PCOK's Mounting Losses, Debt Raise Going Concern Doubts

TL;DR

**PCOK is a distressed asset play; avoid unless you're a vulture investor with a high tolerance for risk and a strong stomach for potential bankruptcy.**

AI Summary

Pacific Oak Strategic Opportunity REIT, Inc. (PCOK) reported a significant net loss of $127.271 million for the six months ended June 30, 2025, a 3.76% increase from the $122.652 million net loss in the prior year period. Total revenues decreased by 7.61% to $63.575 million from $68.811 million, primarily due to a decline in rental income from $61.822 million to $57.018 million. A major factor contributing to the increased net loss was a substantial foreign currency transaction loss of $24.157 million in 2025, compared to a gain of $11.280 million in 2024, and impairment charges on real estate and related intangibles rising to $51.979 million from $21.026 million in the three months ended June 30, 2025. The company faces substantial doubt about its ability to continue as a going concern, with $512.8 million of debt obligations due within one year and expected non-compliance with financial covenants for its Series B and Series D bonds, totaling $289.2 million. Management plans include seeking debt extensions, refinancing, property sales, or negotiating waivers with bondholders.

Why It Matters

This filing reveals severe financial distress for Pacific Oak Strategic Opportunity REIT, Inc., with significant net losses and a 'going concern' warning. For investors, this signals high risk of capital loss and potential default, as the company faces $512.8 million in debt maturities within a year and expects to breach bond covenants. Employees might face job insecurity if asset sales or restructuring become aggressive. Customers, particularly tenants, could experience instability or changes in property management. The broader real estate market, especially in the office and residential sectors where PCOK operates, could see further downward pressure on asset values if PCOK is forced into distressed sales, potentially impacting competitive dynamics.

Risk Assessment

Risk Level: high — The company explicitly states 'These circumstances raise substantial doubt as to the Company's ability to continue as a going concern for at least one year.' This is evidenced by $512.8 million of debt obligations due within one year and expected non-compliance with financial covenants for Series B and Series D bonds totaling $289.2 million, which could become due and payable.

Analyst Insight

Investors should exercise extreme caution and consider divesting any holdings in PCOK due to the explicit 'going concern' warning and significant debt maturities. Potential investors should avoid initiating positions given the high risk of default and the challenging commercial real estate lending environment cited by the company.

Financial Highlights

debt To Equity

34.8

revenue

$63,575,000

operating Margin

-10.5%

total Assets

$1,012,911,000

total Debt

$866,838,000

net Income

$-127,271,000

eps

$-1.23

gross Margin

N/A

cash Position

$14,682,000

revenue Growth

-7.61%

Revenue Breakdown

Key Numbers

• $127.271M — Net loss for six months ended June 30, 2025 (Increased from $122.652 million in prior year, indicating worsening financial performance.)
• $63.575M — Total revenues for six months ended June 30, 2025 (Decreased from $68.811 million in prior year, showing revenue decline.)
• $51.979M — Impairment charges for three months ended June 30, 2025 (Significantly increased from $21.026 million in prior year, reflecting asset value deterioration.)
• $24.157M — Foreign currency transaction loss for six months ended June 30, 2025 (Shifted from a $11.280 million gain in prior year, negatively impacting profitability.)
• $512.8M — Debt obligations due within one year (A critical liquidity challenge contributing to the 'going concern' doubt.)
• $289.2M — Series B and Series D bonds at risk (May become due and payable if financial covenants are breached for two consecutive quarters.)
• 102,951,395 — Outstanding common shares as of August 12, 2025 (Used for per share calculations.)
• $1.23 — Net loss per common share for six months ended June 30, 2025 (Increased from $1.17 in prior year, indicating higher per-share losses.)
• 64% — Occupancy rate for consolidated office complexes (Indicates significant vacancy in a key asset class.)
• 92% — Occupancy rate for residential home portfolio (Higher occupancy compared to office, but still part of a struggling portfolio.)

