Pacific Oak Strategic Opportunity REIT, Inc.

Current report (Form 8-K) · Jun 2, 2026 · Investor press release · Financial statements

Company

Documents

Primary topic

Investor press release

Filed

Jun 2, 2026

Overview Analysis Documents(36)Full text Exhibits(3)

EX-99.1 · bviq12026ex991.htm

Type

EX-99.1

File

bviq12026ex991.htm

Document text
EX-99.1 · bviq12026ex991.htm EX-99.1 2 bviq12026ex991.htm EX-99.1 Exhibit 99.1 This English translation is for convenience purposes only. This is not an official translation and is not binding. Whilst reasonable care and skill have been exercised in the preparation hereof, no translation can ever perfectly reflect the original Hebrew version. In the event of any discrepancy between the Hebrew version and this translation, the Hebrew version shall prevail. PACIFIC OAK SOR (BVI) HOLDINGS, LTD. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2026 UNAUDITED U.S. DOLLARS IN THOUSANDS INDEX Page Condensed Consolidated Statements of Financial Position 2 Condensed Consolidated Statements of Profit or Loss 3 Condensed Consolidated Statements of Equity 4 Condensed Consolidated Statements of Cash Flows 5-6 Notes to Interim Condensed Consolidated Financial Statements 7-20 - - - - - - - - - - - - - - - - - - - PACIFIC OAK SOR (BVI) HOLDINGS LTD . CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION March 31, December 31, 2026 2025 2025 Unaudited Audited U.S. dollars in thousands ASSETS CURRENT ASSETS Cash and cash equivalents $ 9,595 $ 22,976 $ 11,960 Financial assets at fair value through profit or loss 4,732 13,154 15,079 Rents and other receivables, net 2,105 3,049 3,979 Prepaid expenses and other assets 4,450 5,597 2,976 Due from affiliate — 1,502 — Restricted cash 43,980 24,185 49,016 64,862 70,463 83,010 Investment properties held for sale 230,185 — 238,808 295,047 70,463 321,818 NON-CURRENT ASSETS Investment properties 571,284 1,157,476 581,861 Property plant and equipment - hotel, net 20,080 33,355 20,200 Investment in joint ventures 90,133 175,508 84,580 Goodwill — 949 — Restricted cash — 15,083 1,017 681,497 1,382,371 687,658 Total assets $ 976,544 $ 1,452,834 $ 1,009,476 LIABILITIES AND EQUITY CURRENT LIABILITIES Notes payable, net $ 293,507 $ 171,030 $ 349,179 Bonds payable, net 304,937 104,421 302,004 Accounts payable and accrued liabilities 45,289 21,939 38,487 Due to affiliates 18,361 21,361 18,024 Other liabilities 13,937 17,048 13,212 676,031 335,799 720,906 Liabilities related to investment properties held for sale 209,884 — 174,947 885,915 335,799 895,853 NON-CURRENT LIABILITIES Lease obligation 9,294 9,354 9,308 Other liabilities 21,013 25,314 23,484 Notes payable, net — 372,310 — Bonds payable, net — 188,483 — 30,307 595,461 32,792 Total liabilities 916,222 931,260 928,645 EQUITY Owner's net equity 59,693 517,521 80,489 Non-controlling interests 629 4,053 342 Total equity 60,322 521,574 80,831 Total liabilities and equity $ 976,544 $ 1,452,834 $ 1,009,476 2 PACIFIC OAK SOR (BVI) HOLDINGS LTD . May 31, 2026 /s/ Ryan Schluttenhofer /s/ Ronen Nakar Date of approval of Schluttenhofer, Ryan Nakar, Ronen financial statements Chief Accounting Officer Chief Executive Officer and Chairman of the Board authorized by the Company's Board of Directors to execute the financial statements The accompanying notes are an integral part of the interim condensed consolidated financial statements. 3 PACIFIC OAK SOR (BVI) HOLDINGS LTD . CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS Three months ended March 31, Year ended December 31, 2026 2025 2025 Unaudited Audited U.S. dollars in thousands Revenues and other income: Rental income $ 21,638 $ 26,425 $ 101,150 Tenant reimbursements 2,393 3,008 11,163 Hotel revenues 2,440 2,885 7,597 Other operating income 431 464 1,883 Total revenues and other income 26,902 32,782 121,793 Expenses: Operating, maintenance, and management fees (12,134) (11,678) (49,755) Real estate taxes and insurance (4,478) (5,481) (20,290) Hotel expenses (1,838) (1,737) (6,277) Total expenses (18,450) (18,896) (76,322) Gross profit 8,452 13,886 45,471 Fair value adjustment of investment properties, net 5,381 (2,545) (266,810) Depreciation (144) (274) (964) Equity in loss of unconsolidated joint ventures, net (5,420) (1,867) (92,794) Management fees (2,536) (3,665) (13,991) Restructuring charges (721) — (1,508) General and administrative expenses (3,063) (1,598) (6,268) Impairment charges on goodwill — — (949) Impairment loss - hotel — — (12,521) Operating income (loss) 1,949 3,937 (350,334) Other income (loss), net 4,270 557 (2,630) Gain on deconsolidation of subsidiary 595 — — Provision for guarantee obligations (1,875) — — Finance income 1,678 286 1,380 Finance (loss) income from financial assets at fair value through profit or loss, net (4,571) — 1,925 Finance expenses, net (20,307) (16,143) (76,136) Gain on extinguishment of debt — — 19,449 Foreign currency transaction (loss) gain (2,248) 5,984 (40,556) Net loss before income taxes $ (20,509) $ (5,379) $ (446,902) Income tax provision — (890) — Net loss $ (20,509) $ (6,269) $ (446,902) Net loss attributable to owner $ (20,796) $ (6,468) $ (443,500) Net income (loss) attributable to non-controlling interests 287 199 (3,402) Net loss $ (20,509) $ (6,269) $ (446,902) Total comprehensive loss $ (20,509) $ (6,269) $ (446,902) The accompanying notes are an integral part of the interim condensed consolidated financial statements. 4 PACIFIC OAK SOR (BVI) HOLDINGS LTD . CONDENSED CONSOLIDATED STATEMENTS OF EQUITY Owner contributions Retained earnings Paid-in Capital resulting from transactions with non-controlling interests Owner's net equity Non-controlling interests Total equity Unaudited U.S. dollars in thousands Balance as of January 1, 2026 $ 693,554 $ (656,139) $ 43,074 $ 80,489 $ 342 $ 80,831 Net loss — (20,796) — (20,796) 287 (20,509) Total comprehensive loss — (20,796) — (20,796) 287 (20,509) Balance as of March 31, 2026 $ 693,554 $ (676,935) $ 43,074 $ 59,693 $ 629 $ 60,322 Owner contributions Retained earnings Paid-in Capital resulting from transactions with non-controlling interests Owner's net equity Non-controlling interests Total equity Unaudited U.S. dollars in thousands Balance as of January 1, 2025 $ 693,554 $ (212,639) $ 43,074 $ 523,989 $ 3,914 $ 527,903 Net loss — (6,468) — (6,468) 199 (6,269) Total comprehensive (loss) income — (6,468) — (6,468) 199 (6,269) Noncontrolling interest distribution — — — — (60) (60) Balance as of March 31, 2025 $ 693,554 $ (219,107) $ 43,074 $ 517,521 $ 4,053 $ 521,574 Owner contributions Retained earnings Paid-in Capital resulting from transactions with non-controlling interests Owner's net equity Non-controlling interests Total equity Audited U.S. dollars in thousands Balance at January 1, 2025 $ 693,554 $ (212,639) $ 43,074 $ 523,989 $ 3,914 $ 527,903 Net loss — (443,500) — (443,500) (3,402) (446,902) Total comprehensive loss — (443,500) — (443,500) (3,402) (446,902) Non-controlling interest contributions — — — — 75 75 Non-controlling interest distributions — — — — (245) (245) Balance at December 31, 2025 $ 693,554 $ (656,139) $ 43,074 $ 80,489 $ 342 $ 80,831 The accompanying notes are an integral part of the interim condensed consolidated financial statements. 5 PACIFIC OAK SOR (BVI) HOLDINGS LTD . CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three months ended March 31, Year ended December 31, 2026 2025 2025 Unaudited Audited U.S. dollars in thousands Cash Flows from Operating Activities: Net loss $ (20,509) $ (6,269) $ (446,902) Adjustments to reconcile net loss to net cash provided by operating activities: Equity in loss of joint ventures, net 5,420 1,867 92,794 Fair value adjustment on investment properties, net (5,381) 2,545 266,810 Depreciation 144 274 964 Gain on deconsolidation of subsidiary (595) — — Provision for guarantee obligations 1,875 — — Deferred rent 234 484 1,582 Credit loss on financial assets 1,292 684 4,503 Finance expenses, net 20,307 16,143 76,136 Other (income) loss, net (4,270) (556) 2,630 Finance income (1,678) (286) (1,380) Finance loss (income) from financial assets at fair value through profit or loss, net 4,571 — (1,925) Foreign currency transaction loss (gain) 2,248 (5,984) 40,556 Impairment loss - hotel — — 12,521 Impairment charges on goodwill — — 949 Income tax provision — 890 — Gain on extinguishment of debt — — (19,449) 3,658 9,792 29,789 Changes in assets and liabilities: Restricted cash 102 4,405 (1,391) Rents and other receivables, net (137) (1,532) 289 Prepaid expenses and other assets (1,505) (1,421) 1,206 Accounts payable and accrued liabilities (2,026) (3,157) 2,597 Due to affiliates 337 701 (3,803) Other liabilities 469 (793) (3,602) (2,760) (1,797) (4,704) Net cash provided by operating activities 898 7,995 25,085 Cash Flows from Investing Activities: Improvements to investment properties (1,744) (4,265) (8,808) Other investing cash flows, net — 556 (2,630) Interest received 1,847 286 1,380 Payments for development obligations (508) (1,855) (3,565) Contributions to joint ventures (6,872) — — Advance to associate — (1,502) — Proceeds from the sale of investments in financial assets at fair value through profit or loss 5,777 — — Proceeds from sales of investment properties, net — 1,351 70,490 Distribution of capital from joint venture — — 757 Net cash (used in) provided by investing activities (1,500) (5,429) 57,624 Cash Flows from Financing Activities: Principal payments on notes and bonds payable (2,425) (24,397) (145,227) Payments on deferred financing costs and extinguishment of debt — (167) (5,350) Interest paid (7,154) (19,055) (61,394) Release (distribution) of restricted cash 6,621 282 (3,526) Proceeds from notes and bonds payable 1,195 — 80,000 Non-controlling interest contributions — — 75 Non-controlling interest distributions — (60) (245) Proceeds from loans from owner — 8,000 10,000 Net cash used in financing activities (1,763) (35,397) (125,667) Effect of exchange rate changes on cash and cash equivalents — (49) (938) 6 PACIFIC OAK SOR (BVI) HOLDINGS LTD . Net decrease in cash and cash equivalents (2,365) (32,880) (43,896) Cash and cash equivalents, beginning of period 11,960 55,856 55,856 Cash and cash equivalents, end of period $ 9,595 $ 22,976 $ 11,960 Supplemental Disclosure of Noncash Activities: Accrued development obligations $ 8,967 $ 9,644 $ 7,895 Asset management fee payable to owner $ 6,458 $ 13,938 $ 7,415 Deconsolidation of a subsidiary Investment property $ (24,700) $ — $ — Other assets $ (854) $ — $ — Notes payable $ 20,040 $ — $ — Other liabilities $ 6,109 $ — $ — Gain on deconsolidation of a subsidiary $ 595 $ — $ — The accompanying notes are an integral part of the interim condensed consolidated financial statements. 7 PACIFIC OAK SOR (BVI) HOLDINGS LTD . NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: GENERAL INFORMATION a. These financial statements have been prepared in a condensed format as of March 31, 2026, and for the three months period then ended (“interim condensed consolidated financial statements”). These interim condensed consolidated financial statements should be read in conjunction with the Company’s annual financial statements as of December 31, 2025, and for the year then ended and the accompanying notes. The Company and its subsidiaries operate in the investment real estate segment in the United States, which includes mainly investment in office and residential real estate and undeveloped lands. The Company has three reporting segments: 1) strategic opportunistic properties 2) residential homes and 3) hotel. As of March 31, 2026, the Company consolidated four office complexes, encompassing, in the aggregate, approximately 1.4 million rentable square feet and these properties were 68% occupied. In addition, the Company owned one residential home portfolio consisting of 1,387 residential homes, and one apartment property, containing 317 units, which were 100% and 92% occupied, respectively. The Company also owned one hotel property with 196 rooms, one investment in undeveloped land with approximately 107 developable acres, and one office/retail development property, two investments in unconsolidated joint ventures and one financial asset at fair value through profit or loss. Additionally, the Company had two office complexes (Richardson Office and Lincoln Court), 690 residential homes and approximately 140 developable acres (Richardson and Park Highlands) classified as held-for-sale in accordance with IFRS 5. The assets met the criteria for classified as held-for-sale, as their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Management is committed to a plan to sell the assets, is highly probable, and the sale is expected to be completed within twelve months. As a result of the classification, certain assets and liabilities were reclassified on the condensed consolidated statements of financial position. b. The financial condition of the Company and the going concern assumption. As of March 31, 2026, the Company had a working capital shortfall amounting to $590.9 million, primarily attributed to loans that have matured or are maturing within a twelve month period from the date of the condensed consolidated statements of financial position, including: (i) Series B (388.3 million Israeli new Shekels or $122.7 million as of March 31, 2026) and Series D (587.0 million Israeli new Shekels or $185.5 million as of March 31, 2026), collectively (“Series Bonds”) of 975.3 million Israeli new shekels ($308.2 million as of March 31, 2026), (ii) mortgage loans related to our residential homes portfolio of $187.9 million, and (iii) other mortgage loans of $337.4 million, which primarily includes the Bank of America Loan of $152.6 million and the WhiteHawk Loan of $80.0 million. As a result of defaults due to covenant breaches, cross-collateralization, and other factors, the Company may be obligated to dispose of investment properties under forced-sale circumstances, which could result in proceeds that are lower than fair values as of March 31, 2026. As of the date the interim condensed consolidated financial statements are issued, in order for the Company to continue its regular operations, several actions will need to be completed in the near term, including debt refinancing and real estate sales, all of which are subject to approval under a standstill agreement and other third-party approvals. These plans are subject to change based on market conditions in the commercial real estate lending environment, the current interest rate environment, leasing and transaction volume challenges in certain markets, successful restructuring with the Bondholders (see Note 1d for additional details), and such plans are not within the control of the Company, and therefore, there is no assurance that the Company will be successful in implementing its plans and fulfill its existing and projected obligations upon maturity. The uncertainty regarding the Company’s plans could be mitigated through the potential sales of its residential homes, successful negotiations with the Trustee and Representatives, and other strategic actions currently under consideration. Since the plans mentioned above are not within the control of the Company and subject to approval of third parties, including consents from bondholders and other lenders, the Company's management and the Board of Directors have concluded that there are significant doubts regarding the Company's ability to continue as a going concern. No adjustments were made to the financial statements to the values or classifications of assets and liabilities that might be necessary if the Company is unable to continue operating as a going concern. c. Class Action Suit 8 PACIFIC OAK SOR (BVI) HOLDINGS LTD . NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS On September 10, 2025, a bondholder filed a petition for certification of a class action in the Tel Aviv District Court, Israel against the Company and certain members of its board of directors, alleging that disclosures relating to the Company 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 March 31, 2026) and cites the petitioner’s expert model estimating potential class-wide damages of approximately 124.6–145.2 million Israeli new shekels ($39.6–$46.0 million as of March 31, 2026). The matter is at a preliminary stage; the court has not ruled on class certification or on the merits and based on the Company’s legal counsel’s advice, the potential outcome cannot be determined, nor can the chances of the petition being approved be reliably assessed. d. Negotiations between the Company and a trustee that represents the bondholders of the Series Bonds (the “Trustee” and “Bondholders”) and the representatives of the Bondholders during and after the three months ended March 31, 2026. The following is a summary of the main actions and decisions that were carried out and made in the framework of the aforementioned negotiations: 1. Series Bonds Deferral On May 11, 2026, the Trustee announced an additional deferral of the principal and interest payment dates for the Series Bonds to July 1, 2026. 2. Board of Directors On May 3, 2026, the Bondholders approved the selection of Mr. Izhak Lax as a candidate for appointment as a director of the Company. Mr. Lax will start as a director on June 1, 2026. 3. Approval of Loan with Klirmark Opportunity Fund IV, LP On April 28, 2026, assemblies of Series B and Series D debenture holders, in an aggregate count, approved a resolution to ratify the Company’s entry into a loan agreement with Klirmark Opportunity Fund IV, LP, on the basis of the memorandum of understanding dated February 17, 2026, while updating the terms of the memorandum of understanding so that the amount excluded from the distribution restrictions in PORT will be up to $4.0 million, instead of $8.0 million. 4. Approval of Proposed Debt Arrangement On April 27, 2026, assemblies of Series B and Series D debenture holders approved a resolution to approve the proposed debt arrangement and to authorize the Trustee to perform all actions required for its implementation, including the signing of an amended deed of trust. 5. Objection to Filing Insolvency Proceedings On March 10, 2026, meetings of the Bondholders resolved to object to the filing of an application for an order to commence insolvency proceedings against the Company, in accordance with the mechanism set out in the Insolvency and Economic Rehabilitation Law and Section 35H(d2b)(1) of the Securities Law. However, the applicable securities law requires a quorum of at least 75% of the voting rights, and such quorum was not achieved at the March 10, 2026 meetings. As a result, the Trustee was obligated to submit a petition for the commencement of insolvency proceedings. A court hearing on the petition has been scheduled for April 28, 2026. 6. Refinancing of the PORT Property Portfolio On February 18, 2026, meetings of the Bondholders approved entering into a memorandum of understanding and a detailed agreement for the refinancing of loans secured by the Company’s residential homes portfolio. The voting approved the refinancing and to which the financing proposal of Klirmark Opportunity Fund IV, LP was selected. Refer to Note 7 for additional details. 7. Exemption from Liability for Officers and Management Company On February 15, 2026, meetings of the Bondholders, by special resolution, approved granting a full exemption from liability and waiver of claims with respect to the new officer and directors (Mr. Ronen Nakar, Ms. Varda Kalal, and Mr. Itay Dayan), as well as R2 Advisors, LLC, Mr. Ryan Schluttenhofer, and all officers and managers thereof, in connection with management services provided to the Company. 8. Deferral of Debenture Payment Dates 9 PACIFIC OAK SOR (BVI) HOLDINGS LTD . NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Meetings of the Bondholders approved several resolutions to defer repayment dates. On March 17, 2026, holders of Series B bonds approved deferring principal and interest payments to June 1, 2026 (instead of April 1, 2026), and authorized the Trustee, by special resolution, to grant an additional deferral of up to one month. On March 17, 2026, the trustee for the Series D bonds exercised previously granted authority to further defer interest payment dates, such that the effective date was deferred to April 18, 2026 and the payment date to April 30, 2026. 9. Use of Interest Cushion Funds As of March 31, 2026 the Bondholders approved the extension of two loans to the Company, in an aggregate amount of approximately $10.0 million, from funds held in the interest cushion accounts of the Series Bonds. The loans bear an annual interest of 20% and repayment of principal and accrued interest is expected to occur from the earliest proceeds received by the Company or controlled entities, including: asset sales or refinancing of real estate properties, sale of equity interests, or issuance of additional debt instruments, subject to creditor repayment priorities and maintenance of a minimum operating cash balance. As of March 31, 2026, the full facility of $10.0 million remained outstanding. 10. Asset Management Transition (Westdale) On January 22, 2026, the Company replaced previous management company and entered into a asset management agreement with Westdale for the Company’s portfolio of investments, excluding residential homes. Refer to Note 6 for additional details. 11. Management Agreement with R2 Advisors, LLC On January 22, 2026, meetings of the Bondholders approved entering into a management agreement with R2 Advisors, LLC. Refer to Note 6 for additional details. 12. Authorization to Sell Keppel Pacific Oak US REIT (S-REIT) Shares Meetings of the Bondholders approved authorizing the Company to sell its holdings in S-REIT shares, subject to approvals by the representative body and U.S. counsel. As of the approval date of the interim condensed consolidated financial statements, the Company completed sales of all S-REIT shares. Refer to Notes 6 and 7 for additional details. 13. Debt Arrangement Proposals On February 4, 2026, the Tel Aviv District Court approved the convening of such creditor meetings. 14. Transactions Relating to Sale of PORT Properties On February 4, 2026, meetings rejected proposals to enter into a memorandum of understanding for the sale of all the residential homes. 15. Corporate structure and separation from POCA Effective January 31, 2026, the Company and Pacific Oak Strategic Opportunity REIT, Inc., the parent company, ceased to be part of POCA following the termination of the previous management and advisory arrangements and the transition to new service providers. On January 22, 2026, following approval by the Board of Directors and debenture holders, the Company entered into: An agreement with the Pacific Oak Strategic Opportunity REIT, Inc. governing settlement of amounts payable and terminating the previous management company’s engagement. A new asset management agreement with a replacement management company and new accounting and financial services agreement with a third-party provider became effective January 31, 2026. Concurrently, Pacific Oak Strategic Opportunity REIT, Inc. formally terminated the advisory agreement with the previous management company effective January 31, 2026, after which the new service providers commenced operations. Refer to Note 6 for additional details. 16. Changes in directors and officers During the three months ended March 31, 2026, there were service provider changes, prior directors and one senior officer, including the former President and CEO were removed. New executive leadership and external directors were appointed. One director announced intentions to conclude their service during the first half of 2026. These governance changes represent a significant change in management and oversight during the reporting period. Refer to Note 6 for additional details. 10 PACIFIC OAK SOR (BVI) HOLDINGS LTD . NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS e. Restructuring Events Bondholder Request to the Israeli Court and Related Debt Agreement In February 2026, the Trustee applied to the Tel Aviv–Jaffa District Court to convene a meeting of the Bondholders to consider and approve a proposed debt arrangement under the Israeli Insolvency and Economic Rehabilitation Law. The proposed arrangement extends the final maturity of both series to June 2028, modifies key terms (including interest, security and enforcement), and provides for a consolidated repayment schedule aligned with an orderly realization of the Company’s assets, including a defined payment waterfall and minimum liquidity reserve requirements. It also requires the creation and registration of first-priority security interests over substantially all unencumbered Company assets (subject to limitations) and imposes significant operating covenants and restrictions, with enhanced trustee/bondholder oversight and specified enforcement rights upon certain events of default. As of the approval date of the interim condensed consolidated financial statements, the proposed debt arrangement is still under review. REIT Support In connection with the proposed debt arrangement, upon execution, the Company and the REIT would enter into a second loan arrangement pursuant to which the Company may, in its discretion, advance funds to the REIT in accordance with a mutually agreed budget (subject to Board determination that the Company has sufficient available funds). The budgeted advances are capped at approximately $2.9 million through July 2026, including $0.4 million previously advanced under a prior bridge arrangement and $61,000 per month thereafter. Amounts advanced under the prior bridge arrangement and the second loan may, at the Company’s option, be applied as payment or reimbursement of amounts owed by the Company to the REIT, with any such application reducing the outstanding balance owed. PORT Board of Directors In March 2026, following the Company’s request, several members of PORT’s board of directors, including the former President and CEO, resigned, and PORT’s new executive leadership and external directors were appointed. These governance changes represent a significant change in management and oversight following the reporting period. Refer to Note 7 for additional details. S&P Global Rating Cessation On February 17, 2026, S&P Global Ratings Maalot announced the termination of surveillance and withdrawal of the issuer credit rating and the ratings of the Series Bonds, at the Company’s request. Accordingly, beginning on that date, the Company’s securities are considered not rated (NR) by S&P Global Ratings. The cessation of the rating reflects the discontinuation of rating coverage rather than the publication of a new credit opinion. NOTE 2: SIGNIFICANT ACCOUNTING POLICY Basis of presentation of the interim condensed consolidated financial statements: The interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for the preparation of financial statements for interim periods, as prescribed in IAS 34, "Interim Financial Reporting", and in accordance with the disclosure requirements of Chapter D of the Securities Regulations (Periodic and Immediate Reports), 1970. The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the annual consolidated financial statements . NOTE 3: INVESTMENT IN JOINT VENTURES As of March 31, 2026, the Company’s investment in joint ventures was composed of the following (dollars in thousands): 11 PACIFIC OAK SOR (BVI) HOLDINGS LTD . NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Properties as of March 31, 2026 Investment Balance as of March 31, December 31, 2025 2026 2025 Joint Venture Location Ownership % (Unaudited) (Audited) 110 William Joint Venture 1 New York, New York (1) $ 58,925 $ 140,773 $ 52,911 Pacific Oak Opportunity Zone Fund I 4 Various 47.0% 31,208 34,735 31,669 $ 90,133 $ 175,508 $ 84,580 _____________________ (1) As of March 31, 2026, the Company owned 77.5% of preferred interest and 100% of common interest in the 110 William Joint Venture. The equity in profit (loss) of joint ventures for the three months ended March 31, 2026 and 2025 and the year ended December 31, 2025 was as follows (in thousands): Three Months Ended March 31, Year ended December 31, 2025 2026 2025 (Unaudited) (Audited) 110 William Joint Venture $ (4,960) $ (2,126) $ (89,987) Pacific Oak Opportunity Zone Fund I (460) 259 (2,807) Equity in loss of unconsolidated joint ventures, net $ (5,420) $ (1,867) $ (92,794) 110 William Joint Venture: Summarized information about the statements of financial position and the statements of profit or loss of Pacific Oak SOR SREF III 110 William, LLC (100%) (in thousands): March 31, December 31, 2026 2025 2025 (Unaudited) (Audited) Current assets $ 17,721 $ 8,245 $ 8,880 Non-current assets (including investment property) (1) 422,100 492,095 422,100 Current liabilities (2) 343,450 31,661 342,038 Non-current liabilities 30,898 302,048 30,151 Equity 65,473 166,631 58,791 Equity attributable to equity holders of the Company (Based on the waterfall mechanism) $ 58,925 $ 140,773 $ 52,911 _____________________ (1) As of March 31, 2026 and December 31, 2025, non-current assets consist of the investment property held by the 110 William Joint Venture with a carrying value of $422.1 million. The investment property is measured at fair value, which was determined based on valuation assessments performed by independent external valuation experts holding recognized and relevant professional qualifications and experience in the location and category of the property being valued. The valuations were primarily based on expected future cash flows and market assumptions. The 110 William Joint Venture’s investment property is subject to significant disposal restrictions under the joint venture agreement, including the requirement to satisfy certain conditions and obtain consent from the other joint venture partner. (2) Current liabilities consist of principal balances of $305.3 million under senior loan facilities and $21.0 million under a mezzanine loan facility, both with initial maturities of July 5, 2026. The related financial covenants apply to the Company’s wholly owned subsidiary, Pacific Oak SOR Properties, LLC, which serves as guarantor of both the senior and mezzanine loans. As of March 31, 2026, Pacific Oak SOR Properties, LLC was not in compliance with the minimum net worth covenant for the mezzanine loan facility, resulting in a technical default under the mezzanine loan agreement. As of the approval date of the interim condensed consolidated financial statements, the 110 William Joint Venture is in discussions with the lender regarding a potential waiver, forbearance, or amendment of this covenant. Such amendment, if obtained, may include, among other alternatives, the provision of additional collateral or a modification to the covenant calculation to reflect the joint venture interest, subject to lender approval. 12 PACIFIC OAK SOR (BVI) HOLDINGS LTD . NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Three months ended March 31, Year ended December 31, 2026 2025 2025 (Unaudited) (Audited) Revenues $ 12,168 $ 3,582 $ 16,418 Gross profit (loss) 7,660 (1,089) (1,585) Operating income (loss) ) 4,403 (698) (97,098) Net loss ) (4,292) (5,563) (113,403) Share of equity in loss from joint venture (Based on the waterfall mechanism) (4,960) (2,126) (89,987) ) Includes revaluation of investment properties $ (3,192) $ (424) $ (95,204) Pacific Oak Opportunity Zone Fund I: Summarized information about the statements of financial position and the statements of profit or loss of Pacific Oak Opportunity Zone Fund 1, LLC (100%) (in thousands): Three months ended March 31, December 31, 2026 2025 2025 (Unaudited) (Audited) Current assets $ 375 $ 2,265 $ 1,466 Non-current assets (investment property) (1) 122,446 129,132 122,446 Current liabilities 1,996 786 1,996 Non-current liabilities (2) 55,672 57,782 55,672 Equity 65,153 72,829 66,244 Equity attributable to equity holders of the Company (Based on the waterfall mechanism) $ 31,208 $ 34,735 $ 31,669 _____________________ (1) As of March 31, 2026 and December 31, 2025, non-current assets consist of three investment property held by the Pacific Oak Opportunity Zone Fund I with a carrying value of $110.1 million. The investment properties are measured at fair value, which was primarily based on expected future cash flows and market assumptions. (2) Non-current liabilities consists of three secured mortgage loans with an aggregate principal balance of $55.6 million and initial maturities ranging from 2031 to 2032. Three months ended March 31, Year ended December 31, 2026 2025 2025 (Unaudited) (Audited) Revenues $ 1,594 $ 2,138 $ 6,377 Gross profit 589 1,333 2,355 Operating (loss) income ) (421) 1,223 (1,683) Net (loss) income ) (1,091) 548 (4,362) Share of equity in profit (loss) from joint venture (Based on the waterfall mechanism) (460) 259 (2,807) ) Includes revaluation of investment properties $ — $ — $ (2,293) The Company does not attach the financial statements related to the investment in joint ventures, as the reports do not add more information to the contained above. NOTE 4: FINANCIAL INSTRUMENTS The fair values of the Company’s Series Bonds as of March 31, 2026 and December 31, 2025 were $144.3 million and $196.0 million, respectively. Additionally, the outstanding principal balances and accrued interest of the Series Bonds as of 13 PACIFIC OAK SOR (BVI) HOLDINGS LTD . NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2026 and December 31, 2025 were $324.3 million and $315.1 million, respectively. The Series Bonds are publicly traded on the Tel-Aviv Stock Exchange and the fair values are based on the quoted price and the Company classifies this input as a Level 1 input. The Series B bonds contain the following covenants: (i) Consolidated Equity Capital of the Company (not including minority rights) shall not be less than USD 475 million; (ii) the Net Adjusted Financial Debt to Net Adjusted Cap (shall not exceed a rate of 75%); (iii) Adjusted NOI shall be no lower than USD 35 million; and (iv) the consolidated scope of the projects for development of the Company shall not exceed 10% of the adjusted balance. As of March 31, 2026, the Company was not in compliance with all covenants under the deed of trust of the Series B Bonds and were calculated as follows: (i) Consolidated Equity Capital of the Company as of March 31, 2026 was $59.7 million; (ii) the Net Adjusted Debt to Net Adjusted Cap was 95%; (iii) the Adjusted NOI was $46.6 million for the trailing twelve months ended March 31, 2026; and (iv) the consolidated scope of projects was $0 as of March 31, 2026. The Series D bonds contains the following covenants: (i) Consolidated Equity Capital of the Company (not including minority rights) shall not be less than USD 450 million; (ii) the Net Adjusted Financial Debt to Net Adjusted Cap shall not exceed a rate of 75%; (iii) Adjusted NOI shall be no lower than USD 35 million. As of March 31, 2026, the Company was not in compliance with all covenants under the deed of trust of the Series D Bonds and were calculated as follows: (i) Consolidated Equity Capital of the Company as of March 31, 2026 was $59.7 million; (ii) the Net Adjusted Debt to Net Adjusted Cap was 95%; (iii) and the Adjusted NOI was $46.6 million for the trailing twelve months ended March 31, 2026. As of March 31, 2026, the Company was not in compliance with financial and nonfinancial covenants and as a result, the Company continues to operate under a standstill agreement. The Company has not disclosed the fair value of its notes payable as management has determined that the carrying amounts represent a reasonable approximation of fair value. This assessment considers the default status of the loans, ongoing negotiations with lenders, and the expectation that any settlement would approximate the recorded obligations. Accordingly, the Company has not performed a separate fair value determination for these instruments. The Company's investments in real estate equity securities are carried at their estimated fair value based on quoted market prices (Level 1) for the securities. Unrealized gains and losses are reported in finance loss from financial assets at fair value through profit or loss. NOTE 5: SEGMENT INFORMATION The operating segments are identified on the basis of information that is reviewed by the chief operating decision maker (“CODM”) to make decisions about resources to be allocated and assess its performance. All corporate related costs are included in the strategic opportunistic properties segment to align with how financial information is presented to the CODM. The selected financial information for the reporting segments as of and for the three months ended March 31, 2026 and 2025 and as of and the year ended December 31, 2025 is as follows (in thousands): 14 PACIFIC OAK SOR (BVI) HOLDINGS LTD . NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2026 Strategic Opportunistic Properties Residential Homes Hotel Total (Unaudited) Investment properties $ 440,871 $ 360,598 $ — $ 801,469 Property plant and equipment - hotel, net $ — $ — $ 20,080 $ 20,080 Total assets $ 584,948 $ 369,998 $ 21,598 $ 976,544 Total liabilities $ 695,167 $ 196,794 $ 24,261 $ 916,222 Three months ended March 31, 2026 Strategic Opportunistic Properties Residential Homes Hotel Total (Unaudited) Total revenues and other income $ 15,205 $ 9,257 $ 2,440 $ 26,902 Gross profit $ 4,760 $ 3,090 $ 602 $ 8,452 Finance expenses, net $ 17,063 $ 2,605 $ 639 $ 20,307 March 31, 2025 Strategic Opportunistic Properties Residential Homes Hotel Total (Unaudited) Investment properties $ 763,375 $ 394,101 $ — $ 1,157,476 Property plant and equipment - hotel, net $ — $ — $ 33,355 $ 33,355 Total assets $ 1,008,601 $ 407,833 $ 36,400 $ 1,452,834 Total liabilities $ 710,236 $ 197,344 $ 23,680 $ 931,260 Three months ended March 31, 2025 Strategic Opportunistic Properties Residential Homes Hotel Total (Unaudited) Total revenues and other income $ 20,825 $ 9,072 $ 2,885 $ 32,782 Gross profit $ 9,896 $ 2,842 $ 1,148 $ 13,886 Finance expenses, net $ 13,309 $ 2,281 $ 553 $ 16,143 15 PACIFIC OAK SOR (BVI) HOLDINGS LTD . NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Strategic Opportunistic Properties Residential Homes Hotel Total (Audited) Investment properties $ 460,071 $ 360,598 $ — $ 820,669 Property plant and equipment - hotel, net $ — $ — $ 20,200 $ 20,200 Total assets $ 612,346 $ 374,731 $ 22,399 $ 1,009,476 Total liabilities $ 704,231 $ 200,772 $ 23,642 $ 928,645 Year ended December 31, 2025 Strategic Opportunistic Properties Residential Homes Hotel Total (Audited) Total revenues and other income $ 77,256 $ 36,940 $ 7,597 $ 121,793 Gross profit $ 29,829 $ 14,322 $ 1,320 $ 45,471 Finance expenses, net $ 64,677 $ 9,430 $ 2,029 $ 76,136 NOTE 6: SIGNIFICANT EVENTS DURING THE REPORTING PERIOD POCA Advisory Agreement Termination On January 23, 2026, Pacific Oak Strategic Opportunity REIT, Inc. terminated its advisory agreement with Pacific Oak Capital Advisors, LLC (“POCA”), effective January 31, 2026. As a result, the back-to-back agreement between Pacific Oak Strategic Opportunity REIT, Inc. and the Company was also terminated. Amounts presented as due to affiliates in the condensed consolidated statements of financial position primarily represent unpaid historical asset management fees incurred under the now-terminated back-to-back agreement. Westdale Asset Management, Ltd. (“Westdale”) On January 22, 2026, the Company entered into an asset management agreement with Westdale (the “Westdale Agreement”). Pursuant to the Westdale Agreement, Westdale is responsible for managing, operating, directing and supervising the operations and administration of the Company’s assets (other than those held through PORT). The Company will pay Westdale a monthly fee (a) with respect to each property owned by the Company an amount equal to the greater of (i) 2.0% of the sum of the gross income of each property received during the prior month and (ii) $10,000 and (b) $10,000 with respect to the investment in Pacific Oak Opportunity Zone Fund I, LLC. In connection with any asset sale, Westdale will receive a fee at the closing equal to 0.25% of the contract sales price for such sale. R2 Advisors, LLC (“R2”) On January 23, 2026, the Company entered into a management services agreement with R2. R2 provides the Company with accounting advisory services and is majority-owned and controlled by Ryan Schluttenhofer, the Company’s Chief Accounting Officer. Pursuant to this agreement, R2 will provide the Company with support in the following areas: (a) corporate accounting, recordkeeping, and regulatory filings, (b) books and records maintenance and coordination with third parties, (c) tax and compliance coordination, (d) corporate cash management support, (e) insurance and risk management support, (f) corporate governance support and (g) chief accounting officer support. The initial term of the agreement will be twelve months and the total contract value is $1.7 million, excluding reimbursement of expenses. Brian Ragsdale Management Agreement 16 PACIFIC OAK SOR (BVI) HOLDINGS LTD . NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS On January 27, 2026, the Company entered into a management agreement with Brian Ragsdale, the Chief Executive Officer, Chief Financial Officer and President of the REIT. The agreement is effective February 1, 2026 and Mr. Ragsdale is responsible for providing high-level management and advisory support, including, but not limited to: debt restructuring and asset management. The term of the agreement is six months and the total contract value is $0.2 million. Chairman and Chief Executive Officer Appointment On January 29, 2026, the Company appointed Ronen Nakar as Chairman and Chief Executive Officer. Mr. Nakar succeeds Keith David Hall, who resigned effective January 28, 2026. Mr. Nakar’s responsibilities are customary for a person in his position and are exercised in accordance with the Company’s bylaws and applicable law. The appointment is effective as of February 1, 2026 and either party may terminate the appointment upon 30 days’ notice. Mr. Nakar is entitled to monthly compensation of ILS 40,000, plus VAT. Madison Square Receivership In March 2026, the lender under the mortgage loan secured by the Madison Square property obtained a court-appointed receiver to assume control over the operations and management of the Madison Square property and to oversee the potential disposition of the asset. Management determined that the appointment of the receiver resulted in the Company losing control of the Madison Square property under IFRS 10. Accordingly, the Company deconsolidated the investment property of $24.7 million and mortgage loan of $20.0 million and related assets and liabilities and recognized a gain on deconsolidation of subsidiary of $0.6 million in the accompanying condensed consolidated statements of profit or loss. The Company has a guarantee obligation associated with the mortgage loan related to the Madison Square property. As a result, the Company recognized a guarantee obligation of approximately $1.9 million as of March 31, 2026. The guarantee obligation is included within other liabilities in the accompanying condensed consolidated statements of financial position. Sale of Financial Assets The Company completed the sale of equity securities of 49 million shares of its 64 million shares in the Keppel Pacific Oak US REIT on the Singapore Exchange for proceeds of $7.9 million. As of March 31, 2026, the Company had 15 million shares remaining, all of which were disposed of subsequent to March 31, 2026. PORT and POCA Loan On January 29, 2026, the Com pany’s owner shared a notice of default and reservation of rights letter (the “Notice”) from POCA, the predecessor advisor through January 31, 2026. The Notice relates to the POCA Loan and alleges, among other things, that no interest has ever been paid on the loan and, as a result, the loan is in default and all principal and accrued interest are now due. The Notice also alleges that default interest of 15.0% is now accruing and that more collateral is required under the related pledge agreement. On March 27, 2026, the Company received a letter from POCA to PORT asserting a notice of default under the bridge loan and indicated its intent to enforce related collateral and direct certain proceeds. As of March 31, 2026, the principal balance of this loan is $10.0 million. Refer to Note 7 for additional details. Park Highlands Series A2 Preferred Shares In March 2026, the sole shareholder of the Company’s 1,927 outstanding Series A2 preferred shares filed a petition with the Tel Aviv District Court seeking recognition as a party in interest as part of the debt arrangement proposed by the Bondholders. The court approved this petition, and the sole shareholder has been recognized as a party in interest in the arrangement. The aggregate value of the Series A2 preferred shares is approximately $1.9 million. NOTE 7: SUBSEQUENT EVENTS The Company evaluates subsequent events up until the date the interim condensed consolidated financial statements are issued. PORT Refinancing 17 PACIFIC OAK SOR (BVI) HOLDINGS LTD . NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS On May 8, 2026, Pacific Oak Residential Trust, Inc. (“PORT”), an indirect wholly owned subsidiary of the Company, completed the senior secured refinancing of PORT’s approximately 2,077-home single-family residential portfolio with Klirmark Opportunity Fund IV, LP. The loan was for $216.0 million bearing interest of Secured Overnight Financing Rate (“SOFR”) plus 4.75%, with a SOFR floor of 3.0%, financing terms include a $10.0 million interest reserve, a maintained three-month reserve for taxes, insurance, HOA fees, capex and property maintenance, and distribution of certain allowable amounts at closing with additional amounts subject to certain release conditions. The loan contains certain covenants, including requiring 150 homes to be sold in the first six months and at least 100 homes per quarter thereafter, and related reserve, loan-to-value and default-based release conditions. PORT Board Restructuring Between March and April 6, 2026, all five members of the Board of Directors of PORT, including Mike Gough, Manager of PORT, and Keith Hall, former CEO and Director of the Company, had resigned. The resignations were part of a reconstitution of the PORT Board, following recommendations from the Company’s Board, which includes the appointment of two new directors, a Chief Accounting Officer, and the appointment of a Chief Restructuring Officer which was conditional on the refinancing timing. The reconstituted PORT Board and Chief Restructuring Officer were expected to support the Company’s strategy for the orderly retail sale of its residential homes portfolio and to advance the evaluation and execution of strategic alternatives. There can be no assurance regarding the timing, outcome, or success of these initiatives. PORT and POCA Loan On April 21, 2026, POCA delivered an additional demand directing PORT to transfer and re-register certain pledged equity interests into POCA’s name, together with a purported UCC transfer statement. The Company believes it has meritorious defenses to POCA’s asserted rights, remedies and demands, including the requested transfer and re-registration of PORT shares, and intends to vigorously defend against such claims while evaluating available claims, defenses and counterclaims against POCA in its capacity as the Company’s prior advisor. Given the early stage of the matter, the disputed issues, and the potential assertion of counterclaims, the Company is unable to determine the likelihood of an unfavorable outcome or reasonably estimate a range of possible loss, if any. Accordingly, no provision was recorded as of March 31, 2026. Lincoln Court Sale Subsequent to March 31, 2026, at the direction of the lender under the Lincoln Court Mortgage Loan, the Company entered into a purchase and sale agreement for the disposition of the related investment property for a purchase price of $24.6 million. The transaction closed on May 7, 2026. At the time of closing, the outstanding principal balance of the mortgage loan was approximately $31.3 million. In connection with the closing, the lender released its lien on the property and the Company was fully discharged from its obligations under the mortgage loan, including any related guaranty. Richardson Land Sale Subsequent to March 31, 2026, the Company entered into a purchase and sale agreement for the sale of approximately 25.4 acres of undeveloped land located in Richardson, Texas (the “Richardson Land”) for $12.5 million. The agreement provides for closing to occur within approximately 15 days following the expiration of a 30-day inspection period, subject to the satisfaction of customary closing conditions, including satisfactory title review, the absence of legal proceedings affecting the transaction, and receipt of required approvals. As a result of entering into the agreement, the Company recognized a $5.5 million increase in fair value, which was recorded as fair value adjustment of investment properties, net in the accompanying condensed statements of profit or loss. 110 William Contributions Subsequent to March 31, 2026, the joint venture partner of the 110 William Joint Venture approved the recognition of previously expensed contributions the Company made to the 110 William Joint Venture. As a result of the approval, the Company recognized a gain of $4.1 million as other income (loss), net, in the accompanying interim consolidated statements of profit or loss. WhiteHawk Default Notice 18 PACIFIC OAK SOR (BVI) HOLDINGS LTD . NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Subsequent to March 31, 2026, the Company received notices of events of default, reservation of rights, and demands for payment from WhiteHawk Capital Partners LP (“WhiteHawk”), in its capacity as administrative agent and collateral agent under the Company’s credit agreement dated July 29, 2025. The notices asserted, among other things, that (i) certain restrictive agreements entered into in favor of holders of the Company’s debt constituted breaches of the credit agreement, and (ii) insolvency proceedings commenced against the Company constituted additional events of default under the credit agreement. WhiteHawk asserted that, as a result of such events of default, all obligations under the credit agreement, including applicable exit fees and default interest, were immediately due and payable and reserved all rights and remedies available under the loan documents and applicable law. In addition, WhiteHawk issued demands for immediate payment and performance under certain guaranties provided by Pacific Oak SOR Properties, LLC and Pacific Oak SOR US Properties II LLC, the Company’s subsidiaries. On May 28, 2026, the Company received notice that Whitehawk filed claims in New York court against one of the Company’s wholly owned subsidiaries, Pacific Oak SOR Properties, LLC and Pacific Oak SOR US Properties II LLC, each provided full financial guarantees in connection with the loan. In the claims, the lender seeks, among other things, damages for an alleged breach of the loan agreement, legal costs, and additional relief. The notices include a summons requiring a response within 20 days of service. The Company and the guarantor subsidiaries are reviewing the claims, may dispute them, and are working with their U.S. advisors while concurrently negotiating with the lender. There can be no assurance as to the outcome of the proceedings or the completion of the Park Highlands land sale transaction on its existing terms. However, as of the date of this report, the Company has not been notified of any change to the transaction timetable, and it continues to proceed as planned. Bond Restructuring Subsequent to March 31, 2026, the Company continued to advance discussions with the trustee and representatives of the holders of its Series B and Series D debentures regarding a proposed debt arrangement, and creditor meetings were held to approve the proposed arrangement and authorize related implementation actions, including amendments to the deeds of trust. The proposed arrangement includes, among other things, amendments to the debenture repayment schedule and interest terms, use of interest reserve funds, mandatory early redemption rights, revised immediate repayment and collateral provisions, additional pledges and guarantees, and enhanced coordination rights for debenture holders; however, there can be no assurance that the arrangement will be completed, implemented on the terms proposed, or result in full repayment of the Company’s obligations. - - - - - - - - - - - - - - - - - - - 19

Document text

EX-99.1 · bviq12026ex991.htm

EX-99.1
 2
 bviq12026ex991.htm
 EX-99.1

 Exhibit 99.1

 This English translation is for convenience purposes only. This is not an official translation and is not binding. Whilst reasonable care and skill have been exercised in the preparation hereof, no translation can ever perfectly reflect the original Hebrew version. In the event of any discrepancy between the Hebrew version and this translation, the Hebrew version shall prevail.

