NOTES AND BONDS PAYABLE

12 Months Ended

Dec. 31, 2023

As of December 31, 2023 and December 31, 2022, the Company’s notes and bonds payable, including notes payable related to real estate held for sale, consisted of the following (dollars in thousands):


	Book Value as of December 31, 2023		Book Value as of December 31, 2022		Contractual Interest Rate as of December 31, 2023 (1)	Interest Rate at December 31, 2023 (1)	Payment Type (2)	Maturity Date (3)
Richardson Office Mortgage Loan	$	12,209	$	18,844	SOFR +3.50%	8.84%	Principal & Interest	11/01/2024
Series B Bonds (4)	321,724		331,213		3.93%	3.93%	(4)	01/31/2026
Series C Bonds (4)	99,461		—		9.00%	9.00%	(4)	06/30/2026
Crown Pointe Mortgage Loan	54,738		53,758		SOFR + 2.30%	7.64%	Interest Only	04/01/2025
Georgia 400 Center Mortgage Loan (6)	40,184		44,129		SOFR + 1.55%	6.89%	Interest Only	05/22/2024
PORT Mortgage Loan 1	34,967		51,302		4.74%	4.74%	Interest Only	10/01/2025
PORT Mortgage Loan 2	10,523		10,523		4.72%	4.72%	Interest Only	03/01/2026
PORT MetLife Loan	59,091		60,000		3.90%	3.90%	Interest Only	04/10/2026
PORT II Metlife Loan	93,388		93,701		3.99%	3.99%	Interest Only	04/10/2026
Q&C Hotel Mortgage Loan	24,579		24,784		SOFR + 3.50%	8.84%	Principal & Interest	1/31/2024 (5)
Lincoln Court Mortgage Loan (6)	33,310		35,314		SOFR + 3.25%	8.59%	Interest Only	08/07/2025
Lofts at NoHo Commons Mortgage Loan	68,451		71,536		SOFR + 2.18% (7)	7.52%	Interest Only	09/09/2024
Madison Square Mortgage Loan	17,962		17,964		4.63%	4.63%	Interest Only	10/07/2024
Four Pack Mortgage Loan (8)	175,234		—		BSBY + 2.75%	8.18%	Principal & Interest	09/01/2026
Oakland City Center Mortgage Loan (8)	—		87,000		(8)	(8)	(8)	(8)
Park Centre Mortgage Loan (8)	—		26,233		(8)	(8)	(8)	(8)
1180 Raymond Mortgage Loan (8)	—		31,070		(8)	(8)	(8)	(8)
The Marq Mortgage Loan (8)	—		60,796		(8)	(8)	(8)	(8)
Eight & Nine Corporate Centre Mortgage Loan (9)	—		47,945		(9)	(9)	(9)	(9)
Total Notes and Bonds Payable principal outstanding	1,045,821		1,066,112
Deferred financing costs and debt discount and premium, net (10)	(17,138)		(21,403)
Total Notes and Bonds Payable, net	$	1,028,683	$	1,044,709

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(1) Contractual interest rate represents the interest rate in effect under the loan as of December 31, 2023. The interest rate was calculated as the actual interest rate in effect as of December 31, 2023 (consisting of the contractual interest rate and contractual floor rates), using interest rate indices such as Secured Overnight Financing Rate (“SOFR”) or Bloomberg Short Term Bank Yield (“BSBY”) as of December 31, 2023, where applicable.

(2) Represents the payment type required under the loan as of December 31, 2023. Certain future monthly payments due under this loan also include amortizing principal payments.

(3) Represents the initial maturity date or the maturity date as extended as of December 31, 2023; subject to certain conditions, the maturity dates of certain loans may be extended beyond the date shown. For more information of the Company’s contractual obligations under its notes and bonds payable, see five-year maturity table below.

(4) See “Israeli Bond Financings” below.

(5) Subsequent to December 31, 2023, the Company extended the maturity date of this mortgage loan to April 30, 2024.

(6) The Company’s notes and bonds payable are generally non-recourse. These mortgage loans have guarantees over certain balances whereby the Company would be required to make guaranteed payments in the event that the Company turned the property over to the lender. As of December 31, 2023, the guaranteed amount in the aggregate was $22.8 million.

