UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM			10-Q


(Mark One):
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	June 30, ~~2022~~2023
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number 1-13610

CREATIVE MEDIA & COMMUNITY TRUST CORPORATION

(Exact name of registrant as specified in its charter)

Maryland

75-6446078

(State or Other Jurisdiction of Incorporation or Organization)

(I.R.S. Employer Identification No.)

17950 Preston Road,

Suite 600,

Dallas,

Texas

75252

(Address of Principal Executive Offices)

(Zip Code)

(972)

349-3200

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities Registered Pursuant to Section 12(b) of the Act:

Common Stock, $0.001 Par Value

CMCT

Nasdaq Global Market

Common Stock, $0.001 Par Value

~~CMCT-L~~

~~Tel Aviv Stock Exchange~~

~~Series L Preferred Stock, $0.001 Par Value~~

~~CMCTP~~

~~Nasdaq Global Market~~

~~Series L Preferred Stock, $0.001 Par Value~~

~~CMCTP~~CMCT

Tel Aviv Stock Exchange

(Title of each class)

(Trading symbol)

(Name of each exchange on which registered)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 3, ~~2022,~~2023, the Registrant had outstanding ~~23,358,941~~22,786,741 shares of common stock, par value $0.001 per share.

Table of Contents

CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES

INDEX


			PAGE NO.
PART I.	Financial Information
	Item 1.	Financial Statements
		Consolidated Balance Sheets — June 30, ~~2022~~2023 and December 31, ~~2021~~2022	1
		Consolidated Statements of Operations ��— Three and Six Months Ended June 30, ~~2022~~2023 and ~~2021~~2022	2

		Consolidated Statements of Equity — Six Months Ended June 30, ~~2022~~2023 and ~~2021~~2022	3
		Consolidated Statements of Cash Flows — Six Months Ended June 30, ~~2022~~2023 and ~~2021~~2022	5
		Notes to Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3639
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5055
	Item 4.	Controls and Procedures	5055

PART II.	Other Information
	Item 1.	Legal Proceedings	5256
	Item 1A.	Risk Factors	5256
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5256
	Item 3.	Defaults Upon Senior Securities	5256
	Item 4.	Mine Safety Disclosures	5256
	Item 5.	Other Information	5256
	Item 6.	Exhibits	5357

Table of Contents

PART I

Financial Information

Item 1.

Financial Statements

CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except share and per share amounts) (Unaudited)


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Investments in real estate, net	Investments in real estate, net	$	502,607	$	497,984	Investments in real estate, net	$	711,848	$	502,006
Investment in unconsolidated entity		22,788		—
Investments in unconsolidated entities						Investments in unconsolidated entities	27,525		12,381
Cash and cash equivalents	Cash and cash equivalents	16,480		22,311		Cash and cash equivalents	24,561		46,190
Restricted cash	Restricted cash	11,208		11,340		Restricted cash	23,783		11,290
Loans receivable, net		68,540		73,543
Loans receivable, net (Note 5)						Loans receivable, net (Note 5)	60,451		62,547
Accounts receivable, net	Accounts receivable, net	3,353		3,396		Accounts receivable, net	4,673		3,780
Deferred rent receivable and charges, net	Deferred rent receivable and charges, net	36,474		36,095		Deferred rent receivable and charges, net	32,773		37,543
Other intangible assets, net	Other intangible assets, net	4,812		5,251		Other intangible assets, net	13,552		4,461
Other assets	Other assets	11,483		10,946		Other assets	20,529		10,050

TOTAL ASSETS	TOTAL ASSETS	$	677,745	$	660,866	TOTAL ASSETS	$	919,695	$	690,248
LIABILITIES, REDEEMABLE PREFERRED STOCK, AND EQUITY	LIABILITIES, REDEEMABLE PREFERRED STOCK, AND EQUITY					LIABILITIES, REDEEMABLE PREFERRED STOCK, AND EQUITY
LIABILITIES:	LIABILITIES:					LIABILITIES:
Debt, net	Debt, net	$	207,816	$	201,145	Debt, net	$	487,802	$	184,267
Accounts payable and accrued expenses	Accounts payable and accrued expenses	19,195		26,751		Accounts payable and accrued expenses	31,482		107,220
Intangible liabilities, net	Intangible liabilities, net	108		237		Intangible liabilities, net	93		20
Due to related parties	Due to related parties	7,013		4,541		Due to related parties	4,725		3,155
Other liabilities	Other liabilities	20,471		16,861		Other liabilities	14,271		17,856

Total liabilities	Total liabilities	254,603		249,535		Total liabilities	538,373		312,518
COMMITMENTS AND CONTINGENCIES (Note 14)		0		0
REDEEMABLE PREFERRED STOCK: Series A cumulative redeemable preferred stock, $0.001 par value; 36,000,000 shares authorized; 1,565,703 and 1,565,703 shares issued and outstanding, respectively, as of June 30, 2022 and 1,633,965 and 1,631,965 shares issued and outstanding, respectively, as of December 31, 2021; liquidation preference of $25.00 per share, subject to adjustment		36,136		37,782
COMMITMENTS AND CONTINGENCIES (Note 15)						COMMITMENTS AND CONTINGENCIES (Note 15)
REDEEMABLE PREFERRED STOCK: Series A cumulative redeemable preferred stock, $0.001 par value; 35,061,620 shares authorized; no shares issued or outstanding as of June 30, 2023 and 693,741 and 693,741 shares issued and outstanding, respectively, as of December 31, 2022; liquidation preference of $25.00 per share, subject to adjustment						REDEEMABLE PREFERRED STOCK: Series A cumulative redeemable preferred stock, $0.001 par value; 35,061,620 shares authorized; no shares issued or outstanding as of June 30, 2023 and 693,741 and 693,741 shares issued and outstanding, respectively, as of December 31, 2022; liquidation preference of $25.00 per share, subject to adjustment	—		15,697
EQUITY:	EQUITY:					EQUITY:
Series A cumulative redeemable preferred stock, $0.001 par value; 36,000,000 shares authorized; 7,254,635 and 6,893,774 shares issued and outstanding, respectively, as of June 30, 2022 and 6,492,632 and 6,271,337 shares issued and outstanding, respectively, as of December 31, 2021; liquidation preference of $25.00 per share, subject to adjustment		172,176		156,431
Series A1 cumulative redeemable preferred stock, $0.001 par value; 28,000,000 shares authorized; 192,440 shares issued and outstanding as of June 30, 2022 and no shares issued or outstanding as of December 31, 2021; liquidation preference of $25.00 per share, subject to adjustment		4,770		—
Series D cumulative redeemable preferred stock, $0.001 par value; 27,000,000 shares authorized; 56,857 shares issued and outstanding as of June 30, 2022 and 56,857 shares issued and outstanding as of December 31, 2021; liquidation preference of $25.00 per share, subject to adjustment		1,396		1,396
Series L cumulative redeemable preferred stock, $0.001 par value; 9,000,000 shares authorized; 8,080,740 and 5,387,160 shares issued and outstanding, respectively, as of June 30, 2022 and December 31, 2021; liquidation preference of $28.37 per share, subject to adjustment		152,834		152,834
Common stock, $0.001 par value; 900,000,000 shares authorized; 23,358,941 shares issued and outstanding as of June 30, 2022 and 23,369,331 shares issued and outstanding as of December 31, 2021.		24		24
Series A cumulative redeemable preferred stock, $0.001 par value; 35,061,620 shares authorized; 8,820,338 and 7,881,958 shares issued and outstanding, respectively, as of June 30, 2023 and 8,126,597 and 7,565,349 shares issued and outstanding, respectively, as of December 31, 2022; liquidation preference of $25.00 per share, subject to adjustment						Series A cumulative redeemable preferred stock, $0.001 par value; 35,061,620 shares authorized; 8,820,338 and 7,881,958 shares issued and outstanding, respectively, as of June 30, 2023 and 8,126,597 and 7,565,349 shares issued and outstanding, respectively, as of December 31, 2022; liquidation preference of $25.00 per share, subject to adjustment	196,911		189,048
Series A1 cumulative redeemable preferred stock, $0.001 par value; 27,966,000 shares authorized; 8,194,099 and 8,160,099 shares issued and outstanding, respectively, as of June 30, 2023 and 5,966,077 and 5,956,147 shares issued and outstanding, respectively, as of December 31, 2022; liquidation preference of $25.00 per share, subject to adjustment						Series A1 cumulative redeemable preferred stock, $0.001 par value; 27,966,000 shares authorized; 8,194,099 and 8,160,099 shares issued and outstanding, respectively, as of June 30, 2023 and 5,966,077 and 5,956,147 shares issued and outstanding, respectively, as of December 31, 2022; liquidation preference of $25.00 per share, subject to adjustment	202,069		147,514
Series D cumulative redeemable preferred stock, $0.001 par value; 26,991,590 shares authorized; 56,857 and 48,447 shares issued and outstanding, respectively, as of June 30, 2023 and 56,857 and 48,857 shares issued and outstanding, respectively, as of December 31, 2022; liquidation preference of $25.00 per share, subject to adjustment						Series D cumulative redeemable preferred stock, $0.001 par value; 26,991,590 shares authorized; 56,857 and 48,447 shares issued and outstanding, respectively, as of June 30, 2023 and 56,857 and 48,857 shares issued and outstanding, respectively, as of December 31, 2022; liquidation preference of $25.00 per share, subject to adjustment	1,190		1,200

Common stock, $0.001 par value; 900,000,000 shares authorized; 22,737,853 shares issued and outstanding as of June 30, 2023 and 22,737,853 shares issued and outstanding as of December 31, 2022.						Common stock, $0.001 par value; 900,000,000 shares authorized; 22,737,853 shares issued and outstanding as of June 30, 2023 and 22,737,853 shares issued and outstanding as of December 31, 2022.	23		23
Additional paid-in capital	Additional paid-in capital	864,602		866,746		Additional paid-in capital	856,235		861,721
Distributions in excess of earnings	Distributions in excess of earnings	(809,157)		(804,227)		Distributions in excess of earnings	(878,854)		(837,846)
Total stockholders’ equity	Total stockholders’ equity	386,645		373,204		Total stockholders’ equity	377,574		361,660
Noncontrolling interests	Noncontrolling interests	361		345		Noncontrolling interests	3,748		373
Total equity	Total equity	387,006		373,549		Total equity	381,322		362,033
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK, AND EQUITY	TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK, AND EQUITY	$	677,745	$	660,866	TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK, AND EQUITY	$	919,695	$	690,248

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

(In thousands, except per share amounts) (Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
REVENUES:	REVENUES:									REVENUES:
Rental and other property income	Rental and other property income	$	14,194	$	13,309	$	28,290	$	26,658	Rental and other property income	$	18,052	$	14,194	$	32,938	$	28,290
Hotel income	Hotel income	9,107		3,130		16,511		4,862		Hotel income	11,182		9,107		22,105		16,511
Interest and other income	Interest and other income	3,102		6,234		6,384		10,032		Interest and other income	3,526		3,102		6,629		6,384
Total Revenues	Total Revenues	26,403		22,673		51,185		41,552		Total Revenues	32,760		26,403		61,672		51,185
EXPENSES:	EXPENSES:									EXPENSES:
Rental and other property operating	Rental and other property operating	12,731		9,115		24,223		17,405		Rental and other property operating	16,979		12,731		32,204		24,223
Asset management and other fees to related parties	Asset management and other fees to related parties	920		2,260		1,841		4,519		Asset management and other fees to related parties	627		920		1,347		1,841
Expense reimbursements to related parties—corporate	Expense reimbursements to related parties—corporate	526		454		948		1,059		Expense reimbursements to related parties—corporate	677		526		1,205		948
Expense reimbursements to related parties—lending segment	Expense reimbursements to related parties—lending segment	604		433		1,073		1,164		Expense reimbursements to related parties—lending segment	910		604		1,518		1,073
Interest	Interest	2,403		2,673		4,573		5,305		Interest	8,709		2,403		14,945		4,573
General and administrative	General and administrative	1,253		1,146		3,068		3,768		General and administrative	1,684		1,253		3,609		3,068

Transaction-related costs										Transaction-related costs	—		—		3,360		—
Depreciation and amortization	Depreciation and amortization	4,974		5,069		9,978		10,106		Depreciation and amortization	20,472		4,974		29,974		9,978

Total Expenses	Total Expenses	23,411		21,150		45,704		43,326		Total Expenses	50,058		23,411		88,162		45,704
Income from unconsolidated entity		260		—		380		—

INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES		3,252		1,523		5,861		(1,774)
(Loss) income from unconsolidated entities										(Loss) income from unconsolidated entities	(904)		260		(136)		380
Gain on sale of real estate (Note 3)										Gain on sale of real estate (Note 3)	—		—		1,104		—
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES										(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES	(18,202)		3,252		(25,522)		5,861
Provision for income taxes	Provision for income taxes	321		996		628		1,370		Provision for income taxes	159		321		415		628
NET INCOME (LOSS)		2,931		527		5,233		(3,144)
Net (income) loss attributable to noncontrolling interests		(9)		3		(14)		4
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY		2,922		530		5,219		(3,140)
Redeemable preferred stock dividends declared or accumulated (Note 10)		(5,161)		(4,621)		(10,179)		(9,087)
Redeemable preferred stock deemed dividends (Note 10)		(4)		(106)		(19)		(163)
Redeemable preferred stock redemptions (Note 10)		(106)		(13)		(181)		(26)
NET (LOSS) INCOME										NET (LOSS) INCOME	(18,361)		2,931		(25,937)		5,233
Net loss (income) attributable to noncontrolling interests										Net loss (income) attributable to noncontrolling interests	1,002		(9)		1,627		(14)
NET (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY										NET (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY	(17,359)		2,922		(24,310)		5,219
Redeemable preferred stock dividends declared or accumulated (Note 11)										Redeemable preferred stock dividends declared or accumulated (Note 11)	(6,141)		(5,161)		(11,532)		(10,179)
Redeemable preferred stock deemed dividends (Note 11)										Redeemable preferred stock deemed dividends (Note 11)	—		(4)		—		(19)
Redeemable preferred stock redemptions (Note 11)										Redeemable preferred stock redemptions (Note 11)	(315)		(106)		(688)		(181)
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS	NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(2,349)	$	(4,210)	$	(5,160)	$	(12,416)	NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(23,815)	$	(2,349)	$	(36,530)	$	(5,160)
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS PER SHARE:	NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS PER SHARE:									NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS PER SHARE:
Basic	Basic	$	(0.10)	$	(0.28)	$	(0.22)	$	(0.83)	Basic	$	(1.05)	$	(0.10)	$	(1.61)	$	(0.22)
Diluted	Diluted	$	(0.10)	$	(0.28)	$	(0.22)	$	(0.83)	Diluted	$	(1.05)	$	(0.10)	$	(1.61)	$	(0.22)
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING:	WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING:									WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING:
Basic	Basic	23,353		15,102		23,351		14,956		Basic	22,707		23,353		22,707		23,351
Diluted	Diluted	23,353		15,102		23,351		14,956		Diluted	22,707		23,353		22,707		23,351