 PACIFIC OAK SOR (BVI) HOLDINGS, LTD.

 INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 AS OF MARCH 31, 2026

 UNAUDITED

 U.S. DOLLARS IN THOUSANDS

 INDEX

 Page

 Condensed Consolidated Statements of Financial Position
 2

 Condensed Consolidated Statements of Profit or Loss
 3

 Condensed Consolidated Statements of Equity
 4

 Condensed Consolidated Statements of Cash Flows
 5-6

 Notes to Interim Condensed Consolidated Financial Statements
 7-20

 - - - - - - - - - - - - - - - - - - -

 PACIFIC OAK SOR (BVI) HOLDINGS LTD .

 CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 March 31, December 31,
 2026 2025 2025
 Unaudited Audited
 U.S. dollars in thousands
 ASSETS
 CURRENT ASSETS
 Cash and cash equivalents $ 9,595 $ 22,976 $ 11,960
 Financial assets at fair value through profit or loss 4,732 13,154 15,079
 Rents and other receivables, net 2,105 3,049 3,979
 Prepaid expenses and other assets 4,450 5,597 2,976
 Due from affiliate — 1,502 —
 Restricted cash 43,980 24,185 49,016
 64,862 70,463 83,010
 Investment properties held for sale 230,185 — 238,808
 295,047 70,463 321,818
 NON-CURRENT ASSETS
 Investment properties 571,284 1,157,476 581,861
 Property plant and equipment - hotel, net 20,080 33,355 20,200
 Investment in joint ventures 90,133 175,508 84,580
 Goodwill — 949 —
 Restricted cash — 15,083 1,017
 681,497 1,382,371 687,658
 Total assets $ 976,544 $ 1,452,834 $ 1,009,476

 LIABILITIES AND EQUITY
 CURRENT LIABILITIES
 Notes payable, net $ 293,507 $ 171,030 $ 349,179
 Bonds payable, net 304,937 104,421 302,004
 Accounts payable and accrued liabilities 45,289 21,939 38,487
 Due to affiliates 18,361 21,361 18,024

 Other liabilities 13,937 17,048 13,212

 676,031 335,799 720,906
 Liabilities related to investment properties held for sale 209,884 — 174,947
 885,915 335,799 895,853

 NON-CURRENT LIABILITIES
 Lease obligation 9,294 9,354 9,308
 Other liabilities 21,013 25,314 23,484
 Notes payable, net — 372,310 —
 Bonds payable, net — 188,483 —
 30,307 595,461 32,792
 Total liabilities 916,222 931,260 928,645

 EQUITY
 Owner's net equity 59,693 517,521 80,489
 Non-controlling interests 629 4,053 342
 Total equity 60,322 521,574 80,831
 Total liabilities and equity $ 976,544 $ 1,452,834 $ 1,009,476

 2

 PACIFIC OAK SOR (BVI) HOLDINGS LTD .

 May 31, 2026
 /s/ Ryan Schluttenhofer /s/ Ronen Nakar
 Date of approval of
 Schluttenhofer, Ryan
 Nakar, Ronen

 financial statements
 Chief Accounting Officer
 Chief Executive Officer and Chairman of the Board authorized by the Company's Board of Directors to execute the financial statements

 The accompanying notes are an integral part of the interim condensed consolidated financial statements.
 3

 PACIFIC OAK SOR (BVI) HOLDINGS LTD .

 CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

 Three months ended March 31, Year ended December 31,
 2026 2025 2025
 Unaudited Audited
 U.S. dollars in thousands
 Revenues and other income:
 Rental income $ 21,638  $ 26,425  $ 101,150 
 Tenant reimbursements 2,393  3,008  11,163 
 Hotel revenues 2,440  2,885  7,597 
 Other operating income 431  464  1,883 
 Total revenues and other income 26,902  32,782  121,793 

 Expenses:
 Operating, maintenance, and management fees (12,134) (11,678) (49,755)
 Real estate taxes and insurance (4,478) (5,481) (20,290)
 Hotel expenses (1,838) (1,737) (6,277)
 Total expenses (18,450) (18,896) (76,322)
 Gross profit 8,452  13,886  45,471 

 Fair value adjustment of investment properties, net 5,381  (2,545) (266,810)
 Depreciation (144) (274) (964)
 Equity in loss of unconsolidated joint ventures, net (5,420) (1,867) (92,794)
 Management fees (2,536) (3,665) (13,991)
 Restructuring charges (721) —  (1,508)
 General and administrative expenses (3,063) (1,598) (6,268)
 Impairment charges on goodwill —  —  (949)
 Impairment loss - hotel —  —  (12,521)
 Operating income (loss) 1,949  3,937  (350,334)

 Other income (loss), net 4,270  557  (2,630)
 Gain on deconsolidation of subsidiary 595  —  — 
 Provision for guarantee obligations (1,875) —  — 
 Finance income 1,678  286  1,380 
 Finance (loss) income from financial assets at fair value through profit or loss, net (4,571) —  1,925 
 Finance expenses, net (20,307) (16,143) (76,136)
 Gain on extinguishment of debt —  —  19,449 
 Foreign currency transaction (loss) gain (2,248) 5,984  (40,556)
 Net loss before income taxes $ (20,509) $ (5,379) $ (446,902)
 Income tax provision —  (890) — 
 Net loss $ (20,509) $ (6,269) $ (446,902)

 Net loss attributable to owner $ (20,796) $ (6,468) $ (443,500)
 Net income (loss) attributable to non-controlling interests 287  199  (3,402)
 Net loss $ (20,509) $ (6,269) $ (446,902)
 Total comprehensive loss $ (20,509) $ (6,269) $ (446,902)

 The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 4

 PACIFIC OAK SOR (BVI) HOLDINGS LTD .

 CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

 Owner contributions Retained earnings Paid-in Capital resulting from transactions with non-controlling interests Owner's net equity Non-controlling interests Total equity
 Unaudited
 U.S. dollars in thousands
 Balance as of January 1, 2026 $ 693,554  $ (656,139) $ 43,074  $ 80,489  $ 342  $ 80,831 
 Net loss —  (20,796) —  (20,796) 287  (20,509)
 Total comprehensive loss —  (20,796) —  (20,796) 287  (20,509)

 Balance as of March 31, 2026 $ 693,554  $ (676,935) $ 43,074  $ 59,693  $ 629  $ 60,322 

 Owner contributions Retained earnings Paid-in Capital resulting from transactions with non-controlling interests Owner's net equity Non-controlling interests Total equity
 Unaudited
 U.S. dollars in thousands
 Balance as of January 1, 2025 $ 693,554  $ (212,639) $ 43,074  $ 523,989  $ 3,914  $ 527,903 
 Net loss —  (6,468) —  (6,468) 199  (6,269)
 Total comprehensive (loss) income —  (6,468) —  (6,468) 199  (6,269)
 Noncontrolling interest distribution —  —  —  —  (60) (60)
 Balance as of March 31, 2025 $ 693,554  $ (219,107) $ 43,074  $ 517,521  $ 4,053  $ 521,574 

 Owner contributions Retained earnings Paid-in Capital resulting from transactions with non-controlling interests Owner's net equity Non-controlling interests Total equity
 Audited
 U.S. dollars in thousands
 Balance at January 1, 2025 $ 693,554  $ (212,639) $ 43,074  $ 523,989  $ 3,914  $ 527,903 
 Net loss —  (443,500) —  (443,500) (3,402) (446,902)
 Total comprehensive loss —  (443,500) —  (443,500) (3,402) (446,902)
 Non-controlling interest contributions —  —  —  —  75  75 
 Non-controlling interest distributions —  —  —  —  (245) (245)
 Balance at December 31, 2025 $ 693,554  $ (656,139) $ 43,074  $ 80,489  $ 342  $ 80,831 

 The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 5

 PACIFIC OAK SOR (BVI) HOLDINGS LTD .

 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 Three months ended
March 31, Year ended December 31,
 2026 2025 2025
 Unaudited Audited
 U.S. dollars in thousands
 Cash Flows from Operating Activities:
 Net loss
 $ (20,509) $ (6,269) $ (446,902)
 Adjustments to reconcile net loss to net cash provided by operating activities:

 Equity in loss of joint ventures, net
 5,420  1,867  92,794 
 Fair value adjustment on investment properties, net
 (5,381) 2,545  266,810 
 Depreciation 144  274  964 
 Gain on deconsolidation of subsidiary (595) —  — 
 Provision for guarantee obligations 1,875  —  — 
 Deferred rent 234  484  1,582 
 Credit loss on financial assets
 1,292  684  4,503 
 Finance expenses, net
 20,307  16,143  76,136 
 Other (income) loss, net
 (4,270) (556) 2,630 
 Finance income
 (1,678) (286) (1,380)
 Finance loss (income) from financial assets at fair value through profit or loss, net
 4,571  —  (1,925)
 Foreign currency transaction loss (gain)
 2,248  (5,984) 40,556 
 Impairment loss - hotel —  —  12,521 
 Impairment charges on goodwill —  —  949 
 Income tax provision —  890  — 
 Gain on extinguishment of debt
 —  —  (19,449)
 3,658  9,792  29,789 
 Changes in assets and liabilities:

 Restricted cash
 102  4,405  (1,391)
 Rents and other receivables, net
 (137) (1,532) 289 
 Prepaid expenses and other assets
 (1,505) (1,421) 1,206 
 Accounts payable and accrued liabilities
 (2,026) (3,157) 2,597 
 Due to affiliates 337  701  (3,803)
 Other liabilities
 469  (793) (3,602)
 (2,760) (1,797) (4,704)
 Net cash provided by operating activities 898  7,995  25,085 

 Cash Flows from Investing Activities:
 Improvements to investment properties (1,744) (4,265) (8,808)
 Other investing cash flows, net —  556  (2,630)
 Interest received 1,847  286  1,380 
 Payments for development obligations (508) (1,855) (3,565)
 Contributions to joint ventures (6,872) —  — 
 Advance to associate —  (1,502) — 
 Proceeds from the sale of investments in financial assets at fair value through profit or loss
 5,777  —  — 
 Proceeds from sales of investment properties, net —  1,351  70,490 
 Distribution of capital from joint venture —  —  757 
 Net cash (used in) provided by investing activities (1,500) (5,429) 57,624 

 Cash Flows from Financing Activities:
 Principal payments on notes and bonds payable (2,425) (24,397) (145,227)
 Payments on deferred financing costs and extinguishment of debt —  (167) (5,350)
 Interest paid (7,154) (19,055) (61,394)
 Release (distribution) of restricted cash 6,621  282  (3,526)
 Proceeds from notes and bonds payable 1,195  —  80,000 
 Non-controlling interest contributions —  —  75 
 Non-controlling interest distributions —  (60) (245)
 Proceeds from loans from owner —  8,000  10,000 
 Net cash used in financing activities (1,763) (35,397) (125,667)
 Effect of exchange rate changes on cash and cash equivalents —  (49) (938)

 6

 PACIFIC OAK SOR (BVI) HOLDINGS LTD .

 Net decrease in cash and cash equivalents (2,365) (32,880) (43,896)
 Cash and cash equivalents, beginning of period 11,960  55,856  55,856 
 Cash and cash equivalents, end of period $ 9,595  $ 22,976  $ 11,960 

 Supplemental Disclosure of Noncash Activities:

 Accrued development obligations
 $ 8,967  $ 9,644  $ 7,895 
 Asset management fee payable to owner $ 6,458  $ 13,938  $ 7,415 
 Deconsolidation of a subsidiary
 Investment property $ (24,700) $ —  $ — 
 Other assets $ (854) $ —  $ — 
 Notes payable $ 20,040  $ —  $ — 
 Other liabilities $ 6,109  $ —  $ — 
 Gain on deconsolidation of a subsidiary $ 595  $ —  $ — 

 The accompanying notes are an integral part of the interim condensed consolidated financial statements.
 7

 PACIFIC OAK SOR (BVI) HOLDINGS LTD .

 NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 NOTE 1:    GENERAL INFORMATION

 a. These financial statements have been prepared in a condensed format as of March 31, 2026, and for the three months period then ended (“interim condensed consolidated financial statements”). These interim condensed consolidated financial statements should be read in conjunction with the Company’s annual financial statements as of December 31, 2025, and for the year then ended and the accompanying notes.

 The Company and its subsidiaries operate in the investment real estate segment in the United States, which includes mainly investment in office and residential real estate and undeveloped lands. The Company has three reporting segments: 1) strategic opportunistic properties 2) residential homes and 3) hotel.

 As of March 31, 2026, the Company consolidated four office complexes, encompassing, in the aggregate, approximately 1.4 million rentable square feet and these properties were 68% occupied. In addition, the Company owned one residential home portfolio consisting of 1,387 residential homes, and one apartment property, containing 317 units, which were 100% and 92% occupied, respectively. The Company also owned one hotel property with 196 rooms, one investment in undeveloped land with approximately 107 developable acres, and one office/retail development property, two investments in unconsolidated joint ventures and one financial asset at fair value through profit or loss. Additionally, the Company had two office complexes (Richardson Office and Lincoln Court), 690 residential homes and approximately 140 developable acres (Richardson and Park Highlands) classified as held-for-sale in accordance with IFRS 5. The assets met the criteria for classified as held-for-sale, as their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Management is committed to a plan to sell the assets, is highly probable, and the sale is expected to be completed within twelve months. As a result of the classification, certain assets and liabilities were reclassified on the condensed consolidated statements of financial position.

 b. The financial condition of the Company and the going concern assumption.

 As of March 31, 2026, the Company had a working capital shortfall amounting to $590.9 million, primarily attributed to loans that have matured or are maturing within a twelve month period from the date of the condensed consolidated statements of financial position, including: (i) Series B (388.3 million Israeli new Shekels or $122.7 million as of March 31, 2026) and Series D (587.0 million Israeli new Shekels or $185.5 million as of March 31, 2026), collectively (“Series Bonds”) of 975.3 million Israeli new shekels ($308.2 million as of March 31, 2026), (ii) mortgage loans related to our residential homes portfolio of $187.9 million, and (iii) other mortgage loans of $337.4 million, which primarily includes the Bank of America Loan of $152.6 million and the WhiteHawk Loan of $80.0 million. As a result of defaults due to covenant breaches, cross-collateralization, and other factors, the Company may be obligated to dispose of investment properties under forced-sale circumstances, which could result in proceeds that are lower than fair values as of March 31, 2026.

 As of the date the interim condensed consolidated financial statements are issued, in order for the Company to continue its regular operations, several actions will need to be completed in the near term, including debt refinancing and real estate sales, all of which are subject to approval under a standstill agreement and other third-party approvals. These plans are subject to change based on market conditions in the commercial real estate lending environment, the current interest rate environment, leasing and transaction volume challenges in certain markets, successful restructuring with the Bondholders (see Note 1d for additional details), and such plans are not within the control of the Company, and therefore, there is no assurance that the Company will be successful in implementing its plans and fulfill its existing and projected obligations upon maturity. The uncertainty regarding the Company’s plans could be mitigated through the potential sales of its residential homes, successful negotiations with the Trustee and Representatives, and other strategic actions currently under consideration. Since the plans mentioned above are not within the control of the Company and subject to approval of third parties, including consents from bondholders and other lenders, the Company's management and the Board of Directors have concluded that there are significant doubts regarding the Company's ability to continue as a going concern. No adjustments were made to the financial statements to the values or classifications of assets and liabilities that might be necessary if the Company is unable to continue operating as a going concern.

 c. Class Action Suit

 8

 PACIFIC OAK SOR (BVI) HOLDINGS LTD .

 NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 On September 10, 2025, a bondholder filed a petition for certification of a class action in the Tel Aviv District Court, Israel against the Company and certain members of its board of directors, alleging that disclosures relating to the Company 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 March 31, 2026) and cites the petitioner’s expert model estimating potential class-wide damages of approximately 124.6–145.2 million Israeli new shekels ($39.6–$46.0 million as of March 31, 2026). The matter is at a preliminary stage; the court has not ruled on class certification or on the merits and based on the Company’s legal counsel’s advice, the potential outcome cannot be determined, nor can the chances of the petition being approved be reliably assessed.

 d. Negotiations between the Company and a trustee that represents the bondholders of the Series Bonds (the “Trustee” and “Bondholders”) and the representatives of the Bondholders during and after the three months ended March 31, 2026.

 The following is a summary of the main actions and decisions that were carried out and made in the framework of the aforementioned negotiations:

 1. Series Bonds Deferral
 On May 11, 2026, the Trustee announced an additional deferral of the principal and interest payment dates for the Series Bonds to July 1, 2026.

 2. Board of Directors
 On May 3, 2026, the Bondholders approved the selection of Mr. Izhak Lax as a candidate for appointment as a director of the Company. Mr. Lax will start as a director on June 1, 2026.

 3. Approval of Loan with Klirmark Opportunity Fund IV, LP
 On April 28, 2026, assemblies of Series B and Series D debenture holders, in an aggregate count, approved a resolution to ratify the Company’s entry into a loan agreement with Klirmark Opportunity Fund IV, LP, on the basis of the memorandum of understanding dated February 17, 2026, while updating the terms of the memorandum of understanding so that the amount excluded from the distribution restrictions in PORT will be up to $4.0 million, instead of $8.0 million.

 4. Approval of Proposed Debt Arrangement
 On April 27, 2026, assemblies of Series B and Series D debenture holders approved a resolution to approve the proposed debt arrangement and to authorize the Trustee to perform all actions required for its implementation, including the signing of an amended deed of trust.

 5. Objection to Filing Insolvency Proceedings
 On March 10, 2026, meetings of the Bondholders resolved to object to the filing of an application for an order to commence insolvency proceedings against the Company, in accordance with the mechanism set out in the Insolvency and Economic Rehabilitation Law and Section 35H(d2b)(1) of the Securities Law. However, the applicable securities law requires a quorum of at least 75% of the voting rights, and such quorum was not achieved at the March 10, 2026 meetings. As a result, the Trustee was obligated to submit a petition for the commencement of insolvency proceedings. A court hearing on the petition has been scheduled for April 28, 2026.

 6. Refinancing of the PORT Property Portfolio
 On February 18, 2026, meetings of the Bondholders approved entering into a memorandum of understanding and a detailed agreement for the refinancing of loans secured by the Company’s residential homes portfolio. The voting approved the refinancing and to which the financing proposal of Klirmark Opportunity Fund IV, LP was selected. Refer to Note 7 for additional details.

 7. Exemption from Liability for Officers and Management Company
 On February 15, 2026, meetings of the Bondholders, by special resolution, approved granting a full exemption from liability and waiver of claims with respect to the new officer and directors (Mr. Ronen Nakar, Ms. Varda Kalal, and Mr. Itay Dayan), as well as R2 Advisors, LLC, Mr. Ryan Schluttenhofer, and all officers and managers thereof, in connection with management services provided to the Company.

 8. Deferral of Debenture Payment Dates
 9

 PACIFIC OAK SOR (BVI) HOLDINGS LTD .

 NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 Meetings of the Bondholders approved several resolutions to defer repayment dates.

 On March 17, 2026, holders of Series B bonds approved deferring principal and interest payments to June 1, 2026 (instead of April 1, 2026), and authorized the Trustee, by special resolution, to grant an additional deferral of up to one month.

 On March 17, 2026, the trustee for the Series D bonds exercised previously granted authority to further defer interest payment dates, such that the effective date was deferred to April 18, 2026 and the payment date to April 30, 2026.

 9. Use of Interest Cushion Funds
 As of March 31, 2026 the Bondholders approved the extension of two loans to the Company, in an aggregate amount of approximately $10.0 million, from funds held in the interest cushion accounts of the Series Bonds. The loans bear an annual interest of 20% and repayment of principal and accrued interest is expected to occur from the earliest proceeds received by the Company or controlled entities, including: asset sales or refinancing of real estate properties, sale of equity interests, or issuance of additional debt instruments, subject to creditor repayment priorities and maintenance of a minimum operating cash balance. As of March 31, 2026, the full facility of $10.0 million remained outstanding.

 10. Asset Management Transition (Westdale)
 On January 22, 2026, the Company replaced previous management company and entered into a asset management agreement with Westdale for the Company’s portfolio of investments, excluding residential homes. Refer to Note 6 for additional details.

 11. Management Agreement with R2 Advisors, LLC
 On January 22, 2026, meetings of the Bondholders approved entering into a management agreement with R2 Advisors, LLC. Refer to Note 6 for additional details.

 12. Authorization to Sell Keppel Pacific Oak US REIT (S-REIT) Shares
 Meetings of the Bondholders approved authorizing the Company to sell its holdings in S-REIT shares, subject to approvals by the representative body and U.S. counsel. As of the approval date of the interim condensed consolidated financial statements, the Company completed sales of all S-REIT shares. Refer to Notes 6 and 7 for additional details.

 13. Debt Arrangement Proposals
 On February 4, 2026, the Tel Aviv District Court approved the convening of such creditor meetings.

 14. Transactions Relating to Sale of PORT Properties
 On February 4, 2026, meetings rejected proposals to enter into a memorandum of understanding for the sale of all the residential homes.

 15. Corporate structure and separation from POCA
 Effective January 31, 2026, the Company and Pacific Oak Strategic Opportunity REIT, Inc., the parent company, ceased to be part of POCA following the termination of the previous management and advisory arrangements and the transition to new service providers. On January 22, 2026, following approval by the Board of Directors and debenture holders, the Company entered into: An agreement with the Pacific Oak Strategic Opportunity REIT, Inc. governing settlement of amounts payable and terminating the previous management company’s engagement. A new asset management agreement with a replacement management company and new accounting and financial services agreement with a third-party provider became effective January 31, 2026. Concurrently, Pacific Oak Strategic Opportunity REIT, Inc. formally terminated the advisory agreement with the previous management company effective January 31, 2026, after which the new service providers commenced operations. Refer to Note 6 for additional details.

 16. Changes in directors and officers
 During the three months ended March 31, 2026, there were service provider changes, prior directors and one senior officer, including the former President and CEO were removed. New executive leadership and external directors were appointed. One director announced intentions to conclude their service during the first half of 2026. These governance changes represent a significant change in management and oversight during the reporting period. Refer to Note 6 for additional details.

 10

 PACIFIC OAK SOR (BVI) HOLDINGS LTD .

 NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 e. Restructuring Events

 Bondholder Request to the Israeli Court and Related Debt Agreement

 In February 2026, the Trustee applied to the Tel Aviv–Jaffa District Court to convene a meeting of the Bondholders to consider and approve a proposed debt arrangement under the Israeli Insolvency and Economic Rehabilitation Law.

 The proposed arrangement extends the final maturity of both series to June 2028, modifies key terms (including interest, security and enforcement), and provides for a consolidated repayment schedule aligned with an orderly realization of the Company’s assets, including a defined payment waterfall and minimum liquidity reserve requirements. It also requires the creation and registration of first-priority security interests over substantially all unencumbered Company assets (subject to limitations) and imposes significant operating covenants and restrictions, with enhanced trustee/bondholder oversight and specified enforcement rights upon certain events of default. As of the approval date of the interim condensed consolidated financial statements, the proposed debt arrangement is still under review.

 REIT Support

 In connection with the proposed debt arrangement, upon execution, the Company and the REIT would enter into a second loan arrangement pursuant to which the Company may, in its discretion, advance funds to the REIT in accordance with a mutually agreed budget (subject to Board determination that the Company has sufficient available funds). The budgeted advances are capped at approximately $2.9 million through July 2026, including $0.4 million previously advanced under a prior bridge arrangement and $61,000 per month thereafter. Amounts advanced under the prior bridge arrangement and the second loan may, at the Company’s option, be applied as payment or reimbursement of amounts owed by the Company to the REIT, with any such application reducing the outstanding balance owed.

 PORT Board of Directors

 In March 2026, following the Company’s request, several members of PORT’s board of directors, including the former President and CEO, resigned, and PORT’s new executive leadership and external directors were appointed. These governance changes represent a significant change in management and oversight following the reporting period. Refer to Note 7 for additional details.

 S&P Global Rating Cessation

 On February 17, 2026, S&P Global Ratings Maalot announced the termination of surveillance and withdrawal of the issuer credit rating and the ratings of the Series Bonds, at the Company’s request. Accordingly, beginning on that date, the Company’s securities are considered not rated (NR) by S&P Global Ratings. The cessation of the rating reflects the discontinuation of rating coverage rather than the publication of a new credit opinion.

 NOTE 2:    SIGNIFICANT ACCOUNTING POLICY

 Basis of presentation of the interim condensed consolidated financial statements:

 The interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for the preparation of financial statements for interim periods, as prescribed in IAS 34, "Interim Financial Reporting", and in accordance with the disclosure requirements of Chapter D of the Securities Regulations (Periodic and Immediate Reports), 1970.

 The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the annual consolidated financial statements .

 NOTE 3:    INVESTMENT IN JOINT VENTURES

 As of March 31, 2026, the Company’s investment in joint ventures was composed of the following (dollars in thousands):
 11

 PACIFIC OAK SOR (BVI) HOLDINGS LTD .

 NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 Properties as of March 31, 2026
 Investment Balance as of
 March 31,
 December 31, 2025

 2026
 2025
 Joint Venture Location Ownership % (Unaudited) (Audited)
 110 William Joint Venture 1 New York, New York (1)
 $ 58,925  $ 140,773  $ 52,911 
 Pacific Oak Opportunity Zone Fund I 4 Various 47.0% 31,208  34,735  31,669 

 $ 90,133  $ 175,508  $ 84,580 

 _____________________
 (1) As of March 31, 2026, the Company owned 77.5% of preferred interest and 100% of common interest in the 110 William Joint Venture.

 The equity in profit (loss) of joint ventures for the three months ended March 31, 2026 and 2025 and the year ended December 31, 2025 was as follows (in thousands):

 Three Months Ended March 31,
 Year ended December 31, 2025

 2026
 2025

 (Unaudited) (Audited)
 110 William Joint Venture $ (4,960) $ (2,126) $ (89,987)
 Pacific Oak Opportunity Zone Fund I (460) 259  (2,807)

 Equity in loss of unconsolidated joint ventures, net
 $ (5,420) $ (1,867) $ (92,794)

 110 William Joint Venture:

 Summarized information about the statements of financial position and the statements of profit or loss of Pacific Oak SOR SREF III 110 William, LLC (100%) (in thousands):

 March 31, December 31,
 2026
 2025
 2025

 (Unaudited) (Audited)

 Current assets $ 17,721  $ 8,245  $ 8,880 
 Non-current assets (including investment property) (1)
 422,100  492,095  422,100 
 Current liabilities (2)
 343,450  31,661  342,038 
 Non-current liabilities 30,898  302,048  30,151 
 Equity 65,473  166,631  58,791 
 Equity attributable to equity holders of the Company (Based on the waterfall mechanism) $ 58,925  $ 140,773  $ 52,911 

 _____________________
 (1) As of March 31, 2026 and December 31, 2025, non-current assets consist of the investment property held by the 110 William Joint Venture with a carrying value of $422.1 million. The investment property is measured at fair value, which was determined based on valuation assessments performed by independent external valuation experts holding recognized and relevant professional qualifications and experience in the location and category of the property being valued. The valuations were primarily based on expected future cash flows and market assumptions. The 110 William Joint Venture’s investment property is subject to significant disposal restrictions under the joint venture agreement, including the requirement to satisfy certain conditions and obtain consent from the other joint venture partner.
 (2) Current liabilities consist of principal balances of $305.3 million under senior loan facilities and $21.0 million under a mezzanine loan facility, both with initial maturities of July 5, 2026. The related financial covenants apply to the Company’s wholly owned subsidiary, Pacific Oak SOR Properties, LLC, which serves as guarantor of both the senior and mezzanine loans. As of March 31, 2026, Pacific Oak SOR Properties, LLC was not in compliance with the minimum net worth covenant for the mezzanine loan facility, resulting in a technical default under the mezzanine loan agreement. As of the approval date of the interim condensed consolidated financial statements, the 110 William Joint Venture is in discussions with the lender regarding a potential waiver, forbearance, or amendment of this covenant. Such amendment, if obtained, may include, among other alternatives, the provision of additional collateral or a modification to the covenant calculation to reflect the joint venture interest, subject to lender approval.
 12

 PACIFIC OAK SOR (BVI) HOLDINGS LTD .

 NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 Three months ended March 31, Year ended December 31,
 2026
 2025
 2025

 (Unaudited) (Audited)

 Revenues $ 12,168  $ 3,582  $ 16,418 
 Gross profit (loss) 7,660  (1,089) (1,585)
 Operating income (loss) *) 4,403  (698) (97,098)
 Net loss *) (4,292) (5,563) (113,403)
 Share of equity in loss from joint venture (Based on the waterfall mechanism) (4,960) (2,126) (89,987)
 *) Includes revaluation of investment properties $ (3,192) $ (424) $ (95,204)

 Pacific Oak Opportunity Zone Fund I:

 Summarized information about the statements of financial position and the statements of profit or loss of Pacific Oak Opportunity Zone Fund 1, LLC (100%) (in thousands):

 Three months ended March 31, December 31,
 2026
 2025
 2025

 (Unaudited) (Audited)

 Current assets $ 375  $ 2,265  $ 1,466 
 Non-current assets (investment property) (1)
 122,446  129,132  122,446 
 Current liabilities 1,996  786  1,996 
 Non-current liabilities (2)
 55,672  57,782  55,672 
 Equity 65,153  72,829  66,244 
 Equity attributable to equity holders of the Company (Based on the waterfall mechanism) $ 31,208  $ 34,735  $ 31,669 

 _____________________
 (1) As of March 31, 2026 and December 31, 2025, non-current assets consist of three investment property held by the Pacific Oak Opportunity Zone Fund I with a carrying value of $110.1 million. The investment properties are measured at fair value, which was primarily based on expected future cash flows and market assumptions.
 (2) Non-current liabilities consists of three secured mortgage loans with an aggregate principal balance of $55.6 million and initial maturities ranging from 2031 to 2032.

 Three months ended March 31, Year ended December 31,
 2026
 2025
 2025

 (Unaudited) (Audited)

 Revenues $ 1,594  $ 2,138  $ 6,377 
 Gross profit 589  1,333  2,355 
 Operating (loss) income *) (421) 1,223  (1,683)
 Net (loss) income *) (1,091) 548  (4,362)
 Share of equity in profit (loss) from joint venture (Based on the waterfall mechanism) (460) 259  (2,807)
 *) Includes revaluation of investment properties $ —  $ —  $ (2,293)

 The Company does not attach the financial statements related to the investment in joint ventures, as the reports do not add more information to the contained above.

 NOTE 4:    FINANCIAL INSTRUMENTS

 The fair values of the Company’s Series Bonds as of March 31, 2026 and December 31, 2025 were $144.3 million and $196.0 million, respectively. Additionally, the outstanding principal balances and accrued interest of the Series Bonds as of
 13

 PACIFIC OAK SOR (BVI) HOLDINGS LTD .

 NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 March 31, 2026 and December 31, 2025 were $324.3 million and $315.1 million, respectively. The Series Bonds are publicly traded on the Tel-Aviv Stock Exchange and the fair values are based on the quoted price and the Company classifies this input as a Level 1 input.

 The Series B bonds contain the following covenants: (i) Consolidated Equity Capital of the Company (not including minority rights) shall not be less than USD 475 million; (ii) the Net Adjusted Financial Debt to Net Adjusted Cap (shall not exceed a rate of 75%); (iii) Adjusted NOI shall be no lower than USD 35 million; and (iv) the consolidated scope of the projects for development of the Company shall not exceed 10% of the adjusted balance. As of March 31, 2026, the Company was not in compliance with all covenants under the deed of trust of the Series B Bonds and were calculated as follows: (i) Consolidated Equity Capital of the Company as of March 31, 2026 was $59.7 million; (ii) the Net Adjusted Debt to Net Adjusted Cap was 95%; (iii) the Adjusted NOI was $46.6 million for the trailing twelve months ended March 31, 2026; and (iv) the consolidated scope of projects was $0 as of March 31, 2026.

 The Series D bonds contains the following covenants: (i) Consolidated Equity Capital of the Company (not including minority rights) shall not be less than USD 450 million; (ii) the Net Adjusted Financial Debt to Net Adjusted Cap shall not exceed a rate of 75%; (iii) Adjusted NOI shall be no lower than USD 35 million. As of March 31, 2026, the Company was not in compliance with all covenants under the deed of trust of the Series D Bonds and were calculated as follows: (i) Consolidated Equity Capital of the Company as of March 31, 2026 was $59.7 million; (ii) the Net Adjusted Debt to Net Adjusted Cap was 95%; (iii) and the Adjusted NOI was $46.6 million for the trailing twelve months ended March 31, 2026.

 As of March 31, 2026, the Company was not in compliance with financial and nonfinancial covenants and as a result, the Company continues to operate under a standstill agreement.

 The Company has not disclosed the fair value of its notes payable as management has determined that the carrying amounts represent a reasonable approximation of fair value. This assessment considers the default status of the loans, ongoing negotiations with lenders, and the expectation that any settlement would approximate the recorded obligations. Accordingly, the Company has not performed a separate fair value determination for these instruments.

 The Company's investments in real estate equity securities are carried at their estimated fair value based on quoted market prices (Level 1) for the securities. Unrealized gains and losses are reported in finance loss from financial assets at fair value through profit or loss.

 NOTE 5:    SEGMENT INFORMATION

 The operating segments are identified on the basis of information that is reviewed by the chief operating decision maker (“CODM”) to make decisions about resources to be allocated and assess its performance. All corporate related costs are included in the strategic opportunistic properties segment to align with how financial information is presented to the CODM. The selected financial information for the reporting segments as of and for the three months ended March 31, 2026 and 2025 and as of and the year ended December 31, 2025 is as follows (in thousands):
 14

 PACIFIC OAK SOR (BVI) HOLDINGS LTD .

 NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 March 31, 2026

 Strategic Opportunistic Properties Residential Homes Hotel Total
 (Unaudited)
 Investment properties $ 440,871  $ 360,598  $ —  $ 801,469 
 Property plant and equipment - hotel, net $ —  $ —  $ 20,080  $ 20,080 
 Total assets $ 584,948  $ 369,998  $ 21,598  $ 976,544 
 Total liabilities $ 695,167  $ 196,794  $ 24,261  $ 916,222 

 Three months ended March 31, 2026

 Strategic Opportunistic Properties Residential Homes Hotel Total
 (Unaudited)
 Total revenues and other income $ 15,205  $ 9,257  $ 2,440  $ 26,902 
 Gross profit $ 4,760  $ 3,090  $ 602  $ 8,452 
 Finance expenses, net $ 17,063  $ 2,605  $ 639  $ 20,307 

 March 31, 2025

 Strategic Opportunistic Properties Residential Homes Hotel Total
 (Unaudited)
 Investment properties $ 763,375  $ 394,101  $ —  $ 1,157,476 
 Property plant and equipment - hotel, net $ —  $ —  $ 33,355  $ 33,355 
 Total assets $ 1,008,601  $ 407,833  $ 36,400  $ 1,452,834 
 Total liabilities $ 710,236  $ 197,344  $ 23,680  $ 931,260 

 Three months ended March 31, 2025

 Strategic Opportunistic Properties Residential Homes Hotel Total
 (Unaudited)
 Total revenues and other income $ 20,825  $ 9,072  $ 2,885  $ 32,782 
 Gross profit $ 9,896  $ 2,842  $ 1,148  $ 13,886 
 Finance expenses, net $ 13,309  $ 2,281  $ 553  $ 16,143 

 15

 PACIFIC OAK SOR (BVI) HOLDINGS LTD .

 NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 December 31, 2025

 Strategic Opportunistic Properties Residential Homes Hotel Total
 (Audited)
 Investment properties $ 460,071  $ 360,598  $ —  $ 820,669 
 Property plant and equipment - hotel, net $ —  $ —  $ 20,200  $ 20,200 
 Total assets $ 612,346  $ 374,731  $ 22,399  $ 1,009,476 
 Total liabilities $ 704,231  $ 200,772  $ 23,642  $ 928,645 

 Year ended December 31, 2025

 Strategic Opportunistic Properties Residential Homes Hotel Total
 (Audited)
 Total revenues and other income $ 77,256  $ 36,940  $ 7,597  $ 121,793 
 Gross profit $ 29,829  $ 14,322  $ 1,320  $ 45,471 
 Finance expenses, net $ 64,677  $ 9,430  $ 2,029  $ 76,136 

 NOTE 6:    SIGNIFICANT EVENTS DURING THE REPORTING PERIOD

 POCA Advisory Agreement Termination

 On January 23, 2026, Pacific Oak Strategic Opportunity REIT, Inc. terminated its advisory agreement with Pacific Oak Capital Advisors, LLC (“POCA”), effective January 31, 2026. As a result, the back-to-back agreement between Pacific Oak Strategic Opportunity REIT, Inc. and the Company was also terminated. Amounts presented as due to affiliates in the condensed consolidated statements of financial position primarily represent unpaid historical asset management fees incurred under the now-terminated back-to-back agreement.

 Westdale Asset Management, Ltd. (“Westdale”)

 On January 22, 2026, the Company entered into an asset management agreement with Westdale (the “Westdale Agreement”). Pursuant to the Westdale Agreement, Westdale is responsible for managing, operating, directing and supervising the operations and administration of the Company’s assets (other than those held through PORT). The Company will pay Westdale a monthly fee (a) with respect to each property owned by the Company an amount equal to the greater of (i) 2.0% of the sum of the gross income of each property received during the prior month and (ii) $10,000 and (b) $10,000 with respect to the investment in Pacific Oak Opportunity Zone Fund I, LLC. In connection with any asset sale, Westdale will receive a fee at the closing equal to 0.25% of the contract sales price for such sale.

 R2 Advisors, LLC (“R2”)

 On January 23, 2026, the Company entered into a management services agreement with R2. R2 provides the Company with accounting advisory services and is majority-owned and controlled by Ryan Schluttenhofer, the Company’s Chief Accounting Officer. Pursuant to this agreement, R2 will provide the Company with support in the following areas: (a) corporate accounting, recordkeeping, and regulatory filings, (b) books and records maintenance and coordination with third parties, (c) tax and compliance coordination, (d) corporate cash management support, (e) insurance and risk management support, (f) corporate governance support and (g) chief accounting officer support. The initial term of the agreement will be twelve months and the total contract value is $1.7 million, excluding reimbursement of expenses.

 Brian Ragsdale Management Agreement

 16

 PACIFIC OAK SOR (BVI) HOLDINGS LTD .

 NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 On January 27, 2026, the Company entered into a management agreement with Brian Ragsdale, the Chief Executive Officer, Chief Financial Officer and President of the REIT. The agreement is effective February 1, 2026 and Mr. Ragsdale is responsible for providing high-level management and advisory support, including, but not limited to: debt restructuring and asset management. The term of the agreement is six months and the total contract value is $0.2 million.

 Chairman and Chief Executive Officer Appointment

 On January 29, 2026, the Company appointed Ronen Nakar as Chairman and Chief Executive Officer. Mr. Nakar succeeds Keith David Hall, who resigned effective January 28, 2026. Mr. Nakar’s responsibilities are customary for a person in his position and are exercised in accordance with the Company’s bylaws and applicable law. The appointment is effective as of February 1, 2026 and either party may terminate the appointment upon 30 days’ notice. Mr. Nakar is entitled to monthly compensation of ILS 40,000, plus VAT.

 Madison Square Receivership

 In March 2026, the lender under the mortgage loan secured by the Madison Square property obtained a court-appointed receiver to assume control over the operations and management of the Madison Square property and to oversee the potential disposition of the asset. Management determined that the appointment of the receiver resulted in the Company losing control of the Madison Square property under IFRS 10. Accordingly, the Company deconsolidated the investment property of $24.7 million and mortgage loan of $20.0 million and related assets and liabilities and recognized a gain on deconsolidation of subsidiary of $0.6 million in the accompanying condensed consolidated statements of profit or loss. The Company has a guarantee obligation associated with the mortgage loan related to the Madison Square property. As a result, the Company recognized a guarantee obligation of approximately $1.9 million as of March 31, 2026. The guarantee obligation is included within other liabilities in the accompanying condensed consolidated statements of financial position.

 Sale of Financial Assets

 The Company completed the sale of equity securities of 49 million shares of its 64 million shares in the Keppel Pacific Oak US REIT on the Singapore Exchange for proceeds of $7.9 million. As of March 31, 2026, the Company had 15 million shares remaining, all of which were disposed of subsequent to March 31, 2026.

 PORT and POCA Loan

 On January 29, 2026, the Com pany’s owner shared a notice of default and reservation of rights letter (the “Notice”) from POCA, the predecessor advisor through January 31, 2026. The Notice relates to the POCA Loan and alleges, among other things, that no interest has ever been paid on the loan and, as a result, the loan is in default and all principal and accrued interest are now due. The Notice also alleges that default interest of 15.0% is now accruing and that more collateral is required under the related pledge agreement. On March 27, 2026, the Company received a letter from POCA to PORT asserting a notice of default under the bridge loan and indicated its intent to enforce related collateral and direct certain proceeds. As of March 31, 2026, the principal balance of this loan is $10.0 million. Refer to Note 7 for additional details.

 Park Highlands Series A2 Preferred Shares

 In March 2026, the sole shareholder of the Company’s 1,927 outstanding Series A2 preferred shares filed a petition with the Tel Aviv District Court seeking recognition as a party in interest as part of the debt arrangement proposed by the Bondholders. The court approved this petition, and the sole shareholder has been recognized as a party in interest in the arrangement. The aggregate value of the Series A2 preferred shares is approximately $1.9 million.

 NOTE 7:    SUBSEQUENT EVENTS

 The Company evaluates subsequent events up until the date the interim condensed consolidated financial statements are issued.

 PORT Refinancing

 17

 PACIFIC OAK SOR (BVI) HOLDINGS LTD .

 NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 On May 8, 2026, Pacific Oak Residential Trust, Inc. (“PORT”), an indirect wholly owned subsidiary of the Company, completed the senior secured refinancing of PORT’s approximately 2,077-home single-family residential portfolio with Klirmark Opportunity Fund IV, LP. The loan was for $216.0 million bearing interest of Secured Overnight Financing Rate (“SOFR”) plus 4.75%, with a SOFR floor of 3.0%, financing terms include a $10.0 million interest reserve, a maintained three-month reserve for taxes, insurance, HOA fees, capex and property maintenance, and distribution of certain allowable amounts at closing with additional amounts subject to certain release conditions. The loan contains certain covenants, including requiring 150 homes to be sold in the first six months and at least 100 homes per quarter thereafter, and related reserve, loan-to-value and default-based release conditions.

 PORT Board Restructuring

 Between March and April 6, 2026, all five members of the Board of Directors of PORT, including Mike Gough, Manager of PORT, and Keith Hall, former CEO and Director of the Company, had resigned. The resignations were part of a reconstitution of the PORT Board, following recommendations from the Company’s Board, which includes the appointment of two new directors, a Chief Accounting Officer, and the appointment of a Chief Restructuring Officer which was conditional on the refinancing timing. The reconstituted PORT Board and Chief Restructuring Officer were expected to support the Company’s strategy for the orderly retail sale of its residential homes portfolio and to advance the evaluation and execution of strategic alternatives. There can be no assurance regarding the timing, outcome, or success of these initiatives.

 PORT and POCA Loan

 On April 21, 2026, POCA delivered an additional demand directing PORT to transfer and re-register certain pledged equity interests into POCA’s name, together with a purported UCC transfer statement. The Company believes it has meritorious defenses to POCA’s asserted rights, remedies and demands, including the requested transfer and re-registration of PORT shares, and intends to vigorously defend against such claims while evaluating available claims, defenses and counterclaims against POCA in its capacity as the Company’s prior advisor. Given the early stage of the matter, the disputed issues, and the potential assertion of counterclaims, the Company is unable to determine the likelihood of an unfavorable outcome or reasonably estimate a range of possible loss, if any. Accordingly, no provision was recorded as of March 31, 2026.

 Lincoln Court Sale

 Subsequent to March 31, 2026, at the direction of the lender under the Lincoln Court Mortgage Loan, the Company entered into a purchase and sale agreement for the disposition of the related investment property for a purchase price of $24.6 million. The transaction closed on May 7, 2026. At the time of closing, the outstanding principal balance of the mortgage loan was approximately $31.3 million. In connection with the closing, the lender released its lien on the property and the Company was fully discharged from its obligations under the mortgage loan, including any related guaranty.

 Richardson Land Sale

 Subsequent to March 31, 2026, the Company entered into a purchase and sale agreement for the sale of approximately 25.4 acres of undeveloped land located in Richardson, Texas (the “Richardson Land”) for $12.5 million. The agreement provides for closing to occur within approximately 15 days following the expiration of a 30-day inspection period, subject to the satisfaction of customary closing conditions, including satisfactory title review, the absence of legal proceedings affecting the transaction, and receipt of required approvals. As a result of entering into the agreement, the Company recognized a $5.5 million increase in fair value, which was recorded as fair value adjustment of investment properties, net in the accompanying condensed statements of profit or loss.

 110 William Contributions

 Subsequent to March 31, 2026, the joint venture partner of the 110 William Joint Venture approved the recognition of previously expensed contributions the Company made to the 110 William Joint Venture. As a result of the approval, the Company recognized a gain of $4.1 million as other income (loss), net, in the accompanying interim consolidated statements of profit or loss.

 WhiteHawk Default Notice
 18

 PACIFIC OAK SOR (BVI) HOLDINGS LTD .

 NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 Subsequent to March 31, 2026, the Company received notices of events of default, reservation of rights, and demands for payment from WhiteHawk Capital Partners LP (“WhiteHawk”), in its capacity as administrative agent and collateral agent under the Company’s credit agreement dated July 29, 2025. The notices asserted, among other things, that (i) certain restrictive agreements entered into in favor of holders of the Company’s debt constituted breaches of the credit agreement, and (ii) insolvency proceedings commenced against the Company constituted additional events of default under the credit agreement. WhiteHawk asserted that, as a result of such events of default, all obligations under the credit agreement, including applicable exit fees and default interest, were immediately due and payable and reserved all rights and remedies available under the loan documents and applicable law. In addition, WhiteHawk issued demands for immediate payment and performance under certain guaranties provided by Pacific Oak SOR Properties, LLC and Pacific Oak SOR US Properties II LLC, the Company’s subsidiaries.

 On May 28, 2026, the Company received notice that Whitehawk filed claims in New York court against one of the Company’s wholly owned subsidiaries, Pacific Oak SOR Properties, LLC and Pacific Oak SOR US Properties II LLC, each provided full financial guarantees in connection with the loan. In the claims, the lender seeks, among other things, damages for an alleged breach of the loan agreement, legal costs, and additional relief. The notices include a summons requiring a response within 20 days of service.

 The Company and the guarantor subsidiaries are reviewing the claims, may dispute them, and are working with their U.S. advisors while concurrently negotiating with the lender. There can be no assurance as to the outcome of the proceedings or the completion of the Park Highlands land sale transaction on its existing terms.

 However, as of the date of this report, the Company has not been notified of any change to the transaction timetable, and it continues to proceed as planned.

 Bond Restructuring

 Subsequent to March 31, 2026, the Company continued to advance discussions with the trustee and representatives of the holders of its Series B and Series D debentures regarding a proposed debt arrangement, and creditor meetings were held to approve the proposed arrangement and authorize related implementation actions, including amendments to the deeds of trust. The proposed arrangement includes, among other things, amendments to the debenture repayment schedule and interest terms, use of interest reserve funds, mandatory early redemption rights, revised immediate repayment and collateral provisions, additional pledges and guarantees, and enhanced coordination rights for debenture holders; however, there can be no assurance that the arrangement will be completed, implemented on the terms proposed, or result in full repayment of the Company’s obligations.

 - - - - - - - - - - - - - - - - - - -
 19

EX-99.2 · bviq12026ex992.htm

Type

EX-99.2

File

bviq12026ex992.htm

Document text
EX-99.2 · bviq12026ex992.htm EX-99.2 3 bviq12026ex992.htm EX-99.2 Exhibit 99.2 This English translation is for convenience purposes only. This is not an official translation and is not binding. Whilst reasonable care and skill have been exercised in the preparation hereof, no translation can ever perfectly reflect the original Hebrew version. In the event of any discrepancy between the Hebrew version and this translation, the Hebrew version shall prevail. PACIFIC OAK SOR (BVI) HOLDINGS, LTD. PRESENTATION OF SEPARATE FINANCIAL DATA FROM THE CONSOLIDATED FINANCIAL STATEMENTS ATTRIBUTABLE TO THE COMPANY March 31, 2026 (Unaudited) PACIFIC OAK SOR (BVI) HOLDINGS, LTD. PRESENTATION OF SEPARATE FINANCIAL DATA FROM THE CONSOLIDATED FINANCIAL STATEMENTS ATTRIBUTABLE TO THE COMPANY AS OF MARCH 31, 2026 (UNAUDITED) U.S. DOLLARS IN THOUSANDS INDEX Page Special Report Presented Pursuant to Regulation 38d 2 Financial Information from the Consolidated Statements of Financial Position Attributable to the Company 3 Financial Information from the Consolidated Statements of Profit or Loss Attributable to the Company 4 Financial Information from the Consolidated Statements of Cash Flows Attributable to the Company 5 Additional Information 6 - - - - - - - - - - - Special Report in accordance with Regulation 38d Financial Information and Financial Data from the Consolidated Financial Statements Attributable to the Company Below is separate financial information and financial data attributable to the Company from the Group's consolidated financial statements as of March 31, 2026, published as part of the periodic reports ("consolidated financial statements"), presented in accordance with Regulation 38d to the Israeli Securities Regulations (Periodic and Immediate Reports), 1970. 2 PACIFIC OAK SOR (BVI) HOLDINGS, LTD. Financial Information from the Consolidated Statements of Financial Position Attributable to the Company March 31, December 31, 2026 2025 2025 Unaudited Audited U.S. dollars in thousands ASSETS NON-CURRENT ASSETS Investments in investees $ 396,598 $ 820,977 $ 400,139 Restricted cash — 4,655 — 396,598 825,632 400,139 CURRENT ASSETS Cash and cash equivalents 626 615 622 Restricted cash 4,251 8,540 10,870 4,877 9,155 11,492 TOTAL ASSETS $ 401,475 $ 834,787 $ 411,631 EQUITY $ 59,693 $ 517,521 $ 80,489 NON-CURRENT LIABILITIES Bonds payable, net — 188,483 — CURRENT LIABILITIES Accounts payable and accrued liabilities 19,183 3,782 11,813 Bonds payable 304,937 104,421 302,004 Due to owner 17,662 20,580 17,325 341,782 128,783 331,142 TOTAL LIABILITIES 341,782 317,266 331,142 TOTAL EQUITY AND LIABILITIES $ 401,475 $ 834,787 $ 411,631 The accompanying notes are an integral part of the condensed interim financial data. May 31, 2026 /s/ Ryan Schluttenhofer /s/ Ronen Nakar Date of approval of Schluttenhofer, Ryan Nakar, Ronen financial statements Chief Accounting Officer Chief Executive Officer and Chairman of the Board authorized by the Company's Board of Directors to execute the financial statements 3 PACIFIC OAK SOR (BVI) HOLDINGS, LTD. Financial Information from the Consolidated Statements of Profit or Loss Attributable to the Company Three months ended March 31, Year ended December 31, 2026 2025 2025 Unaudited Audited U.S. dollars in thousands Share of loss from investees, net $ (7,829) $ (2,396) $ (355,991) Asset management fees (1,506) (2,657) (9,641) Restructuring charges (721) — (1,508) General and administrative expenses (1,793) (491) (3,622) Operating loss (11,849) (5,544) (370,762) Finance expense (6,767) (7,018) (30,773) Finance income 68 110 501 Loss on extinguishment of debt — — (1,910) Foreign currency transaction (loss) gain, net (2,248) 5,984 (40,556) Net loss $ (20,796) $ (6,468) $ (443,500) Total comprehensive loss $ (20,796) $ (6,468) $ (443,500) The accompanying notes are an integral part of the condensed interim financial data. 4 PACIFIC OAK SOR (BVI) HOLDINGS, LTD. Financial Information from the Consolidated Statements of Cash Flows Attributable to the Company Three months ended March 31, Year ended December 31, 2026 2025 2025 Unaudited Audited U.S. dollars in thousands Cash flows from operating activities Net loss $ (20,796) $ (6,468) $ (443,500) Adjustments to reconcile net loss to net cash used in by operating activities: Share of loss from investees 7,829 2,396 355,991 Finance expense 6,767 7,018 30,773 Finance income (68) (110) (501) Distribution from investees, net — 12,304 26,566 Foreign currency transaction adjustments, net 2,248 (5,984) 40,556 Loss on extinguishment of debt — — 1,910 Changes in operating assets and liabilities: Accounts payable and accrued liabilities 1,125 123 670 Restricted cash for operational expenditures 158 (371) 1,504 Due to affiliates 337 614 (3,808) Net cash provided by (used in) operating activities (2,400) 9,522 10,161 Cash flows from investing activities Distributions (to) from investees, net (4,287) 13,813 66,796 Finance income 68 110 501 Net cash (used in) provided by investing activities (4,219) 13,923 67,297 Cash flows from financing activities Payment on bonds payable — (21,184) (62,595) Payments of deferred financing costs — (231) — Interest paid — (10,331) (26,746) Release of restricted cash 6,623 261 2,729 Proceeds from loan from owner — 8,000 10,000 Net cash used in by financing activities 6,623 (23,485) (76,612) Effect of exchange rate changes on cash and cash equivalents — (49) (928) Increase (decrease) in cash 4 (89) (82) Cash, beginning of the period 622 704 704 Cash, end of the period $ 626 $ 615 $ 622 Supplemental Disclosure of Noncash Activities: Asset management fee payable $ 6,458 $ 13,938 $ 7,415 The accompanying notes are an integral part of the condensed interim financial data. 5 PACIFIC OAK SOR (BVI) HOLDINGS, LTD. Additional Information U.S. dollars in thousands NOTE 1: BASIS OF PREPARATION a. Separate financial information is prepared in a condensed format as of March 31, 2026 and for the three months then ended, in accordance with Regulation 38D of the Securities Regulations (Periodic and Immediate Reports), 1970. Please refer to the separate financial information in this regard to the financial information on the annual financial statements of the Company as of December 31, 2025 and for the year then ended, and the information accompanying notes (hereinafter - the annual consolidated financial statements). b. As of March 31, 2026, the Company had a working capital shortfall amounting to $336.9 million, primarily attributed to bonds outstanding of 975.3 million Israeli new shekels ($308.2 million as of March 31, 2026) (“Series Bonds”), which includes Series B bonds (388.3 million Israeli new Shekels or $122.7 million as of March 31, 2026) and Series D bonds (587.0 million Israeli new Shekels or $185.5 million as of March 31, 2026) maturing within 12 month period from the date of the statement of the financial position and of which per the terms of the deed of trust, the bondholders have grounds for calling an immediate repayment of the bonds. As of the approval date of the condensed financial data, in order for the Company’s investees to continue their regular operations, several actions will need to be completed in the near term, including debt refinancing and real estate sales, all of which are subject to approval under the standstill agreement and other third-party approvals. These plans are subject to change based on market conditions in the commercial real estate lending environment, the current interest rate environment, leasing and transaction volume challenges in certain markets, successful negotiations with the Trustee and representatives of the Bondholders, and such plans are not within the control of the Company, and therefore, there is no assurance that the Company’s investees will be successful in implementing its plans and fulfill existing and projected obligations upon maturity. The uncertainty regarding the Company’s plans could be mitigated through the potential sales of its residential homes, successful negotiations with the Trustee and Representatives, and other strategic actions currently under consideration. Since the plans mentioned above are not within the control of the Company and subject to approval of third parties, including consents from bondholders and other lenders, the Company's management and the Board of Directors have concluded that there are significant doubts regarding the Company's ability to continue as a going concern. c. Class Action Suit On September 10, 2025, a bondholder filed a petition for certification of a class action in the Tel Aviv District Court, Israel against the Company and certain members of its board of directors, alleging that disclosures relating to the Company 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 March 31, 2026) and cites the petitioner’s expert model estimating potential class-wide damages of approximately 124.6–145.2 million Israeli new shekels ($39.6–$46.0 million as of March 31, 2026). The matter is at a preliminary stage; the court has not ruled on class certification or on the merits and based on the Company’s legal counsel’s advice, the potential outcome cannot be determined, nor can the chances of the petition being approved be reliably assessed. d. Negotiations between the Company and a trustee that represents the bondholders of the Series Bonds (the “Trustee” and “Bondholders”) and the representatives of the Bondholders during and after the three months ended March 31, 2026. The following is a summary of the main actions and decisions that were carried out and made in the framework of the aforementioned negotiations: 1. Series Bonds Deferral On May 11, 2026, the Trustee announced an additional deferral of the principal and interest payment dates for the Series Bonds to July 1, 2026. 2. Board of Directors On May 3, 2026, the Bondholders approved the selection of Mr. Izhak Lax as a candidate for appointment as a director of the Company. Mr. Lax will start as a director on June 1, 2026. 3. Approval of Loan with Klirmark Opportunity Fund IV, LP On April 28, 2026, assemblies of Series B and Series D debenture holders, in an aggregate count, approved a resolution to ratify the Company’s entry into a loan agreement with Klirmark Opportunity Fund IV, LP, on the basis of the 6 PACIFIC OAK SOR (BVI) HOLDINGS, LTD. Additional Information U.S. dollars in thousands memorandum of understanding dated February 17, 2026, while updating the terms of the memorandum of understanding so that the amount excluded from the distribution restrictions in PORT will be up to $4.0 million, instead of $8.0 million. 4. Approval of Proposed Debt Arrangement On April 27, 2026, assemblies of Series B and Series D debenture holders approved a resolution to approve the proposed debt arrangement and to authorize the Trustee to perform all actions required for its implementation, including the signing of an amended deed of trust. 5. Objection to Filing Insolvency Proceedings On March 10, 2026, meetings of the Bondholders resolved to object to the filing of an application for an order to commence insolvency proceedings against the Company, in accordance with the mechanism set out in the Insolvency and Economic Rehabilitation Law and Section 35H(d2b)(1) of the Securities Law. However, the applicable securities law requires a quorum of at least 75% of the voting rights, and such quorum was not achieved at the March 10, 2026 meetings. As a result, the Trustee was obligated to submit a petition for the commencement of insolvency proceedings. A court hearing on the petition has been scheduled for April 28, 2026. 6. Refinancing of the PORT Property Portfolio On February 18, 2026, meetings of the Bondholders approved entering into a memorandum of understanding and a detailed agreement for the refinancing of loans secured by the Company’s residential homes portfolio, held through investees. The voting approved the refinancing and to which the financing proposal of Klirmark Opportunity Fund IV, LP was selected. 7. Exemption from Liability for Officers and Management Company On February 15, 2026, meetings of the Bondholders, by special resolution, approved granting a full exemption from liability and waiver of claims with respect to the new officer and directors (Mr. Ronen Nakar, Ms. Varda Kalal, and Mr. Itay Dayan), as well as R2 Advisors, LLC, Mr. Ryan Schluttenhofer, and all officers and managers thereof, in connection with management services provided to the Company. 8. Deferral of Debenture Payment Dates Meetings of the Bondholders approved several resolutions to defer repayment dates. On March 17, 2026, holders of Series B bonds approved deferring principal and interest payments to June 1, 2026 (instead of April 1, 2026), and authorized the Trustee, by special resolution, to grant an additional deferral of up to one month. On March 17, 2026, the trustee for the Series D bonds exercised previously granted authority to further defer interest payment dates, such that the effective date was deferred to April 18, 2026 and the payment date to April 30, 2026. 9. Use of Interest Cushion Funds As of March 31, 2026 the Bondholders approved the extension of two loans to the Company, in an aggregate amount of approximately $10.0 million, from funds held in the interest cushion accounts of the Series Bonds. The loans bear an annual interest of 20% and repayment of principal and accrued interest is expected to occur from the earliest proceeds received by the Company or controlled entities, including: asset sales or refinancing of real estate properties, sale of equity interests, or issuance of additional debt instruments, subject to creditor repayment priorities and maintenance of a minimum operating cash balance. As of March 31, 2026, the full facility of $10.0 million remained outstanding. 10. Asset Management Transition (Westdale) On January 22, 2026, the Company replaced previous management company and entered into a asset management agreement with Westdale for the Company’s portfolio of investments, excluding residential homes. Refer to Note 2 for additional details. 11. Management Agreement with R2 Advisors, LLC On January 22, 2026, meetings of the Bondholders approved entering into a management agreement with R2 Advisors, LLC. Refer to Note 2 for additional details. 12. Authorization to Sell Keppel Pacific Oak US REIT (S-REIT) Shares 7 PACIFIC OAK SOR (BVI) HOLDINGS, LTD. Additional Information U.S. dollars in thousands Meetings of the Bondholders approved authorizing the Company to sell its holdings in S-REIT shares held through the Company's investees, subject to approvals by the representative body and U.S. counsel. 13. Debt Arrangement Proposals On February 4, 2026, the Tel Aviv District Court approved the convening of such creditor meetings. 14. Transactions Relating to Sale of PORT Properties On February 4, 2026, meetings rejected proposals to enter into a memorandum of understanding for the sale of all the residential homes. 15. Corporate structure and separation from POCA Effective January 31, 2026, the Company and Pacific Oak Strategic Opportunity REIT, Inc., the parent company, ceased to be part of POCA following the termination of the previous management and advisory arrangements and the transition to new service providers. On January 22, 2026, following approval by the Board of Directors and debenture holders, the Company entered into: An agreement with the Pacific Oak Strategic Opportunity REIT, Inc. governing settlement of amounts payable and terminating the previous management company’s engagement. A new asset management agreement with a replacement management company and new accounting and financial services agreement with a third-party provider became effective January 31, 2026. Concurrently, Pacific Oak Strategic Opportunity REIT, Inc. formally terminated the advisory agreement with the previous management company effective January 31, 2026, after which the new service providers commenced operations. Refer to Note 6 for additional details. 16. Changes in directors and officers During the three months ended March 31, 2026, there were service provider changes, prior directors and one senior officer, including the former President and CEO were removed. New executive leadership and external directors were appointed. One director announced intentions to conclude their service during the first half of 2026. These governance changes represent a significant change in management and oversight during the reporting period. Refer to Note 6 for additional details. e. Restructuring Events Bondholder Request to the Israeli Court and Related Debt Agreement In February 2026, the Trustee applied to the Tel Aviv–Jaffa District Court to convene a meeting of the Bondholders to consider and approve a proposed debt arrangement under the Israeli Insolvency and Economic Rehabilitation Law. The proposed arrangement extends the final maturity of both series to June 2028, modifies key terms (including interest, security and enforcement), and provides for a consolidated repayment schedule aligned with an orderly realization of the Company’s assets, including a defined payment waterfall and minimum liquidity reserve requirements. It also requires the creation and registration of first-priority security interests over substantially all unencumbered Company assets (subject to limitations) and imposes significant operating covenants and restrictions, with enhanced trustee/bondholder oversight and specified enforcement rights upon certain events of default. As of the approval date of the interim condensed consolidated financial statements, the proposed debt arrangement is still under review. REIT Support In connection with the proposed debt arrangement, upon execution, the Company and the REIT would enter into a second loan arrangement pursuant to which the Company may, in its discretion, advance funds to the REIT in accordance with a mutually agreed budget (subject to Board determination that the Company has sufficient available funds). The budgeted advances are capped at approximately $2.9 million through July 2026, including $0.4 million previously advanced under a prior bridge arrangement and $61,000 per month thereafter. Amounts advanced under the prior bridge arrangement and the second loan may, at the Company’s option, be applied as payment or reimbursement of amounts owed by the Company to the REIT, with any such application reducing the outstanding balance owed. S&P Global Rating Cessation On February 17, 2026, S&P Global Ratings Maalot announced the termination of surveillance and withdrawal of the issuer credit rating and the ratings of the Series Bonds, at the Company’s request. Accordingly, beginning on that date, 8 PACIFIC OAK SOR (BVI) HOLDINGS, LTD. Additional Information U.S. dollars in thousands the Company’s securities are considered not rated (NR) by S&P Global Ratings. The cessation of the rating reflects the discontinuation of rating coverage rather than the publication of a new credit opinion. NOTE 2: SIGNIFICANT EVENTS DURING THE REPORTING PERIOD Israeli Bond Financings The deeds of trust that govern the terms of the Series Bonds contain various financial covenants. The Series B bonds contain the following covenants: (i) Consolidated Equity Capital of the Company (not including minority rights) shall not be less than USD 475 million; (ii) the Net Adjusted Financial Debt to Net Adjusted Cap (shall not exceed a rate of 75%); (iii) Adjusted NOI shall be no lower than USD 35 million; and (iv) the consolidated scope of the projects for development of the Company shall not exceed 10% of the adjusted balance. As of March 31, 2026, the Company was not in compliance with all covenants under the deed of trust of the Series B Bonds and were calculated as follows: (i) Consolidated Equity Capital of the Company as of March 31, 2026 was $59.7 million; (ii) the Net Adjusted Debt to Net Adjusted Cap was 95%; (iii) the Adjusted NOI was $46.6 million for the trailing twelve months ended March 31, 2026; and (iv) the consolidated scope of projects was $0 as of March 31, 2026. The Series D bonds contains the following covenants: (i) Consolidated Equity Capital of the Company (not including minority rights) shall not be less than USD 450 million; (ii) the Net Adjusted Financial Debt to Net Adjusted Cap shall not exceed a rate of 75%; (iii) Adjusted NOI shall be no lower than USD 35 million. As of March 31, 2026, the Company was not in compliance with all covenants under the deed of trust of the Series D Bonds and were calculated as follows: (i) Consolidated Equity Capital of the Company as of March 31, 2026 was $59.7 million; (ii) the Net Adjusted Debt to Net Adjusted Cap was 95%; (iii) and the Adjusted NOI was $46.6 million for the trailing twelve months ended March 31, 2026. As of March 31, 2026, the Company was not in compliance with financial and nonfinancial covenants and as a result, the Company continues to operate under a standstill agreement. POCA Advisory Agreement Termination On January 23, 2026, Pacific Oak Strategic Opportunity REIT, Inc. terminated its advisory agreement with Pacific Oak Capital Advisors, LLC (“POCA”), effective January 31, 2026. As a result, the back-to-back agreement between Pacific Oak Strategic Opportunity REIT, Inc. and the Company was also terminated. Amounts presented as due to affiliates in the condensed consolidated statements of financial position primarily represent unpaid historical asset management fees incurred under the now-terminated back-to-back agreement. Westdale Asset Management, Ltd. (“Westdale”) On January 22, 2026, the Company entered into an asset management agreement with Westdale (the “Westdale Agreement”). Pursuant to the Westdale Agreement, Westdale is responsible for managing, operating, directing and supervising the operations and administration of the Company’s assets (other than those held through PORT). The Company will pay Westdale a monthly fee (a) with respect to each property owned by the Company an amount equal to the greater of (i) 2.0% of the sum of the gross income of each property received during the prior month and (ii) $10,000 and (b) $10,000 with respect to the investment in Pacific Oak Opportunity Zone Fund I, LLC. In connection with any asset sale, Westdale will receive a fee at the closing equal to 0.25% of the contract sales price for such sale. R2 Advisors, LLC (“R2”) On January 23, 2026, the Company entered into a management services agreement with R2. R2 provides the Company with accounting advisory services and is majority-owned and controlled by Ryan Schluttenhofer, the Company’s Chief Accounting Officer. Pursuant to this agreement, R2 will provide the Company with support in the following areas: (a) corporate accounting, recordkeeping, and regulatory filings, (b) books and records maintenance and coordination with third parties, (c) tax and compliance coordination, (d) corporate cash management support, (e) insurance and risk management support, (f) corporate governance support and (g) chief accounting officer support. The initial term of the agreement will be twelve months and the total contract value is $1.7 million, excluding reimbursement of expenses. Brian Ragsdale Management Agreement 9 PACIFIC OAK SOR (BVI) HOLDINGS, LTD. Additional Information U.S. dollars in thousands On January 27, 2026, the Company entered into a management agreement with Brian Ragsdale, the Chief Executive Officer, Chief Financial Officer and President of the REIT. The agreement is effective February 1, 2026 and Mr. Ragsdale is responsible for providing high-level management and advisory support, including, but not limited to: debt restructuring and asset management. The term of the agreement is six months and the total contract value is $0.2 million. Chairman and Chief Executive Officer Appointment On January 29, 2026, the Company appointed Ronen Nakar as Chairman and Chief Executive Officer. Mr. Nakar succeeds Keith David Hall, who resigned effective January 28, 2026. Mr. Nakar’s responsibilities are customary for a person in his position and are exercised in accordance with the Company’s bylaws and applicable law. The appointment is effective as of February 1, 2026 and either party may terminate the appointment upon 30 days’ notice. Mr. Nakar is entitled to monthly compensation of ILS 40,000, plus VAT. NOTE 3: SUBSEQUENT EVENT The Company evaluates subsequent events up until the date the consolidated financial statements are issued. Bond Restructuring Subsequent to March 31, 2026, the Company continued to advance discussions with the trustee and representatives of the holders of its Series B and Series D debentures regarding a proposed debt arrangement, and creditor meetings were held to approve the proposed arrangement and authorize related implementation actions, including amendments to the deeds of trust. The proposed arrangement includes, among other things, amendments to the debenture repayment schedule and interest terms, use of interest reserve funds, mandatory early redemption rights, revised immediate repayment and collateral provisions, additional pledges and guarantees, and enhanced coordination rights for debenture holders; however, there can be no assurance that the arrangement will be completed, implemented on the terms proposed, or result in full repayment of the Company’s obligations. - - - - - - - - - - - - - - - - - - 10

Document text

EX-99.2 · bviq12026ex992.htm

EX-99.2
3
bviq12026ex992.htm
EX-99.2

Exhibit 99.2

This English translation is for convenience purposes only. This is not an official translation and is not binding. Whilst reasonable care and skill have been exercised in the preparation hereof, no translation can ever perfectly reflect the original Hebrew version. In the event of any discrepancy between the Hebrew version and this translation, the Hebrew version shall prevail.

PACIFIC OAK SOR (BVI) HOLDINGS, LTD.

PRESENTATION OF SEPARATE FINANCIAL DATA FROM THE
CONSOLIDATED FINANCIAL STATEMENTS ATTRIBUTABLE TO THE COMPANY

March 31, 2026 (Unaudited)

PACIFIC OAK SOR (BVI) HOLDINGS, LTD.

PRESENTATION OF SEPARATE FINANCIAL DATA

FROM THE CONSOLIDATED FINANCIAL STATEMENTS

ATTRIBUTABLE TO THE COMPANY

AS OF MARCH 31, 2026
(UNAUDITED)

U.S. DOLLARS IN THOUSANDS

INDEX

Page

Special Report Presented Pursuant to Regulation 38d 2

Financial Information from the Consolidated Statements of Financial Position Attributable to the Company 3

Financial Information from the Consolidated Statements of Profit or Loss Attributable to the Company 4

Financial Information from the Consolidated Statements of Cash Flows Attributable to the Company 5

Additional Information 6

- - - - - - - - - - -

Special Report in accordance with Regulation 38d

Financial Information and Financial Data from the

Consolidated Financial Statements Attributable to the Company

Below is separate financial information and financial data attributable to the Company from the Group's consolidated financial statements as of March 31, 2026, published as part of the periodic reports ("consolidated financial statements"), presented in accordance with Regulation 38d to the Israeli Securities Regulations (Periodic and Immediate Reports), 1970.

PACIFIC OAK SOR (BVI) HOLDINGS, LTD.

Financial Information from the Consolidated Statements of Financial Position Attributable to the Company

March 31, December 31,
2026
2025 2025
Unaudited Audited
U.S. dollars in thousands
ASSETS
NON-CURRENT ASSETS
Investments in investees $ 396,598 $ 820,977 $ 400,139
Restricted cash — 4,655 —
396,598 825,632 400,139
CURRENT ASSETS
Cash and cash equivalents 626 615 622
Restricted cash 4,251 8,540 10,870
4,877 9,155 11,492
TOTAL ASSETS $ 401,475 $ 834,787 $ 411,631

EQUITY $ 59,693 $ 517,521 $ 80,489

NON-CURRENT LIABILITIES
Bonds payable, net — 188,483 —

CURRENT LIABILITIES
Accounts payable and accrued liabilities 19,183 3,782 11,813
Bonds payable 304,937 104,421 302,004
Due to owner 17,662 20,580 17,325

341,782 128,783 331,142
TOTAL LIABILITIES 341,782 317,266 331,142
TOTAL EQUITY AND LIABILITIES $ 401,475 $ 834,787 $ 411,631

The accompanying notes are an integral part of the condensed interim financial data.

May 31, 2026
/s/ Ryan Schluttenhofer /s/ Ronen Nakar
Date of approval of
Schluttenhofer, Ryan
Nakar, Ronen

financial statements
Chief Accounting Officer
Chief Executive Officer and Chairman of the Board authorized by the Company's Board of Directors to execute the financial statements

PACIFIC OAK SOR (BVI) HOLDINGS, LTD.

Financial Information from the Consolidated Statements of Profit or Loss Attributable to the Company

Three months ended March 31, Year ended December 31,
2026 2025 2025
Unaudited Audited
U.S. dollars in thousands

Share of loss from investees, net $ (7,829) $ (2,396) $ (355,991)
Asset management fees (1,506) (2,657) (9,641)
Restructuring charges (721) — (1,508)
General and administrative expenses (1,793) (491) (3,622)
Operating loss (11,849) (5,544) (370,762)
Finance expense (6,767) (7,018) (30,773)
Finance income 68 110 501
Loss on extinguishment of debt — — (1,910)
Foreign currency transaction (loss) gain, net (2,248) 5,984 (40,556)
Net loss $ (20,796) $ (6,468) $ (443,500)
Total comprehensive loss $ (20,796) $ (6,468) $ (443,500)

The accompanying notes are an integral part of the condensed interim financial data.

PACIFIC OAK SOR (BVI) HOLDINGS, LTD.

Financial Information from the Consolidated Statements of Cash Flows Attributable to the Company

Three months ended March 31, Year ended
December 31,
2026 2025 2025
Unaudited Audited
U.S. dollars in thousands
Cash flows from operating activities
Net loss $ (20,796) $ (6,468) $ (443,500)
Adjustments to reconcile net loss to net cash used in by operating activities:
Share of loss from investees 7,829 2,396 355,991
Finance expense 6,767 7,018 30,773
Finance income (68) (110) (501)
Distribution from investees, net — 12,304 26,566
Foreign currency transaction adjustments, net 2,248 (5,984) 40,556
Loss on extinguishment of debt — — 1,910
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities 1,125 123 670
Restricted cash for operational expenditures 158 (371) 1,504
Due to affiliates 337 614 (3,808)
Net cash provided by (used in) operating activities (2,400) 9,522 10,161
Cash flows from investing activities
Distributions (to) from investees, net (4,287) 13,813 66,796

Finance income 68 110 501
Net cash (used in) provided by investing activities (4,219) 13,923 67,297
Cash flows from financing activities
Payment on bonds payable — (21,184) (62,595)
Payments of deferred financing costs — (231) —

Interest paid — (10,331) (26,746)
Release of restricted cash 6,623 261 2,729
Proceeds from loan from owner — 8,000 10,000

Net cash used in by financing activities 6,623 (23,485) (76,612)
Effect of exchange rate changes on cash and cash equivalents — (49) (928)
Increase (decrease) in cash 4 (89) (82)
Cash, beginning of the period 622 704 704
Cash, end of the period $ 626 $ 615 $ 622

Supplemental Disclosure of Noncash Activities:
Asset management fee payable $ 6,458 $ 13,938 $ 7,415

The accompanying notes are an integral part of the condensed interim financial data.
5

PACIFIC OAK SOR (BVI) HOLDINGS, LTD.
Additional Information

U.S. dollars in thousands

NOTE 1: BASIS OF PREPARATION
a. Separate financial information is prepared in a condensed format as of March 31, 2026 and for the three months then ended, in accordance with Regulation 38D of the Securities Regulations (Periodic and Immediate Reports), 1970.
Please refer to the separate financial information in this regard to the financial information on the annual financial statements of the Company as of December 31, 2025 and for the year then ended, and the information accompanying notes (hereinafter - the annual consolidated financial statements).

b. As of March 31, 2026, the Company had a working capital shortfall amounting to $336.9 million, primarily attributed to bonds outstanding of 975.3 million Israeli new shekels ($308.2 million as of March 31, 2026) (“Series Bonds”), which includes Series B bonds (388.3 million Israeli new Shekels or $122.7 million as of March 31, 2026) and Series D bonds (587.0 million Israeli new Shekels or $185.5 million as of March 31, 2026) maturing within 12 month period from the date of the statement of the financial position and of which per the terms of the deed of trust, the bondholders have grounds for calling an immediate repayment of the bonds.

