Q3 2025 Creative Media & Community Trust Corporation Earnings Call
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Speaker #1: Good day, and welcome to the Creative Media & Community Trust 3rd Quarter 2025 earnings conference call. All participants will be in listen-only mode.
To withdraw your question. Please press Star then two please.
Please note. This event is being recorded I would now like to turn the conference over to Steve Ultra Brando portfolio oversight. Please go ahead.
Speaker #1: Should you need assistance, 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.
Hello, everyone and thank you for joining US my name is Steve Ultra brand out of the portfolio oversight for CMC.
Speaker #1: To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star and then two. Please note that this event is being recorded.
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.
Speaker #1: I would now like to turn the conference over to Steve Altebrando, Portfolio Oversight. Please go ahead.
Speaker #1: Hello, everyone, and thank you for joining us today.
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 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.
Speaker #2: Joining us, my name is Stephen 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.
Speaker #2: 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.
Although we believe 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.
Speaker #2: Our earnings release includes a reconciliation of non-GAAP financial measures discussed during today's call. 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.
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.
Speaker #2: 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.
Thanks, Steve and thank you to everyone for joining our call today.
I'll begin with an update on the progress, we're making with our strategic initiatives and then review our results for the quarter.
Speaker #2: Although we believe 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.
As a reminder, our key priorities remain focused on two main goals strengthening our liquidity and our balance sheet and growing our multifamily business to advance these objectives, which we first outlined last September we've been executing a significant refinancing program and evaluating selective asset sales.
Speaker #2: Potential risks. Please refer to our For a more detailed description of SEC filings, which can be found in the Investor Relations section of our website.
Speaker #2: With that, I'll turn the call over to David Thompson.
Earlier this week, we announced that we have entered into a definitive agreement to sell our lending business. This business is primarily focused on originating SBA seven loans for limited service hotels and it was considered a noncore asset for the company.
Speaker #3: Thanks, Steve, and thank you to everyone for joining our call today. I'll begin with an update on the progress we're making with our strategic initiatives and then review our results for the quarter.
Speaker #3: We remain focused on two main goals: strengthening our liquidity and our balance sheet, and growing our multifamily business. To advance these objectives, as a reminder, our key priorities—which we first outlined last September—we've been executing a significant refinancing program and evaluating selective asset sales.
As of September 30, the purchase price was estimated to be approximately $44 million and yield the company about $31 million after repayment of debt transaction and other expenses.
The transaction remains subject to small business administration approval as well as certain closing conditions.
Speaker #3: Earlier this week, we announced that we have entered into a definitive agreement to sell our lending business. This business is primarily focused on originating SBA 7(a) loans for limited-service hotels, and it was considered a non-core asset for the company.
At the same time, we continued to make meaningful progress on our refinancing initiatives. Since last September we completed financings on seven assets and put in place a warehouse facility for a lending division.
This facility will be retired at the close of our sale transaction.
Speaker #3: As of September 30th, the purchase price was estimated to be approximately $44 million, yielding the company about $31 million after repayment of debt, transaction costs, and other expenses.
We're also working on an upsize of our mortgage up on Penfield, our creative office asset in Austin. After closing this financing earlier this year, we executed a lease with an investment grade Ted which should allow us to upsize alone. We're now finalizing the loan documents with the lender.
Speaker #3: The transaction remains subject to Small Business Administration approval, as well as certain closing conditions. At the same time, we continued to make meaningful progress on our refinancing initiatives.
Taken together these actions were important steps for the company.
Speaker #3: Since last September, we completed financings on seven assets and put in place a warehouse facility for our lending division. This facility will be retired at the close of our sale transaction.
They provided proceeds that allowed us to significantly reduce our recourse debt, including the full retirement of our $169 million recourse credit facility earlier this year.
Speaker #3: We are also working on an upsize of our mortgage on Penfield, our creative office asset in Austin. After closing this financing earlier this year, we executed a lease with an investment-grade tenant, which should allow us to upsize the loan.
Also supported our growth initiatives, including lease up activity at our Beverly Hills, Culver City, Brentwood, San Francisco, and Austin properties renovations at our hotel asset.
New loan originations in our lending business and enable us to continue paying preferred dividends overall, we're encouraged by the progress we've made in improving liquidity.
Speaker #3: We're now finalizing the loan documents with the lender. Taken together, these actions were important steps for the company. They provided proceeds that allowed us to significantly reduce our recourse debt, including the full retirement of our $169 million recourse credit facility earlier this year.
We are working to position the company to benefit from a recovery in commercial real estate market, which is supported by lower interest rates a significant uptick in office leasing activity and improving economic conditions in the San Francisco Bay area.
