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Pacific Oak Strategic Opportunity REIT Urges Stockholders to Reject Comrit Offer

Pacific Oak Strategic Opportunity REIT Inc., a publicly registered non-traded real estate investment trust formerly known as KBS Strategic Opportunity REIT Inc., recommended to its stockholders that they reject a mini-tender offer to be made by Comrit Investments 1 LP for up to 991,501 shares of the company’s common stock at an offer price of $3.53 per share.

According to a stockholder letter signed by Peter McMillan III, president and chairman of the board, the REIT believes that Comrit is attempting to capitalize on illiquidity by buying shares at what it believes is a discounted price with the intention of making a profit.

The REIT reminded stockholders that Comrit is in no way affiliated with the REIT, its external adviser Pacific Oak Capital Advisors LLC, or its dealer manager Pacific Oak Capital Markets LLC.

After evaluation of the tender offer, the REIT recommended that its stockholders ignore and reject the tender offer, considering several factors, including:

  • Last fall 2023, the REIT published an estimated value per share for its common stock of $8.03.
  • Tendering stockholders whose share are accepted for payment will lose the opportunity to participate in any potential future upside and growth of the REIT with respect to such shares and will lose the right to receive any future distributions or dividends.

In December 2023, the REIT reported a 23.5% annual decline NAV, according to previous reporting by The DI Wire.

The latest letter spoke of liquidity factors.

As of Dec. 31, 2023, the REIT had unfulfilled requests to redeem just over 14 million shares, or $112.9 million of the most recent NAV per share, due to funding limitations of the share redemption program. In 2022 and 2023, no funding was made available for the SRP, excluding funding reserved for redemptions in connection with a stockholder’s death or qualifying disability. All redemption requests related to these outcomes were satisfied.

Although it has limited liquidity relative to its needs in 2024, the REIT said it continues to increase liquidity via opportunistic property sales and/or transactions and continues to manage its portfolio to add value and maximize total returns despite the challenging real estate market landscape.

Finally, the REIT also cautioned investors about the heightened risks involved with mini-tender offers, which are those that are for less than 5% of a company’s shares.

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