CMCT

Good afternoon, welcome to the Creative Media & Community Trust first quarter 2026 earnings conference call. I would now like to turn the conference over to Steve Altebrando, Portfolio Oversight. Please go ahead.

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 Brandon Hill, 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. 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, and 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. 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. Hello, everyone, and thank you for joining us today. I'd like to begin with an update on the strategic plan we outlined on prior calls to strengthen our balance sheet, improve liquidity, and sharpen our focus on premier multifamily assets and the meaningful progress we've made against those priorities in the first quarter. Over the past several months, we've taken actions to position CMCT for long-term stability and growth. During the quarter, we completed the redemption of $243 million of preferred stock into common stock. This was a transformational step for the company that significantly improved our balance sheet and will improve our funds from operations starting in the second quarter of 2026. We expect the redemption to increase our FFO by approximately $16 million per year, and it returns the company's capital structure back in line with our long-term targets.

Since first announcing our plan to strengthen our balance sheet and improve liquidity in September of 2024, the company has redeemed approximately $396 million of preferred stock into common stock. In parallel, we have also shifted our financing strategy towards an asset-based approach. We have completed financings on 9 assets and have fully retired our recourse credit facility. As a result, we now operate with minimal recourse debt, significantly reducing risk and improving our flexibility. We also sold our lending division in January of 2026. After accounting for debt repayment, transaction expenses, and other related items, this transaction yielded net cash proceeds to the company of approximately $31 million. In summary, we believe that we have restored the company to a position of financial health. With a stronger balance sheet, improved liquidity, and a more focused portfolio, we are now well-positioned for growth.

Going forward, our primary focus is on improving FFO in 2026 and 2027. We believe there are two key levers that will enable us to achieve this. First, we are focused on improving property-level performance across our portfolio. Second, we expect a substantial reduction in preferred dividend obligations. As a reminder, we completed the redemption near the end of the first quarter, so the impact of that action was only minimally reflected in our first quarter FFO. The full benefit of that redemption will begin in the second quarter. In addition, we are continuing to take proactive steps to further strengthen our financial profile. We are actively working to extend debt maturities on a handful of assets, and at the same time, we will continue to evaluate selective asset sales where we see opportunities to unlock value, improve portfolio quality, or redeploy capital more efficiently.

We believe that executing on these priorities is critical to reducing what we believe is a substantial gap between our current share price and the intrinsic value of the portfolio. To put that in perspective, on a cost basis, our undepreciated book value was approximately $147 per share at the end of the first quarter. We believe this highlights the underlying value of our assets and reinforces the opportunity ahead as we translate operational improvements and capital structure efficiencies into stronger financial performance. Turning to net operating income and trends for the first quarter. Starting with office, NOI declined approximately $600,000 year-over-year. This was primarily driven by a one-time benefit in the prior year period related to a tax appeal we won and which should not recur this year.

Excluding our Oakland office asset, our office lease percentage was approximately 85.7% at the end of the first quarter, representing a 470 basis point increase year-over-year. In our multifamily segment, performance was notably stronger. Excluding our joint venture properties, NOI increased 64% year-over-year. When including our JV properties, NOI increased modestly, primarily due to non-cash changes in appraised values. Occupancy across the multifamily portfolio improved to 89.6% at quarter end, an increase of 940 basis points compared to the prior year.

Importantly, after several very challenging years in Oakland, we are beginning to see early signs of recovery, supported by improving fundamentals in that market. Turning to our hotel asset, NOI declined by approximately $700,000 year-over-year. This was largely attributable to temporary factors, including renovation-related disruptions early in the quarter and an issue in one of the mechanical systems that temporarily removed a number of rooms from service in March.

I'm pleased to report that the renovation was substantially completed during the first quarter. Over the past two years, we have renovated all 505 guest rooms, along with the property's common areas, positioning the asset for improved performance going forward. In summary, we continue to see encouraging operating trends across the multifamily portfolio, as well as in our Los Angeles and Austin office assets and at the company's hotel property in Sacramento. With that, I'll turn the call over to Steve to provide additional color on our refinancing activities and property level performance.

