Pacific Oak Strategic Opportunity REIT Reports $106.6 Million Net Loss and Declining Revenues

Pacific Oak Strategic Opportunity REIT, Inc. reported a net loss of $106.6 million for the three months ended June 30, 2025, compared to a loss of $44.2 million for the same period in 2024. Total revenues decreased to $31.5 million from $33.8 million year-over-year, primarily driven by a decline in rental income, which fell to $28.8 million from $30.6 million. The decrease in rental income was attributed to the sale of 76 residential homes and one apartment property, resulting in a loss of approximately $2.3 million in revenue. The company also experienced a significant foreign currency transaction loss of $30.1 million, compared to a gain of $7.4 million in the prior year, largely due to unfavorable exchange rates affecting its Israeli bonds.

In terms of operational performance, the company’s real estate portfolio showed mixed occupancy rates as of June 30, 2025. The office complexes were 64% occupied, while the residential home portfolio and apartment property had occupancy rates of 92% and 90%, respectively. The company’s total assets decreased to $1.01 billion from $1.12 billion at the end of 2024, with real estate held for investment declining to $778.9 million from $828.4 million. The decrease in total assets was primarily due to the sale of properties and impairments on real estate assets, which totaled $52.0 million for the quarter.

Strategically, Pacific Oak has been active in managing its debt obligations, with $874.7 million in total outstanding debt as of June 30, 2025. The company has significant debt maturing within the next year, raising concerns about its ability to continue as a going concern. Management plans to address these obligations through a combination of refinancing, utilizing extension options, and potentially selling properties. In July 2025, the company entered into a credit agreement for an $80 million loan, which was used to pay off outstanding Series C bonds.

The company’s financial outlook remains cautious, with management acknowledging substantial doubt regarding its ability to meet upcoming debt obligations. The current economic environment, characterized by rising interest rates and market volatility, poses additional challenges. The company is focused on improving cash flows through leasing additional space and acquiring new assets, although it anticipates potential decreases in cash flows from asset disposals. The management's plans to navigate these challenges include exploring refinancing options and negotiating with bondholders for potential waivers or amendments to existing covenants.

Overall, Pacific Oak Strategic Opportunity REIT, Inc. is navigating a complex financial landscape marked by significant losses, declining revenues, and substantial debt obligations, while actively seeking strategies to stabilize its operations and improve its financial position.