Pacific Oak Strategic Opportunity REIT Inc., a publicly registered non-traded real estate investment trust formerly known as KBS Strategic Opportunity REIT Inc., reported this month that its operating partnership had entered into a loan agreement for $8 million from Pacific Oak Capital Advisors LLC. The loan matures in May 2025, and bears interest at a 12% annual rate.
The REIT owns nine office properties that comprise approximately 72% of its total assets. These properties encompass approximately 3.2 million rentable square feet and were 66% occupied at the close of the third quarter 2024.
In addition, as of Sept. 30, 2024, the company owned one residential home portfolio consisting of 2,145 residential homes, and one apartment property, containing 317 units, which were 94% and 95% occupied, respectively.
The REIT suspended its share redemption program in July 2024 and reported that it continues to focus on dispositions of certain office and residential assets and refinancing out existing debts. In October 2024, it closed on the final phase of three transactions to sell a total of 501 developable acres of land in North Las Vegas, Nev., to buyers unaffiliated with the company: Forestar (USA) Real Estate Group Inc. and D.R. Horton Inc.
As reported by the REIT during an August 2024 presentation to stockholders, the Park Highlands land sales “closes out an incredibly profitable and timely investment by the company, which had acquired the large acreage during joint venture deals in 2011 and 2013 at the depths of the housing bust, and then subsequently bought out its joint venture partners.” At the time of the partner buyouts in 2016, the company said its acquisition basis was just $68.4 million, or $55,000 per estimated developable acre. The aggregate gross sales proceeds were $223.1 million, before closing costs, taxes, reimbursements, and credits.
The REIT reported total assets of $1.1 billion and debt-to-gross assets were approximately 87% as of Sept. 30, 2024.
The company had previously extended out certain loans and refinanced certain debts into a consolidated loan that matures in 2026. Approximately 14% of outstanding debt is scheduled to mature in 2025. Pacific Oak anticipates asset sales of approximately $400 million by the end of 2025, with estimated proceeds net of debt repayment of approximately $150 million.
Pacific Oak Strategic Opportunity REIT closed its initial public offering on Nov. 20, 2012. On Oct. 1, 2020, Pacific Oak Strategic Opportunity REIT II shareholders approved the merger into Pacific Oak Strategic Opportunity REIT. This REIT was designed to capitalize on the dislocation, lack of liquidity, and government intervention that exists in the commercial real estate markets by acquiring a diverse portfolio of opportunistic investments in discounted debt and distressed equity assets. The REIT seeks to provide stockholders attractive total returns through the purchase of non-performing loans at favorable prices and real estate from distressed sellers.
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