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES

Consolidated Statements of Equity

(In thousands, except share and per share amounts) (Unaudited)


		Six Months Ended June 30, 2022																	Six Months Ended June 30, 2023
		Common Stock			Preferred Stock														Common Stock			Preferred Stock
		Shares	Par Value		Shares	Par Value		Additional Paid-in Capital		Distributions in Excess of Earnings		Total Stockholders’ Equity		Non-controlling Interests		Total Equity			Shares	Par Value		Shares	Par Value		Additional Paid-in Capital		Distributions in Excess of Earnings		Total Stockholders’ Equity		Non-controlling Interests		Total Equity
Balances, December 31, 2021		23,369,331	$	24	11,715,354	$	310,661	$	866,746	$	(804,227)	$	373,204	$	345	$	373,549

Balances, December 31, 2022																		Balances, December 31, 2022	22,737,853	$	23	13,570,353	$	337,762	$	861,721	$	(837,846)	$	361,660	$	373	$	362,033
Cumulative-effect adjustment upon adoption of ASU 2016-13 (Note 2)																		Cumulative-effect adjustment upon adoption of ASU 2016-13 (Note 2)	—	—		—	—		—		(619)		(619)		—		(619)
Adjustment to noncontrolling interests																		Adjustment to noncontrolling interests	—	—		—	—		—		—		—		5,002		5,002

Stock based compensation expense	Stock based compensation expense	—	—		—	—		55		—		55		—		55		Stock based compensation expense	—	—		—	—		55		—		55		—		55
Common dividends ($0.085 per share)	Common dividends ($0.085 per share)	—	—		—	—		—		(1,986)		(1,986)		—		(1,986)		Common dividends ($0.085 per share)	—	—		—	—		—		(1,933)		(1,933)		—		(1,933)
Dividends to holders of Series A Preferred Stock ($0.34375 per share)		—	—		—	—		—		(2,896)		(2,896)		—		(2,896)
Issuance of Series A1 Preferred Stock																		Issuance of Series A1 Preferred Stock	—	—		1,032,433	25,569		(2,291)		—		23,278		—		23,278
Redemption of Series A1 Preferred Stock																		Redemption of Series A1 Preferred Stock	—	—		(12,870)	(319)		28		(11)		(302)		—		(302)
Dividends to holders of Series A1 Preferred Stock ($0.39563 per share)																		Dividends to holders of Series A1 Preferred Stock ($0.39563 per share)	—	—		—	—		—		(2,559)		(2,559)		—		(2,559)

Dividends to holders of Series D Preferred Stock ($0.35313 per share)	Dividends to holders of Series D Preferred Stock ($0.35313 per share)	—	—		—	—		—		(21)		(21)		—		(21)		Dividends to holders of Series D Preferred Stock ($0.35313 per share)	—	—		—	—		—		(17)		(17)		—		(17)
Reclassification of Series A Preferred stock to permanent equity	Reclassification of Series A Preferred stock to permanent equity	—	—		329,921	8,304		(637)		—		7,667		—		7,667		Reclassification of Series A Preferred stock to permanent equity	—	—		389,325	9,699		(887)		—		8,812		—		8,812
Redeemable preferred stock accretion		—	—		—	—		—		(15)		(15)		—		(15)

Redemption of Series A Preferred Stock	Redemption of Series A Preferred Stock	—	—		(49,341)	(1,228)		108		(75)		(1,195)		—		(1,195)		Redemption of Series A Preferred Stock	—	—		(189,753)	(4,723)		403		(362)		(4,682)		—		(4,682)
Net income		—	—		—	—		—		2,297		2,297		5		2,302
Balances, March 31, 2022		23,369,331	$	24	11,995,934	$	317,737	$	866,272	$	(806,923)	$	377,110	$	350	$	377,460
Dividends to holders of Series A Preferred Stock ($0.34375 per share)																		Dividends to holders of Series A Preferred Stock ($0.34375 per share)	—	—		—	—		—		(2,810)		(2,810)		—		(2,810)
Net loss																		Net loss	—	—		—	—		—		(6,951)		(6,951)		(625)		(7,576)
Balances, March 31, 2023																		Balances, March 31, 2023	22,737,853	$	23	14,789,488	$	367,988	$	859,029	$	(853,108)	$	373,932	$	4,750	$	378,682
Contributions to noncontrolling interests	Contributions to noncontrolling interests	—	—		—	—		—		—		—		5		5		Contributions to noncontrolling interests	—	—		—	—		—		—		—		—		—
Distributions to noncontrolling interests	Distributions to noncontrolling interests	—	—		—	—		—		—		—		(3)		(3)		Distributions to noncontrolling interests	—	—		—	—		—		—		—		—		—
Stock based compensation expense	Stock based compensation expense	30,984	—		—	—		37		—		37		—		37		Stock based compensation expense	—	—		—	—		37		—		37		—		37
Repurchase of common stock		(41,374)	—		—	—		(303)		—		(303)		—		(303)
Common dividends ($0.085 per share)	Common dividends ($0.085 per share)	—	—		—	—		—		(1,986)		(1,986)		—		(1,986)		Common dividends ($0.085 per share)	—	—		—	—		—		(1,933)		(1,933)		—		(1,933)
Issuance of Series A1 Preferred Stock	Issuance of Series A1 Preferred Stock	—	—		192,440	4,770		(416)		—		4,354		—		4,354		Issuance of Series A1 Preferred Stock	—	—		1,195,589	29,582		(2,597)		—		26,985		—		26,985
Dividends to holders of Series A1 Preferred Stock ($0.37500 per share)		—	—		—	—		—		(79)		(79)		—		(79)
Redemption of Series A1 Preferred Stock																		Redemption of Series A1 Preferred Stock	—	—		(11,200)	(277)		23		(24)		(278)		—		(278)
Dividends to holders of Series A1 Preferred Stock ($0.4425 per share)																		Dividends to holders of Series A1 Preferred Stock ($0.4425 per share)	—	—		—	—		—		(3,373)		(3,373)		—		(3,373)
Redemption of Series D Preferred Stock																		Redemption of Series D Preferred Stock	—	—		(410)	(10)		—		—		(10)		—		(10)
Dividends to holders of Series D Preferred Stock ($0.35313 per share)																		Dividends to holders of Series D Preferred Stock ($0.35313 per share)	—	—		—	—		—		(17)		(17)		—		(17)
Reclassification of Series A Preferred stock to permanent equity																		Reclassification of Series A Preferred stock to permanent equity	—	—		300,846	7,462		(658)		—		6,804		—		6,804

Redemption of Series A Preferred Stock																		Redemption of Series A Preferred Stock	—	—		(183,809)	(4,575)		401		(291)		(4,465)		—		(4,465)
Dividends to holders of Series A Preferred Stock ($0.34375 per share)	Dividends to holders of Series A Preferred Stock ($0.34375 per share)	—	—		—	—		—		(2,960)		(2,960)		—		(2,960)		Dividends to holders of Series A Preferred Stock ($0.34375 per share)	—	—		—	—		—		(2,749)		(2,749)		—		(2,749)
Net loss																		Net loss	—	—		—	—		—		(17,359)		(17,359)		(1,002)		(18,361)

Dividends to holders of Series D Preferred Stock ($0.35313 per share)		—	—		—	—		—		(21)		(21)		—		(21)

Reclassification of Series A Preferred stock to permanent equity		—	—		430,082	10,857		(1,189)		—		9,668		—		9,668
Redeemable preferred stock accretion		—	—		—	—		—		(4)		(4)		—		(4)
Redemption of Series A Preferred Stock		—	—		(88,225)	(2,188)		201		(106)		(2,093)		—		(2,093)
Net income		—	—		—	—		—		2,922		2,922		9		2,931
Balances, June 30, 2022		23,358,941	$	24	12,530,231	$	331,176	$	864,602	$	(809,157)	$	386,645	$	361	$	387,006

Balances, June 30, 2023																		Balances, June 30, 2023	22,737,853	$	23	16,090,504	$	400,170	$	856,235	$	(878,854)	$	377,574	$	3,748	$	381,322

Table of Contents

Six Months Ended June 30, 2021
Common Stock Preferred Stock
Shares Par
Value Shares Par
Value Additional
Paid-in
Capital Distributions
in Excess of Earnings Total Stockholders’ Equity Non-controlling
Interests Total Equity
Balances, December 31, 2020 14,827,410 $ 15 9,784,067 $ 262,036 $ 794,127 $ (778,519) $ 277,659 $ 455 $ 278,114
Distributions to noncontrolling interests — — — — — — — (114) (114)
Stock-based compensation expense — — — — 60 — 60 — 60
Common dividends ($0.075 per share) — — — — — (1,112) (1,112) — (1,112)
Dividends to holders of Series A Preferred Stock ($0.34375 per share) — — — — — (2,350) (2,350) — (2,350)
Issuance of Series D Preferred Stock — — 4,045 99 (3) — 96 — 96
Dividends to holders of Series D Preferred Stock ($0.35313 per share) — — — — — (9) (9) — (9)
Reclassification of Series A Preferred Stock to permanent equity — — 366,991 9,144 (901) — 8,243 — 8,243
Redeemable preferred stock accretion — — — — — (57) (57) — (57)
Redemption of Series A Preferred Stock — — (29,462) (733) 61 (13) (685) — (685)
Net loss — — — — — (3,670) (3,670) (1) (3,671)
Balances, March 31, 2021 14,827,410 $ 15 10,125,641 $ 270,546 $ 793,344 $ (785,730) $ 278,175 $ 340 $ 278,515
Stock-based compensation expense 20,332 — — — 50 — 50 — 50
Common dividends ($0.075 per share) (1) — — — — — (1,114) (1,114) — (1,114)
Dividends to holders of Series A Preferred Stock ($0.34375 per share) — — — — — (2,511) (2,511) — (2,511)
Issuance of Series D Preferred Stock — — 7,835 192 (7) — 185 — 185
Dividends to holders of Series D Preferred Stock ($0.35313 per share) — — — — — (13) (13) — (13)
Reclassification of Series A Preferred Stock to permanent equity — — 556,587 13,915 (1,434) — 12,481 — 12,481
Redeemable Preferred Stock deemed dividends — — — — — (106) (106) — (106)
Redemption of Series A Preferred Stock — — (18,501) (460) 42 (13) (431) — (431)
Issuance of Common Stock 8,521,589 9 — — 76,934 — 76,943 — 76,943
Net income (loss) — — — — — 530 530 (3) 527
Balances, June 30, 2021 23,369,331 $ 24 10,671,562 $ 284,193 $ 868,929 $ (788,957) $ 364,189 $ 337 $ 364,526


	Six Months Ended June 30, 2022
	Common Stock			Preferred Stock
	Shares	Par Value		Shares	Par Value		Additional Paid-in Capital		Distributions in Excess of Earnings		Total Stockholders’ Equity		Non-controlling Interests		Total Equity
Balances, December 31, 2021	23,369,331	$	24	11,715,354	$	310,661	$	866,746	$	(804,227)	$	373,204	$	345	$	373,549
Stock based compensation expense	—	—		—	—		55		—		55		—		55
Common dividends ($0.085 per share)	—	—		—	—		—		(1,986)		(1,986)		—		(1,986)
Dividends to holders of Series A Preferred Stock ($0.34375 per share)	—	—		—	—		—		(2,896)		(2,896)		—		(2,896)
Dividends to holders of Series D Preferred Stock ($0.35313 per share)	—	—		—	—		—		(21)		(21)		—		(21)
Reclassification of Series A Preferred stock to permanent equity	—	—		329,921	8,304		(637)		—		7,667		—		7,667
Redeemable preferred stock accretion	—	—		—	—		—		(15)		(15)		—		(15)
Redemption of Series A Preferred Stock	—	—		(49,341)	(1,228)		108		(75)		(1,195)		—		(1,195)
Net income	—	—		—	—		—		2,297		2,297		5		2,302
Balances, March 31, 2022	23,369,331	$	24	11,995,934	$	317,737	$	866,272	$	(806,923)	$	377,110	$	350	$	377,460
Contributions to noncontrolling interests	—	—		—	—		—		—		—		5		5
Distributions to noncontrolling interests	—	—		—	—		—		—		—		(3)		(3)
Stock based compensation expense	30,984	—		—	—		37		—		37		—		37
Repurchase of common stock	(41,374)	—		—	—		(303)		—		(303)		—		(303)
Common dividends ($0.085 per share)	—	—		—	—		—		(1,986)		(1,986)		—		(1,986)
Issuance of Series A1 Preferred Stock	—	—		192,440	4,770		(416)		—		4,354		—		4,354
Dividends to holders of Series A1 Preferred Stock ($0.37500 per share)	—	—		—	—		—		(79)		(79)		—		(79)
Dividends to holders of Series A Preferred Stock ($0.34375 per share)	—	—		—	—		—		(2,960)		(2,960)		—		(2,960)
Dividends to holders of Series D Preferred Stock ($0.35313 per share)	—	—		—	—		—		(21)		(21)		—		(21)
Reclassification of Series A Preferred stock to permanent equity	—	—		430,082	10,857		(1,189)		—		9,668		—		9,668
Redeemable preferred stock accretion	—	—		—	—		—		(4)		(4)		—		(4)
Redemption of Series A Preferred Stock	—	—		(88,225)	(2,188)		201		(106)		(2,093)				(2,093)
Net income	—	—		—	—		—		2,922		2,922		9		2,931
Balances, June 30, 2022	23,358,941	$	24	12,530,231	$	331,176	$	864,602	$	(809,157)	$	386,645	$	361	$	387,006

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands) (Unaudited)

Six Months Ended
June 30,
2022 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 5,233 $ (3,144)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization, net 10,054 10,095
Amortization of deferred debt origination costs 580 635
Amortization of premiums and discounts on debt 13 15
Unrealized premium adjustment 1,095 1,457
Amortization of deferred costs and accretion of fees on loans receivable, net (294) (279)
Write-offs of uncollectible receivables 39 1,076
Deferred income taxes 47 (13)
Stock-based compensation 92 110
Income from unconsolidated entity (380) —
Loans funded, held for sale to secondary market (18,426) (45,464)
Proceeds from sale of guaranteed loans 23,638 49,207
Principal collected on loans subject to secured borrowings 441 291
Commitment fees remitted and other operating activity (839) (925)
Changes in operating assets and liabilities:
Accounts receivable 15 (1,089)
Other assets (1,174) (2,191)
Accounts payable and accrued expenses (180) (553)
Deferred leasing costs (748) (413)
Other liabilities 3,610 2,680
Due to related parties 2,472 6,345
Net cash provided by operating activities 25,288 17,840
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,601) (823)
Acquisition of real estate (8,115) —
Investment in unconsolidated entity (22,408) —
Loans funded (12,256) (19,746)
Principal collected on loans 11,634 15,747
Net cash used in investing activities (35,746) (4,822)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of revolving credit facilities, mortgages payable, term notes and principal on SBA 7(a) loan-backed notes (33,481) (94,351)
Proceeds from revolving credit facilities and term notes 40,000 30,396
Payment of principal on secured borrowings (441) (291)
Payment of deferred preferred stock offering costs (408) (268)
Payment of deferred costs — (125)
Payment of common dividends (3,739) (2,226)
Repurchase of Common Stock (303) —
Proceeds from issuance of Common Stock — 78,825
Payment of Common Stock offering costs — (325)
Net proceeds from issuance of Preferred Stock 20,246 15,484
Payment of preferred stock dividends (14,038) (12,965)
Redemption of Preferred Stock (3,343) (1,173)
Noncontrolling interests’ distributions (3) (114)
Noncontrolling interests’ contributions 5 —
Net cash provided by financing activities 4,495 12,867