Speaker #3: They also supported our growth initiatives, including lease-up activity at our Beverly Hills, Culver City, Brentwood, San Francisco, and Austin properties. Renovations at our hotel asset, new loan originations in our lending business, and enabled us to continue paying preferred dividends.
Turning to third quarter results, our core <unk> was negative $10 $5 million, reflecting several items that impacted performance during the quarter.
Our overall net operating income was $7 million compared to $9 8 million in the prior quarter.
Speaker #3: Overall, we're encouraged by the progress we've made in improving liquidity. We are working to position the company to benefit from a recovering commercial real estate market, which is supported by lower interest rates, a significant uptick in office leasing activity, and improving economic conditions in the San Francisco Bay Area.
Within our office segment NOI declined by approximately $500000 from the second quarter, largely due to lower appraised value of one of our Jv's NOI modestly increased at our wholly owned properties.
Hotel NOI was $850000 in the quarter compared to $4 2 million in the second quarter, primarily reflecting disruption from our renovation of the public space Q3 is also a seasonally slower quarter for the hotel.
Speaker #3: Turning to Q3 results, our core FFO was negative $10.5 million, reflecting several items that impacted performance during the quarter. Our overall net operating income was $7 million, compared to $9.8 million in the prior quarter.
Our multifamily NOI increase by approximately $600000 from the prior quarter. The improvement was primarily due to a lower appraisal at one of our JV has that impacted Q2 results as well as a decrease in real estate tax expense at our consolidated properties in Q3.
Speaker #3: Within our office segment, NOI declined by approximately $500,000 from Q2, largely due to a lower appraised value at one of our JVs. NOI modestly increased at our wholly owned properties.
Speaker #3: Hotel NOI was $850,000 in the quarter, compared to $4.2 million in the 2nd Quarter, primarily reflecting disruption from our renovation of the public space.
And finally NOI from our lending segment increased by approximately $360000, primarily due to a higher reserve taken in the second quarter.
Speaker #3: Q3 is also a seasonally slower quarter for the hotel. Our multifamily NOI increased by approximately $600,000 from the prior quarter. The improvement was primarily due to a lower appraisal at one of our JVs that impacted Q2 results, as well as a decrease in real estate tax expense at our consolidated properties in Q3.
Looking ahead, we see opportunities to improve cash flow in 2026 supported by several key drivers continued improvement in office leasing activity. The full completion of renovations at our hotel asset and steady gains in multifamily performance through higher rental rates improved occupancy and delivery of new units. We also expect to benefit from a more favorable.
Speaker #3: And finally, NOI from our lending segment increased by approximately $360,000, primarily due to a higher reserve taken in Q2. Looking ahead, we see opportunities to improve cash flow in 2026, supported by several key drivers: continued improvement in office leasing activity, the full completion of renovations at our hotel asset, and steady gains in multifamily performance through higher rental rates, improved occupancy, and delivery of new units.
Interest rate environment.
Before I turn the call over to Steve to provide more detail on the portfolio I want to take a minute to thank Barry Berlin or his years of service.
As part of the sale of our lending Division Barry will be stepping down as CFO in order to join the acquirer of the lending business.
Brandon Hill will assume the role of CFO. Once the transaction is closed Brandon has been intimately involved in <unk> for years, and we expect a seamless transition.
Steve.
Thanks, David we remain focused on improving property level performance across all segments and growing our premier newer vintage multifamily portfolio.
Speaker #3: favorable interest rate environment. We also expect to benefit from a more favorable environment. Before I turn the call over to Steve to provide more detail on the portfolio, I want to take a minute to thank Barry Berlin for his years of service.
Speaker #3: As part of the sale of our lending division, Barry will be stepping down as CFO in order to join the acquirer of the lending business.
This continues to be a key growth area for us, including our joint ventures. We now have four operating assets 11, 50, Clay and channel House in the Bay area and 701, South Hudson 19 O to Park Avenue, and Los Angeles were making steady progress on lease up 701, South Hudson the residential portion of our partial office to residential <unk>.
Speaker #3: Brandon Hill will assume the role of CFO once the transaction has closed. Brandon has been intimately involved in CMCT for years, and we expect a seamless transition.
Speaker #3: Steve?
Speaker #1: Thanks, David. We remain focused
<unk> completed late last year.
Speaker #1: On improving property-level performance across all segments and growing our premier newer vintage multifamily portfolio. This continues to be a key growth area for us, including our joint ventures. We now have four operating assets: 1150 Clay and Channel House in the Bay Area, and 701 South Hudson and 1902 Park Avenue in Los Angeles.
