly or (iii) would require the Advisor to register as a broker-dealer with the SEC or any state.

b.Acquisition Services

.

(i)Provide the Company with relevant market research and economic and statistical data in connection with the Company’s assets and investment objectives and policies;

(ii)Subject to Section 4 hereof and the investment objectives and policies of the Company: (a) locate, analyze and select potential investments; (b) structure and negotiate the terms and conditions of transactions pursuant to which investments in Residential Assets and other Permitted Investments will be made; (c) cause the Company to, directly or indirectly, acquire, Residential Assets and other Permitted Investments; (d) arrange for financing and refinancing and make other changes in the asset or capital structure of investments in Residential Assets and other Permitted Investments; and (e) enter into leases, service contracts and other agreements for Residential Assets and other Permitted Investments, or to engage an approved Property Manager;

(iii)Perform due diligence on prospective investments;

(iv)Prepare reports regarding prospective investments that include recommendations and supporting documentation necessary for the Directors to evaluate the proposed investments;

(v)Obtain reports (which may be prepared by the Advisor or its Affiliates), where appropriate, concerning the value of contemplated investments of the Company; and

(vi)Deliver to or maintain on behalf of the Company copies of all appraisals obtained in connection with the Company’s investments.

c.Asset Management Services

.

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(i)Real Estate and Related Services:

(1)Investigate, select and, on behalf of the Company, engage and conduct business with (including enter contracts with) such Persons as the Advisor deems necessary to the proper performance of its obligations as set forth in this Agreement, including but not limited to consultants, accountants, lenders, technical advisors, attorneys, brokers, underwriters, corporate fiduciaries, escrow agents, depositaries, custodians, agents for collection, insurers, insurance agents, developers, construction companies, Property Managers and any and all Persons acting in any other capacity deemed by the Advisor necessary or desirable for the performance of any of the foregoing services;

(2)Negotiate any borrowings that the Company, directly or indirectly, makes and to cause the Company or the underlying borrower to pay any amounts due on the borrowings;

(3)Monitor applicable markets and obtain reports (which may be prepared by the Advisor or its Affiliates) where appropriate, concerning the value of investments of the Company;

(4)Monitor and evaluate the performance of each asset of the Company and the Company’s overall portfolio of assets, provide daily management services to the Company and perform and supervise the various management and operational functions related to the Company’s investments;

(5)Formulate and oversee the implementation of strategies for the administration, promotion, management, operation, maintenance, improvement, financing and refinancing, marketing, leasing and disposition of Residential Assets and other Permitted Investments on an overall portfolio basis;

(6)Consult with the Company’s officers and the Board and assist the Board in formulating and implementing the Company’s financial policies, and, as necessary with respect to investment and borrowing opportunities presented to the Board, furnish the Board with advice and recommendations with respect to the making of investments consistent with the investment objectives and policies of the Company and in connection with any borrowings proposed to be undertaken by the Company;

(7)Oversee and evaluate the performance by the Property Manager(s) of their duties, including collection and proper deposits of rental payments and payment of Property expenses and maintenance;

(8)Conduct periodic on-site property visits to some or all (as the Advisor deems reasonably necessary) of the Properties to inspect the physical condition of the Properties;

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(9)Review, analyze and comment upon the operating budgets, capital budgets and leasing plans prepared and submitted by each Property Manager and aggregate these property budgets into the Company’s overall budget;

(10)Coordinate and manage relationships between the Company and any co-venturers; and

(11)Consult with the Company’s officers and the Board and provide assistance with the evaluation and approval of potential asset disposition, sale and refinancing opportunities.

(ii)Accounting and Other Administrative Services:

(1)Provide the day-to-day management of the Company and perform and supervise the various administrative functions reasonably necessary for the management of the Company;

(2)From time to time, or at any time reasonably requested by the Board, make reports to the Board on the Advisor’s performance of services to the Company under this Agreement;

(3)Provide or arrange for any administrative services and items, legal and other services, office space, office furnishings, personnel and other overhead items necessary and incidental to the Company’s business and operations;

(4)Provide financial and operational planning services;

(5)Maintain accounting and other record-keeping functions at the Company and investment levels, including information concerning the activities of the Company as shall be required to prepare and to file all periodic financial reports, tax returns and any other information required to be filed with the Internal Revenue Service and any other regulatory agency;

(6)Maintain and preserve all appropriate books and records of the Company;

(7)Provide services necessary to ensure the Company’s compliance with the rules and regulations REIT, including any asset, income and shareholder testing, and addressing with the Board, if necessary, any actions required to maintain REIT compliance;

(8)Provide tax and compliance services and coordinate with appropriate third parties, including the Company’s independent auditors and other consultants, on related tax matters;

(9)Provide the Company with all necessary cash management services;

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(10)Manage and coordinate with the transfer agent payment of dividends and other distributions to Stockholders;

(11)Consult with the Company’s officers and the Board and assist the Board in evaluating and obtaining necessary insurance coverage based upon risk management determinations;

(12)Provide the Company’s officers and the Board with timely updates related to the overall regulatory environment affecting the Company, as well as managing compliance with such matters;

(13)Consult with the Company’s officers and the Board relating to the corporate governance structure and appropriate policies and procedures related thereto;

(14)Perform all reporting, record keeping, internal controls and similar matters in a manner to allow the Company to comply with applicable law;

(15)Notify the Board of all proposed material transactions before they are completed; and

(16)Do all things necessary to assure its ability to render the services described in this Agreement.

ARTICLE 4.

AUTHORITY OF ADVISOR

a.General

. All rights and powers to manage and control the day-to-day business and affairs of the Company shall be vested in the Advisor. The Advisor shall have the power to delegate all or any part of its rights and powers to manage and control the business and affairs of the Company to such officers, employees, Affiliates, agents and representatives of the Advisor or the Company as it may deem appropriate. Any authority delegated by the Advisor to any other Person shall be subject to the limitations on the rights and powers of the Advisor specifically set forth in this Agreement or the Charter.

b.Powers of the Advisor

. Subject to the express limitations set forth in this Agreement and the continuing and exclusive authority of the Board over the management of the Company, the power to direct the management, operation and policies of the Company, including making, financing and disposing of investments, shall be vested in the Advisor, which shall have the power by itself and shall be authorized and empowered on behalf and in the name of the Company to carry out any and all of the objectives and purposes of the Company and to perform all acts and enter into and perform all contracts and other undertakings that it may in its sole discretion deem necessary, advisable or incidental thereto to perform its obligations under this Agreement.

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c.Approval by the Board

. Notwithstanding the foregoing, the Advisor may not take any action on behalf of the Company without the prior approval of the Board or duly authorized committees thereof if the Charter or the MGCL require the prior approval of the Board. If the Board or a committee of the Board must approve a proposed investment, financing or disposition or chooses to do so, the Advisor will deliver to the Board or committee, as applicable, all documents required by it to evaluate such investment, financing or disposition.

d.Modification or Revocation of Authority of Advisor

. The Board may, at any time upon the giving of notice to the Advisor, modify or revoke the authority or approvals set forth in Article 3 and this Article 4 hereof; provided, however, that such modification or revocation shall be effective upon receipt by the Advisor and shall not be applicable to investment transactions to which the Advisor has committed the Company prior to the date of receipt by the Advisor of such notification.

ARTICLE 5.

BANK ACCOUNTS

The Advisor may establish and maintain one or more bank accounts in its own name for the account of the Company or in the name of the Company and may collect and deposit into any such account or accounts, and disburse from any such account or accounts, any money on behalf of the Company, under such terms and conditions as the Board may approve, provided that no funds shall be commingled with the funds of the Advisor. The Advisor shall from time to time render appropriate accountings of such collections and payments to the Board and the independent auditors of the Company.

ARTICLE 6.

RECORDS AND FINANCIAL STATEMENTS

The Advisor, in the conduct of its responsibilities to the Company, shall maintain adequate and separate books and records for the Company’s operations, which shall be supported by sufficient documentation to ascertain that such books and records are properly and accurately recorded. Such books and records shall be the property of the Company and shall be available for inspection by the Board and by counsel, auditors and other authorized agents of the Company or persons with rights to inspect the books and records, at any time or from time to time during normal business hours. Such books and records shall include all information necessary to calculate and audit the fees paid or reimbursements made under this Agreement. The Advisor shall utilize procedures to attempt to ensure such control over accounting and financial transactions as is reasonably required to protect the Company’s assets from theft, error or fraudulent activity. All financial statements that the Advisor delivers to the Company for distribution to Stockholders shall be prepared on an accrual basis in accordance with GAAP, except for special financial reports that by their nature require a deviation from GAAP. The Advisor shall liaise with the Company’s officers and independent auditors and shall provide such officers and auditors with the reports and other information that the Company so requests.

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ARTICLE 7.

LIMITATION ON ACTIVITIES

Notwithstanding any provision in this Agreement to the contrary, the Advisor shall not take any action that, in its sole judgment made in good faith, would (i) adversely affect the ability of the Company to qualify or continue to qualify as a REIT under the Code, (ii) subject the Company to regulation under the Investment Company Act of 1940, as amended, (iii) violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over the Company, its Common Shares or its other securities, (iv) require the Advisor to register as a broker-dealer with the SEC or any state, or (v) violate the Charter or Bylaws.

ARTICLE 8.

FEES

a.Acquisition Fees

. As compensation for the investigation, selection, sourcing and acquisition or origination (by purchase, investment or exchange) of Residential Assets and other Permitted Investments, the Company shall pay the Advisor an Acquisition Fee for each such investment equal to 1.0% of the Cost of Residential Assets for any given transaction. With respect to the acquisition of any Residential Asset or other Permitted Investment through any Joint Venture in which the Company is, directly or indirectly, a partner, member or stockholder the Acquisition Fee payable to the Advisor shall equal 1.0% of each investment in the Joint Venture. The Advisor shall submit an invoice to the Company following the closing or closings of each investment. Generally, the Acquisition Fee payable to the Advisor shall be paid at the closing of the transaction upon receipt of the invoice by the Company. The Advisor may, in its discretion, waive or defer any Acquisition Fee, in whole or in part, in its sole discretion. All or any portion of the Acquisition Fees deferred shall not bear interest and may be paid by the Company in the Joint Venture in such other fiscal year as the Advisor shall determine.

b.Asset Management Fees

. As compensation for the services described in Section 3.03 the Company shall pay the Advisor an asset management fee equal to 0.25% quarterly (1% annually) on the carrying value of the Company’s total assets. For these purposes, the carrying value of the Company’s total assets shall be equal to the value reported on the Company’s balance sheet for the quarter most recently ended. The Advisor shall submit an invoice to the Company, accompanied by a computation of the fees for the applicable period. Generally, the Asset Management Fee payable to the Advisor shall be paid on the last day of such month, or the first business day following the last day of such month.

c.Incentive Fees

. Upon an event triggering the applicable fee below, and subject to the terms of each incentive fee, the Company shall pay (without duplication) to the Advisor the following Incentive Fees:

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(i)Subordinated Incentive in Net Cash Flows;

(ii)Subordinated incentive fee; and

(iii)Subordinated Incentive Fee Due on Termination.

d.Calculation of Incentive Fees

. In all cases above the Stockholders’ 7% Return is calculated like simple interest on a daily basis in the manner described below. In making this calculation, Gross Investment Amount is determined for each day during the period for which the Stockholders’ 7% Return is being calculated, including a daily adjustment to reflect any shares repurchased by the Company. The Stockholders’ 7% Return is not based on the return provided to any individual stockholder but rather is based on total distributions paid on all outstanding shares relative to total Gross Investment Amount. Accordingly, it is not necessary for each stockholder to have received any minimum return in order for the Advisor to be paid any of the incentive fees described above in 8.03(i)-(iii).

ARTICLE 9.

EXPENSES

a.General

. In addition to the compensation paid to the Advisor pursuant to Article 8 hereof, the Company shall pay directly or reimburse the Advisor for Other Organization and Offering Expenses incurred by the Advisor or its Affiliates in connection with the Offering in an amount equal to up to 0.5% of the gross offering proceeds from the offering of $200 million of Common Shares which commenced on August 31, 2020 and for all of the third-party expenses paid or incurred by the Advisor or its Affiliates on behalf of the Company or in connection with the services provided to the Company pursuant to this Agreement; provided, however, neither the Advisor nor any of its Affiliates shall be entitled to any reimbursement for any cost or expenses for salaries and benefits of persons employed by the Advisor or its Affiliates who perform services for the Company or in any way related to the overhead or operations of the Advisor or its Affiliates. The third-party expenses for which payment or reimburse will be allowed include, but are not limited to:

(i)Acquisition Expenses incurred in connection with the selection and acquisition of Residential Assets and other Permitted Investments, including expenses incurred related to assets pursued or considered but not ultimately acquired by the Company;

(ii)The cost of goods and services used by the Company and obtained from third parties other than the Advisor or its Affiliates;

(iii)Interest and other costs for borrowed money, including discounts, points and other similar fees;

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(iv)Taxes and assessments on income or Properties, taxes as an expense of doing business and any other taxes otherwise imposed on the Company and its business, assets or income;

(v)All expenses, except expenses incurred by any Property Manager affiliated with the Advisor, of managing, improving, developing, operating and selling Residential Assets and other Permitted Investments owned, directly or indirectly, by the Company, as well as expenses of other transactions relating to the Residential Assets and other Permitted Investments;

(vi)All expenses in connection with payments to the Board and meetings of the Board and Stockholders;

(vii)Expenses of providing services for and maintaining communications with Stockholders, including the cost of preparing, printing, and mailing annual reports and other Stockholder reports, proxy statements and other reports required by governmental entities;

(viii)Out-of-pocket costs associated with insurance required in connection with the business of the Company or by its officers and directors;

(ix)Audit, accounting and legal fees, and other fees for professional services relating to the operations of the Company and all such fees incurred at the request, or on behalf of, the Board or any committee of the Board;

(x)Expenses for the Company to comply with all applicable laws, regulations and ordinances;

(xi)Expenses connected with payments of Distributions and stock dividends made or caused to be made by the Company to the Stockholders;

(xii)Expenses of merging, liquidating or dissolving the Company or of amending the Charter or the Bylaws; and

(xiii)All other third-party out-of-pocket costs incurred by the Advisor in performing its duties hereunder.

b.Timing of and Additional Limitations on Reimbursements

.

(i)Expenses incurred by the Advisor on behalf of the Company and reimbursable to the Advisor pursuant to this Article 9 shall be reimbursed upon delivery by the Advisor to the Board of a statement documenting the reimbursable expenses for the prior quarter; provided that the statement shall be delivered within 45 days after the end of each quarter.

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ARTICLE 10.

VOTING AGREEMENT

The Advisor agrees that, with respect to any Common Shares now or hereinafter owned by it, the Advisor will not vote or consent on matters submitted to the Stockholders of the Company regarding (i) the removal of the Advisor or any Affiliate of the Advisor, (ii) any transaction between the Company and the Advisor or any of its Affiliates, (iii) the election of directors of the Company or (iv) the approval or termination of any contract with the Advisor or any Affiliate of the Advisor. This voting restriction shall survive until such time that the Advisor is both no longer serving as such and is no longer an Affiliate of the Company.

ARTICLE 11.

RELATIONSHIP OF ADVISOR AND COMPANY;

OTHER ACTIVITIES OF THE ADVISOR

a.Relationship

. The Company and the Advisor are not partners or joint venturers with each other, and nothing in this Agreement shall be construed to make them partners or joint venturers. This Agreement shall not limit or restrict the right of any manager, director, officer, employee or equity holder of the Advisor or its Affiliates to engage in any other business or to render services of any kind to any other Person; provided that neither the Advisor nor its affiliates shall render services similar to those be rendered hereunder to any person or entity in the business of acquiring, owning and managing single family homes (which consist of one to four unit dwellings) and other single family residential assets including securities whose value is derived from or based on investments in single family homes. The Advisor may, with respect to any investment in which the Company is a participant, also render advice and service to each and every other participant therein. The Company acknowledges that the Advisor provides services, as sub-advisor, to Pacific Oak Residential Trust, Inc. The Advisor shall promptly disclose to the Board the existence of any additional condition or circumstance, existing or anticipated, of which it has knowledge that creates or could create a conflict of interest between the Advisor’s obligations to the Company and its obligations to or its interest in any other Person.

b.Time Commitment

. The Advisor shall, and shall cause its Affiliates and their respective employees, officers and agents to, devote to the Company such time as shall be reasonably necessary to conduct the business and affairs of the Company in an appropriate manner consistent with the terms of this Agreement. The Company acknowledges that the Advisor and its Affiliates and their respective employees, officers and agents may also engage in activities unrelated to the Company and may provide services to Persons other than the Company or any of its Affiliates.

ARTICLE 12.

THE PACIFIC OAK NAME

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The Advisor and its Affiliates have a proprietary interest in the name “Pacific Oak.” The Advisor hereby grants to the Company a non-transferable, non-assignable, non-exclusive royalty-free right and license to use the name “Pacific Oak” during the term of this Agreement. Accordingly, and in recognition of this right, if at any time the Company ceases to retain the Advisor or one of its Affiliates to perform advisory services for the Company, the Company will, promptly after receipt of written request from the Advisor, cease to conduct business under or use the name “Pacific Oak” or any derivative thereof and the Company shall change its name and the names of any of its subsidiaries to a name that does not contain the name “Pacific Oak” or any other word or words that might, in the reasonable discretion of the Advisor, be susceptible of indication of some form of relationship between the Company and the Advisor or any of its Affiliates. At such time, the Company will also make any changes to any trademarks, service marks or other marks necessary to remove any references to the word “Pacific Oak.” Consistent with the foregoing, it is specifically recognized that the Advisor or one or more of its Affiliates has in the past and may in the future organize, sponsor or otherwise permit to exist other investment vehicles (including vehicles for investment in real estate) and financial and service organizations having “Pacific Oak” as a part of their name, all without the need for any consent (and without the right to object thereto) by the Company.

ARTICLE 13.

CHANGE OF CONTROL

a.Change of Control

. Notwithstanding any other provisions of this Agreement to the contrary, in the event of a Change of Control of the Company, either the Company or the Advisor shall have the right, subject to the Company’s and the Partnership’s right to assign this Agreement in accordance with Section 15, upon sixty (60) days prior written notice to the other (the “Change of Control Termination Notice”), to terminate this Agreement. If the Advisor or the Company so elects to terminate this Agreement pursuant to this Section 13, the Termination Date shall be the date specified in the Change of Control Termination Notice, but in any event no later than thirty (30) days after the Change of Control of the Company.

ARTICLE 14.

TERM AND TERMINATION OF THE AGREEMENT

a.Term

. The term of this Agreement began on August 31, 2020 (with respect to the Company and its predecessors in interests) and shall end on August 31, 2025 and may be renewed for two successive five-year terms upon mutual consent of the parties. The Company will evaluate the performance of the Advisor before renewing this Agreement, and each such renewal shall be for a term of no more than five years. Any such renewal must be approved by the Board of Directors.

b.Termination by Either Party

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. This Agreement may be terminated for Cause upon 60 days written notice by either the Company or the Advisor. The provisions of Articles 1, 10, 12, 14, 16 and 17 shall survive termination of this Agreement.

c.Payments on Termination and Survival of Certain Rights and Obligations

.

(i)After the Termination Date, the Advisor shall not be entitled to compensation for further services hereunder except it shall be entitled to receive from the Company within 30 days after the effective date of such termination (a) all unpaid reimbursements of expenses and all earned but unpaid fees payable to the Advisor prior to termination of this Agreement and (b) any incentive fees due under Section 8.03 hereunder Notwithstanding the foregoing, no incentive fee will be paid if this Agreement is terminated for Cause by the Company in accordance with Section 14.02 following an event described in clause (a) of the definition of Cause.

(ii)The Advisor shall promptly upon termination:

(1)pay over to the Company all monies, if any, after deducting any accrued fees and reimbursement for its expenses to which it is then entitled;

(2)deliver to the Board a full accounting, including a statement showing all payments collected by it and a statement of all money held by it, covering the period following the date of the last accounting furnished to the Board;

(3)deliver to the Board all documents including, but not limited to those related to the Company’s assets then in the custody of the Advisor; and

(4)cooperate with the Company to provide an orderly transition of advisory functions.

ARTICLE 15.

ASSIGNMENT

This Agreement may be assigned by the Advisor to an Affiliate with the consent of the Board. This Agreement shall not be assigned by the Company without the consent of the Advisor, except in the case of an assignment by the Company to a corporation or other organization that is a successor to all of the assets, rights and obligations of the Company, in which case such successor organization shall be bound hereunder and by the terms of the assignment in the same manner as the Company is bound by this Agreement.

ARTICLE 16.

INDEMNIFICATION AND LIMITATION OF LIABILITY

a.Indemnification

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. The Company shall, to the fullest extent to which the Company many indemnify its directors under the MGCL, indemnify, defend and hold harmless the Advisor and its Affiliates, including their respective officers, directors, partners, agents and employees, from all liability, claims, damages or losses arising in the performance of their duties hereunder, and related expenses, including reasonable attorneys’ fees, incurred by these persons or entities to the extent such liability, claims, damages or losses and related expenses are not fully reimbursed by insurance.

b.Limitation on Payment of Expenses

. The Company shall pay or reimburse the reasonable legal expenses and other costs incurred by the Advisor or its Affiliates in advance of the final disposition of a proceeding subject to the limitations and requirements set forth in the MGCL.

ARTICLE 17.

MISCELLANEOUS

a.Notices

. Any notice, report or other communication required or permitted to be given hereunder shall be in writing unless some other method of giving such notice, report or other communication is required by the Charter, the Bylaws or is accepted by the party to whom it is given, and shall be given by being delivered by hand or by overnight mail or other overnight delivery service to the addresses set forth herein:

To the Company or the Board:

Pacific Oak Residential Trust II, Inc.

3200 Park Center Drive

Suite 600

Costa Mesa, CA 92626

Email: mbender@pac-oak.com

Attention: Michael Bender

To the Advisor:

Pacific Oak Residential Advisors, LLC

11246 Alumni Way

Jacksonville, FL 32246

Email: jhealey@pac-oak.com; Mgough@pac-oak.com

Attention: Jeremy Healey and Michael Gough

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Either party may at any time give notice in writing to the other party of a change in its address for the purposes of this Section 17.01.

b.Modification

. This Agreement shall not be changed, modified, terminated or discharged, in whole or in part, except by an instrument in writing signed by both parties hereto, or their respective successors or permitted assigns.

c.Severability

. The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.

d.Construction

. The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware.

e.Entire Agreement

. This Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing.

f.Waiver

. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

g.Gender

. Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.

h.Titles Not to Affect Interpretation

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. The titles of Articles and Sections contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof.

i.Counterparts

. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.

[The remainder of this page is intentionally left blank. Signature page follows.]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written.

PACIFIC OAK RESIDENTIAL TRUST II, INC.
By:	/s/ T. Jeremiah Healey
Name:	T. Jeremiah Healey
Title:	President and Chief Executive Officer
PACIFIC OAK RESIDENTIAL ADVISORS, LLC
By:	/s/ T. Jeremiah Healey
Name:	T. Jeremiah Healey
Title:	Authorized Signatory

[Signature Page to Amended and Restated Advisory Agreement]

EX-10.6

Exhibit 10.6

MANAGEMENT AGREEMENT

This MANAGEMENT AGREEMENT (this “Agreement”), dated August 31, 2020, is made and entered into by and among Pacific Oak Residential Trust II, Inc., a Maryland corporation (“Owner”), and DMH Realty, LLC, a Florida limited liability company (“Manager”).

RECITALS

WHEREAS, upon the commencement of the equity offering contemplated by the Company, as well as the associated unit issuance contemplated by PORT II OP LP (“OP”), Owner will own or otherwise have the right to collect rents from, and contract for managerial services for, the single-family rental properties identified and described in Schedule A attached hereto, as adjusted by any properties acquired by Owner or subsidiaries of the OP in accordance with this Agreement, minus any properties sold by Owner or subsidiaries of the OP from time to time in accordance with this Agreement (collectively, the “Properties” and each, a “Property”); and

WHEREAS, the parties desire to enter into this Agreement, pursuant to which Manager will undertake certain management, acquisition, disposition and oversight functions with respect to the Properties as provided herein, subject to the limitations set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:

ARTICLE I

APPOINTMENT OF MANAGER

SECTION 1.01 Appointment of Manager. Owner hereby appoints Manager the sole and exclusive manager for the Properties upon the terms and conditions set forth herein. Manager hereby accepts such appointment on the terms and conditions set forth herein and shall furnish the services of its organization for the management of the Properties.

SECTION 1.02 Independent Contractor Status. Manager is hereby engaged to manage the Properties as an independent contractor.

ARTICLE II

TERM OF AGREEMENT

SECTION 2.01 Term of Agreement. This Agreement shall commence upon the Owner’s acquisition or control of the Properties (the “Effective Date”) and shall continue until the last day of the calendar month following the three year anniversary of the Effective Date (the “Term”). Upon

expiration of the Term, this Agreement will automatically renew for additional one-year periods until terminated as provided in Article VIII.

ARTICLE III

MANAGER’S DUTIES AND RESPONSIBILITIES

SECTION 3.01 General Scope. Manager shall devote such efforts as are consistent with the Standard of Care (as defined below) in managing, coordinating and supervising the ordinary and usual business and affairs pertaining to the identification, acquisition, operation, maintenance, leasing, licensing, rehabilitation, construction, disposition and management of the Properties and in compliance with the directives of Owner or the Asset Management Committee (as hereinafter defined), all pursuant to the terms, conditions and limitations of this Agreement. Manager shall have such responsibilities, and shall perform and take, or cause to be performed or taken, all such services and actions customarily taken by managing agents of property of similar nature, location, and character to that of the Properties consistent with the duties set forth in this Article III. Unless otherwise specifically provided in this Agreement, the written directives of Owner or the Asset Management Committee, the Approved Guidelines, or the Approved Operating Budget (collectively, the “Guiding Documents”), all services and actions that Manager is required or permitted to perform or take, or cause to be performed or taken in connection with the management of the Properties shall be performed or taken, as the case may be, on behalf of Owner and at Owner’s sole cost, expense, and risk. Manager’s authority is limited to performing the services set forth herein and the other Guiding Documents. Except as provided in the Guiding Documents, Manager shall have no authority (a) to execute any contract or agreement for or on behalf of Owner, (b) to provide additional services or modify existing services to tenants, or (c) to assume or create any obligation or liability or to make any representation, covenant, agreement or warranty for or on behalf of Owner.

SECTION 3.02 Standard of Care. Manager shall perform its duties and obligations hereunder in a commercially reasonable manner, consistent with the degree of care, skill, prudence, diligence and good faith that a property manager would use in managing other properties or performing similar services in the same geographic location (the “Standard of Care”). Without limiting the generality of the foregoing, Manager shall employ such efforts as are consistent with the Standard of Care to comply with all applicable requirements of federal, state and local laws, ordinances, rules, regulations and orders governing the leasing, promotion, management, use, operation, repair and maintenance of the Properties and the terms of any leases, mortgages or other agreements to which Properties are subject (collectively, the “Requirements” or individually a “Requirement”). Manager shall have in its employ at all times a sufficient number of capable employees to properly, adequately, safely and economically perform the duties hereunder. Further, Manager shall carry out its duties set forth herein in a manner that is consistent with Owner’s written instructions concerning its election to be taxed as a real estate investment trust under the Internal Revenue Code of 1986, as amended.

SECTION 3.03 Proposed Management Plans. Manager shall prepare and submit to Owner a proposed “Management Plan” and “Operating Budget,” which include an annual business plan and budget of proposed Operating Expenditures and capital expenditures with respect to the leasing, management, identification, acquisition, promotion, operation, disposition, and repair and maintenance of the Properties for each calendar year (the “Fiscal Year”); provided, that if the effective date of this

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Agreement occurs on a date other than the first day of a calendar year, or if the day on which the term of this Agreement expires or is terminated occurs on a day other than the last day of a calendar year, then the first and last Fiscal Years, as applicable, shall be prorated according to the number of days in the applicable Fiscal Year. The proposed Management Plans and Operating Budgets for Fiscal Year 2021 shall be submitted to Owner on or before November 15, 2020, and subsequent proposed Management Plans and Operating Budgets shall be submitted to Owner sixty (60) days prior to the beginning of the next Fiscal Year. Owner will review the proposed Management Plan and Operating Budget and will consult with Manager prior to the commencement of the forthcoming fiscal year in order to agree on an approved Management Plan and an approved Operating Budget (collectively, the “Approved Operating Budget”). Manager agrees to use such efforts as are consistent with the Standard of Care to ensure the actual costs of all Operating Expenditures and capital expenditures for the Properties shall not exceed the Approved Operating Budget, both in the aggregate and in respect of the specific budget category pertaining thereto (taking into account any variance allowances permitted in the Guiding Documents).

SECTION 3.04 Approved Operating Budget. The Approved Operating Budget shall constitute an authorization for Manager to establish rental rates and implement marketing strategies in accordance therewith. Manager shall supervise the preparation of all advertising layouts, brochures, and campaigns. Advertising and promotional materials shall be prepared in accordance with the Approved Operating Budget and full compliance with federal, state, and municipal fair housing laws, and Manager shall not use Owner’s name (or any Affiliate of Owner) without Owner’s express written approval.

SECTION 3.05 Acquisition and Disposition. Manager shall provide management, supervisory, administrative and logistical services and support to Owner and to Pacific Oak Residential Advisors LLC (the “Advisor”) consistent with the Standard of Care and the Guiding Documents in connection with (i) the identification and evaluation of Properties that might be suitable for purchase or other acquisition, (ii) the purchase or other acquisition of Properties, (iii) the financing or refinancing of Properties, and (iv) the sale or other disposition of Properties (including, without limitation, the structuring and negotiation of such transactions and the management of Owner’s dealings with brokers, appraisers, bankers and other professionals engaged by Owner in connection with such transactions). For purposes of clarification, Properties acquired by Owner or any subsidiaries of the OP will be deemed Properties under this Agreement, and Properties sold by Owner or any subsidiaries of the OP shall no longer be deemed Properties under this Agreement, in either case regardless of whether this Agreement or any exhibit or schedule is formally amended to reflect the new or former Properties.

SECTION 3.06 Leasing. Manager shall exercise such efforts as are consistent with the Standard of Care to obtain and keep residents and will cooperate with any broker in any reasonable manner likely to aid in filling any vacancy. Manager is authorized, subject to the Approved Operating Budget and consistent with the Standard of Care and Guiding Documents, to negotiate, prepare, and execute all leases on Owner’s approved lease form, including all renewals and extensions of leases and to cancel and modify existing leases, provided such actions are taken in accordance with all Requirements.

SECTION 3.07 Security Deposits. Manager is authorized to establish accounts on behalf of Owner for holding security deposits, if any, in accordance with the Approved Operating Budget

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and all Requirements, and shall collect and refund security deposits in accordance with the terms of each resident’s lease and as may be required by applicable law. If required by statute, Manager will deposit security deposits into a separate interest-bearing account and pay residents the interest earned on such deposit; otherwise, Manager will deposit security deposits into the Operating Account (as defined below). When Manager reasonably deems appropriate, Manager may offset resident charges with forfeited security deposit amounts and disburse any surplus security deposits from the Operating Account.

SECTION 3.08 Collection of Rents and Enforcement of Leases. Manager shall exercise such efforts as are consistent with the Standard of Care to promptly collect all rents and other charges for services provided in connection with the use of the Properties. All monies collected shall be promptly deposited into the Operating Account unless otherwise directed by Owner. When necessary and permissible by applicable Requirements, Manager is authorized to institute the following actions: (a) terminate tenancies; (b) sign and serve such notices as are deemed reasonably necessary or expedient by Manager; (c) institute and prosecute actions and evict residents; (d) recover rents and other sums due by legal proceedings; and (e) settle, compromise, and release such actions or suits, or reinstitute such tenancies. Attorney’s fees, filing fees, court costs, and other reasonable and necessary expenses incurred in connection with such actions and not recovered from residents shall be paid out of the Operating Account.

SECTION 3.09 Operating Expenditures.

(a)The term “Operating Expenditures” shall mean the aggregate of all actual, reasonable expenses incurred by Manager in accordance with this Agreement in connection with or arising from the identification, acquisition, financing, ownership, operation, management, repair, disposition, replacement, maintenance, and use or occupancy of the Properties including, without limitation, expenditures for: (i) license and permit fees, landowner association fees and assessments, and all other charges of any kind and nature by any governmental or public authority; (ii) management fees and any other reasonable expenses incurred by Manager consistent with the Guiding Documents; (iii) advertising and marketing expenses, and leasing fees and commissions; (iv) legal, accounting, engineering, and other professional and consulting fees and disbursements; (v) accounts payable to independent contractors providing labor, material, services and equipment to the Properties; (vi) premiums for insurance paid with respect to the Properties or the operations thereof; (vii) resident improvements and replacement and segregated reserves therefor; (viii) maintenance and repair of the Properties and all property and equipment used in connection with the operation thereof; (ix) renovation, improvement and development of the Properties and all property and equipment used in connection with the operation thereof; (x) refunds or security or other deposits to resident and contracting parties; (xi) funds reserved for contingent or contested liabilities, real estate taxes, insurance premiums, or other amounts not payable on a monthly basis; (xii) service contracts and public utility charges and assessments; (xiii) personnel administration charges and pre-employment screening and testing costs; (xiv) cost of third party revenue management programs; and (xv) costs of credit reports, bank charges, and like matters. Operating Expenditures may include (A) payroll, benefits and overhead expenses approved by Owner pursuant to the Approved Operating Budget, and (B) other costs and expenses of Manager’s or its Affiliates’ personnel engaged in any Additional Services; provided, however, that Manager shall be responsible for paying, and shall not be reimbursed for, its general administrative overhead costs and expenses,

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including without limitation the costs and expenses of renting its offices, employing its general administrative staff, purchasing or renting its office equipment and supplies, and maintaining phone and internet connections.

