Q2 2024 Creative Media & Community Trust Corp Earnings Call

August 8, 2024

Music

Operator: Good day, and welcome to the Creative Media and Community Trust, second quarter, 2024 earnings call. All participants will be in lesson-only mode.

Operator: Good day and welcome to the Creative Media and Community Trust second quarter 2024 earnings call. All participants will be in less than only one minute. Should you need assistance during the call, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad; to which question would you like to ask, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Stephen Altebrando, Portfolio Oversight. Please go ahead.

Operator: Good day and welcome to the Creative Media and Community Trust Second Quarter 2024 Earnings Call. All participants will be in less than only one minute. Should you need assistance during the call, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad; to which question would you like to ask, please press star then two.

Speaker Change: Good day and welcome to the Creative Media and Community Trust second quarter 2024 earnings call.

Operator: Students need assistance during the call.

Operator: All participants will be in lesson-only mode. Should you need assistance during the call, please signal a conference specialist by pressing the star key followed by zero.

Operator: Please signal conference specialist by pressing the start key followed by zero.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press start them one on your telephone keypad. To withdraw your question, please press start them two.

Speaker Change: After today's presentation there will be an opportunity to ask questions.

Operator: To ask a question, you may press star then 1 on your telephone keypad.

Operator: Please note, this event is being recorded.

Operator: Please note, this event is being recorded. I would now like to turn the conference over to Stephen Altebrando, Portfolio Oversight. Please, go ahead.

Operator: To withdraw your question, please press star then choose. Please note, this event is being recorded.

Steve Altebrando: I would now like to turn the conference over to Steve Altebrando, portfolio oversight. Please go ahead.

Stephen Altebrando: Hello, everyone, and thank you for joining us. My name is Steve Altebrand. I'm the Portfolio Oversight Manager for CMCT. Also on the call today are David Thompson, our Chief Executive Officer, and Barry Berlin, our Chief Financial Officer. This call is being webcast and will be temporarily archived on the investor relations section of our website, where you can also find our earnings. Our earnings release includes a reconciliation of non-GAAP financial measures discussed during today's call.

Speaker Change: I would now like to turn the conference over to Stephen Altebrando, Portfolio Oversight. Please, go ahead.

Stephen Altebrando: Hello, everyone, and thank you for joining us. My name is Steve Altebrand, I'm the Portfolio Oversight for CMCT. Also on the call today are David Thompson, our Chief Executive Officer, and Barry Berlin, our Chief Financial Officer. This call is being webcast and will be temporarily archived on the investor relations section of our website, where you can also find our earnings release. Our earnings release includes a reconciliation of non-GAAP financial measures discussed during today's call.

Steve Altebrando: Hello everyone, and thank you for joining us. My name is Steve Altebrando, the portfolio oversight for CMCT. Also on the call today are David Thompson, our Chief Executive Officer, and Barry Berlin, our Chief Financial Officer.

Stephen Altebrando: Hello everyone and thank you for joining us. My name is Steve Altebrando, the Portfolio Oversight for CMCT.

Stephen Altebrando: Also on the call today are David Thompson, our Chief Executive Officer, and Barry Berlin, our Chief Financial Officer.

Steve Altebrando: This call is being webcast and will be temporarily archived on the Investor Relations section of our website, where you can also find our earnings release. Our earnings release includes a reconciliation of non-GAAP financial measures discussed during today's call.

Stephen Altebrando: This call is being webcast and will be temporarily archived on the investor relations section of our website, where you can also find our earnings release.

Stephen Altebrando: Our earnings release includes a reconciliation of non-GAAP financial measures discussed during today's call.

Steve Altebrando: During this call, we will make forward-looking statements. These forward-looking statements are based on the beliefs of assumptions made by an information currently available to us. Our actual results will be affected by known and unknown risks, trends, uncertainties, and other factors that are beyond our control or ability to predict. Although we believe that our assumptions are reasonable, they are not guarantees of future performance, and some will prove to be incorrect. Therefore, our actual future results can be expected to differ from our expectations, and those differences may be material.

Stephen Altebrando: During this call, we will make forward-looking statements. These forward-looking statements are based on our beliefs, assumptions made by, and information currently available to us. Our actual results will be affected by known and unknown risks, trends, uncertainties, and other factors that are beyond our control or ability to predict. Although we believe that our assumptions are reasonable, they are not guarantees of future performance, and some will prove to be incorrect. Therefore, our actual future results can be expected to differ from our expectations, and those differences may be material.

Stephen Altebrando: During this call, we will make forward-looking statements. These forward-looking statements are based on the beliefs of, assumptions made by, and information currently available to us.

Stephen Altebrando: Our actual results will be affected by known and unknown risks, trends, uncertainties, and other factors that are beyond our control or ability to predict.

Stephen Altebrando: Although we believe that our assumptions are reasonable, they are not guarantees of future performance, and some will prove to be incorrect. Therefore, our actual future results can be expected to differ from our expectations, and those differences may be material.

Stephen Altebrando: For a more detailed description of potential risks, please refer to our SEC filings, which can be found in the Investor Relations section of our website. With that, I'll turn the call over to David Thompson. Thanks, Steve.

Steve Altebrando: For more detailed description of potential risks, please refer to our SEC filings, which can be found in the Investor Relations section of our website.

Stephen Altebrando: For a more detailed description of potential risks, please refer to our SEC filings, which can be found in the Investor Relations section of our website.

David Thompson: Thanks Steve and thank you everyone for joining our call today. This morning we released our second quarter 2024 results, and operating income improved from the first quarter across all of our real estate operating segments: Office, Multifamily, and Hotel.

David Thompson: With that, I'll turn the call over to David Thompson.

David Thompson: Thanks Steve and thank you everyone for joining our call today. This morning we released our second quarter 2024 results.

David Thompson: That operating income improved from the first quarter across all of our real estate operating segments.

David Thompson: Where we are pleased with this improvement from last quarter, our cash flow continues to be impacted by elevated short-term interest rates, the widely known challenges in the office market, and continued soft rental rates at our Bay Area multi-family assets. We are focused on strengthening our balance sheet and improving our cash flow. As such, we continue to evaluate asset sales and other ways to reduce both our recourse debt and overall debt. We also expect to eventually benefit from lower sofa on our floating rate debt and lower preferred dividends as the Fed Funds rate is expected to come down over time.

David Thompson: While we are pleased with this improvement from last quarter, our cash flow continues to be impacted by elevated short-term interest rates, the widely known challenges in the office market, and continued soft rental rates at our Bay Area multifamily assets. We are focused on strengthening our balance sheet and improving our cash flow. As such, we continue to evaluate asset sales and other ways to reduce both our recourse debt and overall debt. We also expect to eventually benefit from lower SOFR on our floating rate debt and lower preferred dividends as the Fed funds rate is expected to come down over time. As a reminder, our Series A1 Preferred Dividend is greater of 6% or Fed Funds plus 2.5%.

Speaker Change: Office, Multifamily, and Hotel.

David Thompson: We also expect to eventually benefit from lower SOFR on our floating rate debt and lower preferred dividends as the Fed funds rate is expected to come down over time.

David Thompson: As a reminder, our Series A1 preferred dividend is the greater of 6% or Fed Funds plus 2.5%.

