Peter McMillan III
About Peter McMillan III
Peter McMillan III is President and Chairman of the Board of Pacific Oak Strategic Opportunity REIT, Inc. (PCOK) and has served as a director since 2008; he is 67 years old as of March 28, 2025 and holds an MBA in Finance from Wharton and a BA in Economics from Clark University . He is a co-owner of the sponsor (Pacific Oak Holding) and advisor (Pacific Oak Capital Advisors), with over 40 years in real estate finance and investment management; PCOK does not disclose executive TSR/revenue/EBITDA performance metrics, but advisor-linked hurdles include a 7% cumulative return and value-creation thresholds for fee participation (see Performance Compensation) .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Pacific Oak Strategic Opportunity REIT, Inc. | President; Chairman; Director | Since 2008 | Board leadership, investment committee oversight; external manager oversight |
| Pacific Oak Strategic Opportunity REIT II | President; Chairman; Director | 2013–merger into PCOK | Led strategy through merger; external management transition |
| KBS REIT I | EVP; Treasurer; Secretary; Director | 2005–2018 | Capital deployment and portfolio management for opportunistic REIT |
| KBS REIT II | EVP; Treasurer; Secretary; Director | 2007–2018 (director to 2019) | Debt/equity structuring and asset management in REIT platform |
| KBS REIT III | EVP; Treasurer; Secretary; Director | Various (formed 2007) | Governance and real estate investment oversight |
| KBS Legacy Partners Apartment REIT | Executive Vice President | 2009–2018 | Multifamily investments and portfolio execution |
| Temescal Canyon Partners LP | Partner & co-owner | Until Jan 2022 | Multi-strategy hedge fund management, capital markets expertise |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Keppel Pacific Oak-US REIT Management Pte. Ltd. (Manager of Keppel Pacific Oak US REIT) | Chairman & Director | Since Nov 2017 | Oversight of Singapore-listed US office REIT; fee-bearing management JV |
| TCW Funds, Inc.; TCW Strategic Income Fund, Inc.; TCW ETF Trust; TCW Private Asset Income Fund | Director/Trustee | Current | Governance of registered funds, income strategies |
| Metropolitan West Funds | Board of Trustees | Current | Oversight of fixed-income mutual fund complex |
Fixed Compensation
- PCOK pays no salary, bonus, or equity directly to executive officers; McMillan’s compensation is received via the advisor/sponsor entities he co-owns .
- As a director who is also an executive officer, he receives no director cash fees from PCOK (independent directors alone are paid board retainers/meeting fees) .
Performance Compensation
Advisor-linked incentives that benefit McMillan through his ownership/control of the sponsor/advisor:
| Incentive | Trigger | Formula/Hurdle | Vesting/Timing |
|---|---|---|---|
| Subordinated participation in net cash flows (while unlisted) | After stockholders collectively receive net invested capital + 7% cumulative, noncompounded annual return + $36.3M Prior Advisor Performance Fee Value | Advisor receives 15% of net cash flows (operations/sales) after hurdles | Payable only if company is not listed on a national exchange; calculated daily on hurdle |
| Subordinated incentive listing fee (upon listing) | Listing of common stock on a national exchange | Advisor receives 15% of excess of (market value + pre-listing distributions) over (net invested capital + cash flow to generate 7% cumulative return + Prior Advisor Performance Fee Value) | Due at listing; hurdle calculated daily; returns differ among stockholders |
| Subordinated performance fee upon termination (if advisory agreement terminated/not renewed other than for cause) | Advisory agreement termination | Advisor entitled to 15% of net cash flows after stockholders receive net invested capital + 7% cumulative return, less Prior Advisor Performance Fee Value (if unlisted) | Payable only if not listed; daily hurdle calculation; applies to past actions too |
Implication: McMillan’s economic upside is tied to cash generation, distributions, asset dispositions, and listing value creation; explicit 7% cumulative return hurdle provides a pay-for-performance framework, but fees can still be earned with uneven investor outcomes (some stockholders may realize returns below 7%) .
Equity Ownership & Alignment
| Metric | 2024 | 2025 |
|---|---|---|
| Shares beneficially owned | 3,404,963 (via Willowbrook Capital Group LLC and GKP Holding LLC) | 3,404,963 (via Willowbrook Capital Group LLC and GKP Holding LLC) |
| Ownership % of shares outstanding | 3.28% | 3.31% (102,951,395 shares outstanding) |
| Pledged as collateral | None | None |
| Voting in director elections | Willowbrook/GKP abstain from director election votes | Willowbrook/GKP abstain from director election votes |
Insider trading/hedging: The company has an insider trading policy in its Code of Conduct, but currently has no hedging policy for officers/directors; options are not granted by PCOK .
Employment Terms
| Topic | Detail |
|---|---|
| Employment start date & tenure | Director since 2008; President & Chairman since December 2008 |
| Contract structure | No direct employment agreement with PCOK; executives are officers/employees of the advisor; the advisory agreement governs compensation economics |
| Advisory agreement term | One-year term expiring Nov 1, 2025; renewable annually by mutual consent; amended Dec 19, 2024 for PORT-related updates |
| Severance/CIC economics | Subordinated performance/listing fees payable to advisor as described in Performance Compensation; not individual severance terms |
| Clawback/tax gross-ups | No executive clawback/tax gross-up disclosures for PCOK; director comp applies only to independent directors |
| Non-compete/non-solicit | Not disclosed for McMillan; PCOK executives are externally managed |
Board Governance
- Structure: Chairman (McMillan) and CEO roles are separated; board has two permanent committees—the audit committee and the conflicts committee—both comprised entirely of independent directors .