Multifamily occupancy at the property was approximately 81% at the end of the third quarter up from 68% at the end of the second quarter.
As a reminder, the top two floors of the building were converted into 68 high end residential units, while the ground floor creative office component known as <unk> thousand 750 remains 100% leased.
As mentioned on our prior calls we believe there is an opportunity to develop additional units on the back surface lot of the property given recent zoning changes and we continue to make progress on those plans.
Speaker #1: We're making steady progress on the lease-up of 701 South Hudson, the residential portion of our partial office-to-residential conversion completed late last year. Multifamily occupancy at the property was approximately 81% at the end of Q3, up from 68% at the end of Q2.
Our fifth project $19 15 Park in Los Angeles, We will deliver this month. This 36 unit ground up multifamily development is a joint venture with an international pension fund and is located adjacent to our office building at 1910 West Sunset in Echo Park, a highly desirable lockable sub market with attractive dining and entertainment options.
Speaker #1: As a reminder, the top two floors of the building were converted into 68 high-end residential units, while the ground floor creative office component, known as 4750, remains 100% leased.
Speaker #1: As mentioned on our prior calls, we believe there's an opportunity to develop additional units on the back surface lot of the property, given recent zoning changes. We continue to make progress on those plans.
And Oakland, we saw a modest improvement in total occupancy during the quarter. We believe our properties will benefit from limited new construction and Oakland residential market as well as the ongoing recovery across the broader Bay area and San Francisco multifamily properties continue to improve with area vacancy at its lowest level since 2011 third.
Speaker #1: Our fifth project, 1915 Park in Los Angeles, will deliver this month. This 36-unit ground-up multifamily development is a joint venture with an international pension fund and is located adjacent to our office building at 1910 West Sunset in Echo Park.
Quarter rent growth of five 2% in San Francisco is the strongest year over year growth rate since 2015.
Speaker #1: A highly desirable, walkable submarket with attractive dining and entertainment options. In Oakland, we saw a modest improvement in total occupancy during the quarter. We believe our properties will benefit from limited new construction in the Oakland residential market, as well as the ongoing recovery across the broader Bay Area.
In addition in January 'twenty, six Samuel Merit universities opening its new campus, which is located just steps from our class a multifamily asset at 11 50 clay.
The new campus is expected to draw 2000 students in 500 faculty members.
Speaker #1: Francisco, multifamily properties continue to improve, with area vacancy at its lowest level since 2011. The 3rd Quarter rent growth of 5.2% in San Francisco is the strongest year-over-year growth rate since 2015.
We see meaningful opportunities to grow our multifamily net operating income through a combination of rising rents increasing occupancy lowering operating cost and the delivery of our fifth asset this month.
Turning to the office segment earlier this year, we noted that our leasing pipeline was very very active and that translated into very strong leasing activity.
Speaker #1: In addition, on January 26, Samuel Merritt University is opening its new campus, which is located just steps from our Class A multifamily asset at 1150 Clay.
Through the first nine months of 2025, we executed approximately 159000 square feet of leases at 69% increase compared to the same period last year.
Speaker #1: The new campus is expected to draw 2,000 students and 500 faculty members. We see meaningful opportunities to grow our multifamily net operating income through a combination of rising rents, increasing occupancy, lowering operating costs, and the delivery of our fifth asset this month.
This follows a 176000 square feet of leasing activity in the fourth quarter of 2024.
At the end of the third quarter, our office portfolio was 73, 6% leased excluding our one Oakland office property, our lease percentage was 86, 6%, which was up from 81, 7% at the end of 2020 for.
Speaker #1: Turning to the office segment, earlier this year we noted that our leasing pipeline was very active, and that translated into very strong leasing activity.
Speaker #1: Through the first nine months of 2025, we executed approximately 159,000 square feet of leases, a 69% increase compared to the same period last year.
Importantly, we believe the headwinds from Covid are largely behind us and we're now beginning to see the benefits of return to office trends, which are creating tailwind for our portfolio.
Speaker #1: This follows 176,000 square feet of leasing activity in the 4th quarter of 2024. At the end of the 3rd quarter, our office portfolio was 73.6% leased.
Turning to our hotel, we believe we're entering 2026 from a position of strength. Following a couple of years of renovation related disruption.
Nearing completion of our $11 million renovation of the public space at the Sheraton Grands Sacramento.
Speaker #1: Excluding our one Oakland office property, our lease percentage was 86.6%, which was up from 81.7% at the end of 2024. Importantly, we believe the headwinds from COVID are largely behind us, and we're now beginning to see the benefits of return-to-office trends, which are creating tailwinds for our portfolio.