	Six Months Ended June 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(25,937)	$	5,233
Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization, net	30,056		10,054



Gain on sale of real estate	(1,104)		—




Amortization of deferred debt origination costs	1,025		580
Amortization of premiums and discounts on debt	18		13
Unrealized premium adjustment	520		1,095
Amortization of deferred costs and accretion of fees on loans receivable, net	(195)		(294)
Write-offs of uncollectible receivables	(136)		39

Gain on interest rate caps	(275)		—
Deferred income taxes	31		47
Stock-based compensation	92		92
Loss (income) from unconsolidated entities	136		(380)

Loans funded, held for sale to secondary market	(13,359)		(18,426)
Proceeds from sale of guaranteed loans	12,722		23,638
Principal collected on loans subject to secured borrowings	708		441
Commitment fees remitted and other operating activity	(245)		(839)

Changes in operating assets and liabilities:
Accounts receivable	(848)		15
Other assets	(4,491)		(1,174)
Accounts payable and accrued expenses	13,152		(180)
Deferred leasing costs	(435)		(748)
Other liabilities	(3,585)		3,610
Due to related parties	1,570		2,472
Net cash provided by operating activities	9,420		25,288
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(6,455)		(4,601)
Acquisition of real estate	(96,731)		(8,115)
Proceeds from sale of real estate, net	30,613		—
Investment in unconsolidated entity	(6,680)		(22,408)

Loans funded	(4,769)		(12,256)
Principal collected on loans	6,333		11,634

Net cash used in investing activities	(77,689)		(35,746)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of revolving credit facilities, mortgages payable, term notes and principal on SBA 7(a) loan-backed notes	(151,162)		(33,481)
Proceeds from revolving credit facilities, term notes and mortgages	222,415		40,000
Proceeds from the issuance of SBA 7(a) loan-backed notes	54,141		—
Payment of principal on secured borrowings	(708)		(441)

Payment of deferred preferred stock offering costs	(501)		(408)
Payment of deferred debt origination costs	(3,167)		—
Payment of common dividends	(3,866)		(3,739)

Repurchase of Common Stock	—		(303)




Net proceeds from issuance of Preferred Stock	51,024		20,246
Payment of preferred stock dividends	(15,713)		(14,038)

Redemption of Preferred Stock	(93,330)		(3,343)
Noncontrolling interests’ distributions	—		(3)
Noncontrolling interests’ contributions	—		5
Net cash provided by financing activities	59,133		4,495

(Continued)

Table of Contents

CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Continued)

(In thousands) (Unaudited)


		Six Months Ended June 30,					Six Months Ended June 30,
		2022		2021			2023		2022
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		(5,963)		25,885
NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH						NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH	(9,136)		(5,963)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:	CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:					CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:
Beginning of period	Beginning of period	33,651		43,649		Beginning of period	57,480		33,651
End of period	End of period	$	27,688	$	69,534	End of period	$	48,344	$	27,688
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS:	RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS:					RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS:
Cash and cash equivalents	Cash and cash equivalents	$	16,480	$	59,730	Cash and cash equivalents	$	24,561	$	16,480
Restricted cash	Restricted cash	11,208		9,804		Restricted cash	23,783		11,208
Total cash and cash equivalents and restricted cash	Total cash and cash equivalents and restricted cash	$	27,688	$	69,534	Total cash and cash equivalents and restricted cash	$	48,344	$	27,688
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:	SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:					SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest	Cash paid during the period for interest	$	3,789	$	4,582	Cash paid during the period for interest	$	13,032	$	3,789
Federal income taxes paid	Federal income taxes paid	$	555	$	425	Federal income taxes paid	$	500	$	555
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:	SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:					SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Accrued capital expenditures, tenant improvements and real estate developments	Accrued capital expenditures, tenant improvements and real estate developments	$	2,477	$	390	Accrued capital expenditures, tenant improvements and real estate developments	$	3,813	$	2,477
Proceeds from the sale of real estate committed but not yet received						Proceeds from the sale of real estate committed but not yet received	$	3,787	$	—

Other amounts due from unconsolidated joint venture partners included in other assets						Other amounts due from unconsolidated joint venture partners included in other assets	$	1,445	$	—
Non-cash contributions to unconsolidated joint venture						Non-cash contributions to unconsolidated joint venture	$	8,600	$	—
Accrued preferred stock offering costs	Accrued preferred stock offering costs	$	392	$	984	Accrued preferred stock offering costs	$	134	$	392
Accrual of dividends payable to common stockholders						Accrual of dividends payable to common stockholders	$	1,933	$	—
Accrual of dividends payable to preferred stockholders	Accrual of dividends payable to preferred stockholders	$	3,984	$	3,260	Accrual of dividends payable to preferred stockholders	$	2,088	$	3,984
Preferred stock offering costs offset against redeemable preferred stock	Preferred stock offering costs offset against redeemable preferred stock	$	296	$	250	Preferred stock offering costs offset against redeemable preferred stock	$	842	$	296
Reclassification of Series A Preferred Stock from temporary equity to permanent equity	Reclassification of Series A Preferred Stock from temporary equity to permanent equity	$	17,335	$	20,724	Reclassification of Series A Preferred Stock from temporary equity to permanent equity	$	15,616	$	17,335
Accrued deferred costs		$	—	$	1

Reclassification of Series A Preferred Stock from permanent equity to accounts payable and accrued expenses						Reclassification of Series A Preferred Stock from permanent equity to accounts payable and accrued expenses	$	328	$	—

Mortgage notes assumed in connection with our acquisition of real estate						Mortgage notes assumed in connection with our acquisition of real estate	$	181,318	$	—
Redeemable preferred stock deemed dividends						Redeemable preferred stock deemed dividends	$	—	$	19
Accrued redeemable preferred stock fees						Accrued redeemable preferred stock fees	$	369	$	563
Adjustment to noncontrolling interests						Adjustment to noncontrolling interests	$	5,002	$	—

Redeemable preferred stock deemed dividends		$	19	$	163
Accrued redeemable preferred stock fees		$	563	$	640
Equity-based payment for management fees		$	—	$	2,419
Accrued Common Stock offering costs included in additional paid-in capital		$	—	$	1,557

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2022~~2023 (Unaudited)

1. ORGANIZATION AND OPERATIONS

Creative Media & Community Trust Corporation (formerly known as CIM Commercial Trust Corporation) (the “Company”), is a Maryland corporation and real estate investment trust (“REIT”). The Company primarily acquires, develops, owns and operates both premier multifamily properties situated in vibrant communities throughout the United States and Class A and creative office real assets in ~~vibrant~~markets with similar business and ~~improving metropolitan communities throughout the United States.~~ employment characteristics to its multifamily investments.The Company also owns 1one hotel in northern California and a lending platform that originates loans under the Small Business Administration (“SBA”) 7(a) loan program. The Company seeks to ~~acquire, operate~~apply the expertise of CIM Group, L.P. (“CIM Group”) to the acquisition, development and ~~develop~~operation of premier multifamily properties and creative office assets that cater to rapidly growing industries such as technology, media and entertainment in vibrant and emerging communities throughout the United States. The Company seeks to apply the expertise of CIM Group, L.P. (“CIM Group”) to the acquisition, development and operation of top-tier multifamily properties situated in dynamic markets with similar business and employment characteristics to its creative office investments.

The Company’s common stock, $0.001 par value per share (“Common Stock”), is currently traded on the Nasdaq Global Market (“Nasdaq”) under the ticker symbol “CMCT”, and on the Tel Aviv Stock Exchange (the “TASE”) under the ticker symbol “CMCT-L.” The Company’s Series L preferred stock, $0.001 par value per share (“Series L Preferred Stock”), is currently traded on Nasdaq and on the TASE, in each case under the ticker symbol “CMCTP.“CMCT.” The Company has authorized for issuance 900,000,000 shares of common stock and 100,000,000 shares of preferred stock (“Preferred Stock”).

The Company filed Articles of Amendment (the “Reverse Stock Split Amendment”) to effectuate a one-for-three reverse stock split of the Company’s Common Stock, effective on September 3, 2019 (the “Reverse Stock Split”). Pursuant to the Reverse Stock Split Amendment, every three shares of Common Stock issued and outstanding immediately prior to the effective time of the Reverse Stock Split were converted into one share of Common Stock, par value $0.003 per share. In connection with the Reverse Split Amendment, the Company filed Articles of Amendment to revert the par value of the Common Stock issued and outstanding from $0.003 per share to $0.001 per share, effective as of September 3, 2019, following the effective time of the Reverse Split Amendment. All Common Stock and per share of Common Stock amounts set forth in this Quarterly Report on Form 10-Q have been adjusted to give retroactive effect to the Reverse Stock Split, unless otherwise stated.

Since June 2022, the Company has been conducting a continuous public offering with respect to shares of its Series A1 Preferred Stock, par value $0.001 per share with an initial stated value of $25.00 per share, subject to ~~adjustment.~~adjustment (Note 11).

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

For more information regarding the Company’s significant accounting policies and estimates, please refer to “Basis of Presentation and Summary of Significant Accounting Policies” contained in Note 2 to the Company’s consolidated financial statements for the year ended December 31, ~~2021,~~2022, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March ~~16, 2022.~~30, 2023.

Interim Financial Information—The accompanying interim consolidated financial statements of the Company have been prepared by the Company’s management in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Certain information and note disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the interim consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. The accompanying financial information reflects all adjustments which are, in the opinion of the Company’s management, of a normal recurring nature and necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods. Operating results for the three and six months ended June 30, ~~2022~~2023 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2022 given, among other things, the uncertain impact of the novel coronavirus (“COVID-19”) on the Company’s operations during the remainder of the year.~~2023. The accompanying interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto, included in the ~~2021~~2022 Form 10-K.

Principles of Consolidation—The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. In determining whether the Company has controlling interests in an entity and the requirement to consolidate the accounts in that entity, the Company analyzes its investments in real estate in accordance with standards set forth in GAAP to determine whether they are variable interest entities (“VIEs”), and if so, whether the Company is the primary beneficiary. The Company’s judgment with respect to its level of influence or control over an entity and whether the Company is the primary beneficiary of a VIE involves

~~Table of Contents~~

~~CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022 (Unaudited) – (Continued)~~

consideration of various factors, including the form of the Company’s ownership interest, the Company’s voting interest, the size of the Company’s investment (including loans), and the Company’s ability to participate in major policy-making decisions. The Company’s ability to correctly assess its influence or control over an entity affects the presentation of these investments in real estate on the Company’s consolidated financial statements. As of June 30, ~~2022,~~2023, the Company has determined that the trust formed for the benefit of the note holders (the “Trust”) for the securitization of the unguaranteed portion of certain of the Company’s SBA 7(a) loans receivable is considered a VIE. Applying the consolidation requirements for VIEs, the Company determined that it is the primary beneficiary based on its power to direct activities through its role as servicer and its obligations to absorb losses and right to receive benefits. In addition, as of June 30, 2023, the Company has determined that its Unconsolidated Joint Ventures (as defined below) are considered VIEs. Applying the consolidation requirements for VIEs, the Company determined that it is not the primary beneficiary based on its lack of power to direct activities and its obligations to absorb losses and right to receive benefits. Therefore, the Unconsolidated Joint Ventures do not qualify for consolidation. The Company accounts for its investments in Unconsolidated Joint Ventures as equity method investments.

Table of Contents

CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023 (Unaudited) – (Continued)

Investments in Real Estate—Investments in real estate are stated at depreciated cost. Depreciation and amortization are recorded on a straight-line basis over the estimated useful lives as follows:


Buildings and improvements						15 - 40 years
Furniture, fixtures, and equipment						3 - 5 years
Tenant improvements						Lesser of useful life or lease term

The fair value of real estate acquired is recorded to acquired tangible assets, consisting primarily of land, land improvements, building and improvements, tenant improvements, furniture, fixtures, and equipment, and identified intangible assets and liabilities, consisting of the value of acquired above-market and below-market leases, in-place leases and ground leases, if any, based in each case on their respective fair values. Loan premiums, in the case of above-market rate loans, or loan discounts, in the case of below-market rate loans, are recorded based on the fair value of any loans assumed in connection with acquiring the real estate.

Capitalized Project Costs

The Company capitalizes project costs, including pre-construction costs, interest expense, property taxes, insurance, and other costs directly related and essential to the development, redevelopment, or construction of a project, while activities are ongoing to prepare an asset for its intended use. Costs incurred after a project is substantially complete and ready for its intended use are expensed as incurred. Improvements and replacements are capitalized when they extend the useful life, increase capacity, or improve the efficiency of the asset. Ordinary repairs and maintenance are expensed as incurred.

Recoverability of Investments in Real Estate—The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate assets may not be recoverable. Investments in real estate are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If, and when, such events or changes in circumstances are present, the recoverability of assets to be held and used requires significant judgment and estimates and is measured by a comparison of the carrying amount to the future undiscounted cash flows expected to be generated by the assets and their eventual disposition. If the undiscounted cash flows are less than the carrying amount of the assets, an impairment is recognized to the extent the carrying amount of the assets exceeds the estimated fair value of the assets. The process for evaluating real estate impairment requires management to make significant assumptions related to certain inputs, including rental rates, lease-up period, occupancy, estimated holding periods, capital expenditures, growth rates, market discount rates and terminal capitalization rates. These inputs require a subjective evaluation based on the specific property and market. Changes in the assumptions could have a significant impact on either the fair value, the amount of impairment charge, if any, or both. Any asset held for sale is reported at the lower of the asset’s carrying amount or fair value, less costs to sell. When an asset is identified by the Company as held for sale, the Company will cease recording depreciation and amortization of the asset. The Company did not recognize any impairment of long-lived assets during the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 (Note 3).