Thanks, David. The actions we've taken over the past several quarters have significantly improved our balance sheet and will strengthen our funds from operations. We are now well-positioned to benefit from improving fundamentals, particularly in our multifamily assets in the Bay Area. Today, CMCT owns 621 residential units across two premier Class A assets in the market. After several challenging years, we're beginning to see the recovery gain momentum, supported by a strengthening San Francisco residential market, with demand increasingly bolstered by growth in AI-related employment and investment. At the end of the first quarter, our Oakland multifamily occupancy increased to 91.9%, representing an improvement of 860 basis points compared to the end of the first quarter last year. In addition, we are also seeing concessions ease in the market, particularly at our 1150 Clay asset.

More broadly, in the adjacent downtown San Francisco market, multifamily fundamentals have rebounded significantly. In 2025, rent growth reached 7.6%, the highest growth rate in 25 years, followed by an additional 7% increase in the first quarter of 2026. Vacancy has declined to 4.3%, the lowest level in nearly 20 years. In Oakland, we are also seeing encouraging signs of recovery. Vacancy has declined to 7.8% at the end of the first quarter, down from a peak of approximately 18% in 2021. Importantly, rent growth turned positive in 2025 after 3 consecutive years of decline and increased by 2.9% in the first quarter of 2026. Turning to Los Angeles, we have made solid progress across our 2 new L.A. multifamily assets.

At 701 South Hudson, our partial conversion of office to residential is now 88.2% occupied. As we mentioned on our last call, we received entitlements in the first quarter of 2026 to build an additional 50 units on the back surface lot of the property. We are currently working on pre-development and anticipate having the option to start that project later this year. At 1915 Park, our ground-up development in Echo Park, we achieved 52.8% leased at quarter end. This 36-unit project, delivered in the fourth quarter, is located in a highly desirable walkable submarket with significant dining and entertainment options. The development is a joint venture with an international pension fund and was built on land adjacent to our office property at 1910 West Sunset. Including our joint ventures, we now have five operating multifamily assets.

Turning to the office segment, we executed approximately 20,562 sq ft of leases in the first quarter and continue to see an active pipeline of activity, particularly in L.A. and Austin. Excluding the company's 1 Oakland office asset, our lease percentage stood at 85.7% at the end of the first quarter, representing an improvement of 470 basis points year-over-year. At 11600 Wilshire Boulevard, we recently commenced a renovation program focused on several small suites. We believe this targeted investment will enhance leasing activity and tenant demand. This project is expected to be completed over the next few months. Finally, in our hotel segment, we have substantially completed the renovation of the property's public spaces following the full renovation of all 505 guest rooms.

This marks the first comprehensive renovation of the asset since its acquisition in 2008 and positions the hotel well for improved performance in 2026 and beyond. We are also evaluating the opportunity to add 8 new guest rooms by converting currently underutilized space, which we believe would be highly accretive. Turning to financing, we are actively engaged in 3 initiatives. At the Sheraton Grand, with the renovation now substantially complete, we believe there's an opportunity to both increase the loan balance and reduce the borrowing spread.

At 1150 Clay, we are in active discussions with the lender and anticipate securing a 1-year extension on the mortgage as we continue to work to improve the asset's NOI. Finally, at our Oakland office property, we're seeking extension of the loan maturity. We cannot guarantee we will reach an agreement with the lender. For context, in the first quarter of 2025, this asset generated approximately $800,000 of cash flow after debt service. With that, I'll turn the call over to Brandon.

Thank you, Steve. Good afternoon. I'm going to spend a few minutes going over the comparative financial highlights for the first quarter of 2026 versus the first quarter of 2025, starting with our segment NOI, which was $9.8 million in the first quarter of 2026 compared to $11.8 million in the prior year comparable period. Broken down by segment, the decrease of approximately $1.9 million was driven by decreases of $728,000 from our hotel property, $602,000 from our office properties, and $590,000 from our lending business. Our hotel segment NOI for Q1 2026 was $4 million versus $4.7 million in Q1 2025.

This decrease was largely attributable to temporary factors, including a renovation-related disruption early in the quarter and an issue in one of the mechanical systems that temporarily removed a number of rooms from service in March. Our office segment NOI for Q1 2026 was $6.5 million versus $7.1 million in Q1 2025. The decrease was primarily driven by a decrease in tenant reimbursement revenue at an office property in Oakland, California, and an increase in real estate tax expense at an office property in Beverly Hills, California, driven by a tax refund recorded in the prior year period. In January 2026, we completed the sale of our lending business, First Western, for a purchase price of approximately $44.9 million.

