NOTES AND BONDS PAYABLE

12 Months Ended

Dec. 31, 2022

As of December 31, 2022 and December 31, 2021, the Company’s notes and bonds payable, including notes payable related to real estate held for sale, consisted of the following (dollars in thousands):


	Book Value as of December 31, 2022		Book Value as of December 31, 2021		Contractual Interest Rate as of December 31, 2022 (1)	Interest Rate at December 31, 2022 (1)	Payment Type (2)	Maturity Date (3)
Richardson Portfolio Mortgage Loan	$	18,844	$	28,470	SOFR + 2.50%	6.11%	Principal & Interest	11/01/2023
Park Centre Mortgage Loan	26,233		26,185		BSBY + 1.75%	6.90%	Principal & Interest	06/27/2023
1180 Raymond Mortgage Loan (4)	31,070		31,070		BSBY + 2.25%	6.61%	Interest Only	12/01/2023
Pacific Oak SOR (BVI) Holdings, Ltd. Series B Debentures (6)	331,213		271,978		3.93%	3.93%	(6)	01/31/2026
Crown Pointe Mortgage Loan	53,758		52,315		SOFR + 2.30%	6.60%	Interest Only	04/01/2025
The Marq Mortgage Loan	60,796		61,874		BSBY + 1.55%	5.91%	Principal & Interest	06/06/2023
Eight & Nine Corporate Centre Mortgage Loan	47,945		48,545		BSBY + 1.60%	5.96%	Principal & Interest	06/08/2023
Georgia 400 Center Mortgage Loan	44,129		61,154		LIBOR + 1.55%	5.95%	Interest Only	05/22/2023
PORT Mortgage Loan 1	51,302		51,302		4.74%	4.74%	Interest Only	10/01/2025
PORT Mortgage Loan 2	10,523		10,523		4.72%	4.72%	Interest Only	03/01/2026
PORT MetLife Loan	60,000		60,000		3.90%	3.90%	Interest Only	04/10/2026
PORT II Metlife Loan (7)	93,701		—		3.99%	3.99%	Interest Only	04/10/2026
Springmaid Beach Resort Mortgage Loan	—		55,491		(5)	(5)	(5)	(5)
Q&C Hotel Mortgage Loan	24,784		25,000		LIBOR + 2.50% (8)	6.90%	Principal & Interest	01/31/2023 (8)
Lincoln Court Mortgage Loan (4)	35,314		34,623		SOFR + 3.25%	7.55%	Interest Only	08/07/2025
Lofts at NoHo Commons Mortgage Loan	71,536		74,536		SOFR + 2.18% (9)	6.48%	Interest Only	09/09/2023
210 West 31st Street Mortgage Loan	—		8,850		(5)	(5)	(5)	(5)
Oakland City Center Mortgage Loan (4)	87,000		96,075		BSBY + 3.00%	7.36%	Principal & Interest	09/01/2023
Madison Square Mortgage Loan	17,964		17,500		4.63%	4.63%	Interest Only	10/07/2024
Total Notes and Bonds Payable principal outstanding	1,066,112		1,015,491
Discount on Notes and Bonds Payable, net (10)	(11,964)		(8,146)
Deferred financing costs, net	(9,439)		(8,396)
Total Notes and Bonds Payable, net	$	1,044,709	$	998,949

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(1) Contractual interest rate represents the interest rate in effect under the loan as of December 31, 2022. The interest rate is calculated as the actual interest rate in effect as of December 31, 2022 (consisting of the contractual interest rate and contractual floor rates), using interest rate indices at December 31, 2022, where applicable.

(2) Represents the payment type required under the loan as of December 31, 2022. 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.

(3) Represents the initial maturity date or the maturity date as extended as of December 31, 2022; subject to certain conditions, the maturity dates of certain loans may be extended beyond the date shown.

(4) The Company’s notes and bond’s payable are generally non-recourse. These mortgage loans have guarantees over certain balances whereby the Company would be required to make guaranteed payments in the event that the Company turned the property over to the lender. The guarantees are typically 25% of the outstanding loan balance. As of December 31, 2022, the guaranteed amount in the aggregate was $38.3 million.