(b)For purposes of clarification, Manager may perform (or cause its Affiliates to perform) certain services (including without limitation services related to leasing, onboarding, fit-up, inspecting, renovation, improvement, development, construction, maintenance, repair, cleaning, painting or decorating any of the Properties) that could be contracted or subcontracted out to third parties hereunder, and, for performing such services, Manager (or its Affiliates) shall be entitled to reimbursement for the costs and expenses incurred performing such services (in addition to the Leasing Fees, Property Management Fee, and Shared Fees contemplated under Article VI) at rates commensurate with rates that would be payable to unrelated third parties if Manager engaged such unrelated third parties to perform such services (collectively, the “Additional Services”).

(c)The Approved Operating Budget shall constitute an authorization for Manager to expend the amounts approved as long as the expenses are incurred in connection with the operation and management of the Properties. Manager shall employ such efforts as are consistent with the Standard of Care to insure that the actual costs of maintaining and operating the Properties shall not exceed the Approved Operating Budget and significant year-to-date budget variances will be explained to Owner each month. In cases of emergency, Manager may make expenditures which exceed the aforementioned spending limit without prior approval, if such expenditures are necessary in the reasonable judgment of Manager to effectively protect the Properties or to prevent personal injury and is not in excess of $5,000 with respect to any individual Property or $250,000 collectively among all Properties during any calendar year. Manager will promptly notify Owner of any such emergency.

SECTION 3.10 Capital Expenditures. Any capital expenditures set forth in the Approved Operating Budget shall constitute an authorization for Manager to expend the amounts approved; however, any capital expenditure (excluding expenditures related to acquisition activities and rehabilitation of newly acquired Properties) over $15,000 per Property shall be awarded on the basis of competitive bidding, solicited in the following manner: (a) a minimum of two (2) written bids shall be obtained for each purchase where possible and practical to obtain such bids; (b) each bid will be solicited in a form so that uniformity will exist in the bid quotes; (c) Manager shall provide the Asset Management Committee with all bid responses accompanied by Manager’s recommendations as to the most acceptable bid; and (d) the Asset Management Committee shall be free to accept or reject any and all bids, provided that if the Asset Management Committee fails to do so within three (3) Business Days, Manager shall provide written notice to the Asset Management Committee that a failure to respond within one (1) Business Day shall constitute a deemed approval, and the Asset Management Committee fails to do so within such one (1) Business Day, such failure shall be deemed acceptance. Owner shall be responsible for capital expenditures set forth in the Approved Operating Budget and may pay some from its own resources or may authorize payment by Manager out of available funds in the Operating Account.

SECTION 3.11 Public Utility and Service Contracts. To the extent applicable, Manager shall negotiate and execute, in its capacity as Owner’s agent, contracts for water, electricity, gas, vermin or pest extermination, and any other services which are necessary to properly maintain the

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Properties. All required utility deposits will be the responsibility of Owner and each contract shall: (a) be in the name of, and expense of, Owner; and (b) include a provision for cancellation thereof by Owner or Manager.

SECTION 3.12 Reserved.

SECTION 3.13 Compliance with Regulations. Manager shall employ such efforts as are consistent with the Standard of Care to cause the Properties to be in compliance with all Requirements. Manager shall promptly give notice to the Asset Management Committee of Manager’s receipt of any oral or written notice of the existence of a material violation of any material Requirement or as otherwise required by the Standard of Care (a “Violation”), and Manager shall promptly cure at Owner’s expense any such Violation applicable to any Property, other than a Violation that is required to be cured by the respective tenants under the leases in effect at the Property. Expenses incurred in curing any Violation applicable to any Property may be paid from the Operating Account to the extent such expenses have been budgeted for in the Approved Operating Budget, and provided such expenses do not exceed $2,500 in any one instance. If (1) such expenses have not been so budgeted, (2) more than $2,500 is required to remedy a Violation, or (3) a Violation is one for which Owner may be subject to penalty, Manager shall immediately notify Owner of such Violation and advise Owner regarding a course of action for curing such Violation.

SECTION 3.14 Environmental Risk Management. Owner acknowledges and understands that Manager, except with respect to the obligations set forth in Section 3.05, is not responsible for (1) evaluating the presence or absence of hazardous or toxic substances, mold, waste, materials, electromagnetic field, radon, or radioactive materials upon, within, above, or beneath the Properties; (2) maintaining or evaluating compliance with environmental, hazardous or solid materials or waste laws, rules and regulations except for any operating and maintenance plan applicable to the Properties or in connection with Manager’s construction management duties; or (3) conducting or ensuring clean-up or remediation of existing or identified hazardous material spills or contamination unless the parties otherwise agree in writing or as expressly provided herein.

(a)Accordingly, Manager’s obligations to Owner with respect to the presence of Hazardous Materials and/or with the compliance and enforcement of Hazardous Materials Laws shall be subject to, conditioned upon, and limited by the following:

(i)Owner may from time to time, at Owner’s sole discretion and expense, obtain from an independent environmental consultant retained by Owner, an environmental assessment report on the Properties (or any of them) and may have such assessment report periodically updated.

(ii)Except as provided by Section 3.14(a)(iii), Section 3.05, or as otherwise expressly agreed in writing by the parties, Manager shall not be obligated to make an independent determination as to the presence or absence of Hazardous Materials, or whether the Properties are in violation or compliance with any Hazardous Materials Laws. Manager may seek, on Owner’s behalf and at Owner’s expense, to enforce a resident’s compliance with any Hazardous Materials Laws in accordance with an environmental consultant’s recommendations contained in any environmental assessment report. Manager shall not have any obligation to determine whether or not Owner, any

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residents, the Properties, or any portion thereof is in compliance with Hazardous Materials Laws; provided, Manager shall promptly notify Owner of any violations or potential violations of Hazardous Materials Laws observed on the Properties.

(iii)Manager shall be responsible for any Hazardous Materials which it uses or introduces to the Properties, including storage, containment, removal, or remediation as required by applicable law. To the extent Hazardous Materials (such as cleaning supplies or fuel) are required by Manager in the discharge of its duties under this Agreement, Manager shall only use and store quantities of such Hazardous Materials as are permitted under applicable law, and shall store, use and dispose of such Hazardous Materials in accordance with applicable laws. In connection with the foregoing, Manager hereby agrees to and shall indemnify, protect, defend, save, and hold harmless Owner, its principals and employees, and their respective successors and assigns from any claim, cause of action, liability, loss, demand, damages (including damages associated with any environmental law), fine, penalty, injury, cost, or expense (including attorney’s fees and expenses) arising out of or relating in any way to Manager’s violation of this Section 3.14(a)(iii).

(iv)Manager shall not be responsible for the abatement, clean-up or remediation of any spill of or contamination from any Hazardous Materials upon, beneath, or within all, or any portion, of the Properties (other than Hazardous Materials introduced, used or stored by Manager in violation of Section 3.14(a)(iii)), and the entire responsibility for such clean-up, abatement, or remediation shall lie with Owner and Owner’s environmental consultation. However, Manager shall cooperate with Owner in coordinating and supervising any abatement, clean-up, monitoring or remedial action on a Property site. Owner agrees that, with respect to any abatement, clean-up, or remedial action, Owner shall employ a qualified and licensed environmental clean-up company to undertake such clean-up and remediation, and Owner’s environmental consultant shall oversee the entire abatement, clean-up and remediation process and the obtaining of any required governmental approvals. If the clean-up or remediation is the responsibility of any resident of the Properties and/or Owner’s environmental consultant, Manager shall, on Owner’s behalf, require the resident to utilize qualified and licensed environmental clean-up companies and ensure that the clean-up and remediation is conducted to Owner’s satisfaction and in accordance with all Hazardous Materials Laws, governmental laws and approvals of which Manager is aware.

(v)In connection with the foregoing, Owner hereby agrees to and shall indemnify, protect, defend, save, and hold harmless Manager, its principals and employees, and their respective successors and assigns from any claim, cause of action, liability, loss, demand, damages (including damages associated with any environmental law), fine, penalty, injury, cost or expense (including attorney’s fees and expenses) arising out of or relating in any way to (1) the actions, or failure to act, by Manager in following Owner’s and Owner’s environmental consultant’s directions, (2) Owner’s failure or refusal to employ an environmental consultant with respect to the Properties, (3) the acts, omissions, or negligence of Owner, Owner’s environmental consultant, or the failure of such environmental consultant, to fulfill its obligations with respect to the Properties, (4) any violation of Hazardous Materials Laws applicable to the Properties,

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(5) the designation of Manager as an “operator” or the Properties as a “regulated facility” under Hazardous Materials Laws, or otherwise liable as a party under any Hazardous Materials Laws, or as a party in any claim for contribution, cost recovery or indemnity against Manager, or its insurer arising out of the foregoing, and (6) any condition or circumstance arising initially prior to the date of this Agreement (regardless of whether such condition or circumstance continues). The foregoing indemnity shall not apply to any claim, cause of action, liability, loss, demand, damages (including damages associated with any environmental law), fine, penalty, injury, cost, or expense (including attorney’s fees and expenses) resulting from an indemnified party’s sole or gross negligence or willful misconduct.

(b)The indemnities herein shall be immediately vested and shall survive the expiration or termination of this Agreement.

SECTION 3.15 Disclaimer of Certain Liabilities. Manager assumes no liability for any acts or omissions of Owner. Manager assumes no liability for any failure of, or default by, any tenant in the payment of any rent or other charges due Owner or in the performance of any obligations owed by any tenant to Owner pursuant to any lease or otherwise.

SECTION 3.16 No Requirement to Advance Funds. In no event shall Manager advance any monies on behalf of Owner, lend its credit to the Properties, or incur any liability in Manager’s own name.

SECTION 3.17 Representations. Manager represents and warrants to Owner as follows:

(a)Manager (i) is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Florida, (ii) has qualified or will qualify to do business as a foreign corporation and will remain so qualified, and is and will remain in good standing, in each jurisdiction where the character of its property or the nature of its activities makes such qualification necessary and in which failure to so qualify would have a material adverse effect upon Manager or its ability to perform its obligations hereunder, (iii) has and will have full limited liability company power to own its property, carry on its business as presently conducted, and to enter into and perform it obligations under this Agreement and (iv) has and will have all licenses or other governmental approvals necessary to perform it obligations hereunder.

(b)The execution and delivery by Manager of this Agreement has been duly authorized by all necessary limited liability company action on the part of Manager. Neither the execution and delivery of this Agreement, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof, will conflict with or result in a breach of, or constitute a default under, any of the provisions of any law, governmental rule, regulation, judgment, decree or order binding on Manager or its property or the certificate of formation of Manager, or any of the provisions of any indenture, mortgage, contract or other instrument to which Manager is a party or by which it is bound or result in the creation or imposition of any lien, charge or encumbrance upon any of its property pursuant to the terms of any such indenture, mortgage, contract or other instrument.

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(c)The execution and delivery by Manager of this Agreement does not require the consent or approval of, the giving of notice to, the registration or filing with, or the taking of any other action in respect of any state, federal or other governmental authority or agency.

(d)This Agreement has been duly executed and delivered by Manager and, assuming due authorization, execution and delivery by Owner, constitutes a valid and binding obligation of Manager enforceable against it in accordance with its terms (subject to applicable bankruptcy and insolvency laws and other similar laws affecting the enforcement of the rights of creditors generally and general principles of equity).

(e)There are no actions, suits, or proceedings pending, or, to the knowledge of Manager, threatened or likely to be asserted against or affecting Manager before or by any court, administrative agency, arbitrator, or governmental body (i) with respect to any of the transactions contemplated by this Agreement or (ii) with respect to any other matter which in the judgment of Manager will be determined adversely to Manager or if determined adversely to Manager, will materially and adversely affect it or its business, assets, operations or condition, financial or otherwise, or adversely affect Manager’s ability to perform its obligations under this Agreement. Manager is not in default with respect to any order of any court, administrative agency, arbitrator or governmental body so as to materially and adversely affect the transactions contemplated by the above mentioned documents.

(f)No consents, approvals, waivers or notifications of members, creditors, lessors or other nongovernmental persons are required to be obtained by Manager in connection with the execution and delivery of this Agreement and the consummation of all the transactions herein contemplated.

(g)Manager is not (and no person or entity owning a beneficial interest equal to or greater than twenty percent (20%) in Manager shall be) subject to sanctions of the United States government or in violation of any federal, state, municipal or local laws, statutes, codes, ordinances, orders, decrees, rules or regulations (“Laws”) relating to terrorism or money laundering, including, without limitation, Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the “Executive Order”) and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56, the “Patriot Act”).

(h)Neither Manager nor any person or entity owning a beneficial interest equal to or greater than twenty percent (20%) in Manager is a “Prohibited Person,” which term is defined as: (i) a person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order; (ii) a person or entity owned or controlled by, or acting for or on behalf of, any person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order; (iii) a person or entity with whom Manager is prohibited from dealing or otherwise engaging in any transaction by any terrorism or anti-money laundering Law, including the Executive Order and the Patriot Act; (iv) a person or entity who commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order; or (v) a person or entity that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official

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website, http://www.treas.gov/ofac/tllusdn.pdf or any replacement website or other replacement official publication of such list.

(i)As of the Effective Date, Manager has no actual knowledge of any illegal activities relating to controlled substances on any Property.

(j)As of the Effective Date, to Manager’s actual knowledge, (i) each Property is being used exclusively as a residential rental property and (ii) no illegal activity is taking place at any Property.

SECTION 3.18 Asset Management Committee. Notwithstanding anything to the contrary herein, the duties and responsibilities of Manager set forth herein are subject in all respects to the authority of the asset management committee established by Owner (the “Asset Management Committee”) pursuant to the governing documents of Owner.

SECTION 3.19 Additional Covenants. Manager shall exercise such efforts as are consistent with the Standard of Care to comply with the terms and conditions of any additional requirements of Lender(s) to the Propertiesand agrees not to knowingly or intentionally take any action in material contravention thereof.

ARTICLE IV

BANKING AND FINANCIAL RECORDS

SECTION 4.01 Account Agency Agreement & Bank Accounts. Concurrent with the commencement of this Agreement, Owner and Manager shall enter into a joint account agreement at Owner’s platform bank or other bank acceptable to Owner (the “Operating Account”). Owner shall retain the ability to change the platform banks at its discretion with reasonable notice to Manager. It is understood that the bank account contemplated and authorized by the Account Agency Agreement shall be a non-interest bearing checking account.

SECTION 4.02 Financial Recordkeeping. Financial records include, but is not limited to, general ledgers for each account, journal entries, all supporting documentation and calculations used to create journal entries, trial balances, financial statements, bank statements, bank reconciliations, tax reports, accounts payable and receivable records, rent rolls, tenant information, portfolio analysis routinely created or created at the request of Owner, ad hoc reports requested by Owner from time to time and any other financial records and reports listed on Schedule B. At Owner’s cost, Manager shall maintain, at Manager’s premises and electronically in a centralized location designated and accessible by Owner, and maintain in a manner customary and consistent with generally accepted accounting principles, financial records based on Owner’s fiscal year-end. Manager shall not delete, destroy, relocate or otherwise make any historical record inaccessible to Owner without Owner’s prior written consent. Manager shall use the Company’s chart of accounts. Owner shall bear the expense of maintaining financial records electronically and the expense of storing historical financial records that are more than 36 months old.

SECTION 4.03 Internal Controls Environment. Manager shall continuously maintain an internal control environment that is customary and consistent with the size and complexity of Owner’s business. At Owner’s expense, Owner may hire consultants and other advisors to further

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develop and refine Manager’s internal controls. Manager agrees, at Owner’s expense, to implement all reasonable suggestions Owner makes to modify internal controls and agrees to periodic testing and remediation of any identified deficiencies. Manager also agrees to assist in an audit of the internal controls if requested by Owner, to be completed at Owner’s expense and in accordance with Section 4.05 herein.

SECTION 4.04 Required Financial Reports. Manager shall furnish as listed on Schedule B monthly reports of collections, disbursements, and other accounting matters, on a schedule agreed to by Owner and any Lender(s). To support the monthly financial reports, Manager shall maintain at Manager’s premises copies of the following: (a) bank statements, bank deposit slips, and cancelled checks; comprehensive bank reconciliations; (c) detailed cash receipt records; (d) summaries of adjusting journal entries, and (e) supporting documentation for payroll, payroll taxes, and employee benefits.

SECTION 4.05 Owner’s Right to Audit and Test. Manager, in the conduct of its responsibilities and obligations to Owner hereunder, shall maintain complete, accurate, and separate books and records for the Properties, the entries to which shall be supported by sufficient documentation to ascertain that said entries are properly and accurately recorded with regard to each Property. Such books and records shall be maintained in accordance with Owner's financial information requirements and shall at all times be the property of Owner. Manager shall maintain such books and records for a period of not less than 12 months after the date of expiration or earlier termination of this Agreement, except that upon any termination of this Agreement by Owner, Manager shall immediately deliver to Owner all such books and records. Owner reserves the right to conduct an examination of the books and records maintained by Manager for Owner or that relate to the calculation of the fees, expenses, or other compensation paid or payable pursuant to this Agreement, and to perform any and all audit tests (whether conducted by the external auditors or Owner’s internal audit team) relating to Manager’s activities, either at the Properties, or at the office of Manager; provided such examination and tests are related to those activities performed by Manager for Owner or the calculation of the fees, expenses, or other compensation paid or payable pursuant to this Agreement. Owner may also conduct periodic testing of Manager’s internal controls. Owner shall give Manager not less than forty-eight (48) hours written notice of any such audit, examination or testing. Any and all such audits conducted either by Owner’s employees or appointees will be at the sole expense of Owner.

SECTION 4.06 Disbursement of Deposits. If requested by Owner, Manager shall remit to Owner with the monthly financial report all unexpended operating funds, except for a reserve of contingencies, as provided in Section 5.01 below, which shall remain in the Operating Account.

ARTICLE V

OWNER’S DUTIES AND RESPONSIBILITIES

SECTION 5.01 Initial Deposits and Contingency Reserves. Immediately upon the commencement of this Agreement, Owner shall deposit into the Operating Account the following amounts: (a) the sum of $100,000 to be deposited in the Operating Account as an initial deposit representing the estimated disbursements for Operating Expenditures to be made in the first month following the commencement of this Agreement. Furthermore, Owner authorizes Manager to maintain a contingency reserve of $250 per Property at all times in the Operating Account to enable

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Manager to pay obligations of Owner under this Agreement as they become due in accordance with this Agreement and the Approved Operating Budget.

SECTION 5.02 Insufficient Operating Funds. If a cash flow deficit can be anticipated in the next budgeted month of operations, Owner agrees to, prior to the commencement of the next budgeted month, remit to Manager sufficient funds to cover the anticipated deficiency and fully fund the Operating Expenditures and approved contingency reserves. In the event that funds in the Operating Account become insufficient to cover all Operating Expenditures and approved contingency reserves, Owner agrees to, within three (3) days of notice, remit to Manager sufficient funds to cover the deficiency and replenish the contingency reserves. Notwithstanding any provision hereof to the contrary, Manager’s performance under this Agreement shall be excused and shall in no event be in default in the event there are insufficient funds in the Operating Account to perform its services described hereunder unless due to the gross negligence or willful misconduct of Manager.

SECTION 5.03 Manager’s Compensation. Owner agrees to pay Manager, as compensation for services rendered in managing and leasing the Properties in accordance with the terms of this Agreement, the compensation as specified in Article VI below. Manager’s compensation may be paid to itself by Manager, on behalf of Owner when due hereunder from the Operating Account.

SECTION 5.04 Manager’s Costs to be Reimbursed. Owner agrees to reimburse Manager for all direct costs incurred in managing and leasing the Properties in accordance with the terms of this Agreement and the Approved Operating Budget. Manager’s reimbursement may be paid to itself by Manager, on behalf of Owner, from the Operating Account as incurred by Manager.

SECTION 5.05 Representations. As of the Effective Date, Owner represents and warrants to Manager as follows:

(a)Owner is a corporation duly formed, validly existing and in good standing under the laws of the State of Maryland, (ii) has qualified or will qualify to do business as a foreign corporation and will remain so qualified, and is and will remain in good standing, in each jurisdiction where the character of its Properties or the nature of its activities makes such qualification necessary and in which failure to so qualify would have a material adverse effect upon Owner or its ability to perform its obligations hereunder, (iii) has and will have full corporate power to own the Properties, carry on its business as presently conducted, and to enter into and perform it obligations under this Agreement and (iv) has and will have all licenses or other governmental approvals necessary to perform it obligations hereunder.

(b)The execution and delivery by Owner of this Agreement has been duly authorized by all necessary corporate action on the part of Owner. Neither the execution and delivery of this Agreement, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof, will conflict with or result in a breach of, or constitute a default under, any of the provisions of any law, governmental rule, regulation, judgment, decree or order binding on Owner or its Properties or the certificate of formation of Owner, or any of the provisions of any indenture, mortgage, contract or other instrument to which Owner is a party or by which it is bound or result in the creation or imposition of any lien, charge or encumbrance upon any of the Properties pursuant to the terms of any such indenture, mortgage, contract or other instrument. The execution and delivery by Owner of this Agreement does not require the consent or approval

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of, the giving of notice to, the registration or filing with, or the taking of any other action in respect of any state, federal or other governmental authority or agency.

(c)This Agreement has been duly executed and delivered by Owner and, assuming due authorization, execution and delivery by Manager, constitutes a valid and binding obligation of Owner enforceable against it in accordance with its terms (subject to applicable bankruptcy and insolvency laws and other similar laws affecting the enforcement of the rights of creditors generally and general principles of equity).

(d)There are no actions, suits, or proceedings pending, or, to the knowledge of Owner, threatened or likely to be asserted against or affecting Owner before or by any court, administrative agency, arbitrator, or governmental body (i) with respect to any of the transactions contemplated by this Agreement or (ii) with respect to any other matter which in the judgment of Owner will be determined adversely to Owner or if determined adversely to Owner, will materially and adversely affect it or its business, assets, operations or condition, financial or otherwise, or adversely affect Owner’s ability to perform its obligations under this Agreement. Owner is not in default with respect to any order of any court, administrative agency, arbitrator or governmental body so as to materially and adversely affect the transactions contemplated by the above mentioned documents.

(e)No consents, approvals, waivers or notifications of members, creditors, lessors or other nongovernmental persons are required to be obtained by Owner in connection with the execution and delivery of this Agreement and the consummation of all the transactions herein contemplated.

(f)Owner is not (and no person or entity owning a beneficial interest equal to or greater than twenty percent (20%) in Owner shall be) subject to sanctions of the United States government or in violation of any Laws relating to terrorism or money laundering, including, without limitation, the Executive Order and the Patriot Act. Neither Owner nor any person or entity owning a beneficial interest equal to or greater than twenty percent (20%) in Owner is a Prohibited Person.

ARTICLE VI

COMPENSATION OF MANAGER

SECTION 6.01 Leasing Fees. Owner shall pay to Manager on a monthly basis in arrears, the following fees in connection with ongoing lease activity: (a) for all newly placed tenants, one-half of one month’s rent applicable to the initial rent period, and (b) for all renewal tenants, $100.

SECTION 6.02 Property Management Fee. Owner shall pay to Manager on a monthly basis in arrears, fees for services provided by Manager to manage each Property equal to 8% of the Collected Rental Revenues for all Properties up to $50,000,000, 7% of the Collected Rental Revenues for all Properties in excess of $50,000,000 up to $75,000,000, 6% of the Collected Rental Revenues for all Properties in excess of $75,000,000. (the “Property Management Fee”).

SECTION 6.03 Shared Fees. Owner shall pay to Manager on a monthly basis in arrears, the following portion of additional fees actually collected from any Properties: (a) from

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application fees collected, 100% to Manager, (b) from insufficient funds fees collected, 50% to Manager; (c) from any late fees collected, 50% to Manager, and (d) from any other fees, 50% to Manager. For the avoidance of doubt, Owner shall retain 100% of the following fees: (x) any move-in fees, and (y) any pet fees.

SECTION 6.04 Definitions. “Collected Rental Revenues” shall mean the amount of rental revenue actually collected for each Property per the terms of the lease pertaining to each Property (including lease breakage fees) or pursuant to any early termination buyouts, but excluding other income items, fees or revenue collected by Manager, including but not limited to: application fees, insufficient funds fees, late fees, move-in fees, pet fees, and security deposits (except to the extent applied to rent per the terms of the lease pertaining to any Property).

SECTION 6.05 Additional Services; No Other Compensation. The Leasing Fees, Property Management Fee, and Shared Fees are in addition to the reimbursements otherwise due to Manager under this Agreement, including for the Additional Services as described in Section 3.09. Manager expressly agrees that Manager shall not be entitled to receive any other compensation or other payments from Owner for services provided in respect of the Property (including, without limitation, for construction management, legal, tenant coordination, design, engineering, consulting or any other services performed by Manager or its Affiliates) unless expressly provided for in this Agreement or pursuant to a separate written agreement between Owner and Manager.

ARTICLE VII

INSURANCE AND INDEMNIFICATION

SECTION 7.01 Property and Liability Insurance. Manager shall, at Owner’s sole cost and expense, promptly obtain and keep in force at all times adequate insurance against physical damage (e.g., fire with extended coverage endorsement) and against liability for loss, damage, or injury to property or persons which might arise out of the occupancy, management, operation, or maintenance of the Properties and in accordance with the policies of Owner and/or Lender(s).

SECTION 7.02 Workers’ Compensation Insurance. Manager shall maintain workers’ compensation insurance covering all employees of Manager employed in, on, or about the Properties so as to provide statutory benefits required by state and federal laws.

SECTION 7.03 Fidelity Bond. Manager will maintain, at Manager’s expense, a comprehensive fidelity bond covering all employees of Manager who handle or are responsible for the safekeeping of any monies of Owner.

SECTION 7.04 Indemnification. Owner shall indemnify, defend, and hold harmless Manager and its agents and employees from and against all claims, liabilities, losses, damages, and/or expenses arising out of (i) Manager’s performance under this Agreement, or (ii) facts, occurrences, or matters first arising prior to the date of this Agreement. Owner, at its own cost and expense, shall defend any action or proceeding against Manager arising therefrom. Notwithstanding the foregoing, Owner shall not be required to indemnify Manager against damages or expenses suffered as a result of the gross negligence, willful misconduct, or fraud on the part of Manager, its agents or employees. Manager shall indemnify, defend and hold harmless Owner and its agents from and against all claims, liabilities, losses, damages and/or expenses arising out of the gross negligence, willful misconduct, or

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fraud on the part of Manager, its agents, or employees, and shall at its own cost and expense defend any action or proceeding against Owner arising therefrom.

ARTICLE VIII TERMINATION

SECTION 8.01 Termination. Notwithstanding the provisions of Article II above, this Agreement may also be terminated as follows:

(a)Automatically, in the event (i) Owner sells or otherwise disposes of all or substantially all of the Properties (which for purposes of clarification may include the sale of all or substantially all of the REIT’s or the OP’s direct or indirect ownership interests in Owner), or (ii) of an initial public offering of the REIT; or

(b)by Manager, in the event Owner defaults in the performance of any of its obligations under this Agreement and fails to cure such default within fifteen (15) days after its receipt from Manager of a notice of default (specifying in reasonable detail the nature of the default complained of); provided, however, with respect to any non- monetary default that cannot be cured within fifteen (15) days, Owner shall have such additional period as shall be reasonable, provided that Owner has commenced to cure such default within such fifteen (15) day period, has proceeded to prosecute such cure with due diligence, and such cure is completed within sixty (60) days after Owner’s receipt of the notice of default; or

(c)by Owner, in the event Manager defaults in the performance of any of its obligations under this Agreement and fails to cure such default within fifteen (15) days after its receipt from Owner of a notice of default (specifying in reasonable detail the nature of the default complained of); provided, however, that if such default cannot be cured within fifteen (15) days, then such additional period as shall be reasonable, provided that Manager has commenced to cure such default within such fifteen (15) day period, has proceeded to prosecute such cure with due diligence and such cure is completed within sixty (60) days after Manager’s receipt of the notice of default; or

(d)by either Owner or Manager, if a Bankruptcy Event occurs with respect to the other party, or if any involuntary bankruptcy petition shall be filed against the other party and is not dismissed within sixty (60) days of the date of such filing, or in the event the other party shall make an assignment for the benefit of creditors, or take advantage of any insolvency statute or similar law, in any such event, termination to become effective upon written notice to the other party; or

(e)by Owner, without cause upon not less than ninety (90) days prior written notice to Manager.

Any amounts accruing to Manager prior to such termination shall be due and payable upon termination of this Agreement; provided, however, that in the event this Agreement is terminated pursuant to Section 8.01(c), no further fees or expenses shall be payable to Manager thereafter, other than reimbursement of expenses properly documented and supported by invoices or receipts.

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SECTION 8.02 Termination Fee. If Owner terminates this Agreement pursuant to Section 8.01(a)(ii) or Section 8.01(e) before the end of the Term or any subsequent term year, then Owner shall be obligated to pay Manager an amount equal to three times the sum of the annual Property Management Fee for the trailing 12-month period. Any amounts accruing to Manager prior to such termination, shall be due and payable upon termination of this Agreement. To the extent funds are available, such sums shall be payable from the Operating Account. Any amount due in excess of the funds available from the Operating Account shall be paid by Owner to Manager upon demand. For the avoidance of doubt, Leaseing Fees, Shared Fees, and fees attributable to Additional Services are not considered in the calculation of the Termination Fee.

SECTION 8.03 Owner Responsible for Payments. Owner will be responsible for the direct handling and payment of invoices received after notice of termination. Upon notice of termination, Manager will submit to Owner written notice of all obligations payable with respect to the Properties through the termination date.

SECTION 8.04 Final Accounting. Within sixty (60) days after termination, Manager shall deliver to Owner: (a) a final accounting, reflecting the balance of income and expenses on the Properties as of the date of termination; (b) all records, contracts, leases, receipts, deposits, unpaid bills, and other papers or documents which pertain to the Properties; and (c) all remaining funds held by Manager with respect to the Properties. In consideration of performing the services contemplated under the preceding sentence during such post-termination period, provided this Agreement is not terminated pursuant to Section 8.01(c), Owner shall pay Manager an accounting fee equal to $75,000 per month.

SECTION 8.05 Manager’s Retention of Copies. Manager shall be entitled to retain copies of all documents referred to in Section 8.04.

SECTION 8.06 Survival of Obligations. All obligations of the parties hereunder, as to which performance is contemplated to occur after termination, shall survive termination of this Agreement. Without limiting the generality of the foregoing, all representations and warranties of the parties contained herein and all provisions of this Agreement that require Owner to have insured or to defend, reimburse, or indemnify Manager shall survive the termination of this Agreement; and if Manager is or becomes involved in any proceeding or litigation by reason of having been Owner’s agent, such provisions shall apply as if this Agreement were still in effect.

ARTICLE IX RESERVED

ARTICLE X

MANAGER RESTRUCTURING

SECTION 10.01 Subcontracting. Manager is authorized to subcontract or delegate any of its responsibilities hereunder to any of its Affiliates provided that such Affiliate executes a joinder to this Agreement, in form and substance satisfactory to Owner.

ARTICLE XI MISCELLANEOUS

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SECTION 11.01 Notices. All notices or other communications required or permitted by this Agreement shall be in writing and shall be deemed to have been duly received (i) if given by electronic mail transmitted delivery receipt requested, upon receipt of a delivery receipt, (ii) if given by certified or registered mail, return receipt requested, postage prepaid, three (3) Business Days after being deposited in the U.S. mails and (iii) if given by courier or other means, when received or personally delivered, and, in any such case, addressed as follows:

If to Owner:

Pacific Oak Residential Trust II, Inc.

11246 Alumni Way

Jacksonville, FL 32246

Attention: Jeremy Healey and Michael Gough

Email: jhealey@pac-oak.com and mgough@pac-oak.com

If to Manager:

DMH Realty LLC

11246 Alumni Way

Jacksonville, FL 32246

Attention: Mark Peta and Dan Umstead

Email: mpeta@pac-oak.com and

dumstead@pac-oak.com

or to such other addresses as may be specified by any such person to the other person pursuant to notice given by such person in accordance with the provisions of this Section 11.01.

SECTION 11.02 Governing Law; Waiver of Jury Trial. THE PROVISIONS OF THIS AGREEMENT SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA AS AT THE TIME IN EFFECT, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. THE PARTIES TO THIS AGREEMENT HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF FLORIDA, INCLUDING ANY APPELLATE COURTS THEREOF. THE PARTIES ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND, THEREFORE, EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

SECTION 11.03 Entire Agreement. This Agreement sets forth the final, entire agreement among the parties hereto with respect to the subject matter hereof and supersedes any and all prior

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commitments, agreements, representations, and understandings, whether written or oral, relating to the subject matter hereof.