David Thompson: As a reminder, our Series A1 Preferred Dividend is a greater of 6% or Fed Funds plus 2.5%.

David Thompson: We continue to make progress in our development and redevelopment pipeline, and we are ahead of the schedule at two of our three active projects. We have two multi-family projects underway, and we commence the room renovation at our one hotel in July. Steve will provide more details in a moment.

David Thompson: We continue to make progress on our development and redevelopment pipeline, and we are ahead of schedule at two of our three active projects. We have two multifamily projects underway, and we've commenced the room renovation at one hotel in July. Steve will provide more details in a moment.

David Thompson: We continue to make progress on our development and redevelopment pipeline and we are ahead of schedule at two of our three active projects. We have two multifamily projects underway and we commenced the room renovation at our one hotel in July . Steve will provide more details in a moment.

Barry Berlin: Berlin. As for our results in the quarter, our same store office segment NOI increased 9% year over year to $7.6 million. The increase was primarily driven by an increase in our JV income.

David Thompson: As for our results in the quarter... Our same-store office segment NOI increased 9% year-over-year to $7.6 million. The increase was primarily driven by an increase in our JV income. We had an unrealized gain in the second quarter of 2024, whereas in the second quarter of 2023, we had an unrealized loss. This was primarily driven by a price value.

David Thompson: As for our results in the quarter, our same store office segment NOI increased 9% year-over-year to $7.6 million. The increase was primarily driven by an increase in our JV income.

Barry Berlin: We had an unrealized gain in the second quarter of 2024, whereas in the second quarter of 2023, we had an unrealized loss. This is primarily driven by appraise values. Overall, our office lease percentage remains stable in the quarter at 83.5%, and we executed approximately 52,000 square feet of office leases in the quarter.

David Thompson: We had an unrealized gain in the second quarter of 2024, whereas in the second quarter of 2023, we had an unrealized loss. This was primarily driven by appraised values.

David Thompson: Overall, our office lease percentage remained stable in the quarter at 83.5%, and we executed approximately 52,000 square feet of office leases in the quarter. However, we do expect our occupancy to decline in the third quarter. As previously disclosed, we have a large tenant that gave back approximately 130,000 square feet at the end of July at our Kaiser Plaza office building in Oakland. Our hotel segment NOI increased 5% from the prior year to $4.3 million, primarily due to improving average daily room rent.

David Thompson: Overall, our office lease percentage remained stable in the quarter at 83.5%, and we executed approximately 52,000 square feet of office leases in the quarter. However, we do expect our occupancy to decline in the third quarter. As previously disclosed, we have a large tenant that gave back approximately 130,000 square feet at the end of July at our one Kaiser Plaza office building in Oakland. Our hotel segment NOI increased 5% from the prior year to $4.3 million, primarily due to improving average daily room rent.

David Thompson: Overall, our office lease percentage remained stable in the quarter at 83.5%, and we executed approximately 52,000 square feet of office leases in the quarter.

Barry Berlin: However, we do expect our occupancy to decline in the third quarter. As previously disclosed, we have a large tenant that gave back approximately 130,000 square feet at the end of July at our One Kaiser Plaza office building in Oakland. Our hotel segment NOI increased 5% from the prior year to $4.3 million, primarily due to improving average daily room rate. Our $2.3 million of NOI in the quarter compared to $900,000 of NOI in the first quarter of 2024. The increase was driven by occupancy gain, which improved at 92.5% at the end of the second quarter from 79.3% at the end of 2023.

David Thompson: However, we do expect our occupancy to decline in the third quarter. As previously disclosed, we have a large tenant that gave back approximately 130,000 square feet at the end of July at our One Kaiser Plaza office building in Oakland.

David Thompson: Our hotel segment NOI increased 5% from the prior year to $4.3 million, primarily due to improving average daily room rate.

David Thompson: Our multifamily segment generated $2.3 million of NOI in the quarter compared to $900,000 of NOI in the first quarter of 2024. The increase was driven by occupancy gains, which improved to 92.5% at the end of the second quarter from 79.3% at the end of 2023. However, the rental rate at our two largest properties, Channel House and 1150 Clay, located in Oakland, continues to be below our expectations. Our lending segment NOI increased 42% year-over-year to $743,000.

David Thompson: Our multifamily segment generated $2.3 million of NOI in the quarter compared to $900,000 of NOI in the first quarter of 2024. The increase was driven by occupancy gain, which improved to 92.5% at the end of the second quarter from 79.3% at the end of 2023. However, the rental rate at our two largest properties, Channel House and 1150 Clay, located in Oakland, continues to be below our expectations. Our lending segment NOI increased 42% year-over-year to $743,000.

David Thompson: Our multifamily segment generated 2.3 million dollars of NOI in the quarter compared to $900,000 of NOI in the first quarter of 2024.

David Thompson: Your increase was driven by occupancy gain, which improved to 92.5% at the end of the second quarter from 79.3% at the end of 2023.

Barry Berlin: However, the rental rate at our two largest properties, Channel House and 1150 Clay, located in Oakland, continues to be below our expectations. Our lending segment NOI increased 42% year-over-year to $743,000. The increase was primarily due to a decrease in interest expense resulting from the amount of the principal repayments on our SBA-7A loan-backed notes.

David Thompson: However, the rental rate at our two largest properties, Channel House and 1150 Clay, located in Oakland, continues to be below our expectations.

David Thompson: Our lending segment NOI increased 42% year-over-year to $743,000.

David Thompson: The increase was primarily due to a decrease in interest expense resulting from the amount of principal repayments on our SBA 7A loan-backed notes. With that, I will turn it over to Steve to provide a further update on our development pipeline and the portfolio.

Steve: The increase was primarily due to a decrease in interest expense resulting from the amount of principal repayments on our SBA 7A loan-backed notes.

Steve Altebrando: With that, I will turn it over to CED to provide a further update on our development pipeline and the portfolio. Thanks, David. Starting with our development pipeline, we have three projects underway. Two multi-family projects in LA and the hotel room renovation in Sacramento. Starting with multi-family, our office to residential project at $47.50 is near completion. $47.50 is located in Hancock Park, an affluent residential sub-market of LA where housing is supply-constrained. This property was previously a three-story office building. We preserve the ground floor creative office space, which is 100% leased, and we have been converting the top two floors to 68 high-end, four-rent residential units.

David Thompson: With that, I will turn it over to Steve to provide a further update on our development pipeline and the portfolio.

Stephen Altebrando: David, starting with our development pipeline, we have three projects underway, two multifamily projects in L.A., and the hotel room renovation in Sacramento. Starting with multifamily, our office to residential project at 4750 Wilshire is nearing completion. 4750 Wilshire is located in Hancock Park, an affluent residential submarket of LA where housing is supply constrained. This property was previously a three-story office building. We preserved the ground-floor creative office space, which is 100% leased, and we have been converting the top two floors to 68 high-end, four-rent residential units. We are on track to complete the project in the third quarter ahead of the previously announced timeline for the fourth quarter.