~~Investment~~Investments in Unconsolidated ~~Entity~~Entities—In February 2022, the Company invested in an unconsolidated joint venture arrangement (the “Unconsolidated Joint Venture”) with a CIM-managed separate account (the “CIM JV Partner”) to purchase an office property in Los Angeles, California for approximately $51.0 million, gross of proration amounts, of which the Company initially contributed approximately $22.4 million and the CIM JV Partner initially contributed the remaining balance. The Company accounts for its ~~approximately 44% investment~~investments in the ~~Unconsolidated~~unconsolidated joint ventures (the “Unconsolidated Joint ~~Venture~~Ventures”) under the equity method, as itthe Company has the ability to exercise significant influence over the ~~investment.~~investments. The Unconsolidated Joint ~~Venture records its~~Ventures record their assets and liabilities at fair value. As such, the Company records its share of the Unconsolidated Joint ~~Venture’s~~Ventures’ unrealized gains or losses as well as its share of the revenues and expenses on a quarterly basis as an adjustment to the carrying value of the investment on the Company’s consolidated balance sheet and such share is recognized within the Company’s income from unconsolidated ~~entity~~entities on the consolidated statements of operations.

Derivative Financial Instruments—As part of risk management and operational strategies, from time to time, we may enter into derivative contracts with various counterparties. All derivatives are recognized on the balance sheet at their estimated fair value. On the date that we enter into a derivative contract, we designate the derivative as a fair value hedge, a cash flow hedge, a foreign currency fair value or cash flow hedge, a hedge of a net investment in a foreign operation, or a trading or non-hedging instrument.

Accounting for changes in the fair value of a derivative instrument depends on the intended use and designation of the derivative instrument. The Company has interest rate caps that are used to manage exposure to interest rate movements, but do not meet the requirements to be designated as hedging instruments. The change in fair value of the derivative instruments that are not designated as hedges is recorded ~~income~~directly to earnings as interest expense on the accompanying consolidated statements of ~~$260,000~~operations. See Note 8 for further disclosures about our derivative financial instruments and ~~$380,000 related to its~~hedging activities.

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~~investment in the Unconsolidated Joint Venture during the three and six months ended June 30, 2022, respectively, in the consolidated statements of operations.~~

Revenue Recognition—At the inception of a revenue-producing contract, the Company determines if a contract qualifies as a lease and if not, then as a customer contract. Based on this determination, the appropriate treatment in accordance with GAAP is applied to the contract, including its revenue recognition.

Revenue from leasing activities

The Company operates as a lessor of both office and multifamily real estate assets. When the Company enters into a contract or amends an existing contract, the Company evaluates if the contracts meet the definition of a lease using the following criteria:

•One party (lessor) must hold an identified asset;

•The counterparty (lessee) must have the right to obtain substantially all of the economic benefits from the use of the asset throughout the period of the contract; and

•The counterparty (lessee) must have the right to direct the use of the identified asset throughout the period of the contract.

The Company determined that the Company’s contracts with its tenants explicitly identify the premises and that any substitution rights to relocate tenants to other premises within the same building stated in the contract are not substantive. Additionally, so long as payments are made timely under such contracts, the Company’s tenants have the right to obtain substantially all the economic benefits from the use of the identified asset and can direct how and for what purpose the premises are used to conduct their operations. Therefore, the contracts with the Company’s tenants constitute leases.

All leases are classified as operating leases and minimum rents are recognized on a straight-line basis over the terms of the leases when collectability is probable and the tenant has taken possession or controls the physical use of the leased asset. The excess of rents recognized over amounts contractually due pursuant to the underlying leases is recorded as deferred rent. If the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or the Company. When the Company is the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is considered the owner of the improvements, any tenant improvement allowance that is funded is treated as an incentive. Lease incentives paid to tenants are included in other assets and amortized as a reduction to rental revenue on a straight-line basis over the term of the related lease. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, lease incentives of ~~$4.0~~$3.9 million and ~~$4.0~~$3.9 million, respectively, are presented net of accumulated amortization of ~~$2.9~~$3.1 million and ~~$2.7~~$3.0 million, respectively.

Reimbursements from tenants, consisting of amounts due from tenants for common area maintenance, real estate taxes, insurance, and other recoverable costs, are recognized as revenue and are included in rental and other property income in the period the expenses are incurred, with the corresponding expenses included in rental and other property operating expense. Tenant reimbursements are recognized and presented on a gross basis when the Company is primarily responsible for fulfilling the promise to provide the specified good or service and control that specified good or service before it is transferred to the tenant. The Company has elected not to separate lease and non-lease components as the pattern of revenue recognition does not differ for the two components, and the non-lease component is not the primary component in the Company’s leases.

In addition to minimum rents, certain leases, including the Company’s parking leases with third-party operators, provide for additional rents based upon varying percentages of tenants’ sales in excess of annual minimums. Percentage rent is recognized once lessees’ specified sales targets have been met.

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For the three and six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, the Company recognized rental income as follows (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Rental and other property income	Rental and other property income									Rental and other property income
Fixed lease payments (1)	Fixed lease payments (1)	$	11,561	$	12,066	$	23,184	$	24,510	Fixed lease payments (1)	$	15,198	$	11,561	$	27,672	$	23,184
Variable lease payments (2)	Variable lease payments (2)	2,633		1,243		5,106		2,148		Variable lease payments (2)	2,854		2,633		5,266		5,106
Rental and other property income	Rental and other property income	$	14,194	$	13,309	$	28,290	$	26,658	Rental and other property income	$	18,052	$	14,194	$	32,938	$	28,290

______________________

(1)Fixed lease payments include contractual rents under lease agreements with tenants recognized on a straight-line basis over the lease term, including amortization of acquired above-market leases, below-market leases and lease incentives.

(2)Variable lease payments include expense reimbursements billed to tenants and percentage rent, net of bad debt expense from the Company’s operating leases plus cash payments from tenants deemed not probable of collection.

Collectability of Lease-Related Receivables

The Company continually reviews whether collection of lease-related receivables, including any straight-line rent, and current and future operating expense reimbursements from tenants is probable. The determination of whether collectability is probable takes into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. Upon the determination that the collectability of a receivable is not probable, the Company will record a reduction to rental and other property income and a decrease in the outstanding receivable. Revenue from leases where collection is deemed to be not probable is recorded on a cash basis until collectability becomes probable. Management’s estimate of the collectability of lease-related receivables is based on the best information available at the time of estimate. The Company does not use a general reserve approach. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had identified certain tenants where collection was no longer considered probable and decreased outstanding receivables by ~~$314,000~~$663,000 and ~~$579,000,~~$387,000, respectively, across all operating leases.

Revenue from lending activities

Interest income included in interest and other income is comprised of interest earned on loans and the Company’s short-term investments and the accretion of loan discounts. Interest income on loans is accrued as earned with the accrual of interest suspended when the related loan becomes a Non-Accrual Loan (as defined below).

Revenue from hotel activities

The Company recognizes revenue from hotel activities separate from its leasing activities. At contract inception, the Company assesses the goods and services promised in its contracts with customers and identifies a performance obligation for each promise to transfer to the customer a good or service (or bundle of goods or services) that is distinct. To identify the performance obligations, the Company considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or implied by customary business practices. Various performance obligations of hotel revenues can be categorized as follows:

•cancellable and noncancelable room revenues from reservations and

•ancillary services including facility usage and food or beverage.

Cancellable reservations represent a single performance obligation of providing lodging services at the hotel. The Company satisfies its performance obligation and recognizes revenues associated with these reservations over time as services are rendered to the customer. The Company satisfies its performance obligation and recognizes revenues associated with noncancelable reservations at the earlier of (i) the date on which the customer cancels the reservation or (ii) over time as services are rendered to the customer.

Ancillary services include facilities usage and providing food and beverage. The Company satisfies its performance obligation and recognizes revenues associated with these services at a point in time when the good or service is delivered to the customer.

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At inception of a contract with a customer for hotel goods and services, the contractual price is equivalent to the transaction price as there are no elements of variable consideration to estimate.

The Company presents hotel revenues net of sales, occupancy, and other taxes.

Below is a reconciliation of the hotel revenue from contracts with customers to the total hotel segment revenue disclosed in Note 1617 (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Hotel properties	Hotel properties									Hotel properties
Hotel income	Hotel income	$	9,107	$	3,130	$	16,511	$	4,862	Hotel income	$	11,182	$	9,107	$	22,105	$	16,511
Rental and other property income	Rental and other property income	448		334		822		465		Rental and other property income	402		448		892		822
Interest and other income	Interest and other income	21		13		36		28		Interest and other income	84		21		163		36
Hotel revenues	Hotel revenues	$	9,576	$	3,477	$	17,369	$	5,355	Hotel revenues	$	11,668	$	9,576	$	23,160	$	17,369

Tenant recoveries outside of the lease agreements

Tenant recoveries outside of the lease agreements are related to construction projects in which the Company’s tenants have agreed to fully reimburse the Company for all costs related to construction. These services include architectural, permit expediter and construction services. At inception of the contract with the customer, the contractual price is equivalent to the transaction price as there are no elements of variable consideration to estimate. While these individual services are distinct, in the context of the arrangement with the customer, all of these services are bundled together and represent a single package of construction services requested by the customer. The Company satisfies its performance obligation and recognizes revenues associated with these services over time as the construction is completed. No such amounts were recognized for tenant recoveries outside of the lease agreements for each of the three and six months ended June 30, ~~2022~~2023 and ~~2021.~~2022. As of June 30, ~~2022,~~2023, there were no remaining performance obligations associated with tenant recoveries outside of the lease agreements.

Loans Receivable—The Company’s loans receivable are carried at their unamortized principal balance less

unamortized acquisition discounts and premiums, retained loan discounts and ~~loan loss reserves.~~reserves for expected credit losses. Acquisition discounts or premiums, origination fees and retained loan discounts are amortized as a component of interest and other income using the effective interest method over the expected life of the respective loans, or on a straight-line basis when it approximates the effective interest method. All loans were originated pursuant to programs sponsored by the Small Business Administration (the “SBA”)~~. The programs consist of loans originated~~ under the SBA 7(a) Small Business Loan Program (the “SBA 7(a) Program”) ~~and, commencing with the quarter ended June 30, 2020, the Paycheck Protection Program (the “PPP”)~~.

Pursuant to the SBA 7(a) Program, the Company sells the portion of the loan that is guaranteed by the SBA. Upon sale of the SBA guaranteed portion of the loans, which are accounted for as sales, the unguaranteed portion of the loan retained by the Company is recorded at fair value and a discount is recorded as a reduction in basis of the retained portion of the loan. Unamortized retained loan discounts were ~~$9.8~~$8.7 million and ~~$9.6~~$9.0 million as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

At the closing of the merger in 2014 between CIM Urban REIT, LLC (“CIM REIT”), an affiliate of CIM Group, and certain of its subsidiaries and PMC Commercial Trust, the predecessor to the Company, the carrying value of the Company’s loans was adjusted to estimated fair market value and acquisition discounts of $33.9 million were recorded, which are being accreted to interest and other income using the effective interest method. Acquisition discounts of $321,000 and $381,000 remained as of June 30, 2022 and December 31, 2021, respectively.

A loan receivable is generally classified as non-accrual (a “Non-Accrual Loan”) if (i) it is past due as to payment of principal or interest for a period of 60 days or more, (ii) any portion of the loan is classified as doubtful or is charged-off or (iii) the repayment in full of the principal and or interest is in doubt. Generally, loans are charged-off when management determines that the Company will be unable to collect any remaining amounts due under the loan agreement, either through liquidation of collateral or other means. Interest income, included in interest and other income, on a Non-Accrual Loan is recognized on the cost recovery basis.

~~Loan Loss Reserves~~Current Expected Credit Losses—On ~~a quarterly basis, and more frequently if indicators exist,~~January 1, 2023, the Company ~~evaluates~~adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses, and subsequent amendments (“ASU 2016-13”). The current expected credit losses (“CECL”) required under ASU 2016-13 reflects the ~~collectability~~Company’s current estimate of ~~its~~potential credit losses related to the Company’s loans ~~receivable.~~receivable included in the consolidated balance sheets. The initial current expected credit losses recorded on January 1, 2023 is reflected as a direct charge to distributions in excess of earnings on the Company’s ~~evaluation~~consolidated statements of ~~collectability involves significant judgment, estimates,~~equity; however subsequent changes to the current expected credit losses are recognized through net income on the Company’s consolidated statements of operations. While ASU 2016-13 does not require any particular method for determining the current expected credit losses, it does specify the allowance should be based on relevant information about past events, including historical loss experience, current portfolio and amarket conditions, and reasonable and supportable forecasts

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~~review~~for the duration of each respective loan. In addition, other than a few narrow exceptions, ASU 2016-13 requires that all financial instruments subject to the ~~ability~~credit loss model have some amount of loss reserve to reflect the ~~borrower~~GAAP principal underlying the credit loss model that all loans, debt securities, and similar assets have some inherent risk of loss, regardless of credit quality, subordinate capital, or other mitigating factors.

The Company estimates the current expected credit loss for its loans primarily using its historical experience with loan write-offs, historical charge-offs from third-party firms, and the Weighted Average Remaining Maturity method, which has been identified as an acceptable method for estimating CECL reserves in the Financial Accounting Standards Board (“FASB”) Staff Q&A Topic 326, No. 1. This method requires the Company to ~~make principal~~reference historical loan loss data across a comparable data set and ~~interest payments,~~apply such loss rate to each loan investment over its expected remaining term, taking into consideration expected economic conditions over the relevant timeframe. The Company considers loans that are both (i) expected to be substantially repaid through the operation or sale of the underlying collateral, and (ii) for which the ~~borrowers’ business models and future operations.~~borrower is experiencing financial difficulty, to be “collateral-dependent” loans. For ~~the three and six months ended June 30, 2022,~~such loans that the Company ~~recorded no net impairment~~determines that foreclosure of the collateral is probable, the Company measures the expected losses based on ~~its~~the difference between the fair value of the collateral less costs to sell and the amortized cost basis of the loan as of the measurement date. For collateral-dependent loans ~~receivable. For~~with respect to which the ~~three~~Company determines foreclosure is not probable, the Company applies a practical expedient to estimate expected losses using the difference between the collateral’s fair value (less costs to sell the asset if repayment is expected through the sale of the collateral) and ~~six months ended June 30, 2021,~~ the amortized cost basis of the loan. The Company may use other acceptable alternative approaches in the future depending on, among other factors, the type of loan, underlying collateral, and availability of relevant historical market loan loss data.

The Company adopted ASU 2016-13 using the modified retrospective method for all financial assets measured at amortized cost. The Company recorded a ~~net recovery~~cumulative-effective adjustment to the opening distributions in excess of ~~$88,000~~ ~~and a net impairment~~earnings in its consolidated statement of ~~$4,000, respectively, on its loans receivable. There were no material loans receivable subject to credit risk which were considered to be impaired~~equity as of ~~June 30, 2022 or December 31, 2021. The~~January 1, 2023 of $619,000. This represents a total CECL reserve transition adjustment of approximately $783,000, net of a $164,000 deferred tax asset.