Key Players & Entities

• Pacific Oak Strategic Opportunity REIT, Inc. (company) — Registrant and primary entity under analysis
• SEC (regulator) — Securities and Exchange Commission
• Pacific Oak SOR (BVI) Holdings, Ltd. (company) — Primary business vehicle for the Company
• Pacific Oak Strategic Opportunity Limited Partnership (company) — Operating Partnership where the Company is the sole general partner
• REIT Holdings (company) — Sole limited partner of the Operating Partnership
• $512.8 million (dollar_amount) — Debt obligations due within one year
• $289.2 million (dollar_amount) — Value of Series B and Series D bonds at risk of becoming due
• FASB (regulator) — Financial Accounting Standards Board
• Bloomberg (company) — Publisher of the analysis
• Maryland (person) — State of incorporation for the Company

FAQ

Risk Factors

• Going Concern Uncertainty [high — financial]: The company faces substantial doubt about its ability to continue as a going concern due to $512.8 million in debt obligations due within one year and expected non-compliance with financial covenants for Series B and D bonds totaling $289.2 million. Management is pursuing extensions, refinancing, property sales, or waivers.
• Significant Net Loss and Revenue Decline [high — financial]: Reported a net loss of $127.271 million for the six months ended June 30, 2025, an increase from $122.652 million in the prior year. Total revenues decreased by 7.61% to $63.575 million from $68.811 million, driven by lower rental income.
• Foreign Currency Transaction Losses [high — financial]: Experienced a foreign currency transaction loss of $24.157 million for the six months ended June 30, 2025, a significant swing from a gain of $11.280 million in the prior year, negatively impacting profitability.
• Substantial Impairment Charges [high — financial]: Impairment charges on real estate and related intangibles rose to $51.979 million for the three months ended June 30, 2025, from $21.026 million in the prior year, indicating a deterioration in asset values.
• Real Estate Market Volatility [medium — market]: The company's performance is tied to the real estate market, which can be subject to economic downturns, interest rate fluctuations, and changes in demand for office and residential properties. The 64% occupancy rate for consolidated office complexes highlights this vulnerability.
• Asset Management Fees [medium — operational]: Asset management fees to affiliate decreased to $5.396 million for the six months ended June 30, 2025, from $7.974 million in the prior year. While a reduction, these fees represent a significant operating expense.
• Debt Obligations and Covenant Compliance [high — financial]: The company has $866.8 million in notes and bonds payable. Non-compliance with covenants on $289.2 million of bonds could trigger immediate repayment demands, exacerbating liquidity issues.
• Declining Cash Position [high — financial]: Cash and cash equivalents decreased from $56.0 million at December 31, 2024, to $14.682 million at June 30, 2025. Restricted cash increased from $42.376 million to $50.634 million.

Industry Context

The real estate investment trust (REIT) sector, particularly those focused on office and diversified portfolios, faces headwinds from evolving work-from-home trends and higher interest rates. While residential segments may show resilience, the overall market demands strong balance sheets and operational efficiency to navigate economic uncertainties and maintain occupancy.

Regulatory Implications

As a publicly traded entity, PCOK is subject to SEC regulations and reporting requirements. The 'going concern' disclosure triggers heightened scrutiny from regulators and investors regarding financial stability and future viability. Compliance with debt covenants is critical to avoid further financial distress.

What Investors Should Do

1. Monitor debt restructuring and covenant waiver negotiations closely.
2. Evaluate the success of property sales strategy.
3. Assess the impact of foreign currency fluctuations and impairment charges.
4. Analyze the trend in rental income and occupancy rates.
5. Consider the company's ability to attract new capital or equity.

Key Dates

• 2025-06-30: Six Months Ended — Reported a net loss of $127.271 million and total revenues of $63.575 million, reflecting significant financial challenges.
• 2025-06-30: Three Months Ended — Impairment charges rose to $51.979 million, contributing to the increased net loss.
• 2025-06-30: Balance Sheet Date — Total assets were $1,012,911,000 and total liabilities were $984,614,000, with total equity at $28,297,000.
• 2024-12-31: Prior Year End — Total assets were $1,124,956,000 and total liabilities were $969,153,000, with total equity at $155,803,000.
• 2024-06-30: Prior Year Six Months Ended — Reported a net loss of $122.652 million and total revenues of $68.811 million.