SECTION 11.04 Amendment; Modification. This Agreement shall not be amended, supplemented, modified, terminated, or discharged, in whole or in part, except by an instrument in writing signed by the parties hereto, or their respective successors or assignees; provided that Owner shall deliver an updated Schedule A to Manager each month in accordance with Section 11.01.

SECTION 11.05 Severability. The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.

SECTION 11.06 Construction. This Agreement shall be construed as if jointly drafted by Owner and Manager. Headings for sections, subsections, and other parts of this Agreement are for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect.

SECTION 11.07 Counterparts. This Agreement and any amendments, waivers, consents, or supplements may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute but one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by facsimile, scanned pages or electronic signature shall be effective as delivery of a manually executed counterpart to this Agreement

SECTION 11.08 Transferability; Successors and Assigns. This Agreement is not transferable by Manager. The rights of Owner hereunder are transferable to any of its respective Affiliates upon no less than ten (10) days’ prior written notice to Manager. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

SECTION 11.09 Confidentiality. No party to this Agreement will disclose the terms of this Agreement to any third party without the consent of the other parties hereto, except as required by securities or other applicable laws. Notwithstanding the above provisions, each party may disclose the terms of this Agreement (i) in connection with the requirements of a public offering or securities filing, (ii) to accountants, banks, and financing sources (both debt and equity) and their advisors, (iii) in connection with the enforcement of this Agreement or rights under this Agreement, or (iv) in connection with a merger or acquisition (whether by an equity or asset transfer), or the like.

[Signature page follows]

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IN WITNESS WHEREOF, the parties have executed and delivered this MANAGEMENT AGREEMENT as of the date first written above.

Pacific Oak Residential Trust II, Inc. a Maryland corporation
By:	/s/ T. Jeremiah Healey
Name:	T. Jeremiah Healey
Title:	President and Chief Executive Officer
DMH REALTY, LLC a Florida limited liability company
By:	/s/ Michael S. Gough
Name:	Michael S. Gough
Title:	Manager

[Signature Page to Management Agreement]

Schedule A

The Properties

[To come]

Schedule B

Financial Record and Reports

(to be provided monthly unless otherwise noted)

1.Profit and Loss Statement (actual versus budgeted)

2.Rent Roll with Security Deposit

3.Leasing status report

4.Statement of Cash Flows

5.Monthly General Ledger detail

6.Capital Expenditure Report

7.Aged Receivable Report

8.Management Fee Calculation

9.Casualty reports (quarterly) detailing all damages and potential insurance claims

10.Liability reports (quarterly) detailing all current and potential legal claims from tenants, vendors, and third parties related to the Properties

11.Real estate tax analysis (quarterly)

Schedule C

Defined Terms

Capitalized terms used in this Agreement but not otherwise defined herein have the following definitions:

“Affiliate” of any Person means (i) any other individual or entity that is, directly or indirectly, (A) in Control of the applicable Person, (B) under the Control of the applicable Person or (C) under common Control with the applicable Person; (ii) any individual that is a director or officer of the applicable Person or (iii) any individual that is a director or officer of any entity described in clause

(i) of this definition.

“Bankruptcy Code” means the United States Bankruptcy Code, 11 U.S.C. Section 101 et seq., as amended from time to time.

“Bankruptcy Event” with respect to any Person, means the occurrence of any of the following:

a.Such Person voluntarily files for bankruptcy protection under the Bankruptcy Code.

b.Such Person voluntarily becomes subject to any reorganization, receivership, insolvency proceeding, or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights.

c.Any Property becomes an asset in a voluntary bankruptcy or becomes subject to any voluntary reorganization, receivership, insolvency proceeding, or other similar voluntary proceeding pursuant to any other federal or state law affecting debtor and creditor rights.

d.An order of relief is entered against such Person pursuant to the Bankruptcy Code or other federal or state law affecting debtor and creditor rights in any involuntary bankruptcy proceeding initiated or joined in by a Related Party. If such Person, any general partner of such person if such Person is a general partnership, or any Related Party has solicited creditors to initiate or participate in such a proceeding, regardless of whether any of the creditors solicited actually initiates or participates in the proceeding, then such proceeding will be considered as having been initiated by a Related Party.

e.An involuntary bankruptcy or other involuntary insolvency proceeding is commenced against such Person (by a party other than Owner) but only if such Person has failed to use commercially reasonable efforts to dismiss such proceeding or has consented to such proceeding. “Commercially reasonable efforts” will not require any direct or indirect interest holders in such Person to contribute or cause the contribution of additional capital to such Person.

f.If such Person is a general partnership, any of the following occur:

i.Any general partner of such Person voluntarily files for bankruptcy protection under the Bankruptcy Code.

ii.Any general partner of such Person voluntarily becomes subject to any reorganization, receivership, insolvency proceeding, or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights.

iii.An order of relief is entered against any general partner of such Person pursuant to the Bankruptcy Code or other federal or state law affecting debtor and creditor rights in any involuntary bankruptcy proceeding initiated or joined in by a Related Party.

(viii)    An involuntary bankruptcy or other involuntary insolvency proceeding is commenced against any general partner of such Person (by a party other than Owner) but only if such Person or such general partner of such Person has failed to use commercially reasonable efforts to dismiss such proceeding or has consented to such proceeding. “Commercially reasonable efforts” will not require any direct or indirect interest holders in such Person or such general partner of such Person to contribute or cause the contribution of additional capital to such Person.

“Business Day” means any day other than a Saturday, a Sunday, or any other day on which Owner or the national banking associations are not open for business.

“Control” means to possess, directly or indirectly through one or more intermediate entities, the power to direct or cause the direction of the management, operation, or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, including the power to elect a majority of the directors or trustees of a corporation or trust, as the case may be.

For example, a trustee of a trust is a Person that Controls that trust; a general partner in a limited partnership is a Person that Controls that limited partnership; a managing member or a non- member manager of a limited liability company is a Person that Controls that limited liability company; members of a limited liability company with a voting interest that permits them (individually or collectively) to direct or control the decisions of the limited liability company are Persons that Control that limited liability company; every general partner in a general partnership or member in a joint venture is a Person that Controls that entity; a shareholder of a corporation that holds 50% or more of the shares in the corporation (whether individually or in the aggregate with its Affiliates) is a Person that Controls that corporation.

“Governmental Authority” means any board, commission, department, agency or body of any municipal, county, state or federal governmental unit, or any subdivision of any of them, which has or acquires jurisdiction over any Property, or the use, operation or improvement of any Property, or over Manager.

“Hazardous Materials” means petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives; flammable materials; radioactive materials; polychlorinated biphenyls (PCBs) and compounds containing them; lead and lead- based paint; asbestos or asbestos containing materials in any form that is or could become friable; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which on any Property is prohibited by any Governmental Authority; any substance that requires

special handling and any other material or substance now or in the future that (i) is defined as a “hazardous substance,” “hazardous material,” “hazardous waste,” “toxic substance,” “toxic pollutant,” “contaminant,” or “pollutant” by or within the meaning of any Hazardous Materials Law, or (ii) is regulated in any way by or within the meaning of any Hazardous Materials Law.

“Hazardous Materials Law” and “Hazardous Materials Laws” means any and all federal, state and local laws, ordinances, regulations and standards, rules, policies and other governmental requirements, administrative rulings and court judgments and decrees in effect now or in the future, including all amendments, that relate to Hazardous Materials or the protection of human health or the environment and apply to Manager or to any Property. Hazardous Materials Laws include the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101 et seq., and their state analogs.

“Lender” means any lender providing a loan to Owner which is secured by a mortgage or deed of trust on any Property.

“Person” means any natural person, sole proprietorship, corporation, general partnership, limited partnership, limited liability company, limited liability partnership, limited liability limited partnership, joint venture, association, joint stock company, bank, trust, estate, unincorporated organization, any federal, state, county or municipal government (or any agency or political subdivision thereof), endowment fund or any other form of entity.

“Related Party” means all the following:

(i)Manager.

(ii)Any general partner of Manager if Manager is a general partnership.

(iii)Any Person that holds, directly or indirectly, any ownership interest (including any shareholder, member or partner) in Manager, any general partner of Manager if Manager is a general partnership, or any Person that has a right to manage Manager or any general partner of Manager if Manager is a general partnership.

(iv)Any Person in which Manager or any general partner of Manager if Manager is a general partnership.

(v)Any Person in which any partner, shareholder, or member of Manager or any general partner of Manager if Manager is a general partnership.

(vi)Any Person in which any Person holding an interest in Manager or any general partner of Manager if Manager is a general partnership.

(vii)Any creditor of Manager that is related by blood, marriage or adoption to Manager.

(viii)Any creditor of Manager or any general partner of Manager if Manager is a general partnership that is related to any partner, shareholder or member of, or any other Person holding an interest in, Manager or any general partner of Manager, if Manager is a general partnership.

EX-31.1

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 quarterly report on Form 10-Q 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:	November 13, 2020	By:	/S/ KEITH D. HALL
			Keith D. Hall
			Chief Executive Officer and Director
			(principal executive officer)

EX-31.2

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 quarterly report on Form 10-Q 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:	November 13, 2020	By:	/S/ MICHAEL A. BENDER
			Michael A. Bender
			Chief Financial Officer
			(principal financial officer)

EX-32.1

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 Quarterly Report on Form 10-Q of Pacific Oak Strategic Opportunity REIT, Inc. (the “Registrant”) for the quarter ended September 30, 2020, 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:	November 13, 2020	By:	/S/ KEITH D. HALL
			Keith D. Hall
			Chief Executive Officer and Director
			(principal executive officer)

EX-32.2

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 Quarterly Report on Form 10-Q of Pacific Oak Strategic Opportunity REIT, Inc. (the “Registrant”) for the quarter ended September 30, 2020, 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:	November 13, 2020	By:	/S/ MICHAEL A. BENDER
			Michael A. Bender
			Chief Financial Officer
			(principal financial officer)

XML

Cover Page - shares	9 Months Ended
	Sep. 30, 2020	Nov. 11, 2020
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2020
Document Transition Report	false
Entity File Number	000-54382
Entity Registrant Name	PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.
Entity Incorporation, State or Country Code	MD
Entity Tax Identification Number	26-3842535
Entity Address, Address Line One	11766 Wilshire Blvd., Suite 1670
Entity Address, City or Town	Los Angeles,
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	90025
City Area Code	424
Local Phone Number	208-8100
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		98,198,922
Entity Central Index Key	0001452936
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Assets
Real estate held for investment, net	$ 822,498	$ 759,479
Real estate equity securities	84,365	81,439
Total real estate and real estate-related investments, net	906,863	840,918
Cash and cash equivalents	77,617	76,492
Restricted cash	11,721	12,002
Investments in unconsolidated entities	69,686	78,276
Rents and other receivables, net	19,607	16,593
Above-market leases, net	2,732	2,973
Prepaid expenses and other assets	15,174	13,988
Total assets	1,103,400	1,041,242
Liabilities, mezzanine equity and equity
Notes and bonds payable, net	758,075	673,663
Accounts payable and accrued liabilities	15,579	21,329
Due to affiliates	6,449	1,635
Below-market leases, net	2,504	3,180
Other liabilities	19,745	19,801
Redeemable common stock payable	262	829
Restricted stock payable	15,506	16,320
Total liabilities	818,120	736,757
Commitments and contingencies (Note 15)
Mezzanine equity
Restricted stock	12,089	12,089
Noncontrolling Series A Cumulative Convertible Redeemable Preferred Stock	15,233	15,008
Redeemable noncontrolling interest	3,001	0
Equity
Preferred stock, $.01 par value; 10,000,000 shares authorized, no shares issued and outstanding	0	0
Common stock, $.01 par value; 1,000,000,000 shares authorized, 69,225,016 and 65,866,765 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively	693	659
Additional paid-in capital	553,129	553,170
Cumulative distributions and net income	(299,589)	(277,196)
Total Pacific Oak Strategic Opportunity REIT, Inc. stockholders’ equity	254,233	276,633
Noncontrolling interests	724	755
Total equity	254,957	277,388
Total liabilities, mezzanine equity and equity	$ 1,103,400	$ 1,041,242

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	1,000,000,000	1,000,000,000
Common stock, shares issued (in shares)	69,225,016	65,866,765
Common stock, shares outstanding (in shares)	69,225,016	65,866,765

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Revenues:
Rental income	$ 23,871	$ 21,669	$ 67,808	$ 59,879
Other operating income	888	1,317	2,722	4,219
Interest income from real estate debt securities	0	0	0	369
Dividend income from real estate equity securities	2,986	2,296	5,339	4,414
Total revenues	27,745	25,282	75,869	68,881
Expenses:
Operating, maintenance, and management costs	7,888	8,156	22,258	21,254
Real estate taxes and insurance	3,791	3,278	10,570	9,556
Asset management fees to affiliates	2,426	2,093	6,867	5,954
General and administrative expenses	1,960	2,038	6,302	5,586
Foreign currency transaction loss (gain), net	445	5,344	(12,338)	10,634
Depreciation and amortization	9,470	9,239	27,417	25,276
Interest expense	6,274	7,359	19,055	21,776
Total expenses	32,254	37,507	80,131	100,036
Other income (loss):
Gain from remeasurement of prior equity interest	2,009	0	2,009	0
Income from NIP	0	0	52	0
Equity in income (loss) of unconsolidated entities	519	(419)	1,512	6,677
Casualty-related gain	0	0	51	(506)
Other interest income	19	536	297	1,862
(Loss) gain on real estate equity securities	(6,527)	3,845	(21,620)	19,304
Change in subordinated performance fee due upon termination to affiliate	1,121	0	814	0
Gain on sale of real estate	0	10,559	0	18,128
Loss on extinguishment of debt	0	(6)	0	(861)
Total other (loss) income, net	(2,859)	14,515	(16,885)	44,604
Net (loss) income	(7,368)	2,290	(21,147)	13,449
Net loss (income) attributable to noncontrolling interests	43	(1,518)	115	(2,145)
Net loss attributable to redeemable noncontrolling interest	23	0	23	0
Preferred stock dividends	(191)	0	(788)	0
Net (loss) income attributable to common stockholders	$ (7,493)	$ 772	$ (21,797)	$ 11,304
Net (loss) income per common share, basic and diluted (in dollars per share)	$ (0.11)	$ 0.01	$ (0.32)	$ 0.17
Weighted-average number of common shares outstanding, basic and diluted (in shares)	69,225,212	66,326,646	68,179,046	66,564,532

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CONSOLIDATED STATEMENTS OF EQUITY - USD ($) $ in Thousands	Total	Total Stockholders' Equity	Common Stock	Additional Paid-in Capital	Cumulative Distributions and Net Income (Loss)	Noncontrolling Interests
Balance (in shares) at Dec. 31, 2018			66,822,861
Balance at Dec. 31, 2018	$ 293,964	$ 291,454	$ 668	$ 547,770	$ (256,984)	$ 2,510
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	13,449	11,304			11,304	2,145
Issuance of common stock (in shares)			84,248
Issuance of common stock	835	835	$ 1	834
Transfers from redeemable common stock	6,577	6,577		6,577
Redemptions of common stock (in shares)			(782,391)
Redemptions of common stock	(7,433)	(7,433)	$ (8)	(7,425)
Distributions declared	(1,721)	(1,721)			(1,721)
Other offering costs	(6)	(6)		(6)
Noncontrolling interests contributions	12	0				12
Distributions to noncontrolling interests	(3,793)	0				(3,793)
Balance (in shares) at Sep. 30, 2019			66,124,718
Balance at Sep. 30, 2019	301,884	301,010	$ 661	547,750	(247,401)	874
Balance (in shares) at Jun. 30, 2019			66,342,855
Balance at Jun. 30, 2019	302,152	300,827	$ 663	547,767	(247,603)	1,325
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	2,290	772			772	1,518
Issuance of common stock (in shares)			27,434
Issuance of common stock	271	271		271
Transfers from redeemable common stock	2,040	2,040		2,040
Redemptions of common stock (in shares)			(245,571)
Redemptions of common stock	(2,326)	(2,326)	$ (2)	(2,324)
Distributions declared	(570)	(570)			(570)
Other offering costs	(4)	(4)		(4)
Distributions to noncontrolling interests	(1,969)	0				(1,969)
Balance (in shares) at Sep. 30, 2019			66,124,718
Balance at Sep. 30, 2019	$ 301,884	301,010	$ 661	547,750	(247,401)	874
Balance (in shares) at Dec. 31, 2019	65,866,765		65,866,765
Balance at Dec. 31, 2019	$ 277,388	276,633	$ 659	553,170	(277,196)	755
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(21,912)	(21,797)			(21,797)	(115)
Issuance of common stock (in shares)			24,645
Issuance of common stock	262	262		262
Transfers from redeemable common stock	567	567		567
Redemptions of common stock (in shares)			(78,131)
Redemptions of common stock	(830)	(830)		(830)
Distributions declared	(596)	(596)			(596)
Other offering costs	(6)	(6)		(6)
Issuance of restricted stock (in shares)			3,411,737
Issuance of restricted stock	0	0	$ 34	(34)
Noncontrolling interests contributions	112	0				112
Distributions to noncontrolling interests	$ (28)	0				(28)
Balance (in shares) at Sep. 30, 2020	69,225,016		69,225,016
Balance at Sep. 30, 2020	$ 254,957	254,233	$ 693	553,129	(299,589)	724
Balance (in shares) at Jun. 30, 2020			69,225,617
Balance at Jun. 30, 2020	262,521	261,726	$ 693	553,129	(292,096)	795
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(7,536)	(7,493)			(7,493)	(43)
Transfers from redeemable common stock	6	6		6
Redemptions of common stock (in shares)			(601)
Redemptions of common stock	(6)	(6)		(6)
Distributions to noncontrolling interests	$ (28)	0				(28)
Balance (in shares) at Sep. 30, 2020	69,225,016		69,225,016
Balance at Sep. 30, 2020	$ 254,957	$ 254,233	$ 693	$ 553,129	$ (299,589)	$ 724

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash Flows from Operating Activities:
Net (loss) income	$ (21,147)	$ 13,449
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Change in subordinated performance fee due upon termination to affiliate	(814)	0
Casualty-related loss	0	506
Gain from remeasurement of prior equity interest	(2,009)	0
Equity in income of unconsolidated entities	(1,151)	(6,677)
Depreciation and amortization	27,417	25,276
Loss (gain) on real estate equity securities	21,620	(19,304)
Gain on sale of real estate	0	(18,128)
Loss on extinguishment of debt	0	861
Unrealized loss on interest rate caps	10	50
Deferred rent	(2,559)	(3,213)
Amortization of above- and below-market leases, net	(435)	(856)
Amortization of deferred financing costs	2,481	2,683
Accretion of interest income on real estate debt securities	0	(13)
Amortization of premium on bond and notes payable	14	(73)
Foreign currency transaction (gain) loss, net	(12,338)	10,634
Changes in assets and liabilities:
Rents and other receivables	(566)	(2,164)
Prepaid expenses and other assets	(2,286)	(4,527)
Accounts payable and accrued liabilities	(3,471)	(559)
Due to affiliates	182	8
Other liabilities	(142)	(97)
Net cash provided by (used in) operating activities	4,806	(2,144)
Cash Flows from Investing Activities:
Acquisitions of real estate, net of cash acquired	(19,034)	(90,266)
Improvements to real estate	(15,946)	(25,833)
Proceeds from sales of real estate, net	0	43,164
Insurance proceeds received for property damages	0	438
Contributions to unconsolidated entities	(1,708)	(5,050)
Distributions of capital from unconsolidated entities	1,225	8,051
Purchase of interest rate cap	(6)	(28)
Investment in real estate equity securities	(35,510)	(10,015)
Proceeds from the sale of real estate equity securities	10,964	24,076
Proceeds from principal repayment on real estate debt securities	0	7,750
Proceeds from disposition of foreign currency collars	14,125	0
Funding of development obligations	0	(134)
Net cash used in investing activities	(45,890)	(47,847)
Cash Flows from Financing Activities:
Proceeds from notes and bonds payable	104,143	84,268
Principal payments on notes and bonds payable	(57,611)	(73,250)
Payments of deferred financing costs	(2,438)	(1,121)
Payments to redeem common stock	(830)	(7,433)
Payment of prepaid other offering costs	(606)	(2)
Distributions paid	(334)	(886)
Preferred dividends paid	(563)	0
Noncontrolling interest contributions	112	12
Distributions to noncontrolling interests	(28)	(3,793)
Other financing proceeds, net	0	1,822
Net cash provided by financing activities	41,845	(383)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	83	2,367
Net increase (decrease) in cash, cash equivalents and restricted cash	844	(48,007)
Cash, cash equivalents and restricted cash, beginning of period	88,494	162,727
Cash, cash equivalents and restricted cash, end of period	$ 89,338	$ 114,720

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ORGANIZATION

9 Months Ended

Sep. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

ORGANIZATION

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 was externally managed by KBS Capital Advisors LLC (“KBS Capital Advisors”), an affiliate of the Company, pursuant to an advisory agreement the Company renewed with KBS Capital Advisors on October 7, 2019. KBS Capital Advisors conducted the Company’s operations and managed its portfolio of real estate and other real estate-related investments. On October 31, 2019, KBS Capital Advisors ceased to serve as the Company’s advisor or have any advisory responsibility to the Company immediately following the filing of the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2019 (filed November 8, 2019) with the Securities and Exchange Commission (the “SEC”). On November 1, 2019, the Company entered into an advisory agreement with Pacific Oak Capital Advisors, LLC (the “Advisor”), which was renewed on November 1, 2020. The advisory agreement is currently effective through November 1, 2021; however the Company or the Advisor may terminate the advisory agreement without cause or penalty upon providing 60 days’ written notice. The terms of the advisory agreement are consistent with those of the advisory agreement that was previously in effect with KBS Capital Advisors, except as discussed in Note 10.

On February 19, 2020, the Company, Pacific Oak SOR II, LLC, an indirect subsidiary of the Company (“Merger Sub”), and Pacific Oak Strategic Opportunity REIT II, Inc. (“POSOR II”) entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to the Merger Agreement, on October 5, 2020, POSOR II merged with and into Merger Sub (the “Merger”), with Merger Sub surviving the Merger (the “Surviving Entity”), such that following the Merger, the Surviving Entity continued as an indirect subsidiary of the Company. In accordance with the applicable provisions of the Maryland General Corporation Law, the separate existence of POSOR II ceased. At the effective time of the Merger, each issued and outstanding share of POSOR II’s common stock converted into the right to receive 0.9643 shares of the Company's common stock.

On January 8, 2009, the Company 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 (the “Offering”), 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 continues to offer shares under its dividend reinvestment plan.

The Company sold 56,584,976 shares of common stock in its primary offering for gross offering proceeds of $561.7 million. As of September 30, 2020, the Company had sold 6,851,969 shares of common stock under its dividend reinvestment plan for gross offering proceeds of $76.5 million. Also, as of September 30, 2020, the Company had redeemed 23,897,205 shares for $286.3 million. As of September 30, 2020, the Company had issued 25,976,746 shares of common stock in connection with special dividends. Additionally, on December 29, 2011 and October 23, 2012, the Company 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. On March 27, 2020, the Company issued 3,411,737 restricted shares of its common stock (the “Restricted Stock”) to KBS Capital Advisors pursuant to a Restricted Stock Agreement, dated as of March 27, 2020 (the “Restricted Stock Agreement”).

On March 2, 2016, Pacific Oak SOR BVI 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 “Series A Debentures”) at an annual interest rate not to exceed 4.25%. On March 1, 2016, Pacific Oak SOR BVI commenced the institutional tender of the Series A Debentures and accepted application for 842.5 million Israeli new Shekels. On March 7, 2016, Pacific Oak SOR BVI commenced the public tender of the Series A Debentures and accepted 127.7 million Israeli new Shekels.  In the aggregate, Pacific Oak SOR 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 SOR BVI issued the Series A Debentures on March 8, 2016.

In connection with the above-referenced offering, on March 8, 2016, the Operating Partnership assigned to Pacific Oak SOR BVI all of its interests in the subsidiaries through which the Company indirectly owns all of its real estate and real estate-related investments. The Operating Partnership owns all of the issued and outstanding equity of Pacific Oak SOR BVI.  As a result of these transactions, the Company now holds all of its real estate and real estate-related investments indirectly through Pacific Oak SOR BVI.

On February 16, 2020, Pacific Oak SOR BVI issued 254.1 million Israeli new Shekels (approximately $74.1 million as of February 16, 2020) of Series B debentures (the “Series B Debentures”) to Israeli investors pursuant to a public offering registered with the Israel Securities Authority. The Series B Debentures bears interest at the rate of 3.93% per year. The 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.

As of September 30, 2020, the Company consolidated six office properties, one office portfolio consisting of four office buildings and 14 acres of undeveloped land, one apartment property, three investments in undeveloped land with approximately 1,000 developable acres, one residential home portfolio consisting of 1,769 single-family homes and owned six investments in unconsolidated entities and three investments in real estate equity securities.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 2019. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the SEC.

Principles of Consolidation and Basis of Presentation

The accompanying unaudited consolidated financial statements and condensed notes thereto have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the FASB Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods. Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

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, 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 are eliminated in consolidation.

Liquidity

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. As further discussed in Note 7, the Company has significant debt coming due over the next 12-month period. In order to satisfy obligations as they mature, management plans 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. Based upon these plans, management believes it will have sufficient liquidity 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 7 for further discussion.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

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 and capital improvements and replacements.

Redeemable Common Stock

The Company limits the dollar value of shares that may be redeemed under the share redemption program. During the nine months ended September 30, 2020, the Company had redeemed $0.8 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 September 2020 redemption date, except for 5,938,443 shares totaling $60.0 million due to the limitations under the share redemption program. The Company recorded $0.3 million and $0.8 million of redeemable common stock payable on the Company’s balance sheet as of September 30, 2020 and December 31, 2019, respectively, related to unfulfilled redemption requests received in good order under the share redemption program. Based on the eleventh amended and restated share redemption program, the Company has fully exhausted all redemption amounts for the remainder of 2020, including shares that are redeemed in connection with a stockholders’ death, “qualifying disability” or “determination of incompetence”. Effective beginning with the month of February 2020, the Company suspended (a) redemptions requested under the share redemption program in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence”, until the Company and POSOR II file with the SEC a registration statement on Form S-4 containing a Joint Proxy Statement/Prospectus for the Merger, and (b) all other redemptions under the share redemption program until after the Merger closes. The Form S-4 was filed on June 15, 2020 with the SEC and the Merger closed on October 5, 2020.

Segments

The Company has invested in opportunistic real estate, non-performing loans, other real estate-related assets and single-family homes. In general, the Company intends to hold its investments in opportunistic real estate, non-performing loans and other real estate-related assets for capital appreciation. Traditional performance metrics of opportunistic real estate, non-performing loans 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, non-performing loans and other real estate-related assets as similar investments. Substantially all of its revenue and net income (loss) is from opportunistic real estate, non-performing loans and other real estate-related assets, and therefore, the Company currently recognizes two reportable business segment consisting of strategic opportunity properties and related investments and single-family homes. The Company owns single-family homes in 17 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.

Per Share Data

The Company applies the two-class method when computing its earnings per share. Net income per share for each class of stock is calculated by assuming all of the Company’s net income (loss) is distributed to each class of stock based on their contractual rights.

Unvested restricted stock that contains non-forfeitable rights to distributions (whether paid or unpaid) are considered participating securities and are included in the computation of earnings per share.

Basic earnings (loss) per share of common stock is calculated by dividing net income (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. Potential common shares consist of unvested restricted stock, using the more dilutive of either the two-class method or the treasury stock method.

The noncontrolling Series A convertible redeemable preferred shares of Pacific Oak Residential Trust, Inc. (“PORT”) are not included as the preferred shares are convertible contingent on the common stock of PORT being publicly traded. If PORT common stock becomes publicly traded, the per-share earnings of PORT will be included in the Company’s EPS computations based on the consolidated holdings of PORT. See Note 14, “PORT Preferred Stock” for more information.

The Company’s unvested Restricted Stock have been included in the calculation of basic and diluted earnings per share for the three and nine months ended September 30, 2020, as the restriction is not contingent on any conditions except the passage of time.

Distributions declared per share were $0.0086 during the nine months ended September 30, 2020 and $0.0086 and $0.0258 during the three and nine months ended September 30, 2019. There were no distributions declared for the three months ended September 30, 2020.

Square Footage, Occupancy and Other Measures

Any references to square footage, 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 financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board.

Recently Issued Accounting Standards Updates

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments (“ASU No. 2016-13”). ASU No. 2016-13 affects entities holding financial assets and net investments in leases that are not accounted for at fair value through net income. The amendments in ASU No. 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. ASU No. 2016-13 also amends the impairment model for available-for-sale debt securities. An entity will recognize an allowance for credit losses on available-for-sale debt securities as a contra-account to the amortized cost basis rather than as a direct reduction of the amortized cost basis of the investment, as is currently required. ASU No. 2016-13 also requires new disclosures. For financial assets measured at amortized cost, an entity will be required to disclose information about how it developed its allowance for credit losses, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes. For financing receivables and net investments in leases measured at amortized cost, an entity will be required to further disaggregate the information it currently discloses about the credit quality of these assets by year of the asset’s origination for as many as five annual periods. For available-for-sale debt securities, an entity will be required to provide a roll-forward of the allowance for credit losses and an aging analysis for securities that are past due. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which clarified that receivables from operating leases are not within the scope of Topic 326 and instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842. The Company adopted ASU No. 2016-13 on January 1, 2020 and it did not have a material effect on its financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848). ASU No. 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU No. 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the six months ended September 30, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. For the period from January 1, 2020 (the earliest date the Company may elect to apply ASU No. 2020-04) through September 30, 2020, the Company did not have any contract modifications that meet the criteria described above, specifically contract modifications that have been modified from LIBOR to an alternative reference rate. The Company’s loan agreements, derivative instruments, and certain lease agreements use LIBOR as the current reference rate. For eligible contract modifications, the Company expects to adopt the temporary optional expedients described in ASU No. 2020-04. The optional expedients for hedging relationships described in ASU No. 2020-04 are not expected to have an impact to the Company, as the Company has elected to not designate its derivative instruments as a hedge.

In April 2020, the FASB issued a FASB Staff Q&A related to Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic (the “Topic 842 Q&A”) which focused on the application of lease guidance for concessions related to the effects of the COVID-19 pandemic. In this Q&A document, the FASB staff will allow entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how those concessions would be accounted for under Topic 842, Leases, ("Topic 842") as though enforceable rights and obligations for those qualifying concessions existed. The Company adopted this guidance and did not have any material lease concessions related to the effects of the COVID-19 pandemic that had a material impact to the Company’s consolidated balance sheet as of September 30, 2020 or consolidated statement of operations for the nine months ended September 30, 2020.

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REAL ESTATE HELD FOR INVESTMENT

9 Months Ended

Sep. 30, 2020

Real Estate [Abstract]

REAL ESTATE HELD FOR INVESTMENT

REAL ESTATE HELD FOR INVESTMENT

As of September 30, 2020, the Company owned six office properties and one office portfolio consisting of four office buildings and 14 acres of undeveloped land, encompassing, in the aggregate, approximately 3.0 million rentable square feet. As of September 30, 2020, these properties were 80% occupied. In addition, as of the September 30, 2020, the Company owned one residential home portfolio consisting of 1,769 single-family homes and encompassing approximately 1.6 million rental square feet and one apartment property, containing 317 units and encompassing approximately 0.3 million rentable square feet, which was 91% and 87% occupied, respectively. The Company also owned three investments in undeveloped land with approximately 1,000 developable acres. The following table summarizes the Company’s real estate held for investment as of September 30, 2020 and December 31, 2019, respectively (in thousands):

	September 30, 2020		December 31, 2019
Land	$	193,602	$	175,317
Buildings and improvements	689,202		618,974
Tenant origination and absorption costs	27,984		30,569
Total real estate, cost	910,788		824,860
Accumulated depreciation and amortization	(88,290)		(65,381)
Total real estate, net	$	822,498	$	759,479

The following table provides summary information regarding the Company’s real estate held for investment as of September 30, 2020 (in thousands):

Property	Date Acquired or Foreclosed on	City	State	Property Type	Land		Building and Improvements		Tenant Origination and Absorption		Total Real Estate, at Cost		Accumulated Depreciation and Amortization		Total Real Estate, Net		Ownership %
Richardson Portfolio:
Palisades Central I	11/23/2011	Richardson	TX	Office	$	1,037	$	13,035	$	—	$	14,072	$	(4,194)	$	9,878	90.0	%
Palisades Central II	11/23/2011	Richardson	TX	Office	810		22,016		—		22,826		(6,496)		16,330		90.0	%
Greenway I	11/23/2011	Richardson	TX	Office	561		2,456		—		3,017		(1,176)		1,841		90.0	%
Greenway III	11/23/2011	Richardson	TX	Office	702		3,960		—		4,662		(1,584)		3,078		90.0	%
Undeveloped Land	11/23/2011	Richardson	TX	Undeveloped Land	3,134		—		—		3,134		—		3,134		90.0	%
Total Richardson Portfolio					6,244		41,467		—		47,711		(13,450)		34,261
Park Highlands (1)	12/30/2011	North Las Vegas	NV	Undeveloped Land	36,817		—		—		36,817		—		36,817		100.0%(1)
Park Centre	03/28/2013	Austin	TX	Office	3,251		34,766		—		38,017		(8,066)		29,951		100.0	%
1180 Raymond	08/20/2013	Newark	NJ	Apartment	8,292		39,231		—		47,523		(8,857)		38,666		100.0	%
Park Highlands II (1)	12/10/2013	North Las Vegas	NV	Undeveloped Land	27,854		—		—		27,854		—		27,854		100.0%(1)
Richardson Land II	09/04/2014	Richardson	TX	Undeveloped Land	3,418		—		—		3,418		—		3,418		90.0	%
Crown Pointe	02/14/2017	Dunwoody	GA	Office	22,590		69,663		3,618		95,871		(13,987)		81,884		100.0	%
The Marq	03/01/2018	Minneapolis	MN	Office	10,387		81,976		3,551		95,914		(9,618)		86,296		100.0	%
City Tower	03/06/2018	Orange	CA	Office	13,930		137,780		6,713		158,423		(16,780)		141,643		100.0	%
Eight & Nine Corporate Centre	06/08/2018	Franklin	TN	Office	17,401		58,011		4,518		79,930		(6,639)		73,291		100.0	%
Georgia 400 Center	05/23/2019	Alpharetta	GA	Office	11,431		73,841		7,368		92,640		(6,426)		86,214		100.0	%
Single-Family Homes Portfolio	Multiple	Multiple	Multiple	Home	31,987		152,467		2,216		186,670		(4,467)		182,203		96.1%(2)
					$	193,602	$	689,202	$	27,984	$	910,788	$	(88,290)	$	822,498

_____________________

(1) The Company owns 100% of the common members’ equity of Park Highlands and Park Highlands II. On September 7, 2016 and January 8, 2019, a subsidiary of the Company that owns a portion of Park Highlands and Park Highlands II, sold 820 units of 10% Class A non-voting preferred membership units for $0.8 million and 1,927 units of 10% Class A2 non-voting preferred membership units for $1.9 million, respectively, to accredited investors. The amount of the Class A and A2 non-voting preferred membership units raised, net of offering costs, is included in other liabilities on the accompanying consolidated balance sheets.