Prior to adoption, the Company ~~considers~~considered a loan to be impaired when the Company ~~does~~did not expect to collect all of the contractual interest and principal payments as scheduled in the loan ~~agreements.~~agreements. The Company also ~~establishes~~established a general loan loss reserve when available information ~~indicates~~indicated that it iswas probable a loss ~~has~~had occurred based on the carrying value of the portfolio and if the amount of the loss ~~can~~could be reasonably estimated. Significant judgment is required in determining the general loan loss reserve, including estimates of the likelihood of default and the estimated fair value of the collateral. The general loan loss reserve includes those loans, which may have negative characteristics which have not yet become known to the Company. In addition to the reserves established on loans not considered impaired that have been evaluated under a specific evaluation, the Company establishes the general loan loss reserve using a consistent methodology to determine a loss percentage to be applied to loan balances. These loss percentages are based on many factors, primarily cumulative and recent loss history and general economic conditions. As of ~~June 30, 2022 and~~ December 31, ~~2021,~~2022, the Company had loan loss reserves of ~~$954,000 and $943,000, respectively.~~$1.1 million, which is recorded as a reduction to the loans receivable, net balance on the consolidated balance sheet. As of June 30, 2023, the Company had a total current expected credit loss of $1.7 million.

Deferred Rent Receivable and Charges—Deferred rent receivable and charges consist of deferred rent, deferred leasing costs, deferred offering costs (Note ~~10)~~11) deferred financing costs and other deferred costs. Deferred leasing costs, which represent lease commissions and other direct costs associated with the acquisition of tenants, are capitalized and amortized on a straight-line basis over the terms of the related leases. Deferred offering costs represent direct costs incurred in connection with the Company’s offerings of Series A1 Preferred Stock (as defined below), Series A Preferred ~~Units~~Stock (as defined below), and, after January 2020, Series A Preferred Stock (as defined below) and Series D Preferred Stock (as defined below), excluding costs specifically identifiable to a closing, such as commissions, dealer-manager fees, and other offering fees and expenses. Generally, for a specific issuance of securities, issuance-specific offering costs are recorded as a reduction of proceeds raised on the issuance date and offering costs incurred but not directly related to a specifically identifiable closing of a security are deferred. Deferred offering costs are first allocated to each issuance of a security on a pro-rata basis equal to the ratio of the number of securities issued in a given issuance to the maximum number of securities that are expected to be issued in the related offering. In the case of the Series A Preferred ~~Units, which were~~Stock issued prior to February 2020, the issuance-specific offering costs and the deferred offering costs allocated to such issuance were further allocated to the Series A Preferred Stock and Series A Preferred Warrants issued in such issuance based on the relative fair value of the instruments on the date of issuance. The deferred offering costs allocated to the Series A Preferred Stock and Series A Preferred Warrants are reductions to temporary equity and permanent equity, respectively. Deferred financing costs related to the securing of a revolving line of credit are presented as an asset and amortized ratably over the term of the line of credit arrangement. As such, the Company’s current and corresponding prior period total deferred costs, net in the accompanying consolidated balance sheets relate only to the revolving loan portion of the credit facilities.

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June 30, 2023 (Unaudited) – (Continued)

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, deferred rent receivable and charges consist of the following (in thousands):


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Deferred rent receivable	Deferred rent receivable	$	21,260	$	20,870	Deferred rent receivable	$	17,807	$	20,949
Deferred leasing costs, net of accumulated amortization of $9,558 and $8,971, respectively		8,099		8,453
Deferred leasing costs, net of accumulated amortization of $9,794 and $9,637, respectively						Deferred leasing costs, net of accumulated amortization of $9,794 and $9,637, respectively	7,293		8,319
Deferred offering costs	Deferred offering costs	6,624		6,281		Deferred offering costs	5,389		5,664
Deferred financing costs, net of accumulated amortization of $395 and $30, respectively						Deferred financing costs, net of accumulated amortization of $395 and $30, respectively	1,793		2,120
Other deferred costs	Other deferred costs	491		491		Other deferred costs	491		491
Deferred rent receivable and charges, net	Deferred rent receivable and charges, net	$	36,474	$	36,095	Deferred rent receivable and charges, net	$	32,773	$	37,543

Redeemable Preferred Stock—Beginning on the date of original issuance of any given shares of Series A1 Preferred Stock, par value ~~$.001~~$0.001 per share (“Series A1 Preferred Stock”), with an initial stated value of $25.00 per share, subject to adjustment (the “Series A1 Preferred Stock Stated Value”), Series A Preferred Stock, par value $0.001 per share (“Series A Preferred Stock”) with an initial stated value of $25.00 per share, subject to adjustment (the “Series A Preferred Stock Stated Value”), or Series D Preferred Stock, par value $0.001 per share (“Series D Preferred Stock”), with an initial stated value of $25.00 per share, subject to adjustment (the “Series D Preferred Stock Stated Value”), ~~and from and after the fifth anniversary date of the original issuance of the Series L Preferred Stock,~~ the holder of such shares has the right to require the Company to redeem such shares, subject to certain limitations as discussed in Note ~~10.~~11. The Company records the activity related to the Series A1 Preferred Stock, Series A Preferred Warrants ~~Series D Preferred Stock~~ and Series LD Preferred Stock in permanent equity. In the event a holder of Series A Preferred Stock requests redemption of such shares and such redemption takes place prior to the first anniversary of the date of original issuance, the Company is required to pay such redemption in cash. As a

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result, the Company recorded issuances of Series A Preferred Stock in temporary equity. On the first anniversary of the date of original issuance of a particular share of Series A Preferred Stock, the Company reclassifies such share of Series A Preferred Stock from temporary equity to permanent equity because the feature giving rise to temporary equity classification, the requirement to satisfy redemption requests in cash, lapses on the first anniversary date.

Noncontrolling Interests—Noncontrolling interests represent the interests in various properties owned by third-parties.

Restricted Cash—The Company’s mortgage loan and hotel management agreements provide for depositing cash into restricted accounts reserved for capital expenditures, free rent, tenant improvement and leasing commission obligations. Restricted cash also includes cash required to be segregated in connection with certain of the Company’s loans ~~receivable.~~receivable and with its SBA 7(a) loan-backed notes.

Use of Estimates—The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company bases such estimates on historical experience, information available at the time, and assumptions the Company believes to be reasonable under the circumstances ~~and~~ at such ~~time, including the impact of extraordinary events such as COVID-19.~~time. Actual results could differ from those estimates.

Recently Issued Accounting Pronouncements—In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which was subsequently amended by ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses (“ASU 2018-19”) in November 2018. Subsequently, the FASB issued ASU No. 2019-04, ASU No. 2019-05, ASU No. 2019-10, ASU No. 2019-11 and ASU No. 2020-02 to provide additional guidance on the credit losses standard. ASU 2016-13 and the related updates improve financial reporting requiring more timely recognition of credit losses on loans and other financial instruments that are not accounted for at fair value through net income, including loans held-for-investment, held-to-maturity debt securities, net investment in leases and other such commitments. ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU 2016-13 require the Company to measure all expected credit losses based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets and eliminates the “incurred loss” methodology under current GAAP. ASU 2018-19 clarified that receivables arising from operating leases are not within the scope of Topic 326.

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Instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASU No. 2016-02, Leases (Topic 842). For smaller reporting companies, public entities that are not SEC filers, and entities that are not public business entities, the ASU is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2022. Early adoption iswas permitted for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2018. The Company ~~has been evaluating the impact of adoption of ASU 2016-13 on its consolidated financial statements and expects to adopt~~adopted ASU 2016-13 and the related updates ~~beginning~~ on January 1, ~~2023.~~2023 and the adoption did not have a material impact.

On ~~April 10, 2020,~~March 31, 2022, the FASB issued ASU No. 2022-02, Troubled Debt Restructurings and Vintage Disclosures (Topic 326) (“ASU 2022-02”). ASU 2022-02 eliminates the recognition and measurement guidance for troubled debt restructurings (“TDRs”) and, instead, requires that an entity evaluate (consistent with the accounting for other loan modifications) whether the modification represents a ~~question-and-answer document (the “Q&A”)~~new loan or a continuation of an existing loan. The ASU also enhances existing disclosure requirements and introduces new requirements related to ~~address stakeholder questions~~certain modifications of receivables made to borrowers experiencing financial difficulty. The ASU became effective for the Company beginning January 1, 2023 and is generally to be applied prospectively. ASU 2022-02 did not have an impact on the ~~application~~Company’s consolidated financial statements for the three and six months ended June 30, 2023.

3. INVESTMENTS IN REAL ESTATE

Investments in real estate consist of the ~~lease accounting guidance for lease concessions related to~~following (in thousands):


	June 30, 2023		December 31, 2022
Land	$	175,709	$	151,727
Land improvements	5,887		1,837
Buildings and improvements	632,866		455,275
Furniture, fixtures, and equipment	12,531		4,339
Tenant improvements	30,322		34,372
Work in progress	14,464		12,863
Investments in real estate	871,779		660,413
Accumulated depreciation	(159,931)		(158,407)
Net investments in real estate	$	711,848	$	502,006

For the ~~effects of COVID-19. The lease modification guidance in Topic 842,~~ ~~Leases, (or Topic 840,~~ ~~Leases) would require~~three months ended June 30, 2023 and 2022, the Company ~~to determine, on a lease by lease basis, if a lease concession was~~recorded depreciation expense of $5.9 million and $4.2 million, respectively. For the ~~result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was made pursuant to the enforceable rights~~six months ended June 30, 2023 and ~~obligations of the existing lease agreement (precluded from applying the lease modification accounting framework). However, the Q&A provides that~~2022, the Company ~~may bypass~~recorded depreciation expense of $10.7 million and $8.4 million, respectively.

2023 Transactions—During the ~~lease by lease analysis if certain criteria are met, and instead elect to either consistently apply, or consistently not apply,~~six months ended June 30, 2023, the ~~lease modification framework to groups of leases with similar characteristics and similar circumstances. The~~ Company ~~has elected not to apply the lease modification guidance to concessions related to the effects of COVID-19 that do not result in a substantial increase~~acquired an interest in the ~~Company’s rights~~following properties from subsidiaries indirectly wholly-owned by a fund that is managed by affiliates of CIM Group Management, LLC. The purchases were accounted for as ~~lessor, including concessions that result in the total payments required by the modified lease being substantially the same as or less than the total payments required by the original lease.~~asset acquisitions.


	Asset	Date of		Interest		Purchase
Property	Type	Acquisition	Units	Acquired		Price
						(in thousands)
Channel House	Multifamily(1)	January 31, 2023	333	89.4	%	$	134,615
F3 Land Site	Multifamily (1)	January 31, 2023	N/A	89.4	%	$	250
466 Water Street Land Site	Multifamily (1)	January 31, 2023	N/A	89.4	%	$	2,500
1150 Clay	Multifamily (2)	March 28, 2023	288	98.1	%	$	145,500

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June 30, ~~2022~~2023 (Unaudited) – (Continued)

~~3. INVESTMENTS IN REAL ESTATE~~

~~Investments~~(1)Transaction costs that were capitalized as a component of the assets acquired and liabilities assumed in connection with the acquisition of these property totaled $37,000, which are not included in the purchase prices above. The building at Channel House also includes approximately 1,864 square feet of retail space. The F3 Land Site is currently being utilized as a surface parking lot.

(2)Transaction costs that were capitalized as a component of the assets acquired and liabilities assumed in connection with the acquisition of this property totaled $149,000, which are not included in the purchase price above. The building also includes approximately 3,968 square feet of retail space.

In addition, please see “Investments in Unconsolidated Entities” (Note 4) for information on the Company’s real estate ~~consist of~~acquisitions through its investments in unconsolidated entities.

The Company sold an interest in the following ~~(in thousands):~~

June 30, 2022 December 31, 2021
Land $ 149,144 $ 141,236
Land improvements 2,697 2,644
Buildings and improvements 454,845 454,431
Furniture, fixtures, and equipment 4,451 4,398
Tenant improvements 30,677 29,733
Work in progress 13,446 10,260
Investments in real estate 655,260 642,702
Accumulated depreciation (152,653) (144,718)
Net investments in real estate $ 502,607 $ 497,984

~~For the three months ended June 30, 2022 and 2021, the Company recorded depreciation expense of $4.2 million and $4.2 million. For~~property during the six months ended June 30, ~~2022 and 2021,~~2023.

Asset

Date of

Interest

Sales

Gain on

Property

Type

Sale

Sold

Price

Sale

(in thousands)

4750 Wilshire Boulevard (1)

Office / Multifamily

February 17, 2023

80.0

34,400

1,104

(1)The Company sold 80% of its interest in 4750 Wilshire Boulevard (excluding a vacant land parcel which was not included in the sale) to co-investors with whom it formed the 4750 Wilshire JV (defined in Note 4). At the acquisition date, the Company ~~recorded depreciation expense~~received net proceeds of ~~$8.4~~$16.7 million and ~~$8.5 million.~~recorded a receivable of $17.7 million, which the Company expects to collect over a six month period. As of June 30, 2023, the receivable was $5.2 million and is included in other assets on the consolidated balance sheet. The Company owns a 20% interest in the 4750 Wilshire JV and accounts for its investment as an equity method investment as of June 30, 2023.

2022 Transactions—During the six months ended June 30, 2022, the Company acquired a 100% fee-simple interest in the following properties from unrelated ~~third-parties. The purchases were~~third-parties which transaction was accounted for as an asset ~~acquisitions. Please see “Investments in Unconsolidated Entities” (Note 4) for information on the Company’s acquisition of an approximate 44% interest in an office property in February 2022.~~acquisition.

Asset

Date of

Purchase

Asset

Date of

Purchase

Property

Type

Acquisition

Square Feet

Price

Property

Type

Acquisition

Square Feet

Price

(in thousands)

3022 S Western Avenue, Los Angeles, CA (1) (3)

Multifamily (3)

May 20, 2022

6,000

5,650

3022 S Western Avenue, Los Angeles, CA (1) (3)

Multifamily (3)

May 20, 2022

6,000

5,650

3101 S Western Avenue, Los Angeles, CA (2) (4)

Multifamily (4)

February 11, 2022

3,752

2,260

3101 S Western Avenue, Los Angeles, CA (2) (4)

Multifamily Development Site (4)

February 11, 2022

3,752

2,260

(1)Transaction costs that were capitalized as a component of the assets acquired and liabilities assumed in connection with the acquisition of this property totaled ~~$191,000,~~$192,000, which are not included in the purchase price above.

(2)Transaction costs that were capitalized as a component of the assets acquired and liabilities assumed in connection with the acquisition of this property totaled ~~$14,000,~~$22,000, which are not included in the purchase price above.

(3)The property is located on a land site of approximately 28,300 square feet. The Company intends to entitle the property and develop approximately ~~114~~119 residential ~~units starting in 2024.~~units.