As of the approval date of the condensed financial data, in order for the Company’s investees to continue their regular operations, several actions will need to be completed in the near term, including debt refinancing and real estate sales, all of which are subject to approval under the standstill agreement and other third-party approvals. These plans are subject to change based on market conditions in the commercial real estate lending environment, the current interest rate environment, leasing and transaction volume challenges in certain markets, successful negotiations with the Trustee and representatives of the Bondholders, and such plans are not within the control of the Company, and therefore, there is no assurance that the Company’s investees will be successful in implementing its plans and fulfill existing and projected obligations upon maturity. The uncertainty regarding the Company’s plans could be mitigated through the potential sales of its residential homes, successful negotiations with the Trustee and Representatives, and other strategic actions currently under consideration. Since the plans mentioned above are not within the control of the Company and subject to approval of third parties, including consents from bondholders and other lenders, the Company's management and the Board of Directors have concluded that there are significant doubts regarding the Company's ability to continue as a going concern.

c. Class Action Suit

On September 10, 2025, a bondholder filed a petition for certification of a class action in the Tel Aviv District Court, Israel against the Company and certain members of its board of directors, alleging that disclosures relating to the Company 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 March 31, 2026) and cites the petitioner’s expert model estimating potential class-wide damages of approximately 124.6–145.2 million Israeli new shekels ($39.6–$46.0 million as of March 31, 2026). The matter is at a preliminary stage; the court has not ruled on class certification or on the merits and based on the Company’s legal counsel’s advice, the potential outcome cannot be determined, nor can the chances of the petition being approved be reliably assessed.

d. Negotiations between the Company and a trustee that represents the bondholders of the Series Bonds (the “Trustee” and “Bondholders”) and the representatives of the Bondholders during and after the three months ended March 31, 2026.

The following is a summary of the main actions and decisions that were carried out and made in the framework of the aforementioned negotiations:

1. Series Bonds Deferral
On May 11, 2026, the Trustee announced an additional deferral of the principal and interest payment dates for the Series Bonds to July 1, 2026.

2. Board of Directors
On May 3, 2026, the Bondholders approved the selection of Mr. Izhak Lax as a candidate for appointment as a director of the Company. Mr. Lax will start as a director on June 1, 2026.

3. Approval of Loan with Klirmark Opportunity Fund IV, LP
On April 28, 2026, assemblies of Series B and Series D debenture holders, in an aggregate count, approved a resolution to ratify the Company’s entry into a loan agreement with Klirmark Opportunity Fund IV, LP, on the basis of the
6

PACIFIC OAK SOR (BVI) HOLDINGS, LTD.
Additional Information

U.S. dollars in thousands

memorandum of understanding dated February 17, 2026, while updating the terms of the memorandum of understanding so that the amount excluded from the distribution restrictions in PORT will be up to $4.0 million, instead of $8.0 million.

4. Approval of Proposed Debt Arrangement
On April 27, 2026, assemblies of Series B and Series D debenture holders approved a resolution to approve the proposed debt arrangement and to authorize the Trustee to perform all actions required for its implementation, including the signing of an amended deed of trust.

5. Objection to Filing Insolvency Proceedings
On March 10, 2026, meetings of the Bondholders resolved to object to the filing of an application for an order to commence insolvency proceedings against the Company, in accordance with the mechanism set out in the Insolvency and Economic Rehabilitation Law and Section 35H(d2b)(1) of the Securities Law. However, the applicable securities law requires a quorum of at least 75% of the voting rights, and such quorum was not achieved at the March 10, 2026 meetings. As a result, the Trustee was obligated to submit a petition for the commencement of insolvency proceedings. A court hearing on the petition has been scheduled for April 28, 2026.

6. Refinancing of the PORT Property Portfolio
On February 18, 2026, meetings of the Bondholders approved entering into a memorandum of understanding and a detailed agreement for the refinancing of loans secured by the Company’s residential homes portfolio, held through investees. The voting approved the refinancing and to which the financing proposal of Klirmark Opportunity Fund IV, LP was selected.

7. Exemption from Liability for Officers and Management Company
On February 15, 2026, meetings of the Bondholders, by special resolution, approved granting a full exemption from liability and waiver of claims with respect to the new officer and directors (Mr. Ronen Nakar, Ms. Varda Kalal, and Mr. Itay Dayan), as well as R2 Advisors, LLC, Mr. Ryan Schluttenhofer, and all officers and managers thereof, in connection with management services provided to the Company.

8. Deferral of Debenture Payment Dates
Meetings of the Bondholders approved several resolutions to defer repayment dates.

On March 17, 2026, holders of Series B bonds approved deferring principal and interest payments to June 1, 2026 (instead of April 1, 2026), and authorized the Trustee, by special resolution, to grant an additional deferral of up to one month.

On March 17, 2026, the trustee for the Series D bonds exercised previously granted authority to further defer interest payment dates, such that the effective date was deferred to April 18, 2026 and the payment date to April 30, 2026.

9. Use of Interest Cushion Funds
As of March 31, 2026 the Bondholders approved the extension of two loans to the Company, in an aggregate amount of approximately $10.0 million, from funds held in the interest cushion accounts of the Series Bonds. The loans bear an annual interest of 20% and repayment of principal and accrued interest is expected to occur from the earliest proceeds received by the Company or controlled entities, including: asset sales or refinancing of real estate properties, sale of equity interests, or issuance of additional debt instruments, subject to creditor repayment priorities and maintenance of a minimum operating cash balance. As of March 31, 2026, the full facility of $10.0 million remained outstanding.

10. Asset Management Transition (Westdale)
On January 22, 2026, the Company replaced previous management company and entered into a asset management agreement with Westdale for the Company’s portfolio of investments, excluding residential homes. Refer to Note 2 for additional details.

11. Management Agreement with R2 Advisors, LLC
On January 22, 2026, meetings of the Bondholders approved entering into a management agreement with R2 Advisors, LLC. Refer to Note 2 for additional details.

12. Authorization to Sell Keppel Pacific Oak US REIT (S-REIT) Shares
7

PACIFIC OAK SOR (BVI) HOLDINGS, LTD.
Additional Information

U.S. dollars in thousands

Meetings of the Bondholders approved authorizing the Company to sell its holdings in S-REIT shares held through the Company's investees, subject to approvals by the representative body and U.S. counsel.

13. Debt Arrangement Proposals
On February 4, 2026, the Tel Aviv District Court approved the convening of such creditor meetings.

14. Transactions Relating to Sale of PORT Properties
On February 4, 2026, meetings rejected proposals to enter into a memorandum of understanding for the sale of all the residential homes.

15. Corporate structure and separation from POCA
Effective January 31, 2026, the Company and Pacific Oak Strategic Opportunity REIT, Inc., the parent company, ceased to be part of POCA following the termination of the previous management and advisory arrangements and the transition to new service providers. On January 22, 2026, following approval by the Board of Directors and debenture holders, the Company entered into: An agreement with the Pacific Oak Strategic Opportunity REIT, Inc. governing settlement of amounts payable and terminating the previous management company’s engagement. A new asset management agreement with a replacement management company and new accounting and financial services agreement with a third-party provider became effective January 31, 2026. Concurrently, Pacific Oak Strategic Opportunity REIT, Inc. formally terminated the advisory agreement with the previous management company effective January 31, 2026, after which the new service providers commenced operations. Refer to Note 6 for additional details.

16. Changes in directors and officers
During the three months ended March 31, 2026, there were service provider changes, prior directors and one senior officer, including the former President and CEO were removed. New executive leadership and external directors were appointed. One director announced intentions to conclude their service during the first half of 2026. These governance changes represent a significant change in management and oversight during the reporting period. Refer to Note 6 for additional details.

e. Restructuring Events

Bondholder Request to the Israeli Court and Related Debt Agreement

In February 2026, the Trustee applied to the Tel Aviv–Jaffa District Court to convene a meeting of the Bondholders to consider and approve a proposed debt arrangement under the Israeli Insolvency and Economic Rehabilitation Law.

The proposed arrangement extends the final maturity of both series to June 2028, modifies key terms (including interest, security and enforcement), and provides for a consolidated repayment schedule aligned with an orderly realization of the Company’s assets, including a defined payment waterfall and minimum liquidity reserve requirements. It also requires the creation and registration of first-priority security interests over substantially all unencumbered Company assets (subject to limitations) and imposes significant operating covenants and restrictions, with enhanced trustee/bondholder oversight and specified enforcement rights upon certain events of default. As of the approval date of the interim condensed consolidated financial statements, the proposed debt arrangement is still under review.

REIT Support

In connection with the proposed debt arrangement, upon execution, the Company and the REIT would enter into a second loan arrangement pursuant to which the Company may, in its discretion, advance funds to the REIT in accordance with a mutually agreed budget (subject to Board determination that the Company has sufficient available funds). The budgeted advances are capped at approximately $2.9 million through July 2026, including $0.4 million previously advanced under a prior bridge arrangement and $61,000 per month thereafter. Amounts advanced under the prior bridge arrangement and the second loan may, at the Company’s option, be applied as payment or reimbursement of amounts owed by the Company to the REIT, with any such application reducing the outstanding balance owed.

S&P Global Rating Cessation

On February 17, 2026, S&P Global Ratings Maalot announced the termination of surveillance and withdrawal of the issuer credit rating and the ratings of the Series Bonds, at the Company’s request. Accordingly, beginning on that date,
8

PACIFIC OAK SOR (BVI) HOLDINGS, LTD.
Additional Information

U.S. dollars in thousands

the Company’s securities are considered not rated (NR) by S&P Global Ratings. The cessation of the rating reflects the discontinuation of rating coverage rather than the publication of a new credit opinion.

NOTE 2: SIGNIFICANT EVENTS DURING THE REPORTING PERIOD
Israeli Bond Financings
The deeds of trust that govern the terms of the Series Bonds contain various financial covenants.

The Series B bonds contain the following covenants: (i) Consolidated Equity Capital of the Company (not including minority rights) shall not be less than USD 475 million; (ii) the Net Adjusted Financial Debt to Net Adjusted Cap (shall not exceed a rate of 75%); (iii) Adjusted NOI shall be no lower than USD 35 million; and (iv) the consolidated scope of the projects for development of the Company shall not exceed 10% of the adjusted balance. As of March 31, 2026, the Company was not in compliance with all covenants under the deed of trust of the Series B Bonds and were calculated as follows: (i) Consolidated Equity Capital of the Company as of March 31, 2026 was $59.7 million; (ii) the Net Adjusted Debt to Net Adjusted Cap was 95%; (iii) the Adjusted NOI was $46.6 million for the trailing twelve months ended March 31, 2026; and (iv) the consolidated scope of projects was $0 as of March 31, 2026.

The Series D bonds contains the following covenants: (i) Consolidated Equity Capital of the Company (not including minority rights) shall not be less than USD 450 million; (ii) the Net Adjusted Financial Debt to Net Adjusted Cap shall not exceed a rate of 75%; (iii) Adjusted NOI shall be no lower than USD 35 million. As of March 31, 2026, the Company was not in compliance with all covenants under the deed of trust of the Series D Bonds and were calculated as follows: (i) Consolidated Equity Capital of the Company as of March 31, 2026 was $59.7 million; (ii) the Net Adjusted Debt to Net Adjusted Cap was 95%; (iii) and the Adjusted NOI was $46.6 million for the trailing twelve months ended March 31, 2026.

As of March 31, 2026, the Company was not in compliance with financial and nonfinancial covenants and as a result, the Company continues to operate under a standstill agreement.

POCA Advisory Agreement Termination

On January 23, 2026, Pacific Oak Strategic Opportunity REIT, Inc. terminated its advisory agreement with Pacific Oak Capital Advisors, LLC (“POCA”), effective January 31, 2026. As a result, the back-to-back agreement between Pacific Oak Strategic Opportunity REIT, Inc. and the Company was also terminated. Amounts presented as due to affiliates in the condensed consolidated statements of financial position primarily represent unpaid historical asset management fees incurred under the now-terminated back-to-back agreement.

Westdale Asset Management, Ltd. (“Westdale”)

On January 22, 2026, the Company entered into an asset management agreement with Westdale (the “Westdale Agreement”). Pursuant to the Westdale Agreement, Westdale is responsible for managing, operating, directing and supervising the operations and administration of the Company’s assets (other than those held through PORT). The Company will pay Westdale a monthly fee (a) with respect to each property owned by the Company an amount equal to the greater of (i) 2.0% of the sum of the gross income of each property received during the prior month and (ii) $10,000 and (b) $10,000 with respect to the investment in Pacific Oak Opportunity Zone Fund I, LLC. In connection with any asset sale, Westdale will receive a fee at the closing equal to 0.25% of the contract sales price for such sale.

R2 Advisors, LLC (“R2”)

On January 23, 2026, the Company entered into a management services agreement with R2. R2 provides the Company with accounting advisory services and is majority-owned and controlled by Ryan Schluttenhofer, the Company’s Chief Accounting Officer. Pursuant to this agreement, R2 will provide the Company with support in the following areas: (a) corporate accounting, recordkeeping, and regulatory filings, (b) books and records maintenance and coordination with third parties, (c) tax and compliance coordination, (d) corporate cash management support, (e) insurance and risk management support, (f) corporate governance support and (g) chief accounting officer support. The initial term of the agreement will be twelve months and the total contract value is $1.7 million, excluding reimbursement of expenses.

Brian Ragsdale Management Agreement
9

PACIFIC OAK SOR (BVI) HOLDINGS, LTD.
Additional Information

U.S. dollars in thousands

On January 27, 2026, the Company entered into a management agreement with Brian Ragsdale, the Chief Executive Officer, Chief Financial Officer and President of the REIT. The agreement is effective February 1, 2026 and Mr. Ragsdale is responsible for providing high-level management and advisory support, including, but not limited to: debt restructuring and asset management. The term of the agreement is six months and the total contract value is $0.2 million.

Chairman and Chief Executive Officer Appointment

On January 29, 2026, the Company appointed Ronen Nakar as Chairman and Chief Executive Officer. Mr. Nakar succeeds Keith David Hall, who resigned effective January 28, 2026. Mr. Nakar’s responsibilities are customary for a person in his position and are exercised in accordance with the Company’s bylaws and applicable law. The appointment is effective as of February 1, 2026 and either party may terminate the appointment upon 30 days’ notice. Mr. Nakar is entitled to monthly compensation of ILS 40,000, plus VAT.

NOTE 3: SUBSEQUENT EVENT
The Company evaluates subsequent events up until the date the consolidated financial statements are issued.

Bond Restructuring

Subsequent to March 31, 2026, the Company continued to advance discussions with the trustee and representatives of the holders of its Series B and Series D debentures regarding a proposed debt arrangement, and creditor meetings were held to approve the proposed arrangement and authorize related implementation actions, including amendments to the deeds of trust. The proposed arrangement includes, among other things, amendments to the debenture repayment schedule and interest terms, use of interest reserve funds, mandatory early redemption rights, revised immediate repayment and collateral provisions, additional pledges and guarantees, and enhanced coordination rights for debenture holders; however, there can be no assurance that the arrangement will be completed, implemented on the terms proposed, or result in full repayment of the Company’s obligations.