(2) As of September 30, 2020, the Company owned 96.1% of the equity of the single-family homes portfolio. All of these single-family homes are held by PORT OP, LP (“PORT OP”). PORT, a wholly owned subsidiary of the Company, owns 96.1% of the equity in PORT OP. PORT OP qualifies as a VIE and the Company is the primary beneficiary. In addition, PORT has authorized and issued preferred stock. See Note 14V, “PORT Preferred Stock” for more information.

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 September 30, 2020, the leases, excluding options to extend and apartment leases and single-family homes, which have terms that are generally one year or less, had remaining terms of up to 12.9 years with a weighted-average remaining term of 4.4 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 were both $4.3 million as of September 30, 2020 and December 31, 2019.

During the three and nine months ended September 30, 2020, the Company recognized deferred rent from tenants of $2.6 million and $0.9 million, respectively, net of lease incentive amortization. During the three and nine months ended September 30, 2019, the Company recognized deferred rent from tenants of $3.2 million and $1.0 million, respectively, net of lease incentive amortization. As of September 30, 2020 and December 31, 2019, the cumulative deferred rent receivable balance, including unamortized lease incentive receivables, was $16.7 million and $13.6 million, respectively, and is included in rents and other receivables on the accompanying balance sheets. The cumulative deferred rent balance included $3.3 million and $3.1 million of unamortized lease incentives as of September 30, 2020 and December 31, 2019, respectively.

As of September 30, 2020, the future minimum rental income from the Company’s properties, excluding apartment leases and single-family homes, under non-cancelable operating leases was as follows (in thousands):

October 1, 2020 through December 31, 2020	$	14,056
2021	57,171
2022	50,817
2023	42,545
2024	36,856
Thereafter	92,949
	$	294,394

As of September 30, 2020, the Company’s commercial real estate properties were leased to approximately 235 tenants over a diverse range of industries and geographic areas. The Company’s highest tenant industry concentrations (greater than 10% of annualized base rent) were as follows:

Industry	Number of Tenants	Annualized Base Rent (1) (in thousands)		Percentage of Annualized Base Rent
Insurance	25	$	7,256	11.8	%
Computer Systems Design	25	7,088		11.5	%
Health Care and Social Assistance	15	6,769		11.0	%
		$	21,113	34.3	%

_____________________

(1) Annualized base rent represents annualized contractual base rental income as of September 30, 2020, 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.

No other tenant industries accounted for more than 10% of annualized base rent. No material tenant credit issues have been identified at this time. During the three and nine months ended September 30, 2020, the Company recorded adjustments to rental income of $0.4 million and $1.1 million, respectively, for lease payments that were deemed not probable of collection. During the three and nine months ended September 30, 2019, the Company recorded adjustments to rental income of $0.2 million and $0.4 million, respectively, for lease payments that were deemed not probable of collection.

Geographic Concentration Risk

As of September 30, 2020, the Company’s real estate investments in Georgia and California represented 15.7% and 12.9%, 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 Georgia and California 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.

Recent Acquisitions

Battery Point Trust Inc. Acquisition

On July 1, 2020, the Company acquired, through its subsidiaries, Battery Point Trust Inc., a Maryland corporation (“Battery Point”). Battery Point is a real estate investment trust that owns 559 single-family rental homes throughout the Midwestern and Southeastern United States. The Company recorded this acquisition as an asset acquisition and the relative fair value of Battery Point's real estate assets were recorded as: $11.1 million to land, $44.6 million to building and improvements and $0.5 million to tenant origination and absorption costs. The Company also assumed a $36.6 million mortgage loan and $16.0 million of A-3 Preferred Units, which were eliminated in consolidation.

All of these assets are held by the Company through its subsidiary, PORT OP (formerly known as Reven Housing REIT OP, L.P.).

The Company acquired Battery Point by acquiring all the 1,000,000 outstanding shares of Battery Point common stock from BPT Holdings, LLC (“BPT Holdings”), a wholly owned subsidiary of the Advisor. The Advisor is the Company’s external advisor and is owned and controlled by Keith D. Hall, the Company’s Chief Executive Officer and a director, and Peter M. McMillan, the Company’s President and Chairman of the Board. In exchange, BPT Holdings received 510,816 common equity units in PORT OP, approximately 4.5% of the outstanding common equity units, as of July 1, 2020. The value of the interests exchanged was estimated by the participants at approximately $3.0 million. The common equity units issued to BPT Holdings are redeemable after one year at the request of BPT Holdings for all or a portion of the common equity units at a redemption price equal to and in the form of cash based on the unit price of PORT. The following table summarizes the redeemable non-controlling interest activity related to the BPT Holdings for the nine months ended September 30, 2020 (in thousands):

Issuance of PORT OP Units	$	3,024
Net loss attributable to redeemable noncontrolling interest	(23)
September 30, 2020	$	3,001

Prior to the acquisition date, the Company accounted for its investment in the Battery Point A-3 Preferred Units as an equity investment without a readily determinable fair value. The acquisition-date carrying value of the previous equity interest was $14.0 million and is included in the measurement of the consideration transferred. The Company recognized a gain of $2.0 million as a result of remeasuring its prior equity interest in the Battery Point A-3 Preferred Units held before the acquisition. The gain is included in the line item “Gain from remeasurement of prior equity interest” in the consolidated statement of operations. As a result of the Battery Point acquisition, the Company’s 640,000 shares of Battery Point Series A-3 Preferred Units were eliminated in consolidation.

Single-Family Home Acquisitions

On May 28, 2020, the Company acquired a single-family home portfolio consisting of 196 homes in Chicago, Illinois. The seller is not affiliated with the Company or the Advisor. The purchase price was $17.3 million, which includes $0.4 million of capitalized acquisition costs. The Company recorded this acquisition as an asset acquisition and recorded $3.4 million to land, $13.6 million to building and improvements and $0.3 million to tenant origination and absorption costs.

On July 29, 2020, the Company, through a wholly owned subsidiary of PORT OP, acquired a single-family home portfolio consisting of 12 homes in Alabama, Arkansas, and Illinois. The portfolio was purchased from DayMark Financial Acceptance LLC, an entity affiliated with the Advisor. The acquisition fee was waived for this acquisition. The purchase price was $1.0 million, which includes $10,000 of capitalized acquisition costs. The Company recorded this acquisition as an asset acquisition and recorded $0.2 million to land and $0.8 million to building and improvements.

On August 14, 2020, the Company, through a wholly owned subsidiary of PORT OP, acquired a single-family home portfolio consisting of 11 homes in Memphis, Tennessee. The seller is not affiliated with the Company or the Advisor. The purchase price was $1.0 million, which includes $8,000 of capitalized acquisition costs. The Company recorded this acquisition as an asset acquisition and recorded $0.2 million to land, $0.8 million to building and improvements and $11,000 to tenant origination and absorption costs.

Sale of Real Estate

As of September 30, 2020 and December 31, 2019, the Company had recorded contract liabilities of $3.1 million related to deferred proceeds received from the buyers of the Park Highlands prior year land sales and another developer for the value of land that was contributed to a master association that is consolidated by the Company, which was included in other liabilities on the accompanying consolidated balance sheets.

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TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES

9 Months Ended

Sep. 30, 2020

Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities [Abstract]

TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES

TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES

As of September 30, 2020 and December 31, 2019, the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities (excluding fully amortized assets and liabilities and accumulated amortization) were as follows (in thousands):

	Tenant Origination and Absorption Costs				Above-Market Lease Assets				Below-Market Lease Liabilities
	September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019
Cost	$	27,984	$	30,569	$	3,499	$	3,714	$	(4,122)	$	(4,958)
Accumulated Amortization	(11,861)		(10,223)		(767)		(741)		1,618		1,778
Net Amount	$	16,123	$	20,346	$	2,732	$	2,973	$	(2,504)	$	(3,180)

Increases (decreases) in net income as a result of amortization of the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities for the three and nine months ended September 30, 2020 and 2019 were as follows (in thousands):

	Tenant Origination and Absorption Costs				Above-Market Lease Assets				Below-Market Lease Liabilities
	For the Three Months Ended September 30,				For the Three Months Ended September 30,				For the Three Months Ended September 30,
	2020		2019		2020		2019		2020		2019
Amortization	$	(1,625)	$	(2,000)	$	(74)	$	(101)	$	194	$	421

	Tenant Origination and Absorption Costs				Above-Market Lease Assets				Below-Market Lease Liabilities
	For the Nine Months Ended September 30,				For the Nine Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019		2020		2019
Amortization	$	(4,965)	$	(5,324)	$	(241)	$	(303)	$	676	$	1,159

Additionally, as of September 30, 2020 and December 31, 2019, the Company had recorded tax abatement intangible assets, net of amortization, on real estate held for investment, which are included in prepaid expenses and other assets in the accompanying balance sheets, of $0.5 million and $1.0 million, respectively. During both of the three and nine months ended September 30, 2020 and 2019, the Company recorded amortization expense of $0.1 million and $0.5 million, respectively, related to tax abatement intangible assets. As of September 30, 2020, the tax abatement intangible assets had a remaining amortization period of 0.9 years.

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REAL ESTATE EQUITY SECURITIES

9 Months Ended

Sep. 30, 2020

Investments, Debt and Equity Securities [Abstract]

REAL ESTATE EQUITY SECURITIES

REAL ESTATE EQUITY SECURITIES

As of September 30, 2020, the Company owned three investments in real estate equity securities. The following table sets forth the number of shares owned by the Company and the related carrying value of the shares as of September 30, 2020 and December 31, 2019 (dollars in thousands):

	September 30, 2020			December 31, 2019
Real Estate Equity Security	Number of Shares Owned	Total Carrying Value		Number of Shares Owned	Total Carrying Value
Keppel Pacific Oak US REIT	64,165,352	$	46,520	64,165,352	$	50,049
Franklin Street Properties Corp.	5,211,021	19,072		2,773,729	23,743
Plymouth Industrial REIT, Inc.	1,521,276	18,773		415,841	7,647
	70,897,649	$	84,365	67,354,922	$	81,439

During the nine months ended September 30, 2020, the Company purchased 1,722,751 shares of common stock of Plymouth Industrial REIT, Inc. (NYSE Ticker: PLYM) for an aggregate purchase price of $21.6 million and also purchased 2,437,292 shares of Franklin Street Properties Corp., (NYSE Ticker: FSP) for an aggregate purchase price of $14.0 million. During the nine months ended September 30, 2020, the Company sold 617,316 shares of common stock of Plymouth Industrial REIT for an aggregate sale price of $11.0 million.

The following summarizes the portion of gain and loss for the period related to real estate equity securities held during the three and nine months ended September 30, 2020 and 2019 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net (loss) gain recognized during the period on real estate equity securities	$	(6,527)	$	3,845	$	(21,620)	$	19,304
Less net gain recognized during the period on real estate equity securities sold during the period	—		—		(711)		(3,397)
Unrealized (loss) gain recognized during the reporting period on real estate equity securities held at the end of the period	$	(6,527)	$	3,845	$	(22,331)	$	15,907

During the three and nine months ended September 30, 2020, the Company recognized $2.8 million and $4.4 million, respectively, of dividend income from real estate equity securities. During the three and nine months ended September 30, 2019, the Company recognized $2.2 million and $4.3 million, respectively, of dividend income from real estate equity securities.

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REAL ESTATE SOLD

9 Months Ended

Sep. 30, 2020

Discontinued Operations and Disposal Groups [Abstract]

REAL ESTATE SOLD

REAL ESTATE SOLD

During the year ended December 31, 2019, the Company disposed of one office building, one retail property and one apartment property. There were no dispositions during the nine months ended September 30, 2020.

On November 12, 2013, the Company, through an indirect wholly owned subsidiary, and EE 424 Bedford OM, LLC entered into an agreement to form a joint venture (the “424 Bedford Joint Venture”), and on January 31, 2014, the 424 Bedford Joint Venture acquired an apartment building containing 66 units in Brooklyn, New York (“424 Bedford”). On January 11, 2019, the 424 Bedford Joint Venture sold 424 Bedford to a purchaser unaffiliated with the Company or the Advisor, for $43.8 million before closing costs and credits. The carrying value of 424 Bedford as of the disposition date was $34.0 million, which was net of $5.3 million of accumulated depreciation and amortization. The Company recognized a gain on sale of $7.6 million related to the disposition of 424 Bedford.

On December 12, 2012, the Company, through an indirect wholly owned subsidiary, and Goldstein Planting Partners, LLC and its affiliate entered into a joint venture agreement (the “Burbank Collection Joint Venture”), and on December 12, 2012, the Burbank Collection Joint Venture acquired a Class A retail property containing 39,428 rentable square feet located in Burbank, California (the “Burbank Collection”). On July 19, 2019, the Burbank Collection Joint Venture sold the Burbank Collection to a purchaser unaffiliated with the Company or the Advisor for $25.9 million before closing costs. The carrying value of the Burbank Collection as of the disposition date was $14.7 million, which was net of $2.6 million of accumulated depreciation and amortization. The Company recognized a gain on sale of $10.5 million related to the disposition of the Burbank Collection.

On November 1, 2019, the Company, through an indirect wholly owned subsidiary, sold 125 John Carpenter to KORE 125 John Carpenter, LLC, a wholly owned subsidiary of the Keppel Pacific Oak US REIT, previously known as Keppel-KBS US REIT, a newly formed Singapore real estate investment trust (the “SREIT”). The sale price, net of closing credits, of 125 John Carpenter was $99.8 million, before third-party closing costs of approximately $0.2 million and excluding any disposition fees payable to the Company's then-current external advisor. Prior to the sale of 125 John Carpenter, the Company owned 56,979,352 common units of the SREIT, representing a 6.89% ownership interest. On October 29, 2019, the Company purchased 7,186,000 common units of the SREIT for $5.2 million in connection with a private placement to institutional and other investors, maintaining its 6.89% ownership interest. The Company recognized a gain on sale of $16.0 million related to the disposition of 125 John Carpenter.

The operations of these properties and gain on sales are included in continuing operations on the accompanying statements of operations. The following table summarizes certain revenue and expenses related to these properties for the three and nine months ended September 30, 2020 and 2019 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenues
Rental income	$	—	$	3,443	$	138	$	10,566
Other operating income	—		254		40		828
Total revenues	$	—	$	3,697	$	178	$	11,394
Expenses
Operating, maintenance, and management costs	$	—	$	1,042	$	86	$	3,030
Real estate taxes and insurance	—		710		—		2,110
Asset management fees to affiliate	—		250		—		784
Depreciation and amortization	—		1,183		—		3,784
Interest expense	—		596		—		2,086
Total expenses	$	—	$	3,781	$	86	$	11,794

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NOTES AND BONDS PAYABLE

9 Months Ended

Sep. 30, 2020

Notes and Bonds Payable [Abstract]

NOTES AND BONDS PAYABLE

NOTES AND BONDS PAYABLE

As of September 30, 2020 and December 31, 2019, the Company’s notes and bonds payable consisted of the following (dollars in thousands):

	Book Value as of September 30, 2020		Book Value as of December 31, 2019		Contractual Interest Rate as of September 30, 2020 (1)	Effective Interest Rate at September 30, 2020 (1)	Payment Type (3)	Maturity Date (2)
Richardson Portfolio Mortgage Loan	$	36,000	$	36,000	One-Month LIBOR + 2.50%	2.65%	Interest Only (3)	11/01/2021
Park Centre Mortgage Loan	21,970		21,970		One-Month LIBOR + 1.75%	1.90%	Interest Only	06/27/2022
1180 Raymond Mortgage Loan	29,948		30,250		One-Month LIBOR + 2.50% (7)	3.50%	Principal & Interest	12/01/2021
1180 Raymond Bond Payable	5,930		6,080		6.50%	6.50%	Principal & Interest	09/01/2036
Pacific Oak SOR (BVI) Holdings, Ltd. Series A Debentures (4)	169,927		224,746		4.25%	4.25%	(4)	03/01/2023
Pacific Oak SOR (BVI) Holdings, Ltd. Series B Debentures (4)	74,159		—		3.93%	3.93%	(4)	01/31/2026
Crown Pointe Mortgage Loan	53,254		51,171		One-Month LIBOR + 2.60%	2.75%	Principal & Interest	02/13/2021
City Tower Mortgage Loan	94,167		89,000		One-Month LIBOR + 1.55%	1.70%	Interest Only	03/05/2021
The Marq Mortgage Loan	58,331		53,408		One-Month LIBOR + 1.55%	1.70%	Interest Only	06/06/2021
Eight & Nine Corporate Centre Mortgage Loan	47,066		43,880		One-Month LIBOR + 1.60%	1.75%	Interest Only	06/08/2021
Georgia 400 Center Mortgage Loan	59,690		59,690		One-Month LIBOR + 1.55%	1.70%	Interest Only	05/22/2023
PORT Mortgage Loan 1	51,362		51,362		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 Mortgage Loan 3	12,000		—		5.00% (5)	5.00%	Interest Only	03/31/2021
Battery Point Trust Mortgage Loan	38,743		—		One-Month LIBOR + 2.50% (7)	3.50%	Interest Only	03/20/2022
Total Notes and Bonds Payable principal outstanding	763,070		678,080
Net premium on Notes and Bonds Payable (6)	175		783
Deferred financing costs, net	(5,170)		(5,200)
Total Notes and Bonds Payable, net	$	758,075	$	673,663

_____________________

(1) Contractual interest rate represents the interest rate in effect under the loan as of September 30, 2020. Effective interest rate is calculated as the actual interest rate in effect as of September 30, 2020 (consisting of the contractual interest rate and contractual floor rates), using interest rate indices at September 30, 2020, where applicable.

(2) Represents the initial maturity date or the maturity date as extended as of September 30, 2020; 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 September 30, 2020. 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) See “ – Israeli Bond Financing” below.

(5) Contractual interest is 5.0% through November 30, 2020 and 6.5% from December 1, 2020 through March 31, 2021.

(6) 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 premium/discount is amortized over the remaining life of the notes and bonds payable.

(7) The mortgage loans have a LIBOR floor of 1%.

During the three and nine months ended September 30, 2020, the Company incurred $6.3 million and $19.1 million, respectively, of interest expense. Included in interest expense for the three and nine months ended September 30, 2020 was $0.8 million and $2.5 million, respectively, of amortization of deferred financing costs. Additionally, during the three and nine months ended September 30, 2020, the Company capitalized $0.7 million and $2.4 million, respectively of interest related to its investments in undeveloped land and an investment in unconsolidated entity.

During the three and nine months ended September 30, 2019, the Company incurred $7.4 million and $21.8 million, respectively, of interest expense. Included in interest expense for the three and nine months ended September 30, 2019 was $0.9 million and $2.6 million, respectively, of amortization of deferred financing costs. Additionally, during the three and nine months ended September 30, 2019, the Company capitalized $0.7 million and $2.1 million, respectively of interest related to its investments in undeveloped land.

As of September 30, 2020 and December 31, 2019, the Company’s interest payable was $2.3 million and $4.8 million, respectively.

The following is a schedule of maturities, including principal amortization payments, for all notes and bonds payable outstanding as of September 30, 2020 (in thousands):

October 1, 2020 through December 31, 2020	$	507
2021	387,178
2022	117,595
2023	116,587
2024	24,990
Thereafter	116,213
	$	763,070

As of November 13, 2020, the Company had a total of $357.9 million of debt obligations scheduled to mature over the next 12 months. On October 5, 2020, the Company assumed the debt obligations of POSOR II upon the close of the Merger, of which $155.1 million is scheduled to mature over the next 12 months. The Company and POSOR II have extension options with respect to $350.9 million of the debt obligations outstanding that is 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 we will be able to meet these requirements. All of the Company’s debt obligations are generally non-recourse, subject to certain limited guaranty payments, except for the Company’s Series A Debentures and Series B Debentures. The Company plans to utilize available extension options or refinance the notes 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. There can be no assurance as to the certainty or timing of any such transactions.

The Company’s notes payable contain financial debt covenants. As of September 30, 2020, the Company was in compliance with all of these debt covenants.

Israeli Bond Financing

On March 2, 2016, Pacific Oak SOR 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 the Series A Debentures at an annual interest rate not to exceed 4.25%. On March 1, 2016, Pacific Oak SOR BVI commenced the institutional tender of the Series A Debentures and accepted application for 842.5 million Israeli new Shekels. On March 7, 2016, Pacific Oak SOR BVI commenced the public tender of the Debentures and accepted 127.7 million Israeli new Shekels.  In the aggregate, Pacific Oak SOR 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 SOR BVI issued the Debentures on March 8, 2016. The terms of the Series A Debentures require five equal annual installment principal payments on March 1st of each year from 2019 to 2023.

On February 16, 2020, Pacific Oak SOR 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 deeds of trust that govern the Series A Debentures and Series B Debentures contain various financial covenants. As of September 30, 2020, the Company was in compliance with all of these financial debt covenants.

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DERIVATIVE INSTRUMENTS

9 Months Ended

Sep. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS

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 and foreign currency exchange rate movements. The primary goal of the Company’s risk management practices related to interest rate risk is to prevent changes in interest rates from adversely impacting the Company’s ability to achieve its investment return objectives. The Company does not enter into derivatives for speculative purposes.

The Company enters into foreign currency collars to mitigate its exposure to foreign currency exchange rate movements on its bonds payable outstanding denominated in Israeli new Shekels. A foreign currency collar consists of a purchased call option to buy and a sold put option to sell Israeli new Shekels. A foreign currency collar guarantees that the exchange rate of the currency will not fluctuate beyond the range of the options’ strike prices.

The following table summarizes the notional amount and other information related to the Company’s foreign currency collars as of September 30, 2020 and December 31, 2019. The notional amount is an indication of the extent of the Company’s involvement in each instrument at that time, but does not represent exposure to credit, interest rate or market risks (currency in thousands):

	September 30, 2020		December 31, 2019		Strike Price	Trade Date	Maturity Date
Derivative Instruments	Number of Instruments	Notional Amount	Number of Instruments	Notional Amount
Derivative instruments not designated as hedging instruments
Foreign currency collar	—	—	—	—	3.70 - 3.82 ILS - USD	03/17/2020	9/16/2020 (1)
Foreign currency collar	—	—	—	—	3.5875 - 3.725 ILS - USD	03/16/2020	9/16/2020 (1)
Foreign currency collar	—	—	1	776,182 ILS	3.38 - 3.4991 ILS - USD	11/25/2019	02/26/2020

____________________

(1) On July 29, 2020, the Company terminated the foreign currency collars and as a result received $14.1 million.

The Company enters into interest rate caps to mitigate its exposure to rising interest rates on its variable rate notes payable. The values of interest rate caps are primarily impacted by interest rates, market expectations about interest rates, and the remaining life of the instrument. In general, increases in interest rates, or anticipated increases in interest rates, will increase the value of interest rate caps. As the remaining life of an interest rate cap decreases, the value of the instrument will generally decrease towards zero.

The Company enters into interest rate caps to mitigate its exposure to rising interest rates on its variable rate notes payable. The values of interest rate caps are primarily impacted by interest rates, market expectations about interest rates, and the remaining life of the instrument. In general, increases in interest rates, or anticipated increases in interest rates, will increase the value of interest rate caps. As the remaining life of an interest rate cap decreases, the value of the instrument will generally decrease towards zero.

As of September 30, 2020, the Company had entered into three interest rate caps, which were not designated as a hedging instruments. The following table summarizes the notional amounts and other information related to the Company’s derivative instruments as of September 30, 2020. The notional amount is an indication of the extent of the Company’s involvement in the instrument at that time, but does not represent exposure to credit, interest rate or market risks (dollars in thousands):

Derivative Instrument	Effective Date	Maturity Date	Notional Value		Reference Rate
Interest rate cap	04/02/2018	03/05/2021	$	77,513	One-month LIBOR at 3.50%
Interest rate cap	06/21/2019	05/22/2023	$	51,252	One-month LIBOR at 4.00%
Interest rate cap	02/12/2020	02/16/2021	$	46,875	One-month LIBOR at 3.00%

The following table sets forth the fair value of the Company’s derivative instruments as well as their classification on the consolidated balance sheets as of September 30, 2020 and December 31, 2019 (dollars in thousands):

		September 30, 2020			December 31, 2019
Derivative Instruments	Balance Sheet Location	Number of Instruments	Fair Value		Number of Instruments	Fair Value
Derivative instruments not designated as hedging instruments
Interest rate caps	Prepaid expenses and other assets	3	$	8	3	$	12
Foreign currency collars	Prepaid expenses and other assets (Other liabilities)	—	$	—	1	$	(179)

The change in fair value of foreign currency collars that are not designated as cash flow hedges are recorded as foreign currency transaction gains or losses in the accompanying consolidated statements of operations. During the three months ended September 30, 2020, the Company recognized a $2.2 million gain related to the foreign currency collars, which is shown combined with $2.6 million of foreign currency transaction loss in the accompanying consolidated statements of operations as foreign currency transaction loss, net. During the nine months ended September 30, 2020, the Company recognized a $14.3 million gain related to the foreign currency collars, which is shown combined with $2.0 million of foreign currency transaction loss in the accompanying consolidated statements of operations as foreign currency transaction gain, net. On July 29, 2020, the Company terminated the foreign currency collars and as a result received $14.1 million.

During the three months ended September 30, 2019, the Company recognized a $0.4 million gain related to the foreign currency collars, which is shown net against $5.7 million of foreign currency transaction loss in the accompanying consolidated statements of operations as foreign currency transaction loss, net. During the nine months ended September 30, 2019, the Company recognized a $4.6 million gain related to the foreign currency collars, which is shown net against $15.2 million of foreign currency transaction loss in the accompanying consolidated statements of operations as foreign currency transaction loss, net.

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FAIR VALUE DISCLOSURES

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

FAIR VALUE DISCLOSURES

FAIR VALUE DISCLOSURES

The following were the face values, carrying amounts and fair values of the Company’s financial instruments as of September 30, 2020 and December 31, 2019, which carrying amounts do not approximate the fair values (in thousands):

	September 30, 2020						December 31, 2019
	Face Value		Carrying Amount		Fair Value		Face Value		Carrying Amount		Fair Value
Financial liabilities (Level 3):
Notes and bond payable	$	518,984	$	517,731	$	524,259	$	453,334	$	451,743	$	455,849
Financial liabilities (Level 1):
Pacific Oak SOR (BVI) Holdings, Ltd. Series A Debentures	$	169,927	$	168,190	$	158,620	$	224,746	$	221,920	$	229,877
Pacific Oak SOR (BVI) Holdings, Ltd. Series B Debentures	$	74,159	$	72,154	$	60,325	$	—	$	—	$	—

Disclosure of the fair value of financial instruments 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 September 30, 2020, the Company measured the following assets at fair value (in thousands):

			Fair Value Measurements Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring Basis:
Real estate equity securities	$	84,365	$	84,365	$	—	$	—
Asset derivative - interest rate caps	$	8	$	—	$	8	$	—

As of December 31, 2019, the Company measured the following assets and liabilities at fair value (in thousands):

			Fair Value Measurements Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring Basis:
Real estate equity securities	$	81,439	$	81,439	$	—	$	—
Asset derivative - interest rate caps	$	12	$	—	$	12	$	—
Liability derivative - foreign currency collar	$	(179)	$	—	$	(179)	$	—

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RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2020

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONSAs 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 since November 1, 2019. Messrs. Hall and McMillan are also two of the Company’s executive officers and directors.

In addition, along with Charles J. Schreiber, Jr., Keith D. Hall and Peter McMillan III control and indirectly own KBS Holdings LLC (“KBS Holdings”), the Company’s sponsor prior to November 1, 2019. KBS Holdings is the sole owner of KBS Capital Advisors, the Company’s advisor prior to November 1, 2019, and KBS Capital Markets Group LLC, the entity that acted as the dealer manager of the Company’s now-terminated primary initial public offering.

From the Company’s inception through October 31, 2019, KBS Capital Advisors provided day-to-day management of the Company’s business. The advisory agreement with KBS Capital Advisors terminated on October 31, 2019, and the Company hired the Advisor under substantially the same terms on November 1, 2019. The advisory agreement with the Advisor has a one-year term subject to an unlimited number of successive one-year renewals upon the mutual consent of the parties.

Pursuant to the terms of these agreements, summarized below are the related-party costs incurred by the Company for the three and nine months ended September 30, 2020 and 2019, respectively, and any related amounts payable as of September 30, 2020 and December 31, 2019 (in thousands):

	Incurred								Payable as of
	Three Months Ended September 30,				Nine Months Ended September 30,				September 30, 2020		December 31, 2019
Expensed	2020		2019		2020		2019
Asset management fees	$	2,426	$	2,093	$	6,867	$	5,954	$	2,538	$	1,498
Property management fees (1)	114		—		114		—		—		—
Reimbursable operating expenses (2)	56		79		148		251		—		—
Disposition fees (3)	—		233		—		627		—		—
Change in subordinated performance fee due upon termination to affiliate (4)	(1,121)		—		(814)		—		(3)		(3)
Capitalized
Acquisition fees on real estate equity securities	—		—		122		—		—		—
Acquisition fee on real estate	—		—		171		897		—		—
Acquisition fee on investment in unconsolidated entities	—		—		—		50		—		137
Investment in PORT II (5)	—		—		—		—		3,911		—
	$	1,475	$	2,405	$	6,608	$	7,779	$	6,449	$	1,635

_____________________

(1) Property management fees are for single-family homes under Battery Point and paid to DayMark. These fees are included in the line item “Operating, maintenance, and management cost” in the consolidated statement of operations.

(2) The relevant advisor may seek reimbursement for certain employee costs under the relevant advisory agreement. The Company has reimbursed the relevant advisor for the Company’s allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to the Company. These amounts totaled $65,000 and $198,000 for the three and nine months ended September 30, 2019, respectively, and were the only employee costs reimbursed under the advisory agreement during these periods. There were no employee cost reimbursements during 2020. The Company will not reimburse for employee costs in connection with services for which the Advisor earns acquisition, origination or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries or benefits the Advisor or its affiliates may pay to the Company’s executive officers. In addition to the amounts above, the Company reimburses the Advisor for certain of the Company’s direct costs incurred from third parties that were initially paid by the Advisor on behalf of the Company.

(3) Disposition fees with respect to real estate sold are included in the gain on sale of real estate in the accompanying consolidated statements of operations.

(4) Change in estimate of fees payable to KBS Capital Advisors due to the termination of the former advisory agreement with KBS Capital Advisors. See “Subordinated Performance Fee Due Upon Termination to KBS Capital Advisors”, below, for more details.

(5) During the nine months ended September 30, 2020, the Company, through a subsidiary of PORT OP, invested $5.0 million in PORT II OP LP (“PORT II OP”), of which $3.9 million was payable. See "PORT II" below for more details.