Stephen Altebrando: David, starting with our development pipeline, we have three projects underway, two multifamily projects in L.A. and the hotel room renovation in Sacramento. Starting with multifamily, our office to residential project at 4750 Wilshire is nearing completion. 4750 Wilshire is located in Hancock Park, an affluent residential sub market of LA where housing is supply constrained. This property was previously a three-story office building. We preserved the ground floor creative office space, which is 100% leased, and we have been converting the top two floors to 68 high-end, four-rent residential units. We are on track to complete the project in the third quarter ahead of the previously announced timeline of the fourth quarter.

Speaker Change: Thanks David. Starting with our development pipeline, we have three projects underway. Two multifamily projects in LA and the hotel room renovation in Sacramento.

Stephen Altebrando: Starting with multifamily, our office to residential project at 4750 Wilshire is nearing completion. 4750 Wilshire is located in Hancock Park, an affluent residential sub market of LA where housing is supply constrained.

Stephen Altebrando: This property was previously a three-story office building. We preserved the ground floor creative office space, which is 100% leased, and we have been converting the top two floors to 68 high-end, 4-rent residential units.

Steve Altebrando: We are in track to complete the project in the third quarter ahead of the previously announced timeline of the fourth quarter. The residential component has been renamed 701 Self-Hudson, and we have launched the property's website and expect to start marketing units for lease in the coming weeks. We are excited about this project, which we believe reflects CMCT strategy to invest in and develop premier multi-family and creative office assets in hybrid to entry markets. Our second development is 1915 Park in the Echo Park section of Los Angeles, with an expected mid-2025 delivery. Upon completion, the new seven-story building will feature 36 units.

Stephen Altebrando: We are on track to complete the project in the third quarter ahead of the previously announced timeline of the fourth quarter.

Stephen Altebrando: The residential component has been renamed 701 South Hudson, and we have launched the property's website and expect to start marketing units for lease in the coming weeks. We're excited about this project, which we believe reflects CMCT's strategy to invest in and develop premier multifamily and creative office assets in high-barrier-to-entry markets. Our second development is 1915 Park in the Echo Park section of Los Angeles with an expected delivery date of mid-2025. Upon completion, the new seven-story building will feature 36 units. Echo Park is a highly desirable, walkable neighborhood with dozens of dining and entertainment options.

Stephen Altebrando: The residential component has been renamed 701 South Hudson, and we have launched the property's website and expect to start marketing units for lease in the coming weeks.

Stephen Altebrando: We are excited about this project, which we believe reflects CMCT's strategy to invest in and develop premier multifamily and creative office assets in high barrier-to-entry markets.

Stephen Altebrando: Our second development is 1915 Park in the Echo Park section of Los Angeles with an expected mid-2025 delivery.

Steve Altebrando: Echo Park is a highly desirable, walkable neighborhood with dozens of dining and entertainment options. Turning to the hotel, in July, we began an approximately $21 million room renovation at the Sheraton Grand in Sacramento. The renovation includes a refresh of all 503 rooms. Williams. We expect to complete the project around the end of 2024 and believe this renovation will generate a solid return on investment. The hotel is one of just two hotels located directly across the street from Sacramento's Convention Center, which itself completed a major renovation and expansion in 2021.

Stephen Altebrando: Upon completion, the new seven-story building will feature 36 units. Echo Park is a highly desirable, walkable neighborhood with dozens of dining and entertainment options.

Stephen Altebrando: Turning to the hotel, in July, we began an approximately $21 million room renovation at the Sheraton Grand in Sacramento. The renovation includes a refresh of all 503 rooms. We expect to complete the project around the end of 2024 and believe this renovation will generate a solid return on investment. The hotel is one of just two hotels located directly across the street from Sacramento's Convention Center, which itself completed a major renovation and expansion in 2021.

Stephen Altebrando: Turning to the hotel, in July we began an approximately $21 million room renovation at the Sheridan Grand in Sacramento.

Stephen Altebrando: The renovation includes a refresh of all 503 rooms.

Stephen Altebrando: We expect to complete the project around the end of 2024 and believe this renovation will generate a solid return on investment.

Stephen Altebrando: The hotel is one of just two hotels located directly across the street from Sacramento's Convention Center, which itself completed a major renovation and expansion in 2021.

Steve Altebrando: Now turning to our operating portfolio, on a consolidated basis at quarter-end, our multifamily segment was 92.5% occupied, up from 86.2% in the first quarter and 79.3% at the end of the fourth quarter.

Stephen Altebrando: Now turning to our operating portfolio, on a consolidated basis at quarter end, our multifamily segment was 92.5% occupied, up from 86.2% in the first quarter and 79.3% at the end of the fourth quarter. In Echo Park, Los Angeles, our multifamily asset at 1902 Park, occupancy increased to 93.3% at the end of the quarter, up 40 basis points from 2023 year-end. We've been executing new leases for new tenants at substantially higher rates than our in-place rent.

Stephen Altebrando: Now turning to our operating portfolio, on a consolidated basis at quarter end, our multifamily segment was 92.5% occupied, up from 86.2% in the first quarter and 79.3% at the end of the fourth quarter. In Echo Park, Los Angeles, our multifamily asset at 1902 Park, occupancy increased to 93.3 percent at the end of the quarter, up 40 basis points from 2023 year-end. We've been executing new leases for new tenants at substantially higher rates than our in-place rent.

Steve Altebrando: An F.O. Park Los Angeles and our multifamily asset at 19.02. Park occupancy increased to 93.3% at the end of the quarter, up 40 basis points from 2023 year-end. We've been executing new leases for new tenants at substantially higher rates on our in-place rents. Monthly rent for occupied unit was $1,800 and $6 as at the end of the second quarter. This represents a 4% increase from a year ago, and our rate for new tenants generally exceeds $2,200 per month, a more than 20% increase from our in-place rents. In Oakland, we continue to make progress improving occupancy, and we had an increase in NLI this quarter.

Stephen Altebrando: In Echo Park, Los Angeles, our multifamily asset at 1902 Park, occupancy increased to 93.3% at the end of the quarter, up 40 basis points from 2023 year-end. We've been executing new leases for new tenants at substantially higher rates than our in-place rents.

Stephen Altebrando: The monthly rent per occupied unit was $1,806 as of the end of the second quarter. This represents a 4% increase from a year ago, and our rate for new tenants generally exceeds $2,200 per month, a more than 20% increase from our in-place rent. In Oakland, we continue to make progress, improving occupancy, and we had an increase in NOI this quarter. However, as David referenced, our rental rates at Channel House and 1150 Clay have been below expectations as the market absorbs the high level of supply added in Oakland in 2018 through 2022.

Stephen Altebrando: The monthly rent per occupied unit was $1,806 at the end of the second quarter. This represents a 4% increase from a year ago, and our rate for new tenants generally exceeds $2,200 per month, a more than 20% increase from our in-place rent. In Oakland, we continue to make progress, improving occupancy, and we had an increase in NOI this quarter. However, as David referenced, our rental rates at Channel House and 1150 Clay have been below expectations as the market absorbs the high level of supply added in Oakland in 2018 through 2022.

Stephen Altebrando: Monthly rent per occupied unit was $1,806 as of the end of the second quarter. This represents a 4% increase from a year ago and our rate for new tenants generally exceeds $2,200 per month, a more than 20% increase from our in-place rents.