(4)The property is located on a land site of approximately 11,300 square feet. The Company intends to entitle the property and develop approximately 4540 residential ~~units starting in 2023.~~

~~There were no dispositions during the six months ended June 30, 2022.~~

~~2021 Transactions— There were no acquisitions or dispositions for the six months ended June 30, 2021.~~units.

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There were no dispositions during the six months ended June 30, 2022.

The results of operations of the properties the Company acquired have been included in the consolidated statements of operations from the ~~date~~dates of acquisition. The purchase price of the acquisitions completed during the six months ended June 30, 2022 were less than 10% of the Company’s total assets as of the respective most recent annual consolidated financial statements filed at or prior to the date of acquisitions. The following table summarizes the purchase price allocation of the aforementioned acquisitions during the six months ended June 30, 2023 and 2022.




	Six months ended June 30,
	2023		2022
	(in thousands)
Land	$	36,613	$	7,907
Land improvements	4,523		52
Buildings and improvements	206,717		156

Furniture, fixtures, and equipment	8,140		—
Acquired in-place leases (1)	27,210		—
Acquired above-market leases (2)	71		—
Acquired below-market leases (3)	(223)		—
Net assets acquired	$	283,051	$	8,115

~~(in thousands)~~

~~Land~~

~~7,907~~

~~Land improvements~~

~~Buildings and improvements~~

~~156~~

~~Net assets acquired~~

~~8,115~~

(1)The amortization period for the acquired in-place leases was approximately 6 months at the date of acquisition.

(2)The amortization period for the acquired above-market leases was approximately 7 months at the date of acquisition.

(3)The amortization period for the acquired below-market leases was approximately 5 months at the date of acquisition.

4. INVESTMENT IN UNCONSOLIDATED ~~ENTITY~~ENTITIES

The following table details the Company’s equity method investments in ~~unconsolidated entities. Refer to~~its Unconsolidated Joint Ventures. See Note 2 - Basis of Presentation and Summary of Significant Accounting Policies ~~for more details~~ (dollars in thousands):

Carrying Value

Property

Asset Type

Location

Date of Acquisition

Ownership Interest

June 30, 2022

December 31, 2021

Property

Asset Type

Location

Acquisition Date

Ownership Interest

June 30, 2023

December 31, 2022

1910 Sunset Boulevard (1)

Office

Los Angeles, CA

February 11, 2022

44%

22,788

—

1910 Sunset Boulevard (1)

Office

Los Angeles, CA

February 11, 2022

44.2%

12,100

12,381

4750 Wilshire Boulevard (2)

Office / Multifamily

Los Angeles, CA

February 17, 2023

20.0%

8,111

—

1902 Park Avenue (3)

Multifamily

Los Angeles, CA

February 28, 2023

50.0%

7,314

—

Total investments in unconsolidated entities

27,525

12,381

______________________

(1)1910 Sunset Boulevard is an office building with ~~97,002~~96,406 square feet of office space and 2,760 square feet of retail ~~space.~~space The ~~Unconsolidated Joint Venture plans~~plan for the property is to undertake a capital improvement program to renovate and modernize the building into creative office space as well as a limited number of multifamily units.

(2)4750 Wilshire Boulevard is a three-story office building with 30,335 square feet of office space located on the first floor. The remainder of the building is being converted into for-lease multifamily units.

(3)1902 Park Avenue is a 75-unit four-story multifamily building.

1910 Sunset Boulevard— In February 2022, the Company invested in a joint venture (the “1910 Sunset JV”) with a CIM-managed separate account (the “1910 Sunset JV Partner) to purchase an office property in Los Angeles, California for a gross purchase price of approximately $51.0 million, of which the Company initially contributed approximately $22.4 million and the CIM JV Partner initially contributed the remaining balance. In September 2022, the 1910 Sunset JV obtained financing through a mortgage loan of $23.9 million secured by the office property (the “1910 Sunset Mortgage Loan”). The Company ~~did not receive any distributions from~~provided a limited guarantee to the ~~Unconsolidated Joint Venture~~lender under the 1910 Sunset Mortgage Loan.

The Company recorded a loss of $220,000 and $281,000 related to its investment in the 1910 Sunset JV during the three and six months ended June 30, ~~2022.~~2023, respectively, and income of $260,000 and $380,000 during the three and six months

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023 (Unaudited) – (Continued)

ended June 30, 2022, respectively, in the consolidated statements of operations. The Company’s investment in the 1910 Sunset JV was $12.1 million and its ownership percentage remained unchanged as of June 30, 2023.

4750 Wilshire Boulevard— In February 2023, three co-investors (the “4750 Wilshire JV Partners”) acquired an 80% interest in a property owned by a subsidiary of the Company located at 4750 Wilshire Boulevard in Los Angeles, California (“4750 Wilshire”) for a gross sales price of $34.4 million (excluding transaction costs). The Company retained a 20% interest in 4750 Wilshire through a joint venture arrangement between the Company and the 4750 Wilshire JV Partners (the “4750 Wilshire JV”). The 4750 Wilshire JV Partners is converting two of the three floors of 4750 Wilshire from office-use into for-lease multifamily units, with the first floor of 4750 Wilshire continuing to function as 30,335 square feet of office space. The total cost of the conversion is expected to be approximately $31.0 million, which will be financed by a combination of equity contributions from the 4750 Wilshire JV Partners and a third-party construction loan, secured by 4750 Wilshire, which closed in March 2023, that allows for total draws of $38.5 million (the “4750 Wilshire Construction Loan”). The Company provided a limited guarantee to the lender, under the 4750 Wilshire Construction Loan. Pursuant to the co-investment agreement, the 4750 Wilshire JV Partners will pay an on-going management fee to the Company. In addition, the Company may earn incentive fees based on the performance of 4750 Wilshire after the conversion.

The Company recorded a loss of $490,000 and $493,000 related to its investment in the 4750 Wilshire JV during the three and six months ended June 30, 2023, respectively, in the consolidated statements of operations. The Company’s investment in the 4750 Wilshire JV was $8.1 million and its ownership percentage remained unchanged as of June 30, 2023.

1902 Park Avenue— In February 2023, the Company and a CIM-managed interval fund (the “1902 Park JV Partner) purchased a multifamily property in the Echo Park neighborhood of Los Angeles, California for a gross purchase price of $19.1 million (excluding transaction costs) (the “1902 Park JV”). The Company owns 50% of the 1902 Park JV. In connection with the closing in February 2023, the 1902 Park JV obtained financing through a mortgage loan of $9.6 million secured by the multifamily property (the “1902 Park Mortgage Loan”). The Company provided a limited guarantee to the lender under the 1902 Park Mortgage Loan.

The Company recorded a loss of $194,000 and income of $638,000 related to its investment in the 1902 Park JV during the three and six months ended June 30, 2023, respectively, in the consolidated statements of operations. The Company’s investment in the 1902 Park JV was $7.3 million as of June 30, 2023.

5. LOANS RECEIVABLE

Loans receivable consist of the following (in thousands):


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
SBA 7(a) loans receivable, subject to credit risk	SBA 7(a) loans receivable, subject to credit risk	$	44,582	$	42,103	SBA 7(a) loans receivable, subject to credit risk	$	4,380	$	56,116
SBA 7(a) loans receivable, subject to loan-backed notes	SBA 7(a) loans receivable, subject to loan-backed notes	15,960		18,050		SBA 7(a) loans receivable, subject to loan-backed notes	50,471		—
SBA 7(a) loans receivable, Paycheck Protection Program		205		5,050
SBA 7(a) loans receivable, subject to secured borrowings	SBA 7(a) loans receivable, subject to secured borrowings	6,387		6,857		SBA 7(a) loans receivable, subject to secured borrowings	5,391		6,127
SBA 7(a) loans receivable, held for sale	SBA 7(a) loans receivable, held for sale	958		1,200		SBA 7(a) loans receivable, held for sale	729		117
Loans receivable	Loans receivable	68,092		73,260		Loans receivable	60,971		62,360
Deferred capitalized costs, net	Deferred capitalized costs, net	1,402		1,226		Deferred capitalized costs, net	1,193		1,293
Loan loss reserves		(954)		(943)
Loan loss reserves (1)						Loan loss reserves (1)	(1,713)		(1,106)
Loans receivable, net	Loans receivable, net	$	68,540	$	73,543	Loans receivable, net	$	60,451	$	62,547

____________________

(1)On January 1, 2023, the Company adopted ASU 2016-13. As such, the amounts as of June 30, 2023 reflect the Company’s current estimate of potential credit losses related to the Company’s loans receivable.

SBA 7(a) Loans Receivable, Subject to Credit Risk—Represents the unguaranteed portions of loans originated under the SBA 7(a) Program which were retained by the Company.

SBA 7(a) Loans Receivable, Subject to Loan-Backed Notes—Represents the unguaranteed portions of loans originated under the SBA 7(a) Program which were transferred to a trust and are held as collateral in connection with a securitization transaction. The proceeds received from the transfer ~~are~~were reflected as loan-backed notes payable (Note 7). These loans ~~are~~were subject to credit risk.

~~SBA 7(a) Loans Receivable, Paycheck Protection Program—As an SBA 7(a) licensee, the Company originated loans under the PPP. As of June 30, 2022, substantially all of the loans originated under the PPP have been satisfied in full.~~

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SBA 7(a) Loans Receivable, Subject to Secured Borrowings—Represents the government guaranteed portions of loans originated under the SBA 7(a) Program which were sold with the proceeds received from the sale reflected as secured borrowings—government guaranteed loans. There iswas no credit risk associated with these loans since the SBA has guaranteed payment of the principal.

SBA 7(a) Loans Receivable, Held for Sale— Represents the government guaranteed portion of loans held for sale at the end of the period or that had been sold but in respect of which proceeds had not been received as of the end of the period.

Current Expected Credit Losses

Current expected credit losses (“CECL”) reflect the Company’s current estimate of potential credit losses related to loans receivable included in the Company’s consolidated balance sheets as of June 30, 2023 pursuant to ASU 2016-13 as implemented effective January 1, 2023. Refer to Note 2 for further discussion of CECL.

The following table presents the activity in the Company’s current expected credit losses for the six months ended June 30, 2023 (dollar amounts in thousands):


	Loans Receivable
Allowance for credit losses as of December 31, 2022	$	1,106
Transition adjustment on January 1, 2023	783
Reserve for expected credit losses	51
Current expected credit losses as of March 31, 2023	1,940
Write-offs	(85)
Reserve for expected credit losses	(142)
Current expected credit losses as of June 30, 2023	$	1,713

The Company’s initial estimate of its current expected credit losses against the loans receivable of $783,000, net of a $164,000 deferred tax asset, was recorded on January 1, 2023 directly to distributions in excess of earnings on the Company’s consolidated statements of equity. Subsequent changes to the allowance for credit losses are recognized through net income on the Company’s consolidated statements of operations. During the three and six months ended June 30, 2023, the Company recorded a decrease of $142,000 and $91,000, respectively, in its current expected credit losses related to its loans receivable, which is recorded in general and administrative in the consolidated statement of operations, and recorded a decrease due to write-offs of $85,000, bringing the total current expected credit loss to $1.7 million as of June 30, 2023.

Other

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company’s loans subject to credit risk were ~~99.9%~~100.0% and ~~99.8%~~99.9%, respectively, concentrated in the hospitality industry. As of June 30, ~~2022~~2023 and December 31, ~~2021, 100.0%~~2022, 99.4% and ~~100.0%~~98.4%, respectively, of the Company’s loans subject to credit risk were current. The Company classifies loans with negative characteristics in substandard categories ranging from special mention to doubtful. As of June 30, ~~2022~~2023 and December 31, ~~2021, $1.0~~2022, $1.1 million and ~~$1.1~~$1.0 million, respectively, of loans subject to credit risk were classified in substandard categories.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023 (Unaudited) – (Continued)

6. OTHER INTANGIBLE ASSETS AND LIABILITIES

A schedule of the Company’s intangible assets and liabilities and related accumulated amortization and accretion as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 is as follows (in thousands):

June 30, 2022 December 31, 2021
Intangible assets:
Acquired in-place leases, net of accumulated amortization of $8,657 and $9,030, respectively, both with an average useful life of 9 years $ 1,833 $ 2,266
Acquired above-market leases, net of accumulated amortization of $33 and $27, respectively, both with an average useful life of 6 years 22 28
Trade name and license 2,957 2,957
Total intangible lease assets, net $ 4,812 $ 5,251
Intangible lease liabilities:
Acquired below-market leases, net of accumulated amortization of $1,056 and $1,134, respectively, both with an average useful life of 5 years $ 108 $ 237


	June 30, 2023		December 31, 2022
Intangible assets:
Acquired in-place leases, net of accumulated amortization of $25,928 and $7,795, respectively, with an average useful life of 2 and 8 years, respectively.	$	10,566	$	1,488
Acquired above-market leases, net of accumulated amortization of $97 and $39, respectively, with an average useful life of 3 and 6 years, respectively	29		16
Trade name and license	2,957		2,957
Total intangible assets, net	$	13,552	$	4,461
Intangible lease liabilities:
Acquired below-market leases, net of accumulated amortization of $173 and $22, respectively, both with an average useful life of 1 year	$	93	$	20

Amortization of the acquired above-market leases is recorded as a reduction to rental and other property income, and amortization of the acquired in-place leases is included in depreciation and amortization in the accompanying consolidated statements of operations. Amortization of the acquired below-market leases is recorded as an increase to rental and other property income in the accompanying consolidated statements of operations.