- - - - - - - - - - - - - - - - - -
10

EX-99.3 · pacificoak-q12026xbodrep.htm

Type

EX-99.3

File

pacificoak-q12026xbodrep.htm

Document text
EX-99.3 · pacificoak-q12026xbodrep.htm EX-99.3 4 pacificoak-q12026xbodrep.htm EX-99.3 3857 Birch St Newport Beach, CA 92660-2616 Quarterly Report - 2026 PACIFIC OAK SOR (BVI) HOLDINGS, LTD.As of March 31, 2026 CITY TOWER Including: Chapter C - Director Statements Chapter B - Financial Statements as of March 31, 2026 Chapter A - BOD Report of Company’s Business. A-1 PACIFIC OAK SOR (BVI) Holdings Ltd. (the "Company") The Board of Directors of the Company hereby submits the Board of Directors Report of the Company for the three-month period ending March 31, 2026 (hereinafter: the 'Reported Period" or the "Report Period). The review is limited in scope and relates to events and changes that have occurred in the state of the affairs of the Company in the Reported Period. The report is prepared under the assumption that the readers are in possession of the Board of Directors' Re- port on the affairs of the Company as of December 31, 2025, which was attached to the 2025 Periodic Report of the Company1 and which is presented in this report by way of reference (hereinafter: the "2025 Periodic Report"). As of the date of publication of the report, grounds exist for declaring Series B and D debentures immediately due and payable. For details, see Part E below, Dedicated Dis- closure to the Company's debenture holders. It should be noted that on February 17, 2026, S&P Global Ratings Maalot Ltd. an- nounced the discontinuation of the rating of the Company's debentures. For details, see the notice by Maalot, reference no. 2026-15-015594. 1 Published on April 16, 2026 (reference number: 2026-01-035767). A-2 Part One – A brief description of the Company and the business environment thereof 1. The Company and the business environment thereof A. The Company was incorporated on December 18, 2015 as a private company limited by shares, in accordance with the provisions of the British Virgin Is- lands (BVI) Business Companies Act, 2004, for the purpose of raising debt from the public in Israel through the issuance of Debentures, not convertible into shares, on the Tel Aviv Stock Exchange Ltd. B. As of the date of this report, the Company has two series of Debentures; De- bentures (Series B), the balance of which as of the date of this report's release totals ILS 388,237,587 par value, and Debentures (Series D), the balance of which as of the date of this report's release totals ILS 587,063,000 par value. For more details on the Debentures (Series B), and Debentures (Series D) see the dedicated disclosure to debentures holders in Part Four below. 2. Events during and after the reporting period 2.1. Creditors' meeting of the Company for approval of a debt arrangement On April 30, 2026, a creditors' meeting of the Company was held for the approval of a debt arrangement, which was published in the Company's immediate report dated April 17, 20262. For details regarding the results of the said creditors' meeting, as received from the trustee for the holders of the Company's debentures, see the Com- pany's immediate report dated May 1, 2026, reference no. 2026-01-040454, the con- tents of which are included in this report by way of reference. Furthermore, for details regarding objections and responses filed with the Court concerning the approval of the debt restructuring, see the Company’s immediate re- ports dated May 18, 19, and 24, 2026 (Reference Nos. 2026-01-045945, 2026-01- 046241, and 2026-01-047330), the information therein is incorporated in this report by reference. On May 24, 2026, subsequent to the report date, the Tel Aviv District Court rendered its decision, according to which, insofar as the debt restructuring is approved, a re- structuring administrator will be appointed, whose powers will not be limited solely to reviewing the debt claims of the objectors. Within its decision, the Court granted the Bond Trustee three days to notify whether it stands by its petition to approve the proposed debt restructuring, or whether it will seek to advance a motion for an order to commence proceedings under Chapter B. On May 25, 2026, this deadline was extended until June 3, 2026, and therefore, as of the publication date of this report, the Court’s decision on the matter has not yet been rendered. For further details, see 2 Reference: 2026-01-035898, the contents of which are included in this report by way of reference. A-3 the Company’s immediate report dated May 24, 2026 (Reference No. 2026-01- 047593), the information therein is incorporated in this report by reference. The text of the debt arrangement was attached to a disclosure report pursuant to Reg- ulation 37K of the Securities Regulations, which the Company published on April 26, 2026, reference no. 2026-01-038064, the contents of which are included in this report by way of reference, (hereinafter: the "Debt Arrangement". In summary, it includes, among other things, the provisions set out below regarding the amendment of the debt terms for debenture holders. A. Amendment of the debt terms for the debenture holders The payment dates of the principal of Series B and Series D Debentures will be consolidated and will be paid according to the new amortization schedule. The payment dates in the new amortization schedule will apply to all creditors. During the period from August 1, 2025, until the Completion Date, as this term is defined in the proposed Debt Arrangement, the annual interest rate on the debentures will be amended retroactively and will stand at 11% annual shekel interest, without linkage to the index. From the Completion Date onward, the annual interest rate on the debentures will be amended and will stand at 11.5% annual shekel interest, without linkage to the index. The existing default inter- est under the deeds of trust, including its terms, will not be amended under the Debt Arrangement. If the debenture holders adopt a resolution for mandatory early redemption, without the existence of grounds for immediate repayment, as stated in Section 19.3 of the Debt Arrangement, and also in the event that the Company's debt is declared immediately due and payable due to the going concern note included in the Company's financial statements as of February 4, 2026, the "Specific Immediate Repayment Ground", as distinct from a case in which this going concern note is no longer included in one of the Company's financial statements during the period after January 1, 2026, and subsequently returns and is in- cluded again in one of the Company's financial statements, then, without dero- gating from the debenture holders' right to receive the full amount of their debt, principal and interest, in these cases they will not be entitled to default interest. However, the foregoing does not derogate from the debenture holders' right to default interest in any other case, including where the Company's debt is de- clared immediately due and payable on the basis of any ground for immediate repayment other than the Specific Immediate Repayment Ground. On the final repayment date, if the debentures are repaid in full, the debenture holders will be paid an additional payment equal to the lower of the following two alternatives: (a) interest at an annual rate of 1.5%, calculated on the full principal amount of the debentures for the period from August 31, 2026, until the final repayment date or until the date of full early redemption of the deben- tures, whichever is earlier; or (b) 50% of the aggregate balance of all properties A-4 and rights of every kind and type, including cash and cash equivalents, of the Pacific Group, as such balance will be five business days before the earlier of: (1) the final repayment date; or (2) the date on which full early redemption of the debentures is completed, if full early redemption is carried out. Such additional payment, subject to the conditions above, will also be paid pro- portionately, with the necessary adjustments, in respect of the Company's debts to additional creditors. Regarding the Company's ability to repay the full debt to the debenture holders and to the Company's creditors even if the Debt Arrangement is approved, the Company draws attention in this regard to the final paragraph of Section 3.5.5 of Chapter B of the Company's financial statements for 2025. B. Use of funds in the interest reserve On the Completion Date, the debenture holders of Series B and the debenture holders of Series D, as applicable, will be paid, on account of the debt owed to them, the full amount of the interest reserve funds as held at that time by the trustee for Debentures B and Debentures D, as applicable, after deducting the amount required for providing the balance of the loans that the debenture hold- ers approved to be provided to the Company, insofar as these have not been provided in full by the Completion Date. C. Mandatory early redemption The debenture holders will have the right, at any time, to require the Company to repay the full debt in respect of the debentures, including principal and in- terest, by way of early redemption, an early redemption ("Mandatory Early Redemption"), provided that both debentures series, Series B and Series D, and not only one of them, adopt a resolution for Mandatory Early Redemption at a meeting of the debenture holders of each of the series, namely, at separate meetings of each of the two series. Such meetings must be convened at the request of one or more holders who own at least 15% of the debentures of each of the debentures series, for the purpose of adopting a resolution on Mandatory Early Redemption, by a majority of 66% of the total votes participating in the vote, excluding abstentions, for each series separately. D. Immediate repayment and realization of collateral The provisions of Section 8 of each of the deeds of trust concerning immediate repayment will be amended as follows: Each of the grounds for immediate repayment under Section 8 of each of the deeds of trust, as amended pursuant to this Arrangement, will, upon its occur- rence, also constitute grounds for the debenture holders of the relevant series to realize any collateral and any pledge granted in favor of the Trustee for the benefit of the debenture holders of that series. A-5 The following additional grounds will be added to Section 8 of each of the deeds of trust. The following will apply separately with respect to each of the said trust deeds: (1) In the event that the Company's shares are held by a third party that is not the Partnership, the sole shareholder of the Company, and in any case in which rights in the partnership are held by a third party, that is not the REIT fund; in the event that more than 10% of the shares of the REIT fund are held by one shareholder or by a group of shareholders acting jointly or in coordination among themselves; or in the event that insol- vency proceedings are initiated against the REIT or against the partner- ship, including if an officer, functionary, receiver, trustee, or similar ap- pointee is appointed for the REIT or the Partnership. (2) The termination of the term of office of the new directors, the increase of the board of directors beyond five directors, or the delegation of powers of the board of directors, in each case if carried out without the consent of the debenture holders. (3) The replacement of the existing management company, Westdale, and/or the termination of its term as the company providing management ser- vices to the Company, and/or any amendment to the terms of the existing services agreement with it, and/or the removal of powers granted to it under the services agreement, insofar as any of the actions described is carried out without the consent of the debenture holders. (4) A breach of an undertaking under this Arrangement and/or under the deeds of trust as amended pursuant to this Arrangement, including a breach of the Company's undertakings to create and register pledges as described in the proposed Debt Arrangement, and a breach of the re- strictions on the Company's activity described in the proposed agree- ment. In addition, the grounds for immediate repayment listed in the deeds of trust under Sections 8.1.12, breach of financial covenants; 8.1.13, distribution pur- suant to the terms of the original trust deed; 8.1.14, downgrade; 8.1.21, discon- tinuation of rating; and 8.1.29, incurring debt not in accordance with the terms of the original deed, will be deleted. E. Pledges, guarantees, and payment waterfall The Company undertakes to create pledges in favor of the trustee for the de- benture holders within 105 days from the date of finalizing the Arrangement, for all of the Company's unencumbered assets, including all rights in each asset and rights to the fruits or proceeds of such asset. An irrevocable and unconditional deed of guarantee will be signed by the enti- ties Pacific Oak SOR Properties LLC, Pacific Oak Strategic Opportunity Lim- ited Partnership II, Pacific Oak SOR US Properties II LLC, and Pacific Oak A-6 SOR Equity Holdings X LLC in favor of the Trustee for the benefit of the de- benture holders, to secure the Company's debt to the holders of Debentures Series B and Series D. The additional creditors will have the right to a portion of the proceeds from the Company's assets and rights, including the pledged assets and the guaran- teeing companies, according to the following payment waterfall: (1) secured creditors in the asset; (2) payment of the debts of the property entity; (3) com- pletion of the Company's minimum reserve; (4) early redemption to the deben- ture holders and additional creditors. In the event of a dispute, it will be sub- mitted to the decision of an arbitrator to be appointed by agreement between the Company and the Trustee, and the arbitrator's decision will be final. F. Management of the Company after completion of the Debt Arrangement The composition of the board of directors will be changed so that directors whose names were proposed by the debenture holders will serve, and the re- maining directors will terminate their office. This action has already been car- ried out in practice, as described above in Section 13, and currently only direc- tors whose names were proposed by the debenture holders serve in the Com- pany, while one director, who was appointed in the summer of 2025 after the beginning of the crisis and on the recommendation of the Trustee for the de- benture holders, still serves but has announced the termination of his office at the end of May 2026. The Debt Arrangement includes agreements with the management companies and the REIT fund. These agreements were agreed directly between the deben- ture holders and the management companies/REIT fund, without the Compa- ny's involvement. The agreements are attached to the Arrangement and/or de- tailed in Section 34 of the Debt Arrangement. The Company undertakes to act in full cooperation with the debenture holders, including, inter alia: (1) to act to sell all of its assets and rights in full coopera- tion with the representatives of the debenture holders, while the sale of indi- vidual homes of the PORT assets that meets the conditions defined in Section 4.1.5 of the Debt Arrangement may be carried out without the debenture hold- ers' prior approval; (2) sale proceedings and the manner of selecting brokers, the sale process, dates, and terms will be coordinated on an ongoing and con- tinuous basis with the debenture holders' representatives; (3) coordination and cooperation with the debenture holders' representatives will also apply to all financing processes of any kind that the Pacific Group advances with respect to any of its properties and rights; (4) the Company's representatives will pro- vide an oral update to the Trustee and the debenture holders' representatives every two weeks and a written update every month regarding the financing and realization processes relevant to the relevant period that has ended; (5) to pro- mote the raising of new series of secured debentures; (6) to appoint an officer in the PORT Properties who will be granted broad rights, and also to ensure A-7 that decisions concerning the PORT assets that have a material effect, the cu- mulative scope of which exceeds USD 1 million, and any decision concerning any disposition of in PORT Properties, will be subject to the Company's prior approval. The Company undertakes not to carry out many actions without the prior ap- proval of the debenture holders and/or their representatives, including: (1) lim- iting the amount of its general and administrative expenses to USD 5 million in 2026, USD 4 million in 2027, and USD 3 million in 2028, with this limitation not including payments pursuant to the REIT agreement and the Company's expenses for the costs of this Arrangement up to the Completion Date; (2) not to take loans or credit or carry out financing transactions; (3) not to carry out a transaction with the REIT fund or the new management company or other in- terested parties; (4) not to make a distribution, dispose of its assets and rights, acquire assets, or provide guarantees; (5) payments to financial creditors will not be discontinued. G. Claims manager All causes of action and claims rights of all creditors and of the Company will be assigned in full to the claims manager, who will be appointed by the court at its discretion, taking into consideration, as much as possible, the identity of the person selected at a joint meeting of the Company's creditors. For additional details regarding the Debt Arrangement, see the Company's im- mediate report dated April 26, 2026, reference no. 2026-01-038064, the con- tents of which are included in this report by way of reference. 2.2. Investment Real Estate Properties During the three-month period that ended on March 31, 2026, the Company recorded an increase in value of investment real estate properties of approximately USD 5.4 million, which primarily stemmed from entering into an agreement for the sale of the Richardson Land for consideration of approximately USD 12.5 million. For details, see Section 2.6.1 below. 2.3. Updates regarding PORT Properties A. During April 2026, after the reporting date of the financial statements, the Company completed changes to the structure of PORT's board of directors, such that as of the date of publication of the report, only two directors serve on PORT's board of directors, both on behalf of the Company. In addition, in May 2026, the PORT board of directors appointed a Chief Restructuring Officer who will supervise the processes for the sale of the PORT properties. A-8 B. On May 8, 2026, following the reporting date of the financial statements, a refinancing agreement in the amount of approximately USD 216 million was closed with a lender consortium led by Klirmark Capital, for a term of 15 months with two extension options of 6 months each, bearing an annual interest rate of SOFR + 4.75%. The loan proceeds were used for full repayment of the existing loans on the PORT properties in the amount of approximately USD 186.1 million, as well as for interest reserve (approximately USD 10 million), transaction fees (approximately USD 3.2 million), designated deposits (ap- proximately USD 4.8 million) and customary closing costs. Additionally, the loan agreement terms permit cash releases in the amount of approximately USD 4 million shortly following the date of closing and approximately USD 4 million additional during the loan term, subject to compliance with the loan agreement conditions. For further details on the terms of the loan, see Appen- dix A to this report, as well as the Company's immediate report dated May 10, 2026 (Reference Number: 2026-01-043136), which is incorporated into this report by reference. 2.4. Updates regarding 110 William A. On April 1, 2026, the tenant, the City of New York (hereinafter: DCAS), gave notice of the revocation of the substantial completion approval that had been granted on December 5, 2025, for the third phase under the lease agreement for the property. This was on the grounds that improvement works in the relevant area, which DCAS had previously required, had not been completed. Accord- ingly, DCAS notified that it would not occupy the areas of the third phase of the lease agreement and would not begin paying rent to the property entity. DCAS further notified that the revocation of the substantial completion ap- proval, as stated above, took place after the date by which the property entity was required to complete all improvement works in the property pursuant to the terms of the lease agreement, and therefore DCAS is entitled to exercise all rights and remedies granted to it due to the failure to meet the said timelines, including termination of the lease agreement. DCAS also requested that the property entity provide it with a detailed plan and timetable for completion of the required improvement works by April 15, 2026. For details, see the Company's immediate report dated April 3, 2026, reference no. 2026-01-031667, the contents of which are included in this report by way of reference. In the Company's estimation, there are no longer any material improvements that the property entity must complete for DCAS for Substantial Completion, and according to the property entity's position, additional improvements re- quested by DCAS may be carried out after such Substantial Completion. A-9 The Company, together with its legal advisers in this matter, is examining the options available to it in light of DCAS's notice, including the possibility of initiating legal proceedings. It should be noted that the Company sent a notice to DCAS demanding that it begin paying rent and also pay reimbursement and expense indemnification amounts totaling approximately USD 19 million. B. As stated in the Company's immediate report dated May 10, 20263, on May 8, 2026, after the reporting date of the financial statements, counsel for the Com- pany received a settlement proposal from DCAS, the principal terms of which are as follows: 1) DCAS and the property entity will enter into a Stand Still agreement un- der which the parties will suspend the existing legal disputes between them, without derogating from either party's rights, and will work to reach agreements regarding the substantial completion date and the Rent Commencement Date under the lease agreement. Should either party wish to terminate the Stand Still, it must do so by giving 30 days' prior notice. 2) The parties will reach agreements on a list of the improvements and re- pairs required in the area of the property leased to the city, and on the timetable for their completion. 3) In order to assist the property entity in completing the said improvements, DCAS will release into a trust account with an Escrow Agent an amount of approximately USD 14 million, which will be released gradually to the property entity as progress is made in completing the required im- provements as stated above. In response to the above, separately, the Company has responded and begun discussions with the tenant regarding a potential negotiated resolution of cer- tain lease-related matters, while expressly preserving all rights and remedies. Depending on the outcome of those discussions, the Company is evaluating available paths, including a settlement on commercially attractive terms or, if warranted, pursuing remedies that may include termination of the lease. The property entity and the Company reserve all of their rights under the lease agreement and applicable law. As of the reporting date, the Company and DCAS are engaged in a dialogue regarding potential updates to the aforemen- tioned notice of default, as well as the Company’s intention to reach agree- ments concerning the required property improvements and the collection of rent from the property. C. According to the Company's estimate, there is no material change in the costs required to complete the improvement works in the property for DCAS com- pared with previous estimates. However, due to the delay in receiving 3 Reference: 2026-01-043135, the contents of which are included in this report by way of reference. A-10 payments from DCAS as stated above, the property entity has incurred a cash- flow deficit of approximately USD 11.5 million, of which the Company has funded since the beginning of 2026 and to the date of publication of this report. D. As of the date of publication of the report, the Company is not fully meeting the repayment payments of the senior loan in the property and is maintaining a dialogue on this matter with the lender. In addition, ahead of the final repay- ment date of the said loan, in July 2026, the Company is maintaining a dialogue with the lender regarding the exercise of the extension option granted to the property entity under the loan agreement for one additional year, with a central condition from the lender for such extension being that DCAS begin paying rent. it is clarified that there is no certainty regarding the date on which DCAS will enter the third phase under the lease agreement and begin paying rent, if at all, and there is also no certainty that it will be possible to exercise the option to extend the final repayment date of the existing loans in the property. See also the Company's immediate report dated April 5, 2026 (reference no. 2026-01- 031863). It should be noted that up to shortly before the date of publication of the report, interest payments on the senior loan had not been paid, in a total amount of approximately USD 1.0 million. In addition, the Company is also not meeting the repayment payments of the Mezzanine loan in the property and is maintaining a dialogue on this matter with the lender. It should be noted that up to shortly before the date of publica- tion of the report, interest payments in respect of the Mezzanine loan had not been paid, in a total amount of approximately USD 1.9 million. E. The Company has engaged a leading broker in the United States to market the property beginning in January 2027. The value of the property in the Company's books, based on 100%, which the Company does not consolidate in its financial statements, is approximately USD 422.1 million. A-11 2.5. Sale of assets during the first quarter of 2026 and up to shortly before the publication date of the report Property name Completion date of sale Book value be- fore entering into the sale agreement Debt in the property before completion of the sale trans- action Sale consid- eration Cash flow gener- ated for the Com- pany from the sale transaction Remaining debt in the property after comple- tion of the sale transaction Additional details (USD millions) Lincoln Court May 7, 2026 Approx. USD 31.8 million Approx. USD 31.3 million Approx. USD 24.6 million 0 -- On May 7, 2026, after the reporting date, the transac- tion for the sale of the Lincoln Court property to a third party was completed for a total consideration of ap- proximately USD 24.6 million. The sale proceeds were used to repay the existing loan on the property. In this framework, the lender agreed to release the property from the loan encumbrance and to accept the sale pro- ceeds as full satisfaction of the loan, including the un- paid principal balance of approximately USD 7.4 mil- lion. Upon completion of the transaction as stated, all of the Company's obligations to the lender in connec- tion with this loan expired. For further details, see the Company's immediate report dated May 10, 2026 (Ref- erence No.: 2026-01-043133), the information from which is incorporated into this report by reference. S-REIT shares During the first quarter of 2026 and until April 20, 2026, after the date of the statement of financial position, the sale of all S-REIT shares held by the Company was completed in several installments. These sales generated total consideration for the Company of approximately USD 10.5 million. For details regarding these sale transactions, see Section 1.2.3 of Chapter A of the 2025 annual report, as well as the immediate report dated April 21, 2026 (reference no. 2026-01-037168), the contents of which are included in this report by way of reference. A-12 2.6. Updates regarding transactions for the sale of the Company's properties 2.6.1. Conditional sale agreement for the sale of Richardson Land During the reporting period, and in accordance with the Standstill framework signed between the Company and the debenture holders, the Company entered into a condi- tional agreement for the sale of all of its rights in Richardson Land to a third party, for consideration of approximately USD 12.5 million. Completion of the transaction is subject to the completion of a 30-day due diligence period, at the end of which a deposit of USD 125 thousand will become non-refundable, and to the fulfillment of customary conditions precedent, including approval by the debenture holders. It should be noted that, in light of Whitehawk’s allegations of default under the loan it extended, which the Company is reviewing, as stated in Section 2.7 below, it is possible that the entire net sale proceeds will be used for partial repayment of the Whitehawk loan. For additional details regarding the terms of the agreement, the deposit mechanism, and the sale fees, see the Company's immediate report dated April 27, 2026 (refer- ence no. 2026-01-038207). On May 3, 2026, assemblies of Series B and Series D debenture holders approved a resolution authorizing the Company to enter into the sale transaction, as defined in the Company's immediate report dated April 27, 2026 (reference no. 2026-01- 038207) (hereinafter: the "Company's Report", in connection with the sale of Rich- ardson Land for total sale consideration of approximately USD 12.5 million. For ad- ditional details, see the Trustee's reports dated May 3, 2026 (reference nos. 2026-10- 040747 and 2026-10-040748), the contents of which are included in this report by way of reference. Further to the aforementioned, on May 7, 2026, the Company entered into an agree- ment as mentioned above. For further details, see the immediate report dated May 10, 2026 (Reference No.: 2026-01-043134), the information from which is incorpo- rated into this report by reference. It is clarified that the completion of the sale transaction as stated constitutes forward-looking information, as such term is defined in the Securities Law, 1968, which is based on the said sale agreement, representations provided to the Company by the purchaser, ongoing dialogue with the existing lender, and the Company's experience in transactions of this type. The entry into effect of the aforementioned information may not materialize if the conditions precedent for the completion of the transaction are not met, and/or if agreements are not reached with the existing lender on the property, and/or if the purchaser with- draws from the agreement, , or if adverse changes occur in the real estate mar- ket in the area where the property is located, as well as due to the materialization of the risk factors detailed in Section 1.18 of Chapter A of the Annual Report for the year 2025. A-13 2.6.2. Agreement with the REIT fund, replacement of the management company, cancella- tion of the management agreement and the Back-to-Back agreement, and changes to the Company's board of directors On January 22, 2026, further to the approval of the Company's board of directors and the approval of the Company's debenture holders, the Company entered into three agreements: (1) An agreement with the REIT fund regulating payments from the Company to the REIT fund, the termination of the role of the previous management com- pany, and entry into the agreements referred to in Subsections (2) and (3) be- low. (2) A new Property Management agreement with the new management company. (3) A new Accounting Management agreement. For additional details regarding the new agreements signed by the Company, see Chapter A of the 2025 annual report, the contents of which are included in this report by way of reference. 2.6.3. Bridge loans from the Trustee of the Company's debenture holders During February 2026, the Trustee of the Company's debenture holders, Series B and Series D, on behalf of the debenture holders, provided the Company with an addi- tional bridge loan in the amount of USD 6.2 million, bearing annual interest at a rate of 20%. For additional details regarding this loan, see Chapter A of the 2025 annual report, the contents of which are included in this report by way of reference. 2.7. Updates regarding Company's Properties and Loans It should be noted that in all existing loans in which Pacific Oak SOR Properties, a wholly owned subsidiary of the Company, provided a guarantee under which it un- dertook to meet minimum Net Worth financial covenants, it does not meet such un- dertaking as of the date of the statement of financial position, except in connection with the senior loan on the 110 William property where Pacific Oak SOR Properties is in compliance with the Net Worth covenant. For further details regarding existing financial guarantees in loans secured by the Company's properties, see Section 3 of Part Three of this report below. # Property name Outstanding loan balance as of March 31, 2026 (thousands of dollars) Maturity date (as of March 31, 2026) Details and updates regarding the property and its existing financing 1 Q&C Hotel (*)() 21,725 February 6, 2026 (instead of the original maturity a. The Company is working to sell the property. b. Since the property was not sold, on November 13, 2025, the Company received from the lender a Notice of Event of Default dated October 30, 2025. According to the notice, the failure to repay the loan on its due date, July 29, 2025, constitutes an Event of Default under that loan; from A-14 # Property name Outstanding loan balance as of March 31, 2026 (thousands of dollars) Maturity date (as of March 31, 2026) Details and updates regarding the property and its existing financing date of July 29, 2025) that date, the loans bear default interest at a rate of 5%; and the lender reserves all of its rights under the loan agreements. See also the Compa- ny's immediate report on this matter dated November 14, 2025, refer- ence no. 2025-01-087323. c. The Company and the lender agreed to extend the final maturity date to February 6, 2026. This date has also passed, and the loan is therefore in maturity default. d. As of shortly before the publication date of the report, the interest ac- crued and not yet paid amounts to approximately USD 1.8 million. e. As of shortly before the publication date of the report, dialogue is being held with the lender, during which the possibility is being examined of settling the debt owed to it as part of a sale process to be managed by the lender, including by deed in lieu, as part of an overall arrangement involving the sale of the Richardson Office property. It is clarified that, as of the date of the report, the parties have not yet reached agreements on this matter, and there is no certainty that such agreements will indeed be reached. For details regarding the dialogue being held with the same lender in connection with the sale of the Richardson Office property, see this table below. 2 Richardson Of- fice (*)() 11,782 February 6, 2026 (instead of the original maturity date of July 29, 2025) a. As stated in the company's previous reports, the sale transaction for the sale of the property alongside the Richardson Land parcel was not com- pleted due to the seller's objection, and as stated in section 2.6.1 above, the company entered into a new sale agreement for the said land prop- erty only. b. The final maturity date of the loan has passed, and the loan is in tech- nical default. c. As of shortly before the publication date of the report, the interest ac- crued and not yet paid amounts to approximately USD 0.1 million. d. It should be noted that, as part of the loan structure in the property, there is at all times a mechanism under which the property entity, the bor- rower, transfers the cash flow generated by the property to a designated account for servicing the loan repayment payments. It should be noted that there is no cash sweep mechanism controlled by the lender. 3 Madison Square (^)() 20,040 November 30, 2025 a. As stated in the Company's immediate report dated March 31, 2026,4 on March 30, 2026, the court in Arizona accepted, on March 19, 2026, a motion filed by the lender for the appointment of a Receiver, with the purpose of managing and operating the property and, among other things, protecting the lender's rights in connection with the property and the loan, including with respect to the assignment to the lender of all income cash flow generated by the property. In addition, subject to the lender's approval, the Receiver may act to market and sell the property. b. Further to the aforementioned, as noted in the May 15, 2026 immediate report5, the Receiver announced that an auction will be held to sell the property to the highest bidder on July 22, 2026. As a result, the Com- pany has not received indications of value from the auction process that would support a valuation different from the Company’s current ex- pected sale price, although there can be no assurance as to the ultimate timing, terms, or proceeds of any sale. 4 Reference: 2026-01-030059, the contents of which are included in this report by way of reference. 5 Reference: 2026-01-045040, the contents of which are included in this report by way of reference. A-15 # Property name Outstanding loan balance as of March 31, 2026 (thousands of dollars) Maturity date (as of March 31, 2026) Details and updates regarding the property and its existing financing c. In this regard, it should be noted that following the appointment of the Receiver, the property was deconsolidated and the aforementioned loan was derecognized from the Company's balance sheet. d. On May 27, 2026, the Company received notice that the lender with respect to the property is seeking from the court in the State of Arizona a default judgment against the Company’s subsidiaries in connection with the property (Pacific Oak/Verus GC Phoenix, LLC and Pacific Oak SOR Properties LLC), on the grounds that no statement of defense was filed within the time prescribed by the court. The Company is reviewing the notice with its legal counsel and is considering its course of action in this matter. See also the immediate report published proximate to the publication of this report. e. As of the date of the report, outstanding cumulative interest totals ap- proximately USD 1.6 million. 4 Eight & Nine Corporate Cen- tre () 20,070 February 9, 2027 a. During February 2026, the Company and the lender entered into an agreement to extend the maturity date until February 9, 2027. Within the framework of the agreements with the lender, the lender provided the property entity with a sum of approximately USD 1.2 million for the property's leasing activities (lender reserves for lease-up). The total out- standing loan balance on the property after providing the said sum stands at approximately USD 20.2 million. b. Furthermore, the parties agreed on an update to the financial covenants of the subsidiary (100% owned by the Company) Pacific Oak SOR Prop- erties, LLC, which serves as a guarantor under the loan agreement, whereby the net worth financial covenant was canceled and a liquid as- sets covenant was added, requiring them to not fall below USD 10 mil- lion. c. It notes that a significant tenant in the property, which leases approxi- mately 76 thousand square feet, is expected to vacate the leased premises in June 2026, which is expected to decrease the occupancy rate of the property to approximately 66%. In this context, the lender reserves for lease-up is intended to support the Company's efforts to lease out the vacant spaces in the property. It shall be noted that as part of the property's loan structure, there is, at all times, a quasi-cash sweep mechanism, under which the lender utilizes the cash flow generated from the property for the monthly interest payments required under the loan, and uses 50% of the remaining excess amount for loan principal repayments, while transferring the remaining 50% to the Company. 5 White Hawk loan secured by land areas in the Park Highlands and Richard- son properties and the 210 West 31st land property () (^^) 80,000 December 1, 2027 a. Pursuant to the terms of the said loan agreement, the existence of a right to declare the Debentures, Series B and Series D, immediately due and payable, insofar as no waiver, including a temporary waiver, of the said right has been obtained from the debenture holders, even if such right has not been exercised, constitutes grounds for declaring the loan imme- diately due and payable. As a result, the loan bears additional default interest at a rate of 3 percent. b. It should be noted that on April 30, 2026, the Company received notices of default and demand letters in which the lender demands from wholly owned subsidiaries of the Company, Pacific Oak SOR US Properties II, LLC and Pacific Oak SOR Properties, LLC, the immediate repayment of the loan. The Company has referred this matter to its legal advisers and is exam- ining the said letters. The Company is also still maintaining dialogue A-16 # Property name Outstanding loan balance as of March 31, 2026 (thousands of dollars) Maturity date (as of March 31, 2026) Details and updates regarding the property and its existing financing with the White Hawk lender regarding the continuation of the loan pe- riod. For additional details, see the Company's immediate report dated May 2, 2026, reference no. 2026-01-040463, the contents of which are included in this report by way of reference. c. Subsequently, on May 20, 2026, after the reporting date, the Company received notices regarding lawsuits filed by the lender in the District Court of Clark County, Nevada, against the property entities holding the Highlands Park lands, seeking declaratory reliefs and orders concerning the breach of the loan agreement and the lender's lien rights. On May 22, 2026, an inter partes hearing was held, during which the court, with the parties' consent, issued a temporary injunction prohibiting the creation of liens, the incurrence of debt in connection with the Highlands Park lands, and any interference with the sale transaction, until a hearing scheduled for June 16, 2026. The Company and the property entities are reviewing the lender's claims and may dispute them, while working with their US legal counsel and conducting parallel negotiations with the lender. It should be noted that there is no certainty as to the outcomes of the proceedings or the completion of the Highlands Park lands sale trans- action under its existing terms. For further details, see the Company’s immediate report dated May 24, 2026 (Reference No.: 2026-01-047562), the information of which is incorporated herein by reference. d. On May 28, 2026, after the reporting date, the Company received by email additional notices (the “Additional Notices”) stating that the lender had filed additional claims against the Company’s wholly owned subsid- iaries (100%) that had provided full financial guarantees in respect of the loan (Pacific Oak SOR Properties, LLC and Pacific Oak SOR US Prop- erties II LLC) (the “Guarantor Entities”) in the Supreme Court of the State of New York, County of New York: Commercial Division, seeking remedies whose principal elements are: that the Guarantor Entities pay damages to the lender for losses incurred by it as a result of the breach of the loan agreement, in amounts to be determined in the legal proceed- ing; that the borrowers bear the lender’s legal costs; and (c) the award of additional damages to the lender at the court’s discretion. The Additional Notices also include a summons from the aforesaid court, pursuant to which the Guarantor Entities are required to submit their response to the claim within 20 days of service thereof, failing which the aforesaid court may enter judgment in favor of the lender. The Company and the Guarantor Entities are reviewing the lender’s claims and may dispute them, while working with their U.S. legal coun- sel and conducting parallel negotiations with the lender. It should be noted that there is no certainty regarding the outcome of the proceeding or the completion of the Highlands Park land sale transaction on its cur- rent terms. For further details, see the Company’s immediate report pub- lished proximate to the publication of this report, the information of which is incorporated into this report by reference. e. It should be noted that, as of the date of this report, the Company has not been informed of any change in the timetable of the Park Highlands land sale transaction, and it is proceeding as usual. In this regard, Whitehawk informed the Company that the purchaser deposited with it the monthly deferral fees that the purchaser is required to pay under the purchase agreement, and these were used for the monthly interest payments on the loan. 6 Bank of Amer- ica Loan 152,636 September 1, 2026 Further to what was stated in the Company's immediate report dated Feb- ruary 17, 2026, reference no. 2026-01-015474, the Company continues its A-17 # Property name Outstanding loan balance as of March 31, 2026 (thousands of dollars) Maturity date (as of March 31, 2026) Details and updates regarding the property and its existing financing secured by Park Centre, 1180 Raymond, The Marq, and Oakland City Center () dialogue with the lender for the purpose of entering into a forbearance agreement. Under this agreement, the lender would grant a Forbearance period until August 31, 2026, during which, subject to compliance with the terms of the agreement as set out below, the lender will not exercise its rights in respect of the Notice of Default of the loan and will not collect the required monthly principal and interest payments under the loan agree- ment. It is clarified that the memorandum of understanding is non-binding and that the lender reserves all of its rights and claims in connection with the loan agreement. During the Forbearance period stated above, the Com- pany and the property entities will be required to comply with the follow- ing conditions: a. Upon entering into the Forbearance agreement, the Company will be required to transfer the net cash flow generated by the properties to a designated deposit account, a Cash Sweep mechanism. Due to the said contacts, as of shortly before the publication date of the report, a Cash Sweep mechanism is in effect in the properties, and it will continue to remain in effect until the end of the Forbearance period. b. A Cash Trap mechanism will be activated in all of the properties. c. The Company will be required to meet milestones for the marketing and sale of all the properties, in coordination with and with the consent of the lender, so that the 1180 Raymond property will be sold by June 2026 and the other three properties will be sold by August 2026. d. Failure to meet the milestones for the sale of the properties will consti- tute a breach of the terms of the Forbearance agreement. It should be noted that entering into such an agreement is also expected to regulate the Company's failure to make loan payments, principal and inter- est, and the non-compliance by Pacific Oak SOR Properties, LLC, a wholly owned subsidiary of the Company serving as guarantor under the loan agreement, with the net worth financial covenant6 to which it com- mitted as guarantor under the terms of the loan agreement. - In this context, as part of the dialogue for entering into the Forbearance agreement described above, as of the publication date of the report, the Company and the lender are acting on the understanding that the said Cash Sweep mechanism has already been activated. - It should be noted that the property entities have not paid the monthly interest payments in respect of the loan since September 2025, and as of shortly before the publication date of the report, the interest accrued and not yet paid amounts to approximately USD 10.8 million. - It should further be noted that, concurrently with the dialogue with the lender described above, the Company is working to market and sell the four properties pledged in favor of said loan. It is clarified that there is no certainty that the negotiations described above will mature into a binding forbearance agreement. 7 Loans in the PORT Proper- ties portfolio () (^^^) Loan A: 30,203 Loan A: December 1, 2025 These loans were repaid as part of a refinancing following the date of the report on the financial position. For details Section 2.3 above. Loan B: 9,998 Loan B: March 1, 2026 6 The net worth required from Pacific Oak SOR US Properties, LLC, in accordance with the terms of the loan agreement is approximately USD 250 million, and as of March 31, 2026, it is not in compliance with said covenant. A-18 # Property name Outstanding loan balance as of March 31, 2026 (thousands of dollars) Maturity date (as of March 31, 2026) Details and updates regarding the property and its existing financing Loan C: 54,796 Loan C: April 10, 2026 Loan D: 93,043 Loan D: April 10, 2026 8 110 William () Senior loan: 305,342 Senior loan: July 5, 2026 For details regarding the property and its financing, see Section 2.4 above. Mezzanine loan: 21,000 Mezzanine loan: July 5, 2026 () Non-recourse loans. () The loan agreements for the Q&C Hotel and Richardson Office Portfolio properties contain a Cross Default provision as well as Cross Collateral between the two properties, such that an event of default under one loan will constitute an event of default under the other loan as well. (^) Under the loan agreement for the Madison Square property, Pacific Oak SOR US Properties LLC (a 100%- owned subsidiary of the Company) provided a full financial guarantee (in the amount of 100% of the loan principal) for the full obligations of the borrower entity. It should be noted that until October 7, 2021, such guarantee was provided by Pacific Oak SOR US Properties II LLC (another 100%-owned subsidiary of the Company), and from such month, as part of an update to the loan terms, the said guarantee was assigned to Pacific Oak SOR US Properties LLC. (^^) The loan agreement from the lender White Hawk is a loan under which Pacific Oak SOR Properties LLC and Pacific Oak SOR Properties II LLC provided a full financial guarantee (in the amount of 100% of the loan principal) for the full obligations of the borrowers entity pursuant to the loan. (^^^) The previous loans in the PORT portfolio, which were repaid in full after the reporting date of the financial statements, were non-recourse loans, where under loans C and D (lender MetLife), Pacific Oak SOR Equity Holdings X LLC (a 100%-owned subsidiary of the Company that indirectly holds rights in part of the Company's single-family residential properties, including the Opportunity Zone investment) provided full financial guarantees (in the amount of 100% of the loan principal) for the full obligations of the borrower entities. Such loans were repaid in full as part of a refinancing after the date of the statement of financial position. The Company's estimates regarding property sale transactions, completion of dialogue with lenders for the arrangement of the loans and/or refinancing thereof, and possible implications of the sale transactions and dialogue with lenders described in the table above constitute forward-looking information as defined in the Securities Act, 1968. This information is based on dialogue that the Company is conducting with potential purchasers, dialogue with existing lenders and potential lenders, the Company's understanding of the terms of the loan agreements, and the Company's past experience. This information may not mate- rialize at all or may materialize differently from what is stated above if the contacts and negotiations described above do not mature into binding sale agreements and sale transactions, if arrangements with lenders or refinancing agreements are not completed, or if it turns out that the final interpretations of the loan agreements differ from the Company's current understanding thereof, as applicable, due to adverse changes in the markets and areas of activity in which the properties are located and due to the realization of the risk factors detailed in Section 1.18 of Chapter A of the 2025 annual report. A-19 2.8. Bridge loans from the previous management company Further to the bridge loans provided to the Company by the previous management company through the Company's sole shareholder, the Partnership: A. On January 29, 2026, the Company's sole shareholder informed the Company that it had received a notice of default from the previous management company, POCA, according to which non-payment of interest constitutes grounds for de- claring the bridge loan immediately due and payable. At the same time, during January 2026, legal disputes were raised by counsel for the REIT fund in the United States concerning the absence of documentation for the "back-to-back" component between the partnership and the Company, as well as inconsisten- cies in the repayment dates and loan terms compared with previous approvals and reports. Further thereto, on March 27, 2026, the Company received, for the PORT en- tities, a letter from POCA's counsel notifying of the realization of the pledge over the PORT shares and demanding that all proceeds deriving therefrom, in- cluding dividends, realizations, liquidation proceeds and the like, be transferred to POCA. As of shortly before the publication date of the report, the shareholder is re- viewing the allegations set out in the said notice and reserves all of its legal rights. For additional details regarding the disputes, the loan terms, and the implica- tions of realization of the collateral, see Section 1.1.2.9 of Chapter A of the 2025 annual report, the information contained therein being incorporated by reference. B. On April 21, 2026, POCA sent an additional demand for the registration and transfer of 4,431,934 PORT shares under its name. In this demand, addressed to the Company and to the PORT entities, POCA demanded that the transfer of the shares not be delayed and that, until completion of the registration, all div- idends and proceeds from the shares be transferred to it, or held in trust for it. In addition, POCA demanded that any agreement or payment relating to the shares pledged to it, or any additional allocation of shares in PORT, be subject to POCA's approval. For additional details, see the Company's immediate re- port dated April 23, 2026 (reference no. 2026-01-037682), the contents of which are included in this report by way of reference. Further thereto, on April 29, 2026, the Company's counsel received an addi- tional letter from counsel for the Company's previous management company, POCA, concerning a demand for distributions that may arise from refinancing of the PORT assets and a reservation of rights. For additional details, see the Company's immediate report dated April 29, 2026 (reference no. 2026-01- 039690), the contents of which are included in this report by way of reference. A-20 The Company (and some of its subsidiaries) has engaged legal counsel in the United States and has commenced discussions with POCA and its representa- tives regarding the demands and claims raised by POCA as aforesaid. The Company and its U.S. legal counsel are examining the merits of such claims and the basis therefor, as well as the full exercise of the Company’s legal rights in connection therewith. 2.9. Negotiations between the Company and the Trustee and the Representatives of the holders of the Debentures (Series B and Series D) of the Company The following is a summary of the main actions and the decisions that were carried out and made in the framework of the aforementioned negotiations: A. As stated in Section 1.1.3 of Chapter A of the 2025 annual report, the details of which are incorporated into this report by reference, from December 2025 and up to shortly before the publication date of the 2025 annual report, discus- sions have been taking place between representatives of the Company and the controlling shareholder and the trustee for the Debentures, Series B and Series D, and his representatives. For details regarding resolutions of assemblies of Company's debenture holders up to April 16, the publication date of the Com- pany's 2025 annual report, see Section 1.1.3 of Chapter A of the Company's 2025 annual report, the contents of which are included in this report by way of reference. B. The following are the main additional resolutions of meetings of the holders of the Company's debentures adopted up to shortly before the publication date of this report: - On April 27, 2026, assemblies of Series B and Series D debenture holders approved a resolution to approve the proposed debt arrangement, as pub- lished on April 17, 2026, and to authorize the Trustee to perform all actions required for its implementation, including the signing of an amended deed of trust. For additional details, see the reports published by the Trustee on April 27 and 28, 2026, reference nos. 2026-10-038656, 2026-10-038657, and 2026-10-038974, the contents of which are included in this report by way of reference. - On April 28, 2026, assemblies of Series B and Series D debenture holders, in an aggregate count, approved a resolution to ratify the Company's entry into a loan agreement with lender consortium led by Klirmark Opportunity Fund IV, LP, on the basis of the memorandum of understanding dated Feb- ruary 17, 2026, while updating the terms of the memorandum of under- standing so that the amount excluded from the distribution restrictions in PORT will be up to USD 4 million, instead of USD 8 million. For details, see the reports published by the Trustee on April 28, 2026, reference nos. 2026-10-039027 and 2026-10-039030, the contents of which are included in this report by way of reference. A-21 - On May 3, 2026, subsequent to the report date, the holders of the Compa- ny's Bonds (Series B and Series D) approved the selection of Mr. Yitzhak Lax as a candidate for appointment as a director of the Company. For fur- ther details, see the Company’s immediate report dated May 3, 2026 (Ref- erence Nos. 2026-10-040725, 2026-10-040722), the information therein is incorporated in this report by reference. - On May 11, 2026, subsequent to the report date, and further to the resolu- tions of the Bondholders' meeting dated March 17, 2026, the Bond Trustee announced an additional deferral of the principal and interest payment dates for the Bonds (Series B) to July 1, 2026. For further details, see the Company’s immediate report dated May 11, 2026 (Reference No. 2026- 10-043401), the information therein is incorporated in this report by refer- ence. - On May 11, 2026, subsequent to the report date, and further to the resolu- tions of the Bondholders' meeting dated April 16, 2026, the Bond Trustee announced that the payment date for the interest on the Bonds (Series D) was deferred to July 1, 2026, and the record date was deferred to June 19, 2026. For further details, see the Company’s immediate report dated May 11, 2026 (Reference No. 2026-10-043402), the information therein is in- corporated in this report by reference. 2.10. Macro-economic effects which have or are expected to have a material impact on Company's operating performance or its development: For details of the effects of macro-economic trends which have or may have a mate- rial impact on Company's business performance or its 2026 developments, see Sec- tion 1.6.6. of Part A of Company's 2025 Periodic Report. Below are details of Macro-economic effects Company's operation as of the first quarter of 2026: A. Current Financing of the Company – As of March 31, 2026, approximately 56.0% of Company's loans, on a consolidated basis, along with its share in as- sociated companies (including Debentures (Series B) and Debentures (Series D)), as well as 40.5% of Company's total loans on a consolidated basis (includ- ing Debentures (Series B), Debentures (Series C), and Debentures (Series D)) excluding Company's share in associated companies, carry a variable interest rate. In this regard, note that Company has engaged in interest rate cap agree- ments on approximately USD 247.3 million of its variable interest loans (in- cluding loans by associated companies), which are intended to protect it from significant changes to the Federal Funds Rate, and which will protect the Com- pany somewhat from future increases in US interest rates. A-22 Following are details regarding Company's loan composition on a consolidated basis (including Debentures (Series B), and Debentures (Series D)) at fixed and variable interest rates, as of shortly around the date of the release of the report: Total Consolidated Variable Interest Debt (USD thou- sands) Aggregate Variable Inter- est (%) Total Consolidated Debt (including Debentures7) with fixed interest (USD thousands) Aggregate Fixed Interest (%) Effective Interest Rate (Aggregate Fixed and Variable Interest) 337,527 11.05% 496,006 6.76% 8.49% Following are the details of the loan composition of the Company on a consol- idated basis (including Debentures (Series B) and Debentures (Series D)) and the share thereof in affiliated companies, fixed and variable interest rates as of proximate to the date of the publication of the report: Total Consolidated Debt and Company's Share in Associated Companies at Variable Interest Rates (USD thousands) Aggregate Variable In- terest (%) Total Consolidated and Com- pany's Share in Associated Companies at Fixed Interest Rates, including Debentures (USD thousands) Aggregate Fixed Inter- est (%) Effective Interest Rate (Aggregate Fixed and Varia- ble Interest) 631,236 9.28% 496,006 6.76% 8.17% B. New Financing Obtained by the Company – for the effects of changes in the federal interest on new financing taken by the Company, see Section 1.6.6 of Chapter A of the 2025 Periodic Report. C. Impact on the Value of Company's Properties – changes in the federal in- terest rate may impact the capitalization rates applied in appraisals and may affect the value of Company's properties. For details of Company's Material and Highly Material appraisals, see Section 3 of Part B of the 2025 Periodic Report, and Sections 1.7.8 and 1.7.9 of Part A of the 2025 Periodic Report. For details of major changes recorded in the value of Company's properties during the reported period, see Section 2.2 above. 3. Financial Position as of March 31, 2026 Sections 3.1-3.3 below shall present the Board's explanations of Company's financial position, performance, equity, and its cash flows for the three-month period ending March 31, 2026 (all figures are in USD thousands unless noted otherwise): 7 The Debentures (Series B), Debentures (Series C), and Debentures (Series D). A-23 3.1. Analysis of the main changes in the financial position of the Company: Item Balance as of Company explanations for material balances and changes March 31, 2026 March 31, 2025 December 31, 2025 USD thousands Current assets 295,047 70,463 321,818 The decrease compared to December 31, 2025 stems primarily from the deconsolidation of the Madison Square asset in the amount of approxi- mately USD 24.7 million, following the company's determination that it lost control of the property as a result of the appointment of a receiver. Non-current assets 681,497 1,382,371 687,658 -- Total assets 976,544 1,452,834 1,009,476 -- Current liabilities 885,915 335,799 895,853 The decrease compared to December 31, 2025 stems primarily from the deconsolidation of the Madison Square mortgage loan of approximately USD 20.0 million and partiall offset by increases in interest payable bal- ances. Non-current liabilities 30,307 595,461 32,792 -- Equity attributed to own- ers 59,693 517,521 80,489 The decrease compared to the periodic report for the year 2025 (as of December 31, 2025) stems from a loss attributable to shareholders. Non-Controlling Rights 629 4,053 342 -- Total equity 60,322 521,574 80,831 -- Total liabilities and equity 976,544 1,452,834 1,009,476 -- A-24 3.2. Analysis of the main operating results based on the consolidated financial statements: Item For the three months ending March 31 For the year ended Decem- ber31 The Company's Explanations for the Balances and the Material Changes 2026 2025 2025 Thousands of dollars Income from rental real estate for investment, reimbursement of expenses from tenants and others 24,462 29,897 114,196 The decrease compared to the three-month period ended March 31, 2025 last year stems primarily from the sale of Georgia 400 Center in July 2025 and the sale of Crown Pointe in November 2025. These properties were income-producing properties, and their disposition led to a decrease in op- erating revenues and expenses. Operating expenses for invest- ment real estate (16,612) (17,159) (70,045) -- Revenue from hotel operations 2,440 2,885 7,597 -- Hotel operating expenses (1,838) (1,737) (6,277) Gross profit 8,452 13,886 45,471 -- General and administrative ex- penses (3,063) (1,598) (6,267) The increase compared to the three-month period ended March 31, 2025 stems primarily from fees related to: insurance, legal, audit and account- ing, internal audit, and banking. Debt restructuring charges (721) -- (1,508) -- Depreciation and amortization (144 ) (274) (964) -- Management fees (2,536) (3,665) (13,991) Until January 2026, the said management fees were paid to the Company's previous management company (Pacific Oak Capital Advisors, LLC), which was a related party. As of February 1, 2026, management services are provided by the new management company (Westdale Asset Manage- ment) and the new Management Accounting company (R2 Advisors LLC). For details, see Section 1.12.5 of Chapter A of the Company's 2025 peri- odic report. Impairment of fixed assets (Impairment property plant and equipment – hotel) -- -- (12,521) -- A-25 Item For the three months ending March 31 For the year ended Decem- ber31 The Company's Explanations for the Balances and the Material Changes 2026 2025 2025 Thousands of dollars Fair value adjustments of invest- ment real estate assets, net 5,381 (2,545) (266,810) The increase compared to the three-month period ending March 31, 2025, primarily resulted from an increase in the fair value of the Richardson Land property, against the background of entry into a sale agreement for total gross consideration of approximately USD 12.5 million, in respect of which an increase in fair value of USD 5.5 million was recognized. Goodwill Impairment -- -- (949) -- The Company's share of the losses of joint transactions that were not consolidated (5,420) (1,867) (92,794) The increase in share of the loss of joint transactions compared to the three- month period ending March 31, 2025 is primarily related to the share in 110 William Joint Venture, primarily related to the fair value loss, as a result of capital expenditures (CAPEX). Operating profit (loss) 1,949 3,937 (350,334) -- Other income (loss), net 4,270 557 (2,630) -- Finance income 1,678 286 1,380 -- Gain due to the deconsolidation of a subsidiary 595 -- -- Stems from the deconsolidation of the Madison Square property, following the company's determination that it lost control of the property as a result of the appointment of a receiver. Provision for guarantee obliga- tions (1,875) -- -- In connection with a guarantee for a loan of the Company’s subsidiary, Pacific Oak SOR US Properties LLC, related to the Madison Square prop- erty. Income (expenses) financing from Financial assets at fair value through profit and loss (4,571) -- 1,925 -- Financing expenses (20,307) (16,143) (76,136) -- Gain (loss) from disposal of debt -- -- 19,449 -- Rate differentials for foreign currency transactions (2,248) 5,984 (40,556) Attributable to changes in the NIS/USD exchange rates. Profit (Loss) before tax (20,509) (5,379) (446,902) -- Income taxes -- (890) 0 -- A-26 Item For the three months ending March 31 For the year ended Decem- ber31 The Company's Explanations for the Balances and the Material Changes 2026 2025 2025 Thousands of dollars Net profit (Loss) (20,509) (6,269) (446,902) -- Net profit (loss) attributable to the owner (20,796) (6,468) (443,500) -- Net profit (loss) attributable to non-controlling interests 287 199 (3,402) -- 3.3. Analysis of the liquidity and financing resources of the Company: Item For the three months ending March 31 For the year ended Decem- ber 31 The Company's explanations for the balances and the material changes 2026 2025 2025 Thousands of dollars Cash flow provided by (used in) Current Operations 898 7,995 25,085 The decrease compared to the three-month period ended March 31, 2025 last year stems primarily from the sale of the Georgia 400 Center property in July 2025 and the sale of the Crown Pointe property in November 2025. These properties were income-producing properties, and their disposition led to a decrease in cash flows from operating activities. Additionally, during the three-month period ended March 31, 2026, there were re- structuring charges of approximately USD 0.7 million and increases in general and administrative expenses of approximately USD 1.5 million. Cash flow (used in) provided by Investments (1,500) (5,429) 57,624 The decrease in cash used in investing activities compared to the three months ended March 31, 2025 stems primarily from a decrease in the volume of improve- ments (capital expenditures) on investment property. Cash flow used in Financing (1,763) (35,397) (125,667 ) The decrease in cash used in financing activities compared to the three-month pe- riod ended March 31, 2025 last year stems primarily from a decrease in interest and principal payments on the company's debts, in the amounts of approximately USD 11.9 million and approximately USD 22.0 million, respectively. Additionally, A-27 Item For the three months ending March 31 For the year ended Decem- ber 31 The Company's explanations for the balances and the material changes 2026 2025 2025 Thousands of dollars during the three-month period ended March 31, 2026, there were a release of re- stricted cash of approximately USD 6.6 million and proceeds from notes payable of approximately USD 1.2 million. The decrease in cash used was partially offset by receipts (consideration) in the amount of USD 8.0 million received from the owners during the three months ended March 31, 2025 last year. The effect of the changes in the Exchange rate on the cash and cash equivalent bal- ances -- (49) (938) -- A-28 3.4. Financing and Liquidity A. As of March 31, 2026, the Company has a working capital deficit of approxi- mately USD 590.9 million in the consolidated financial statements attributable to loans falling due within 12 months after the date of the statement of financial position, which were therefore classified as short-term loans. Such loans in- clude: (1) the debentures (Series B) in the amount of approximately NIS 388.3 million (approximately USD 122.7 million as of March 31, 2026) and the de- bentures (Series D) in the amount of approximately NIS 587 million (approxi- mately USD 185.5 million as of March 31, 2026), totaling (for the debentures (Series B and Series D)) approximately NIS 975.3 million (approximately USD 308.2 million as of March 31, 2026); (2) mortgage loans related to PORT's residential properties in the amount of approximately USD 187.9 million, which were refinanced after the reporting date of the financial statements; and (3) mortgage loans in the amount of approximately USD 317.4 million, which primarily include the loan from Bank of America in the amount of approxi- mately USD 152.6 million as well as the loan from the Whitehawk lender in the amount of approximately USD 80 million. B. The Company has a working capital deficit of approximately USD 336.9 mil- lion in the separate (solo) financial statements, resulting primarily from the de- benture payments as stated above. C. For the three-month period ended March 31, 2026, the Company has positive cash flow from operating activities in the consolidated financial statements, in the amount of approximately USD 0.9 million, and negative cash flow from operating activities in the solo financial statements, in the amount of approxi- mately USD 2.4 million. In this regard, see the following: (USD thousands) As of March 31, 2026 Adjustments (for a 12 month period) Total Current Assets 295,047 -- 295,047 Current Liabilities 885,915 -- 885,915 Surplus (Deficit) of Current Assets over Current Liabilities (590,868) -- (590,868) 3.5. Disclosure pursuant to Article 10 (b) (14) of the Periodic and Immediate Reports Regulations and Disclosure of Projected Cash Flow to Finance the Repayment of Company's Obligations 3.5.1. In the Company's consolidated financial statements as of March 31, 2026, a warning sign exists for the Company, as defined in Regulation 10(b)(14) of the Reporting Regulations, due to the opinion of the Company's independent auditors, which in- cludes an emphasis of matter regarding significant doubts as to the Company's ability to continue as a going concern. See Note 1 to the financial statements in this regard. Accordingly, the Company attaches a projected cash flow for the next two years. A-29 Such warning sign has existed since the Company's financial statements as of June 30, 2025. 3.5.2. As of the publication date of this report, in order for the Company to continue its ongoing operations, several actions must be completed in the near term, including refinancing loans and selling real-estate properties, all of which are subject to ap- provals under the Standstill arrangement and additional approvals of third parties. These plans are subject to changes according to market conditions in the commercial real-estate credit environment, the current interest-rate environment, leasing chal- lenges and transaction volumes in certain markets, the success of the arrangement process with the Company's debenture holders, and additional factors, and are not within the Company's control. Therefore, there is no certainty that the Company will be able to implement its plans and meet its existing and projected obligations when they mature. The uncertainty concerning the Company's plans may be mitigated through a potential sale of residential homes, the PORT Properties, and successful negotiations to reach an arrangement with the debenture holders and additional lend- ers. Since these plans are not within the Company's control and depend on third-party approvals as stated above, the Company's management and board of directors have concluded that there are material doubts as to the Company's ability to continue op- erating as a going concern. 3.5.3. The following are the principal working assumptions underlying the projected cash flow set out below: A. According to the Company's management, in properties in which the Company estimates that there is positive equity, it will be possible, subject to the success of negotiations with the lenders, to extend the maturity dates of the loans or to refinance them, including loans whose maturity dates have passed or that were classified as short-term loans in the Company's consolidated financial state- ments. B. The Company estimates that during the projected cash-flow period it will com- plete several sale transactions involving some of its income-producing real- estate properties and additional assets, as set out in this section below. C. The table below includes distributions from investee companies, both from re- tained earnings and from returns of capital investments. Based on the operating agreements of each such investee company, surplus funds are distributed to the partners in accordance with the distribution mechanism set out in the operating agreements. See in this regard the forward-looking information paragraph in Section 3.5.4 below. 3.5.4. Set out below is a table summarizing the projected cash flow for the next two years, in millions of dollars () () (): A-30 For the period from 04/2026 to 12/2026 For the period from 1/2027 to 12/2027 For the period from 1/2028 to 3/2028 Use thousands Cash balance at start of period 9.7 2.0 26.9 Cash flows from current operations Solo general and administrative expenses (3.8) (4.0) (0.8) Total cash flow from current operations (3.8) (4.0) (0.8) Cash flows from investment activities Net distributions from investee companies 3.0 102.2 59.0 Total cash flows from investment activities 3.0 102.2 59.0 Cash flows for financing activities Repayment to Creditors (7.0) (3.0) (74.0) Interest Payments on Debentures 0 (70.3) (9.1) Total cash flow for financing activities (7.0) (73.3) (83.1) Total net cash flow for the period (7.7) 24.9 (24.8) Cash balance at end of period 2.0 26.9 2.0 It should be noted that the projected cash-flow data above consist of the Company's solo data. () The cash flow described above does not include termination fees to the management company of the PORT Properties, Second Avenue Group, which the Company may be required to pay in an amount that it is unable to estimate as of the publication date of the report. This is because the amount of such termination fees, as well as the very need to pay them, is determined, among other things, by the circumstances of termination of the agreement, insofar as it is terminated, according to a mechanism derived from the per- formance of the PORT assets and according to the date of termination of the agreement. () It should be noted that assumptions relating to cash flow that will arise from the sale of residential homes held through PORT may change materially in light of the existing uncertainty in connection with such sales, including the nature of the sale, whether bulk or retail, the timing of the sale, CAPEX expenses, and debt- service costs until the sale. () The assumptions in the cash flow do not include sales of properties in sale processes led by the existing lenders of the properties, since the Company does not expect such sales to generate cash flow for it. (^) The value under "net distributions from investee companies" includes the net value of NOI, net operating income, together with financing costs. 3.5.5. Assumptions used in preparing the projected cash-flow report for two years from the date of the financial report: The Company is currently holding discussions with the representatives of the holders of the Company's Debentures, Series B and Series D, for the purpose of amending the debt terms, within the framework of a legal proceeding for approval of a debt A-31 arrangement between the Company and its creditors. Pursuant to the decision of the Tel Aviv District Court dated February 4, 2026, on April 30, 2026, a creditors' meet- ing was held whose agenda included approval of a debt arrangement pursuant to Sec- tion 85 of the Insolvency and Economic Rehabilitation Law, -2018. For details re- garding the proposed debt arrangement and said creditors' meeting, see the Compa- ny's immediate report dated April 7, 2026, reference no. 2026-01-032324, the con- tents of which are included in this report by way of reference. In addition, for details regarding the results of the said creditors' meeting, as received from the trustee for the holders of the Company's debentures, see the Company's immediate report dated May 1, 2026, reference no. 2026-01-040454, Furthermore, for details regarding the text of the debt restructuring agreement, which was attached to the disclosure report pursuant to Regulation 37K of the Securities Regulations, and regarding the Tel Aviv District Court’s decision dated May 24, 2026, in connection with the debt restructur- ing, see the Company’s immediate reports dated April 26, 2026 (Reference No. 2026- 01-038064) and May 24, 2026 (Reference No. 2026-01-047593), the information therein is incorporated in this report by reference. It should be noted that, in the assumptions set out below, the Company assumed that the holders of the Company's debentures will not object to said actions and will not declare the Company's debt immediately due and payable, even if grounds for de- claring the Company's debt immediately due and payable exist during the projected cash-flow period. Under the proposed arrangement, the repayment date of the De- bentures, Series B, and the Debentures, Series D, as well as the repayment date for the rest of the Company's creditors, is set for June 30, 2028, in one payment, subject to the provisions regarding mandatory early redemption. It should be noted that the said projected cash flow reflects the operating principles and assumptions that were also set forth in the proposed debt restructuring, as stated above, as well as the company's operating assumptions regarding negotiations with lenders and regarding the realization values of the company's properties. The projec- tions are highly sensitive to changes in market conditions, the execution of property realizations, lenders' decisions, and additional uncertainties, which may cause actual results to differ materially from the presented projections. (1) Net cash expected to be received by the Company from investee companies: This item includes the Company's share of cash expected to be received from the sale of assets of investee companies after interest expenses on the loans in the properties and operating expenses. For the period from 4/2026 to 12/2026: - These distributions mainly include approximately USD 5.7 million from the sale of land parcels in Park Highlands, which will arise from the sale transaction of such parcels for consideration of approximately USD 52.3 million, of which approximately USD 45 million will be used for a relative A-32 repayment of the WhiteHawk loan as part of the release of the areas from the said loan, and transaction costs of approximately USD 1.6 million. - Approximately USD 4.8 million from the sale of S-REIT shares, financial assets, that their sale was completed after the reporting date of the financial statements. - Approximately USD 9.5 million that will arise from the sale of 390 resi- dential homes, held through PORT, for consideration of approximately USD 67.7 million, and from an increase of the refinanced and upsized loan on the PORT Properties in the amount of approximately USD 3.4 million. Out of the said sale consideration, approximately USD 54.9 million will be used for a relative repayment of existing loans in the properties, and approximately USD 6.7 million will be used for transaction costs. For the period from 1/2027 to 12/2027: These distributions mainly include: - Approximately USD 20.8 million that will arise from the sale of an addi- tional 1,189 residential homes, held through PORT, for consideration of approximately USD 206.4 million. Out of said sale consideration, approx- imately USD 165.2 million will be used for repayment of existing loans and related interest in the properties, net of distributable amounts and ap- proximately USD 20.4 million for transaction costs. It should be noted that after the year ending December 31, 2027, the Com- pany estimates that additional cash flow will arise from the sale of the re- maining residential homes, which at that time are not expected to be en- cumbered by debt. - Approximately USD 23.4 million from the sale of the remaining land areas in Park Highlands, which will arise from the sale transaction of such areas for consideration of approximately USD 49.9 million, of which approxi- mately USD 25 million will be used to repay the WhiteHawk loan as part of the release of the areas from the said loan, and for transaction costs of approximately USD 1.5 million. - Distributions in the amount of approximately USD 63.6 million that will arise from the joint venture holding the 110 William property, from the sale transaction of the said property for estimated total consideration of approximately USD 422.1 million, of which approximately USD 326.3 million will be used to repay the existing loans in the property, as well as additional debt service and transaction costs in the amounts of approxi- mately USD 17.6 million and USD 7.6 million, respectively. The distribu- tion is based on the Company's effective holding rate in the property, which is 90%. For the period from 1/2028 to 03/2028: A-33 The distributions from investee companies derive mainly from: - A total of approximately USD 34.2 million from the sale of the Eight & Nine Corporate Center in return for approximately USD 55 million, of which approximately USD 19.1 million will be used for the repayment of an existing loan on the property as well as transaction costs of approxi- mately USD 1.7 million. - Approximately USD 17.7 million that will arise from the sale of an addi- tional 150 residential homes, held through PORT, for consideration of ap- proximately USD 26 million. Out of the said sale consideration, approxi- mately USD 2.6 million will be used for transaction costs and approxi- mately USD 5.7 million for debt service. The assumption is that the senior loan in the PORT assets will be repaid during 2027, so that in the first quarter of 2028 there will be no mortgage on the PORT assets. The assumptions and projected cash flow detailed above constitute forward-looking information, as defined in the Securities Act, -1968, including, among other things, forecasts, assessments, estimates, and other information relating to future events or matters whose realization is uncertain and does not depend solely on the Company, but on many additional factors that are not under its control, including receipt of the debenture holders' approval for sale and financing transactions. These estimates are based on the information currently available to the Company regarding its activity, the Company's past experience, and dialogue and negotiations being held with lend- ers, potential purchasers, and brokers, as applicable. The said information may not materialize at all or may materialize differently from what is stated above if the con- tacts and negotiations described above do not mature on the timetable set out above or do not mature at all into binding sale agreements and sale transactions, as applica- ble, for various reasons, including adverse changes in the markets and areas of activ- ity in which the properties are located and due to the realization of the risk factors detailed in Section 1.18 of Chapter A of the 2025 annual report. It is also possible that the assumptions in the cash flow will not materialize because the proposed debt arrangement is not approved. It should further be noted that, in light of existing breaches of the terms of loan agree- ments in connection with the Company's properties, as stated in Section 1.1.2.7 of Chapter A of the 2025 annual report, the Company may be required to carry out forced sales of properties, which may result in the consideration for the sale of such properties being lower, even materially lower, than the fair value of the properties as of the date of this report. With respect to property sales, the sale of residential homes held through PORT may change materially in light of the existing uncertainty in connection with such sales, including the nature of the sale, whether bulk or retail, the timing of the sale, CAPEX expenses, and debt-service costs until the sale. A-34 In this context, as follows from the foregoing, based on the information available to the Company as of the date of this report, according to the cash-flow forecast prepared by the Company as described above, and based on the information available to it as of the date of the report, the Company will not have sufficient amounts to fully repay its obligations to its creditors, including the holders of the Company's debentures. 3.5.6. Further to the existing uncertainties presented after the assumptions for the projected cash flow in Section 3.5.5 above, see below the Company's estimates regarding the possible effects of the foregoing on the Company's equity: Amount Notes Equity as of March 31, 2026 60 Adjustments: Investment real estate assets () (68 ) Adjustment in respect of the possible sale of properties in the framework of accelerated sale processes as described above. Investments in associates (Joint Ventures) (23) Adjustment in respect of possible transaction costs for the sale of the 110 William property, and adjustment in respect of the lack of marketability of the Company's holdings in the Opportunity Zone. Transaction costs (36) Adjustment in respect of expected transaction costs for the sale of all residential properties held through PORT, the sale of 8&9 Corporate Center, and the Park Highlands lands. Equity after adjustments (*) (67) () It should be noted that there is uncertainty regarding the consideration that may arise from the sale of the PORT Properties and the properties pledged in favor of Bank of America, in light of the high pace of sales required under the terms of the new loan in PORT, as well as contacts for entering into a forbearance agreement with Bank of America for the properties pledged to it. The assumption with respect to these properties is that the sale price will not exceed the amount of the debt to the lender. (*) The adjustments to equity do not include financing expenses, including the effect of exchange rates, capital investments in the PORT Properties, and operating profit/loss. In addition, the adjustments above do not include termination fees to the management company of the PORT Properties, Second Avenue Group, which the Company may be required to pay in an amount that it is unable to estimate as of the publication date of the report. This is because the amount of such termination fees, as well as the very need to pay them, is determined, among other things, by the circumstances of termination of the agreement, insofar as it is terminated, according to a mechanism derived from the per- formance of the PORT Properties and according to the date of termination of the agreement. A-35 3.6. FFO (Funds from Operations) Below are the FFO results the net reported profit after deducting non-recurring in- come and expenses (including gains and losses from the sale of properties, adjust- ment of the fair value of investment properties and changes in percentage holdings in investee companies) with the addition of the share of amortizations of the Com- pany, which is a parameter commonly used by analysts to analyze the results of in- come-producing property companies. It is emphasized that FFO: (a) does not represent cash flows from operating activities in accordance with gen- erally accepted accounting principles; (b) Does not reflect cash held by the Company and its ability to distribute the cash; (c) Does not replace the net reported profit; (d) Is not data audited nor reviewed by the auditors of the Company The Company believes that subject to and in addition to its financial statements, the FFO adequately reflects another aspect of the Company's operating results, and offers a basis for comparison between the Company's operating results in a specific period and those in prior periods, and between the Company's operating results and those of other income-producing property companies. Following are Company's FFO figures: FFO () For the three-month period ending March 31 For the year ended December 31, 2025 Increase (de- crease) March 31, 2026 vs. March 31, 2025 2026 2025 (USD thousand) Net Profit (loss) (20,509) (6,270) (446,902) (12,364) Adjustments: According to the provisions of the fourth addition to the Securities Regulations (Prospectus Information and Draft Prospectus – Structure and Form), 5729-1969 Neutralized Secondary Operations (Ho- tel) 204 (733) 2,538 937 Gains and Losses from Reappraisals of Investment Real Estate (5,381) 2,545 266,810 (7,926) One-time or Extraordinary Expenses 1,280 -- (18,500) 1,280 Loss or disposal of loss from deprecia- tion in accordance with IAS 36 (includ- ing depreciation of investments valued at book value) or gains from distressed ac- quisitions -- -- 12,521 -- Gain/Loss from changes in the fair value or sale of financial instruments 4,571 -- (1,925) 4,571 One-time tax expenses8 -- 890 - (890) Adjustments (detailed above) for associ- ated companies or joint ventures pre- sented at book value 3,192 (359) 86,767 3,551 8 Due to the sale of the Park Highlands lands. A-36 FFO () For the three-month period ending March 31 For the year ended December 31, 2025 Increase (de- crease) March 31, 2026 vs. March 31, 2025 2026 2025 (USD thousand) FFO according to the ISA's approach (16,643) (3,927) (98,691) (12,716) Adjustments due to non-controlling rights' share of FFO (307) (27) (1,925) (280) FFO according to the ISA's approach attributed to Company's shareholders (16,950) (3,954) (100,616) (12,996) Of which: FFO from current opera- tions (16,950) (3,954) (100,616) (12,996) Adjustments due to non-controlling rights' share of FFO 0 0 0 0 FFO according to the ISA's approach attributed to Company's shareholders (16,950) (3,954) (100,616) (12,996) Of which: FFO from current opera- tions according to the ISA's approach attributed to Company's shareholders (16,950) (3,954) (100,616) (12,996) * FFO does not constitute a financial index based on generally accepted accounting guidelines; this index is calculated pursuant to the instructions of the Israel Securities Authority; the index represents net accounting profit for the period, after neutralizing one time income and expenses (including gains or losses from the reappraisal of properties), property sales, depreciation and deductions and other types of gains; use of this index is generally accepted when reviewing the performance of income generating real estate companies; required adjustments from the accounting profit are detailed in this table. A-37 3.7. Net Operating Income (NOI) Below is information with respect to the Net Operating Income (NOI) (profit from property rental and operation thereof) of the Group: The management of the Company estimates that the NOI data is one of the most important parameters in valuating income-producing real estate. The result of divid- ing this by the customary discount rate in the geographical area in which the property is located ("Cap Rate") is one of the indicators for determining the value of the prop- erty (in addition to other indicators, such as: the market value of similar properties in the area, the sale price per square meter built from recent transactions, etc.). In addi- tion, the NOI data is used to measure the free cash flow available for service of a financial debt taken to finance the purchase of the property, while investments in renovations and maintenance of the current property are deducted from the total NOI. It should be noted that NOI: (a) does not reflect cash flow provided by current operations in accordance with GAAP; (b) does not reflect cash available for financing all of the Group's cash flows, in- cluding its capacity to make distributions; (c) should not be considered a substitute for net income, in evaluating the Group's operating results. (d) is not audited nor reviewed by the auditors of the Company. Below is NOI information for the Company (not including its pro-rata share of NOI of associates and jointly-controlled entities): NOI For the three-month period ending March 31 For the year ending December 31, 2025 2026 2025 USD thousands 8,452 13,886 45,471 A-38 Part Two – Corporate Governance 4. General Pursuant to Section 39a(a) of the Securities Act (hereinafter: "Section 39a"), the pro- visions of the Companies Act and the regulations set forth in the Securities Act, 1968 (hereinafter: "The Securities Act") apply to companies incorporating outside of Is- rael and which has offered its shares or warrants to the Israeli public, all as set forth in the Fourth Addition (Part B) to the Securities Act. Whereas Company's noncon- vertible warrants have been offered to the Israeli public by way of a prospectus, and have been listed for trading on the Exchange, pursuant to Israeli law, as described above, the provisions of Section 39a apply to the Company, and therefore various provisions of the Companies Act apply to it (including provisions pertaining to the appointment of external directors, and internal auditor and an audit committee) as detailed in Part B of the Fourth Addition to the Securities Act, and these provisions apply in addition to the provisions set forth in Company's incorporation documents and the laws of the British Virgin Islands. Pursuant to the 2019 Shelf Prospectus, (as the term is defined in the above Section A – Descriptions of the Entity's Business) in September 2019, the Insolvency and Fi- nancial Rehabilitation legislation, 2018 (hereinafter: "the Insolvency Law") came into effect, which includes, inter alia, instructions which have replaced certain sec- tions contained in Corporate law regarding compromises and settlements (including Mark C, in Section G, Chapter 2, which deals with financial rehabilitation, as well as Section 3, Part 10, which concerns approval of a material debt settlement by a de- bentures company), which applies as of the date the Insolvency Legislation came into effect. 4.1. Charitable Contributions The Company does not have a current permanent policy with regard to charitable donation nor does it have any existing commitment to make charitable donations in the future. During the report period, the Company did not make any material dona- tions. 4.2. Composition of the Board of Directors As of the reporting date, the Company's board of directors includes (4) directors, all of whom have accounting and financial expertise: - Mr. Ronen Nakar, Chairman of the Board of Directors and CEO of the Com- pany; - Mr. Ron Hadassi, external director; - Ms. Varda Klal, external director; A-39 - Mr. Itay Dayan, external director. Changes in the composition of the board of directors For details regarding the notice of Mr. Ron Hadassi, an external director of the Com- pany, of his intention to terminate his tenure as an external director of the Company shortly after the publication of the Company’s financial statements as of March 31, 2026, see the Company’s immediate report dated February 5, 2026 (Reference No.: 2026-01-013083), the information of which is incorporated herein by reference. Note that on June 1, 2026, after the report date, Mr. Izhak David Lax was appointed to serve as a director of the Company, with his term to commence on June 1, 2026. For further details, see the Company's immediate report dated May 13, 2026 (Refer- ence No.: 2026-01-044169), the information from which is incorporated into this re- port by reference. For details regarding changes in the composition of the board of directors in January 2026, see Section 3(a) of Chapter B of the 2025 annual report. 4.3. Directors with accounting and financial expertise At the meeting of the Board of Directors on March 28, 2016, the Board of Directors decided, under Article 92(a)(12) of the Companies Law, that the appropriate mini- mum number of directors with accounting and financial expertise, including external directors (which will be appointed in accordance with the provisions of the Compa- nies Law) is two (including external directors (hereinafter: the "Appropriate Mini- mum Number"). The Appropriate Minimum Number was determined while taking into consideration, among other things, the size of the Company, its areas of activity and the nature of the accounting and financial issues arising from the examination of the financial position of the Company as well as the preparation and approval of its financial statements. In this regard, it should be noted that at the date of the Report, all four of the Company's directors possess accounting and financial expertise, as detailed in Section 4.2 above. 4.4. Independent Directors The Company articles do not include any provision in regard to the number of inde- pendent Directors. As of the date of the report the Company has three external direc- tors and no independent directors. A-40 Part Three – Disclosure provision in connection with the finan- cial reporting of the corporation 1. Critical accounting estimates With regard to critical accounting estimates, see note 3 to the consolidated financial statements of the Company as of March 31, 2026. 2. Highly Material Appraisers All of Company's properties have been appraised by Kroll, Inc. (previously: Duff & Phelps) and Colliers International Valuation and Advisory Services, LLC, save for Company's single-family properties (the PORT properties), appraised by House Ca- nary. Note that all of the aforementioned appraisers are independent of the Company. A. Kroll, Inc. (previously: Duff & Phelps) is a financial services consultation firm which providing financial consulting and investment banking services. Among other things, Kroll specializes in appraisals in major real estate cities and mar- kets in the US in a variety of real estate segments (office, residential, hotels, industry, healthcare, commerce, and retail) for business clients. Kroll employs approximately 5,000 people and provides services in over 100 nations. B. Colliers International Valuation and Advisory Services, LLC specializes in ap- praisals in major real estate cities and markets in the US in a variety of real estate segments (office, residential, hotels, industry, healthcare, commerce, and retail) for business clients such as financial institutions, real estate corpora- tions, contractors, investors, entrepreneurs and legal firms. Colliers employs approximately 17,000 people working in 62 branches and offices around the world. C. House Canary specializes in appraisals of various real estate properties in major cities and markets in the US for private and corporate clients such as financial institutions, real estate corporations, contractors, investors, and entrepreneurs. The House Canary appraisal model is autonomous and is based on, and backed by, machine learning technology and a large variety of data sources. For details on Material and Highly Material appraisals of Company properties, see Sections 1.7.8-1.7.9 to Chapter A of the 2025 Periodic Report and Section 3 of Part 4 of Chapter B (Report of the Board of Directors) of the 2025 Periodic Report. 3. Guarantees to ensure repayment of obligations by borrowing entities Further to the contents of Section 1.11.2 a of Company's 2024 Periodic Report, fol- lowing are details of the financial guarantees (guarantees of the obligations of lenders as part of loan agreements, including payment of principal and interest, which are at times limited in amount) (hereinafter: "Financial Guarantees") granted by A-41 Company's Investee Companies as part of loan agreements on its properties as of around the date of the release of this report: - Pacific Oak SOR Properties LLC (a 100%-owned subsidiary of the Company) provided a full financial guarantee (in the amount of 100% of the loan princi- pal) in connection with the loan in respect of the Madison Square property. It should be noted that until October 7, 2021, such guarantee was provided by Pacific Oak SOR US Properties II LLC (another 100%-owned subsidiary of the Company), and from such month, as part of an update to the loan terms, the said guarantee was assigned to Pacific Oak SOR US Properties LLC. It should be noted that a guarantee of this kind was also provided in connection with the Lincoln Court property, the sale of which was completed after the date of the statement of financial position. For details, see Section 2.5 above. - Pacific Oak SOR Equity Holdings X LLC (a 100%-owned subsidiary of the Company that indirectly holds rights in the Company's single-family residen- tial properties) provided full financial guarantees (in the amount of 100% of the loan principal) in connection with two of the four loans which existed in respect of the PORT properties. Such loans were repaid in full after the report- ing date of the financial statements as part of a refinancing. For details, see Section 2.3 above. - In addition to the foregoing, in July 2025 Pacific Oak SOR Properties LLC and Pacific Oak SOR US Properties II LLC provided full financial guarantees for all the obligations of the borrowing entities under the loan granted in connec- tion with the properties Park Highlands, Richardson lands, and 210 West 31st, totaling approximately USD 80 million. For details regarding the guarantee and the terms of the aforementioned loan, see Appendix A below (Material Loans). 4. Additional information on the Company's restricted cash Following is a detail of Company's restricted cash, by property: Restricted Cash: Certain cash balances are subject to contractual or enforceable restrictions and are therefore not available for general corporate and operating purposes. Restricted cash primarily consists of (i) lender-controlled cash management accounts associated with loans in default and (ii) lender-required impound, reserve and escrow accounts established under the Company’s bor- rowing arrangements (iii) non-lender escrows for future commitments. These balances may only be used for purposes specified in the applicable loan agreements or other escrow arrangements. Entity Restricted Cash Balance Q&C Hotel 1,104 Richardson Portfolio 1,127 Park Centre 35 The Marq 5,514 Oakland City Center 1,193 A-42 1180 Raymond 692 Lincoln Court (1) 1,132 PORT 6,530 Eight & Nine Corporate Centre 7,029 Park Highlands (2) 14,147 BVI Corporate 4,251 Other 1,226 Total (3) 43,980 (1) Lincoln Court was sold subsequent to March 31, 2026. Due to the default provisions under the related mortgage loan agreement, the restricted cash balance was remitted to the lender. (2) Park Highlands restricted cash balance is primarily related to interest reserves related to the WhiteHawk loan and escrowed funds for construction obligations. (3) Restricted cash related to Madison Square was excluded from the Company’s consolidated balance as a result of the property entering into a receivership in March 2026. 5. Legal Proceedings As of the date of publication of this report, there are no material legal proceedings pending against the Company or its controlled entities, except as detailed below: For details regarding a motion to certify a Class Action filed against the Company and members of its Board of Directors, submitted to the Economic Department of the Tel Aviv District Court and received by the Company on September 11, 2025, see the Company's report dated September 11, 2025 (reference number: 2025-01- 068917). For details regarding notices received by the Company concerning lawsuits filed by the lender against the property entities holding the Highlands Park lands, seeking declaratory reliefs and orders regarding the breach of the loan agreement and its lien rights, as well as the temporary injunction issued by the court with the parties' consent in connection with the Highlands Park lands, see the Company’s immediate report dated May 24, 2026 (Reference No.: 2026-01-047562), the information of which is incorporated herein by reference. A-43 Part Four – Specific Disclosure to the Company's Deben- ture Holders Materialization of grounds for calling Company's debentures for im- mediate repayment On March 31, 2026, further to the report of the Trustee for Company's Series B and D Debentures regarding the results of an assembly of Series B and Series D debenture holders in which Holders resolved to object to the proposed transaction for sale of the PORT properties, S&P Global Ratings Maalot, LTD announced that it was down- grading Company's issuer's rating to ilB (in lieu of ilBBB) and maintaining its inclu- sion on a negative watchlist, as well as a downgrade of the rating of Company's un- secured Series B and D debentures to ilB (in lieu of ilBBB) and maintaining their inclusion on a negative watchlist. Due to the aforementioned downgrading of the ratings of Company's debentures, grounds have arisen for Series B and D debenture holders, as applies, to call Series B and D debentures for immediate repayment, as set forth in Section 8.1 of the deeds of trust for Series B and D debentures. For details, see Company's March 31, 2026 immediate report (Reference Number: 2025-01-073499), the contents of which are included in this report by way of refer- ence. In addition, on February 17, 2026, S&P Global Ratings Maalot announced that, at the Company's request, it was discontinuing the rating of the Company and its de- bentures, so that as of shortly before the publication date of this report, the Company and its debentures are not rated. Immediately prior to such rating discontinuation, the Company and its debentures were rated 'ilCCC' due to the increased risks of a default event. Further to the aforementioned, as described in this current section, below, beginning with Q3/25, the Company has violated the financial covenants in accordance with the deeds of trust of Company's Series B and D debentures for two consecutive quar- ters. As a result of the failure to comply with the financial covenants, grounds have arisen for Series B and D debenture holders, as applies, to call Series B and D deben- tures for immediate repayment, as set forth in Section 8.1 of the deeds of trust for Series B and D debentures. See also Company's immediate report published in tandem with this report. In addition, the review reports and opinions, as applicable, of the Company's auditors that were attached to the Company's financial statements beginning with the Compa- ny's financial statements as of June 30, 2025, included and include, as applicable, an emphasis of matter regarding significant doubts concerning the Company's continued existence as a going concern, in a manner that grants the holders of the debentures, Series B and Series D, as applicable, the right to declare the debentures, Series B or Series D, as applicable, immediately due and payable, as stated in Section 8.1 of the trust deeds. A-44 6. Below are details of the Debentures (Series B, Series C, and Series D) issued by the Company, which are held by the public as of the publication date of the report: Debentures (Series B) Debentures (Series D) Is the debenture series material (as the term is defined in Regulation 10(b)(13)(a) of the Reports Regula- tion Yes – Material Debenture series Yes – Material Debenture series Date of issue February 16, 2020 April 25, 2024 Series Expansion Date October 31, 2021 – series expansion as part of a public offering pursuant to a Shelf Offering Report November 7, 2021 – series expansion as part of a private allot- ment May 2, 2022 – series expansion as part of a private allotment August 20, 2024 – series expansion by way of a public offering in accordance with a shelf offering report Par value on the date of issue (ILS thousands) 254,055 288,103 Par value on the date of series expan- sion (ILS thousands) October 31, 2021 – 790,411 November 7, 2021 – 844,055 May 2, 2022 – 1,164,479 August 20, 2024 – 587,063 Par value as of March 31, 2026 (ILS) 388,237 587,063 Linked par value as of March 31, 2026 (ILS thousands) The debentures are not index-linked The debentures are not index-linked The amount of accrued interest plus linkage differences (ILS thousands) as of March 31, 2026 13,407 37,670 Value in the financial statements as of March 31, 2026 (ILS thousands), in- cluding interest payable. 401,644 624,732 Stock exchange value as of March 31, 2026 (ILS thousands) 197,225 289,070 Type of interest rate and date of pay- ment thereof As of close to this report's publication date – the annual interest rate on Debentures (Series B) is 5.18%. Following is an explanation regarding the interest rate: The Fixed interest rate – 3.93%. As of close to this report's publication date – the annual interest rate on Debentures (Series B) is 11%. Following is an explanation regarding the interest rate: The Fixed interest rate – 9.5%. A-45 Debentures (Series B) Debentures (Series D) Beginning December 8, 2024, the interest rate was adjusted to 4.18% due to a downgrade of one notch in the rating of the de- bentures. Beginning March 3, 2025 the interest rate was adjusted to 4.43% due to a downgrade of an additional notch in the rating of the debentures. Beginning July 7, 2025, the interest rate was adjusted to 5.18% due to a downgrade of one notch in the rating of the debentures. The interest is to be paid in two annual payments – on July 31, 2020 and on January 31 and July 31 of each year between 2021 to 2026, beginning on July 31, 2020 and ending on January 31, 2026 (inclusive), except for the first interest period9. Interest is subject to adjustments in the event of a change in the rating of Debentures (Series B) and/or failure to comply with financial covenants. Beginning December 8, 2024, the interest rate was adjusted to 9.75% due to a downgrade of one notch in the rating of the de- bentures, as described below. Beginning March 3, 2025 the interest rate was adjusted to 10% due to a downgrade of an additional notch in the rating of the debentures. Beginning March 31, 2025 the interest rate was adjusted to 10.5% due to non-compliance with the minimum equity cove- nant set forth in Section 5.3 of the Deed of Trust. Beginning July 7, 2025, the interest rate was adjusted to 11% due to a downgrade of one notch in the rating of the debentures. The interest is to be paid in two annual payments – on August 31 of each year between 2024 to 2028 and on February 28 of each year between 2026 to 2029, beginning on August 31, 2024 and ending on February 28, 2029 (inclusive), except for the first interest period10. Interest is subject to adjustments in the event of a change in the rating of Debentures (Series D) and/or failure to comply with financial covenants. Rating downgrade of December 8, 2024 On December 8, Maalot announced it was downgrading the rat- ing of Series B debentures from ilAA- to ilA+, which had impli- cations for the aforementioned rating increase of Series B de- bentures11. On December 8, Maalot announced it was downgrading the rat- ing of Series D debentures from ilAA- to ilA+, which had impli- cations for the aforementioned rating increase of Series D de- bentures, as detailed above12. Rating downgrade of March 2, 2025 On March 3, 2025, Maalot announced it was downgrading the rating of Series B debentures from ilA+ to ilA, which had On March 3, 2025, Maalot announced it was downgrading the rating of Series D debentures from ilA+ to ilA, which had 9 In this regard, "First Interest Period" – beginning on February 16, 2020, and ending on July 31, 2020. 10 In this regard, "First Interest Period" – beginning on April 25, 2024, and ending on August 31, 2024. 11 For details, see Company's immediate reports of December 8, 2024 (Reference Number: 2024-01-622870 and 2024-01-622869, respectively), the contents of which are included in this report by way of reference. 12 For details, see Company's immediate reports of December 8, 2024 (Reference Number: 2024-01-622870 and 2024-01-622869, respectively), the contents of which are included in this report by way of reference. A-46 Debentures (Series B) Debentures (Series D) implications for the aforementioned rating increase of Series B debentures13. implications for the aforementioned rating increase of Series D debentures14. Rating downgrade of July 6, 2025 On July 6, 2025, Maalot announced the downgrading of its Se- ries B Debentures from ilA to ilBBB, which affected the increase of the debenture rating (Series B) as stated above15. On July 6, 2025, Maalot announced the downgrading of its Se- ries D Debentures from ilA to ilBBB, which affected the in- crease of the debenture rating (Series D) as stated above16. Rating downgrade of September 30, 2025 On September 30, 2025, Maalot announced it was downgrading the rating of Series B debentures from ilBBB to ilB17. Note that due to the aforementioned rating downgrade, grounds have materialized for holders of Series B debentures to call Se- ries B debentures for immediate repayment, as set forth in Sec- tion 8.1 of the Series B debentures Deed of Trust. On September 30, 2025, Maalot announced it was downgrading the rating of Series D debentures from ilBBB to ilB18. Note that due to the aforementioned rating downgrade, grounds have materialized for holders of Series D debentures to call Se- ries B debentures for immediate repayment, as set forth in Sec- tion 8.1 of the Series D debentures Deed of Trust. Interest increase due to a failure to comply with financial covenants As noted in Company's August 31, 2025 immediate report as well as in the below Section 5.8, the Company is not in compli- ance with its financial covenants. Note that beginning July 7, 2025, Series B and D debentures bear the Maximum Additional Interest Rate in accordance with the provisions of Sections 5.2 and 5.3 of Company's deeds of trust, and therefore, the violations set forth in this immediate report shall not entitle holders of Company's debentures to interest rate additions. On March 31, 2025 Company announced it was not in compli- ance with the consolidated equity covenant set forth in Section 5.3 of the Series D Deed of Trust, which had implications for the aforementioned increase of the interest rate on Series D deben- tures19. As noted in Company's August 31, 2025 immediate report as well as in the below Section 5.8, the Company is not in compli- ance with its financial covenants. Note that beginning July 7, 2025, Series B and D debentures bear the Maximum Additional Interest Rate in accordance with the provisions of Sections 5.2 and 5.3 of Company's deeds of trust, and therefore, the violations 13 For details, see Company's immediate reports of March 3, 2025 (Reference Number: 2025-01-014001 and 2025-01-014005, respectively), the contents of which are included in this report by way of reference. 14 For details, see Company's immediate reports of March 3, 2025 (Reference Number: 2025-01-014001 and 2025-01-014005, respectively), the contents of which are included in this report by way of reference. 15 For details, see the Immediate Report of July 6, 2025 (Ref. No. 2025-15-049073), the information according to which is incorporated in this report by way of reference. 16 For details, see the Immediate Report of July 6, 2025 (Ref. No. 2025-15-049073), the information according to which is incorporated in this report by way of reference. 17 For details, see the report dated September 30, 2025 (Reference Number: 2025-15-073415), the contents of which are included in this report by way of reference. 18 For details, see the report dated September 30, 2025 (Reference Number: 2025-15-073415), the contents of which are included in this report by way of reference. 19 For details, see Company's immediate report of March 31, 2025 (Reference Number: 2025-01-022634), the contents of which are included in this report by way of reference. A-47 Debentures (Series B) Debentures (Series D) set forth in this immediate report shall not entitle holders of Company's debentures to interest rate additions. Dates of payment of the principal Repayable in three (3) annual payments on January 31 of each of the years 2024 to 2026, in such a way that each of the first two payments constitutes 33.33% of the principle of the face value of the Debentures (Series B), while the third and final pay- ment constitutes 33.34% of the principle of the face value of the Debentures (Series B). Repayable in three (3) annual payments on February 28 of each of the years 2027 through 2029 (…