Glossary

REIT

Real Estate Investment Trust. A company that owns, operates, or finances income-generating real estate. (Pacific Oak Strategic Opportunity REIT, Inc. is structured as a REIT.)

Going Concern

An accounting assumption that a business will continue to operate for the foreseeable future. (The company's ability to continue as a going concern is in doubt due to significant financial pressures.)

Impairment Charges

A reduction in the carrying value of an asset when its fair value is less than its book value. (Significant impairment charges on real estate indicate a decline in asset values.)

Foreign Currency Transaction Loss

Losses incurred due to fluctuations in exchange rates when a company deals in foreign currencies. (A substantial foreign currency loss significantly impacted the company's net loss.)

Financial Covenants

Conditions or restrictions in loan agreements that a borrower must meet. (Expected non-compliance with covenants on bonds could lead to accelerated debt repayment.)

Cumulative Distributions and Net Loss

An equity account reflecting the total net losses and distributions paid to shareholders over time. (This account shows a large negative balance of $(867,203,000) as of June 30, 2025, indicating substantial accumulated losses.)

Noncontrolling Interests

The portion of equity in a subsidiary that is not attributable to the parent company. (Represents a small portion of the company's equity, with a negative balance of $(4,132,000) as of June 30, 2025.)

Year-Over-Year Comparison

Pacific Oak Strategic Opportunity REIT, Inc. reported a worsening financial performance for the six months ended June 30, 2025, compared to the prior year. Total revenues decreased by 7.61% to $63.575 million, while the net loss widened by 3.76% to $127.271 million. Key negative variances include a significant shift from a foreign currency gain to a substantial loss ($24.157 million loss vs. $11.280 million gain) and a sharp increase in impairment charges ($51.979 million vs. $21.026 million for the three-month period), both contributing to the increased net loss and highlighting deteriorating asset values and market conditions.

Filing Documents

• pacoaksor-20250630.htm (10-Q) — 1320KB
• exhibit101posor-amendeda.htm (EX-10.1) — 60KB
• exhibit102posor-amendeda.htm (EX-10.2) — 13KB
• exhibit103posor-pledgean.htm (EX-10.3) — 44KB
• exhibit104formofindemnif.htm (EX-10.4) — 53KB
• pacificoaksorq22025ex311.htm (EX-31.1) — 10KB
• pacificoaksorq22025ex312.htm (EX-31.2) — 10KB
• pacificoaksorq22025ex321.htm (EX-32.1) — 6KB
• pacificoaksorq22025ex322.htm (EX-32.2) — 6KB
• exhibit101posor-amendeda001.jpg (GRAPHIC) — 1050KB
• exhibit101posor-amendeda002.jpg (GRAPHIC) — 1217KB
• exhibit101posor-amendeda003.jpg (GRAPHIC) — 1059KB
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• exhibit101posor-amendeda005.jpg (GRAPHIC) — 759KB
• exhibit101posor-amendeda006.jpg (GRAPHIC) — 81KB
• exhibit102posor-amendeda001.jpg (GRAPHIC) — 1044KB
• exhibit102posor-amendeda002.jpg (GRAPHIC) — 66KB
• exhibit103posor-pledgean001.jpg (GRAPHIC) — 1053KB
• exhibit103posor-pledgean002.jpg (GRAPHIC) — 1166KB
• exhibit103posor-pledgean003.jpg (GRAPHIC) — 1047KB
• exhibit103posor-pledgean004.jpg (GRAPHIC) — 562KB
• exhibit104formofindemnif001.jpg (GRAPHIC) — 1432KB
• exhibit104formofindemnif002.jpg (GRAPHIC) — 1440KB
• exhibit104formofindemnif003.jpg (GRAPHIC) — 224KB
• 0001452936-25-000083.txt ( ) — 25745KB
• pacoaksor-20250630.xsd (EX-101.SCH) — 47KB
• pacoaksor-20250630_cal.xml (EX-101.CAL) — 73KB
• pacoaksor-20250630_def.xml (EX-101.DEF) — 311KB
• pacoaksor-20250630_lab.xml (EX-101.LAB) — 584KB
• pacoaksor-20250630_pre.xml (EX-101.PRE) — 441KB
• pacoaksor-20250630_htm.xml (XML) — 1112KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION 2

