FAIR VALUE DISCLOSURES

6 Months Ended

Jun. 30, 2024

Fair Value Disclosures [Abstract]

FAIR VALUE DISCLOSURES

FAIR VALUE DISCLOSURES

As of June 30, 2024 and December 31, 2023, the carrying amounts and fair values of the Company’s financial instruments are as follows (in thousands):

	June 30, 2024				December 31, 2023
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial liabilities (Level 3):
Notes payable	$	631,472	$	627,950	$	620,262	$	611,725
Financial liabilities (Level 1):
Pacific Oak SOR BVI Series B Bonds	$	198,900	$	196,764	$	312,458	$	296,380
Pacific Oak SOR BVI Series C Bonds	$	92,741	$	99,173	$	95,963	$	102,664
Pacific Oak SOR BVI Series D Bonds	$	76,329	$	77,520	$	—	$	—

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.

As of June 30, 2024, 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	$	8,598	$	8,598	$	—	$	—
Asset derivative - interest rate caps (1)	$	1,446	$	—	$	1,446	$	—
Nonrecurring Basis:
Impaired real estate (2)	$	276,875	$	—	$	—	$	276,875

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(1) Interest rate caps are included in prepaid expenses and other assets in the consolidated balance sheets.

(2) Amount represents the fair value for a real estate asset impacted by impairment charges during the six months ended June 30, 2024, as of the date that the fair value measurement was made. The carrying value for the real estate asset may have subsequently increased or decreased from the fair value reflected due to activity that has occurred since the measurement date.

During the six months ended June 30, 2024, three of the Company’s real estate properties and one hotel were impaired and written down to their estimated fair values due to declines in market conditions and projected cash flows. Three of the Company’s real estate properties were measured based on an income approach with the significant unobservable inputs used in evaluating the estimated fair value of the properties, with discount rates between 8.25% to 8.75% and terminal cap rates between 7.0% to 8.0%. One of the Company’s real estate properties was measured based on a recently quoted transaction price.

During the six months ended June 30, 2023, two of the Company’s real estate properties were impaired and written down to their estimated fair values. The two real estate properties were measured based on an income approach with the significant unobservable inputs used in evaluating the estimated fair value of these properties, including discount rates between 7.5 to 9.0% and terminal cap rates of 7.0 to 8.25%. One investment in unconsolidated entity was measured at the estimated value of the Company’s ownership calculated based on a hypothetical liquidation of the net assets, discounted for lack of marketability and control. The Company used a discount rate of 8.75% and a cap rate of 7.0% to estimate the fair value of the real estate, an interest rate adjustment of 0.15% to estimate the fair value of the debt, a discount rate of 20% for lack of marketability, and a discount rate of 20% for lack of control.

As of December 31, 2023, the Company measured the following assets at fair value (in thousands):

			Fair Value Measurements Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring Basis:
Real estate equity securities	$	41,609	$	41,609	$	—	$	—
Asset derivative - interest rate caps (1)	$	1,236	$	—	$	1,236	$	—
Asset derivative - foreign currency collar (1)	$	3,655	$	—	$	3,655	$	—
Nonrecurring Basis:
Impaired real estate (2)	$	193,529	$	—	$	—	$	193,529

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(1) Interest rate caps and foreign currency collars are included in prepaid expenses and other assets on the accompanying consolidated balance sheets.

(2) Amount represents the fair value for a real estate asset impacted by impairment charges during the year ended December 31, 2023, as of the date that the fair value measurement was made. The carrying value for the real estate asset may have subsequently increased or decreased from the fair value reflected due to activity that has occurred since the measurement date.