Stephen Altebrando: In Oakland, we continue to make progress, improving occupancy, and we had an increase in NOI this quarter. However, as David referenced, our rental rate at Channel House and 1150 Clay have been below expectations, as the market absorbs the high levels of supply added in Oakland in 2018 through 2022.

Steve Altebrando: However, as David referenced, our rental rate at Channel House and 1150 Clay have been below expectations, as the market absorbs the high-level supply added in Oakland in 2018 through 2022. We believe the local rents would need to increase dramatically before it's economical to see new multifamily construction, so we expect minimal new supply for the foreseeable future. The pipeline for development in the East Bay from multifamily remains well below the average for the top 25 U.S. markets.

Stephen Altebrando: We believe local rents would need to increase dramatically before it's economical to see new multifamily construction, so we expect minimal new supply for the foreseeable future. The pipeline for development in the East Bay for multifamily remains well below the average for the top 25 US markets.

Stephen Altebrando: We believe the local rents would need to increase dramatically before it's economical to see new multifamily construction, so we expect minimal new supply for the foreseeable future.

Stephen Altebrando: The pipeline for development in the East Bay for multifamily remains well below the average for the top 25 U.S. markets.

Barry Berlin: With that, I'll turn it over to Barry.

Barry Berlin: With that, I'll turn it over to Barry. Thank you, Steve.

Barry Berlin: Thank you, Steve. Good morning.

Barry Berlin: Thank you, Steve. Good morning. I will be going over some of our financial highlights for the second quarter, starting with Segment NOI, which was $16.2 million for the second quarter of 2024, compared to $12 million in the prior year comparable period. This increase of $4.2 million was driven by segment increases of $2.1 million in our office segment, $1.7 million in our multifamily segment, and $200,000 in both our hotel and lending segments.

Barry Berlin: With that, I'll turn it over to Barry.

Barry Berlin: Good morning. I will be going over some of our financial highlights for the second quarter, starting with segment NLI, which was $16.2 million for the second quarter of 2024 compared to $12 million in the prior year comfortable period. This increase of $4.2 million was driven by segment increases of $2.1 million in our office segment, $1.7 million in our multifamily segment, and $200,000 in both our hotel and lending segments. Our all-to-segment NLI increased by $2.1 million to $8.9 million from its $6.8 million in the prior year comfortable period. As mentioned by David, this was primarily driven by an unrealized gain on the value of real estate at one of our unsolidated office entities compared to aggregate unrealized losses at our unsolidated office entities in the prior year comfortable period.

Barry Berlin: I will be going over some of our financial highlights for the second quarter, starting with Segment NOI, which was $16.2 million for the second quarter of 2024, compared to $12 million in the prior year comparable period. This increase of $4.2 million was driven by segment increases of $2.1 million in our office segment, $1.7 million in our multifamily segment, and $200,000 in both our hotel and lending segments. Our Office Segment NOI increased by $2.1 million to $8.9 million from $6.8 million in the prior year conference period.

Barry Berlin: Thank you, Steve. Good morning.

Barry Berlin: I will be going over some of our financial highlights for the second quarter, starting with segment NOI, which was $16.2 million for the second quarter of 2024, compared to $12 million in the prior year comparable period.

Barry Berlin: This increase of $4.2 million was driven by segment increases of $2.1 million in our office segment, $1.7 million in our multifamily segment, and $200,000 in both our hotel and lending segments.

Barry Berlin: Our Office Segment NOI increased by $2.1 million to $8.9 million from $6.8 million in the prior year comparable period. As mentioned by David, this was primarily driven by an unrealized gain on the value of real estate at one of our unconsolidated office entities compared to aggregate unrealized losses at our unconsolidated office entities in the prior year comparable period.

Barry Berlin: Our office segment NOI increased by $2.1 million to $8.9 million from its $6.8 million in the prior year and comparable period.

Barry Berlin: As mentioned by David, this was primarily driven by an unrealized gain on the value of real estate at one of our unconsolidated office entities compared to aggregate unrealized losses at our unconsolidated office entities in the prior year comparable period.

Barry Berlin: Our hotel segment NLI increased $200,000 to $4.3 million for the second quarter of 2024 compared to $4.1 million in the prior year comfortable period, which was attributed to an increase in revenue per available room driven by increased ADR. Our lending division NLI increased to $743,000 from $524,000 in the prior year comfortable period. Primarily due to the decreased interest expense resulting from the amount of principal repayments on our SBA-7A loan back. and our multi-family segment, which commenced with asset acquisitions during the first quarter of 2023, reported NOI of approximately $2.3 million, compared to approximately $522,000 for the prior year. The increase is primarily due to higher rental revenues at our multi-family properties in Oakland, California, from increased occupancy and from an increase in monthly rent per occupied unit as adjusted by rent concessions.

Barry Berlin: Our hotel segment NOI increased $200,000 to $4.3 million for the second quarter of 2024 compared to $4.1 million in the prior year comparable period, which was attributed to an increase in revenue per available room driven by increased ADR. Our Lending Division NOI increased to $743,000 from $524,000 in the prior year comparable period, primarily due to the decreased interest expense resulting from the amount of principal repayments on our SBA 7A Loan Back Payment.

Barry Berlin: Our lending division NOI increased to $743,000 from $524,000 in the prior year comparable period, primarily due to the decreased interest expense resulting from the amount of principal repayments on our SBA 7A loan back notes.

Barry Berlin: And our multifamily segment, which commenced with asset acquisitions during the first quarter of 2023, reported NOI of approximately $2.3 million, compared to approximately $522,000 for the prior year comparable period. The increase is primarily due to higher rental revenues at our multifamily properties in Oakland, California from increased occupancy and from an increase in monthly rent per occupied unit as adjusted by rent concession. Our non-segment expenses had a significant decrease in depreciation amortization by $14 million, which was driven by the full amortization during 2023 of the acquired in-place lease intangible assets for our Oakland assets. There was no amortization for the acquired in-place lease intangible assets during 2024.

Barry Berlin: The increase is primarily due to higher rental revenues at our multifamily properties in Oakland, California from increased occupancy and from an increase in monthly rent per occupied unit as adjusted by rent concessions.

Barry Berlin: Our non-segment expenses had a significant decrease in depreciation and amortization by $14 million, which was driven by the full amortization during 2023 of the acquired in-place lease and tangible assets for our Oakland assets. There was no amortization for acquired in-place lease and tangible assets during 2024. Partially offsetting the non-segment expense decrease was a $1 million increase in non-segment allocated interest expense, which was primarily due to market interest rate rises and higher average outstanding principal balances on our revolver. The bottom line is that our FFO was a negative $0.14 per diluted share compared to negative $0.19 in the prior year comfortable period, and our core FFO was a negative $0.9 per diluted share compared to a negative $0.17 in the prior year comfortable period.

Barry Berlin: Our non-segment expenses had a significant decrease in depreciation and amortization by $14 million.

Barry Berlin: which was driven by the full amortization during 2023 of the acquired in-place lease intangible assets for our Oakland assets. There was no amortization for acquired in-place lease intangible assets during 2024.