Financial Statements

Item 1. Financial Statements 2 Consolidated Balance Sheets as of June 30, 2025 (unaudited) and December 31, 2024 2 Consolidated Statements of Operations (unaudited) for the Three and Six Months Ended June 30, 2025 and 2024 3 Consolidated Statements of Equity (unaudited) for the Three and Six Mo nths Ended June 30, 2025 and 2024 4 Consolidated Statements of Cash Flows (unaudited) for the Six M onths Ended June 30, 2025 and 2024 5 Condensed Notes to Consolidated Financial Statements as of June 30, 2025 (unaudited) 7

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 21

Quantitative and Qualitative Disclosures about Market Risk

Item 3. Quantitative and Qualitative Disclosures about Market Risk 31

Controls and Procedures

Item 4. Controls and Procedures 33

OTHER INFORMATION

PART II. OTHER INFORMATION 34

Legal Proceedings

Item 1. Legal Proceedings 34

Risk Factors

Item 1A. Risk Factors 34

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 34

Defaults upon Senior Securities

Item 3. Defaults upon Senior Securities 34

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 35

Other Information

Item 5. Other Information 35

Exhibits

Item 6. Exhibits 36

SIGNATURES

SIGNATURES 37 1 Table of Contents

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) June 30, 2025 December 31, 2024 (unaudited) Assets Real estate held for investment, net $ 778,921 $ 828,442 Real estate held for sale, net 39,100 55,637 Real estate equity securities 14,116 13,154 Total real estate and real estate-related investments, net 832,137 897,233 Cash and cash equivalents 14,682 56,000 Restricted cash 50,634 42,376 Investments in unconsolidated entities 72,835 88,087 Due from affiliate 2,317 — Rents and other receivables, net 22,544 22,084 Prepaid expenses and other assets 17,762 19,176 Total assets $ 1,012,911 $ 1,124,956 Liabilities and equity Notes and bonds payable related to real estate held for investment, net $ 827,323 $ 824,684 Notes payable related to real estate held for sale, net 39,515 40,608 Notes and bonds payable, net 866,838 865,292 Accounts payable and accrued liabilities 35,181 31,233 Due to affiliate 27,235 12,660 Other liabilities 55,360 59,968 Total liabilities 984,614 969,153 Commitments, contingencies and guarantees (Note 9) Equity 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, 102,951,395 shares issued and outstanding as of June 30, 2025 and December 31, 2024 1,030 1,030 Additional paid-in capital 898,602 898,682 Cumulative distributions and net loss ( 867,203 ) ( 740,770 ) Total stockholders' equity 32,429 158,942 Noncontrolling interests ( 4,132 ) ( 3,139 ) Total equity 28,297 155,803 Total liabilities and equity $ 1,012,911 $ 1,124,956 See accompanying condensed notes to consolidated financial statements. 2 Table of Contents

FINANCIAL INFORMATION (CONTINUED)

PART I. FINANCIAL INFORMATION (CONTINUED)

Financial Statements (continued)