As the lending segment activity was de minimis during the period it remained under our ownership during Q1 2026, the related amounts were excluded from segment-level activity. Our lending division NOI was $590,000 in the prior year comparable period. Our multifamily segment net operating loss of $613,000 remained fairly consistent compared to the prior year comparable period. Below the segment NOI line, we had an increase in depreciation and amortization expense of $1.2 million, primarily due to an increase in tenant improvement amortization at an office property located in Beverly Hills, California, as well as an increase at our hotel property due to renovation projects which have increased depreciable assets.

We also had an increase in loss in early extinguishment of debt of $705,000, which was incurred in connection with the full payoff of our lending division revolving credit facility during the first quarter of 2026. These were partially offset by a gain on sale of $1.7 million as a result of our sale of First Western during Q1 2026. Our FFO was -$28.8 million, or -$58.47 per diluted share, compared to -$5.4 million or -$900.83 per diluted share in the prior year comparable period.

The decrease in our FFO was primarily driven by an increase in preferred stock redemptions of $21.9 million, a decrease of approximately $1.9 million in total segment NOI, and an increase of $705,000 in loss on early extinguishment of debt, partially offset by a decrease of $1.3 million in redeemable preferred stock dividends. Our Core FFO was negative $5.9 million, or negative $11.89 per diluted share, compared to negative $5.1 million or negative $846.50 per diluted share in the prior year comparable period.

This decrease in Core FFO is attributable to the previously discussed changes in FFO while not impacted by the increase in loss on early extinguishment of debt or the increase in redeemable preferred stock redemptions, as these are excluded from our Core FFO calculation. With that, we can open the line for questions.

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Showing no questions, this concludes our question and answer session and the conference has also now concluded. Thank you for attending today's presentation. You may now disconnect.

Afternoon, welcome to the Creative Media & Community Trust Fourth Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. 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. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Steve Altebrando, Portfolio Oversight. Please go ahead.

Hello, everyone. 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 Brandon Hill, 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. 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. 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. 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. Good afternoon, and thanks everyone for joining us today. We continue to execute on the strategic plan we have discussed on previous calls. We are making significant progress in accelerating our focus towards premier multifamily assets, strengthening our balance sheet and improving liquidity. At the same time, operating trends within the portfolio are moving in the right direction across our multifamily portfolio, our Los Angeles and Austin office assets, and the company's hotel asset in Sacramento. Since announcing our strategic plan in September 2024, we've taken actions to significantly improve our balance sheet. We completed financing on nine assets since September 2024 and fully retired our recourse credit facility in April 2025. We completed the sale of our lending division in January 2026, and we redeemed approximately $153.3 million of preferred stock into common stock since September of 2024. Building on that progress, the company announced today that it is redeeming approximately 2 million shares of Series A preferred stock, approximately 7.8 million shares of Series A-1 preferred stock, and approximately 22,000 shares of the Series D preferred stock, with a redemption price to be paid in shares of common stock. This redemption is expected to improve CMCT's annual funds from operations by approximately $16 million per year and returns the company's capital structure back to our long-term target, approximately 38% common equity, 7% preferred equity, and 55% debt on a fair value basis adjusted for the redemption.

Importantly, given the company's significantly improved financial position, we do not currently intend to initiate at our election additional preferred stock redemptions into common stock. However, we will continue to evaluate redemption requests submitted by holders of our preferred stock as error received and may elect to redeem those shares in common stock or cash at the company's discretion. With respect to asset sales, as we mentioned, we completed the sale of our lending division in January for a purchase price of approximately $44.9 million net of the outstanding debt related to the 2023 securitization of certain loan receivables and subject to customary post-closing adjustments. After giving effect to the repayment of other debt, transaction expenses, and related items, the transaction generated approximately $31.2 million of net cash proceeds to the company. We continue to actively evaluate additional asset sales as part of our broader effort to enhance liquidity and optimize our balance sheet. In terms of operating trends, looking ahead, we see opportunity to improve cash flow in 2026, supported by several key drivers across the portfolio. First, net operating income continues to improve across all segments. In our office portfolio, lease occupancy reached 88.5% at the end of 2025, excluding our Oakland asset, representing a 190 basis point increase from the third quarter of 2025 and a 680 basis point improvement over year-end 2024.

