COMMITMENTS, CONTINGENCIES AND GUARANTEES

9 Months Ended

Sep. 30, 2025

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS, CONTINGENCIES AND GUARANTEES

Lease Obligations

As of September 30, 2025 and December 31, 2024, the Company’s lease and rights to a leasehold interest with respect to 210 West 31st, which was accounted as a finance lease, are included in the consolidated balance sheet as follows:


	September 30, 2025			December 31, 2024
Right-of-use asset (included in real estate held for investment, net, in thousands)	$	4,955		$	6,014
Lease obligation (included in other liabilities, in thousands)	9,682			9,632

Remaining lease term	88.3 years			89 years
Discount rate	4.8		%	4.8		%

As of September 30, 2025, the Company had a leasehold interest expiring in 2114. Future minimum lease payments under the Company’s finance lease as of September 30, 2025 are as follows (in thousands):



October 1, 2025 through December 31, 2025	$	99
2026	396
2027	396
2028	396
2029	396
Thereafter	50,979
Total expected minimum lease obligations	52,662
Less: Amount representing interest (1)	(42,980)
Present value of net minimum lease payments (2)	$	9,682

_____________________

(1) Interest includes the amount necessary to reduce the total expected minimum lease obligations to present value calculated at the Company’s incremental borrowing rate at acquisition.

(2) The present value of net minimum lease payments is included in other liabilities in the accompanying consolidated balance sheets.

Guarantee Agreements

As of September 30, 2025, and as part of the previous 110 William Joint Venture debt and restructuring agreements, the Company guaranteed the completion of the construction and the development of the building expenditures and tenant improvements. The Company also guaranteed all debt servicing costs and timely debt payments by the 110 William Joint Venture. The guaranteed amounts are due upon occurrence of a triggering event, such as default for nonpayment or failure to perform based on the conditions defined in the agreement. As of September 30, 2025, the maximum potential amount of future payments under the Company’s guarantees is not estimable as it is dependent on various factors including the 110 William Joint Venture’s future operating performance level, potential completion cost overages, future levels of variable-rate debt and related interest, and the amount of future contributions by the Company. Due to uncertainties surrounding these factors, the Company was unable to estimate the maximum amounts payable under the guarantees. As of September 30, 2025, no triggering events had occurred, the likelihood of loss was determined to be remote, and no liability related to the guarantees was recognized.

As of September 30, 2025, and as part of the Madison Square, Lincoln Court, and WhiteHawk loans, the Company guaranteed the payment of $131.4 million, whereby the Company would be required to make payments in the event that the Company turned the collateralized properties over to the lenders.

Economic Dependency

The Company is dependent on Pacific Oak Capital Advisors and a subsidiary of Second Avenue Group, LLC, which is the advisor for the Company’s residential homes portfolio, for certain services that are essential to the Company, including the identification, evaluation, negotiation, origination, acquisition and disposition of investments; management of the daily operations of the Company’s investment portfolio; and other general and administrative responsibilities. In the event that the advisors are unable to provide these services, the Company will be required to obtain such services from other sources.

Additionally, under the Standstill, as defined in Note 2, the Pacific Oak SOR BVI agreed to maintain working capital and operational guidelines as outlined in the Standstill and any operations outside of these guidelines must be approved by the bondholder’s trustee. Accordingly, certain operating decisions of the Pacific Oak SOR BVI are subject to the terms of the Standstill, such as disbursements and asset transactions and would require approval from the bondholders’ trustee, which may limit the Pacific Oak SOR BVI’s flexibility to execute initiatives outside of the agreed operating and working capital guidelines.

Environmental

As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. Although there can be no assurance, the Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations as of September 30, 2025.

Legal Matters

In the ordinary course of business, the Company may become subject to litigation, claims and regulatory matters. As of September 30, 2025, there are no material legal or regulatory proceedings pending or known to be contemplated against the Company or its properties, except as noted below.

On September 10, 2025, an Israeli investor filed a petition for certification of a class action in the Tel Aviv District Court, Israel against Pacific Oak SOR BVI and certain members of its board of directors, alleging that disclosures relating to Pacific Oak SOR BVI were misleading and caused investor harm. The petition states an individual claim amount in excess of 2.5 million Israeli new shekels ($0.8 million as of September 30, 2025) and cites the petitioner’s expert model estimating potential class-wide damages of approximately 124.6–145.2 million Israeli new shekels ($37.6-43.9 million as of September 30, 2025). The matter is at a preliminary stage; the court has not ruled on class certification or on the merits.

The Company intends to dispute the allegations and to defend the matter vigorously. In accordance with ASC 450-20, based on information currently available, the Company did not recorded an accrual as of September 30, 2025 because a loss is not probable and reasonably estimable. While a loss is reasonably possible, the Company cannot reasonably estimate a possible loss or range of loss at this time. An adverse outcome could be material to our results of operations, financial position, or liquidity in one or more periods. The Company will continue to monitor developments and update disclosures and recognition, if and when estimation becomes possible. Any potential insurance recoveries will be recognized when realization is probable.