NOTES AND BOND PAYABLE

3 Months Ended

Mar. 31, 2020

NOTES AND BONDS PAYABLE

As of March 31, 2020 and December 31, 2019, 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 March 31, 2020		Book Value as of December 31, 2019		Contractual Interest Rate as of March 31, 2020 ⁽¹⁾	Effective Interest Rate at March 31, 2020 ⁽¹⁾	Payment Type ⁽³⁾	Maturity Date ⁽²⁾
Richardson Portfolio Mortgage Loan	$	36,000	$	36,000	One-Month LIBOR + 2.50%	3.49%	Interest Only ⁽³⁾	11/01/2021
Park Centre Mortgage Loan	21,970		21,970		One-Month LIBOR + 1.75%	2.74%	Interest Only	06/27/2022

1180 Raymond Mortgage Loan	30,150		30,250		One-Month LIBOR + 2.25%	3.24%	Principal & Interest	06/01/2020
1180 Raymond Bond Payable	6,030		6,080		6.50%	6.50%	Principal & Interest	09/01/2036

Pacific Oak SOR (BVI) Holdings, Ltd. Series A Debentures ⁽⁴⁾	164,065		224,746		4.25%	4.25%	⁽⁴⁾	03/01/2023
Pacific Oak SOR (BVI) Holdings, Ltd. Series B Debentures ⁽⁴⁾	71,601		—		3.93%	3.93%	⁽⁴⁾	01/31/2026
Crown Pointe Mortgage Loan	53,612		51,171		One-Month LIBOR + 2.60%	3.59%	Principal & Interest	02/13/2021

City Tower Mortgage Loan	94,167		89,000		One-Month LIBOR + 1.55%	2.54%	Interest Only	03/05/2021
The Marq Mortgage Loan	58,331		53,408		One-Month LIBOR + 1.55%	2.54%	Interest Only	06/06/2021
Eight & Nine Corporate Centre Mortgage Loan	47,066		43,880		One-Month LIBOR + 1.60%	2.59%	Interest Only	06/08/2021
Georgia 400 Center Mortgage Loan	59,690		59,690		One-Month LIBOR + 1.55%	2.54%	Interest Only	05/22/2023
PORT Mortgage Loan 1	51,362		51,362		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
Total Notes and Bonds Payable principal outstanding	704,567		678,080
Premium on Notes and Bonds Payable ⁽⁵⁾	757		783
Deferred financing costs, net	(6,636)		(5,200)
Total Notes and Bonds Payable, net	$	698,688	$	673,663

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⁽¹⁾ Contractual interest rate represents the interest rate in effect under the loan as of March 31, 2020. Effective interest rate is calculated as the actual interest rate in effect as of March 31, 2020 (consisting of the contractual interest rate and contractual floor rates), using interest rate indices at March 31, 2020, where applicable.

⁽²⁾ Represents the initial maturity date or the maturity date as extended as of March 31, 2020; subject to certain conditions, the maturity dates of certain loans may be extended beyond the date shown.

⁽³⁾Represents the payment type required under the loan as of March 31, 2020. 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.

⁽⁴⁾ See “ – Israeli Bond Financing” below.

⁽⁵⁾Represents the unamortized premium on notes and bonds payable due to the above-market interest rates when the debt was assumed. The premium is amortized over the remaining life of the notes and bonds payable.

The Company plans to refinance or utilize available extension options for notes payable with maturities through the first quarter of 2021. There can be no assurance that the Company will be able to refinance or utilize extension options.

During the three months ended March 31, 2020 and 2019 , the Company incurred $6.8 million and $7.2 million, respectively, of interest expense. Included in interest expense for each of the three months ended March 31, 2020 and 2019 was $0.9 million of amortization of deferred financing costs. Additionally, during the three months ended March 31, 2020 and 2019, the Company capitalized $0.9 million and $0.7 million, respectively of interest related to its investments in undeveloped land.

As of March 31, 2020 and December 31, 2019, the Company’s interest payable was $2.5 million and $4.8 million, respectively.

The following is a schedule of maturities, including principal amortization payments, for all notes and bonds payable outstanding as of March 31, 2020 (in thousands):


April 1, 2020 through December 31, 2020	$	31,772
2021	342,622
2022	76,898
2023	114,634
2024	24,137
Thereafter	114,504
	$	704,567

The Company’s notes payable contain financial debt covenants. As of March 31, 2020, the Company was in compliance with all of these debt covenants.

Israeli Bond Financing

On March 2, 2016, Pacific Oak SOR BVI, a wholly owned subsidiary of the Company, filed a final prospectus with the Israel Securities Authority for a proposed offering of up to 1,000,000,000 Israeli new Shekels of the Debentures at an annual interest rate not to exceed 4.25%. On March 1, 2016, Pacific Oak SOR BVI commenced the institutional tender of the Debentures and accepted application for 842.5 million Israeli new Shekels. On March 7, 2016, Pacific Oak SOR BVI commenced the public tender of the Debentures and accepted 127.7 million Israeli new Shekels. In the aggregate, Pacific Oak SOR BVI accepted 970.2 million Israeli new Shekels (approximately $249.2 million as of March 8, 2016) in both the institutional and public tenders at an annual interest rate of 4.25%. Pacific Oak SOR BVI issued the Debentures on March 8, 2016. The terms of the Debentures require five equal annual installment principal payments on March 1st of each year from 2019 to 2023. As of March 31, 2020, the Company had two foreign currency collar for an aggregate notional amount of 798.0 million Israeli new Shekels to hedge its exposure to foreign currency exchange rate movements. See note 8, “Derivative Instruments” for a further discussion on the Company’s foreign currency collar.

On February 16, 2020, Pacific Oak SOR BVI issued 254.1 million Israeli new Shekels (approximately $74.1 million as of February 16, 2020) of Series B debentures to Israeli investors pursuant to a public offering registered with the Israel Securities Authority. The Series B Debentures will 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.

The deed of trust that governs the terms of the Debentures contains various financial covenants. As of March 31, 2020, the Company was in compliance with all of these financial debt covenants.