Pacific Oak Strategic Opportunity REIT has hired investment banking firm Robert A. Stanger & Co. to serve as its financial adviser as part of a formal process to explore strategic alternatives as it faces insolvency.
The Costa Mesa, California-based real estate investment trust cited its "difficult financial situation" as the catalyst for the decision. Auditors expressed substantial doubt last quarter about Pacific Oak's ability to continue as a going concern.
The REIT's decision to pursue strategic alternatives suggests that the company may seek a buyer, merger partner or restructuring plan rather than attempt to resolve its financial challenges independently.
Company representatives did not respond to CoStar News' requests for comment.
Pacific Oak issued bonds in Israel in 2020 to finance some of its real estate investments. It has $512.8 million of debt obligations coming due within one year on those bonds.
Additionally, the REIT is out of compliance on some of those bonds, it reported in regulatory filings in the United States and Israel.
Israeli bondholders are scheduled to meet next week to discuss placing the bonds into immediate redemption and discuss Pacific Oak's pending property sales. The bondholders previously rejected two proposed property sales in September that would have raised $318 million.
Pacific Oak has requested a postponement of next week's meeting to give Stanger & Co. additional time to participate in restructuring negotiations, according to filings in Israel.
The REIT has not posted a profit since the end of 2018, according to its annual reports filed with the U.S. Securities and Exchange Commission.
As of June 30, Pacific Oak controlled eight office complexes, encompassing 2.8 million rentable square feet, that are collectively 64% occupied. In addition, the REIT owned a single-family rental portfolio comprising 2,078 homes and one apartment property containing 317 units. It also owned a hotel with 196 rooms, three investments in undeveloped land totaling 247 acres, and an office or retail development property.