Document text

EX-99.3 · pacificoak-q12026xbodrep.htm

EX-99.3
 4
 pacificoak-q12026xbodrep.htm
 EX-99.3

 3857 Birch St Newport Beach, CA 92660-2616 Quarterly Report - 2026 PACIFIC OAK SOR (BVI) HOLDINGS, LTD.As of March 31, 2026 CITY TOWER Including: Chapter C - Director Statements Chapter B - Financial Statements as of March 31, 2026 Chapter A - BOD Report of Company’s Business. A-1 PACIFIC OAK SOR (BVI) Holdings Ltd. (the "Company") The Board of Directors of the Company hereby submits the Board of Directors Report of the Company for the three-month period ending March 31, 2026 (hereinafter: the 'Reported Period" or the "Report Period). The review is limited in scope and relates to events and changes that have occurred in the state of the affairs of the Company in the Reported Period. The report is prepared under the assumption that the readers are in possession of the Board of Directors' Re- port on the affairs of the Company as of December 31, 2025, which was attached to the 2025 Periodic Report of the Company1 and which is presented in this report by way of reference (hereinafter: the "2025 Periodic Report"). As of the date of publication of the report, grounds exist for declaring Series B and D debentures immediately due and payable. For details, see Part E below, Dedicated Dis- closure to the Company's debenture holders. It should be noted that on February 17, 2026, S&P Global Ratings Maalot Ltd. an- nounced the discontinuation of the rating of the Company's debentures. For details, see the notice by Maalot, reference no. 2026-15-015594. 1 Published on April 16, 2026 (reference number: 2026-01-035767). A-2 Part One – A brief description of the Company and the business environment thereof 1. The Company and the business environment thereof A. The Company was incorporated on December 18, 2015 as a private company limited by shares, in accordance with the provisions of the British Virgin Is- lands (BVI) Business Companies Act, 2004, for the purpose of raising debt from the public in Israel through the issuance of Debentures, not convertible into shares, on the Tel Aviv Stock Exchange Ltd. B. As of the date of this report, the Company has two series of Debentures; De- bentures (Series B), the balance of which as of the date of this report's release totals ILS 388,237,587 par value, and Debentures (Series D), the balance of which as of the date of this report's release totals ILS 587,063,000 par value. For more details on the Debentures (Series B), and Debentures (Series D) see the dedicated disclosure to debentures holders in Part Four below. 2. Events during and after the reporting period 2.1. Creditors' meeting of the Company for approval of a debt arrangement On April 30, 2026, a creditors' meeting of the Company was held for the approval of a debt arrangement, which was published in the Company's immediate report dated April 17, 20262. For details regarding the results of the said creditors' meeting, as received from the trustee for the holders of the Company's debentures, see the Com- pany's immediate report dated May 1, 2026, reference no. 2026-01-040454, the con- tents of which are included in this report by way of reference. Furthermore, for details regarding objections and responses filed with the Court concerning the approval of the debt restructuring, see the Company’s immediate re- ports dated May 18, 19, and 24, 2026 (Reference Nos. 2026-01-045945, 2026-01- 046241, and 2026-01-047330), the information therein is incorporated in this report by reference. On May 24, 2026, subsequent to the report date, the Tel Aviv District Court rendered its decision, according to which, insofar as the debt restructuring is approved, a re- structuring administrator will be appointed, whose powers will not be limited solely to reviewing the debt claims of the objectors. Within its decision, the Court granted the Bond Trustee three days to notify whether it stands by its petition to approve the proposed debt restructuring, or whether it will seek to advance a motion for an order to commence proceedings under Chapter B. On May 25, 2026, this deadline was extended until June 3, 2026, and therefore, as of the publication date of this report, the Court’s decision on the matter has not yet been rendered. For further details, see 2 Reference: 2026-01-035898, the contents of which are included in this report by way of reference. A-3 the Company’s immediate report dated May 24, 2026 (Reference No. 2026-01- 047593), the information therein is incorporated in this report by reference. The text of the debt arrangement was attached to a disclosure report pursuant to Reg- ulation 37K of the Securities Regulations, which the Company published on April 26, 2026, reference no. 2026-01-038064, the contents of which are included in this report by way of reference, (hereinafter: the "Debt Arrangement". In summary, it includes, among other things, the provisions set out below regarding the amendment of the debt terms for debenture holders. A. Amendment of the debt terms for the debenture holders The payment dates of the principal of Series B and Series D Debentures will be consolidated and will be paid according to the new amortization schedule. The payment dates in the new amortization schedule will apply to all creditors. During the period from August 1, 2025, until the Completion Date, as this term is defined in the proposed Debt Arrangement, the annual interest rate on the debentures will be amended retroactively and will stand at 11% annual shekel interest, without linkage to the index. From the Completion Date onward, the annual interest rate on the debentures will be amended and will stand at 11.5% annual shekel interest, without linkage to the index. The existing default inter- est under the deeds of trust, including its terms, will not be amended under the Debt Arrangement. If the debenture holders adopt a resolution for mandatory early redemption, without the existence of grounds for immediate repayment, as stated in Section 19.3 of the Debt Arrangement, and also in the event that the Company's debt is declared immediately due and payable due to the going concern note included in the Company's financial statements as of February 4, 2026, the "Specific Immediate Repayment Ground", as distinct from a case in which this going concern note is no longer included in one of the Company's financial statements during the period after January 1, 2026, and subsequently returns and is in- cluded again in one of the Company's financial statements, then, without dero- gating from the debenture holders' right to receive the full amount of their debt, principal and interest, in these cases they will not be entitled to default interest. However, the foregoing does not derogate from the debenture holders' right to default interest in any other case, including where the Company's debt is de- clared immediately due and payable on the basis of any ground for immediate repayment other than the Specific Immediate Repayment Ground. On the final repayment date, if the debentures are repaid in full, the debenture holders will be paid an additional payment equal to the lower of the following two alternatives: (a) interest at an annual rate of 1.5%, calculated on the full principal amount of the debentures for the period from August 31, 2026, until the final repayment date or until the date of full early redemption of the deben- tures, whichever is earlier; or (b) 50% of the aggregate balance of all properties

 A-4 and rights of every kind and type, including cash and cash equivalents, of the Pacific Group, as such balance will be five business days before the earlier of: (1) the final repayment date; or (2) the date on which full early redemption of the debentures is completed, if full early redemption is carried out. Such additional payment, subject to the conditions above, will also be paid pro- portionately, with the necessary adjustments, in respect of the Company's debts to additional creditors. Regarding the Company's ability to repay the full debt to the debenture holders and to the Company's creditors even if the Debt Arrangement is approved, the Company draws attention in this regard to the final paragraph of Section 3.5.5 of Chapter B of the Company's financial statements for 2025. B. Use of funds in the interest reserve On the Completion Date, the debenture holders of Series B and the debenture holders of Series D, as applicable, will be paid, on account of the debt owed to them, the full amount of the interest reserve funds as held at that time by the trustee for Debentures B and Debentures D, as applicable, after deducting the amount required for providing the balance of the loans that the debenture hold- ers approved to be provided to the Company, insofar as these have not been provided in full by the Completion Date. C. Mandatory early redemption The debenture holders will have the right, at any time, to require the Company to repay the full debt in respect of the debentures, including principal and in- terest, by way of early redemption, an early redemption ("Mandatory Early Redemption"), provided that both debentures series, Series B and Series D, and not only one of them, adopt a resolution for Mandatory Early Redemption at a meeting of the debenture holders of each of the series, namely, at separate meetings of each of the two series. Such meetings must be convened at the request of one or more holders who own at least 15% of the debentures of each of the debentures series, for the purpose of adopting a resolution on Mandatory Early Redemption, by a majority of 66% of the total votes participating in the vote, excluding abstentions, for each series separately. D. Immediate repayment and realization of collateral The provisions of Section 8 of each of the deeds of trust concerning immediate repayment will be amended as follows: Each of the grounds for immediate repayment under Section 8 of each of the deeds of trust, as amended pursuant to this Arrangement, will, upon its occur- rence, also constitute grounds for the debenture holders of the relevant series to realize any collateral and any pledge granted in favor of the Trustee for the benefit of the debenture holders of that series. A-5 The following additional grounds will be added to Section 8 of each of the deeds of trust. The following will apply separately with respect to each of the said trust deeds: (1) In the event that the Company's shares are held by a third party that is not the Partnership, the sole shareholder of the Company, and in any case in which rights in the partnership are held by a third party, that is not the REIT fund; in the event that more than 10% of the shares of the REIT fund are held by one shareholder or by a group of shareholders acting jointly or in coordination among themselves; or in the event that insol- vency proceedings are initiated against the REIT or against the partner- ship, including if an officer, functionary, receiver, trustee, or similar ap- pointee is appointed for the REIT or the Partnership. (2) The termination of the term of office of the new directors, the increase of the board of directors beyond five directors, or the delegation of powers of the board of directors, in each case if carried out without the consent of the debenture holders. (3) The replacement of the existing management company, Westdale, and/or the termination of its term as the company providing management ser- vices to the Company, and/or any amendment to the terms of the existing services agreement with it, and/or the removal of powers granted to it under the services agreement, insofar as any of the actions described is carried out without the consent of the debenture holders. (4) A breach of an undertaking under this Arrangement and/or under the deeds of trust as amended pursuant to this Arrangement, including a breach of the Company's undertakings to create and register pledges as described in the proposed Debt Arrangement, and a breach of the re- strictions on the Company's activity described in the proposed agree- ment. In addition, the grounds for immediate repayment listed in the deeds of trust under Sections 8.1.12, breach of financial covenants; 8.1.13, distribution pur- suant to the terms of the original trust deed; 8.1.14, downgrade; 8.1.21, discon- tinuation of rating; and 8.1.29, incurring debt not in accordance with the terms of the original deed, will be deleted. E. Pledges, guarantees, and payment waterfall The Company undertakes to create pledges in favor of the trustee for the de- benture holders within 105 days from the date of finalizing the Arrangement, for all of the Company's unencumbered assets, including all rights in each asset and rights to the fruits or proceeds of such asset. An irrevocable and unconditional deed of guarantee will be signed by the enti- ties Pacific Oak SOR Properties LLC, Pacific Oak Strategic Opportunity Lim- ited Partnership II, Pacific Oak SOR US Properties II LLC, and Pacific Oak A-6 SOR Equity Holdings X LLC in favor of the Trustee for the benefit of the de- benture holders, to secure the Company's debt to the holders of Debentures Series B and Series D. The additional creditors will have the right to a portion of the proceeds from the Company's assets and rights, including the pledged assets and the guaran- teeing companies, according to the following payment waterfall: (1) secured creditors in the asset; (2) payment of the debts of the property entity; (3) com- pletion of the Company's minimum reserve; (4) early redemption to the deben- ture holders and additional creditors. In the event of a dispute, it will be sub- mitted to the decision of an arbitrator to be appointed by agreement between the Company and the Trustee, and the arbitrator's decision will be final. F. Management of the Company after completion of the Debt Arrangement The composition of the board of directors will be changed so that directors whose names were proposed by the debenture holders will serve, and the re- maining directors will terminate their office. This action has already been car- ried out in practice, as described above in Section 13, and currently only direc- tors whose names were proposed by the debenture holders serve in the Com- pany, while one director, who was appointed in the summer of 2025 after the beginning of the crisis and on the recommendation of the Trustee for the de- benture holders, still serves but has announced the termination of his office at the end of May 2026. The Debt Arrangement includes agreements with the management companies and the REIT fund. These agreements were agreed directly between the deben- ture holders and the management companies/REIT fund, without the Compa- ny's involvement. The agreements are attached to the Arrangement and/or de- tailed in Section 34 of the Debt Arrangement. The Company undertakes to act in full cooperation with the debenture holders, including, inter alia: (1) to act to sell all of its assets and rights in full coopera- tion with the representatives of the debenture holders, while the sale of indi- vidual homes of the PORT assets that meets the conditions defined in Section 4.1.5 of the Debt Arrangement may be carried out without the debenture hold- ers' prior approval; (2) sale proceedings and the manner of selecting brokers, the sale process, dates, and terms will be coordinated on an ongoing and con- tinuous basis with the debenture holders' representatives; (3) coordination and cooperation with the debenture holders' representatives will also apply to all financing processes of any kind that the Pacific Group advances with respect to any of its properties and rights; (4) the Company's representatives will pro- vide an oral update to the Trustee and the debenture holders' representatives every two weeks and a written update every month regarding the financing and realization processes relevant to the relevant period that has ended; (5) to pro- mote the raising of new series of secured debentures; (6) to appoint an officer in the PORT Properties who will be granted broad rights, and also to ensure A-7 that decisions concerning the PORT assets that have a material effect, the cu- mulative scope of which exceeds USD 1 million, and any decision concerning any disposition of in PORT Properties, will be subject to the Company's prior approval. The Company undertakes not to carry out many actions without the prior ap- proval of the debenture holders and/or their representatives, including: (1) lim- iting the amount of its general and administrative expenses to USD 5 million in 2026, USD 4 million in 2027, and USD 3 million in 2028, with this limitation not including payments pursuant to the REIT agreement and the Company's expenses for the costs of this Arrangement up to the Completion Date; (2) not to take loans or credit or carry out financing transactions; (3) not to carry out a transaction with the REIT fund or the new management company or other in- terested parties; (4) not to make a distribution, dispose of its assets and rights, acquire assets, or provide guarantees; (5) payments to financial creditors will not be discontinued. G. Claims manager All causes of action and claims rights of all creditors and of the Company will be assigned in full to the claims manager, who will be appointed by the court at its discretion, taking into consideration, as much as possible, the identity of the person selected at a joint meeting of the Company's creditors. For additional details regarding the Debt Arrangement, see the Company's im- mediate report dated April 26, 2026, reference no. 2026-01-038064, the con- tents of which are included in this report by way of reference. 2.2. Investment Real Estate Properties During the three-month period that ended on March 31, 2026, the Company recorded an increase in value of investment real estate properties of approximately USD 5.4 million, which primarily stemmed from entering into an agreement for the sale of the Richardson Land for consideration of approximately USD 12.5 million. For details, see Section 2.6.1 below. 2.3. Updates regarding PORT Properties A. During April 2026, after the reporting date of the financial statements, the Company completed changes to the structure of PORT's board of directors, such that as of the date of publication of the report, only two directors serve on PORT's board of directors, both on behalf of the Company. In addition, in May 2026, the PORT board of directors appointed a Chief Restructuring Officer who will supervise the processes for the sale of the PORT properties.