Barry Berlin: Partially offsetting the non-segment expense decrease was a $1 million increase in non-segment allocated interest expense, which was primarily due to market interest rate rises and higher average outstanding principal balances on our revolvers. The bottom line is that our FFO was a negative 14 cents per diluted share, compared to negative 19 cents in the prior year comparable period. And our core FFO was a negative 9 cents per diluted share, compared to a negative 17 cents in the prior year comparable period.

Barry Berlin: Partially offsetting the non-segment expense decrease was a $1 million increase in non-segment allocated interest expense, which was primarily due to market interest rate rises and higher average outstanding principal balances on our revolvers. The bottom line is that our FFO was a negative 14 cents per diluted share, compared to a negative 19 cents in the prior year comparable period, and our core FFO was a negative 9 cents per diluted share, compared to a negative 17 cents in the prior year comparable period.

Barry Berlin: The bottom line is that our FFO was a negative 14 cents per diluted share compared to negative 19 cents in the prior year comparable period and our core FFO was a negative 9 cents per diluted share compared to a negative 17 cents in the prior year comparable period.

Barry Berlin: These increases were primarily driven by the increase of $4.2 million in our segment NOI, partially offset by an increase in interest expense of $1 million and an increase in our redeemable preferred stock dividends of approximately $1.7 million.

Barry Berlin: These increases were primarily driven by an increase of $4.2 million in our segment NOI, partially offset by an increase in interest expense of $1 million and an increase in our redeemable preferred stock dividends of approximately $1.7. I also wanted to note that during the second quarter of 2024, we recommenced the issuance of our Series A1 Preferred Stock and raised an additional $8.3 million in net proceeds from the sale of securities during June. We can now open the line for questions.

Barry Berlin: These increases were primarily driven by an increase of $4.2 million in our segment NOI, partially offset by an increase in interest expense of $1 million and an increase in our redeemable preferred stock dividends of approximately $1.7. I also wanted to note that during the second quarter of 2024, we recommenced the issuance of our Series A1 preferred stock and raised an additional $8.3 million in net proceeds from the sale of securities during June. We can now open the line for questions.

Barry Berlin: I also wanted to note that during the second quarter of 2024, we recommenced the issuance of our Series A1 preferred stock and raised an additional $8.3 million in net proceeds from the sale securities during June.

Barry Berlin: I also wanted to note that during the second quarter of 2024, we recommenced the issuance of our Series A1 Preferred Stock and raised an additional $8.3 million in net proceeds from the sale of securities during June .

Operator: We can now open the line for questions. We will now begin the question and answer session. To ask a question, you may press start and want on your telephone keypad. If you're using a speaker phone, please pick up your handsets before pressing the keys. If at any time your question has been addressed and you'd like to withdraw your questions, please press star then to.

Barry Berlin: We can now open the line for questions.

Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been answered and you would like to withdraw your question, please press star, then two. At this time, we'll pause momentarily to assemble a roll call. The first question comes from John Massocca from B. Reilly Security. Please go ahead.

Operator: We will now begin the question-and-answer session.

Operator: To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the key.

Operator: If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we'll pause momentarily to assemble a roster.

Operator: At this time, we'll pause momentarily to assemble a roster.

Operator: The first question comes from John LaSoka from the Riley Securities. Please go ahead.

Operator: The first question comes from John Massocca from B. Reilly Securities. Please go ahead.

John LaSoka: Good morning out there. Morning.

David Thompson: So you can go for a little more color on the leasing situation at Lake Merit and just how to give back space and impact things in 3Q. Sure. So we're currently in the process of lease negotiations with the largest tenant in the building, Kaiser, which is about today they lease about two thirds of the building. So those negotiations are ongoing.

John Massocca: So, can we provide a little more color on the leasing situation at Lake Merritt and just how the give-back of space is going to impact things in 3Q?

David Thompson: So, can we go provide a little more color on the leasing situation at Lake Merritt and just how the give back of space is going to impact things in 3Q.

Speaker Change: Good morning out there.

John Massocca: Morning.

Speaker Change: So, can we go provide a little more cover on the leasing situation at Lake Merritt and just...

John Massocca: how the give back of space is going to impact things in 3Q.

David Thompson: So, we're currently in the process of lease negotiations with the largest tenant in the building, Kaiser, which is about two, and today they lease about two-thirds of the building. So those negotiations are ongoing. They did give back, and this is something we previously disclosed, that they gave back about 130,000 square feet at the end of July. That square footage is not part of the negotiation for future lease, but we are in the process of negotiating an extension on their space that expires, part of it in 2025 and part of it in 2027.

David Thompson: Sure. So we're currently in the process of lease negotiations with the largest tenant in the building, Kaiser, which is about two, and today they lease about two-thirds of the building. So those negotiations are ongoing. But they did give back, and this is something we previously disclosed, that they gave back about 130,000 square feet at the end of July. That square footage is not part of the negotiation for the future lease, but we are in the process of negotiating an extension on their space that expires part of it in 2025 and part of it in 2027.

David Thompson: Sure.

Speaker Change: So, thank you. Thank you. Thank you.

Speaker Change: We're currently in the process of lease negotiations with the largest tenant in the building, Kaiser, which is about $2,000,000.

David Thompson: Today, they lease about two-thirds of the building.

David Thompson: They did give back, and this is something we previously disclosed that they gave back about 130,000 square feet at the end of July. That will not be; those are that square footage is not part of the negotiation for future lease, so we're but we are in the process of negotiating an extension on their space that expires part of it in 2025 and part of it in 2027.

David Thompson: So those negotiations are ongoing.

David Thompson: They did give back, and this is something that we previously disclosed, that they gave back about $130,000.

David Thompson: square feet at the end of July . That square footage is not part of the negotiation for future lease, but we are in the process of

David Thompson: Negotiating an extension on their space that expires part of it in 2025 and part of it in 2027.

David Thompson: And then maybe on the open multifamily side of things, obviously, it seems like in the current market, you know, I think supply shouldn't be much of an issue, but what are you seeing on the demand side in terms of multifamily in that market?

David Thompson: and then maybe on the open multifamily side of things. Obviously, it seems like in the current market, you know, the supply shouldn't be much of an issue. But what are you seeing on the demand side in terms of multifamily in that market? We, we actually, I mean, as you could see by the numbers, we had a pretty good first half in terms of picking up occupancy, which was very encouraging. So, you know, we, I would say we have seen a pickup in demand. You know, having said that, the market is still, I think, market-wide vacancies roughly 10% still, which is, you know, much better than the trough, which was 18, 17, 18% or so a couple years ago.

David Thompson: And then maybe on the open multifamily side of things, obviously it seems like in the current market, you know, supply shouldn't be much of an issue, but what are you seeing on the demand side in terms of multifamily in that market?

David Thompson: We actually, I mean, as you can see by the numbers, we had a pretty good first half in terms of picking up occupancy, which was very encouraging. So, I would say we have seen a pickup in demand. Having said that, the market is still, I think, market-wide vacancies are roughly 10% still, which is much better than the trough, which was 17%, 18% or so a couple years ago. So, we've seen a lot of absorption.

David Thompson: We actually, I mean, as you can see by the numbers, we had a pretty good first half in terms of picking up occupancy, which was very encouraging. So, I would say we have seen a pickup in demand. Having said that, the market is still, I think market-wide vacancies are roughly 10% still, which is much better than the trough, which was 17%, 18% or so a couple years ago. So, we've seen a lot of absorption, but what we really haven't seen yet is a pickup in rates.