Battery Point Restructuring

On October 28, 2016, the Company, through an indirect wholly owned subsidiary, agreed to invest up to $25,000,000 in Battery Point Trust, LLC (“Battery Point LLC”) through the purchase of Series B Preferred Equity Units (the “Series B Preferred Units”). On May 12, 2017, the Company and Battery Point LLC agreed to limit the Company’s investment to $17,500,000 worth of Series B Preferred Units. The Company invested the full $17,500,000 in stages. During 2018, $4,500,000 was repaid to the Company. On June 29, 2018, Battery Point LLC was converted into Battery Point Trust, Inc. (“Battery Point”) and the Company’s Series B Preferred Units were converted into Series B Preferred Shares (the “Series B Preferred Shares”). The Series B Preferred Shares are entitled to the same rights and protections as were the Series B Preferred Units. The Series B Preferred Shares pay a quarterly dividend of 12% and had an outside maturity date of October 28, 2019.

On March 20, 2019, the Company, through an indirect wholly owned subsidiary, entered into a redemption agreement for the Battery Point Series B Preferred Shares. The redemption agreement resulted in the redemption of 13,000 Series B Preferred Units with a per-unit price of $1,000. The Company received $8.6 million, of which $0.9 million relates to accrued interest and an exit fee. In addition, the Company received 210,000 Battery Point Series A-3 Preferred Units with a per-unit price of $25.

On March 20, 2019, Pacific Oak Battery Point Holdings, LLC (“Pacific Oak BP”), a wholly owned subsidiary of the Advisor, a real estate asset management company formed in 2019, and its family of companies (collectively, “Pacific Oak”), acquired all the common equity interests in BPT Holdings, LLC (“Battery Point Holdings”). Battery Point Holdings owns (a) the common stock in Battery Point, (b) all the service entities that provide advisory, servicing and property management services to Battery Point Holdings generally named “DayMark”, and (c) 40% of additional DayMark entities that purchase, renovate, lease and sell single-family residential homes to Battery Point. As owner of Battery Point Holdings, Pacific Oak is responsible for funding the ongoing operations of Battery Point Holdings and its subsidiaries. The affiliated DayMark service entities are paid annual asset management fees equal to 1.5% of the gross asset value of Battery Point, annual property management fees equal to 8% of tenants’ rents received by Battery Point, and acquisition fees of 1% of the gross purchase price of properties acquired. The affiliated DayMark service entities also receive fees from tenants upon execution of leases and a 1% commission from sellers of properties into the program, if it acts as the broker for the seller. During the year ended December 31, 2019, the Company purchased additional 430,000 shares of Battery Point Series A-3 Preferred Units for an aggregate amount of $10.8 million.

On July 1, 2020, the Company acquired, through its subsidiaries, Battery Point. The Company acquired Battery Point by acquiring all the 1,000,000 outstanding shares of Battery Point common stock from Battery Point Holdings, a wholly owned subsidiary of the Advisor. In exchange, BPT Holdings received 510,816 common equity units in PORT OP, approximately 4.5% of the outstanding common equity units as of July 1, 2020. The value of the interests exchanged was estimated by the participants at approximately $3.0 million. As a result of the Battery Point acquisition, the Company’s 640,000 shares of Battery Point Series A-3 Preferred Units were eliminated in consolidation.

Prior to the acquisition date, the Company accounted for its investment in the Battery Point A-3 Preferred Units as an equity-method investment. The acquisition-date carrying value of the previous equity interest was $14.0 million and is included in the measurement of the consideration transferred. The Company recognized a gain of $2.0 million as a result of remeasuring its prior equity interest in the Battery Point A-3 Preferred Units held before the acquisition. The gain is included in the line item “Gain from remeasurement of prior equity interest” in the consolidated statement of operations.

Pacific Oak Opportunity Zone Fund I

During the year ended December 31, 2019, the Company acquired 91 Class A Units for $20.6 million in the Pacific Oak Opportunity Zone Fund I, LLC (“Pacific Oak Opportunity Zone Fund I”). Pacific Oak Opportunity Zone Fund I is sponsored by Pacific Oak Holding. The Advisor is entitled to certain fees in connection with the fund. The fund 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. Pacific Oak is also entitled to certain distributions paid by the Pacific Oak Opportunity Zone Fund I after the Class A Members have received their preferred return. These fees and distributions have been waived for the Company’s $20.6 million investment. In addition, a side letter agreement between the Advisor and Pacific Oak Opportunity Zone Fund I was executed on February 28, 2020 and stipulates that any asset management fees allocable to the Company and waived by the Advisor for Pacific Oak Opportunity Zone Fund I and shall be distributed to the Company. During the nine months ended September 30, 2020, the Company recorded $0.5 million of waived asset management fees recorded as equity in income of unconsolidated entities, of which $0.1 million was a receivable as of September 30, 2020.

PORT II

During the nine months ended September 30, 2020, the Company has contributed $5.0 million in PORT II OP, a wholly owned subsidiary of Pacific Oak Residential Trust II, Inc. ("PORT II"). On August 31, 2020, PORT II entered into an advisory agreement (as subsequently amended and restated on October 9, 2020, “PORT II Advisory Agreement”) with Pacific Oak Residential Advisors, LLC (“PORA”), an affiliate of the Advisor. Pursuant to the PORT II Advisory Agreement, PORT II has engaged PORA to act as its external advisor with respect to PORT II’s operations and assets. Because the Company has separately engaged the Advisor to manage its operations and assets, including its interests in PORT II, on November 12, 2020, the Company and the Advisor agreed to amend their advisory agreement to provide that PORT II’s operations and assets will be managed by PORA and not by the Advisor. In addition, the amendment provides that the Advisor will rebate or offset its fees under its advisory agreement with the Company to the extent of the Company’s indirect economic interest in fees paid by PORT II to PORA (which will be based on the Company’s indirect ownership of PORT II OP, which is the operating partnership of PORT II and the entity ultimately responsible for PORT II’s administrative expenses).

On August 31, 2020, PORT II entered into a property management agreement with DMH Realty, LLC (“DMH”), an affiliate of POCA and PORA. Pursuant to the property management agreement, PORT II will pay to DMH a base fee equal to the following: (a) for all rent collections up to $50 million per year, 8%; (b) for all rent collections in excess of $50 million per year, but less than or equal to $75 million per year, 7%; and (c) for all rent collections in excess of $75 million per year, 6%. PORT II will also pay DMH market-based leasing fees that will depend on the type of tenant, shared fees equal to 100% of any application fees collected and 50% of any insufficient funds fees, late fees and certain other fees collected. DMH may also perform additional services at rates that would be payable to unrelated parties.

PORT II is a newly-organized Maryland corporation formed and sponsored by the Advisor to acquire, own and operate single family homes as rental properties as well as to acquire and own other interests, including mortgages on or securities related to single family homes. The Company has contributed $5 million in capital to PORT II OP. The Company made its investment through PORT OP, of which the Company owns 96.1% of the equity as of November 13, 2020.

Subordinated Performance Fee Due Upon Termination to KBS Capital Advisors

The Company and KBS Capital Advisors agreed to terminate their advisory agreement effective October 31, 2019. In connection with that agreement, the Company agreed to pay KBS Capital Advisors a subordinated performance fee due upon termination in the form of Restricted Stock, to be paid to KBS Capital Advisors upon the filing of its Annual Report on Form 10-K for the year ended December 31, 2019. The number of Restricted Stock to be awarded has been set at 3,411,737 shares and was issued on March 27, 2020. This termination payout value to KBS Capital Advisors (the “KBS Termination Fee Value”) was determined based on the Company’s performance from inception through September 30, 2018. In other words, it was based on the Company’s participation fee potential liability to KBS Capital Advisors calculated with respect to the November 12, 2018 estimated value per share. As a result, when the Company hired the Advisor as the Company’s new advisor on November 1, 2019, the Company agreed to a participation fee that was based on the Company’s performance from September 30, 2018. The Restricted Stock vests on November 1, 2021. Within 60 days from vesting of the Restricted Stock, the Company will redeem 50% of the Restricted Stock, with the amount of the cash payment per share determined based on the then most recent net asset value of the shares (which shall not be more than six months old). The remaining vested Restricted Stock (the “Remaining Shares”) shall not be eligible for redemption under the Company’s share redemption program unless the Company has satisfied all outstanding redemption requests from other stockholders, provided that (a) this restriction may be waived in certain situations, such as upon a change of control of the Company and (b) notwithstanding the foregoing, within 60 days after November 1, 2024, the Company shall be required to redeem any Remaining Shares, separate and outside of any general stockholder share redemption program, at the then most recent net asset value per share (which shall not be more than six months old), provided that such outstanding shares are owned or controlled by Charles J. Schreiber, Jr. or the estate of Peter M. Bren, and provided further that pursuant to this clause (b) the Company will only be required to redeem that number Remaining Shares which, when added to any previously redeemed Remaining Shares owned or controlled by Charles J. Schreiber, Jr. or the estate of Peter M. Bren, does not exceed two-thirds of the total number of Remaining Shares.

The Company also agreed with KBS Capital Advisors and the Advisor that with respect to any fiscal quarter that any matter related to the award of Restricted Stock results in a company expense that falls within the definition of Total Operating Expenses (as defined in the Company’s charter), if Total Operating Expenses for the four consecutive fiscal quarters then ended exceed the 2%/25% Guidelines (as defined in the Company’s charter), then the Company’s conflicts committee will determine an Excess Amount (as defined in the Company’s charter) is justified, based on unusual and non-recurring factors that it deems sufficient, in an amount sufficient (a) to allow the portion of Total Operating Expenses for the four consecutive fiscal quarters then ended comprised of the Restricted Stock expenses to be paid or incurred by the Company without reimbursement by the Advisor (as defined in the Company’s charter) and (b) to allow any other portion of Total Operating Expenses for the four consecutive fiscal quarters then ended to be paid or incurred by the Company without reimbursement by the Advisor, to the extent such portion alone (i.e., that portion of Total Operating Expenses exclusive of the Restricted Stock expenses) would not have exceeded the 2%/25% Guidelines.

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INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

9 Months Ended

Sep. 30, 2020

Equity Method Investments and Joint Ventures [Abstract]

INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

As of September 30, 2020 and December 31, 2019, the Company’s investments in unconsolidated joint ventures were composed of the following (dollars in thousands):

	Number of Properties as of September 30, 2020			Investment Balance at
Joint Venture		Location	Ownership %	September 30, 2020		December 31, 2019
NIP Joint Venture	—	—	—	$	—	$	1,225
110 William Joint Venture	1	New York, New York	60.0%	—		—
353 Sacramento Joint Venture	1	San Francisco, California	55.0%	43,790		42,214
Battery Point Series A-3 Preferred Units	N/A	N/A	N/A	—		13,991
Pacific Oak Opportunity Zone Fund I	3	Various	N/A	20,891		20,846
PORT II OP LP	7	Southaven, Mississippi	N/A	5,005		—
				$	69,686	$	78,276

Investment in National Industrial Portfolio Joint Venture

On May 18, 2012, the Company, through an indirect wholly owned subsidiary, entered into a joint venture (the “NIP Joint Venture”) with OCM NIP JV Holdings, L.P. and HC KBS NIP JV, LLC (“HC-KBS”). The NIP Joint Venture has invested in a portfolio of industrial properties. The Company made an initial capital contribution of $8.0 million, which represents less than a 5.0% ownership interest in the NIP Joint Venture as of September 30, 2020.

Prior to January 17, 2018, KBS REIT I, an affiliate of KBS Capital Advisors, was a member of HC-KBS and had a participation interest in certain future potential profits generated by the NIP Joint Venture.  However, KBS REIT I did not have any equity interest in the NIP Joint Venture. On January 17, 2018, KBS REIT I assigned its participation interest in the NIP Joint Venture to one of the other joint venture partners in the NIP Joint Venture. None of the other joint venture partners are affiliated with the Company or the Advisor.

During the nine months ended September 30, 2020, the NIP Joint Venture sold the remaining properties. During the nine months ended September 30, 2020, the Company received a distribution of $1.3 million related to its investment in the NIP Joint Venture and the Company recognized $0.1 million as income distribution and $1.2 million as a return of capital from the NIP Joint Venture. During the nine months ended September 30, 2019, the Company received a distribution of $0.3 million related to its investment in the NIP Joint Venture, which is reflected as a return of capital from the NIP Joint Venture.

Investment in 110 William Joint Venture

On December 23, 2013, the Company, through an indirect wholly owned subsidiary, entered into an agreement with SREF III 110 William JV, LLC (the “110 William JV Partner”) to form a joint venture (the “110 William Joint Venture”). On May 2, 2014, the 110 William Joint Venture acquired an office property containing 928,157 rentable square feet located on approximately 0.8 acres of land in New York, New York (“110 William Street”). Each of the Company and the 110 William JV Partner hold a 60% and 40% ownership interest in the 110 William Joint Venture, respectively.

The Company exercises significant influence over the operations, financial policies and decision making with respect to the 110 William Joint Venture but significant decisions require approval from both members. Accordingly, the Company has accounted for its investment in the 110 William Joint Venture under the equity method of accounting. Income, losses, contributions and distributions are generally allocated based on the members’ respective equity interests.

As of September 30, 2020 and December 31, 2019, the book value of the Company’s investment in the 110 William Joint Venture was $0. During the nine months ended September 30, 2019, the 110 William Joint Venture made a $7.8 million distribution to the Company and a $5.2 million distribution to the 110 William JV Partner funded with proceeds from the 110 William refinancing (discussed below). The distribution exceeded the book value of the Company’s investment in the 110 William Joint Venture, and the Company recorded the $7.8 million distribution as a gain included in equity in income of unconsolidated joint ventures during the nine months ended September 30, 2019. This gain was recorded because the Company determined that the distribution is not refundable and it does not have an implicit or explicit commitment to fund the 110 William Joint Venture. During the nine months ended September 30, 2019, the Company suspended the equity method of accounting and the Company will not record the Company's share of losses and will not record the Company's share of any subsequent income for the 110 William Joint Venture until the Company’s share of net income exceeds the gain recorded and the Company’s share of the net losses not recognized during the period the equity method was suspended. During the nine months ended September 30, 2020, the Company did not record equity in income from the 110 William Joint venture.

Summarized financial information for the 110 William Joint Venture follows (in thousands):

	September 30, 2020		December 31, 2019
Assets:
Real estate assets, net of accumulated depreciation and amortization	$	247,304	$	242,430
Other assets	43,178		35,747
Total assets	$	290,482	$	278,177
Liabilities and equity:
Notes payable, net	$	312,664	$	292,221
Other liabilities	8,257		10,664
Partners’ deficit	(30,439)		(24,708)
Total liabilities and equity	$	290,482	$	278,177

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenues	$	10,005	$	9,274	$	26,604	$	26,975
Expenses:
Operating, maintenance, and management	2,096		2,367		5,994		6,818
Real estate taxes and insurance	1,935		1,818		5,580		5,248
Depreciation and amortization	3,139		2,946		8,721		8,449
Interest expense	4,125		4,084		12,093		12,816
Total expenses	11,295		11,215		32,388		33,331
Total other income	12		34		50		105
Net loss	$	(1,278)	$	(1,907)	$	(5,734)	$	(6,251)
Company’s share of net loss (1)	$	(767)	$	(1,144)	$	(3,440)	$	(3,751)

_____________________

(1) During the three and nine months ended September 30, 2019, the Company recorded $0 and $0.3 million of net losses in equity in income of unconsolidated entities and suspended the recording of the Company’s remaining share of net losses. During the three and nine months ended September 30, 2020, the Company did not record equity in income of unconsolidated entities.

Investment in 353 Sacramento Joint Venture

On July 6, 2017, the Company, through an indirect wholly owned subsidiary, entered into an agreement with the Migdal Members to form a joint venture (the “353 Sacramento Joint Venture”). On July 6, 2017, the Company sold a 45% equity interest in an entity that owns an office building containing 284,751 rentable square feet located on approximately 0.35 acres of land in San Francisco, California (“353 Sacramento”) to the Migdal Members. The sale resulted in 353 Sacramento being owned by the 353 Sacramento Joint Venture, in which the Company indirectly owns 55% of the equity interests and the Migdal Members indirectly own 45% in the aggregate of the equity interests.

The Company exercises significant influence over the operations, financial policies and decision making with respect to the 353 Sacramento Joint Venture but significant decisions require approval from both members. Accordingly, the Company has accounted for its investment in the 353 Sacramento Joint Venture under the equity method of accounting. Income, losses, contributions and distributions are generally allocated based on the members’ respective equity interests.

Summarized financial information for the 353 Sacramento Joint Venture follows (in thousands):

	September 30, 2020		December 31, 2019
Assets:
Real estate assets, net of accumulated depreciation and amortization	$	183,176	$	180,592
Other assets	18,434		21,822
Total assets	$	201,610	$	202,414
Liabilities and equity:
Notes payable, net	$	115,500	$	115,280
Other liabilities	7,507		11,193
Partners’ capital	78,603		75,941
Total liabilities and equity	$	201,610	$	202,414

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenues	$	5,520	$	3,933	$	15,771	$	12,278
Expenses:
Operating, maintenance, and management	932		923		2,450		2,693
Real estate taxes and insurance	755		700		2,235		2,095
Depreciation and amortization	1,894		1,718		5,135		4,849
Interest expense	948		1,420		3,290		4,286
Total expenses	4,529		4,761		13,110		13,923
Net income (loss)	$	991	$	(828)	$	2,661	$	(1,645)
Company’s equity in income (loss) of unconsolidated joint venture	$	583	$	(419)	$	1,576	$	(798)

Battery Point Series A-3 Preferred Units

Beginning October 28, 2016, the Company invested in Battery Point Series B Preferred Units and on March 20, 2019, the Company, through an indirect wholly owned subsidiary, entered into a redemption agreement for the Battery Point Series B Preferred Units. The redemption agreement resulted in the redemption of the Company’s entire investment of 13,000 Series B Preferred Units with a per-unit price of $1,000 with an aggregate outstanding principal balance of $13.0 million. The Company received a principal paydown of $7.7 million plus accrued interest and an exit fee.  In addition, the Company received 210,000 shares of Battery Point Series A-3 Preferred Units with a per-unit price of $25 with an aggregate face amount of $5.3 million. The Battery Point Series A-3 Preferred Units are entitled to a monthly dividend based on an annual rate of 7.5%. The annual dividend rate increases to 10% for the Battery Point Series A-3 Preferred Units not redeemed by February 28, 2020 and to 11% for the Battery Point Series A-3 Preferred Units not redeemed by February 28, 2021. On each monthly dividend payment date, Battery Point has the obligation to use 20% of the net proceeds of any and all future equity capital raising to redeem the Series A-3 Preferred Units. The Battery Point Series A-3 Preferred Units are redeemable at any time by Battery Point and holders of Series A-3 Preferred Shares may elect to redeem their units beginning on February 28, 2021, subject to Battery Point’s board of directors’ determination that the company has sufficient cash.

During the year ended December 31, 2019, the Company purchased additional 430,000 shares of Battery Point Series A-3 Preferred Units for an aggregate amount of $10.8 million.

On July 1, 2020, the Company acquired, through its subsidiaries, Battery Point. As a result of the Battery Point acquisition, the Company’s 640,000 shares of Battery Point Series A-3 Preferred Units were eliminated in consolidation. During the nine months ended September 30, 2020 and 2019, the Company received distributions of $0.9 million and $0.2 million, respectively, which were recognized as dividend income from real estate equity securities.

Prior to the acquisition of Battery Point, the Company accounted for its investment in the Battery Point A-3 Preferred Units as an equity-method investment. The acquisition-date carrying value of the previous equity interest was $14.0 million and is included in the measurement of the consideration transferred. The Company recognized a gain of $2.0 million as a result of remeasuring its prior equity interest in the Battery Point A-3 Preferred Units held before the acquisition. The gain is included in the line item “Gain from remeasurement of prior equity interest” in the consolidated statement of operations.

Investment in Pacific Oak Opportunity Zone Fund I

During the year ended December 31, 2019, the Company acquired 91 Class A Units for $20.6 million in Pacific Oak Opportunity Zone Fund I. As of December 31, 2019, the book value of the Company’s investment in Pacific Oak Opportunity Zone Fund I was $20.8 million, which includes $0.2 million of acquisition fees. As of September 30, 2020, Pacific Oak Opportunity Zone Fund I consolidated three joint ventures with real estate under development. As of September 30, 2020, the Company has concluded that Pacific Oak Opportunity Zone Fund I qualifies as a VIE because there is insufficient equity at risk to finance the entity’s activities and the entity is structured with non-substantive voting rights. The Company concluded it is not the primary beneficiary of this VIE since it does not have the power to direct the activities that most significantly impact the entity’s economic performance and will account for its investment under the equity method of accounting.  

The Company’s maximum exposure to loss as a result of its involvement with this VIE is limited to the carrying value of the investment in Pacific Oak Opportunity Zone Fund I which totaled $20.9 million as of September 30, 2020. During both of the three and nine months ended September 30, 2020, the Company recorded $0.6 million of net loss in equity in income of unconsolidated entities.

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SUPPLEMENTAL CASH FLOW AND SIGNIFICANT NONCASH TRANSACTION DISCLOSURES

9 Months Ended

Sep. 30, 2020

Supplemental Cash Flow and Significant Noncash Transaction Disclosures [Abstract]

SUPPLEMENTAL CASH FLOW AND SIGNIFICANT NONCASH TRANSACTION DISCLOSURES

SUPPLEMENTAL CASH FLOW AND SIGNIFICANT NONCASH TRANSACTION DISCLOSURES

Supplemental cash flow and significant noncash transaction disclosures were as follows (in thousands):

	Nine Months Ended September 30,
	2020		2019
Supplemental Disclosure of Cash Flow Information:
Interest paid, net of capitalized interest of $2,368 and $2,079 for the nine months ended September 30, 2020 and 2019, respectively	$	18,945	$	21,981
Supplemental Disclosure of Significant Noncash Transactions:
Accrued improvements to real estate	2,393		3,414
Mortgage loan assumed by buyer in connection with sale of real estate	—		23,663
Redeemable common stock payable	262		3,423
Distributions paid to common stockholders through common stock issuances pursuant to the dividend reinvestment plan	262		835
Redemption of Series B Preferred Units in exchange for Series A-3 Preferred Units	—		2,992
Accrued preferred dividends	226		—
Assets and liabilities assumed in connection with Battery Point acquisition:			—
Real estate	56,148		—
Notes payable	36,003		—
Other assets	21		—
Other liabilities	355		—
Redeemable non-controlling interest	3,024		—
Series A-3 preferred units payable	16,000		—

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REPORTING SEGMENTS

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

REPORTING SEGMENTS

REPORTING SEGMENTS

The Company recognizes two reporting segments for the three and nine months ended September 30, 2020 and consists of strategic opportunistic properties and related investments and single-family homes. Corporate related costs are allocated to each respective segment. The selected financial information for the two reporting segments for the three months ended September 30, 2020 is as follows (in thousands):

	Three Months Ended September 30, 2020
	Strategic Opportunistic Properties		Single-Family Homes		Total
Total revenues	$	22,548	$	5,197	$	27,745
Total expenses	(26,285)		(5,969)		(32,254)
Total other (loss) income	(2,863)		4		(2,859)
Net loss	$	(6,600)	$	(768)	$	(7,368)

	Nine Months Ended September 30, 2020
	Strategic Opportunistic Properties		Single-Family Homes		Total
Total revenues	$	64,752	$	11,117	$	75,869
Total expenses	(66,928)		(13,203)		(80,131)
Total other (loss) income	(16,939)		54		(16,885)
Net loss	$	(19,115)	$	(2,032)	$	(21,147)

Total assets related to the two reporting segments as of September 30, 2020 and December 31, 2019 are as follows (in thousands):

	September 30, 2020
	Strategic Opportunistic Properties		Single-Family Homes		Total
Total assets	$	915,931	$	187,469	$	1,103,400
	December 31, 2019
	Strategic Opportunistic Properties		Single-Family Homes		Total
Total assets	$	921,917	$	119,325	$	1,041,242

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PORT PREFERRED STOCK

9 Months Ended

Sep. 30, 2020

Equity [Abstract]

PORT PREFERRED STOCK

PORT PREFERRED STOCK

A wholly owned subsidiary of the Company, PORT, has authorized and issued preferred stock. The Company has elected to use the measurement method described under ASC 480-10-S99-3A, paragraph 15(b), resulting in the preferred stock being classified in mezzanine equity and measured based on the estimated future redemption value as of September 30, 2020.

On November 6, 2019, PORT issued 15,000 shares out of its available 25,000,000 shares of Series A Cumulative Convertible Redeemable Preferred Stock for gross proceeds of $1,000 per share resulting in net proceeds of $15.0 million before issuance costs. The shares provide for an annual dividend of 6% payable quarterly, which increases to 12% if all shares are not redeemed by the Company immediately following the redemption date. However, the 12% dividend rate does not apply until the aggregate number of shares selected for redemption do not constitute 10% or more of all outstanding shares. The shares may be redeemed by the holders beginning on November 4, 2021 for $1,000 per share plus all accrued but unpaid dividends through the redemption date, or after November 4, 2022 for $1,120 per share plus all accrued but unpaid dividends through the redemption date. In addition, after November 4, 2020, the shares are redeemable at the Company’s option, at any time or from time to time, at a redemption price of $1,120 per share plus unpaid accrued dividends. Additionally, if the common shares of PORT are publicly traded, the holder may elect to convert its preferred shares into PORT common shares based on a value of the preferred shares of $1,120 per share plus unpaid accrued dividends, and a conversion price of the common shares as stated in the agreement.

On November 22, 2019, PORT issued 125 shares of its Series B Cumulative Redeemable Preferred Stock for gross proceeds of $1,000 per share resulting in net proceeds of $0.1 million after issuance costs. The shares provide for an annual dividend of 12.5% payable semiannually. The shares may be redeemed by the holders for $1,050 per share until December 31, 2021 and for $1,000 per share thereafter.

The following is a reconciliation of PORT’s noncontrolling cumulative convertible redeemable preferred stock for the nine months ended September 30, 2020:

	Series A Preferred Stock			Series B Preferred Stock
	Shares	Amounts		Shares	Amounts
Balance, December 31, 2019	15,000	$	14,909	125	$	99
Dividends Available Upon Redemption	—	781		—	7
Dividends Paid	—	(556)		—	(7)
Balance, September 30, 2020	15,000	$	15,134	125	$	99

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Economic Dependency

The Company is dependent on the Advisor 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 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 September 30, 2020. 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.

COVID-19

During the nine months ended September 30, 2020 and subsequent periods, efforts to slow the spread of the COVID-19 virus have had a significant impact on the U.S. economy. The Company continues to follow the policies described in Note 2 to the Consolidated Financial Statements contained in our 2019 Annual Report on Form 10-K, including those related to impairments of real estate assets and investments in unconsolidated affiliates and collectability assessments on operating lease receivables. While our current analyses did not result in any material adjustments to amounts as of and during the nine months ended September 30, 2020, circumstances related to the COVID-19 pandemic may result in recording impairments, lease modifications and changes to collectability assessments in future periods.

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.

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2020

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

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

Merger

On October 5, 2020, pursuant to the Merger Agreement, POSOR II merged with and into Merger Sub, with Merger Sub surviving as an indirect subsidiary of the Company (the “Merger”). At such time, in accordance with the applicable provisions of the Maryland General Corporation Law (the “MGCL”) and the Maryland Limited Liability Company Act, the separate existence of POSOR II ceased. At the effective time of the Merger, each issued and outstanding share of POSOR II’s common stock (or a fraction thereof), $0.01 par value per share, converted into 0.9643 shares of the Company’s common stock, $0.01 par value per share, or 28,973,906 shares of the Company’s common stock. The combined company after the Merger retains the name “Pacific Oak Strategic Opportunity REIT, Inc.” The Merger is intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended. The Company acquired two hotel properties, three office properties, one apartment building, one consolidated joint venture to develop one office/retail property, two real estate equity securities and two investments in unconsolidated entities. Additionally, the Company assumed $331.8 million of loans related to the acquired properties. Pro forma revenues and earnings have not been presented as the initial accounting for the transaction is incomplete as of the date of the consolidated financial statements are issued. The Company is in process of assessing the fair value of the acquired tangible assets, liabilities assumed and any applicable intangible assets and liabilities for this business combination.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Basis of Presentation

The accompanying unaudited consolidated financial statements and condensed notes thereto have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the FASB Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods. Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

Principles of Consolidation

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, 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 are eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

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 and capital improvements and replacements.

Redeemable Common Stock

The Company limits the dollar value of shares that may be redeemed under the share redemption program. During the nine months ended September 30, 2020, the Company had redeemed $0.8 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 September 2020 redemption date, except for 5,938,443 shares totaling $60.0 million due to the limitations under the share redemption program. The Company recorded $0.3 million and $0.8 million of redeemable common stock payable on the Company’s balance sheet as of September 30, 2020 and December 31, 2019, respectively, related to unfulfilled redemption requests received in good order under the share redemption program. Based on the eleventh amended and restated share redemption program, the Company has fully exhausted all redemption amounts for the remainder of 2020, including shares that are redeemed in connection with a stockholders’ death, “qualifying disability” or “determination of incompetence”. Effective beginning with the month of February 2020, the Company suspended (a) redemptions requested under the share redemption program in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence”, until the Company and POSOR II file with the SEC a registration statement on Form S-4 containing a Joint Proxy Statement/Prospectus for the Merger, and (b) all other redemptions under the share redemption program until after the Merger closes. The Form S-4 was filed on June 15, 2020 with the SEC and the Merger closed on October 5, 2020.

Segments

The Company has invested in opportunistic real estate, non-performing loans, other real estate-related assets and single-family homes. In general, the Company intends to hold its investments in opportunistic real estate, non-performing loans and other real estate-related assets for capital appreciation. Traditional performance metrics of opportunistic real estate, non-performing loans 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, non-performing loans and other real estate-related assets as similar investments. Substantially all of its revenue and net income (loss) is from opportunistic real estate, non-performing loans and other real estate-related assets, and therefore, the Company currently recognizes two reportable business segment consisting of strategic opportunity properties and related investments and single-family homes. The Company owns single-family homes in 17 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.

Per Share Data

The Company applies the two-class method when computing its earnings per share. Net income per share for each class of stock is calculated by assuming all of the Company’s net income (loss) is distributed to each class of stock based on their contractual rights.

Unvested restricted stock that contains non-forfeitable rights to distributions (whether paid or unpaid) are considered participating securities and are included in the computation of earnings per share.

Basic earnings (loss) per share of common stock is calculated by dividing net income (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. Potential common shares consist of unvested restricted stock, using the more dilutive of either the two-class method or the treasury stock method.

The noncontrolling Series A convertible redeemable preferred shares of Pacific Oak Residential Trust, Inc. (“PORT”) are not included as the preferred shares are convertible contingent on the common stock of PORT being publicly traded. If PORT common stock becomes publicly traded, the per-share earnings of PORT will be included in the Company’s EPS computations based on the consolidated holdings of PORT. See Note 14, “PORT Preferred Stock” for more information.

The Company’s unvested Restricted Stock have been included in the calculation of basic and diluted earnings per share for the three and nine months ended September 30, 2020, as the restriction is not contingent on any conditions except the passage of time.

Square Footage, Occupancy and Other Measures

Any references to square footage, 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 financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board.

Recently Issued Accounting Standards Updates

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments (“ASU No. 2016-13”). ASU No. 2016-13 affects entities holding financial assets and net investments in leases that are not accounted for at fair value through net income. The amendments in ASU No. 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. ASU No. 2016-13 also amends the impairment model for available-for-sale debt securities. An entity will recognize an allowance for credit losses on available-for-sale debt securities as a contra-account to the amortized cost basis rather than as a direct reduction of the amortized cost basis of the investment, as is currently required. ASU No. 2016-13 also requires new disclosures. For financial assets measured at amortized cost, an entity will be required to disclose information about how it developed its allowance for credit losses, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes. For financing receivables and net investments in leases measured at amortized cost, an entity will be required to further disaggregate the information it currently discloses about the credit quality of these assets by year of the asset’s origination for as many as five annual periods. For available-for-sale debt securities, an entity will be required to provide a roll-forward of the allowance for credit losses and an aging analysis for securities that are past due. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which clarified that receivables from operating leases are not within the scope of Topic 326 and instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842. The Company adopted ASU No. 2016-13 on January 1, 2020 and it did not have a material effect on its financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848). ASU No. 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU No. 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the six months ended September 30, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. For the period from January 1, 2020 (the earliest date the Company may elect to apply ASU No. 2020-04) through September 30, 2020, the Company did not have any contract modifications that meet the criteria described above, specifically contract modifications that have been modified from LIBOR to an alternative reference rate. The Company’s loan agreements, derivative instruments, and certain lease agreements use LIBOR as the current reference rate. For eligible contract modifications, the Company expects to adopt the temporary optional expedients described in ASU No. 2020-04. The optional expedients for hedging relationships described in ASU No. 2020-04 are not expected to have an impact to the Company, as the Company has elected to not designate its derivative instruments as a hedge.

In April 2020, the FASB issued a FASB Staff Q&A related to Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic (the “Topic 842 Q&A”) which focused on the application of lease guidance for concessions related to the effects of the COVID-19 pandemic. In this Q&A document, the FASB staff will allow entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how those concessions would be accounted for under Topic 842, Leases, ("Topic 842") as though enforceable rights and obligations for those qualifying concessions existed. The Company adopted this guidance and did not have any material lease concessions related to the effects of the COVID-19 pandemic that had a material impact to the Company’s consolidated balance sheet as of September 30, 2020 or consolidated statement of operations for the nine months ended September 30, 2020.