In multifamily, excluding our building in Echo Park in Los Angeles, which just began lease-up during Q4, our occupancy increased to 88.5% at the end of 2025, up 320 basis points from the third quarter of 2025 and then 680 basis points year over year. At our hotel property, we substantially completed the upgrades to the public spaces in the first quarter of 2026 following the renovation to all 505 guest rooms a year ago. With these improvements largely complete, the property is well positioned to drive strong performance in 2026 and beyond. We also anticipate lower interest expense supported by a potentially more favorable rate environment and the opportunity to refinance the hotel following the completion of its renovation. As mentioned earlier, the conversion of preferred equity into common stock is expected to improve annual FFO by approximately $16 million. Turning to our fourth quarter results, our Core FFO was negative $5.9 million. Our overall net operating income was $10.9 million compared to $7 million in the prior quarter. Within our office segment, NOI increased by approximately $1.4 million from the third quarter, largely due to higher appraised value of one of our JVs. NOI also modestly increased at our wholly-owned properties.

Hotel NOI was $2.1 million in the quarter compared to $850,000 in the third quarter, primarily reflecting a greater disruption from a renovation of the public space in the prior quarter. Our multifamily NOI decreased by approximately $1.7 million from the prior quarter. The decrease was primarily due to a lower appraisal at two of our JVs in the current quarter.

With that, I'll turn the call over to Steve to give more color on our refinancing activities and property-level performance.

Thanks, David. As David mentioned, we continue to make progress on improving our balance sheet and liquidity while also investing in key growth initiatives across the portfolio. Since we announced this plan, we have completed nine refinancings, fully retired our $169 million recourse credit facility, and retired our lending warehouse facility upon sale of that business. We are currently working on the extension of two more assets that we expect to complete in the second quarter of 2026. We are also planning to refinance our Sheraton Grand Sacramento Hotel now that we have substantially completed its renovation. These steps have been critical to the company as they have provided proceeds to, first, significantly reduce our recourse debt through the retirement of our credit facility. Second, fund important growth initiatives, including lease-up activity in our multifamily and office portfolios, as well as the renovation of our hotel. Third, continue to fund loan originations within our lending business, allowing us to maximize the value of that business prior to its sale. Fourth, continue to meet our preferred dividend obligations. Turning to our operations, we remain focused on improving property-level performance across all segments and growing our premier newer vintage multifamily portfolio. Including our joint ventures, we now have five operating multifamily assets: 1150 Clay and Channel House in the Bay Area, and 701 South Hudson, 1902 Park Avenue, and 1915 Park Avenue in Los Angeles.

Starting in Los Angeles, we are making 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 83.8% at the end of the fourth quarter, up from 80.9% at the end of the third 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 4750 Wilshire, remains 100% leased. We mentioned on prior calls that we believe there's an opportunity to develop additional units on the back surface lot of the property, given recent zoning changes. We are pleased that we received entitlements in the first quarter of 2026 to build an additional 50 units on this space. We are currently working on pre-development and anticipate having the option to start the project later this year. Also in L.A., we completed 1915 Park in the fourth quarter. 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, walkable sub-market with attractive dining and entertainment options. The building was 52% leased at the end of February 2026, so it's off to a very strong start. In Oakland, we saw another pickup in occupancy during the quarter, and the market appears to be starting to recover.

In adjacent downtown San Francisco, multifamilies had a significant rebound. In 2025, rent growth was 7.6%, which was the highest growth rate in over 25 years, while the vacancy rate has declined to its lowest levels in 15 years. Oakland's vacancy rate has declined to 8% from a high of 18% in 2001, and rent growth has turned positive in 2025 after three straight years of declines. CMCT owns 621 units in Oakland across its two assets, 1150 Clay and Channel House. Occupancy improved to 88.4% at year-end 2025, a 370 basis point increase from the end of the third quarter.