- Independence: Majority independent; independent directors: Laurent Degryse, William M. Petak, Kenneth G. Yee .
- Lead independent director: No policy requiring appointment; independent directors are actively involved .
Board/committee activity:
| Metric | 2023 | 2024 |
|---|---|---|
| Board meetings | 6 | 8 |
| Audit committee meetings | 4 | 4 |
| Conflicts committee meetings | 5 | 7 (plus joint unanimous consents with PORT board) |
Committee roles:
- Audit: Financial reporting integrity, internal controls, auditor independence; Yee is chair and an SEC “financial expert” .
- Conflicts: Oversees advisor performance/compensation, related-party transactions, expense limits, borrowing above charter limits, and executive compensation responsibilities .
Director compensation: Independent directors receive retainer and meeting fees; executive directors (Hall, McMillan) receive no director fees .
Related Party Transactions (Selected, 2023–2025)
| Transaction | 2023 Amount | 2024 Amount | Notes |
|---|---|---|---|
| Asset management fees paid to advisor | $10.9M | $11.5M | Increased annual rate to 1.00% as of Nov 1, 2023 |
| Disposition fees paid to advisor | $0.9M | ~$1.9M | 1.0% of contract sales price, capped vs unaffiliated commissions |
| PORT asset management fees (to PORT Advisor) | $4.5M | $4.0M (to Dec 19, 2024) | Advisory agreement renewed; PORT Advisor sold to unaffiliated third party Dec 19, 2024 |
| DMH Realty property management fees (PORT) | $2.9M | $2.7M (to Dec 19, 2024) | Agreement extended; termination fees apply in certain events |
| SREIT Manager base management fees | $5.8M | $5.3M | 10% of annual distributable income; no performance fee in 2023/2024 |
| Unsecured loan from advisor to PCOK OP | N/A | $8.0M principal; 12% interest; matures May 27, 2025 (extendable) | Executed Feb 26, 2025; conflicts committee deemed fair |
Governance/charter changes: PCOK is seeking/have sought amendments to eliminate NASAA REIT Guideline provisions, expand indemnification/exculpation to Maryland law maximums, relax leverage/issuance limitations, and modify tender-offer provisions post-listing—enhancing flexibility but reducing stockholder protections relative to unlisted REIT charters .
Compensation Structure Analysis
- Shift toward advisor-tied economics: No direct cash/equity compensation from PCOK; pay is realized through advisor fees and performance/listing participation—heightening sensitivity to distributions, asset sales and listing value creation .
- Cash vs equity mix: PCOK does not grant stock options or equity to executives; independent director compensation remains modest cash-based .
- Performance metrics: Advisor hurdles (7% cumulative return and invested capital) create explicit financial targets for fee realization; however, returns are assessed at the aggregate stockholder level, which can lead to uneven individual stockholder outcomes .
- Governance guardrails: Conflicts committee reviews and approves related-party transactions and advisor fees, but charter amendments propose reducing charter-embedded protections and relying on board guidelines/Maryland law, which are more easily amended than charter .
Risk Indicators & Red Flags
- External management conflicts: McMillan co-owns the sponsor/advisor; significant fees and participation rights to the advisor (asset management, disposition, net cash flows, listing fees) can create agency conflicts; Conflicts committee oversight is critical .
- Charter amendments: Expanded indemnification of officers/directors/advisor and removal of NASAA protections may weaken stockholder recourse and increase litigation defense costs borne by the company .
- Sector/liquidity stress: PCOK’s office-heavy portfolio (≈49.6% of value as of Sept 30, 2024) faces refinancing and disposition challenges; near-term stockholder liquidity not anticipated—implications for fee-driven asset sales and potential lender-driven outcomes .
- Hedging policy: No hedging policy for officers/directors; though options are not granted, absence of policy can be viewed negatively by governance-focused investors .
Director Compensation
- Independent directors (Degryse, Petak, Yee) received cash fees ($110–$127k total in 2024; includes $10k for service on PORT board); executive directors (Hall, McMillan) received no director compensation .
Board Service History & Dual-Role Implications
- McMillan serves as Chairman while Hall is CEO, maintaining separation of roles; PCOK has no lead independent director requirement, though independent directors are active .
- Independence concerns mitigated by fully independent audit/conflicts committees, but abstention by Willowbrook/GKP on director elections underscores concentrated insider holdings and potential influence despite abstention .
Investment Implications
- Alignment: McMillan’s incentives are linked to value realization via distributions, net cash flows, and a potential listing; the explicit 7% cumulative return hurdle aligns advisor economics with aggregate stockholder returns, but uneven outcomes for individual holders are possible .
- Governance risk: Proposed charter changes reduce charter-based constraints and enhance indemnification—beneficial for attracting/retaining management but weaker for stockholder protections; increased reliance on conflicts committee rigor is essential .
- Liquidity and execution: Office market headwinds and near-term liquidity limitations elevate execution risk; advisor-linked incentives may drive asset dispositions/refinancings, with a watchpoint on related-party fees and advisor financing (e.g., 12% unsecured loan) .
- Trading signals: Insider ownership is stable (no pledging; abstention from director election voting); absence of option grants and hedging policy reduces typical Form 4 signal flow—monitor charter vote outcomes, conflicts committee reports and asset sale activity for catalysts .