Fair Value Measurement

Disclosure of the fair value of financial instruments 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.

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REAL ESTATE HELD FOR INVESTMENT (Tables)

9 Months Ended

Sep. 30, 2020

Real Estate [Abstract]

Schedule of Real Estate Investments

The following table summarizes the Company’s real estate held for investment as of September 30, 2020 and December 31, 2019, respectively (in thousands):

	September 30, 2020		December 31, 2019
Land	$	193,602	$	175,317
Buildings and improvements	689,202		618,974
Tenant origination and absorption costs	27,984		30,569
Total real estate, cost	910,788		824,860
Accumulated depreciation and amortization	(88,290)		(65,381)
Total real estate, net	$	822,498	$	759,479

The following table provides summary information regarding the Company’s real estate held for investment as of September 30, 2020 (in thousands):

Property	Date Acquired or Foreclosed on	City	State	Property Type	Land		Building and Improvements		Tenant Origination and Absorption		Total Real Estate, at Cost		Accumulated Depreciation and Amortization		Total Real Estate, Net		Ownership %
Richardson Portfolio:
Palisades Central I	11/23/2011	Richardson	TX	Office	$	1,037	$	13,035	$	—	$	14,072	$	(4,194)	$	9,878	90.0	%
Palisades Central II	11/23/2011	Richardson	TX	Office	810		22,016		—		22,826		(6,496)		16,330		90.0	%
Greenway I	11/23/2011	Richardson	TX	Office	561		2,456		—		3,017		(1,176)		1,841		90.0	%
Greenway III	11/23/2011	Richardson	TX	Office	702		3,960		—		4,662		(1,584)		3,078		90.0	%
Undeveloped Land	11/23/2011	Richardson	TX	Undeveloped Land	3,134		—		—		3,134		—		3,134		90.0	%
Total Richardson Portfolio					6,244		41,467		—		47,711		(13,450)		34,261
Park Highlands (1)	12/30/2011	North Las Vegas	NV	Undeveloped Land	36,817		—		—		36,817		—		36,817		100.0%(1)
Park Centre	03/28/2013	Austin	TX	Office	3,251		34,766		—		38,017		(8,066)		29,951		100.0	%
1180 Raymond	08/20/2013	Newark	NJ	Apartment	8,292		39,231		—		47,523		(8,857)		38,666		100.0	%
Park Highlands II (1)	12/10/2013	North Las Vegas	NV	Undeveloped Land	27,854		—		—		27,854		—		27,854		100.0%(1)
Richardson Land II	09/04/2014	Richardson	TX	Undeveloped Land	3,418		—		—		3,418		—		3,418		90.0	%
Crown Pointe	02/14/2017	Dunwoody	GA	Office	22,590		69,663		3,618		95,871		(13,987)		81,884		100.0	%
The Marq	03/01/2018	Minneapolis	MN	Office	10,387		81,976		3,551		95,914		(9,618)		86,296		100.0	%
City Tower	03/06/2018	Orange	CA	Office	13,930		137,780		6,713		158,423		(16,780)		141,643		100.0	%
Eight & Nine Corporate Centre	06/08/2018	Franklin	TN	Office	17,401		58,011		4,518		79,930		(6,639)		73,291		100.0	%
Georgia 400 Center	05/23/2019	Alpharetta	GA	Office	11,431		73,841		7,368		92,640		(6,426)		86,214		100.0	%
Single-Family Homes Portfolio	Multiple	Multiple	Multiple	Home	31,987		152,467		2,216		186,670		(4,467)		182,203		96.1%(2)
					$	193,602	$	689,202	$	27,984	$	910,788	$	(88,290)	$	822,498

_____________________

(1) The Company owns 100% of the common members’ equity of Park Highlands and Park Highlands II. On September 7, 2016 and January 8, 2019, a subsidiary of the Company that owns a portion of Park Highlands and Park Highlands II, sold 820 units of 10% Class A non-voting preferred membership units for $0.8 million and 1,927 units of 10% Class A2 non-voting preferred membership units for $1.9 million, respectively, to accredited investors. The amount of the Class A and A2 non-voting preferred membership units raised, net of offering costs, is included in other liabilities on the accompanying consolidated balance sheets.

(2) As of September 30, 2020, the Company owned 96.1% of the equity of the single-family homes portfolio. All of these single-family homes are held by PORT OP, LP (“PORT OP”). PORT, a wholly owned subsidiary of the Company, owns 96.1% of the equity in PORT OP. PORT OP qualifies as a VIE and the Company is the primary beneficiary. In addition, PORT has authorized and issued preferred stock. See Note 14V, “PORT Preferred Stock” for more information.

Schedule of Future Minimum Rental Income for Company's Properties

As of September 30, 2020, the future minimum rental income from the Company’s properties, excluding apartment leases and single-family homes, under non-cancelable operating leases was as follows (in thousands):

October 1, 2020 through December 31, 2020	$	14,056
2021	57,171
2022	50,817
2023	42,545
2024	36,856
Thereafter	92,949
	$	294,394

Schedule of Real Estate by Industry

The Company’s highest tenant industry concentrations (greater than 10% of annualized base rent) were as follows:

Industry	Number of Tenants	Annualized Base Rent (1) (in thousands)		Percentage of Annualized Base Rent
Insurance	25	$	7,256	11.8	%
Computer Systems Design	25	7,088		11.5	%
Health Care and Social Assistance	15	6,769		11.0	%
		$	21,113	34.3	%

_____________________

(1) Annualized base rent represents annualized contractual base rental income as of September 30, 2020, 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.

Schedule of Redeemable Non-controlling Interest Activities

The following table summarizes the redeemable non-controlling interest activity related to the BPT Holdings for the nine months ended September 30, 2020 (in thousands):

Issuance of PORT OP Units	$	3,024
Net loss attributable to redeemable noncontrolling interest	(23)
September 30, 2020	$	3,001

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TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES (Tables)

9 Months Ended

Sep. 30, 2020

Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities [Abstract]

Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities

As of September 30, 2020 and December 31, 2019, the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities (excluding fully amortized assets and liabilities and accumulated amortization) were as follows (in thousands):

	Tenant Origination and Absorption Costs				Above-Market Lease Assets				Below-Market Lease Liabilities
	September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019
Cost	$	27,984	$	30,569	$	3,499	$	3,714	$	(4,122)	$	(4,958)
Accumulated Amortization	(11,861)		(10,223)		(767)		(741)		1,618		1,778
Net Amount	$	16,123	$	20,346	$	2,732	$	2,973	$	(2,504)	$	(3,180)

Amortization of Tenant Origination and Absorption Costs, Above-Market Leases and Below-Market Lease Liabilities

Increases (decreases) in net income as a result of amortization of the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities for the three and nine months ended September 30, 2020 and 2019 were as follows (in thousands):

	Tenant Origination and Absorption Costs				Above-Market Lease Assets				Below-Market Lease Liabilities
	For the Three Months Ended September 30,				For the Three Months Ended September 30,				For the Three Months Ended September 30,
	2020		2019		2020		2019		2020		2019
Amortization	$	(1,625)	$	(2,000)	$	(74)	$	(101)	$	194	$	421

	Tenant Origination and Absorption Costs				Above-Market Lease Assets				Below-Market Lease Liabilities
	For the Nine Months Ended September 30,				For the Nine Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019		2020		2019
Amortization	$	(4,965)	$	(5,324)	$	(241)	$	(303)	$	676	$	1,159

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REAL ESTATE EQUITY SECURITIES (Tables)

9 Months Ended

Sep. 30, 2020

Investments, Debt and Equity Securities [Abstract]

Schedule of Real Estate Equity Securities

The following table sets forth the number of shares owned by the Company and the related carrying value of the shares as of September 30, 2020 and December 31, 2019 (dollars in thousands):

	September 30, 2020			December 31, 2019
Real Estate Equity Security	Number of Shares Owned	Total Carrying Value		Number of Shares Owned	Total Carrying Value
Keppel Pacific Oak US REIT	64,165,352	$	46,520	64,165,352	$	50,049
Franklin Street Properties Corp.	5,211,021	19,072		2,773,729	23,743
Plymouth Industrial REIT, Inc.	1,521,276	18,773		415,841	7,647
	70,897,649	$	84,365	67,354,922	$	81,439

Gain (Loss) on Investments

The following summarizes the portion of gain and loss for the period related to real estate equity securities held during the three and nine months ended September 30, 2020 and 2019 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net (loss) gain recognized during the period on real estate equity securities	$	(6,527)	$	3,845	$	(21,620)	$	19,304
Less net gain recognized during the period on real estate equity securities sold during the period	—		—		(711)		(3,397)
Unrealized (loss) gain recognized during the reporting period on real estate equity securities held at the end of the period	$	(6,527)	$	3,845	$	(22,331)	$	15,907

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REAL ESTATE SOLD (Tables)

9 Months Ended

Sep. 30, 2020

Discontinued Operations and Disposal Groups [Abstract]

Schedule of Revenue and Expenses of Real Estate Held-for-Sale

The following table summarizes certain revenue and expenses related to these properties for the three and nine months ended September 30, 2020 and 2019 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenues
Rental income	$	—	$	3,443	$	138	$	10,566
Other operating income	—		254		40		828
Total revenues	$	—	$	3,697	$	178	$	11,394
Expenses
Operating, maintenance, and management costs	$	—	$	1,042	$	86	$	3,030
Real estate taxes and insurance	—		710		—		2,110
Asset management fees to affiliate	—		250		—		784
Depreciation and amortization	—		1,183		—		3,784
Interest expense	—		596		—		2,086
Total expenses	$	—	$	3,781	$	86	$	11,794

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NOTES AND BONDS PAYABLE (Tables)

9 Months Ended

Sep. 30, 2020

Notes and Bonds Payable [Abstract]

Schedule of Long-term Debt Instruments

As of September 30, 2020 and December 31, 2019, the Company’s notes and bonds payable consisted of the following (dollars in thousands):

	Book Value as of September 30, 2020		Book Value as of December 31, 2019		Contractual Interest Rate as of September 30, 2020 (1)	Effective Interest Rate at September 30, 2020 (1)	Payment Type (3)	Maturity Date (2)
Richardson Portfolio Mortgage Loan	$	36,000	$	36,000	One-Month LIBOR + 2.50%	2.65%	Interest Only (3)	11/01/2021
Park Centre Mortgage Loan	21,970		21,970		One-Month LIBOR + 1.75%	1.90%	Interest Only	06/27/2022
1180 Raymond Mortgage Loan	29,948		30,250		One-Month LIBOR + 2.50% (7)	3.50%	Principal & Interest	12/01/2021
1180 Raymond Bond Payable	5,930		6,080		6.50%	6.50%	Principal & Interest	09/01/2036
Pacific Oak SOR (BVI) Holdings, Ltd. Series A Debentures (4)	169,927		224,746		4.25%	4.25%	(4)	03/01/2023
Pacific Oak SOR (BVI) Holdings, Ltd. Series B Debentures (4)	74,159		—		3.93%	3.93%	(4)	01/31/2026
Crown Pointe Mortgage Loan	53,254		51,171		One-Month LIBOR + 2.60%	2.75%	Principal & Interest	02/13/2021
City Tower Mortgage Loan	94,167		89,000		One-Month LIBOR + 1.55%	1.70%	Interest Only	03/05/2021
The Marq Mortgage Loan	58,331		53,408		One-Month LIBOR + 1.55%	1.70%	Interest Only	06/06/2021
Eight & Nine Corporate Centre Mortgage Loan	47,066		43,880		One-Month LIBOR + 1.60%	1.75%	Interest Only	06/08/2021
Georgia 400 Center Mortgage Loan	59,690		59,690		One-Month LIBOR + 1.55%	1.70%	Interest Only	05/22/2023
PORT Mortgage Loan 1	51,362		51,362		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 Mortgage Loan 3	12,000		—		5.00% (5)	5.00%	Interest Only	03/31/2021
Battery Point Trust Mortgage Loan	38,743		—		One-Month LIBOR + 2.50% (7)	3.50%	Interest Only	03/20/2022
Total Notes and Bonds Payable principal outstanding	763,070		678,080
Net premium on Notes and Bonds Payable (6)	175		783
Deferred financing costs, net	(5,170)		(5,200)
Total Notes and Bonds Payable, net	$	758,075	$	673,663

_____________________

(1) Contractual interest rate represents the interest rate in effect under the loan as of September 30, 2020. Effective interest rate is calculated as the actual interest rate in effect as of September 30, 2020 (consisting of the contractual interest rate and contractual floor rates), using interest rate indices at September 30, 2020, where applicable.

(2) Represents the initial maturity date or the maturity date as extended as of September 30, 2020; 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 September 30, 2020. 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) See “ – Israeli Bond Financing” below.

(5) Contractual interest is 5.0% through November 30, 2020 and 6.5% from December 1, 2020 through March 31, 2021.

(6) 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 premium/discount is amortized over the remaining life of the notes and bonds payable.

(7) The mortgage loans have a LIBOR floor of 1%.

Schedule of Maturities of Long-term Debt

The following is a schedule of maturities, including principal amortization payments, for all notes and bonds payable outstanding as of September 30, 2020 (in thousands):

October 1, 2020 through December 31, 2020	$	507
2021	387,178
2022	117,595
2023	116,587
2024	24,990
Thereafter	116,213
	$	763,070

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DERIVATIVE INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Foreign Currency Collar

The following table summarizes the notional amount and other information related to the Company’s foreign currency collars as of September 30, 2020 and December 31, 2019. The notional amount is an indication of the extent of the Company’s involvement in each instrument at that time, but does not represent exposure to credit, interest rate or market risks (currency in thousands):

	September 30, 2020		December 31, 2019		Strike Price	Trade Date	Maturity Date
Derivative Instruments	Number of Instruments	Notional Amount	Number of Instruments	Notional Amount
Derivative instruments not designated as hedging instruments
Foreign currency collar	—	—	—	—	3.70 - 3.82 ILS - USD	03/17/2020	9/16/2020 (1)
Foreign currency collar	—	—	—	—	3.5875 - 3.725 ILS - USD	03/16/2020	9/16/2020 (1)
Foreign currency collar	—	—	1	776,182 ILS	3.38 - 3.4991 ILS - USD	11/25/2019	02/26/2020

____________________

(1) On July 29, 2020, the Company terminated the foreign currency collars and as a result received $14.1 million.

Schedule of Interest Rate Derivatives

The following table summarizes the notional amounts and other information related to the Company’s derivative instruments as of September 30, 2020. The notional amount is an indication of the extent of the Company’s involvement in the instrument at that time, but does not represent exposure to credit, interest rate or market risks (dollars in thousands):

Derivative Instrument	Effective Date	Maturity Date	Notional Value		Reference Rate
Interest rate cap	04/02/2018	03/05/2021	$	77,513	One-month LIBOR at 3.50%
Interest rate cap	06/21/2019	05/22/2023	$	51,252	One-month LIBOR at 4.00%
Interest rate cap	02/12/2020	02/16/2021	$	46,875	One-month LIBOR at 3.00%

Schedule of Derivative Instruments in Statement of Financial Position

The following table sets forth the fair value of the Company’s derivative instruments as well as their classification on the consolidated balance sheets as of September 30, 2020 and December 31, 2019 (dollars in thousands):

		September 30, 2020			December 31, 2019
Derivative Instruments	Balance Sheet Location	Number of Instruments	Fair Value		Number of Instruments	Fair Value
Derivative instruments not designated as hedging instruments
Interest rate caps	Prepaid expenses and other assets	3	$	8	3	$	12
Foreign currency collars	Prepaid expenses and other assets (Other liabilities)	—	$	—	1	$	(179)

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FAIR VALUE DISCLOSURES (Tables)

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

Schedule of Face Value, Carrying Amounts and Fair Value

The following were the face values, carrying amounts and fair values of the Company’s financial instruments as of September 30, 2020 and December 31, 2019, which carrying amounts do not approximate the fair values (in thousands):

	September 30, 2020						December 31, 2019
	Face Value		Carrying Amount		Fair Value		Face Value		Carrying Amount		Fair Value
Financial liabilities (Level 3):
Notes and bond payable	$	518,984	$	517,731	$	524,259	$	453,334	$	451,743	$	455,849
Financial liabilities (Level 1):
Pacific Oak SOR (BVI) Holdings, Ltd. Series A Debentures	$	169,927	$	168,190	$	158,620	$	224,746	$	221,920	$	229,877
Pacific Oak SOR (BVI) Holdings, Ltd. Series B Debentures	$	74,159	$	72,154	$	60,325	$	—	$	—	$	—

Fair Value, Assets Measured on Recurring Basis

As of September 30, 2020, the Company measured the following assets at fair value (in thousands):

			Fair Value Measurements Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring Basis:
Real estate equity securities	$	84,365	$	84,365	$	—	$	—
Asset derivative - interest rate caps	$	8	$	—	$	8	$	—

As of December 31, 2019, the Company measured the following assets and liabilities at fair value (in thousands):

			Fair Value Measurements Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring Basis:
Real estate equity securities	$	81,439	$	81,439	$	—	$	—
Asset derivative - interest rate caps	$	12	$	—	$	12	$	—
Liability derivative - foreign currency collar	$	(179)	$	—	$	(179)	$	—

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RELATED PARTY TRANSACTIONS (Tables)

9 Months Ended

Sep. 30, 2020

Related Party Transactions [Abstract]

Schedule of Related Party Costs

Pursuant to the terms of these agreements, summarized below are the related-party costs incurred by the Company for the three and nine months ended September 30, 2020 and 2019, respectively, and any related amounts payable as of September 30, 2020 and December 31, 2019 (in thousands):

	Incurred								Payable as of
	Three Months Ended September 30,				Nine Months Ended September 30,				September 30, 2020		December 31, 2019
Expensed	2020		2019		2020		2019
Asset management fees	$	2,426	$	2,093	$	6,867	$	5,954	$	2,538	$	1,498
Property management fees (1)	114		—		114		—		—		—
Reimbursable operating expenses (2)	56		79		148		251		—		—
Disposition fees (3)	—		233		—		627		—		—
Change in subordinated performance fee due upon termination to affiliate (4)	(1,121)		—		(814)		—		(3)		(3)
Capitalized
Acquisition fees on real estate equity securities	—		—		122		—		—		—
Acquisition fee on real estate	—		—		171		897		—		—
Acquisition fee on investment in unconsolidated entities	—		—		—		50		—		137
Investment in PORT II (5)	—		—		—		—		3,911		—
	$	1,475	$	2,405	$	6,608	$	7,779	$	6,449	$	1,635

_____________________

(1) Property management fees are for single-family homes under Battery Point and paid to DayMark. These fees are included in the line item “Operating, maintenance, and management cost” in the consolidated statement of operations.

(2) The relevant advisor may seek reimbursement for certain employee costs under the relevant advisory agreement. The Company has reimbursed the relevant advisor for the Company’s allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to the Company. These amounts totaled $65,000 and $198,000 for the three and nine months ended September 30, 2019, respectively, and were the only employee costs reimbursed under the advisory agreement during these periods. There were no employee cost reimbursements during 2020. The Company will not reimburse for employee costs in connection with services for which the Advisor earns acquisition, origination or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries or benefits the Advisor or its affiliates may pay to the Company’s executive officers. In addition to the amounts above, the Company reimburses the Advisor for certain of the Company’s direct costs incurred from third parties that were initially paid by the Advisor on behalf of the Company.

(3) Disposition fees with respect to real estate sold are included in the gain on sale of real estate in the accompanying consolidated statements of operations.

(4) Change in estimate of fees payable to KBS Capital Advisors due to the termination of the former advisory agreement with KBS Capital Advisors. See “Subordinated Performance Fee Due Upon Termination to KBS Capital Advisors”, below, for more details.

(5) During the nine months ended September 30, 2020, the Company, through a subsidiary of PORT OP, invested $5.0 million in PORT II OP LP (“PORT II OP”), of which $3.9 million was payable. See "PORT II" below for more details.

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INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (Tables)

9 Months Ended

Sep. 30, 2020

Schedule of Equity Method Investments [Line Items]

Schedule of Investments in Unconsolidated Joint Ventures

As of September 30, 2020 and December 31, 2019, the Company’s investments in unconsolidated joint ventures were composed of the following (dollars in thousands):

	Number of Properties as of September 30, 2020			Investment Balance at
Joint Venture		Location	Ownership %	September 30, 2020		December 31, 2019
NIP Joint Venture	—	—	—	$	—	$	1,225
110 William Joint Venture	1	New York, New York	60.0%	—		—
353 Sacramento Joint Venture	1	San Francisco, California	55.0%	43,790		42,214
Battery Point Series A-3 Preferred Units	N/A	N/A	N/A	—		13,991
Pacific Oak Opportunity Zone Fund I	3	Various	N/A	20,891		20,846
PORT II OP LP	7	Southaven, Mississippi	N/A	5,005		—
				$	69,686	$	78,276

110 William Joint Venture

Schedule of Equity Method Investments [Line Items]

Schedule of Investments in Unconsolidated Joint Ventures

Summarized financial information for the 110 William Joint Venture follows (in thousands):

	September 30, 2020		December 31, 2019
Assets:
Real estate assets, net of accumulated depreciation and amortization	$	247,304	$	242,430
Other assets	43,178		35,747
Total assets	$	290,482	$	278,177
Liabilities and equity:
Notes payable, net	$	312,664	$	292,221
Other liabilities	8,257		10,664
Partners’ deficit	(30,439)		(24,708)
Total liabilities and equity	$	290,482	$	278,177

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenues	$	10,005	$	9,274	$	26,604	$	26,975
Expenses:
Operating, maintenance, and management	2,096		2,367		5,994		6,818
Real estate taxes and insurance	1,935		1,818		5,580		5,248
Depreciation and amortization	3,139		2,946		8,721		8,449
Interest expense	4,125		4,084		12,093		12,816
Total expenses	11,295		11,215		32,388		33,331
Total other income	12		34		50		105
Net loss	$	(1,278)	$	(1,907)	$	(5,734)	$	(6,251)
Company’s share of net loss (1)	$	(767)	$	(1,144)	$	(3,440)	$	(3,751)

_____________________

(1) During the three and nine months ended September 30, 2019, the Company recorded $0 and $0.3 million of net losses in equity in income of unconsolidated entities and suspended the recording of the Company’s remaining share of net losses. During the three and nine months ended September 30, 2020, the Company did not record equity in income of unconsolidated entities.

353 Sacramento Joint Venture

Schedule of Equity Method Investments [Line Items]

Schedule of Investments in Unconsolidated Joint Ventures

Summarized financial information for the 353 Sacramento Joint Venture follows (in thousands):

	September 30, 2020		December 31, 2019
Assets:
Real estate assets, net of accumulated depreciation and amortization	$	183,176	$	180,592
Other assets	18,434		21,822
Total assets	$	201,610	$	202,414
Liabilities and equity:
Notes payable, net	$	115,500	$	115,280
Other liabilities	7,507		11,193
Partners’ capital	78,603		75,941
Total liabilities and equity	$	201,610	$	202,414

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenues	$	5,520	$	3,933	$	15,771	$	12,278
Expenses:
Operating, maintenance, and management	932		923		2,450		2,693
Real estate taxes and insurance	755		700		2,235		2,095
Depreciation and amortization	1,894		1,718		5,135		4,849
Interest expense	948		1,420		3,290		4,286
Total expenses	4,529		4,761		13,110		13,923
Net income (loss)	$	991	$	(828)	$	2,661	$	(1,645)
Company’s equity in income (loss) of unconsolidated joint venture	$	583	$	(419)	$	1,576	$	(798)

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SUPPLEMENTAL CASH FLOW AND SIGNIFICANT NONCASH TRANSACTION DISCLOSURES (Tables)

9 Months Ended

Sep. 30, 2020

Supplemental Cash Flow and Significant Noncash Transaction Disclosures [Abstract]

Schedule of Cash Flow, Supplemental Disclosures

Supplemental cash flow and significant noncash transaction disclosures were as follows (in thousands):

	Nine Months Ended September 30,
	2020		2019
Supplemental Disclosure of Cash Flow Information:
Interest paid, net of capitalized interest of $2,368 and $2,079 for the nine months ended September 30, 2020 and 2019, respectively	$	18,945	$	21,981
Supplemental Disclosure of Significant Noncash Transactions:
Accrued improvements to real estate	2,393		3,414
Mortgage loan assumed by buyer in connection with sale of real estate	—		23,663
Redeemable common stock payable	262		3,423
Distributions paid to common stockholders through common stock issuances pursuant to the dividend reinvestment plan	262		835
Redemption of Series B Preferred Units in exchange for Series A-3 Preferred Units	—		2,992
Accrued preferred dividends	226		—
Assets and liabilities assumed in connection with Battery Point acquisition:			—
Real estate	56,148		—
Notes payable	36,003		—
Other assets	21		—
Other liabilities	355		—
Redeemable non-controlling interest	3,024		—
Series A-3 preferred units payable	16,000		—

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REPORTING SEGMENTS (Tables)

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment

The selected financial information for the two reporting segments for the three months ended September 30, 2020 is as follows (in thousands):

	Three Months Ended September 30, 2020
	Strategic Opportunistic Properties		Single-Family Homes		Total
Total revenues	$	22,548	$	5,197	$	27,745
Total expenses	(26,285)		(5,969)		(32,254)
Total other (loss) income	(2,863)		4		(2,859)
Net loss	$	(6,600)	$	(768)	$	(7,368)

	Nine Months Ended September 30, 2020
	Strategic Opportunistic Properties		Single-Family Homes		Total
Total revenues	$	64,752	$	11,117	$	75,869
Total expenses	(66,928)		(13,203)		(80,131)
Total other (loss) income	(16,939)		54		(16,885)
Net loss	$	(19,115)	$	(2,032)	$	(21,147)

Total assets related to the two reporting segments as of September 30, 2020 and December 31, 2019 are as follows (in thousands):

	September 30, 2020
	Strategic Opportunistic Properties		Single-Family Homes		Total
Total assets	$	915,931	$	187,469	$	1,103,400
	December 31, 2019
	Strategic Opportunistic Properties		Single-Family Homes		Total
Total assets	$	921,917	$	119,325	$	1,041,242

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PORT PREFERRED STOCK (Tables)

9 Months Ended

Sep. 30, 2020

Equity [Abstract]

Schedule of Stock by Class

The following is a reconciliation of PORT’s noncontrolling cumulative convertible redeemable preferred stock for the nine months ended September 30, 2020:

	Series A Preferred Stock			Series B Preferred Stock
	Shares	Amounts		Shares	Amounts
Balance, December 31, 2019	15,000	$	14,909	125	$	99
Dividends Available Upon Redemption	—	781		—	7
Dividends Paid	—	(556)		—	(7)
Balance, September 30, 2020	15,000	$	15,134	125	$	99

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ORGANIZATION (Details) $ / shares in Units, $ in Thousands									3 Months Ended		9 Months Ended		36 Months Ended	130 Months Ended
	Feb. 16, 2020 USD ($)	Nov. 01, 2019	Mar. 20, 2019 USD ($)	Mar. 08, 2016 USD ($)	Mar. 08, 2016 ILS (₪)	Mar. 08, 2016 ILS (₪)	Mar. 07, 2016 ILS (₪)	Mar. 01, 2016 ILS (₪)	Sep. 30, 2020 USD ($) shares	Sep. 30, 2019 USD ($) shares	Sep. 30, 2020 USD ($) shares	Sep. 30, 2019 USD ($) shares	Nov. 14, 2012 USD ($) shares	Sep. 30, 2020 USD ($) shares	Sep. 30, 2020 $ / shares	Sep. 30, 2020 USD ($)	Sep. 30, 2020 property	Sep. 30, 2020 a	Sep. 30, 2020 portfolio	Sep. 30, 2020 unit	Sep. 30, 2020 investment	Mar. 27, 2020 shares	Feb. 19, 2020	Feb. 16, 2020 ILS (₪)	Dec. 31, 2019 USD ($) $ / shares shares	Mar. 02, 2016 ILS (₪)	Dec. 18, 2015 shares	Oct. 23, 2012 USD ($) shares	Dec. 29, 2011 USD ($) shares	Jan. 08, 2009 shares
Organizational Structure [Line Items]
Common stock, shares authorized (in shares)									1,000,000,000		1,000,000,000			1,000,000,000											1,000,000,000
Common stock, shares issued (in shares)									69,225,016		69,225,016			69,225,016											65,866,765			55,249	220,994
Period of termination of advisory agreement without cause or penalty		60 days
Common stock, par value (in dollars per share) | $ / shares															$ 0.01										$ 0.01
Issuance of common stock | $										$ 271	$ 262	$ 835	$ 561,700
Shares of common stock sold under dividend reinvestment plan, value | $														$ 76,500
Redemptions of common stock | $			$ 8,600						$ 6	$ 2,326	$ 830	$ 7,433		$ 286,300
Common stock, value, issued | $																$ 693									$ 659			$ 500	$ 2,000
Preferred stock, shares issued (in shares)									0		0			0											0
Number of investments in unconsolidated joint venture | investment																					6
Number of investments in equity securities | investment																					3
Office Properties
Organizational Structure [Line Items]
Number of real estate properties consolidated | property																	6
Number of real estate properties | property																	6
Office Portfolio
Organizational Structure [Line Items]
Number of real estate properties consolidated | portfolio																			1
Office Buildings, Portfolio
Organizational Structure [Line Items]
Number of real estate properties consolidated | property																	4
Undeveloped Land, Portfolio
Organizational Structure [Line Items]
Real estate area of undeveloped land | a																		14
Apartment Property
Organizational Structure [Line Items]
Number of real estate properties consolidated | property																	1
Undeveloped Land
Organizational Structure [Line Items]
Real estate area of undeveloped land | a																		1,000
Number of investments in real estate | investment																					3
Residential Home Portfolio
Organizational Structure [Line Items]
Number of real estate properties																	1		1
Number of units in real estate property | unit																				1,769
Series A Debentures | Bonds Payable
Organizational Structure [Line Items]
Maximum borrowing capacity | ₪																										₪ 1,000,000,000
Contractual interest rate, percentage																										4.25%
Proceeds from issuance of debt				$ 249,200	₪ 970,200,000	₪ 970,200,000	₪ 127,700,000	₪ 842,500,000
Contractual Interest Rate																										4.25%
Series B Debentures | Bonds Payable
Organizational Structure [Line Items]
Maximum borrowing capacity	$ 74,100																							₪ 254,100,000
Contractual interest rate, percentage	3.93%																							3.93%
Contractual Interest Rate	3.93%																							3.93%
Principal of installment payments as percent of face amount	33.33%
Special Dividends
Organizational Structure [Line Items]
Common stock, shares issued (in shares)									25,976,746		25,976,746			25,976,746
Maximum | Series A Debentures | Bonds Payable
Organizational Structure [Line Items]
Contractual interest rate, percentage																										4.25%
Contractual Interest Rate																										4.25%
Common Stock
Organizational Structure [Line Items]
Shares registered in primary offering (in shares)																														100,000,000
Shares registered for sale under dividend reinvestment plan (in shares)																														40,000,000
Issuance of common stock (in shares)										27,434	24,645	84,248	56,584,976
Issuance of common stock | $												$ 1
Shares of common stock sold under dividend reinvestment plan, (in shares)														6,851,969
Redemptions of common stock (in shares)									601	245,571	78,131	782,391		23,897,205
Redemptions of common stock | $										$ 2		$ 8
Common Stock | Minimum
Organizational Structure [Line Items]
Stock offering, shares authorized for issuance (in shares)																														250,000
Common Stock | Maximum
Organizational Structure [Line Items]
Stock offering, shares authorized for issuance (in shares)																														140,000,000
POSOR II
Organizational Structure [Line Items]
Merger, common stock conversion ratio																							96.43%
KBS Capital Advisors LLC
Organizational Structure [Line Items]
Preferred stock, shares issued (in shares)																						3,411,737
Operating Partnership
Organizational Structure [Line Items]
Partnership interest in Operating Partnership											0.10%
Partnership interest in the Operating Partnership and is its sole limited partner											99.90%
Pacific Oak Strategic Opportunity BVI
Organizational Structure [Line Items]
Common stock, shares authorized (in shares)																											50,000
Pacific Oak Strategic Opportunity BVI | Operating Partnership
Organizational Structure [Line Items]
Common stock, shares issued (in shares)																											10,000

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Redeemable Common Stock and Reclassification (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended		130 Months Ended
	Mar. 20, 2019	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Dec. 31, 2019
Summary of Significant Accounting Policies [Line Items]
Redemptions of common stock	$ 8,600	$ 6	$ 2,326	$ 830	$ 7,433	$ 286,300
Number of shares non-redeemable due to limitation (in shares)				5,938,443
Other liabilities		19,745		$ 19,745		19,745	$ 19,801
Unfulfilled Redemption Request
Summary of Significant Accounting Policies [Line Items]
Other liabilities		$ 300		300		$ 300	$ 800
Common Stock
Summary of Significant Accounting Policies [Line Items]
Redemptions of common stock			$ 2		$ 8
Number of shares non-redeemable due to limitation				60,000
Common Stock | Share Redemption Program
Summary of Significant Accounting Policies [Line Items]
Redemptions of common stock				$ 800