David Thompson: We actually, I mean as you can see by the numbers, we had a pretty good first half in terms of picking up occupancy.

David Thompson: which was...

David Thompson: very encouraging. So, you know, I would say we have seen a pickup in demand. You know, having said that, the market is still, I think, market-wide vacancies roughly 10% still, which is, you know, much better than the

David Thompson: So you've seen a lot of absorption. But what we really haven't seen yet is a pickup and rate. That continues to be a challenge, and it continues to be a market where it's a very high concessions market at the moment. But, you know, we have seen, I would say, a pickup in just overall least velocity. And, you know, we were able to get our occupancy into the low 90s, which was encouraging.

David Thompson: The trough, which was 17-18% or so a couple years ago, so we've seen a lot of absorption. But what we really haven't seen yet is a pickup in rate.

David Thompson: But what we really haven't seen yet is a pickup in rate. That continues to be a challenge, and it continues to be a market where it's a very high concessions market at the moment. But we have seen, I would say, a pickup in just overall lease velocity. And we were able to get our occupancy into the low 90s, which was encouraging.

David Thompson: That continues to be a challenge, and it continues to be a market where it's a very high concessions market at the moment. But we have seen, I would say, a pickup in just overall lease velocity. And we were able to get our occupancy into the low 90s, which was encouraging.

David Thompson: We were able to get our occupancy into the low 90s, which was encouraging.

John Massocca: Where would you think an incident community trend would be on those assets before you could start pushing back a little bit on concessions and maybe pushing more aggressively on rates?

Speaker Change: Okay, where would you think you need to trend in those assets before you could, you know, start pushing back a little bit on concessions and maybe pushing more aggressively on rate?

David Thompson: Okay, where would you think an incident community trend in those assets before you could, you know, start pushing back a little bit on concessions and maybe pushing more aggressively on rate?

David Thompson: probably in the mid-90 range. And overall, the market's, as I mentioned, somewhere around 90% occupied.

David Thompson: probably in the mid-90 range. And overall, markets, as I mentioned, you know, somewhere around 90% occupied.

David Thompson: Probably in the mid 90 range. And, you know, overall markets, as I mentioned, you know, somewhere around 90% occupied.

Operator: Good day, and welcome to the creative media and community trust, second quarter, 2024 earnings call. All participants will be in lesson only mode. Students need assistance during the call. Please signal conference specialist by pressing the start key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press start them one on your telephone keypad. To withdraw your question, please press start them two. Please note, this event is being recorded.

David Thompson: Probably in the mid-90 range and overall markets, as I mentioned, somewhere around 90% occupied.

David Thompson: Okay. And then on the balance sheet sort of things, you know, given the moves you've seen to interest rates, they've excluding today, but the moves you've seen to interest rates in the last couple of weeks, how does that impact your outlook for, you know, refinancing, you know, anything, maybe on the balance, did you put forward or fix it out if rates continue to trend downward, particularly long term rates? Yeah. So it's certainly been good to see from our perspective. We have a good amount of floating rate debt, which those rates come down.

David Thompson: And then on the balance sheet side of things, you know, given the moves we've seen in interest rates, maybe excluding today, but the moves we've seen in interest rates in the last couple of weeks, how does that impact your outlook for refinancing, you know, anything maybe on the balance that you could pull forward or fix out if rates continue to trend downward, particularly long-term rates?

Barry Berlin: And then on the balance sheet side of things, you know, given the moves we've seen in interest rates, maybe excluding today, but the moves we've seen in interest rates in the last couple of weeks, how does that impact your outlook for, you know, refinancing, you know, anything maybe on the balance that you could pull forward or fix out if rates continue to trend downward, particularly long-term rates?

Speaker Change: And then on the balance sheet, a lot of things.

David Thompson: You know, given the moves you've seen in interest rates, maybe excluding today, but the moves you've seen in interest rates in the last couple of weeks, how does that impact your outlook for, you know, refinancing, you know, anything maybe on the balance that you could pull forward or fix out if rates continue to trend downward, particularly long-term rates?

David Thompson: Yeah. So, it's certainly been good to see from our perspective. We have a good amount of floating rate debt, so those rates come down. For short-term rates, there's pretty significant savings for us. But in addition to that, I think what you're more referencing is the potential to potentially fix some of our rate on some longer-term financing. And so, that's something we will take a look at as well, as we've seen the five-year come down quite a bit. So, there is a potential opportunity for us to swap from floating into some... Potentially, we're looking at that right now into some slightly longer-term fixed rate debt.

Barry Berlin: Yeah. So, it's certainly been good to see from our perspective. We have a good amount of floating rate debt, so those rates come down. For short-term rates, there's pretty significant savings for us. But in addition to that, I think what you're more referencing is the potential to potentially fix some of our rate on some longer-term financing. And so, that's something we will take a look at as well, as we've seen the five-year come down quite a bit. So, there is a potential opportunity for us to swap from floating into some... Potentially, we're looking at that right now into some slightly longer-term fixed rate debt.

Operator: I would now like to turn the conference over to Steve Altebrando portfolio oversight. Please go ahead.

David Thompson: Yeah.

David Thompson: So, it's certainly been good to see from our perspective, we have a good amount of floating rate debt, which those rates come down.

Steve Altebrando: Hello everyone and thank you for joining us. My name is Steve Altebrando, the portfolio oversight for CMCT. Also on the call today are David Thompson, our chief executive officer, and Barry Berlin, our chief financial officer.

David Thompson: Short-term rates, there's pretty significant savings for us, but in addition to that, I think what you're more referencing is the potential to potentially fix some of our, fix some of our rate on some longer term financing. And so that's something we will, we will take a look at as well, as we've seen, you know, kind of the five-year come down quite a bit. So there is a potential opportunity for us to swap from floating into some, you know, potentially we're looking at that right now into some a little bit longer term fixed rate debt.

David Thompson: Short-term rates, there's pretty significant savings for us, but in addition to that is I think what you're more referencing is the potential to potentially

Steve Altebrando: This call is being webcast and will be temporarily archived on the investor relations section of our website, where you can also find our earnings release. Our earnings release includes a reconciliation of non-gap financial measures discussed during today's call.

David Thompson: Fix some of our rate on some longer-term financing, and so that's something we will take a look at as well, as we've seen, you know, kind of the five-year come down quite a bit.

Steve Altebrando: During this call, we will make forward-looking statements. These forward-looking statements are based on the beliefs of assumptions made by an information currently available to us. Our actual results will be affected by known and unknown risks, trends, uncertainties, and other factors that are beyond our control or ability to predict. Although we believe that our assumptions are reasonable, they are not guarantees of future performance and some will prove to be incorrect. Therefore, our actual future results can be expected to differ from our expectations and those differences may be material.

David Thompson: So there is a potential opportunity for us to swap from floating into some, you know, potentially, we're looking at that right now, into some a little bit longer term fixed rate debt.

Barry Berlin: Okay, and then last one, you talked about some assets maybe being non-core and some disposition opportunities that might be out there, you know, especially as financing has gotten cheaper for your counterparties in any deals. Have negotiations or talks there picked up, or is it still kind of a little bit early innings on capital recycling and dispositions?