Item 1. Financial Statements (continued) PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per share amounts) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Revenues: Rental income $ 28,772 $ 30,612 $ 57,018 $ 61,822 Hotel revenues 1,737 2,235 4,622 5,039 Other operating income 960 962 1,935 1,950 Total revenues 31,469 33,809 63,575 68,811 Expenses: Operating, maintenance, and management 11,591 11,183 23,611 22,086 Real estate taxes and insurance 5,420 6,556 10,903 13,031 Hotel expenses 1,637 1,784 3,373 3,652 Asset management fees to affiliate 2,739 3,872 5,396 7,974 General and administrative expenses 3,361 4,541 6,211 7,793 Foreign currency transaction loss (gain), net 30,141 ( 7,368 ) 24,157 ( 11,280 ) Depreciation and amortization 10,366 10,380 20,048 21,129 Interest expense, net (1) 17,151 18,008 33,294 34,782 Impairment charges on real estate and related intangibles 51,979 21,026 51,979 60,291 Total expenses 134,385 69,982 178,972 159,458 Other (loss) income: Loss from unconsolidated entities, net ( 6,769 ) ( 8,653 ) ( 14,266 ) ( 16,730 ) Other income 234 283 1,016 738 Gain (loss) on real estate equity securities, net 962 ( 1,282 ) 962 ( 16,632 ) Gain on sale of real estate 1,080 167 1,244 619 Total other loss, net ( 4,493 ) ( 9,485 ) ( 11,044 ) ( 32,005 ) Net loss before income taxes ( 107,409 ) ( 45,658 ) ( 126,441 ) ( 122,652 ) Income tax provision — — ( 830 ) — Net loss ( 107,409 ) ( 45,658 ) ( 127,271 ) ( 122,652 ) Net loss attributable to noncontrolling interests 775 1,437 838 1,958 Net loss attributable to common stockholders $ ( 106,634 ) $ ( 44,221 ) $ ( 126,433 ) $ ( 120,694 ) Net loss per common share, basic and diluted $ ( 1.04 ) $ ( 0.43 ) $ ( 1.23 ) $ ( 1.17 ) Weighted-average number of common shares outstanding, basic and diluted 102,951,395 103,134,992 102,951,395 103,208,689 _____________________ (1) Includes

FINANCIAL INFORMATION (CONTINUED)

PART I. FINANCIAL INFORMATION (CONTINUED)

Financial Statements (continued)

Item 1. Financial Statements (continued) PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC. CONSOLIDATED STATEMENTS OF EQUITY (unaudited) (in thousands, except share amounts) Common Stock Additional Paid-in Capital Cumulative Distributions and Net Loss Total Stockholders' Equity Noncontrolling Interests Total Equity Shares Amounts Balance, March 31, 2025 102,951,395 $ 1,030 $ 898,682 $ ( 760,569 ) $ 139,143 $ ( 3,262 ) $ 135,881 Net loss — — — ( 106,634 ) ( 106,634 ) ( 775 ) ( 107,409 ) Noncontrolling interest contribution — — — — — 10 10 Noncontrolling interest distributions — — ( 80 ) — ( 80 ) ( 105 ) ( 185 ) Balance, June 30, 2025 102,951,395 $ 1,030 $ 898,602 $ ( 867,203 ) $ 32,429 $ ( 4,132 ) $ 28,297 Common Stock Additional Paid-in Capital Cumulative Distributions and Net Loss Total Stockholders' Equity Noncontrolling Interests Total Equity Shares Amounts Balance, March 31, 2024 103,214,807 $ 1,032 $ 901,050 $ ( 716,406 ) $ 185,676 $ 1,044 $ 186,720 Net loss — — — ( 44,221 ) ( 44,221 ) ( 1,437 ) ( 45,658 ) Transfers to redeemable common stock, net — — ( 399 ) — ( 399 ) — ( 399 ) Noncontrolling interest contribution — — — — — 47 47 Noncontrolling interests distributions — — — — — ( 271 ) ( 271 ) Redemptions of common stock ( 197,839 ) ( 2 ) ( 1,599 ) — ( 1,601 ) — ( 1,601 ) Balance, June 30, 2024 103,016,968 $ 1,030 $ 899,052 $ ( 760,627 ) $ 139,455 $ ( 617 ) $ 138,838 Common Stock Additional Paid-in Capital Cumulative Distributions and Net Loss Total Stockholders' Equity Noncontrolling Interests Total Equity Shares Amounts Balance, December 31, 2024 102,951,395 $ 1,030 $ 898,682 $ ( 740,770 ) $ 158,942 $ ( 3,139 ) $ 155,803 Net loss — — — ( 126,433 ) ( 126,433 ) ( 838 ) ( 127,271 ) Noncontrolling interest contribution — — — — — 10 10 Noncontrolling interest distributions — — ( 80 ) — ( 80 ) ( 165 ) ( 245 ) Balance, June 30, 2025 102,951,395 $ 1,030 $ 898,602 $ ( 867,203 ) $ 32,429 $ ( 4,132 ) $ 28,297 Common Stock Additional Pai