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Segments and Per Share Data (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2020 market $ / shares	Sep. 30, 2019 $ / shares	Sep. 30, 2020 segment market $ / shares	Sep. 30, 2019 $ / shares
Accounting Policies [Abstract]
Number of markets | market	17		17
Segment Reporting Information [Line Items]
Number of reportable segments			2
Distributions declared per common share (in dollars per share) | $ / shares	$ 0	$ 0.0086	$ 0.0086	$ 0.0258
Strategic Opportunistic Properties
Segment Reporting Information [Line Items]
Number of reportable segments			2

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REAL ESTATE HELD FOR INVESTMENT - Additional Information (Details) ft² in Millions, $ in Millions	Sep. 30, 2020 property	Sep. 30, 2020 a	Sep. 30, 2020 portfolio	Sep. 30, 2020 unit	Sep. 30, 2020 ft²	Sep. 30, 2020	Sep. 30, 2020 USD ($)	Dec. 31, 2019 USD ($)
Real Estate Properties [Line Items]
Percentage of portfolio occupied						80.00%
Park Highlands
Real Estate Properties [Line Items]
Contract liability | $							$ 3.1	$ 3.1
Office Properties
Real Estate Properties [Line Items]
Number of real estate properties	6
Number of real estate properties consolidated	6
Office Portfolio
Real Estate Properties [Line Items]
Number of real estate properties consolidated | portfolio			1
Office Buildings, Portfolio
Real Estate Properties [Line Items]
Number of real estate properties consolidated	4
Undeveloped Land, Portfolio
Real Estate Properties [Line Items]
Real estate area of undeveloped land | a		14
Rentable square feet | ft²					3.0
Residential Home Portfolio
Real Estate Properties [Line Items]
Number of real estate properties	1		1
Rentable square feet | ft²					1.6
Percentage of portfolio occupied						91.00%
Number of units in real estate property | unit				1,769
Apartment Property
Real Estate Properties [Line Items]
Number of real estate properties consolidated	1
Apartment Building
Real Estate Properties [Line Items]
Rentable square feet | ft²					0.3
Percentage of portfolio occupied						87.00%
Number of units in real estate property | unit				317

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REAL ESTATE HELD FOR INVESTMENT - Schedule of Real Estate Investments (Details) - USD ($) $ in Thousands			9 Months Ended
	Jan. 08, 2019	Sep. 07, 2016	Sep. 30, 2020	Dec. 31, 2019
Real Estate Properties [Line Items]
Total real estate, cost			$ 910,788	$ 824,860
Accumulated depreciation and amortization			(88,290)	(65,381)
Total real estate, net			$ 822,498	759,479
Investment in PORT II OP LP
Real Estate Properties [Line Items]
Ownership %			96.10%
Preferred Class A | Subsidiary of Common Parent
Real Estate Properties [Line Items]
Non-voting preferred membership units sold		820
Interest rate on Class A non-voting preferred membership units		10.00%
Proceeds from sale of units		$ 800
Preferred Class A-2 | Subsidiary of Common Parent
Real Estate Properties [Line Items]
Non-voting preferred membership units sold	1,927
Interest rate on Class A non-voting preferred membership units	10.00%
Proceeds from sale of units	$ 1,900
Total Richardson Portfolio
Real Estate Properties [Line Items]
Total real estate, cost			$ 47,711
Accumulated depreciation and amortization			(13,450)
Total real estate, net			$ 34,261
Palisades Central I
Real Estate Properties [Line Items]
Date Acquired or Foreclosed on			Nov. 23, 2011
Total real estate, cost			$ 14,072
Accumulated depreciation and amortization			(4,194)
Total real estate, net			$ 9,878
Ownership %			90.00%
Palisades Central II
Real Estate Properties [Line Items]
Date Acquired or Foreclosed on			Nov. 23, 2011
Total real estate, cost			$ 22,826
Accumulated depreciation and amortization			(6,496)
Total real estate, net			$ 16,330
Ownership %			90.00%
Greenway I
Real Estate Properties [Line Items]
Date Acquired or Foreclosed on			Nov. 23, 2011
Total real estate, cost			$ 3,017
Accumulated depreciation and amortization			(1,176)
Total real estate, net			$ 1,841
Ownership %			90.00%
Greenway III
Real Estate Properties [Line Items]
Date Acquired or Foreclosed on			Nov. 23, 2011
Total real estate, cost			$ 4,662
Accumulated depreciation and amortization			(1,584)
Total real estate, net			$ 3,078
Ownership %			90.00%
Undeveloped Land
Real Estate Properties [Line Items]
Date Acquired or Foreclosed on			Nov. 23, 2011
Total real estate, cost			$ 3,134
Accumulated depreciation and amortization			0
Total real estate, net			$ 3,134
Ownership %			90.00%
Park Highlands
Real Estate Properties [Line Items]
Date Acquired or Foreclosed on			Dec. 30, 2011
Total real estate, cost			$ 36,817
Accumulated depreciation and amortization			0
Total real estate, net			$ 36,817
Ownership %			100.00%
Park Centre
Real Estate Properties [Line Items]
Date Acquired or Foreclosed on			Mar. 28, 2013
Total real estate, cost			$ 38,017
Accumulated depreciation and amortization			(8,066)
Total real estate, net			$ 29,951
Ownership %			100.00%
1180 Raymond
Real Estate Properties [Line Items]
Date Acquired or Foreclosed on			Aug. 20, 2013
Total real estate, cost			$ 47,523
Accumulated depreciation and amortization			(8,857)
Total real estate, net			$ 38,666
Ownership %			100.00%
Park Highlands II
Real Estate Properties [Line Items]
Date Acquired or Foreclosed on			Dec. 10, 2013
Total real estate, cost			$ 27,854
Accumulated depreciation and amortization			0
Total real estate, net			$ 27,854
Ownership %			100.00%
Richardson Land II
Real Estate Properties [Line Items]
Date Acquired or Foreclosed on			Sep. 04, 2014
Total real estate, cost			$ 3,418
Accumulated depreciation and amortization			0
Total real estate, net			$ 3,418
Ownership %			90.00%
Crown Pointe
Real Estate Properties [Line Items]
Date Acquired or Foreclosed on			Feb. 14, 2017
Total real estate, cost			$ 95,871
Accumulated depreciation and amortization			(13,987)
Total real estate, net			$ 81,884
Ownership %			100.00%
The Marq
Real Estate Properties [Line Items]
Date Acquired or Foreclosed on			Mar. 01, 2018
Total real estate, cost			$ 95,914
Accumulated depreciation and amortization			(9,618)
Total real estate, net			$ 86,296
Ownership %			100.00%
City Tower
Real Estate Properties [Line Items]
Date Acquired or Foreclosed on			Mar. 06, 2018
Total real estate, cost			$ 158,423
Accumulated depreciation and amortization			(16,780)
Total real estate, net			$ 141,643
Ownership %			100.00%
Eight & Nine Corporate Centre
Real Estate Properties [Line Items]
Date Acquired or Foreclosed on			Jun. 08, 2018
Total real estate, cost			$ 79,930
Accumulated depreciation and amortization			(6,639)
Total real estate, net			$ 73,291
Ownership %			100.00%
Georgia 400 Center
Real Estate Properties [Line Items]
Date Acquired or Foreclosed on			May 23, 2019
Total real estate, cost			$ 92,640
Accumulated depreciation and amortization			(6,426)
Total real estate, net			$ 86,214
Ownership %			100.00%
Single-Family Homes Portfolio
Real Estate Properties [Line Items]
Total real estate, cost			$ 186,670
Accumulated depreciation and amortization			(4,467)
Total real estate, net			$ 182,203
Ownership %			96.10%
Land
Real Estate Properties [Line Items]
Total real estate, cost			$ 193,602	175,317
Land | Total Richardson Portfolio
Real Estate Properties [Line Items]
Total real estate, cost			6,244
Land | Palisades Central I
Real Estate Properties [Line Items]
Total real estate, cost			1,037
Land | Palisades Central II
Real Estate Properties [Line Items]
Total real estate, cost			810
Land | Greenway I
Real Estate Properties [Line Items]
Total real estate, cost			561
Land | Greenway III
Real Estate Properties [Line Items]
Total real estate, cost			702
Land | Undeveloped Land
Real Estate Properties [Line Items]
Total real estate, cost			3,134
Land | Park Highlands
Real Estate Properties [Line Items]
Total real estate, cost			36,817
Land | Park Centre
Real Estate Properties [Line Items]
Total real estate, cost			3,251
Land | 1180 Raymond
Real Estate Properties [Line Items]
Total real estate, cost			8,292
Land | Park Highlands II
Real Estate Properties [Line Items]
Total real estate, cost			27,854
Land | Richardson Land II
Real Estate Properties [Line Items]
Total real estate, cost			3,418
Land | Crown Pointe
Real Estate Properties [Line Items]
Total real estate, cost			22,590
Land | The Marq
Real Estate Properties [Line Items]
Total real estate, cost			10,387
Land | City Tower
Real Estate Properties [Line Items]
Total real estate, cost			13,930
Land | Eight & Nine Corporate Centre
Real Estate Properties [Line Items]
Total real estate, cost			17,401
Land | Georgia 400 Center
Real Estate Properties [Line Items]
Total real estate, cost			11,431
Land | Single-Family Homes Portfolio
Real Estate Properties [Line Items]
Total real estate, cost			31,987
Buildings and improvements
Real Estate Properties [Line Items]
Total real estate, cost			689,202	618,974
Buildings and improvements | Total Richardson Portfolio
Real Estate Properties [Line Items]
Total real estate, cost			41,467
Buildings and improvements | Palisades Central I
Real Estate Properties [Line Items]
Total real estate, cost			13,035
Buildings and improvements | Palisades Central II
Real Estate Properties [Line Items]
Total real estate, cost			22,016
Buildings and improvements | Greenway I
Real Estate Properties [Line Items]
Total real estate, cost			2,456
Buildings and improvements | Greenway III
Real Estate Properties [Line Items]
Total real estate, cost			3,960
Buildings and improvements | Undeveloped Land
Real Estate Properties [Line Items]
Total real estate, cost			0
Buildings and improvements | Park Highlands
Real Estate Properties [Line Items]
Total real estate, cost			0
Buildings and improvements | Park Centre
Real Estate Properties [Line Items]
Total real estate, cost			34,766
Buildings and improvements | 1180 Raymond
Real Estate Properties [Line Items]
Total real estate, cost			39,231
Buildings and improvements | Park Highlands II
Real Estate Properties [Line Items]
Total real estate, cost			0
Buildings and improvements | Richardson Land II
Real Estate Properties [Line Items]
Total real estate, cost			0
Buildings and improvements | Crown Pointe
Real Estate Properties [Line Items]
Total real estate, cost			69,663
Buildings and improvements | The Marq
Real Estate Properties [Line Items]
Total real estate, cost			81,976
Buildings and improvements | City Tower
Real Estate Properties [Line Items]
Total real estate, cost			137,780
Buildings and improvements | Eight & Nine Corporate Centre
Real Estate Properties [Line Items]
Total real estate, cost			58,011
Buildings and improvements | Georgia 400 Center
Real Estate Properties [Line Items]
Total real estate, cost			73,841
Buildings and improvements | Single-Family Homes Portfolio
Real Estate Properties [Line Items]
Total real estate, cost			152,467
Tenant origination and absorption costs
Real Estate Properties [Line Items]
Total real estate, cost			27,984	$ 30,569
Tenant origination and absorption costs | Total Richardson Portfolio
Real Estate Properties [Line Items]
Total real estate, cost			0
Tenant origination and absorption costs | Palisades Central I
Real Estate Properties [Line Items]
Total real estate, cost			0
Tenant origination and absorption costs | Palisades Central II
Real Estate Properties [Line Items]
Total real estate, cost			0
Tenant origination and absorption costs | Greenway I
Real Estate Properties [Line Items]
Total real estate, cost			0
Tenant origination and absorption costs | Greenway III
Real Estate Properties [Line Items]
Total real estate, cost			0
Tenant origination and absorption costs | Undeveloped Land
Real Estate Properties [Line Items]
Total real estate, cost			0
Tenant origination and absorption costs | Park Highlands
Real Estate Properties [Line Items]
Total real estate, cost			0
Tenant origination and absorption costs | Park Centre
Real Estate Properties [Line Items]
Total real estate, cost			0
Tenant origination and absorption costs | 1180 Raymond
Real Estate Properties [Line Items]
Total real estate, cost			0
Tenant origination and absorption costs | Park Highlands II
Real Estate Properties [Line Items]
Total real estate, cost			0
Tenant origination and absorption costs | Richardson Land II
Real Estate Properties [Line Items]
Total real estate, cost			0
Tenant origination and absorption costs | Crown Pointe
Real Estate Properties [Line Items]
Total real estate, cost			3,618
Tenant origination and absorption costs | The Marq
Real Estate Properties [Line Items]
Total real estate, cost			3,551
Tenant origination and absorption costs | City Tower
Real Estate Properties [Line Items]
Total real estate, cost			6,713
Tenant origination and absorption costs | Eight & Nine Corporate Centre
Real Estate Properties [Line Items]
Total real estate, cost			4,518
Tenant origination and absorption costs | Georgia 400 Center
Real Estate Properties [Line Items]
Total real estate, cost			7,368
Tenant origination and absorption costs | Single-Family Homes Portfolio
Real Estate Properties [Line Items]
Total real estate, cost			$ 2,216

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REAL ESTATE HELD FOR INVESTMENT - Operating Leases, Additional Information (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020 USD ($) tenant	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($) tenant	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)
Operating Leased Assets [Line Items]
Recognition of deferred revenue, net of discontinued operations	$ 2,600	$ 3,200	$ 900	$ 1,000
Deferred rent receivables	16,700		16,700		$ 13,600
Incentive to lessee	$ 3,300		$ 3,300		3,100
Number of tenants | tenant	235		235
Adjustments to rental income	$ 400	$ 200	$ 1,100	$ 400
Prepaid expenses and other assets (Other liabilities)
Operating Leased Assets [Line Items]
Security deposit liability	$ 4,300		$ 4,300		$ 4,300
Maximum
Operating Leased Assets [Line Items]
Operating lease, term	12 years 10 months 24 days		12 years 10 months 24 days
Weighted Average
Operating Leased Assets [Line Items]
Operating lease, term	4 years 4 months 24 days		4 years 4 months 24 days
Apartment Building
Operating Leased Assets [Line Items]
Operating lease, term	1 year		1 year

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REAL ESTATE HELD FOR INVESTMENT - Future Minimum Rental Income (Details) $ in Thousands	Sep. 30, 2020 USD ($)
Real Estate [Abstract]
October 1, 2020 through December 31, 2020	$ 14,056
2021	57,171
2022	50,817
2023	42,545
2024	36,856
Thereafter	92,949
Future minimum rental income	$ 294,394

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REAL ESTATE HELD FOR INVESTMENT - Highest Tenant Industry Concentrations - Greater than 10% of Annual Base Rent (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2020 USD ($) tenant
Concentration Risk [Line Items]
Number of tenants | tenant	235
Annualized Base Rent | $	$ 21,113
Percentage of Annualized Base Rent	34.30%
Insurance
Concentration Risk [Line Items]
Number of tenants | tenant	25
Annualized Base Rent | $	$ 7,256
Percentage of Annualized Base Rent	11.80%
Computer Systems Design
Concentration Risk [Line Items]
Number of tenants | tenant	25
Annualized Base Rent | $	$ 7,088
Percentage of Annualized Base Rent	11.50%
Health Care and Social Assistance
Concentration Risk [Line Items]
Number of tenants | tenant	15
Annualized Base Rent | $	$ 6,769
Percentage of Annualized Base Rent	11.00%

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REAL ESTATE HELD FOR INVESTMENT - Geographic Concentration Risk (Details)	9 Months Ended
	Sep. 30, 2020
Concentration Risk [Line Items]
Concentration risk, percentage	34.30%
Georgia | Assets, Total
Concentration Risk [Line Items]
Concentration risk, percentage	15.70%
California | Assets, Total
Concentration Risk [Line Items]
Concentration risk, percentage	12.90%

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REAL ESTATE HELD FOR INVESTMENT - Battery Point Trust Inc. Acquisition (Details) $ in Thousands	Jul. 01, 2020 USD ($) property shares	Sep. 30, 2020 USD ($)	Dec. 31, 2019 USD ($)
Business Acquisition [Line Items]
Total real estate, cost		$ 910,788	$ 824,860
Investments in unconsolidated entities		69,686	78,276
Land
Business Acquisition [Line Items]
Total real estate, cost		193,602	175,317
Buildings and improvements
Business Acquisition [Line Items]
Total real estate, cost		689,202	618,974
Tenant origination and absorption costs
Business Acquisition [Line Items]
Total real estate, cost		$ 27,984	$ 30,569
BPT Holdings, LLC | PORT OP LP | Battery Point
Business Acquisition [Line Items]
Common equity units received in transaction (in units) | shares	510,816
Percent of outstanding common equity units received in transaction	4.50%
Common equity units received in transaction	$ 3,000
Battery Point
Business Acquisition [Line Items]
Shares acquired during period (in shares) | shares	1,000,000
Battery Point | Single-family Home
Business Acquisition [Line Items]
Number of homes | property	559
Battery Point | Single-family Home | Land
Business Acquisition [Line Items]
Total real estate, cost	$ 11,100
Battery Point | Single-family Home | Buildings and improvements
Business Acquisition [Line Items]
Total real estate, cost	44,600
Battery Point | Single-family Home | Tenant origination and absorption costs
Business Acquisition [Line Items]
Total real estate, cost	500
Battery Point | Single-family Home | Series A-3 Preferred Units
Business Acquisition [Line Items]
Number of units, eliminated in consolidation	16,000
Battery Point | Single-family Home | Mortgages | Battery Point Trust Inc. Mortgage Loan
Business Acquisition [Line Items]
Notes payable, net	$ 36,600

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REAL ESTATE HELD FOR INVESTMENT - Redeemable Non-controlling Interest Activities (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Schedule of Investments [Line Items]
Net Income (Loss) Attributable to Redeemable Noncontrolling Interest, Total	$ (23)	$ 0	$ (23)	$ 0
PORT OP LP | Battery Point | BPT Holdings, LLC
Schedule of Investments [Line Items]
Issuance of PORT OP Units			3,024
Net loss attributable to redeemable noncontrolling interest			(23)
Net Income (Loss) Attributable to Redeemable Noncontrolling Interest, Total			$ 3,001

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REAL ESTATE HELD FOR INVESTMENT - Recent Real Estate Acquisition (Details) $ in Thousands	Aug. 14, 2020 USD ($) property	Jul. 29, 2020 USD ($) property	May 28, 2020 USD ($) property	Sep. 30, 2020 USD ($)	Dec. 31, 2019 USD ($)
Business Acquisition [Line Items]
Total real estate, cost				$ 910,788	$ 824,860
Land
Business Acquisition [Line Items]
Total real estate, cost				193,602	175,317
Buildings and improvements
Business Acquisition [Line Items]
Total real estate, cost				689,202	618,974
Tenant origination and absorption costs
Business Acquisition [Line Items]
Total real estate, cost				$ 27,984	$ 30,569
Single-Family Home 1 | Single-family Home
Business Acquisition [Line Items]
Number of homes | property			196
Purchase price			$ 17,300
Capitalized acquisition costs			400
Single-Family Home 1 | Single-family Home | Land
Business Acquisition [Line Items]
Total real estate, cost			3,400
Single-Family Home 1 | Single-family Home | Buildings and improvements
Business Acquisition [Line Items]
Total real estate, cost			13,600
Single-Family Home 1 | Single-family Home | Tenant origination and absorption costs
Business Acquisition [Line Items]
Total real estate, cost			$ 300
Single-Family Home 2 | Single-family Home
Business Acquisition [Line Items]
Number of homes | property		12
Purchase price		$ 1,000
Capitalized acquisition costs		10
Single-Family Home 2 | Single-family Home | Land
Business Acquisition [Line Items]
Total real estate, cost		200
Single-Family Home 2 | Single-family Home | Buildings and improvements
Business Acquisition [Line Items]
Total real estate, cost		$ 800
Single-Family Home 3 | Single-family Home
Business Acquisition [Line Items]
Number of homes | property	11
Purchase price	$ 1,000
Capitalized acquisition costs	8
Single-Family Home 3 | Single-family Home | Land
Business Acquisition [Line Items]
Total real estate, cost	200
Single-Family Home 3 | Single-family Home | Buildings and improvements
Business Acquisition [Line Items]
Total real estate, cost	800
Single-Family Home 3 | Single-family Home | Tenant origination and absorption costs
Business Acquisition [Line Items]
Total real estate, cost	$ 11

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TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES - Cost and Amortization (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities [Abstract]
Tenant Origination And Absorption Costs, Cost	$ 27,984		$ 27,984		$ 30,569
Tenant Origination and Absorption Costs, Accumulated Amortization	(11,861)		(11,861)		(10,223)
Tenant Origination and Absorption Costs, Net Amount	16,123		16,123		20,346
Tenant Origination and Absorption Costs, Amortization	(1,625)	$ (2,000)	(4,965)	$ (5,324)
Above-Market Lease Assets, Cost	3,499		3,499		3,714
Above-Market Lease Assets, Accumulated Amortization	(767)		(767)		(741)
Above-Market Lease Assets, Net Amount	2,732		2,732		2,973
Above-Market Lease Assets, Amortization	(74)	(101)	(241)	(303)
Below-Market Lease Liabilities, Cost	(4,122)		(4,122)		(4,958)
Below-Market Lease Liabilities, Accumulated Amortization	1,618		1,618		1,778
Below-Market Lease Liabilities, Net Amount	(2,504)		(2,504)		$ (3,180)
Below-Market Lease Liabilities, Amortization	$ 194	$ 421	$ 676	$ 1,159

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TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities [Line Items]
Tax abatement asset	$ 500		$ 500		$ 1,000
Depreciation and amortization	9,470	$ 9,239	27,417	$ 25,276
Property Tax Abatement Intangible Asset
Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities [Line Items]
Depreciation and amortization	$ 100	$ 100	$ 500	$ 500
Remaining amortization period			10 months 24 days

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REAL ESTATE EQUITY SECURITIES - Additional Information (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020 USD ($) investment	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($) investment shares	Sep. 30, 2019 USD ($)
Debt Securities, Available-for-sale [Line Items]
Number of investments in equity securities | investment	3		3
Purchase price			$ 10,964	$ 24,076
Dividend income from real estate equity securities	$ 2,800	$ 2,200	$ 4,400	$ 4,300
Plymouth Industrial REIT, Inc.
Debt Securities, Available-for-sale [Line Items]
Number of shares purchased (in shares) | shares			1,722,751
Payments to acquire investments			$ 21,600
Plymouth Industrial REIT, Inc. | Common Stock
Debt Securities, Available-for-sale [Line Items]
Issuance of common stock (in shares) | shares			617,316
Purchase price			$ 11,000
Franklin Street Properties Corp.
Debt Securities, Available-for-sale [Line Items]
Number of shares purchased (in shares) | shares			2,437,292
Payments to acquire investments			$ 14,000

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REAL ESTATE EQUITY SECURITIES - Shares Owned (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Debt Securities, Available-for-sale [Line Items]
Number of Shares Owned (in shares)	70,897,649	67,354,922
Total Carrying Value	$ 84,365	$ 81,439
Kepple Pacific Oak US REIT
Debt Securities, Available-for-sale [Line Items]
Number of Shares Owned (in shares)	64,165,352	64,165,352
Total Carrying Value	$ 46,520	$ 50,049
Franklin Street Properties Corp.
Debt Securities, Available-for-sale [Line Items]
Number of Shares Owned (in shares)	5,211,021	2,773,729
Total Carrying Value	$ 19,072	$ 23,743
Plymouth Industrial REIT, Inc.
Debt Securities, Available-for-sale [Line Items]
Number of Shares Owned (in shares)	1,521,276	415,841
Total Carrying Value	$ 18,773	$ 7,647

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REAL ESTATE EQUITY SECURITIES - Portion of Gain and Loss (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Investments, Debt and Equity Securities [Abstract]
Net (loss) gain recognized during the period on real estate equity securities	$ (6,527)	$ 3,845	$ (21,620)	$ 19,304
Less net gain recognized during the period on real estate equity securities sold during the period	0	0	(711)	(3,397)
Unrealized (loss) gain recognized during the reporting period on real estate equity securities held at the end of the period	$ (6,527)	$ 3,845	$ (22,331)	$ 15,907

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REAL ESTATE SOLD - Additional Information (Details) $ in Thousands					3 Months Ended			9 Months Ended
	Nov. 01, 2019 USD ($) shares	Oct. 29, 2019 USD ($) shares	Jul. 19, 2019 USD ($)	Jan. 11, 2019 USD ($)	Sep. 30, 2020 USD ($)	Mar. 31, 2020 property	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($) property	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)	Jan. 31, 2014 unit	Dec. 12, 2012 ft²
Real Estate Properties [Line Items]
Accumulated depreciation and amortization					$ 88,290			$ 88,290		$ 65,381
Gain on sale of real estate					0		$ 10,559	$ 0	$ 18,128
424 Bedford
Real Estate Properties [Line Items]
Sale price				$ 43,800
Real estate held for sale, net				34,000
Accumulated depreciation and amortization				5,300
Gain on sale of real estate				$ 7,600
Burbank Collection
Real Estate Properties [Line Items]
Sale price			$ 25,900
Real estate held for sale, net			14,700
Accumulated depreciation and amortization			2,600
Gain on sale of real estate			$ 10,500
424 Bedford
Real Estate Properties [Line Items]
Number of real estate units | unit											66
Disposed of by Sale
Real Estate Properties [Line Items]
Number of real estate properties disposed | property								0
Total expenses					$ 0		$ 3,781	$ 86	$ 11,794
Disposed of by Sale | SREIT
Real Estate Properties [Line Items]
Ownership interest	6.89%	6.89%
Disposed of by Sale | SREIT
Real Estate Properties [Line Items]
Issuance of common stock (in shares) | shares	56,979,352
Shares acquired during period (in shares) | shares		7,186,000
Shares acquired during period		$ 5,200
Disposed of by Sale | 125 John Carpenter
Real Estate Properties [Line Items]
Sale price	$ 99,800
Gain on sale of real estate		$ 16,000
Total expenses	$ 200
Office Properties | Disposed of by Sale
Real Estate Properties [Line Items]
Number of real estate properties disposed | property						1
Retail Property | Burbank Collection
Real Estate Properties [Line Items]
Net rentable area | ft²												39,428
Retail Property | Disposed of by Sale
Real Estate Properties [Line Items]
Number of real estate properties disposed | property						1
Apartment Building | Disposed of by Sale
Real Estate Properties [Line Items]
Number of real estate properties disposed | property						1

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REAL ESTATE SOLD - Schedule of Certain Revenue and Expenses (Details) - Disposed of by Sale - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Revenues
Rental income	$ 0	$ 3,443	$ 138	$ 10,566
Other operating income	0	254	40	828
Total revenues	0	3,697	178	11,394
Expenses
Operating, maintenance, and management costs	0	1,042	86	3,030
Real estate taxes and insurance	0	710	0	2,110
Asset management fees to affiliate	0	250	0	784
Depreciation and amortization	0	1,183	0	3,784
Interest expense	0	596	0	2,086
Total expenses	$ 0	$ 3,781	$ 86	$ 11,794

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NOTES AND BONDS PAYABLE - Schedule of Long-term Debt Instruments (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Total Notes and Bonds Payable principal outstanding	$ 763,070	$ 678,080
Premium on Notes and Bonds Payable	175	783
Deferred financing costs, net	(5,170)	(5,200)
Notes and Bond Payable, Net	758,075	673,663
Mortgages | Richardson Portfolio Mortgage Loan
Debt Instrument [Line Items]
Notes payable, net	$ 36,000	36,000
Interest rate, effective percentage	2.65%
Mortgages | Richardson Portfolio Mortgage Loan | One-month LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate	2.50%
Mortgages | Park Centre Mortgage Loan
Debt Instrument [Line Items]
Notes payable, net	$ 21,970	21,970
Interest rate, effective percentage	1.90%
Mortgages | Park Centre Mortgage Loan | One-month LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate	1.75%
Mortgages | 1180 Raymond Mortgage Loan
Debt Instrument [Line Items]
Notes payable, net	$ 29,948	30,250
Interest rate, effective percentage	3.50%
Mortgages | 1180 Raymond Mortgage Loan | One-month LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate	2.50%
Mortgages | 1180 Raymond Bond Payable
Debt Instrument [Line Items]
Bonds payable	$ 5,930	6,080
Contractual interest rate, percentage	6.50%
Interest rate, effective percentage	6.50%
Mortgages | Pacific Oak SOR (BVI) Holdings, Ltd. Series A Debentures
Debt Instrument [Line Items]
Notes payable, net	$ 169,927	224,746
Contractual interest rate, percentage	4.25%
Interest rate, effective percentage	4.25%
Mortgages | Pacific Oak SOR (BVI) Holdings, Ltd. Series B Debentures
Debt Instrument [Line Items]
Notes payable, net	$ 74,159	0
Contractual interest rate, percentage	3.93%
Interest rate, effective percentage	3.93%
Mortgages | Crown Pointe Mortgage Loan
Debt Instrument [Line Items]
Notes payable, net	$ 53,254	51,171
Interest rate, effective percentage	2.75%
Mortgages | Crown Pointe Mortgage Loan | One-month LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate	2.60%
Mortgages | City Tower Mortgage Loan
Debt Instrument [Line Items]
Notes payable, net	$ 94,167	89,000
Interest rate, effective percentage	1.70%
Mortgages | City Tower Mortgage Loan | One-month LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate	1.55%
Mortgages | The Marq Mortgage Loan
Debt Instrument [Line Items]
Notes payable, net	$ 58,331	53,408
Interest rate, effective percentage	1.70%
Mortgages | The Marq Mortgage Loan | One-month LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate	1.55%
Mortgages | Eight & Nine Corporate Centre Mortgage Loan
Debt Instrument [Line Items]
Notes payable, net	$ 47,066	43,880
Interest rate, effective percentage	1.75%
Mortgages | Eight & Nine Corporate Centre Mortgage Loan | One-month LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate	1.60%
Mortgages | Georgia 400 Center Mortgage Loan
Debt Instrument [Line Items]
Notes payable, net	$ 59,690	59,690
Interest rate, effective percentage	1.70%
Mortgages | Georgia 400 Center Mortgage Loan | One-month LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate	1.55%
Mortgages | PORT Mortgage Loan 1
Debt Instrument [Line Items]
Notes payable, net	$ 51,362	51,362
Contractual interest rate, percentage	4.74%
Interest rate, effective percentage	4.74%
Mortgages | PORT Mortgage Loan 2
Debt Instrument [Line Items]
Notes payable, net	$ 10,523	10,523
Contractual interest rate, percentage	4.72%
Interest rate, effective percentage	4.72%
Mortgages | PORT Mortgage Loan 3
Debt Instrument [Line Items]
Notes payable, net	$ 12,000	0
Contractual interest rate, percentage	5.00%
Interest rate, effective percentage	5.00%
Mortgages | PORT Mortgage Loan 3 | From December 1, 2020 through March 31, 2021
Debt Instrument [Line Items]
Contractual interest rate, percentage	6.50%
Mortgages | Battery Point Trust Mortgage Loan
Debt Instrument [Line Items]
Notes payable, net	$ 38,743	$ 0
Contractual interest rate, percentage	2.50%
Interest rate, effective percentage	3.50%
Mortgages | Battery Point Trust Mortgage Loan | One-month LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate	1.00%

XML

NOTES AND BONDS PAYABLE - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Nov. 13, 2020	Oct. 05, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Interest expense	$ 6,274	$ 7,359	$ 19,055	$ 21,776
Amortization of deferred financing costs	800	900	2,500	2,600
Interest capitalized			2,368	2,079
Interest payable	2,300		2,300				$ 4,800
Debt obligations scheduled to mature over the next 12 months	387,178		387,178
Subsequent Event
Debt Instrument [Line Items]
Debt obligations scheduled to mature over the next 12 months					$ 357,900
Debt obligations outstanding with extension options					$ 350,900
Subsequent Event | POSOR II
Debt Instrument [Line Items]
Debt obligations scheduled to mature over the next 12 months						$ 155,100
Undeveloped Land
Debt Instrument [Line Items]
Interest capitalized	$ 700	$ 700	$ 2,400	$ 2,100

XML

NOTES AND BONDS PAYABLE - Schedule of Maturities of Long-term Debt (Details) $ in Thousands	Sep. 30, 2020 USD ($)
Notes and Bonds Payable [Abstract]
October 1, 2020 through December 31, 2020	$ 507
2021	387,178
2022	117,595
2023	116,587
2024	24,990
Thereafter	116,213
Notes and bond payable outstanding	$ 763,070