This project includes upgrades to the ballroom banquet space public space and food and beverage areas.
The renovation was funded through a combination of $8 million of key money received as part of the extension of our management agreement with Marriott cash flow from the property and future funding on the mortgage as a reminder.
Speaker #1: Turning to our hotel, we believe we're entering 2026 from a position of strength following a couple of years of renovation-related disruption. We're nearing completion of our $11 million renovation of the public space at the Sheraton Grand Sacramento.
We also renovated all 505 guest rooms last year.
With that I'll turn the call over to Barry who will provide an update on our financial results.
Speaker #1: This project includes upgrades to the ballroom, banquet space, public space, and food and beverage areas. The renovation was funded through a combination of $8 million of key money received as part of the extension of our management agreement with Marriott, cash flow from the property, and future funding on the mortgage.
Thank you Steve good morning.
I'm going to spend a few minutes going over the comparative year over year financial highlights for the third quarter of 2025 versus the third quarter of 2024, starting with our segment NOI, which was $7 million in the third quarter of 2025 compared to $7 $6 million in the prior year comparable period.
Speaker #1: As a reminder, we also renovated all 505 guest rooms last year. With that, I'll turn the call over to Barry, who will provide an update on our financial results.
Speaker #1: As a reminder, we also renovated all 505 guest rooms last year. With that, I'll turn the call over to Barry, who will provide an update on our financials.
Broken down by segment the decrease of approximately $600000 was driven by decreases of $400000 of our office properties $374000 from our lending business and $123000 from our hotel property, partially offset by an increase of $284000 from our multifamily property.
Speaker #2: Thank you, Steve. Good morning. I'm going to spend a few minutes going over the comparative year-over-year financial highlights for the 3rd Quarter of 2025 versus the 3rd Quarter of 2024.
Speaker #2: Starting with our segment NOI, which was $7 million in the 3rd Quarter of 2025 compared to $7.6 million in the prior year comparable period.
<unk>.
Our office segment NOI for Q3, 2025 was $5 million.
Versus $5 $4 million during Q3 2024.
Speaker #2: Broken down by segment, the decrease of approximately $600,000 was driven by decreases of $400,000 for our office properties, $374,000 from our lending business, and $123,000 from our hotel property.
The decrease was primarily driven by a decrease in NOI at an office property in Los Angeles, California, and at an office property in San Francisco, California attributable to lower rental revenues, resulting from a decline in occupancy as well as NOI and an office property in Austin, Texas as a result of higher real estate.
Speaker #2: Partially offset by an increase of $284,000 from our multifamily properties. Our office segment NOI for Q3 2025 was $5 million, compared to $5.4 million during Q3 2024.
Taxes.
Our lending division NOI decreased to $314000 compared to $688000 in the prior year comparable period.
Speaker #2: The decrease was primarily driven by a decline in NOI at an office property in Los Angeles, California, and at an office property in San Francisco, California, attributable to lower rental revenues resulting from a decline in occupancy, as well as NOI at an office property in Austin, Texas, due to higher real estate taxes.
Primarily due to a decrease in interest income as a result of loan pay offs and lower interest rates, partially offset by a decrease in interest expense, resulting from net loan pay downs and a decrease in additions to current expected credit losses.
Our hotel segment NOI for Q3, 2025 was $850000 compared to $1 million in the prior year comparable period.
Speaker #2: Our lending division NOI decreased to $314,000 compared to $688,000 in the prior year comparable period, primarily due to a decrease in interest income as a result of loan payoffs and lower interest rates.
The decrease was driven by a decrease in food and beverage sale revenues, partially offset by an increase in room revenue.
Operations at our hotel property were negatively impacted by a lobby renovation project or in Q3 2025.
Speaker #2: Partially offset by a decrease in interest expense resulting from net loan paydowns and a decrease in additions to current expected credit losses. Our hotel segment NOI for Q3 2025 was $850,000 compared to $1 million in the prior year comparable period.
And our room renovation project during Q3 2024.
Our multifamily segment NOI was $792000 during Q3 2025 compared to $508000 from the prior year comparable period.
Speaker #2: The decrease was driven by a decrease in food and beverage sale revenues, partially offset by an increase in room revenue. Operations at our hotel property were negatively impacted by our lobby renovation project during Q3 2025 and our room renovation project during Q3 2024.
The increase was primarily driven by reductions in real estate taxes at our multifamily properties in Oakland, California. During the third quarter of 2025, partially offset by a decrease in revenues at our multifamily properties in Oakland, California, as a result of declines in occupancy and monthly rent per occupied unit.
