Pacific Oak Resolves New York City Dispute, Secures Debt Repayment Path for Bondholders
Pacific Oak, a BVI-based company owing bondholders 975 million shekels (325 million dollars), has successfully resolved a dispute with New York City that threatened the repayment of its debt. The company, which owns several office and residential rental properties in the U.S., including the 32-story 110 William office building in Lower Manhattan, had leased this key asset to the city under a 20-year agreement signed in July 2023. The lease included a five-year extension option and required Pacific Oak to complete renovations by late 2025 to enable occupancy.
Delays and disagreements arose when the city claimed significant deficiencies in the renovations, preventing its employees from moving in on schedule and withholding rent payments. Recently, the parties reached an agreement that includes the city paying Pacific Oak 10 million dollars in back rent for two completed phases and committing to full monthly rent payments of 1.69 million dollars starting June. The deal also establishes a framework to complete remaining renovations and secure ongoing occupancy.
This resolution removes the immediate risk of the financing party enforcing a lien on the property, which was valued at 442 million dollars, 66% higher than the combined value of Pacific Oak’s other assets. The company had a 305 million dollar loan on the property due for repayment this month, with loan extension contingent on resolving the dispute and resuming rent payments, conditions now met.
The settlement enables Pacific Oak to resume marketing the property for sale, with proceeds expected to help repay bondholders. Bondholders credit the resolution to the replacement earlier this year of Pacific Oak’s management company, Pacific Oak Capital Advisor, led by founders Peter McMillen and Kit Hall, who resigned amid criticism over mismanagement and renovation failures. The new external management also completed the sale of a Texas land asset for 12.2 million dollars, significantly above previous offers, and finalized the sale of the Lincoln Court office building in California for 25 million dollars, agreeing with the lender to forgive the remaining 32 million dollar debt on that property.
These developments mark positive progress for Pacific Oak’s bondholders following their recent victory in approving the company’s debt restructuring plan.