XML

NOTES AND BONDS PAYABLE - Recent Bond Financing (Details) - Bonds Payable $ in Millions	Feb. 16, 2020 ILS (₪)	Mar. 08, 2016 ILS (₪)	Mar. 08, 2016 USD ($)	Mar. 08, 2016 ILS (₪)	Mar. 07, 2016 ILS (₪)	Mar. 02, 2016 ILS (₪)	Mar. 01, 2016 ILS (₪)	Feb. 16, 2020 USD ($)
Series A Debentures
Debt Instrument [Line Items]
Maximum borrowing capacity						₪ 1,000,000,000
Interest rate during period		4.25%	4.25%
Proceeds from issuance of debt		₪ 970,200,000	$ 249.2	₪ 970,200,000	₪ 127,700,000		₪ 842,500,000
Contractual interest rate, percentage						4.25%
Series A Debentures | Maximum
Debt Instrument [Line Items]
Interest rate during period						4.25%
Contractual interest rate, percentage						4.25%
Series B Debentures
Debt Instrument [Line Items]
Maximum borrowing capacity	₪ 254,100,000							$ 74.1
Contractual interest rate, percentage	3.93%							3.93%
Principal of installment payments as percent of face amount	33.33%

XML

DERIVATIVE INSTRUMENTS (Details)		3 Months Ended		9 Months Ended
	Jul. 29, 2020 USD ($)	Sep. 30, 2020 USD ($) instrument	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($) instrument	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($) instrument
Derivative [Line Items]
Gain on sale of derivatives	$ 14,100,000
Foreign currency collars
Derivative [Line Items]
Gain (loss) recognized on derivatives		$ 2,200,000	$ 400,000	$ 14,300,000	$ 4,600,000
Foreign currency transaction gain (loss)		$ 2,600,000	$ (5,700,000)	$ 2,000,000.0	$ (15,200,000)
Not Designated as Hedging Instrument | Foreign currency collar
Derivative [Line Items]
Number of Instruments | instrument		0		0		0
Notional Value		$ 0		$ 0		$ 0
Not Designated as Hedging Instrument | Foreign currency collar | Minimum
Derivative [Line Items]
Exchange rate cap		3.70		3.70
Not Designated as Hedging Instrument | Foreign currency collar | Maximum
Derivative [Line Items]
Exchange rate cap		3.82		3.82
Not Designated as Hedging Instrument | Foreign currency collar
Derivative [Line Items]
Number of Instruments | instrument		0		0		0
Notional Value		$ 0		$ 0		$ 0
Not Designated as Hedging Instrument | Foreign currency collar | Minimum
Derivative [Line Items]
Exchange rate cap		3.5875		3.5875
Not Designated as Hedging Instrument | Foreign currency collar | Maximum
Derivative [Line Items]
Exchange rate cap		3.725		3.725
Not Designated as Hedging Instrument | Foreign currency collar
Derivative [Line Items]
Number of Instruments | instrument		0		0		1
Notional Value		$ 0		$ 0		$ 776,182
Not Designated as Hedging Instrument | Foreign currency collar | Minimum
Derivative [Line Items]
Exchange rate cap		3.38		3.38
Not Designated as Hedging Instrument | Foreign currency collar | Maximum
Derivative [Line Items]
Exchange rate cap		3.4991		3.4991
Not Designated as Hedging Instrument | Interest rate caps
Derivative [Line Items]
Number of Instruments | instrument		3		3
Not Designated as Hedging Instrument | Interest rate caps | Prepaid expenses and other assets
Derivative [Line Items]
Number of Instruments | instrument		3		3		3
Derivative Asset, Fair Value		$ 8,000		$ 8,000		$ 12,000
Not Designated as Hedging Instrument | Interest Rate Cap, Effective Date 4/2/18
Derivative [Line Items]
Notional Value		$ 77,513,000		$ 77,513,000
Not Designated as Hedging Instrument | Interest Rate Cap, Effective Date 4/2/18 | One-month LIBOR
Derivative [Line Items]
Reference Rate		3.50%		3.50%
Not Designated as Hedging Instrument | Interest Rate Cap, Effective Date 6/21/19
Derivative [Line Items]
Notional Value		$ 51,252,000		$ 51,252,000
Not Designated as Hedging Instrument | Interest Rate Cap, Effective Date 6/21/19 | One-month LIBOR
Derivative [Line Items]
Reference Rate		4.00%		4.00%
Not Designated as Hedging Instrument | Interest Rate Cap, Effective Date 2/12/2020
Derivative [Line Items]
Notional Value		$ 46,875,000		$ 46,875,000
Not Designated as Hedging Instrument | Interest Rate Cap, Effective Date 2/12/2020 | One-month LIBOR
Derivative [Line Items]
Reference Rate		3.00%		3.00%
Not Designated as Hedging Instrument | Foreign currency collars | Prepaid expenses and other assets (Other liabilities)
Derivative [Line Items]
Number of Instruments | instrument		0		0		1
Derivative Asset, Fair Value		$ 0		$ 0
Derivative Liability, Fair Value						$ 179,000

XML

FAIR VALUE DISCLOSURES - Schedule of Face Value, Carrying Amounts and Fair Value (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Level 3
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Notes and bond payable, Face Value	$ 518,984,000	$ 453,334,000
Series A Debentures | Pacific Oak SOR (BVI) Holdings, Ltd. Series A Debentures | Level 1
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Notes and bond payable, Face Value	169,927,000	224,746,000
Series B Debentures | Pacific Oak SOR (BVI) Holdings, Ltd. Series B Debentures | Level 1
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Notes and bond payable, Face Value	74,159,000	0
Carrying Amount | Level 3
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Notes and bond payable, Value	517,731,000	451,743,000
Carrying Amount | Series A Debentures | Pacific Oak SOR (BVI) Holdings, Ltd. Series A Debentures | Level 1
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Notes and bond payable, Value	168,190,000	221,920,000
Carrying Amount | Series B Debentures | Pacific Oak SOR (BVI) Holdings, Ltd. Series B Debentures | Level 1
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Notes and bond payable, Value	72,154,000	0
Fair Value | Level 3
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Notes and bond payable, Value	524,259,000	455,849,000
Fair Value | Series A Debentures | Pacific Oak SOR (BVI) Holdings, Ltd. Series A Debentures | Level 1
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Notes and bond payable, Value	158,620,000	229,877,000
Fair Value | Series B Debentures | Pacific Oak SOR (BVI) Holdings, Ltd. Series B Debentures | Level 1
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Notes and bond payable, Value	$ 60,325,000	$ 0

XML

FAIR VALUE DISCLOSURES - Schedule of Assets and Liabilities at Fair Value (Details) - Recurring Basis - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Real estate equity securities	$ 84,365	$ 81,439
Asset derivative		12
Liability derivative - foreign currency collar		(179)
Interest rate caps
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset derivative	8
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Real estate equity securities	84,365	81,439
Asset derivative		0
Liability derivative - foreign currency collar		0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Interest rate caps
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset derivative	0
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Real estate equity securities	0	0
Asset derivative		12
Liability derivative - foreign currency collar		(179)
Significant Other Observable Inputs (Level 2) | Interest rate caps
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset derivative	8
Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Real estate equity securities	0	0
Asset derivative		0
Liability derivative - foreign currency collar		$ 0
Significant Unobservable Inputs (Level 3) | Interest rate caps
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset derivative	$ 0

XML

RELATED PARTY TRANSACTIONS - Costs (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Related Party Transaction [Line Items]
Payable as of	$ 6,449,000		$ 6,449,000		$ 1,635,000
Payment for administrative fees	0	$ 65,000	0	$ 198,000
PORT II OP LP
Related Party Transaction [Line Items]
Payments to acquire investments			5,000,000.0
Investment payable	3,900,000		3,900,000
Pacific Oak Capital Advisors LLC
Related Party Transaction [Line Items]
Capitalized	1,475,000	2,405,000	6,608,000	7,779,000
Payable as of	6,449,000		6,449,000		1,635,000
Pacific Oak Capital Advisors LLC | Asset management fees
Related Party Transaction [Line Items]
Expensed	2,426,000	2,093,000	6,867,000	5,954,000
Payable as of	2,538,000		2,538,000		1,498,000
Pacific Oak Capital Advisors LLC | Property management fees
Related Party Transaction [Line Items]
Expensed	114,000	0	114,000	0
Payable as of	0		0		0
Pacific Oak Capital Advisors LLC | Reimbursable operating expenses
Related Party Transaction [Line Items]
Expensed	56,000	79,000	148,000	251,000
Payable as of	0		0		0
Pacific Oak Capital Advisors LLC | Disposition fees
Related Party Transaction [Line Items]
Expensed	0	233,000	0	627,000
Payable as of	0		0		0
Pacific Oak Capital Advisors LLC | Change in subordinated performance fee due upon termination to affiliate
Related Party Transaction [Line Items]
Expensed	(1,121,000)	0	(814,000)	0
Pacific Oak Capital Advisors LLC | Acquisition fees on real estate equity securities
Related Party Transaction [Line Items]
Capitalized	0	0	122,000	0
Payable as of	0		0		0
Pacific Oak Capital Advisors LLC | Acquisition fee on real estate
Related Party Transaction [Line Items]
Capitalized	0	0	171,000	897,000
Payable as of	0		0		0
Pacific Oak Capital Advisors LLC | Acquisition fee on investment in unconsolidated entities
Related Party Transaction [Line Items]
Capitalized	0	0	0	50,000
Payable as of	0		0		137,000
Pacific Oak Capital Advisors LLC | Investment in PORT II
Related Party Transaction [Line Items]
Capitalized	0	$ 0	0	$ 0
Payable as of	$ 3,911,000		$ 3,911,000		$ 0

XML

RELATED PARTY TRANSACTIONS - Additional Information (Details)							3 Months Ended				9 Months Ended		12 Months Ended	130 Months Ended
	Aug. 31, 2020 USD ($)	Jul. 01, 2020 USD ($) shares	Mar. 27, 2020 shares	Nov. 01, 2019	Oct. 29, 2019	Mar. 20, 2019 USD ($) $ / shares shares	Sep. 30, 2020 USD ($)	Jun. 30, 2020 USD ($)	Mar. 31, 2020 USD ($) shares	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($) unit shares	Sep. 30, 2020 USD ($)	Dec. 31, 2018 USD ($)	May 12, 2017 USD ($)	Oct. 28, 2016 USD ($)
Related Party Transaction [Line Items]
Redemptions of common stock						$ 8,600,000	$ 6,000			$ 2,326,000	$ 830,000	$ 7,433,000		$ 286,300,000
Investments in unconsolidated entities							$ 69,686,000				$ 69,686,000		$ 78,276,000	$ 69,686,000
Battery Point
Related Party Transaction [Line Items]
Shares acquired during period (in shares) | shares		1,000,000
Battery Point | PORT OP LP | BPT Holdings, LLC
Related Party Transaction [Line Items]
Common equity units received in transaction (in units) | shares		510,816
Percent of outstanding common equity units received in transaction		4.50%
Common equity units received in transaction		$ 3,000,000.0
DayMark Service Entities
Related Party Transaction [Line Items]
Property management fee, percent of gross asset value fee						1.50%
Annual property management fee, percent of tenants rent received fee						8.00%
Acquisition fee, percent of purchase price fee						1.00%
Commission fee from sales as broker						1.00%
KBS Capital Advisors LLC | Subordinated Performance Fee Due Upon Termination
Related Party Transaction [Line Items]
Issuance of restricted stock (in shares) | shares			3,411,737
Period of redemption after vesting											60 days
Termination fee as percent of liquidation proceeds, percent							50.00%				50.00%			50.00%
Percent of total operating expenses in four consecutive quarters							2.00%				2.00%			2.00%
Percent of total operating expenses in four consecutive quarters, benchmark							25.00%				25.00%			25.00%
KBS Capital Advisors LLC | Subordinated Performance Fee Due Upon Termination | After November 1, 2024
Related Party Transaction [Line Items]
Period of redemption of remaining shares											60 days
DayMark | Battery Point Holdings
Related Party Transaction [Line Items]
Noncontrolling interest						40.00%
Point Trust LLC
Related Party Transaction [Line Items]
Investment acquired (in shares) | shares						210,000
Investment acquired (in dollars per shares) | $ / shares						$ 25
Series B Preferred Units | Point Trust LLC
Related Party Transaction [Line Items]
Redemptions of common stock (in shares) | shares						13,000
Redemptions of common stock (in dollars per shares) | $ / shares						$ 1,000
Principal paydown						$ 900,000
Series A-3 Preferred Units | Point Trust LLC
Related Party Transaction [Line Items]
Shares eliminated in consolidation due to acquisition | shares		640,000
Point Trust LLC
Related Party Transaction [Line Items]
Investment acquired (in shares) | shares						210,000
Investment acquired (in dollars per shares) | $ / shares						$ 25
Number of shares purchased (in shares) | shares													430,000
Stock repurchased during period													$ 10,800,000
Point Trust LLC | Series B Preferred Units
Related Party Transaction [Line Items]
Investments to be made																$ 17,500,000
Investments															$ 4,500,000
Dividend rate, percentage					12.00%
Redemptions of common stock (in shares) | shares						13,000
Redemptions of common stock (in dollars per shares) | $ / shares						$ 1,000
Point Trust LLC | Series B Preferred Units | Maximum
Related Party Transaction [Line Items]
Investments to be made																	$ 25,000,000
Point Trust LLC | Series A-3 Preferred Units
Related Party Transaction [Line Items]
Investments						$ 5,300,000
Principal paydown						$ 7,700,000
Number of shares purchased (in shares) | shares									430,000
Stock repurchased during period									$ 10,800,000
Shares eliminated in consolidation due to acquisition | shares		640,000
Pacific Oak Opportunity Zone Fund I
Related Party Transaction [Line Items]
Investments							$ 20,900,000				$ 20,900,000		20,600,000	$ 20,900,000
Acquisition fee, percent of purchase price fee									1.50%
Investments in unconsolidated entities							20,891,000				20,891,000		$ 20,846,000	20,891,000
Number of units in real estate property | unit													91
Acquisition fee of purchase price fee in excess of benchmark purchase price									1.00%
Investment, purchase price, benchmark									$ 25,000,000.0
Asset management fee, percent													0.25%
Financing fee as percent of original principal amount of any indebtedness													0.50%
Pacific Oak Opportunity Zone Fund I | Asset management fees
Related Party Transaction [Line Items]
Waived asset management fees											500,000
Due from related parties							100,000				100,000			100,000
Battery Point Series A-3 Preferred Units
Related Party Transaction [Line Items]
Investments in unconsolidated entities							$ 0				0		$ 13,991,000	$ 0
Battery Point Series A-3 Preferred Units | Series A-3 Preferred Units
Related Party Transaction [Line Items]
Investments in unconsolidated entities								$ 14,000,000.0
Gains on investment prior to acquisition								$ 2,000,000.0
PORT II OP LP
Related Party Transaction [Line Items]
Payments to acquire investments											5,000,000.0
Shared fees as percent of application fee collected	100.00%
Shared fees as percent of other fees collected	50.00%
PORT II OP LP | PORT II OP LP
Related Party Transaction [Line Items]
Payments to acquire investments											$ 5,000,000.0
PORT II OP LP | Tier 1
Related Party Transaction [Line Items]
Base fee, as percent of rent collections per year	8.00%
PORT II OP LP | Tier 2
Related Party Transaction [Line Items]
Base fee, as percent of rent collections per year	7.00%
PORT II OP LP | Tier 3
Related Party Transaction [Line Items]
Base fee, as percent of rent collections per year	6.00%
PORT II OP LP | Maximum | Tier 1
Related Party Transaction [Line Items]
Benchmark of rent collections per year	$ 50,000,000
PORT II OP LP | Maximum | Tier 2
Related Party Transaction [Line Items]
Benchmark of rent collections per year	75,000,000
PORT II OP LP | Minimum | Tier 2
Related Party Transaction [Line Items]
Benchmark of rent collections per year	50,000,000
PORT II OP LP | Minimum | Tier 3
Related Party Transaction [Line Items]
Benchmark of rent collections per year	$ 75,000,000
Investment in PORT II OP LP
Related Party Transaction [Line Items]
Ownership %											96.10%
Pacific Oak Capital Advisors LLC
Related Party Transaction [Line Items]
Term of advisory agreement				1 year
Advisory agreement, renewal period				1 year

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INVESTMENT IN UNCONSOLIDATED JOINT VENTURES - Investments in Unconsolidated Joint Ventures (Details) $ in Thousands	Sep. 30, 2020 USD ($) property	Dec. 31, 2019 USD ($)
Schedule of Equity Method Investments [Line Items]
Investment Balance	$ 69,686	$ 78,276
NIP Joint Venture
Schedule of Equity Method Investments [Line Items]
Number of Properties | property	0
Ownership %	0.00%
Investment Balance	$ 0	1,225
110 William Joint Venture
Schedule of Equity Method Investments [Line Items]
Number of Properties | property	1
Ownership %	60.00%
Investment Balance	$ 0	0
353 Sacramento Joint Venture
Schedule of Equity Method Investments [Line Items]
Number of Properties | property	1
Ownership %	55.00%
Investment Balance	$ 43,790	42,214
Battery Point Series A-3 Preferred Units
Schedule of Equity Method Investments [Line Items]
Investment Balance	$ 0	13,991
Pacific Oak Opportunity Zone Fund I
Schedule of Equity Method Investments [Line Items]
Number of Properties | property	3
Investment Balance	$ 20,891	20,846
PORT II OP LP
Schedule of Equity Method Investments [Line Items]
Number of Properties | property	7
Investment Balance	$ 5,005	$ 0

XML

INVESTMENT IN UNCONSOLIDATED JOINT VENTURES - Investments - Additional Information (Details)		3 Months Ended		9 Months Ended
	May 18, 2012 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)	May 02, 2014 ft²
Schedule of Equity Method Investments [Line Items]
Contributions to joint venture				$ 1,708,000	$ 5,050,000
Income from unconsolidated joint venture		$ 0	$ 0	52,000	0
Investments in unconsolidated entities		69,686,000		69,686,000		$ 78,276,000
Equity in income of unconsolidated joint venture				1,151,000	6,677,000
Equity in income (loss) of unconsolidated entities		$ 519,000	$ (419,000)	1,512,000	6,677,000
110 William JV Partner
Schedule of Equity Method Investments [Line Items]
Income from unconsolidated joint venture				$ 0	5,200,000
NIP Joint Venture
Schedule of Equity Method Investments [Line Items]
Contributions to joint venture	$ 8,000,000.0
Ownership percentage		0.00%		0.00%
Distributions				$ 1,300,000	300,000
Income from unconsolidated joint venture				100,000
Return of capital				1,200,000
Investments in unconsolidated entities		$ 0		$ 0		1,225,000
NIP Joint Venture | Maximum
Schedule of Equity Method Investments [Line Items]
Ownership percentage		5.00%		5.00%
110 William Joint Venture
Schedule of Equity Method Investments [Line Items]
Ownership percentage		60.00%		60.00%
Rentable square feet | ft²							928,157
Area of land | ft²							0.8
Investments in unconsolidated entities		$ 0		$ 0		$ 0
Equity in income of unconsolidated joint venture					7,800,000
Equity in income (loss) of unconsolidated entities					$ 7,800,000
110 William Joint Venture | 110 William JV Partner
Schedule of Equity Method Investments [Line Items]
Ownership percentage							60.00%
110 William Joint Venture | 110 William JV Partner | 110 William Joint Venture
Schedule of Equity Method Investments [Line Items]
Noncontrolling interest							40.00%

XML

INVESTMENT IN UNCONSOLIDATED JOINT VENTURES - Summarized Financial Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Balance Sheet Related Disclosures [Abstract]
Real estate assets, net of accumulated depreciation and amortization	$ 822,498,000		$ 822,498,000		$ 759,479,000
Total assets	1,103,400,000		1,103,400,000		1,041,242,000
Other liabilities	19,745,000		19,745,000		19,801,000
Total liabilities, mezzanine equity and equity	1,103,400,000		1,103,400,000		1,041,242,000
Income Statement [Abstract]
Revenues	27,745,000	$ 25,282,000	75,869,000	$ 68,881,000
Real estate taxes and insurance	3,791,000	3,278,000	10,570,000	9,556,000
Depreciation and amortization	9,470,000	9,239,000	27,417,000	25,276,000
Interest expense	6,274,000	7,359,000	19,055,000	21,776,000
Total expenses	32,254,000	37,507,000	80,131,000	100,036,000
Net (loss) income attributable to common stockholders	(7,493,000)	772,000	(21,797,000)	11,304,000
Equity in income (loss) of unconsolidated entities	519,000	(419,000)	1,512,000	6,677,000
110 William Joint Venture
Balance Sheet Related Disclosures [Abstract]
Real estate assets, net of accumulated depreciation and amortization	247,304,000		247,304,000		242,430,000
Other assets	43,178,000		43,178,000		35,747,000
Total assets	290,482,000		290,482,000		278,177,000
Notes payable, net	312,664,000		312,664,000		292,221,000
Other liabilities	8,257,000		8,257,000		10,664,000
Partners’ deficit	(30,439,000)		(30,439,000)		(24,708,000)
Total liabilities, mezzanine equity and equity	290,482,000		290,482,000		278,177,000
Income Statement [Abstract]
Revenues	10,005,000	9,274,000	26,604,000	26,975,000
Real estate taxes and insurance	1,935,000	1,818,000	5,580,000	5,248,000
Depreciation and amortization	3,139,000	2,946,000	8,721,000	8,449,000
Interest expense	4,125,000	4,084,000	12,093,000	12,816,000
Total expenses	11,295,000	11,215,000	32,388,000	33,331,000
Total other income	12,000	34,000	50,000	105,000
Net (loss) income attributable to common stockholders	(1,278,000)	(1,907,000)	(5,734,000)	(6,251,000)
Company’s share of net loss	(767,000)	(1,144,000)	(3,440,000)	(3,751,000)
Loss from equity method investments	0	0	0	300,000
110 William Joint Venture | Operating, maintenance, and management costs
Income Statement [Abstract]
Expenses	2,096,000	2,367,000	5,994,000	6,818,000
353 Sacramento Joint Venture
Balance Sheet Related Disclosures [Abstract]
Real estate assets, net of accumulated depreciation and amortization	183,176,000		183,176,000		180,592,000
Other assets	18,434,000		18,434,000		21,822,000
Total assets	201,610,000		201,610,000		202,414,000
Notes payable, net	115,500,000		115,500,000		115,280,000
Other liabilities	7,507,000		7,507,000		11,193,000
Partners’ deficit	78,603,000		78,603,000		75,941,000
Total liabilities, mezzanine equity and equity	201,610,000		201,610,000		$ 202,414,000
Income Statement [Abstract]
Revenues	5,520,000	3,933,000	15,771,000	12,278,000
Real estate taxes and insurance	755,000	700,000	2,235,000	2,095,000
Depreciation and amortization	1,894,000	1,718,000	5,135,000	4,849,000
Interest expense	948,000	1,420,000	3,290,000	4,286,000
Total expenses	4,529,000	4,761,000	13,110,000	13,923,000
Net (loss) income attributable to common stockholders	991,000	(828,000)	2,661,000	(1,645,000)
Equity in income (loss) of unconsolidated entities	583,000	(419,000)	1,576,000	(798,000)
353 Sacramento Joint Venture | Operating, maintenance, and management costs
Income Statement [Abstract]
Expenses	$ 932,000	$ 923,000	$ 2,450,000	$ 2,693,000

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INVESTMENT IN UNCONSOLIDATED JOINT VENTURES - Investment in 353 Sacramento Joint Venture (Details)	Sep. 30, 2020	Jul. 06, 2017 a ft²
Migdal Members
Schedule of Equity Method Investments [Line Items]
Ownership percentage		45.00%
Joint Venture
Schedule of Equity Method Investments [Line Items]
Ownership percentage		55.00%
353 Sacramento Joint Venture
Schedule of Equity Method Investments [Line Items]
Ownership percentage	55.00%
353 Sacramento Joint Venture | Office Properties | Disposed of by Sale
Schedule of Equity Method Investments [Line Items]
Ownership percentage		45.00%
Net rentable area | ft²		284,751
Area of land | a		0.35

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INVESTMENT IN UNCONSOLIDATED JOINT VENTURES - Battery Point Series A-3 Preferred Units (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended		9 Months Ended		12 Months Ended
	Mar. 20, 2019	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019	Jul. 01, 2020	Dec. 31, 2018
Schedule of Equity Method Investments [Line Items]
Investments in unconsolidated entities				$ 69,686		$ 78,276
Series A-3 Preferred Units | Battery Point Holdings
Schedule of Equity Method Investments [Line Items]
Obligation to use percent of net proceeds for future equity capital raising	20.00%
Point Trust LLC
Schedule of Equity Method Investments [Line Items]
Investment acquired (in shares)	210,000
Investment acquired (in dollars per shares)	$ 25
Number of shares purchased (in shares)						430,000
Stock repurchased during period						$ 10,800
Point Trust LLC | Series B Preferred Units
Schedule of Equity Method Investments [Line Items]
Redemptions of common stock (in shares)	13,000
Redemptions of common stock (in dollars per shares)	$ 1,000
Aggregate principal balance	$ 13,000
Investments								$ 4,500
Point Trust LLC | Series A-3 Preferred Units
Schedule of Equity Method Investments [Line Items]
Principal paydown	7,700
Investments	$ 5,300
Dividends, annual rate	7.50%
Number of shares purchased (in shares)			430,000
Stock repurchased during period			$ 10,800
Shares eliminated in consolidation due to acquisition							640,000
Distributions				900	$ 200
Point Trust LLC | Series A-3 Preferred Units | Not Redeemed by February 28, 2020
Schedule of Equity Method Investments [Line Items]
Dividends, annual rate	10.00%
Point Trust LLC | Series A-3 Preferred Units | Not Redeemed by February 28, 2021
Schedule of Equity Method Investments [Line Items]
Dividends, annual rate	11.00%
Battery Point Series A-3 Preferred Units
Schedule of Equity Method Investments [Line Items]
Investments in unconsolidated entities				$ 0		$ 13,991
Battery Point Series A-3 Preferred Units | Series A-3 Preferred Units
Schedule of Equity Method Investments [Line Items]
Investments in unconsolidated entities		$ 14,000
Gains on investment prior to acquisition		$ 2,000

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INVESTMENT IN UNCONSOLIDATED JOINT VENTURES - Investment in Pacific Oak Opportunity Zone Fund I (Details) $ in Thousands	3 Months Ended	9 Months Ended	12 Months Ended
	Sep. 30, 2020 USD ($) property	Sep. 30, 2020 USD ($) property	Dec. 31, 2019 USD ($) unit
Schedule of Equity Method Investments [Line Items]
Investments in unconsolidated entities	$ 69,686	$ 69,686	$ 78,276
Pacific Oak Opportunity Zone Fund I
Schedule of Equity Method Investments [Line Items]
Number of units in real estate property | unit			91
Investments	20,900	20,900	$ 20,600
Investments in unconsolidated entities	$ 20,891	$ 20,891	20,846
Acquisition related costs			$ 200
Number of joint ventures with real estate under development | property	3	3
Loss from equity method investments	$ 600	$ 600

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SUPPLEMENTAL CASH FLOW AND SIGNIFICANT NONCASH TRANSACTION DISCLOSURES (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Supplemental Disclosure of Cash Flow Information:
Interest paid, net of capitalized interest of $2,368 and $2,079 for the nine months ended September 30, 2020 and 2019, respectively	$ 18,945	$ 21,981
Interest capitalized	2,368	2,079
Supplemental Disclosure of Significant Noncash Transactions:
Accrued improvements to real estate	2,393	3,414
Mortgage loan assumed by buyer in connection with sale of real estate	0	23,663
Redeemable common stock payable	262	3,423
Distributions paid to common stockholders through common stock issuances pursuant to the dividend reinvestment plan	262	835
Redemption of Series B Preferred Units in exchange for Series A-3 Preferred Units	0	2,992
Accrued preferred dividends	226	$ 0
Assets and liabilities assumed in connection with Battery Point acquisition:
Real estate	56,148
Notes payable	36,003
Other assets	21
Other liabilities	355
Redeemable non-controlling interest	3,024
Series A-3 preferred units payable	$ 16,000

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REPORTING SEGMENTS (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($) segment	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)
Segment Reporting [Abstract]
Number of reportable segments | segment			2
Income Statement [Abstract]
Revenues	$ 27,745	$ 25,282	$ 75,869	$ 68,881
Total expenses	(32,254)	(37,507)	(80,131)	(100,036)
Total other (loss) income	(2,859)	$ 14,515	(16,885)	$ 44,604
Net loss	(7,368)		(21,147)
Assets and Liabilities held for Sale
Assets	1,103,400		$ 1,103,400		$ 1,041,242
Strategic Opportunistic Properties
Segment Reporting [Abstract]
Number of reportable segments | segment			2
Income Statement [Abstract]
Revenues	22,548		$ 64,752
Total expenses	(26,285)		(66,928)
Total other (loss) income	(2,863)		(16,939)
Net loss	(6,600)		(19,115)
Assets and Liabilities held for Sale
Assets	915,931		915,931		921,917
Single-Family Homes
Income Statement [Abstract]
Revenues	5,197		11,117
Total expenses	(5,969)		(13,203)
Total other (loss) income	4		54
Net loss	(768)		(2,032)
Assets and Liabilities held for Sale
Assets	$ 187,469		$ 187,469		$ 119,325

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PORT PREFERRED STOCK - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands			3 Months Ended	9 Months Ended		36 Months Ended
	Nov. 22, 2019	Nov. 06, 2019	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Nov. 14, 2012	Dec. 31, 2022	Nov. 04, 2022	Dec. 31, 2021	Nov. 04, 2021	Nov. 04, 2020	Dec. 31, 2019
Class of Stock [Line Items]
Preferred stock, shares authorized (in shares)				10,000,000								10,000,000
Issuance of common stock			$ 271	$ 262	$ 835	$ 561,700
Preferred Class A | Pacific Oak Residential Trust, Inc.
Class of Stock [Line Items]
Issuance of common stock (in shares)		15,000
Preferred stock, shares authorized (in shares)		25,000,000
Issuance of common stock (in dollars per share)		$ 1,000
Issuance of common stock		$ 15,000
Dividend rate, percentage		6.00%
Percent of outstanding shares as benchmark for redemption		10.00%
Conversion price of preferred stock into common stock (in dollars per share)		$ 1,120
Preferred Class A | Pacific Oak Residential Trust, Inc. | Forecast
Class of Stock [Line Items]
Issuance of common stock (in dollars per share)								$ 1,120		$ 1,000
Preferred stock, redemption price (in dollars per share)											$ 1,120
Preferred Class A | Pacific Oak Residential Trust, Inc. | If All Shares are Not Redeemed
Class of Stock [Line Items]
Dividend rate, percentage		12.00%
Preferred Class B | Pacific Oak Residential Trust, Inc.
Class of Stock [Line Items]
Issuance of common stock (in shares)	125
Issuance of common stock (in dollars per share)	$ 1,000
Issuance of common stock	$ 100
Dividend rate, percentage	12.50%
Preferred Class B | Pacific Oak Residential Trust, Inc. | Forecast
Class of Stock [Line Items]
Issuance of common stock (in dollars per share)							$ 1,000		$ 1,050

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PORT PREFERRED STOCK - Schedule (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest [Roll Forward]
Balance	$ 302,152	$ 277,388	$ 293,964
Balance	$ 301,884	$ 254,957	$ 301,884
Preferred Stock | Preferred Class A
Class of Stock [Line Items]
Issuance of common stock (in shares)		15,000
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest [Roll Forward]
Balance		$ 14,909
Dividends Available Upon Redemption		781
Dividends Paid		(556)
Balance		$ 15,134
Preferred Stock | Preferred Class B
Class of Stock [Line Items]
Issuance of common stock (in shares)		125
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest [Roll Forward]
Balance		$ 99
Dividends Available Upon Redemption		7
Dividends Paid		(7)
Balance		$ 99

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SUBSEQUENT EVENTS (Details) $ / shares in Units, $ in Millions	Oct. 05, 2020 USD ($) property joint_venture investment $ / shares shares	Sep. 30, 2020 investment property $ / shares	Feb. 19, 2020	Dec. 31, 2019 $ / shares
Subsequent Event [Line Items]
Preferred stock, par value (in dollars per share) | $ / shares		$ 0.01		$ 0.01
Number of investments in equity securities | investment		3
Number of investments in unconsolidated joint venture | investment		6
Office Properties
Subsequent Event [Line Items]
Number of real estate properties		6
POSOR II
Subsequent Event [Line Items]
Merger, common stock conversion ratio			96.43%
Subsequent Event
Subsequent Event [Line Items]
Preferred stock, par value (in dollars per share) | $ / shares	$ 0.01
Conversion of stock, shares issued (in shares) | shares	28,973,906
Subsequent Event | POSOR II
Subsequent Event [Line Items]
Preferred stock, par value (in dollars per share) | $ / shares	$ 0.01
Merger, common stock conversion ratio	96.43%
Number of consolidated joint ventures | joint_venture	1
Number of investments in equity securities | investment	2
Number of investments in unconsolidated joint venture | investment	2
Loans assumed | $	$ 331.8
Subsequent Event | POSOR II | Hotel
Subsequent Event [Line Items]
Number of real estate properties	2
Subsequent Event | POSOR II | Office Properties
Subsequent Event [Line Items]
Number of real estate properties	3
Subsequent Event | POSOR II | Apartment Building
Subsequent Event [Line Items]
Number of real estate properties	1
Subsequent Event | POSOR II | Office/ Retail Property
Subsequent Event [Line Items]
Number of real estate properties	1