~~Table of Contents~~

~~CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022 (Unaudited) – (Continued)~~

During the three and six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, the Company recognized amortization related to its intangible assets and liabilities as follows (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Acquired above-market lease amortization	Acquired above-market lease amortization	$	3	$	3	$	6	$	6	Acquired above-market lease amortization	$	34	$	3	$	58	$	6
Acquired in-place lease amortization	Acquired in-place lease amortization	$	195	$	257	$	433	$	553	Acquired in-place lease amortization	$	14,005	$	195	$	18,132	$	433
Acquired below-market lease amortization	Acquired below-market lease amortization	$	60	$	84	$	129	$	199	Acquired below-market lease amortization	$	141	$	60	$	150	$	129

A schedule of future amortization and accretion of acquired intangible assets and liabilities as of June 30, ~~2022,~~2023, is as follows (in thousands):


		Assets				Liabilities			Assets				Liabilities
Years Ending December 31,	Years Ending December 31,	Acquired Above-Market Leases		Acquired In-Place Leases		Acquired Below-Market Leases		Years Ending December 31,	Acquired Above-Market Leases		Acquired In-Place Leases		Acquired Below-Market Leases
2022 (Six months ending December 31, 2022)		$	6	$	379	$	(106)
2023	2023	9		469		(2)		2023	$	23	$	9,581	$	(93)
2024	2024	5		374		—		2024	5		374		—
2025	2025	2		171		—		2025	1		171		—
2026	2026	—		123		—		2026	—		123		—
2027								2027	—		123		—
Thereafter	Thereafter	—		317		—		Thereafter	—		194		—
		$	22	$	1,833	$	(108)		$	29	$	10,566	$	(93)

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7. DEBT

The following table summarizes the debt balances as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, and the debt activity for the six months ended June 30, ~~2022~~2023 (in thousands):


				During the Six Months Ended June 30, 2022											During the Six Months Ended June 30, 2023
		Balances as of December 31, 2021		Debt Issuances & Assumptions		Repayments		Accretion & (Amortization)		Balances as of June 30, 2022			Balances as of December 31, 2022		Debt Issuances & Assumptions		Repayments		Accretion & (Amortization)		Balances as of June 30, 2023
Mortgage Payable:
Outstanding Balance		$	97,100	$	—	$	—	$	—	$	97,100
Deferred debt origination costs — Mortgage Payable		(120)		—		—		13		(107)
Total Mortgage Payable		96,980		—		—		13		96,993
Mortgages Payable:												Mortgages Payable:
Fixed rate mortgage payable												Fixed rate mortgage payable	$	97,100	$	—	$	—	$	—	$	97,100
Variable rate mortgages payable												Variable rate mortgages payable	—		181,733		(16,000)		—		165,733
													97,100		181,733		(16,000)		—		262,833
Deferred debt origination costs — Mortgages Payable												Deferred debt origination costs — Mortgages Payable	(94)		(1,855)		—		484		(1,465)
Total Mortgages Payable												Total Mortgages Payable	97,006		179,878		(16,000)		484		261,368
Secured Borrowings — Government Guaranteed Loans:	Secured Borrowings — Government Guaranteed Loans:											Secured Borrowings — Government Guaranteed Loans:
Outstanding Balance	Outstanding Balance	6,671		—		(441)		—		6,230		Outstanding Balance	5,979		—		(708)		—		5,271
Unamortized premiums	Unamortized premiums	305		—		—		(34)		271		Unamortized premiums	258		—		—		(31)		227
Total Secured Borrowings — Government Guaranteed Loans	Total Secured Borrowings — Government Guaranteed Loans	6,976		—		(441)		(34)		6,501		Total Secured Borrowings — Government Guaranteed Loans	6,237		—		(708)		(31)		5,498
Other Debt:	Other Debt:											Other Debt:
2018 revolving credit facility		60,000		40,000		(25,000)		—		75,000
2020 unsecured revolving credit facility		—		—		—		—		—
2022 credit facility revolver												2022 credit facility revolver	—		222,000		(130,000)		—		92,000
2022 credit facility term loan												2022 credit facility term loan	56,230		—		—		—		56,230
Junior subordinated notes	Junior subordinated notes	27,070		—		—		—		27,070		Junior subordinated notes	27,070		—		—		—		27,070
SBA 7(a) loan-backed notes	SBA 7(a) loan-backed notes	7,670		—		(3,656)		—		4,014		SBA 7(a) loan-backed notes	—		54,141		(5,162)		—		48,979
Borrowed funds from the Federal Reserve through the Paycheck Protection Program Liquidity Facility		5,030		—		(4,825)		—		205
Deferred debt origination costs — other	Deferred debt origination costs — other	(989)		—		—		567		(422)		Deferred debt origination costs — other	(779)		(1,312)		—		196		(1,895)
Discount on junior subordinated notes	Discount on junior subordinated notes	(1,592)		—		—		47		(1,545)		Discount on junior subordinated notes	(1,497)		—		—		49		(1,448)
Total Other Debt	Total Other Debt	97,189		40,000		(33,481)		614		104,322		Total Other Debt	81,024		274,829		(135,162)		245		220,936
Total Debt, Net	Total Debt, Net	$	201,145	$	40,000	$	(33,922)	$	593	$	207,816	Total Debt, Net	$	184,267	$	454,707	$	(151,870)	$	698	$	487,802

Fixed Rate Mortgage Payable—The Company’s fixed rate mortgage payable is secured by a deed of trust on a property and assignments of rents receivable. As of June 30, ~~2022,~~2023, the Company’s fixed rate mortgage payable had a fixed interest rate of 4.14% per annum, with monthly payments of interest only, due on July 1, 2026. The loan is nonrecourse.

Variable Rate Mortgages Payable—The Company’s variable rate mortgages payable are secured by a deed of trust on the respective properties and assignments of rents receivable. As of June 30, 2023, the Company’s variable rate mortgages payable had a variable interest rates ranging from SOFR plus 3.25% - 3.35%, with monthly payments of interest only, due on various dates from June 7, 2024 to July 7, 2025 with extension options subject to certain conditions being met. The loans are nonrecourse.

Secured Borrowings—Government Guaranteed Loans—Secured borrowings—government guaranteed loans represent sold loans which are treated as secured borrowings because the loan sales did not meet the derecognition criteria provided for in ASC 860-30, Secured Borrowing and Collateral. These loans included cash premiums that are amortized as a reduction to interest expense over the life of the loan using the effective interest method and are fully amortized when the underlying loan is repaid in full. As of June 30, ~~2022,~~2023, the Company’s secured borrowings-government guaranteed loans included ~~$3.7~~$3.0 million of loans sold for a premium and excess spread, with a variable rate, reset quarterly, based on prime rate with weighted average coupon rate of ~~4.13%,~~8.54% at June 30, 2023, and ~~$2.6~~$2.3 million of loans sold for an excess spread, with a variable rate, reset quarterly, based on prime rate with weighted average coupon rate of ~~1.81%.~~6.32% at June 30, 2023.

~~2018 Revolving~~2022 Credit Facility—In ~~October 2018,~~December 2022, the Company refinanced its 2018 credit facility and replaced it with a new 2022 credit facility, entered into ~~a secured revolving credit facility~~ with a bank syndicate, that ~~as amended, allows the Company to borrow up to $209.5~~includes a $56.2 million ~~subject to a borrowing base calculation~~term loan (the ~~“2018 revolving credit facility”). In September 2020, the 2018 revolving credit facility was amended (the “2018~~“2022 Credit Facility Modification”) to remedy the effect that COVID-19 had on the Company’s ability to borrow under the 2018 revolving credit facility during the period from September 2, 2020 through August 14, 2021 (the “Deferral Period”). The 2018 revolving credit facility bore interest during the Deferral Period at (A) the base rate plus 1.05% or (B) LIBOR plus 2.05% and (ii) bearsTerm

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2022~~2023 (Unaudited) – (Continued)

~~interest after~~Loan”) as well as a revolver allowing the ~~Deferral Period,~~Company to borrow up to $150.0 million (the “2022 Credit Facility Revolver”), both of which are collectively subject to a borrowing base calculation. The 2022 credit facility is secured by certain properties in the Company’s real estate portfolio: six office properties and one hotel property (as well as the hotel’s adjacent parking garage and retail property). The 2022 credit facility bears interest at (A) the base rate plus ~~0.55%~~1.50% or (B) ~~LIBOR~~SOFR plus ~~1.55%~~2.60%. As of June 30, ~~2022 and December 31, 2021,~~2023, the variable interest rate was ~~3.72% and 2.15%, respectively.~~7.69%. The ~~2018 revolving credit facility~~2022 Credit Facility Revolver is also subject to an unused commitment fee of 0.15% or 0.25% depending on the amount of aggregate unused commitments. The ~~2018 revolving~~2022 credit facility is ~~secured~~guaranteed by ~~deeds of trust on certain of~~ the ~~Company’s properties. The 2018 revolving credit facility contains customary covenants~~Company and the Company is ~~not~~ subject to ~~any~~certain financial ~~covenants (though the amount the Company may borrow under the 2018 revolving credit facility is determined by a borrowing base calculation).~~maintenance covenants. The ~~2018 revolving~~2022 credit facility matures in ~~October 2022~~December 2025 and provides for 1two one-year extension ~~option~~options under certain conditions, including providing notice of the election and paying an extension fee of 0.15% of each lender’s commitment being extended on the effective date of such extension. The Company is working with a bank to refinance the 2018 revolving credit facility prior to its maturity date. There can, however, be no assurance that such refinancing will occur. In the interim, in order to preserve flexibility with respect to the Company’s liquidity, the Company submitted an extension notice in July 2022 to extend the maturity of the 2018 Revolving Credit Facility to October 2023. The extension is subject to the satisfaction of certain conditions that the Company expects to be able to satisfy (if the refinancing does not occur). As of June 30, ~~2022~~2023 and December 31, ~~2021, $75.0~~2022, $58.0 million and ~~$60.0 million, respectively, was outstanding under the 2018 revolving credit facility, and approximately $125.9 million and $117.6~~$150.0 million, respectively, was available for future borrowings.

~~2020 Unsecured Revolving Credit Facility~~—In May 2020, the Company entered into an unsecured revolving credit facility with a bank (the “2020 unsecured revolving credit facility”) pursuant to which the Company could borrow up to a maximum of $10.0 million. Outstanding advances under the 2020 unsecured revolving credit facility bore interest at the rate of 1.00%. The 2020 unsecured revolving credit facility contains certain customary covenants including a maximum leverage ratio and a minimum fixed charge coverage ratio, as well as certain other conditions. The 2020 unsecured revolving credit facility matured on May 1, 2022.

Junior Subordinated Notes—The Company has junior subordinated notes with a variable interest rate which resets quarterly based on the three-month LIBOR plus 3.25%, with quarterly interest only payments. The junior subordinated balance is due at maturity on March 30, 2035. The junior subordinated notes may be redeemed at par at the Company’s option.

SBA 7(a) Loan-Backed Notes—On ~~May 30, 2018,~~March 9, 2023, the Company completed a securitization of the unguaranteed portion of certain of its SBA 7(a) loans receivable with the issuance of ~~$38.2~~$54.1 million of unguaranteed SBA 7(a) loan-backed ~~notes.~~notes (with net proceeds of approximately $43.3 million, after payment of fees and expenses in connection with the securitization and the funding of a reserve account and an escrow account). The SBA 7(a) loan-backed notes are ~~secured by deeds of trust or mortgages and are~~ collateralized ~~solely~~ by the right to receive payments and other recoveries attributable to the unguaranteed portions of certain of ~~the Company’s~~our SBA 7(a) loans receivable. The SBA 7(a) loan-backed notes mature on March 20, ~~2043,~~2048, with monthly payments due as payments on the collateralized loans are received. Based on the anticipated repayments of the Company’s collateralized SBA 7(a) loans, at issuance, the Company estimated the weighted average remaining life of the SBA 7(a) loan-backed notes to be approximately two years. The SBA 7(a) loan-backed notes bear interest at a per annum rate equal to the ~~lower~~lesser of ~~the one-month LIBOR~~(i) 30-day average compounded SOFR plus ~~1.40% or the~~2.90% and (ii) prime rate ~~less 1.08%~~minus 0.35%. As of June 30, ~~2022 and December 31, 2021,~~2023, the variable interest rate was ~~3.00% and 1.49%, respectively.~~7.83%. The Company reflects the SBA 7(a) loans receivable as assets on its consolidated balance ~~sheets~~sheet and the SBA 7(a) loan-backed notes as debt on its consolidated balance ~~sheets.~~sheet. The restricted cash on the Company’s consolidated balance sheets included funds related to the Company’s SBA 7(a) loan-backed notes ~~of $1.1 million and $1.9~~was $7.3 million as of June 30, ~~2022 and December 31, 2021, respectively.~~

~~Paycheck Protection Program Liquidity Facility~~—In June 2020, the Company commenced borrowing funds from the Federal Reserve through the PPP Liquidity Facility (the “PPPLF”) to finance all the loans the Company originated under the PPP. Advances under the PPPLF carry an interest rate of 0.35%, are made on a dollar-for-dollar basis based on the amount of loans originated under the PPP and are secured by loans made by the Company under the PPP. The PPPLF contains customary covenants but is not subject to any financial covenants. The maturity date of PPPLF borrowings is the same as the maturity date of the loans pledged to secure the extension of credit, generally two years. At maturity, both principal and accrued interest are due. The maturity date of a PPPLF borrowing will be accelerated if, among other things, the Company has been reimbursed by the SBA for a loan forgiveness (to the extent of the forgiveness), the Company has received payment from the SBA representing exercise of the loan guarantee or the Company has received payment from the underlying borrower (to the extent of the payment received). As of June 30, 2022 and December 31, 2021, $205,000 and $5.0 million, respectively, was outstanding under the PPPLF. As the PPP has ended, no new extensions of credit may be made under the PPPLF and, as of June 30, 2022, substantially all obligations to the Federal Reserve have been satisfied.2023.

Deferred debt issuance costs, which represent legal and third-party fees incurred in connection with the Company’s borrowing activities, are capitalized and amortized to interest expense on a straight-line basis over the life of the related loan, approximating the effective interest method. Deferred debt issuance costs are presented net of accumulated amortization and are a reduction to total debt.

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~~CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022 (Unaudited) – (Continued)~~

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, accrued interest and unused commitment fees payable of ~~$652,000~~$1.7 million and ~~$467,000,~~$562,000, respectively, were included in accounts payable and accrued expenses.

Future principal payments on the Company’s debt (face value) as of June 30, ~~2022~~2023 are as follows (in thousands):


Years Ending December 31,	Years Ending December 31,	Mortgage Payable		Secured Borrowings Principal (1)		2018 Revolving Credit Facility		Other (1) (2)		Total		Years Ending December 31,	Mortgage Payable		Secured Borrowings Principal (1)		2022 Credit Facility		Other (1) (2)		Total
2022 (Six months ending December 31, 2022)		$	—	$	365	$	75,000	$	682	$	76,047
2023		—		376		—		243		619
2023 (Six months ending December 31, 2023)												2023 (Six months ending December 31, 2023)	$	—	$	179	$	—	$	3,875	$	4,054
2024	2024	—		388		—		250		638		2024	78,733		255		—		8,576		87,564
2025	2025	—		400		—		298		698		2025	87,000		275		148,230		7,767		243,272
2026	2026	97,100		413		—		187		97,700		2026	97,100		296		—		7,047		104,443
2027												2027	—		319		—		6,436		6,755
Thereafter	Thereafter	—		4,289		—		29,628		33,917		Thereafter	—		3,947		—		42,348		46,295
		$	97,100	$	6,230	$	75,000	$	31,289	$	209,619		$	262,833	$	5,271	$	148,230	$	76,049	$	492,383

______________________

(1)Principal payments on secured borrowings and SBA 7(a) loan-backed notes, which are included in Other, are generally dependent upon cash flows received from the underlying loans. The Company’s estimate of their repayment is based on scheduled payments on the underlying loans. The Company’s estimate will differ from actual amounts to the extent the Company experiences prepayments and or loan liquidations or charge-offs. ~~No payment is due unless payments are received from the borrowers on the underlying loans.~~

(2)Represents the junior subordinated notes and SBA 7(a) loan-backed ~~notes,~~notes.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023 (Unaudited) – (Continued)

8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

In the normal course of business, the Company may use certain types of derivative instruments for the purpose of managing or hedging its interest rate risk. During the six months ended June 30, 2023, the Company entered into two interest rate cap agreements in connection with the assumption of two mortgage loans.