FINANCIAL INFORMATION (CONTINUED)

PART I. FINANCIAL INFORMATION (CONTINUED)

Financial Statements (continued)

Item 1. Financial Statements (continued) PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands) Six Months Ended June 30, 2025 2024 Cash Flows from Operating Activities: Net loss $ ( 127,271 ) $ ( 122,652 ) Adjustments to reconcile net loss to net cash used in operating activities: Impairment charges on real estate and related intangibles 51,979 60,291 Loss from unconsolidated entities, net 14,266 16,730 Depreciation and amortization 20,048 21,129 (Gain) loss on real estate equity securities, net ( 962 ) 16,632 Gain on sale of real estate ( 1,244 ) ( 619 ) Amortization of deferred financing costs and debt discount and premium, net 3,590 4,781 Foreign currency transaction loss (gain), net 24,157 ( 11,280 ) Changes in assets and liabilities: Rents and other receivables, net ( 217 ) ( 370 ) Prepaid expenses and other assets ( 912 ) ( 1,802 ) Accounts payable and accrued liabilities 3,410 ( 2,243 ) Due to affiliate 4,575 3,074 Other liabilities ( 102 ) 569 Net cash used in operating activities ( 8,683 ) ( 15,760 ) Cash Flows from Investing Activities: Improvements to real estate ( 6,458 ) ( 17,512 ) Proceed from sales of real estate, net 1,845 3,126 Advances to affiliate ( 2,317 ) — Payments on development obligations ( 2,311 ) ( 3,905 ) Distribution of capital from an unconsolidated entity 759 1,497 Purchase of interest rate caps — ( 1,447 ) Proceeds from interest rate caps — 1,687 Contributions to an unconsolidated entity — ( 38,689 ) Payments on foreign currency derivatives, net — ( 478 ) Proceeds from the sale of real estate equity securities — 16,379 Proceeds for development obligations — 5 Net cash used in investing activities ( 8,482 ) ( 39,337 ) Cash Flows from Financing Activities: Advances from affiliate loans 10,000 — Principal payments on notes and bonds payable ( 26,564 ) ( 115,169 ) Noncontrolling interest contributions 10 397 Noncontrolling interest distribut

FINANCIAL INFORMATION (CONTINUED)

PART I. FINANCIAL INFORMATION (CONTINUED)

Financial Statements (continued)

Item 1. Financial Statements (continued) PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (unaudited) (in thousands) Six Months Ended June 30, 2025 2024 Supplemental Disclosure of Cash Flow Information: Interest paid, net of capitalized interest of $ 957 and $ 2,186 for the six months ended June 30, 2025 and 2024, respectively $ 25,968 $ 30,490 Supplemental Disclosure of Significant Noncash Transaction: Accrued development obligations 9,188 7,313 See accompanying condensed notes to consolidated financial statements. 6 Table of Contents

FINANCIAL INFORMATION (CONTINUED)

PART I. FINANCIAL INFORMATION (CONTINUED)

Financial Statements (continued)

Item 1. Financial Statements (continued) PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC. CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2025 (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"). 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. 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, 2024. 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, 2024, included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC"). Principles of Consolidation and Basis of Presentation The accompanying unaudited co

FINANCIAL INFORMATION (CONTINUED)