John Massocca: Okay, and then last one, I mean, in the past calls, you've talked about some assets may be non-core and some disposition opportunities that might be out there, you know, especially as financing has gotten cheaper for your counterparties in any deals. Have negotiations or talks there picked up, or is it still kind of a little bit early innings on capital recycling and disposition?

David Thompson: Okay.

David Thompson: And then last one, I mean, in the past calls, you've talked about some assets that being on core and some decision opportunities that might be out there, you know, especially as financing has gotten cheaper for your counterparties. And any deals, have negotiations or talks they're picked up, or is it still kind of a little bit early earnings on capital restrictions in just positions?

John Massocca: Okay and then last one I mean in the past calls you've talked about

John Massocca: Some assets maybe being non-core and some disposition opportunities that might be out there. You know, especially as financing has gotten cheaper for your counterparties in any deals. Have negotiations or talks there picked up or is it still kind of a little bit early innings on capital recycling and dispositions?

Steve Altebrando: For more detailed description of potential risks, please refer to our SEC filings which can be found in the investor relations section of our website.

David Thompson: We're still, I would say more in the evaluation phase. What we would like to do, we would like to reduce both our recourse and overall debt, so we are really evaluating and doing some work on an asset by asset level to see where we can basically generate the most value. And I think some of the non-core assets that we've discussed in the past; I would also include them in that mix as well, you know, particularly the hotel and lending.

Barry Berlin: We're still, I would say more in the evaluation phase. What we would like to do, we would like to reduce both our recourse and overall debt, so we are really evaluating and doing some work on an asset by asset level to see where we can basically generate the most value. And I think some of the non-core assets that we've discussed in the past; I would also include them in that mix as well, you know, particularly the hotel and lending.

David Thompson: We're still, I would say, more in the evaluation phase. What we would like to, you know, we would like to reduce both our recourse and overall debt. So we are really evaluating and doing some work on an asset-by-asset level to see where we can basically generate the most value.

David Thompson: We're still, I would say, more in the evaluation phase. What we would like to do, we would like to reduce both our recourse and overall debt, so we are really evaluating and doing some work on an asset-by-asset level to see where we can

David Thompson: With that, I'll turn the call over to David Thompson. Thanks, Steve, and thank you, everyone, for joining our call today. This morning, we released our second quarter of 2024 results. Net operating income improved from the first quarter across all of our real estate operating segments. Office, multifamily, and hotel. Where we are pleased with this improvement from last quarter, our cash flow continues to be impacted by elevated short-term interest rates, the widely known challenges in the office market, and continued soft rental rates at our Bay Area multi-family assets.

David Thompson: and I think some of the non-core assets that we've discussed in the past, I would also include them in that mix as well, particularly the hotel and lending division.

David Thompson: basically generate the most value.

David Thompson: And I think some of the non-core assets that we've discussed in the past, I would also include them in that mix as well, particularly the hotel and lending division.

David Thompson: Would the primary use of proceeds be on the multi-family side still in the same market during today? I think the primary use of proceeds today really would just be to pay down debt. That's really our focus at this moment, and then I think as the market settles a little bit, you know, look to, you know, potentially be back as an acquirer. But for now, we really want to get the debt balanced down a bit.

John Massocca: Would the primary use of proceeds be on the multifamily side, still in the same market you're in today?

Barry Berlin: Would the primary use of proceeds be on the multifamily side, still in the same market you're in today?

Speaker Change: Would the primary use of proceeds be on the multifamily side still and in the same markets you're in today?

David Thompson: We are focused on strengthening our balance sheet and improving our cash flow. As such, we continue to evaluate asset sales and other ways to reduce both our recourse debt and overall debt. We also expect to eventually benefit from lower sofa on our floating rate debt and lower preferred dividends as the Fed funds rate is expected to come down over time. As a reminder, our series A1 preferred dividend is a greater of 6% or Fed funds plus 2.5%.

David Thompson: I think the primary use of proceeds today would really just be to pay down debt. That's really our focus at this moment. And then, I think, as the market settles a little bit, we can look to, you know, potentially be back as an acquirer. But for now, we really want to get the debt bounce down a bit.

Barry Berlin: I think the primary use of proceeds today would really just be to pay down debt. That's really our focus at this moment. And then, I think, as the market settles a little bit, we can look to, you know, potentially be back as an acquirer. But for now, we really want to get the debt bounce down a bit.

David Thompson: I think the primary use of proceeds today really would just be to pay down debt. That's really our focus at this moment and then I think as as the market settles a little bit you know look to you know potentially be back as an acquirer but for now we really want to get the debt bounce down a bit.

John LaSoka: Okay, I appreciate the color, and that's it for me. Thank you.

John Massocca: Okay, I appreciate the color, and that's it for me. Thank you.

John Massocca: Okay. I appreciate the color and that's it for me. Thank you.

Operator: This concludes the question and answer session, and the conference has now concluded.

Speaker Change: Okay, I appreciate the color and that's it for me. Thank you.

Operator: This concludes the question and answer session, and the conference has now concluded also. Thank you for attending today's presentation.

Operator: This concludes the question and answer session, and the conference has now concluded also. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: This concludes the question and answer session and the conference has now concluded also. Thank you for attending today's presentation. You may now disconnect.

Operator: You may now disconnect. .

Barry Berlin: Berlin.

Barry Berlin: As for our results in the quarter, our same store office segment NOI increased 9% year over year to $7.6 million. The increase was primarily driven by an increase in our JV income. We had an unrealized gain in the second quarter of 2024, whereas in the second quarter of 2023, we had an unrealized loss.

Barry Berlin: This is primarily driven by apprace values. Overall, our office lease percentage remains stable in the quarter at 83.5% and we executed approximately 52,000 square feet of office leases in the quarter. However, we do expect our occupancy to decline in the third quarter.

Barry Berlin: As previously disclosed, we have a large tenant that gave back approximately 130,000 square feet at the end of July at our one Kaiser Plaza office building in Oakland. Our hotel segment NOI increased 5% from the prior year to $4.3 million, primarily due to improving average daily room rate. Our $2.3 million of NOI in the quarter compared to $900,000 of NOI in the first quarter of 2024. The increase was driven by occupancy gain, which improved at 92.5% at the end of the second quarter from 79.3% at the end of 2023.

Barry Berlin: However, the rental rate at our two largest properties, Channel House and 1150 Clay located in Oakland, continues to be below our expectations. Our lending segment NOI increased 42% year-over-year to $743,000. The increase was primarily due to a decrease in interest expense resulting from the amount of the principal repayments on our SBA-7A loan-backed notes.

Steve Altebrando: We preserve the ground floor creative office space, which is 100% least, and we have been converting the top two floors to 68 high-end, four-rent residential units. We are in track to complete the project in the third quarter ahead of the previously announced timeline of the fourth quarter. The residential component has been renamed 701 Self-Hudson and we have launched the properties website and expect to start marketing units for lease in the coming weeks.