Speaker #2: Our multifamily segment NOI was $792,000 during Q3 2025 compared to $508,000 from the prior year comparable period. The increase was primarily driven by reductions in real estate taxes at our multifamily properties in Oakland, California, during the 3rd quarter of 2025, partially offset by a decrease in revenues at our multifamily properties in Oakland, California, as a result of declines in occupancy and monthly rent per occupied unit, net of rent concessions, compared to the prior year comparable period.
Rent concessions compared to the prior year comparable period.
Below the segment NOI line, we had an increase in depreciation and amortization expense of $922000.
Due to incremental increases to the depreciable asset base at our hotel property following our renovation projects as well as an increase in the net interest expense of $782000 driven by higher aggregate debt outstanding.
Our <unk> was negative $11 1 million or negative $14 75 per diluted share compared to negative $28 $4 million in the prior year comparable period.
Speaker #2: Below the segment NOI line, we had an increase in depreciation and amortization expense of $922,000 due to incremental increases to the depreciable asset base at our hotel property following our renovation projects.
The positive results in our <unk> was primarily driven by decreases in redeemable preferred stock redemption expense of $16 $1 million and through a reduction in redeemable preferred stock dividends of $2 $7 million, partially offset.
Speaker #2: As well as an increase in interest expense of $782,000 driven by higher aggregate debt outstanding, our FFO was negative $11.1 million, or negative $14.75 per diluted share, compared to negative $28.4 million in the prior year comparable period.
By the previously discussed decrease in total segment NOI and the increase in interest expense.
Our core <unk> was negative $10 $5 million or a negative $13 96 per diluted share compared to negative $11 $5 million in the prior year comparable period.
Speaker #2: The positive results in our FFO were primarily driven by decreases in redeemable preferred stock redemption expense of $16.1 million and through a reduction in redeemable preferred stock dividends of $2.7 million.
The increase in core <unk> is attributable to the previously discussed reductions in redeemable preferred stock dividends offset by the decrease in segment NOI and higher interest expense.
Speaker #2: Partially offset by the previously discussed decrease in total segment NOI and the increase in interest expense, our core FFO was negative $10.5 million, or negative $13.96 per diluted share, compared to negative $11.5 million in the prior year comparable period.
Or if that's all calculations exclude reconciliation items to determine F. F O that relate to preferred stock redemptions transaction related costs and deemed dividends.
I would like to conclude by thanking David Thomson for his guidance over my roles with CMC T. Since becoming public in 2014 and more importantly, as my mentor for my roles in CIM. Since then thank you David.
Speaker #2: This increase in core FFO is attributable to the previously discussed reductions in redeemable preferred stock dividends, offset by the decrease in segment NOI and higher interest expense.
Speaker #2: Core FFO calculations exclude reconciliation items to determine FFO that relate to preferred stock redemptions, transaction-related costs, and deemed dividends. I would like to conclude by thanking David Thompson for his guidance over my roles with CMCT since becoming public in 2014.
And while I am very excited to be following the lending division over to its new home and I'm looking forward to helping its ownership grow.
And expand its horizons in the lending arena.
I will truly miss the interaction with the ownership and executive management team at <unk> that has supported me and my roles with the firm.
And lastly to the amazing teams that I've had the pleasure to work with and that have made my job easier that includes Brandon Hill. It was on the call today, who is guided to the financial oversight for CMC T. Since before I took the CFO position.
Speaker #2: And more importantly, as my mentor for my roles in CIM since then, thank you, David. I am very excited to be following the lending division over to its new home, and I'm looking forward to helping its ownership grow and expand its horizons in the lending arena.
And who is patiently awaited us opportunity to take on the job as CFO.
Speaker #2: I will truly miss the interaction with the ownership and executive management team at CIM that has supported me in my roles with the firm.
He is well suited to take on the role and I congratulate him on being.
Provided this opportunity.
Speaker #2: And lastly, to the amazing teams that I've had the pleasure to work with and that have made my job easier. That includes Brandon Hill, who was on the call today, and who has guided the financial oversight for CMCT since before I took the CFO position.
With that we could open the line for questions.
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Speaker #2: And who has patiently awaited his opportunity to take on the job of CFO. He is well-suited to take on the role, and I congratulate him on being provided this opportunity.
If at any time your question has been addressed.
Withdraw your question. Please press Star and then two.
At this time, we will pause momentarily to assemble our roster.
Speaker #2: With that, we could open the line for questions.
Speaker #2: questions. We will
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It appears there are no questions I would like.
Do I conclude the conference. Thank you for attending today's presentation you may now disconnect.
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Thank you.
Sure.