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

(8) The Company refinanced and consolidated four of its mortgage loans into one loan (the “Four Pack Mortgage Loan”) and is cross-collateralized by the associated properties: Park Centre, 1180 Raymond, The Marq, and Oakland City Center. The Four Pack Mortgage Loan has an initial maturity of September 1, 2026 with two 1-year extension options, monthly amortization payments of $0.7 million and a $10.0 million paydown due December 1, 2024. The Company made a principal paydown of $10.0 million on the Four Park Mortgage Loan on December 1, 2023.

(9) This loan was repaid during the year ended December 31, 2023. Subsequent to December 31, 2023, the Company obtained a new mortgage loan on this property. See Note 11 for further discussion.

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

During the years ended December 31, 2023, 2022 and 2021, the Company incurred $68.2 million, $48.1 million, and $40.5 million of interest expense, net, respectively. Included in interest expense, net for the years ended December 31, 2023,

2022 and 2021, was $9.6 million, $8.5 million, and $5.9 million, respectively of amortization of deferred financing costs and debt discount and premium, net. Additionally, during the years ended December 31, 2023, 2022 and 2021, the Company capitalized $3.7 million, $2.5 million, and $2.1 million of interest, respectively, to its investments in undeveloped land.

As of December 31, 2023 and 2022, the Company’s interest payable was $9.0 million and $9.1 million, respectively.

The following is a schedule of maturities, including principal amortization payments, for all notes and bonds payable outstanding as of December 31, 2023 (in thousands):


2024	$	289,025
2025	238,655
2026	518,141
2027	—
2028	—
Thereafter	—
	$	1,045,821

As of December 31, 2023, the Company had $289.0 million of debt obligations scheduled to mature over the period from January 1, 2024 through December 31, 2024. The Company has extension options with respect to $18.0 million of the debt obligations outstanding that are scheduled to mature over the next 12 months; however, the Company cannot exercise these options if not then in compliance with certain financial covenants in the loans without making a cash payment and there is no assurance that the Company will be able to meet these requirements. All of the Company’s debt obligations are generally non-recourse, subject to certain limited guaranty payments, as outlined in the table above, except for the Company’s Series B and C Bonds. The Company plans to utilize available extension options or seek to refinance the notes and bonds payable. The Company may also choose to market the properties for sale or may negotiate a turnover of the secured properties back to the related mortgage lender.

Debt Covenant Compliance

The Company’s notes and bonds payable contain various financial debt covenants, including debt-to-value, debt yield, minimum equity requirements, and debt service coverage ratios. As of December 31, 2023, the Company was in compliance with all of these debt covenants with the exception that the Georgia 400 Center Mortgage Loan, Q&C Hotel Mortgage Loan, Madison Square Mortgage Loan, and Lincoln Court Mortgage Loan were not in compliance with the debt service coverage requirement. As a result of such non-compliance, the Company is required to provide a cash sweep for the Georgia 400 Center Mortgage Loan and Lincoln Court Mortgage Loan, and the remaining loans are at-risk of cash sweeps and/or principal pay downs if in non-compliance.

Israeli Bond Financings

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

In February 2020, Pacific Oak SOR BVI issued 254.1 million Israeli new shekels of Series B bonds (the “Series B Bonds”) to Israeli investors pursuant to a public offering registered with the Israel Securities Authority. The Series B Bonds have principal installment payments equal to 33.33% of the face amount of the Series B Bonds on January 31st of each year from 2024 to 2026. Pacific Oak SOR BVI issued additional Series B Bonds subsequent to the initial issuance and as of December 31, 2023, 1.2 billion Israeli new shekels (approximately $321.7 million as of December 31, 2023) were outstanding. The Series B Bonds have an equal level of security, pari passu, amongst themselves and between them and the initial Series B Bonds without any right of precedence or preference between any of them. Subsequent to December 31, 2023, the Company made the first Series B Bonds installment payment. See Note 11 for further discussion.

The deeds of trust that govern the terms of the Series B and C Bonds contain various financial covenants. As of December 31, 2023, the Company was in compliance with all of these financial debt covenants