Steve Altebrando: We are excited about this project which is which we believe reflects CMCT strategy to invest in and develop premier multi-family and creative office assets in hybrid to entry markets. Our second development is 1915 Park in the Echo Park section of Los Angeles with an expected mid-2025 delivery. Upon completion, the new seven-story building will feature 36 units. Echo Park is a highly desirable, walkable neighborhood with dozens of dining and entertainment options. Turning to the hotel, in July, we began an approximately $21 million room renovation at the Sheridan Grand in Sacramento.

Steve Altebrando: The renovation includes a refresh of all 503 rooms. Williams. We expect to complete the project around the end of 2024 and believe this renovation will generate a solid return on investment. The hotel is one of just two hotels located directly across the street from Sacramento's Convention Center, which itself completed a major renovation and expansion in 2021. Now turning to our operating portfolio, on a consolidated basis at quarter-end, our multifamily segment was 92.5% occupied, up from 86.2% in the first quarter and 79.3% at the end of the fourth quarter.

Steve Altebrando: An F.O. Park Los Angeles and our multifamily asset at 19.02 Park occupancy increased to 93.3% at the end of the quarter, up 40 basis points from 2023 year-end. We've been executing new leases for new tenants at substantially higher rates on our in-place rents. Monthly rent for occupied unit was $1,800 and $6 as at the end of the second quarter. This represents a 4% increase from a year ago, and our rate for new tenants generally exceeds $2,200 per month, a more than 20% increase from our in-place rents.

Steve Altebrando: In Oakland, we continue to make progress improving occupancy and we had an increase in NLI this quarter. However, as David referenced, our rental rate at Channel House and 1150 Clay have been below expectations as the market absorbs the high-level supply added in Oakland in 2018 through 2022. We believe the local rents would need to increase dramatically before it's economical to see new multifamily construction so we expect minimal new supply for the foreseeable future. The pipeline for development in the East Bay from multifamily remains well below the average for the top 25 U.S, markets.

Barry Berlin: With that, I'll turn it over to Barry. Thank you, Steve.

Barry Berlin: As mentioned by David, this was primarily driven by an unrealized gain on the value of real estate at one of our unsolidated office entities compared to aggregate unrealized losses at our unsolidated office entities in the prior year comfortable period. Our hotel segment NLI increased $200,000 to $4.3 million for the second quarter of 2024 compared to $4.1 million in the prior year comfortable period, which was attributed to an increase in revenue per available room driven by increased ADR.

Barry Berlin: Our lending division NLI increased to $743,000 from $524,000 in the prior year comfortable period. Primarily due to the decreased interest expense resulting from the amount of principal repayments on our SBA-7A loanback, and our multi-family segment, which commenced with asset acquisitions during the first quarter of 2023, reported NOI of approximately $2.3 million, compared to approximately $522,000 for the prior year, the increase is primarily due to higher rental revenues at our multi-family properties in Oakland, California from increased occupancy and from an increase in monthly rent per occupied unit as adjusted by rent concessions.

Barry Berlin: The bottom line is that our FFO was a negative $0.14 per diluted share compared to negative $0.19 in the prior year comfortable period and our core FFO was a negative $0.9 per diluted share compared to a negative $0.17 in the prior year comfortable period. These increases were primarily driven by the increase of $4.2 million in our segment NOI partially offset by an increase in interest expense of $1 million and an increase in our redeemable preferred stock dividends of approximately $1.7 million.

Barry Berlin: I also wanted to note that during the second quarter of 2024 we recommenced the issuance of our Series A1 preferred stock and raised an additional $8.3 million in net proceeds from the sale securities during June.

Operator: We can now open the line for questions. We will now begin the question and answer session. To ask a question you may press start and want on your telephone keypad. If you're using a speaker phone please pick up your handsets before pressing the keys. If at any time your question has been addressed and you'd like to withdraw your questions please press star then to.

Operator: At this time we'll pause momentarily to assemble a roster.

John LaSoka: The first question comes from John LaSoka from the Riley Securities. Please go ahead.

David Thompson: Good morning out there. Morning. So you can go for a little more color on the leasing situation at Lake Merit and just how to give back space and impact things in 3Q. Sure. So we're currently in the process of lease negotiations with the largest tenant in the building Kaiser which is about today they lease about 2 thirds of the building. So those negotiations are ongoing. They did give back and this is something we previously disclosed that they gave back about 130,000 square feet at the end of July.

David Thompson: That will not be those are that square footage is not part of the negotiation for for future lease so we're but we are in the process of negotiating an extension on their space that expires part of it in 2025 2025 and part of it in 2027, and then maybe on the open multifamily side of things. Obviously, it seems like in the current market, you know, the supply shouldn't be much of an issue.

David Thompson: But what are you seeing on the demand side in terms of multifamily in that market? We, we actually, I mean, as you could see by the numbers, we had a pretty good first half in terms of picking up occupancy, which was very encouraging. So, you know, we, I would say we have seen a pickup in demand, you know, having said that the market is still, I think, market-wide vacancies roughly 10% still, which is, you know, much better than the, the trough, which was 18, 17, 18% or so a couple years ago.

David Thompson: So you've seen a lot of absorption. But what we really haven't seen yet is a pickup and rate. That continues to be a challenge and it continues to be a market where it's a very high concessions market at the moment. But, you know, we have seen, I would say, a pickup in just overall least velocity. And, you know, we were able to get our occupancy into the low 90s, which was encouraging.

David Thompson: Okay. You know, where would you think it would be needed to trend in those assets before you could, you know, start pushing back a little bit on concessions and maybe pushing more aggressively on, on rate? Probably in the mid 90 range. And, you know, overall markets, as I mentioned, you know, somewhere around 90% occupied.

David Thompson: We have a good amount of floating rate debt, which those rates come down. Short-term rates, there's pretty significant savings for us, but in addition to that, I think what you're more referencing is the potential to potentially fix some of our, fix some of our rate on some longer term financing. And so that's something we will, we will take a look at as well, as we've seen, you know, kind of the five-year come down quite a bit. So there is a potential opportunity for us to swap from floating into some, you know, potentially we're looking at that right now into some a little bit longer term fixed rate debt. Okay.

David Thompson: And then last one, I mean, in the past calls, you've talked about some assets that being on core and some decision opportunities that might be out there, you know, especially as financing has gotten cheaper for your counterparties and any deals, have negotiations or talks they're picked up, or is it still kind of a little bit early earnings on capital restrictions in just positions? We're still, I would say, more in the evaluation phase.

David Thompson: What we would like to, you know, we would like to reduce both our recourse and overall debt. So we are really evaluating and doing some work on an asset by asset level to see where we can basically generate the most value, and I think some of the non-core assets that we've discussed in the past, I would also include them in that mix as well, particularly the hotel and lending division. Would the primary use of proceeds be on the multi-family side still in the same market during today?

David Thompson: I think the primary use of proceeds today really would just be to pay down debt. That's really our focus at this moment and then I think as the market settles a little bit, you know, look to, you know, potentially be back as an acquirer but for now we really want to get the debt balanced down a bit.

John LaSoka: Okay, I appreciate the color and that's it for me. Thank you.

Operator: This concludes the question and answer session and the conference has now concluded also. Thank you for attending today's presentation. You may now disconnect.

John Massocca: [inaudible] John Massocca, John Massocca, John John Massocca, John Massocca, John[inaudible]

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