 A-8 B. On May 8, 2026, following the reporting date of the financial statements, a refinancing agreement in the amount of approximately USD 216 million was closed with a lender consortium led by Klirmark Capital, for a term of 15 months with two extension options of 6 months each, bearing an annual interest rate of SOFR + 4.75%. The loan proceeds were used for full repayment of the existing loans on the PORT properties in the amount of approximately USD 186.1 million, as well as for interest reserve (approximately USD 10 million), transaction fees (approximately USD 3.2 million), designated deposits (ap- proximately USD 4.8 million) and customary closing costs. Additionally, the loan agreement terms permit cash releases in the amount of approximately USD 4 million shortly following the date of closing and approximately USD 4 million additional during the loan term, subject to compliance with the loan agreement conditions. For further details on the terms of the loan, see Appen- dix A to this report, as well as the Company's immediate report dated May 10, 2026 (Reference Number: 2026-01-043136), which is incorporated into this report by reference. 2.4. Updates regarding 110 William A. On April 1, 2026, the tenant, the City of New York (hereinafter: DCAS), gave notice of the revocation of the substantial completion approval that had been granted on December 5, 2025, for the third phase under the lease agreement for the property. This was on the grounds that improvement works in the relevant area, which DCAS had previously required, had not been completed. Accord- ingly, DCAS notified that it would not occupy the areas of the third phase of the lease agreement and would not begin paying rent to the property entity. DCAS further notified that the revocation of the substantial completion ap- proval, as stated above, took place after the date by which the property entity was required to complete all improvement works in the property pursuant to the terms of the lease agreement, and therefore DCAS is entitled to exercise all rights and remedies granted to it due to the failure to meet the said timelines, including termination of the lease agreement. DCAS also requested that the property entity provide it with a detailed plan and timetable for completion of the required improvement works by April 15, 2026. For details, see the Company's immediate report dated April 3, 2026, reference no. 2026-01-031667, the contents of which are included in this report by way of reference. In the Company's estimation, there are no longer any material improvements that the property entity must complete for DCAS for Substantial Completion, and according to the property entity's position, additional improvements re- quested by DCAS may be carried out after such Substantial Completion. A-9 The Company, together with its legal advisers in this matter, is examining the options available to it in light of DCAS's notice, including the possibility of initiating legal proceedings. It should be noted that the Company sent a notice to DCAS demanding that it begin paying rent and also pay reimbursement and expense indemnification amounts totaling approximately USD 19 million. B. As stated in the Company's immediate report dated May 10, 20263, on May 8, 2026, after the reporting date of the financial statements, counsel for the Com- pany received a settlement proposal from DCAS, the principal terms of which are as follows: 1) DCAS and the property entity will enter into a Stand Still agreement un- der which the parties will suspend the existing legal disputes between them, without derogating from either party's rights, and will work to reach agreements regarding the substantial completion date and the Rent Commencement Date under the lease agreement. Should either party wish to terminate the Stand Still, it must do so by giving 30 days' prior notice. 2) The parties will reach agreements on a list of the improvements and re- pairs required in the area of the property leased to the city, and on the timetable for their completion. 3) In order to assist the property entity in completing the said improvements, DCAS will release into a trust account with an Escrow Agent an amount of approximately USD 14 million, which will be released gradually to the property entity as progress is made in completing the required im- provements as stated above. In response to the above, separately, the Company has responded and begun discussions with the tenant regarding a potential negotiated resolution of cer- tain lease-related matters, while expressly preserving all rights and remedies. Depending on the outcome of those discussions, the Company is evaluating available paths, including a settlement on commercially attractive terms or, if warranted, pursuing remedies that may include termination of the lease. The property entity and the Company reserve all of their rights under the lease agreement and applicable law. As of the reporting date, the Company and DCAS are engaged in a dialogue regarding potential updates to the aforemen- tioned notice of default, as well as the Company’s intention to reach agree- ments concerning the required property improvements and the collection of rent from the property. C. According to the Company's estimate, there is no material change in the costs required to complete the improvement works in the property for DCAS com- pared with previous estimates. However, due to the delay in receiving 3 Reference: 2026-01-043135, the contents of which are included in this report by way of reference. A-10 payments from DCAS as stated above, the property entity has incurred a cash- flow deficit of approximately USD 11.5 million, of which the Company has funded since the beginning of 2026 and to the date of publication of this report. D. As of the date of publication of the report, the Company is not fully meeting the repayment payments of the senior loan in the property and is maintaining a dialogue on this matter with the lender. In addition, ahead of the final repay- ment date of the said loan, in July 2026, the Company is maintaining a dialogue with the lender regarding the exercise of the extension option granted to the property entity under the loan agreement for one additional year, with a central condition from the lender for such extension being that DCAS begin paying rent. it is clarified that there is no certainty regarding the date on which DCAS will enter the third phase under the lease agreement and begin paying rent, if at all, and there is also no certainty that it will be possible to exercise the option to extend the final repayment date of the existing loans in the property. See also the Company's immediate report dated April 5, 2026 (reference no. 2026-01- 031863). It should be noted that up to shortly before the date of publication of the report, interest payments on the senior loan had not been paid, in a total amount of approximately USD 1.0 million. In addition, the Company is also not meeting the repayment payments of the Mezzanine loan in the property and is maintaining a dialogue on this matter with the lender. It should be noted that up to shortly before the date of publica- tion of the report, interest payments in respect of the Mezzanine loan had not been paid, in a total amount of approximately USD 1.9 million. E. The Company has engaged a leading broker in the United States to market the property beginning in January 2027. The value of the property in the Company's books, based on 100%, which the Company does not consolidate in its financial statements, is approximately USD 422.1 million. A-11 2.5. Sale of assets during the first quarter of 2026 and up to shortly before the publication date of the report Property name Completion date of sale Book value be- fore entering into the sale agreement Debt in the property before completion of the sale trans- action Sale consid- eration Cash flow gener- ated for the Com- pany from the sale transaction Remaining debt in the property after comple- tion of the sale transaction Additional details (USD millions) Lincoln Court May 7, 2026 Approx. USD 31.8 million Approx. USD 31.3 million Approx. USD 24.6 million 0 -- On May 7, 2026, after the reporting date, the transac- tion for the sale of the Lincoln Court property to a third party was completed for a total consideration of ap- proximately USD 24.6 million. The sale proceeds were used to repay the existing loan on the property. In this framework, the lender agreed to release the property from the loan encumbrance and to accept the sale pro- ceeds as full satisfaction of the loan, including the un- paid principal balance of approximately USD 7.4 mil- lion. Upon completion of the transaction as stated, all of the Company's obligations to the lender in connec- tion with this loan expired. For further details, see the Company's immediate report dated May 10, 2026 (Ref- erence No.: 2026-01-043133), the information from which is incorporated into this report by reference. S-REIT shares During the first quarter of 2026 and until April 20, 2026, after the date of the statement of financial position, the sale of all S-REIT shares held by the Company was completed in several installments. These sales generated total consideration for the Company of approximately USD 10.5 million. For details regarding these sale transactions, see Section 1.2.3 of Chapter A of the 2025 annual report, as well as the immediate report dated April 21, 2026 (reference no. 2026-01-037168), the contents of which are included in this report by way of reference.

 A-12 2.6. Updates regarding transactions for the sale of the Company's properties 2.6.1. Conditional sale agreement for the sale of Richardson Land During the reporting period, and in accordance with the Standstill framework signed between the Company and the debenture holders, the Company entered into a condi- tional agreement for the sale of all of its rights in Richardson Land to a third party, for consideration of approximately USD 12.5 million. Completion of the transaction is subject to the completion of a 30-day due diligence period, at the end of which a deposit of USD 125 thousand will become non-refundable, and to the fulfillment of customary conditions precedent, including approval by the debenture holders. It should be noted that, in light of Whitehawk’s allegations of default under the loan it extended, which the Company is reviewing, as stated in Section 2.7 below, it is possible that the entire net sale proceeds will be used for partial repayment of the Whitehawk loan. For additional details regarding the terms of the agreement, the deposit mechanism, and the sale fees, see the Company's immediate report dated April 27, 2026 (refer- ence no. 2026-01-038207). On May 3, 2026, assemblies of Series B and Series D debenture holders approved a resolution authorizing the Company to enter into the sale transaction, as defined in the Company's immediate report dated April 27, 2026 (reference no. 2026-01- 038207) (hereinafter: the "Company's Report", in connection with the sale of Rich- ardson Land for total sale consideration of approximately USD 12.5 million. For ad- ditional details, see the Trustee's reports dated May 3, 2026 (reference nos. 2026-10- 040747 and 2026-10-040748), the contents of which are included in this report by way of reference. Further to the aforementioned, on May 7, 2026, the Company entered into an agree- ment as mentioned above. For further details, see the immediate report dated May 10, 2026 (Reference No.: 2026-01-043134), the information from which is incorpo- rated into this report by reference. It is clarified that the completion of the sale transaction as stated constitutes forward-looking information, as such term is defined in the Securities Law, 1968, which is based on the said sale agreement, representations provided to the Company by the purchaser, ongoing dialogue with the existing lender, and the Company's experience in transactions of this type. The entry into effect of the aforementioned information may not materialize if the conditions precedent for the completion of the transaction are not met, and/or if agreements are not reached with the existing lender on the property, and/or if the purchaser with- draws from the agreement, , or if adverse changes occur in the real estate mar- ket in the area where the property is located, as well as due to the materialization of the risk factors detailed in Section 1.18 of Chapter A of the Annual Report for the year 2025. A-13 2.6.2. Agreement with the REIT fund, replacement of the management company, cancella- tion of the management agreement and the Back-to-Back agreement, and changes to the Company's board of directors On January 22, 2026, further to the approval of the Company's board of directors and the approval of the Company's debenture holders, the Company entered into three agreements: (1) An agreement with the REIT fund regulating payments from the Company to the REIT fund, the termination of the role of the previous management com- pany, and entry into the agreements referred to in Subsections (2) and (3) be- low. (2) A new Property Management agreement with the new management company. (3) A new Accounting Management agreement. For additional details regarding the new agreements signed by the Company, see Chapter A of the 2025 annual report, the contents of which are included in this report by way of reference. 2.6.3. Bridge loans from the Trustee of the Company's debenture holders During February 2026, the Trustee of the Company's debenture holders, Series B and Series D, on behalf of the debenture holders, provided the Company with an addi- tional bridge loan in the amount of USD 6.2 million, bearing annual interest at a rate of 20%. For additional details regarding this loan, see Chapter A of the 2025 annual report, the contents of which are included in this report by way of reference. 2.7. Updates regarding Company's Properties and Loans It should be noted that in all existing loans in which Pacific Oak SOR Properties, a wholly owned subsidiary of the Company, provided a guarantee under which it un- dertook to meet minimum Net Worth financial covenants, it does not meet such un- dertaking as of the date of the statement of financial position, except in connection with the senior loan on the 110 William property where Pacific Oak SOR Properties is in compliance with the Net Worth covenant. For further details regarding existing financial guarantees in loans secured by the Company's properties, see Section 3 of Part Three of this report below. # Property name Outstanding loan balance as of March 31, 2026 (thousands of dollars) Maturity date (as of March 31, 2026) Details and updates regarding the property and its existing financing 1 Q&C Hotel (**)(*) 21,725 February 6, 2026 (instead of the original maturity a. The Company is working to sell the property. b. Since the property was not sold, on November 13, 2025, the Company received from the lender a Notice of Event of Default dated October 30, 2025. According to the notice, the failure to repay the loan on its due date, July 29, 2025, constitutes an Event of Default under that loan; from A-14 # Property name Outstanding loan balance as of March 31, 2026 (thousands of dollars) Maturity date (as of March 31, 2026) Details and updates regarding the property and its existing financing date of July 29, 2025) that date, the loans bear default interest at a rate of 5%; and the lender reserves all of its rights under the loan agreements. See also the Compa- ny's immediate report on this matter dated November 14, 2025, refer- ence no. 2025-01-087323. c. The Company and the lender agreed to extend the final maturity date to February 6, 2026. This date has also passed, and the loan is therefore in maturity default. d. As of shortly before the publication date of the report, the interest ac- crued and not yet paid amounts to approximately USD 1.8 million. e. As of shortly before the publication date of the report, dialogue is being held with the lender, during which the possibility is being examined of settling the debt owed to it as part of a sale process to be managed by the lender, including by deed in lieu, as part of an overall arrangement involving the sale of the Richardson Office property. It is clarified that, as of the date of the report, the parties have not yet reached agreements on this matter, and there is no certainty that such agreements will indeed be reached. For details regarding the dialogue being held with the same lender in connection with the sale of the Richardson Office property, see this table below. 2 Richardson Of- fice (**)(*) 11,782 February 6, 2026 (instead of the original maturity date of July 29, 2025) a. As stated in the company's previous reports, the sale transaction for the sale of the property alongside the Richardson Land parcel was not com- pleted due to the seller's objection, and as stated in section 2.6.1 above, the company entered into a new sale agreement for the said land prop- erty only. b. The final maturity date of the loan has passed, and the loan is in tech- nical default. c. As of shortly before the publication date of the report, the interest ac- crued and not yet paid amounts to approximately USD 0.1 million. d. It should be noted that, as part of the loan structure in the property, there is at all times a mechanism under which the property entity, the bor- rower, transfers the cash flow generated by the property to a designated account for servicing the loan repayment payments. It should be noted that there is no cash sweep mechanism controlled by the lender. 3 Madison Square (^)(*) 20,040 November 30, 2025 a. As stated in the Company's immediate report dated March 31, 2026,4 on March 30, 2026, the court in Arizona accepted, on March 19, 2026, a motion filed by the lender for the appointment of a Receiver, with the purpose of managing and operating the property and, among other things, protecting the lender's rights in connection with the property and the loan, including with respect to the assignment to the lender of all income cash flow generated by the property. In addition, subject to the lender's approval, the Receiver may act to market and sell the property. b. Further to the aforementioned, as noted in the May 15, 2026 immediate report5, the Receiver announced that an auction will be held to sell the property to the highest bidder on July 22, 2026. As a result, the Com- pany has not received indications of value from the auction process that would support a valuation different from the Company’s current ex- pected sale price, although there can be no assurance as to the ultimate timing, terms, or proceeds of any sale. 4 Reference: 2026-01-030059, the contents of which are included in this report by way of reference. 5 Reference: 2026-01-045040, the contents of which are included in this report by way of reference. A-15 # Property name Outstanding loan balance as of March 31, 2026 (thousands of dollars) Maturity date (as of March 31, 2026) Details and updates regarding the property and its existing financing c. In this regard, it should be noted that following the appointment of the Receiver, the property was deconsolidated and the aforementioned loan was derecognized from the Company's balance sheet. d. On May 27, 2026, the Company received notice that the lender with respect to the property is seeking from the court in the State of Arizona a default judgment against the Company’s subsidiaries in connection with the property (Pacific Oak/Verus GC Phoenix, LLC and Pacific Oak SOR Properties LLC), on the grounds that no statement of defense was filed within the time prescribed by the court. The Company is reviewing the notice with its legal counsel and is considering its course of action in this matter. See also the immediate report published proximate to the publication of this report. e. As of the date of the report, outstanding cumulative interest totals ap- proximately USD 1.6 million. 4 Eight & Nine Corporate Cen- tre (*) 20,070 February 9, 2027 a. During February 2026, the Company and the lender entered into an agreement to extend the maturity date until February 9, 2027. Within the framework of the agreements with the lender, the lender provided the property entity with a sum of approximately USD 1.2 million for the property's leasing activities (lender reserves for lease-up). The total out- standing loan balance on the property after providing the said sum stands at approximately USD 20.2 million. b. Furthermore, the parties agreed on an update to the financial covenants of the subsidiary (100% owned by the Company) Pacific Oak SOR Prop- erties, LLC, which serves as a guarantor under the loan agreement, whereby the net worth financial covenant was canceled and a liquid as- sets covenant was added, requiring them to not fall below USD 10 mil- lion. c. It notes that a significant tenant in the property, which leases approxi- mately 76 thousand square feet, is expected to vacate the leased premises in June 2026, which is expected to decrease the occupancy rate of the property to approximately 66%. In this context, the lender reserves for lease-up is intended to support the Company's efforts to lease out the vacant spaces in the property. It shall be noted that as part of the property's loan structure, there is, at all times, a quasi-cash sweep mechanism, under which the lender utilizes the cash flow generated from the property for the monthly interest payments required under the loan, and uses 50% of the remaining excess amount for loan principal repayments, while transferring the remaining 50% to the Company. 5 White Hawk loan secured by land areas in the Park Highlands and Richard- son properties and the 210 West 31st land property (*) (^^) 80,000 December 1, 2027 a. Pursuant to the terms of the said loan agreement, the existence of a right to declare the Debentures, Series B and Series D, immediately due and payable, insofar as no waiver, including a temporary waiver, of the said right has been obtained from the debenture holders, even if such right has not been exercised, constitutes grounds for declaring the loan imme- diately due and payable. As a result, the loan bears additional default interest at a rate of 3 percent. b. It should be noted that on April 30, 2026, the Company received notices of default and demand letters in which the lender demands from wholly owned subsidiaries of the Company, Pacific Oak SOR US Properties II, LLC and Pacific Oak SOR Properties, LLC, the immediate repayment of the loan. The Company has referred this matter to its legal advisers and is exam- ining the said letters. The Company is also still maintaining dialogue

 A-16 # Property name Outstanding loan balance as of March 31, 2026 (thousands of dollars) Maturity date (as of March 31, 2026) Details and updates regarding the property and its existing financing with the White Hawk lender regarding the continuation of the loan pe- riod. For additional details, see the Company's immediate report dated May 2, 2026, reference no. 2026-01-040463, the contents of which are included in this report by way of reference. c. Subsequently, on May 20, 2026, after the reporting date, the Company received notices regarding lawsuits filed by the lender in the District Court of Clark County, Nevada, against the property entities holding the Highlands Park lands, seeking declaratory reliefs and orders concerning the breach of the loan agreement and the lender's lien rights. On May 22, 2026, an inter partes hearing was held, during which the court, with the parties' consent, issued a temporary injunction prohibiting the creation of liens, the incurrence of debt in connection with the Highlands Park lands, and any interference with the sale transaction, until a hearing scheduled for June 16, 2026. The Company and the property entities are reviewing the lender's claims and may dispute them, while working with their US legal counsel and conducting parallel negotiations with the lender. It should be noted that there is no certainty as to the outcomes of the proceedings or the completion of the Highlands Park lands sale trans- action under its existing terms. For further details, see the Company’s immediate report dated May 24, 2026 (Reference No.: 2026-01-047562), the information of which is incorporated herein by reference. d. On May 28, 2026, after the reporting date, the Company received by email additional notices (the “Additional Notices”) stating that the lender had filed additional claims against the Company’s wholly owned subsid- iaries (100%) that had provided full financial guarantees in respect of the loan (Pacific Oak SOR Properties, LLC and Pacific Oak SOR US Prop- erties II LLC) (the “Guarantor Entities”) in the Supreme Court of the State of New York, County of New York: Commercial Division, seeking remedies whose principal elements are: that the Guarantor Entities pay damages to the lender for losses incurred by it as a result of the breach of the loan agreement, in amounts to be determined in the legal proceed- ing; that the borrowers bear the lender’s legal costs; and (c) the award of additional damages to the lender at the court’s discretion. The Additional Notices also include a summons from the aforesaid court, pursuant to which the Guarantor Entities are required to submit their response to the claim within 20 days of service thereof, failing which the aforesaid court may enter judgment in favor of the lender. The Company and the Guarantor Entities are reviewing the lender’s claims and may dispute them, while working with their U.S. legal coun- sel and conducting parallel negotiations with the lender. It should be noted that there is no certainty regarding the outcome of the proceeding or the completion of the Highlands Park land sale transaction on its cur- rent terms. For further details, see the Company’s immediate report pub- lished proximate to the publication of this report, the information of which is incorporated into this report by reference. e. It should be noted that, as of the date of this report, the Company has not been informed of any change in the timetable of the Park Highlands land sale transaction, and it is proceeding as usual. In this regard, Whitehawk informed the Company that the purchaser deposited with it the monthly deferral fees that the purchaser is required to pay under the purchase agreement, and these were used for the monthly interest payments on the loan. 6 Bank of Amer- ica Loan 152,636 September 1, 2026 Further to what was stated in the Company's immediate report dated Feb- ruary 17, 2026, reference no. 2026-01-015474, the Company continues its A-17 # Property name Outstanding loan balance as of March 31, 2026 (thousands of dollars) Maturity date (as of March 31, 2026) Details and updates regarding the property and its existing financing secured by Park Centre, 1180 Raymond, The Marq, and Oakland City Center (*) dialogue with the lender for the purpose of entering into a forbearance agreement. Under this agreement, the lender would grant a Forbearance period until August 31, 2026, during which, subject to compliance with the terms of the agreement as set out below, the lender will not exercise its rights in respect of the Notice of Default of the loan and will not collect the required monthly principal and interest payments under the loan agree- ment. It is clarified that the memorandum of understanding is non-binding and that the lender reserves all of its rights and claims in connection with the loan agreement. During the Forbearance period stated above, the Com- pany and the property entities will be required to comply with the follow- ing conditions: a. Upon entering into the Forbearance agreement, the Company will be required to transfer the net cash flow generated by the properties to a designated deposit account, a Cash Sweep mechanism. Due to the said contacts, as of shortly before the publication date of the report, a Cash Sweep mechanism is in effect in the properties, and it will continue to remain in effect until the end of the Forbearance period. b. A Cash Trap mechanism will be activated in all of the properties. c. The Company will be required to meet milestones for the marketing and sale of all the properties, in coordination with and with the consent of the lender, so that the 1180 Raymond property will be sold by June 2026 and the other three properties will be sold by August 2026. d. Failure to meet the milestones for the sale of the properties will consti- tute a breach of the terms of the Forbearance agreement. It should be noted that entering into such an agreement is also expected to regulate the Company's failure to make loan payments, principal and inter- est, and the non-compliance by Pacific Oak SOR Properties, LLC, a wholly owned subsidiary of the Company serving as guarantor under the loan agreement, with the net worth financial covenant6 to which it com- mitted as guarantor under the terms of the loan agreement. - In this context, as part of the dialogue for entering into the Forbearance agreement described above, as of the publication date of the report, the Company and the lender are acting on the understanding that the said Cash Sweep mechanism has already been activated. - It should be noted that the property entities have not paid the monthly interest payments in respect of the loan since September 2025, and as of shortly before the publication date of the report, the interest accrued and not yet paid amounts to approximately USD 10.8 million. - It should further be noted that, concurrently with the dialogue with the lender described above, the Company is working to market and sell the four properties pledged in favor of said loan. It is clarified that there is no certainty that the negotiations described above will mature into a binding forbearance agreement. 7 Loans in the PORT Proper- ties portfolio (*) (^^^) Loan A: 30,203 Loan A: December 1, 2025 These loans were repaid as part of a refinancing following the date of the report on the financial position. For details Section 2.3 above. Loan B: 9,998 Loan B: March 1, 2026 6 The net worth required from Pacific Oak SOR US Properties, LLC, in accordance with the terms of the loan agreement is approximately USD 250 million, and as of March 31, 2026, it is not in compliance with said covenant. A-18 # Property name Outstanding loan balance as of March 31, 2026 (thousands of dollars) Maturity date (as of March 31, 2026) Details and updates regarding the property and its existing financing Loan C: 54,796 Loan C: April 10, 2026 Loan D: 93,043 Loan D: April 10, 2026 8 110 William (*) Senior loan: 305,342 Senior loan: July 5, 2026 For details regarding the property and its financing, see Section 2.4 above. Mezzanine loan: 21,000 Mezzanine loan: July 5, 2026 (*) Non-recourse loans. (**) The loan agreements for the Q&C Hotel and Richardson Office Portfolio properties contain a Cross Default provision as well as Cross Collateral between the two properties, such that an event of default under one loan will constitute an event of default under the other loan as well. (^) Under the loan agreement for the Madison Square property, Pacific Oak SOR US Properties LLC (a 100%- owned subsidiary of the Company) provided a full financial guarantee (in the amount of 100% of the loan principal) for the full obligations of the borrower entity. It should be noted that until October 7, 2021, such guarantee was provided by Pacific Oak SOR US Properties II LLC (another 100%-owned subsidiary of the Company), and from such month, as part of an update to the loan terms, the said guarantee was assigned to Pacific Oak SOR US Properties LLC. (^^) The loan agreement from the lender White Hawk is a loan under which Pacific Oak SOR Properties LLC and Pacific Oak SOR Properties II LLC provided a full financial guarantee (in the amount of 100% of the loan principal) for the full obligations of the borrowers entity pursuant to the loan. (^^^) The previous loans in the PORT portfolio, which were repaid in full after the reporting date of the financial statements, were non-recourse loans, where under loans C and D (lender MetLife), Pacific Oak SOR Equity Holdings X LLC (a 100%-owned subsidiary of the Company that indirectly holds rights in part of the Company's single-family residential properties, including the Opportunity Zone investment) provided full financial guarantees (in the amount of 100% of the loan principal) for the full obligations of the borrower entities. Such loans were repaid in full as part of a refinancing after the date of the statement of financial position. The Company's estimates regarding property sale transactions, completion of dialogue with lenders for the arrangement of the loans and/or refinancing thereof, and possible implications of the sale transactions and dialogue with lenders described in the table above constitute forward-looking information as defined in the Securities Act, 1968. This information is based on dialogue that the Company is conducting with potential purchasers, dialogue with existing lenders and potential lenders, the Company's understanding of the terms of the loan agreements, and the Company's past experience. This information may not mate- rialize at all or may materialize differently from what is stated above if the contacts and negotiations described above do not mature into binding sale agreements and sale transactions, if arrangements with lenders or refinancing agreements are not completed, or if it turns out that the final interpretations of the loan agreements differ from the Company's current understanding thereof, as applicable, due to adverse changes in the markets and areas of activity in which the properties are located and due to the realization of the risk factors detailed in Section 1.18 of Chapter A of the 2025 annual report. A-19 2.8. Bridge loans from the previous management company Further to the bridge loans provided to the Company by the previous management company through the Company's sole shareholder, the Partnership: A. On January 29, 2026, the Company's sole shareholder informed the Company that it had received a notice of default from the previous management company, POCA, according to which non-payment of interest constitutes grounds for de- claring the bridge loan immediately due and payable. At the same time, during January 2026, legal disputes were raised by counsel for the REIT fund in the United States concerning the absence of documentation for the "back-to-back" component between the partnership and the Company, as well as inconsisten- cies in the repayment dates and loan terms compared with previous approvals and reports. Further thereto, on March 27, 2026, the Company received, for the PORT en- tities, a letter from POCA's counsel notifying of the realization of the pledge over the PORT shares and demanding that all proceeds deriving therefrom, in- cluding dividends, realizations, liquidation proceeds and the like, be transferred to POCA. As of shortly before the publication date of the report, the shareholder is re- viewing the allegations set out in the said notice and reserves all of its legal rights. For additional details regarding the disputes, the loan terms, and the implica- tions of realization of the collateral, see Section 1.1.2.9 of Chapter A of the 2025 annual report, the information contained therein being incorporated by reference. B. On April 21, 2026, POCA sent an additional demand for the registration and transfer of 4,431,934 PORT shares under its name. In this demand, addressed to the Company and to the PORT entities, POCA demanded that the transfer of the shares not be delayed and that, until completion of the registration, all div- idends and proceeds from the shares be transferred to it, or held in trust for it. In addition, POCA demanded that any agreement or payment relating to the shares pledged to it, or any additional allocation of shares in PORT, be subject to POCA's approval. For additional details, see the Company's immediate re- port dated April 23, 2026 (reference no. 2026-01-037682), the contents of which are included in this report by way of reference. Further thereto, on April 29, 2026, the Company's counsel received an addi- tional letter from counsel for the Company's previous management company, POCA, concerning a demand for distributions that may arise from refinancing of the PORT assets and a reservation of rights. For additional details, see the Company's immediate report dated April 29, 2026 (reference no. 2026-01- 039690), the contents of which are included in this report by way of reference.

 A-20 The Company (and some of its subsidiaries) has engaged legal counsel in the United States and has commenced discussions with POCA and its representa- tives regarding the demands and claims raised by POCA as aforesaid. The Company and its U.S. legal counsel are examining the merits of such claims and the basis therefor, as well as the full exercise of the Company’s legal rights in connection therewith. 2.9. Negotiations between the Company and the Trustee and the Representatives of the holders of the Debentures (Series B and Series D) of the Company The following is a summary of the main actions and the decisions that were carried out and made in the framework of the aforementioned negotiations: A. As stated in Section 1.1.3 of Chapter A of the 2025 annual report, the details of which are incorporated into this report by reference, from December 2025 and up to shortly before the publication date of the 2025 annual report, discus- sions have been taking place between representatives of the Company and the controlling shareholder and the trustee for the Debentures, Series B and Series D, and his representatives. For details regarding resolutions of assemblies of Company's debenture holders up to April 16, the publication date of the Com- pany's 2025 annual report, see Section 1.1.3 of Chapter A of the Company's 2025 annual report, the contents of which are included in this report by way of reference. B. The following are the main additional resolutions of meetings of the holders of the Company's debentures adopted up to shortly before the publication date of this report: - On April 27, 2026, assemblies of Series B and Series D debenture holders approved a resolution to approve the proposed debt arrangement, as pub- lished on April 17, 2026, and to authorize the Trustee to perform all actions required for its implementation, including the signing of an amended deed of trust. For additional details, see the reports published by the Trustee on April 27 and 28, 2026, reference nos. 2026-10-038656, 2026-10-038657, and 2026-10-038974, the contents of which are included in this report by way of reference. - On April 28, 2026, assemblies of Series B and Series D debenture holders, in an aggregate count, approved a resolution to ratify the Company's entry into a loan agreement with lender consortium led by Klirmark Opportunity Fund IV, LP, on the basis of the memorandum of understanding dated Feb- ruary 17, 2026, while updating the terms of the memorandum of under- standing so that the amount excluded from the distribution restrictions in PORT will be up to USD 4 million, instead of USD 8 million. For details, see the reports published by the Trustee on April 28, 2026, reference nos. 2026-10-039027 and 2026-10-039030, the contents of which are included in this report by way of reference. A-21 - On May 3, 2026, subsequent to the report date, the holders of the Compa- ny's Bonds (Series B and Series D) approved the selection of Mr. Yitzhak Lax as a candidate for appointment as a director of the Company. For fur- ther details, see the Company’s immediate report dated May 3, 2026 (Ref- erence Nos. 2026-10-040725, 2026-10-040722), the information therein is incorporated in this report by reference. - On May 11, 2026, subsequent to the report date, and further to the resolu- tions of the Bondholders' meeting dated March 17, 2026, the Bond Trustee announced an additional deferral of the principal and interest payment dates for the Bonds (Series B) to July 1, 2026. For further details, see the Company’s immediate report dated May 11, 2026 (Reference No. 2026- 10-043401), the information therein is incorporated in this report by refer- ence. - On May 11, 2026, subsequent to the report date, and further to the resolu- tions of the Bondholders' meeting dated April 16, 2026, the Bond Trustee announced that the payment date for the interest on the Bonds (Series D) was deferred to July 1, 2026, and the record date was deferred to June 19, 2026. For further details, see the Company’s immediate report dated May 11, 2026 (Reference No. 2026-10-043402), the information therein is in- corporated in this report by reference. 2.10. Macro-economic effects which have or are expected to have a material impact on Company's operating performance or its development: For details of the effects of macro-economic trends which have or may have a mate- rial impact on Company's business performance or its 2026 developments, see Sec- tion 1.6.6. of Part A of Company's 2025 Periodic Report. Below are details of Macro-economic effects Company's operation as of the first quarter of 2026: A. Current Financing of the Company – As of March 31, 2026, approximately 56.0% of Company's loans, on a consolidated basis, along with its share in as- sociated companies (including Debentures (Series B) and Debentures (Series D)), as well as 40.5% of Company's total loans on a consolidated basis (includ- ing Debentures (Series B), Debentures (Series C), and Debentures (Series D)) excluding Company's share in associated companies, carry a variable interest rate. In this regard, note that Company has engaged in interest rate cap agree- ments on approximately USD 247.3 million of its variable interest loans (in- cluding loans by associated companies), which are intended to protect it from significant changes to the Federal Funds Rate, and which will protect the Com- pany somewhat from future increases in US interest rates. A-22 Following are details regarding Company's loan composition on a consolidated basis (including Debentures (Series B), and Debentures (Series D)) at fixed and variable interest rates, as of shortly around the date of the release of the report: Total Consolidated Variable Interest Debt (USD thou- sands) Aggregate Variable Inter- est (%) Total Consolidated Debt (including Debentures7) with fixed interest (USD thousands) Aggregate Fixed Interest (%) Effective Interest Rate (Aggregate Fixed and Variable Interest) 337,527 11.05% 496,006 6.76% 8.49% Following are the details of the loan composition of the Company on a consol- idated basis (including Debentures (Series B) and Debentures (Series D)) and the share thereof in affiliated companies, fixed and variable interest rates as of proximate to the date of the publication of the report: Total Consolidated Debt and Company's Share in Associated Companies at Variable Interest Rates (USD thousands) Aggregate Variable In- terest (%) Total Consolidated and Com- pany's Share in Associated Companies at Fixed Interest Rates, including Debentures (USD thousands) Aggregate Fixed Inter- est (%) Effective Interest Rate (Aggregate Fixed and Varia- ble Interest) 631,236 9.28% 496,006 6.76% 8.17% B. New Financing Obtained by the Company – for the effects of changes in the federal interest on new financing taken by the Company, see Section 1.6.6 of Chapter A of the 2025 Periodic Report. C. Impact on the Value of Company's Properties – changes in the federal in- terest rate may impact the capitalization rates applied in appraisals and may affect the value of Company's properties. For details of Company's Material and Highly Material appraisals, see Section 3 of Part B of the 2025 Periodic Report, and Sections 1.7.8 and 1.7.9 of Part A of the 2025 Periodic Report. For details of major changes recorded in the value of Company's properties during the reported period, see Section 2.2 above. 3. Financial Position as of March 31, 2026 Sections 3.1-3.3 below shall present the Board's explanations of Company's financial position, performance, equity, and its cash flows for the three-month period ending March 31, 2026 (all figures are in USD thousands unless noted otherwise): 7 The Debentures (Series B), Debentures (Series C), and Debentures (Series D). A-23 3.1. Analysis of the main changes in the financial position of the Company: Item Balance as of Company explanations for material balances and changes March 31, 2026 March 31, 2025 December 31, 2025 USD thousands Current assets 295,047 70,463 321,818 The decrease compared to December 31, 2025 stems primarily from the deconsolidation of the Madison Square asset in the amount of approxi- mately USD 24.7 million, following the company's determination that it lost control of the property as a result of the appointment of a receiver. Non-current assets 681,497 1,382,371 687,658 -- Total assets 976,544 1,452,834 1,009,476 -- Current liabilities 885,915 335,799 895,853 The decrease compared to December 31, 2025 stems primarily from the deconsolidation of the Madison Square mortgage loan of approximately USD 20.0 million and partiall offset by increases in interest payable bal- ances. Non-current liabilities 30,307 595,461 32,792 -- Equity attributed to own- ers 59,693 517,521 80,489 The decrease compared to the periodic report for the year 2025 (as of December 31, 2025) stems from a loss attributable to shareholders. Non-Controlling Rights 629 4,053 342 -- Total equity 60,322 521,574 80,831 -- Total liabilities and equity 976,544 1,452,834 1,009,476 --

 A-24 3.2. Analysis of the main operating results based on the consolidated financial statements: Item For the three months ending March 31 For the year ended Decem- ber31 The Company's Explanations for the Balances and the Material Changes 2026 2025 2025 Thousands of dollars Income from rental real estate for investment, reimbursement of expenses from tenants and others 24,462 29,897 114,196 The decrease compared to the three-month period ended March 31, 2025 last year stems primarily from the sale of Georgia 400 Center in July 2025 and the sale of Crown Pointe in November 2025. These properties were income-producing properties, and their disposition led to a decrease in op- erating revenues and expenses. Operating expenses for invest- ment real estate (16,612) (17,159) (70,045) -- Revenue from hotel operations 2,440 2,885 7,597 -- Hotel operating expenses (1,838) (1,737) (6,277) Gross profit 8,452 13,886 45,471 -- General and administrative ex- penses (3,063) (1,598) (6,267) The increase compared to the three-month period ended March 31, 2025 stems primarily from fees related to: insurance, legal, audit and account- ing, internal audit, and banking. Debt restructuring charges (721) -- (1,508) -- Depreciation and amortization (144 ) (274) (964) -- Management fees (2,536) (3,665) (13,991) Until January 2026, the said management fees were paid to the Company's previous management company (Pacific Oak Capital Advisors, LLC), which was a related party. As of February 1, 2026, management services are provided by the new management company (Westdale Asset Manage- ment) and the new Management Accounting company (R2 Advisors LLC). For details, see Section 1.12.5 of Chapter A of the Company's 2025 peri- odic report. Impairment of fixed assets (Impairment property plant and equipment – hotel) -- -- (12,521) -- A-25 Item For the three months ending March 31 For the year ended Decem- ber31 The Company's Explanations for the Balances and the Material Changes 2026 2025 2025 Thousands of dollars Fair value adjustments of invest- ment real estate assets, net 5,381 (2,545) (266,810) The increase compared to the three-month period ending March 31, 2025, primarily resulted from an increase in the fair value of the Richardson Land property, against the background of entry into a sale agreement for total gross consideration of approximately USD 12.5 million, in respect of which an increase in fair value of USD 5.5 million was recognized. Goodwill Impairment -- -- (949) -- The Company's share of the losses of joint transactions that were not consolidated (5,420) (1,867) (92,794) The increase in share of the loss of joint transactions compared to the three- month period ending March 31, 2025 is primarily related to the share in 110 William Joint Venture, primarily related to the fair value loss, as a result of capital expenditures (CAPEX). Operating profit (loss) 1,949 3,937 (350,334) -- Other income (loss), net 4,270 557 (2,630) -- Finance income 1,678 286 1,380 -- Gain due to the deconsolidation of a subsidiary 595 -- -- Stems from the deconsolidation of the Madison Square property, following the company's determination that it lost control of the property as a result of the appointment of a receiver. Provision for guarantee obliga- tions (1,875) -- -- In connection with a guarantee for a loan of the Company’s subsidiary, Pacific Oak SOR US Properties LLC, related to the Madison Square prop- erty. Income (expenses) financing from Financial assets at fair value through profit and loss (4,571) -- 1,925 -- Financing expenses (20,307) (16,143) (76,136) -- Gain (loss) from disposal of debt -- -- 19,449 -- Rate differentials for foreign currency transactions (2,248) 5,984 (40,556) Attributable to changes in the NIS/USD exchange rates. Profit (Loss) before tax (20,509) (5,379) (446,902) -- Income taxes -- (890) 0 -- A-26 Item For the three months ending March 31 For the year ended Decem- ber31 The Company's Explanations for the Balances and the Material Changes 2026 2025 2025 Thousands of dollars Net profit (Loss) (20,509) (6,269) (446,902) -- Net profit (loss) attributable to the owner (20,796) (6,468) (443,500) -- Net profit (loss) attributable to non-controlling interests 287 199 (3,402) -- 3.3. Analysis of the liquidity and financing resources of the Company: Item For the three months ending March 31 For the year ended Decem- ber 31 The Company's explanations for the balances and the material changes 2026 2025 2025 Thousands of dollars Cash flow provided by (used in) Current Operations 898 7,995 25,085 The decrease compared to the three-month period ended March 31, 2025 last year stems primarily from the sale of the Georgia 400 Center property in July 2025 and the sale of the Crown Pointe property in November 2025. These properties were income-producing properties, and their disposition led to a decrease in cash flows from operating activities. Additionally, during the three-month period ended March 31, 2026, there were re- structuring charges of approximately USD 0.7 million and increases in general and administrative expenses of approximately USD 1.5 million. Cash flow (used in) provided by Investments (1,500) (5,429) 57,624 The decrease in cash used in investing activities compared to the three months ended March 31, 2025 stems primarily from a decrease in the volume of improve- ments (capital expenditures) on investment property. Cash flow used in Financing (1,763) (35,397) (125,667 ) The decrease in cash used in financing activities compared to the three-month pe- riod ended March 31, 2025 last year stems primarily from a decrease in interest and principal payments on the company's debts, in the amounts of approximately USD 11.9 million and approximately USD 22.0 million, respectively. Additionally, A-27 Item For the three months ending March 31 For the year ended Decem- ber 31 The Company's explanations for the balances and the material changes 2026 2025 2025 Thousands of dollars during the three-month period ended March 31, 2026, there were a release of re- stricted cash of approximately USD 6.6 million and proceeds from notes payable of approximately USD 1.2 million. The decrease in cash used was partially offset by receipts (consideration) in the amount of USD 8.0 million received from the owners during the three months ended March 31, 2025 last year. The effect of the changes in the Exchange rate on the cash and cash equivalent bal- ances -- (49) (938) --