PART I. FINANCIAL INFORMATION (CONTINUED)

Financial Statements (continued)

Item 1. Financial Statements (continued) PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC. CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) June 30, 2025 (unaudited) These circumstances raise substantial doubt as to the Company's ability to continue as a going concern for at least one year following the date the financial statements are issued. In order to satisfy obligations as they mature, management's plan involve a combination of the following options: (i) may seek to utilize extension options (if available) in the respective loan agreements, (ii) may make partial loan repayments to meet debt covenant requirements, (iii) may seek to refinance or restructure certain debt instruments, (iv) may sell real estate properties or equity securities to convert to cash to make principal payments, or (v) may negotiate a turnover of one or more secured properties back to the related lender and remit payment for any associated loan guarantee. In addition, if the Company is out of compliance for two consecutive quarters, management plans to negotiate with the Series B and Series D bondholders to obtain either a waiver related to the expected financial covenants noncompliance, or an amendment to the deed of trusts amending the current financial covenants. However, as a result of the commercial real estate lending environment, the current interest rate environment, leasing and transaction volume challenges in certain markets, there can be no assurances as to the certainty or timing of management's plans to be effectively implemented and as a result, management's plans do not alleviate the substantial doubt. The Company's financial statements are prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of obligations in the normal course of business. Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and

FINANCIAL INFORMATION (CONTINUED)

PART I. FINANCIAL INFORMATION (CONTINUED)

Financial Statements (continued)

Item 1. Financial Statements (continued) PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC. CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) June 30, 2025 (unaudited) 3. REAL ESTATE HELD FOR INVESTMENT As of June 30, 2025, the Company consolidated eight office complexes, encompassing, in the aggregate, 2.8 million rentable square feet and these properties were 64 % occupied. In addition, the Company owned one residential home portfolio consisting of 2,078 residential homes, and one apartment property, containing 317 units, which were 92 % and 90 % occupied, respectively. The Company also owned one hotel property with 196 rooms, three investments in undeveloped land with 247 developable acres, and one office/retail development property. The following table summarizes the Company's real estate held for investment as of June 30, 2025 and December 31, 2024 , respectively (in thousands ): June 30, 2025 December 31, 2024 Land $ 180,669 $ 189,449 Buildings and improvements 710,685 787,873 Tenant origination and absorption costs 8,469 11,254 Total real estate, cost 899,823 988,576 Accumulated depreciation and amortization ( 120,902 ) ( 160,134 ) Total real estate held for investment, net $ 778,921 $ 828,442 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 June 30, 2025, the leases, excluding options to extend, apartment leases and residential home leases, which have terms that are generally one year or less, had remaining terms of up to 15.2 years with a weighted-average remaining term of 3.9 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 Co

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PART I. FINANCIAL INFORMATION (CONTINUED)

Financial Statements (continued)

Item 1. Financial Statements (continued) PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC. CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) June 30, 2025 (unaudited) Geographic Concentration Risk As of June 30, 2025, the Company's real estate investments in California represented 11.2 % or $ 113.3 million and in Tennessee represented 10.1 % or $ 102.5 million, 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 these 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. Hotel Property The following table provides detailed information regarding the Company's hotel revenues during the three and six months ended June 30, 2025 and 2024 (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Hotel revenues: Room $ 1,514 $ 1,947 $ 4,098 $ 4,413 Other 223 288 524 626 Hotel revenues $ 1,737 $ 2,235 $ 4,622 $ 5,039 Contract Liabilities The Company's contract liabilities are comprised of: hotel advanced deposits, deferred proceeds received from the buyers of the Park Highlands land sales, and value of Park Highlands land that was contributed to a master association. As of June 30, 2025 and December 31, 2024, contract liabilities were $ 23.7 million and $ 25.7 million, respectively, which are included in other liabilities on the accompanying consolidated balance sheets. During the three and six months ended June 30, 2025, the Company recognized $ 1.2 million related to Park Highlands land contributed to a master association, as a gain on sale of

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