(5) These loans were paid off during the year ended December 31, 2022.

(6) See “Israeli Bond Financing” below.

(7) As of December 31, 2022, $93.7 million had been disbursed to the Company and up to $6.3 million was available for future disbursements, subject to certain terms and conditions contained in the loan documents.

(8) The interest rate is variable at the higher of one-month LIBOR + 2.5% or 4.5%. Subsequent to December 31, 2022, the Company extended the Q&C Hotel Mortgage Loan to January 31, 2024. Beginning February 1, 2023 through March 31, 2023, the interest rate is 8.25% and thereafter is SOFR + 3.5%.

(9) The variable rate is at the higher of one-month SOFR or 1.75%, plus 2.18%.

(10) Represents the unamortized premium/discount on notes and bonds payable due to the above- and below-market interest rates when the debt was assumed. The discount/premium is amortized over the remaining life of the notes and bonds payable.

During the years ended December 31, 2022, 2021 and 2020, the Company incurred $48.1 million, $40.5 million and $29.1 million of interest expense, respectively. Included in interest expense for the years ended December 31, 2022, 2021 and 2020, was $3.7 million, $3.2 million and $3.3 million of amortization of deferred financing costs, respectively and $4.8 million, $2.7 million and $0.6 million of amortization of the debt discount / premium for the years ended December 31, 2022, 2021 and 2020, respectively. Additionally, during the years ended December 31, 2022, 2021 and 2020, the Company capitalized $2.5 million, $2.1 million and $2.9 million of interest, respectively, to its investments in undeveloped land.

As of December 31, 2022 and 2021, the Company’s interest payable was $9.1 million and $6.6 million, respectively.

The following is a schedule of maturities, including principal amortization payments, for all notes and bonds payable outstanding as of December 31, 2022 (in thousands):


2023	$	412,338
2024	128,366
2025	250,779
2026	274,629
2027	—
Thereafter	—
	$	1,066,112

The Company had a total of $522.7 million of debt obligations scheduled to mature from January 1, 2023 through 12 months from the report issuance date. The Company has extension options with respect to $166.7 million of the debt obligations outstanding that are scheduled to mature over the next 12 months; however, the Company cannot exercise these options if not then in compliance with certain financial covenants in the loans without making a cash payment and there is no assurance that the Company will be able to meet these requirements. All of the Company’s debt obligations are generally non-recourse, subject to certain limited guaranty payments, as outlined in the table above, except for the Company’s Series B Debentures (as defined below). The Company plans to utilize available extension options or seek to 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.

The Company’s notes and bonds payable contain various financial debt covenants, including minimum equity requirements and liquidity ratios. As of December 31, 2022, the Company was in compliance with all of these debt covenants with the exception that the Georgia 400 Center Mortgage Loan, Richardson Portfolio Mortgage Loan, Park Centre Mortgage Loan, Lofts at NoHo Commons Mortgage Loan, Lincoln Court Mortgage Loan, and Oakland City Center Mortgage Loan were not in compliance with the debt service coverage requirement. As a result of such non-compliance, the Company is required to provide a cash sweep for the Georgia 400 Center Mortgage Loan and the remaining loans are at-risk of cash sweeps and/or principal pay downs if in non-compliance.

Israeli Bond Financings

On February 16, 2020, Pacific Oak Strategic Opportunity BVI issued 254.1 million Israeli new Shekels (approximately $74.1 million as of February 16, 2020) of Series B debentures (the “Series B Debentures”) to Israeli investors pursuant to a public offering registered with the Israel Securities Authority. The Series B Debentures 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. Pacific Oak Strategic Opportunity BVI issued additional Series B Debentures subsequent to the initial issuance and as of December 31, 2022, 1.2 billion Israeli new Shekels (approximately $331.2 million as December 31, 2022) were outstanding. The additional Series B Debentures have an equal level of security, pari passu, amongst themselves and between them and the initial Series B Debentures, which were initially issued, without any right of precedence or preference between any of them.

The deed of trust that governs the terms of the Series B Debentures contains various financial covenants. As of December 31, 2022, the Company was in compliance with all of these financial debt covenants