 A-28 3.4. Financing and Liquidity A. As of March 31, 2026, the Company has a working capital deficit of approxi- mately USD 590.9 million in the consolidated financial statements attributable to loans falling due within 12 months after the date of the statement of financial position, which were therefore classified as short-term loans. Such loans in- clude: (1) the debentures (Series B) in the amount of approximately NIS 388.3 million (approximately USD 122.7 million as of March 31, 2026) and the de- bentures (Series D) in the amount of approximately NIS 587 million (approxi- mately USD 185.5 million as of March 31, 2026), totaling (for the debentures (Series B and Series D)) approximately NIS 975.3 million (approximately USD 308.2 million as of March 31, 2026); (2) mortgage loans related to PORT's residential properties in the amount of approximately USD 187.9 million, which were refinanced after the reporting date of the financial statements; and (3) mortgage loans in the amount of approximately USD 317.4 million, which primarily include the loan from Bank of America in the amount of approxi- mately USD 152.6 million as well as the loan from the Whitehawk lender in the amount of approximately USD 80 million. B. The Company has a working capital deficit of approximately USD 336.9 mil- lion in the separate (solo) financial statements, resulting primarily from the de- benture payments as stated above. C. For the three-month period ended March 31, 2026, the Company has positive cash flow from operating activities in the consolidated financial statements, in the amount of approximately USD 0.9 million, and negative cash flow from operating activities in the solo financial statements, in the amount of approxi- mately USD 2.4 million. In this regard, see the following: (USD thousands) As of March 31, 2026 Adjustments (for a 12 month period) Total Current Assets 295,047 -- 295,047 Current Liabilities 885,915 -- 885,915 Surplus (Deficit) of Current Assets over Current Liabilities (590,868) -- (590,868) 3.5. Disclosure pursuant to Article 10 (b) (14) of the Periodic and Immediate Reports Regulations and Disclosure of Projected Cash Flow to Finance the Repayment of Company's Obligations 3.5.1. In the Company's consolidated financial statements as of March 31, 2026, a warning sign exists for the Company, as defined in Regulation 10(b)(14) of the Reporting Regulations, due to the opinion of the Company's independent auditors, which in- cludes an emphasis of matter regarding significant doubts as to the Company's ability to continue as a going concern. See Note 1 to the financial statements in this regard. Accordingly, the Company attaches a projected cash flow for the next two years. A-29 Such warning sign has existed since the Company's financial statements as of June 30, 2025. 3.5.2. As of the publication date of this report, in order for the Company to continue its ongoing operations, several actions must be completed in the near term, including refinancing loans and selling real-estate properties, all of which are subject to ap- provals under the Standstill arrangement and additional approvals of third parties. These plans are subject to changes according to market conditions in the commercial real-estate credit environment, the current interest-rate environment, leasing chal- lenges and transaction volumes in certain markets, the success of the arrangement process with the Company's debenture holders, and additional factors, and are not within the Company's control. Therefore, there is no certainty that the Company will be able to implement its plans and meet its existing and projected obligations when they mature. The uncertainty concerning the Company's plans may be mitigated through a potential sale of residential homes, the PORT Properties, and successful negotiations to reach an arrangement with the debenture holders and additional lend- ers. Since these plans are not within the Company's control and depend on third-party approvals as stated above, the Company's management and board of directors have concluded that there are material doubts as to the Company's ability to continue op- erating as a going concern. 3.5.3. The following are the principal working assumptions underlying the projected cash flow set out below: A. According to the Company's management, in properties in which the Company estimates that there is positive equity, it will be possible, subject to the success of negotiations with the lenders, to extend the maturity dates of the loans or to refinance them, including loans whose maturity dates have passed or that were classified as short-term loans in the Company's consolidated financial state- ments. B. The Company estimates that during the projected cash-flow period it will com- plete several sale transactions involving some of its income-producing real- estate properties and additional assets, as set out in this section below. C. The table below includes distributions from investee companies, both from re- tained earnings and from returns of capital investments. Based on the operating agreements of each such investee company, surplus funds are distributed to the partners in accordance with the distribution mechanism set out in the operating agreements. See in this regard the forward-looking information paragraph in Section 3.5.4 below. 3.5.4. Set out below is a table summarizing the projected cash flow for the next two years, in millions of dollars (*) (**) (***): A-30 For the period from 04/2026 to 12/2026 For the period from 1/2027 to 12/2027 For the period from 1/2028 to 3/2028 Use thousands Cash balance at start of period 9.7 2.0 26.9 Cash flows from current operations Solo general and administrative expenses (3.8) (4.0) (0.8) Total cash flow from current operations (3.8) (4.0) (0.8) Cash flows from investment activities Net distributions from investee companies 3.0 102.2 59.0 Total cash flows from investment activities 3.0 102.2 59.0 Cash flows for financing activities Repayment to Creditors (7.0) (3.0) (74.0) Interest Payments on Debentures 0 (70.3) (9.1) Total cash flow for financing activities (7.0) (73.3) (83.1) Total net cash flow for the period (7.7) 24.9 (24.8) Cash balance at end of period 2.0 26.9 2.0 It should be noted that the projected cash-flow data above consist of the Company's solo data. (*) The cash flow described above does not include termination fees to the management company of the PORT Properties, Second Avenue Group, which the Company may be required to pay in an amount that it is unable to estimate as of the publication date of the report. This is because the amount of such termination fees, as well as the very need to pay them, is determined, among other things, by the circumstances of termination of the agreement, insofar as it is terminated, according to a mechanism derived from the per- formance of the PORT assets and according to the date of termination of the agreement. (**) It should be noted that assumptions relating to cash flow that will arise from the sale of residential homes held through PORT may change materially in light of the existing uncertainty in connection with such sales, including the nature of the sale, whether bulk or retail, the timing of the sale, CAPEX expenses, and debt- service costs until the sale. (***) The assumptions in the cash flow do not include sales of properties in sale processes led by the existing lenders of the properties, since the Company does not expect such sales to generate cash flow for it. (^) The value under "net distributions from investee companies" includes the net value of NOI, net operating income, together with financing costs. 3.5.5. Assumptions used in preparing the projected cash-flow report for two years from the date of the financial report: The Company is currently holding discussions with the representatives of the holders of the Company's Debentures, Series B and Series D, for the purpose of amending the debt terms, within the framework of a legal proceeding for approval of a debt A-31 arrangement between the Company and its creditors. Pursuant to the decision of the Tel Aviv District Court dated February 4, 2026, on April 30, 2026, a creditors' meet- ing was held whose agenda included approval of a debt arrangement pursuant to Sec- tion 85 of the Insolvency and Economic Rehabilitation Law, -2018. For details re- garding the proposed debt arrangement and said creditors' meeting, see the Compa- ny's immediate report dated April 7, 2026, reference no. 2026-01-032324, the con- tents of which are included in this report by way of reference. In addition, for details regarding the results of the said creditors' meeting, as received from the trustee for the holders of the Company's debentures, see the Company's immediate report dated May 1, 2026, reference no. 2026-01-040454, Furthermore, for details regarding the text of the debt restructuring agreement, which was attached to the disclosure report pursuant to Regulation 37K of the Securities Regulations, and regarding the Tel Aviv District Court’s decision dated May 24, 2026, in connection with the debt restructur- ing, see the Company’s immediate reports dated April 26, 2026 (Reference No. 2026- 01-038064) and May 24, 2026 (Reference No. 2026-01-047593), the information therein is incorporated in this report by reference. It should be noted that, in the assumptions set out below, the Company assumed that the holders of the Company's debentures will not object to said actions and will not declare the Company's debt immediately due and payable, even if grounds for de- claring the Company's debt immediately due and payable exist during the projected cash-flow period. Under the proposed arrangement, the repayment date of the De- bentures, Series B, and the Debentures, Series D, as well as the repayment date for the rest of the Company's creditors, is set for June 30, 2028, in one payment, subject to the provisions regarding mandatory early redemption. It should be noted that the said projected cash flow reflects the operating principles and assumptions that were also set forth in the proposed debt restructuring, as stated above, as well as the company's operating assumptions regarding negotiations with lenders and regarding the realization values of the company's properties. The projec- tions are highly sensitive to changes in market conditions, the execution of property realizations, lenders' decisions, and additional uncertainties, which may cause actual results to differ materially from the presented projections. (1) Net cash expected to be received by the Company from investee companies: This item includes the Company's share of cash expected to be received from the sale of assets of investee companies after interest expenses on the loans in the properties and operating expenses. For the period from 4/2026 to 12/2026: - These distributions mainly include approximately USD 5.7 million from the sale of land parcels in Park Highlands, which will arise from the sale transaction of such parcels for consideration of approximately USD 52.3 million, of which approximately USD 45 million will be used for a relative

 A-32 repayment of the WhiteHawk loan as part of the release of the areas from the said loan, and transaction costs of approximately USD 1.6 million. - Approximately USD 4.8 million from the sale of S-REIT shares, financial assets, that their sale was completed after the reporting date of the financial statements. - Approximately USD 9.5 million that will arise from the sale of 390 resi- dential homes, held through PORT, for consideration of approximately USD 67.7 million, and from an increase of the refinanced and upsized loan on the PORT Properties in the amount of approximately USD 3.4 million. Out of the said sale consideration, approximately USD 54.9 million will be used for a relative repayment of existing loans in the properties, and approximately USD 6.7 million will be used for transaction costs. For the period from 1/2027 to 12/2027: These distributions mainly include: - Approximately USD 20.8 million that will arise from the sale of an addi- tional 1,189 residential homes, held through PORT, for consideration of approximately USD 206.4 million. Out of said sale consideration, approx- imately USD 165.2 million will be used for repayment of existing loans and related interest in the properties, net of distributable amounts and ap- proximately USD 20.4 million for transaction costs. It should be noted that after the year ending December 31, 2027, the Com- pany estimates that additional cash flow will arise from the sale of the re- maining residential homes, which at that time are not expected to be en- cumbered by debt. - Approximately USD 23.4 million from the sale of the remaining land areas in Park Highlands, which will arise from the sale transaction of such areas for consideration of approximately USD 49.9 million, of which approxi- mately USD 25 million will be used to repay the WhiteHawk loan as part of the release of the areas from the said loan, and for transaction costs of approximately USD 1.5 million. - Distributions in the amount of approximately USD 63.6 million that will arise from the joint venture holding the 110 William property, from the sale transaction of the said property for estimated total consideration of approximately USD 422.1 million, of which approximately USD 326.3 million will be used to repay the existing loans in the property, as well as additional debt service and transaction costs in the amounts of approxi- mately USD 17.6 million and USD 7.6 million, respectively. The distribu- tion is based on the Company's effective holding rate in the property, which is 90%. For the period from 1/2028 to 03/2028: A-33 The distributions from investee companies derive mainly from: - A total of approximately USD 34.2 million from the sale of the Eight & Nine Corporate Center in return for approximately USD 55 million, of which approximately USD 19.1 million will be used for the repayment of an existing loan on the property as well as transaction costs of approxi- mately USD 1.7 million. - Approximately USD 17.7 million that will arise from the sale of an addi- tional 150 residential homes, held through PORT, for consideration of ap- proximately USD 26 million. Out of the said sale consideration, approxi- mately USD 2.6 million will be used for transaction costs and approxi- mately USD 5.7 million for debt service. The assumption is that the senior loan in the PORT assets will be repaid during 2027, so that in the first quarter of 2028 there will be no mortgage on the PORT assets. The assumptions and projected cash flow detailed above constitute forward-looking information, as defined in the Securities Act, -1968, including, among other things, forecasts, assessments, estimates, and other information relating to future events or matters whose realization is uncertain and does not depend solely on the Company, but on many additional factors that are not under its control, including receipt of the debenture holders' approval for sale and financing transactions. These estimates are based on the information currently available to the Company regarding its activity, the Company's past experience, and dialogue and negotiations being held with lend- ers, potential purchasers, and brokers, as applicable. The said information may not materialize at all or may materialize differently from what is stated above if the con- tacts and negotiations described above do not mature on the timetable set out above or do not mature at all into binding sale agreements and sale transactions, as applica- ble, for various reasons, including adverse changes in the markets and areas of activ- ity in which the properties are located and due to the realization of the risk factors detailed in Section 1.18 of Chapter A of the 2025 annual report. It is also possible that the assumptions in the cash flow will not materialize because the proposed debt arrangement is not approved. It should further be noted that, in light of existing breaches of the terms of loan agree- ments in connection with the Company's properties, as stated in Section 1.1.2.7 of Chapter A of the 2025 annual report, the Company may be required to carry out forced sales of properties, which may result in the consideration for the sale of such properties being lower, even materially lower, than the fair value of the properties as of the date of this report. With respect to property sales, the sale of residential homes held through PORT may change materially in light of the existing uncertainty in connection with such sales, including the nature of the sale, whether bulk or retail, the timing of the sale, CAPEX expenses, and debt-service costs until the sale. A-34 In this context, as follows from the foregoing, based on the information available to the Company as of the date of this report, according to the cash-flow forecast prepared by the Company as described above, and based on the information available to it as of the date of the report, the Company will not have sufficient amounts to fully repay its obligations to its creditors, including the holders of the Company's debentures. 3.5.6. Further to the existing uncertainties presented after the assumptions for the projected cash flow in Section 3.5.5 above, see below the Company's estimates regarding the possible effects of the foregoing on the Company's equity: Amount Notes Equity as of March 31, 2026 60 Adjustments: Investment real estate assets (*) (68 ) Adjustment in respect of the possible sale of properties in the framework of accelerated sale processes as described above. Investments in associates (Joint Ventures) (23) Adjustment in respect of possible transaction costs for the sale of the 110 William property, and adjustment in respect of the lack of marketability of the Company's holdings in the Opportunity Zone. Transaction costs (36) Adjustment in respect of expected transaction costs for the sale of all residential properties held through PORT, the sale of 8&9 Corporate Center, and the Park Highlands lands. Equity after adjustments (**) (67) (*) It should be noted that there is uncertainty regarding the consideration that may arise from the sale of the PORT Properties and the properties pledged in favor of Bank of America, in light of the high pace of sales required under the terms of the new loan in PORT, as well as contacts for entering into a forbearance agreement with Bank of America for the properties pledged to it. The assumption with respect to these properties is that the sale price will not exceed the amount of the debt to the lender. (**) The adjustments to equity do not include financing expenses, including the effect of exchange rates, capital investments in the PORT Properties, and operating profit/loss. In addition, the adjustments above do not include termination fees to the management company of the PORT Properties, Second Avenue Group, which the Company may be required to pay in an amount that it is unable to estimate as of the publication date of the report. This is because the amount of such termination fees, as well as the very need to pay them, is determined, among other things, by the circumstances of termination of the agreement, insofar as it is terminated, according to a mechanism derived from the per- formance of the PORT Properties and according to the date of termination of the agreement. A-35 3.6. FFO (Funds from Operations) Below are the FFO results the net reported profit after deducting non-recurring in- come and expenses (including gains and losses from the sale of properties, adjust- ment of the fair value of investment properties and changes in percentage holdings in investee companies) with the addition of the share of amortizations of the Com- pany, which is a parameter commonly used by analysts to analyze the results of in- come-producing property companies. It is emphasized that FFO: (a) does not represent cash flows from operating activities in accordance with gen- erally accepted accounting principles; (b) Does not reflect cash held by the Company and its ability to distribute the cash; (c) Does not replace the net reported profit; (d) Is not data audited nor reviewed by the auditors of the Company The Company believes that subject to and in addition to its financial statements, the FFO adequately reflects another aspect of the Company's operating results, and offers a basis for comparison between the Company's operating results in a specific period and those in prior periods, and between the Company's operating results and those of other income-producing property companies. Following are Company's FFO figures: FFO (*) For the three-month period ending March 31 For the year ended December 31, 2025 Increase (de- crease) March 31, 2026 vs. March 31, 2025 2026 2025 (USD thousand) Net Profit (loss) (20,509) (6,270) (446,902) (12,364) Adjustments: According to the provisions of the fourth addition to the Securities Regulations (Prospectus Information and Draft Prospectus – Structure and Form), 5729-1969 Neutralized Secondary Operations (Ho- tel) 204 (733) 2,538 937 Gains and Losses from Reappraisals of Investment Real Estate (5,381) 2,545 266,810 (7,926) One-time or Extraordinary Expenses 1,280 -- (18,500) 1,280 Loss or disposal of loss from deprecia- tion in accordance with IAS 36 (includ- ing depreciation of investments valued at book value) or gains from distressed ac- quisitions -- -- 12,521 -- Gain/Loss from changes in the fair value or sale of financial instruments 4,571 -- (1,925) 4,571 One-time tax expenses8 -- 890 - (890) Adjustments (detailed above) for associ- ated companies or joint ventures pre- sented at book value 3,192 (359) 86,767 3,551 8 Due to the sale of the Park Highlands lands.

 A-36 FFO (*) For the three-month period ending March 31 For the year ended December 31, 2025 Increase (de- crease) March 31, 2026 vs. March 31, 2025 2026 2025 (USD thousand) FFO according to the ISA's approach (16,643) (3,927) (98,691) (12,716) Adjustments due to non-controlling rights' share of FFO (307) (27) (1,925) (280) FFO according to the ISA's approach attributed to Company's shareholders * (16,950) (3,954) (100,616) (12,996) Of which: FFO from current opera- tions (16,950) (3,954) (100,616) (12,996) Adjustments due to non-controlling rights' share of FFO 0 0 0 0 FFO according to the ISA's approach attributed to Company's shareholders (16,950) (3,954) (100,616) (12,996) Of which: FFO from current opera- tions according to the ISA's approach attributed to Company's shareholders (16,950) (3,954) (100,616) (12,996) * FFO does not constitute a financial index based on generally accepted accounting guidelines; this index is calculated pursuant to the instructions of the Israel Securities Authority; the index represents net accounting profit for the period, after neutralizing one time income and expenses (including gains or losses from the reappraisal of properties), property sales, depreciation and deductions and other types of gains; use of this index is generally accepted when reviewing the performance of income generating real estate companies; required adjustments from the accounting profit are detailed in this table. A-37 3.7. Net Operating Income (NOI) Below is information with respect to the Net Operating Income (NOI) (profit from property rental and operation thereof) of the Group: The management of the Company estimates that the NOI data is one of the most important parameters in valuating income-producing real estate. The result of divid- ing this by the customary discount rate in the geographical area in which the property is located ("Cap Rate") is one of the indicators for determining the value of the prop- erty (in addition to other indicators, such as: the market value of similar properties in the area, the sale price per square meter built from recent transactions, etc.). In addi- tion, the NOI data is used to measure the free cash flow available for service of a financial debt taken to finance the purchase of the property, while investments in renovations and maintenance of the current property are deducted from the total NOI. It should be noted that NOI: (a) does not reflect cash flow provided by current operations in accordance with GAAP; (b) does not reflect cash available for financing all of the Group's cash flows, in- cluding its capacity to make distributions; (c) should not be considered a substitute for net income, in evaluating the Group's operating results. (d) is not audited nor reviewed by the auditors of the Company. Below is NOI information for the Company (not including its pro-rata share of NOI of associates and jointly-controlled entities): NOI For the three-month period ending March 31 For the year ending December 31, 2025 2026 2025 USD thousands 8,452 13,886 45,471 A-38 Part Two – Corporate Governance 4. General Pursuant to Section 39a(a) of the Securities Act (hereinafter: "Section 39a"), the pro- visions of the Companies Act and the regulations set forth in the Securities Act, 1968 (hereinafter: "The Securities Act") apply to companies incorporating outside of Is- rael and which has offered its shares or warrants to the Israeli public, all as set forth in the Fourth Addition (Part B) to the Securities Act. Whereas Company's noncon- vertible warrants have been offered to the Israeli public by way of a prospectus, and have been listed for trading on the Exchange, pursuant to Israeli law, as described above, the provisions of Section 39a apply to the Company, and therefore various provisions of the Companies Act apply to it (including provisions pertaining to the appointment of external directors, and internal auditor and an audit committee) as detailed in Part B of the Fourth Addition to the Securities Act, and these provisions apply in addition to the provisions set forth in Company's incorporation documents and the laws of the British Virgin Islands. Pursuant to the 2019 Shelf Prospectus, (as the term is defined in the above Section A – Descriptions of the Entity's Business) in September 2019, the Insolvency and Fi- nancial Rehabilitation legislation, 2018 (hereinafter: "the Insolvency Law") came into effect, which includes, inter alia, instructions which have replaced certain sec- tions contained in Corporate law regarding compromises and settlements (including Mark C, in Section G, Chapter 2, which deals with financial rehabilitation, as well as Section 3, Part 10, which concerns approval of a material debt settlement by a de- bentures company), which applies as of the date the Insolvency Legislation came into effect. 4.1. Charitable Contributions The Company does not have a current permanent policy with regard to charitable donation nor does it have any existing commitment to make charitable donations in the future. During the report period, the Company did not make any material dona- tions. 4.2. Composition of the Board of Directors As of the reporting date, the Company's board of directors includes (4) directors, all of whom have accounting and financial expertise: - Mr. Ronen Nakar, Chairman of the Board of Directors and CEO of the Com- pany; - Mr. Ron Hadassi, external director; - Ms. Varda Klal, external director; A-39 - Mr. Itay Dayan, external director. Changes in the composition of the board of directors For details regarding the notice of Mr. Ron Hadassi, an external director of the Com- pany, of his intention to terminate his tenure as an external director of the Company shortly after the publication of the Company’s financial statements as of March 31, 2026, see the Company’s immediate report dated February 5, 2026 (Reference No.: 2026-01-013083), the information of which is incorporated herein by reference. Note that on June 1, 2026, after the report date, Mr. Izhak David Lax was appointed to serve as a director of the Company, with his term to commence on June 1, 2026. For further details, see the Company's immediate report dated May 13, 2026 (Refer- ence No.: 2026-01-044169), the information from which is incorporated into this re- port by reference. For details regarding changes in the composition of the board of directors in January 2026, see Section 3(a) of Chapter B of the 2025 annual report. 4.3. Directors with accounting and financial expertise At the meeting of the Board of Directors on March 28, 2016, the Board of Directors decided, under Article 92(a)(12) of the Companies Law, that the appropriate mini- mum number of directors with accounting and financial expertise, including external directors (which will be appointed in accordance with the provisions of the Compa- nies Law) is two (including external directors (hereinafter: the "Appropriate Mini- mum Number"). The Appropriate Minimum Number was determined while taking into consideration, among other things, the size of the Company, its areas of activity and the nature of the accounting and financial issues arising from the examination of the financial position of the Company as well as the preparation and approval of its financial statements. In this regard, it should be noted that at the date of the Report, all four of the Company's directors possess accounting and financial expertise, as detailed in Section 4.2 above. 4.4. Independent Directors The Company articles do not include any provision in regard to the number of inde- pendent Directors. As of the date of the report the Company has three external direc- tors and no independent directors.

 A-40 Part Three – Disclosure provision in connection with the finan- cial reporting of the corporation 1. Critical accounting estimates With regard to critical accounting estimates, see note 3 to the consolidated financial statements of the Company as of March 31, 2026. 2. Highly Material Appraisers All of Company's properties have been appraised by Kroll, Inc. (previously: Duff & Phelps) and Colliers International Valuation and Advisory Services, LLC, save for Company's single-family properties (the PORT properties), appraised by House Ca- nary. Note that all of the aforementioned appraisers are independent of the Company. A. Kroll, Inc. (previously: Duff & Phelps) is a financial services consultation firm which providing financial consulting and investment banking services. Among other things, Kroll specializes in appraisals in major real estate cities and mar- kets in the US in a variety of real estate segments (office, residential, hotels, industry, healthcare, commerce, and retail) for business clients. Kroll employs approximately 5,000 people and provides services in over 100 nations. B. Colliers International Valuation and Advisory Services, LLC specializes in ap- praisals in major real estate cities and markets in the US in a variety of real estate segments (office, residential, hotels, industry, healthcare, commerce, and retail) for business clients such as financial institutions, real estate corpora- tions, contractors, investors, entrepreneurs and legal firms. Colliers employs approximately 17,000 people working in 62 branches and offices around the world. C. House Canary specializes in appraisals of various real estate properties in major cities and markets in the US for private and corporate clients such as financial institutions, real estate corporations, contractors, investors, and entrepreneurs. The House Canary appraisal model is autonomous and is based on, and backed by, machine learning technology and a large variety of data sources. For details on Material and Highly Material appraisals of Company properties, see Sections 1.7.8-1.7.9 to Chapter A of the 2025 Periodic Report and Section 3 of Part 4 of Chapter B (Report of the Board of Directors) of the 2025 Periodic Report. 3. Guarantees to ensure repayment of obligations by borrowing entities Further to the contents of Section 1.11.2 a of Company's 2024 Periodic Report, fol- lowing are details of the financial guarantees (guarantees of the obligations of lenders as part of loan agreements, including payment of principal and interest, which are at times limited in amount) (hereinafter: "Financial Guarantees") granted by A-41 Company's Investee Companies as part of loan agreements on its properties as of around the date of the release of this report: - Pacific Oak SOR Properties LLC (a 100%-owned subsidiary of the Company) provided a full financial guarantee (in the amount of 100% of the loan princi- pal) in connection with the loan in respect of the Madison Square property. It should be noted that until October 7, 2021, such guarantee was provided by Pacific Oak SOR US Properties II LLC (another 100%-owned subsidiary of the Company), and from such month, as part of an update to the loan terms, the said guarantee was assigned to Pacific Oak SOR US Properties LLC. It should be noted that a guarantee of this kind was also provided in connection with the Lincoln Court property, the sale of which was completed after the date of the statement of financial position. For details, see Section 2.5 above. - Pacific Oak SOR Equity Holdings X LLC (a 100%-owned subsidiary of the Company that indirectly holds rights in the Company's single-family residen- tial properties) provided full financial guarantees (in the amount of 100% of the loan principal) in connection with two of the four loans which existed in respect of the PORT properties. Such loans were repaid in full after the report- ing date of the financial statements as part of a refinancing. For details, see Section 2.3 above. - In addition to the foregoing, in July 2025 Pacific Oak SOR Properties LLC and Pacific Oak SOR US Properties II LLC provided full financial guarantees for all the obligations of the borrowing entities under the loan granted in connec- tion with the properties Park Highlands, Richardson lands, and 210 West 31st, totaling approximately USD 80 million. For details regarding the guarantee and the terms of the aforementioned loan, see Appendix A below (Material Loans). 4. Additional information on the Company's restricted cash Following is a detail of Company's restricted cash, by property: Restricted Cash: Certain cash balances are subject to contractual or enforceable restrictions and are therefore not available for general corporate and operating purposes. Restricted cash primarily consists of (i) lender-controlled cash management accounts associated with loans in default and (ii) lender-required impound, reserve and escrow accounts established under the Company’s bor- rowing arrangements (iii) non-lender escrows for future commitments. These balances may only be used for purposes specified in the applicable loan agreements or other escrow arrangements. Entity Restricted Cash Balance Q&C Hotel 1,104 Richardson Portfolio 1,127 Park Centre 35 The Marq 5,514 Oakland City Center 1,193 A-42 1180 Raymond 692 Lincoln Court (1) 1,132 PORT 6,530 Eight & Nine Corporate Centre 7,029 Park Highlands (2) 14,147 BVI Corporate 4,251 Other 1,226 Total (3) 43,980 (1) Lincoln Court was sold subsequent to March 31, 2026. Due to the default provisions under the related mortgage loan agreement, the restricted cash balance was remitted to the lender. (2) Park Highlands restricted cash balance is primarily related to interest reserves related to the WhiteHawk loan and escrowed funds for construction obligations. (3) Restricted cash related to Madison Square was excluded from the Company’s consolidated balance as a result of the property entering into a receivership in March 2026. 5. Legal Proceedings As of the date of publication of this report, there are no material legal proceedings pending against the Company or its controlled entities, except as detailed below: For details regarding a motion to certify a Class Action filed against the Company and members of its Board of Directors, submitted to the Economic Department of the Tel Aviv District Court and received by the Company on September 11, 2025, see the Company's report dated September 11, 2025 (reference number: 2025-01- 068917). For details regarding notices received by the Company concerning lawsuits filed by the lender against the property entities holding the Highlands Park lands, seeking declaratory reliefs and orders regarding the breach of the loan agreement and its lien rights, as well as the temporary injunction issued by the court with the parties' consent in connection with the Highlands Park lands, see the Company’s immediate report dated May 24, 2026 (Reference No.: 2026-01-047562), the information of which is incorporated herein by reference. A-43 Part Four – Specific Disclosure to the Company's Deben- ture Holders Materialization of grounds for calling Company's debentures for im- mediate repayment On March 31, 2026, further to the report of the Trustee for Company's Series B and D Debentures regarding the results of an assembly of Series B and Series D debenture holders in which Holders resolved to object to the proposed transaction for sale of the PORT properties, S&P Global Ratings Maalot, LTD announced that it was down- grading Company's issuer's rating to ilB (in lieu of ilBBB) and maintaining its inclu- sion on a negative watchlist, as well as a downgrade of the rating of Company's un- secured Series B and D debentures to ilB (in lieu of ilBBB) and maintaining their inclusion on a negative watchlist. Due to the aforementioned downgrading of the ratings of Company's debentures, grounds have arisen for Series B and D debenture holders, as applies, to call Series B and D debentures for immediate repayment, as set forth in Section 8.1 of the deeds of trust for Series B and D debentures. For details, see Company's March 31, 2026 immediate report (Reference Number: 2025-01-073499), the contents of which are included in this report by way of refer- ence. In addition, on February 17, 2026, S&P Global Ratings Maalot announced that, at the Company's request, it was discontinuing the rating of the Company and its de- bentures, so that as of shortly before the publication date of this report, the Company and its debentures are not rated. Immediately prior to such rating discontinuation, the Company and its debentures were rated 'ilCCC' due to the increased risks of a default event. Further to the aforementioned, as described in this current section, below, beginning with Q3/25, the Company has violated the financial covenants in accordance with the deeds of trust of Company's Series B and D debentures for two consecutive quar- ters. As a result of the failure to comply with the financial covenants, grounds have arisen for Series B and D debenture holders, as applies, to call Series B and D deben- tures for immediate repayment, as set forth in Section 8.1 of the deeds of trust for Series B and D debentures. See also Company's immediate report published in tandem with this report. In addition, the review reports and opinions, as applicable, of the Company's auditors that were attached to the Company's financial statements beginning with the Compa- ny's financial statements as of June 30, 2025, included and include, as applicable, an emphasis of matter regarding significant doubts concerning the Company's continued existence as a going concern, in a manner that grants the holders of the debentures, Series B and Series D, as applicable, the right to declare the debentures, Series B or Series D, as applicable, immediately due and payable, as stated in Section 8.1 of the trust deeds.

 A-44 6. Below are details of the Debentures (Series B, Series C, and Series D) issued by the Company, which are held by the public as of the publication date of the report: Debentures (Series B) Debentures (Series D) Is the debenture series material (as the term is defined in Regulation 10(b)(13)(a) of the Reports Regula- tion Yes – Material Debenture series Yes – Material Debenture series Date of issue February 16, 2020 April 25, 2024 Series Expansion Date October 31, 2021 – series expansion as part of a public offering pursuant to a Shelf Offering Report November 7, 2021 – series expansion as part of a private allot- ment May 2, 2022 – series expansion as part of a private allotment August 20, 2024 – series expansion by way of a public offering in accordance with a shelf offering report Par value on the date of issue (ILS thousands) 254,055 288,103 Par value on the date of series expan- sion (ILS thousands) October 31, 2021 – 790,411 November 7, 2021 – 844,055 May 2, 2022 – 1,164,479 August 20, 2024 – 587,063 Par value as of March 31, 2026 (ILS) 388,237 587,063 Linked par value as of March 31, 2026 (ILS thousands) The debentures are not index-linked The debentures are not index-linked The amount of accrued interest plus linkage differences (ILS thousands) as of March 31, 2026 13,407 37,670 Value in the financial statements as of March 31, 2026 (ILS thousands), in- cluding interest payable. 401,644 624,732 Stock exchange value as of March 31, 2026 (ILS thousands) 197,225 289,070 Type of interest rate and date of pay- ment thereof As of close to this report's publication date – the annual interest rate on Debentures (Series B) is 5.18%. Following is an explanation regarding the interest rate: The Fixed interest rate – 3.93%. As of close to this report's publication date – the annual interest rate on Debentures (Series B) is 11%. Following is an explanation regarding the interest rate: The Fixed interest rate – 9.5%. A-45 Debentures (Series B) Debentures (Series D) Beginning December 8, 2024, the interest rate was adjusted to 4.18% due to a downgrade of one notch in the rating of the de- bentures. Beginning March 3, 2025 the interest rate was adjusted to 4.43% due to a downgrade of an additional notch in the rating of the debentures. Beginning July 7, 2025, the interest rate was adjusted to 5.18% due to a downgrade of one notch in the rating of the debentures. The interest is to be paid in two annual payments – on July 31, 2020 and on January 31 and July 31 of each year between 2021 to 2026, beginning on July 31, 2020 and ending on January 31, 2026 (inclusive), except for the first interest period9. Interest is subject to adjustments in the event of a change in the rating of Debentures (Series B) and/or failure to comply with financial covenants. Beginning December 8, 2024, the interest rate was adjusted to 9.75% due to a downgrade of one notch in the rating of the de- bentures, as described below. Beginning March 3, 2025 the interest rate was adjusted to 10% due to a downgrade of an additional notch in the rating of the debentures. Beginning March 31, 2025 the interest rate was adjusted to 10.5% due to non-compliance with the minimum equity cove- nant set forth in Section 5.3 of the Deed of Trust. Beginning July 7, 2025, the interest rate was adjusted to 11% due to a downgrade of one notch in the rating of the debentures. The interest is to be paid in two annual payments – on August 31 of each year between 2024 to 2028 and on February 28 of each year between 2026 to 2029, beginning on August 31, 2024 and ending on February 28, 2029 (inclusive), except for the first interest period10. Interest is subject to adjustments in the event of a change in the rating of Debentures (Series D) and/or failure to comply with financial covenants. Rating downgrade of December 8, 2024 On December 8, Maalot announced it was downgrading the rat- ing of Series B debentures from ilAA- to ilA+, which had impli- cations for the aforementioned rating increase of Series B de- bentures11. On December 8, Maalot announced it was downgrading the rat- ing of Series D debentures from ilAA- to ilA+, which had impli- cations for the aforementioned rating increase of Series D de- bentures, as detailed above12. Rating downgrade of March 2, 2025 On March 3, 2025, Maalot announced it was downgrading the rating of Series B debentures from ilA+ to ilA, which had On March 3, 2025, Maalot announced it was downgrading the rating of Series D debentures from ilA+ to ilA, which had 9 In this regard, "First Interest Period" – beginning on February 16, 2020, and ending on July 31, 2020. 10 In this regard, "First Interest Period" – beginning on April 25, 2024, and ending on August 31, 2024. 11 For details, see Company's immediate reports of December 8, 2024 (Reference Number: 2024-01-622870 and 2024-01-622869, respectively), the contents of which are included in this report by way of reference. 12 For details, see Company's immediate reports of December 8, 2024 (Reference Number: 2024-01-622870 and 2024-01-622869, respectively), the contents of which are included in this report by way of reference. A-46 Debentures (Series B) Debentures (Series D) implications for the aforementioned rating increase of Series B debentures13. implications for the aforementioned rating increase of Series D debentures14. Rating downgrade of July 6, 2025 On July 6, 2025, Maalot announced the downgrading of its Se- ries B Debentures from ilA to ilBBB, which affected the increase of the debenture rating (Series B) as stated above15. On July 6, 2025, Maalot announced the downgrading of its Se- ries D Debentures from ilA to ilBBB, which affected the in- crease of the debenture rating (Series D) as stated above16. Rating downgrade of September 30, 2025 On September 30, 2025, Maalot announced it was downgrading the rating of Series B debentures from ilBBB to ilB17. Note that due to the aforementioned rating downgrade, grounds have materialized for holders of Series B debentures to call Se- ries B debentures for immediate repayment, as set forth in Sec- tion 8.1 of the Series B debentures Deed of Trust. On September 30, 2025, Maalot announced it was downgrading the rating of Series D debentures from ilBBB to ilB18. Note that due to the aforementioned rating downgrade, grounds have materialized for holders of Series D debentures to call Se- ries B debentures for immediate repayment, as set forth in Sec- tion 8.1 of the Series D debentures Deed of Trust. Interest increase due to a failure to comply with financial covenants As noted in Company's August 31, 2025 immediate report as well as in the below Section 5.8, the Company is not in compli- ance with its financial covenants. Note that beginning July 7, 2025, Series B and D debentures bear the Maximum Additional Interest Rate in accordance with the provisions of Sections 5.2 and 5.3 of Company's deeds of trust, and therefore, the violations set forth in this immediate report shall not entitle holders of Company's debentures to interest rate additions. On March 31, 2025 Company announced it was not in compli- ance with the consolidated equity covenant set forth in Section 5.3 of the Series D Deed of Trust, which had implications for the aforementioned increase of the interest rate on Series D deben- tures19. As noted in Company's August 31, 2025 immediate report as well as in the below Section 5.8, the Company is not in compli- ance with its financial covenants. Note that beginning July 7, 2025, Series B and D debentures bear the Maximum Additional Interest Rate in accordance with the provisions of Sections 5.2 and 5.3 of Company's deeds of trust, and therefore, the violations 13 For details, see Company's immediate reports of March 3, 2025 (Reference Number: 2025-01-014001 and 2025-01-014005, respectively), the contents of which are included in this report by way of reference. 14 For details, see Company's immediate reports of March 3, 2025 (Reference Number: 2025-01-014001 and 2025-01-014005, respectively), the contents of which are included in this report by way of reference. 15 For details, see the Immediate Report of July 6, 2025 (Ref. No. 2025-15-049073), the information according to which is incorporated in this report by way of reference. 16 For details, see the Immediate Report of July 6, 2025 (Ref. No. 2025-15-049073), the information according to which is incorporated in this report by way of reference. 17 For details, see the report dated September 30, 2025 (Reference Number: 2025-15-073415), the contents of which are included in this report by way of reference. 18 For details, see the report dated September 30, 2025 (Reference Number: 2025-15-073415), the contents of which are included in this report by way of reference. 19 For details, see Company's immediate report of March 31, 2025 (Reference Number: 2025-01-022634), the contents of which are included in this report by way of reference. A-47 Debentures (Series B) Debentures (Series D) set forth in this immediate report shall not entitle holders of Company's debentures to interest rate additions. Dates of payment of the principal Repayable in three (3) annual payments on January 31 of each of the years 2024 to 2026, in such a way that each of the first two payments constitutes 33.33% of the principle of the face value of the Debentures (Series B), while the third and final pay- ment constitutes 33.34% of the principle of the face value of the Debentures (Series B). Repayable in three (3) annual payments on February 28 of each of the years 2027 through 2029 (…

Open on SEC

All SEC filings Signals