Turning to the office segment, we executed approximately 182,000 sq ft of leases during 2025. Excluding the company's one Oakland office building, the lease percentage was 88.5% at the end of 2025, which is a 190 basis point improvement from the third quarter and a 680 basis point improvement from the prior year period. At 1130 Howard, occupancy increased to 100% during the fourth quarter from 38.9% in the third quarter of 2025. At 11600 Wilshire Boulevard, we recently commenced a renovation program on several small office suites, which we anticipate fueling leasing activity. At our one office asset in Oakland, we continue to see soft demand. The mortgage of the asset matures in the third quarter of 2026. The company is currently seeking an extension of the maturity but cannot guarantee it will reach an agreement with the lender. In the fourth quarter of 2025, the Oakland asset generated approximately $0.5 million of cash flow after debt service. Finally, hotel. As David mentioned, we substantially completed our $11 million renovation of the public space at the Sheraton Grand Sacramento in the first quarter. This project includes upgrades to the ballroom, banquet space, public space, and food and beverage areas. This follows the renovation of all 505 guest rooms from last year, which we believe together sets the property up well for 2026 and beyond. The renovation was the first large scale renovation of the property since we acquired it in 2008. We anticipate a big impact on profitability.

With that, I'll turn the call over to Brandon, who will provide an update on our financial results.

Thank you, Steve. Good afternoon. I'm going to spend a few minutes going over the comparative financial highlights for the fourth quarter of 2025 versus the fourth quarter of 2024, starting with our segment NOI, which was $10.9 million in the fourth quarter of 2025 compared to $9.2 million in the prior year comparable period. Broken down by segment, the increase of $1.7 million was driven by increases of $2.3 million from our lending business and $1.2 million for our office properties, offset by a decrease of $1.7 million from our multifamily properties. Our office segment NOI for Q4 2025 was $6.4 million versus $5.2 million during Q4 2024. The increase was primarily driven by an increase in NOI at an office property in Austin, Texas, due to an increase in occupancy and at an office property in Beverly Hills, California, attributable to an increase in occupancy and rental rates, as well as a decrease in property taxes. These were partially offset by a decrease in rental revenues at an office property in Los Angeles, California, due to a decrease in occupancy and at an office property in San Francisco, California, due to a decrease in rental rates. Our lending division NOI increased to $3.3 million compared to NOI of $980,000 in the prior year comparable period, primarily due to the reversal of CECL in connection with the reclassification of the assets and liabilities of First Western to held for sale.

This was partially offset by a decrease in interest income as a result of loan payoffs and lower interest rates. Our lending segment was sold in January 2026. Our hotel segment NOI for Q4 2025 was $2.1 million, which was consistent with the prior year comparable period. Our multifamily segment NOI decreased to a loss of $870,000 during Q4 2025 compared to income of $855,000 from the prior year comparable period. The decrease was primarily driven by an increase in the unrealized loss on investments in real estate at our unconsolidated joint ventures. Below the segment NOI line, we had an increase in impairment of real estate of $3.5 million due to an impairment charge on a multifamily development site in Oakland, California, and an increase in interest expense of $941,000 driven by higher aggregate debt outstanding. These were partially offset by an increase in segment net operating income of $1.7 million and a decrease in loss on early extinguishment of debt of $1.4 million, which was incurred in connection with the partial payoff of our revolving credit facility during the fourth quarter of 2024. Our FFO was negative $7.1 million, or negative $4.49 per diluted share, compared to negative $8.7 million, or negative $23.21 per diluted share in the prior year comparable period.

The increase in our FFO was primarily driven by an increase of $1.7 million in total segment NOI, a decrease in loss on early extinguishment of debt of $1.4 million, and a decrease of $923,000 in redeemable preferred stock dividends. These were partially offset by an increase in interest expense not allocated to our operating segments of $941,000, an increase in preferred stock redemptions of $883,000, and an increase in general and administrative expenses of $617,000.

Our Core FFO was negative $5.9 million or negative $3.74 per diluted share compared to negative $7 million or negative $18.64 per diluted share in the prior year comparable period. This increase in Core FFO is attributable to the previously discussed changes in FFO, while not impacted by the decrease in loss on early extinguishment of debt or the increase in redeemable preferred stock redemptions, as these are excluded from our Core FFO calculation.

With that, we can open the line for questions.

We will now begin the question and answer session.