The following table summarizes the terms of the Company’s interest rate cap agreements as of June 30, 2023 (dollar amounts in thousands):

Outstanding Notional

Fair Value of Assets as of

Balance Sheet

Amount as of

Strike

Effective

Maturity

June 30,

Location

June 30, 2023

Rates (1)

Dates

2023

Interest Rate Caps

Other assets

165,733

2.5% to

4.5%

8/07/2022 to 5/03/2023

6/07/2024 to 7/07/2025

3,590

(1)The index used for the Company’s interest rate cap agreements is 1-Month Term SOFR.

Additional disclosures related to the fair value of the Company’s derivative instruments are included in Note 13. The notional amount under the derivative instruments is an indication of the extent of the Company’s involvement in each instrument, but does not represent exposure to credit, interest rate or market risks.

Accounting for changes in the fair value of a derivative instrument depends on the intended use and ~~borrowed funds from~~designation of the ~~Federal Reserve through~~derivative instrument. The Company has interest rate caps that are used to manage exposure to interest rate movements, but do not meet the ~~PPPLF.~~requirements to be designated as hedging instruments. The change in fair value of the derivative instruments that are not designated as hedges is recorded directly to earnings as interest expense on the accompanying consolidated statements of operations.

8.9. STOCK-BASED COMPENSATION PLANS

On April 3, 2015, the Company’s board of directors (the “Board of Directors”) unanimously approved the Company’s 2015 Equity Incentive Plan (the “2015 Equity Incentive Plan”), which was approved by the Company’s stockholders. Under the 2015 Equity Incentive Plan, the Company granted awards of restricted shares of Common Stock to each of the independent members of the Board of Directors as follows:

Grant Date (1)

Vesting Date

Restricted Shares of Common Stock - Individual

Restricted Shares of Common Stock - Aggregate

Grant Date (1)

Vesting Date

Restricted Shares of Common Stock - Individual

Restricted Shares of Common Stock - Aggregate

May 2020

February 2021 (2)

5,478

May 2020

May 2021

5,478

16,434

May 2021

(3)

5,083

20,332

May 2021

May 2022 (2)

5,083

20,332

June 2022

June 2023

7,746

30,984

June 2022

June 2023

7,746

30,984

______________________

(1)Compensation expense related to these restricted shares of Common Stock is recognized over the vesting period, and generally vests based on one year of continuous service. The Company recorded compensation expense related to these restricted shares of Common Stock in the amount of $37,000 and ~~$50,000~~$37,000 for the three months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and $92,000 and ~~$110,000~~$92,000 for the six months ended June 30, ~~2022~~2023 and ~~2021, respectively.~~2022.

(2)On February 11, 2021, the Company’s Board of Directors approved the immediate vesting of 5,478 shares that had been granted in May 2020 to a former independent member of the Board of Directors following his death.

~~(3)~~These shares vested after one year of continuous service, other than the shares granted to Mr. Frank Golay, Jr., a former independent director of the Company, which vested on April 29, 2022. Mr. Golay retired from the Board on May 2, 2022 and, in recognition of his service to the Company, the Board accelerated the vesting of Mr. Golay’s shares.

As of June 30, ~~2022,~~2023, there was ~~$202,000~~$0 of total unrecognized compensation expense related to restricted shares of Common Stock which will be recognized ratably over the remaining vesting period.

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~~CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022 (Unaudited) – (Continued)~~

9.10. EARNINGS PER SHARE ("EPS")

The computations of basic EPS are based on the Company’s weighted average shares outstanding. No shares of Series D Preferred Stock, Series A Preferred Stock, or Series A1 Preferred Stock outstanding as of June 30, ~~2022 or 2021~~2023 were included in the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023 (Unaudited) – (Continued)

computation of diluted EPS because they had no dilutive effect. Outstanding Series A Preferred Warrants were not included in the computation of diluted EPS for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 because their impact was either anti-dilutive or such warrants were not exercisable during such periods (Note ~~11)~~12). Outstanding shares of Series L Preferred Stock were not included in the computation of diluted EPS for the three and six months ended June 30, 2023 (because they were redeemed in January 2023) and 2022 ~~and 2021 because~~(because such shares were not redeemable during such ~~periods.~~period).

EPS for the year-to-date period may differ from the sum of quarterly EPS amounts due to the required method for computing EPS in the respective periods. In addition, EPS is calculated independently for each component and may not be additive due to rounding.

The following table reconciles the numerator and denominator used in computing the Company’s basic and diluted per-share amounts for net loss attributable to common stockholders for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 (in thousands, except per share amounts):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Numerator:	Numerator:									Numerator:
Net loss attributable to common stockholders	Net loss attributable to common stockholders	$	(2,349)	$	(4,210)	$	(5,160)	$	(12,416)	Net loss attributable to common stockholders	$	(23,815)	$	(2,349)	$	(36,530)	$	(5,160)
Redeemable preferred stock dividends declared on dilutive shares	Redeemable preferred stock dividends declared on dilutive shares	—		—		—		—		Redeemable preferred stock dividends declared on dilutive shares	—		—		—		—
Diluted net loss attributable to common stockholders	Diluted net loss attributable to common stockholders	$	(2,349)	$	(4,210)	$	(5,160)	$	(12,416)	Diluted net loss attributable to common stockholders	$	(23,815)	$	(2,349)	$	(36,530)	$	(5,160)
Denominator:	Denominator:									Denominator:
Basic weighted average shares of Common Stock outstanding	Basic weighted average shares of Common Stock outstanding	23,353		15,102		23,351		14,956		Basic weighted average shares of Common Stock outstanding	22,707		23,353		22,707		23,351
Effect of dilutive securities—contingently issuable shares	Effect of dilutive securities—contingently issuable shares	—		—		—		—		Effect of dilutive securities—contingently issuable shares	—		—		—		—
Diluted weighted average shares and common stock equivalents outstanding	Diluted weighted average shares and common stock equivalents outstanding	23,353		15,102		23,351		14,956		Diluted weighted average shares and common stock equivalents outstanding	22,707		23,353		22,707		23,351
Net loss attributable to common stockholders per share:	Net loss attributable to common stockholders per share:									Net loss attributable to common stockholders per share:
Basic	Basic	$	(0.10)	$	(0.28)	$	(0.22)	$	(0.83)	Basic	$	(1.05)	$	(0.10)	$	(1.61)	$	(0.22)
Diluted	Diluted	$	(0.10)	$	(0.28)	$	(0.22)	$	(0.83)	Diluted	$	(1.05)	$	(0.10)	$	(1.61)	$	(0.22)

2123

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2022~~2023 (Unaudited) – (Continued)

~~10.~~11. REDEEMABLE PREFERRED STOCK

The table below provides information regarding the issuances, reclassifications and redemptions of each class of the Company’s preferred stock in permanent equity during the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 (dollar amounts in thousands):
Preferred Stock
Series A1 Series A Series D Series L Total
Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
Balances, December 31, 2020 — $ — 4,377,762 $ 108,729 19,145 $ 473 5,387,160 $ 152,834 9,784,067 $ 262,036
Issuance of Series D Preferred Stock — — — — 4,045 99 — — 4,045 99
Reclassification of Series A Preferred Stock to permanent equity — — 366,991 9,144 — — — — 366,991 9,144
Redemption of Series A Preferred Stock — — (29,462) (733) — — — — (29,462) (733)
Balances, March 31, 2021 — $ — 4,715,291 $ 117,140 23,190 $ 572 5,387,160 $ 152,834 10,125,641 $ 270,546
Issuance of Series D Preferred Stock — — — — 7,835 192 — — 7,835 192
Reclassification of Series A Preferred Stock to permanent equity — — 556,587 13,915 — — — — 556,587 13,915
Redemption of Series A Preferred Stock — — (18,501) (460) — — — — (18,501) (460)
Balances, June 30, 2021 — $ — 5,253,377 $ 130,595 31,025 $ 764 5,387,160 $ 152,834 10,671,562 $ 284,193
Balances, December 31, 2021 — $ — 6,271,337 $ 156,431 56,857 $ 1,396 5,387,160 $ 152,834 11,715,354 $ 310,661
Issuance of Series D Preferred Stock — — — — — — — — — —
Reclassification of Series A Preferred stock to permanent equity — — 329,921 8,304 — — — — 329,921 8,304
Redemption of Series A Preferred Stock — — (49,341) (1,228) — — — — (49,341) (1,228)
Balances, March 31, 2022 — $ — 6,551,917 $ 163,507 56,857 $ 1,396 5,387,160 $ 152,834 11,995,934 $ 317,737
Issuance of Series A1 Preferred Stock 192,440 4,770 — — — — — — 192,440 4,770
Reclassification of Series A Preferred stock to permanent equity — — 430,082 10,857 — — — — 430,082 10,857
Redemption of Series A Preferred Stock — — (88,225) (2,188) — — — — (88,225) (2,188)
Balances, June 30, 2022 192,440 $ 4,770 6,893,774 $ 172,176 56,857 $ 1,396 5,387,160 $ 152,834 12,530,231 $ 331,176

As of June 30, 2022, the Company had issued in registered public offerings 192,440 shares of Series A1 Preferred Stock, 8,251,657 shares of Series A Preferred Stock, 4,603,287 Series A Preferred Warrants and 56,857 shares of Series D Preferred Stock and received gross proceeds of $212.3 million ($4.8 million of which was allocated to the Series A1 Preferred Stock, $205.4 million of which was allocated to the Series A Preferred Stock, $761,000 of which was allocated to the Series A Preferred Warrants, and $1.4 million of which was allocated to the Series D Preferred Stock) and, additionally, had issued 568,681 shares of Series A Preferred Stock as payment for services to the Administrator, for which no cash proceeds were received. In connection with such issuance, costs specifically identifiable to the offering of Series A Preferred Stock, Series A

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~~CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022 (Unaudited) – (Continued)~~

Preferred Warrants and Series D Preferred Stock, such as commissions, dealer manager fees and other offering fees and expenses, totaled $17.5 million ($356,000 of which was allocated to the Series A1 Preferred Stock, $17.0 million of which was allocated to the Series A Preferred Stock, $142,000 of which was allocated to the Series A Preferred Warrants, and $35,000 of which was allocated to the Series D Preferred Stock). In addition, as of June 30, 2022, non-issuance-specific costs related to this offering totaled $8.6 million. As of June 30, 2022, the Company had reclassified and allocated $60,000, $1.9 million, $5,000 and $13,000 from deferred charges to Series A1 Preferred Stock, Series A Preferred Stock, Series A Preferred Warrants and Series D Preferred Stock, respectively, as a reduction to the gross proceeds received. Such reclassification was based on the cumulative number of securities issued relative to the maximum number of securities expected to be issued under the offering. As of June 30, 2022, there were 192,440 shares of Series A1 Preferred Stock outstanding, 8,459,477 shares of Series A Preferred Stock outstanding, 4,294,512 Series A Preferred Warrants to purchase 1,113,569 shares of Common Stock outstanding, and 56,857 shares of Series D Preferred Stock outstanding. As of June 30, 2022, no shares of Series A1 Preferred Stock, 360,861 shares of Series A Preferred Stock and no shares of Series D Preferred Stock had been redeemed.


	Preferred Stock

	Series A1			Series A			Series D			Series L			Total
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balances, December 31, 2021	—	$	—	6,271,337	$	156,431	56,857	$	1,396	5,387,160	$	152,834	11,715,354	$	310,661

Reclassification of Series A Preferred stock to permanent equity	—	—		329,921	8,304		—	—		—	—		329,921	8,304
Redemption of Series A Preferred Stock	—	—		(49,341)	(1,228)		—	—		—	—		(49,341)	(1,228)
Balances, March 31, 2022	—	$	—	6,551,917	$	163,507	56,857	$	1,396	5,387,160	$	152,834	11,995,934	$	317,737
Issuance of Series A1 Preferred Stock	192,440	4,770		—	—		—	—		—	—		192,440	4,770
Reclassification of Series A Preferred stock to permanent equity	—	—		430,082	10,857		—	—		—	—		430,082	10,857
Redemption of Series A Preferred Stock	—	—		(88,225)	(2,188)		—	—		—	—		(88,225)	(2,188)
Balances, June 30, 2022	192,440	$	4,770	6,893,774	$	172,176	56,857	$	1,396	5,387,160	$	152,834	12,530,231	$	331,176






Balances, December 31, 2022	5,956,147	$	147,514	7,565,349	$	189,048	48,857	$	1,200	—	$	—	13,570,353	$	337,762
Issuance of Series A1 Preferred Stock	1,032,433	25,569		—	—		—	—		—	—		1,032,433	25,569
Redemption of Series A1 Preferred Stock	(12,870)	(319)		—	—		—	—		—	—		(12,870)	(319)

Reclassification of Series A Preferred stock to permanent equity	—	—		389,325	9,699		—	—		—	—		389,325	9,699
Redemption of Series A Preferred Stock	—	—		(189,753)	(4,723)		—	—		—	—		(189,753)	(4,723)
Balances, March 31, 2023	6,975,710	$	172,764	7,764,921	$	194,024	48,857	$	1,200	—	$	—	14,789,488	$	367,988
Issuance of Series A1 Preferred Stock	1,195,589	29,582		—	—		—	—		—	—		1,195,589	29,582
Redemption of Series A1 Preferred Stock	(11,200)	(277)		—	—		—	—		—	—		(11,200)	(277)
Redemption of Series D Preferred Stock	—	—		—	—		(410)	(10)		—	—		(410)	(10)
Reclassification of Series A Preferred stock to permanent equity	—	—		300,846	7,462		—	—		—	—		300,846	7,462
Redemption of Series A Preferred Stock	—	—		(183,809)	(4,575)		—	—		—	—		(183,809)	(4,575)
Balances, June 30, 2023	8,160,099	$	202,069	7,881,958	$	196,911	48,447	$	1,190	—	$	—	16,090,504	$	400,170

Series A1 Preferred Stock—Since June 2022, the Company has been conducting a continuous public offering with respect to shares of its Series A1 Preferred Stock, par value $0.001 per share with an initial stated value of $25.00 per share, subject to adjustment. Shares of Series A1 Preferred Stock are recorded in permanent equity at the time of their issuance. As of June 30, 2023, the Company had issued in registered public offerings 7,994,099 shares of the Series A1 Preferred Stock and received gross proceeds of $197.9 million, and additionally had issued 200,000 shares of Series A1 Preferred Stock as payment for services to the CIM Service Provider, LLC (the “Administrator”), for which no cash proceeds were received. In connection with the issuance of shares of Series A1 Preferred Stock, $14.5 million of costs specifically identifiable to the offering of Series A1 Preferred Stock was allocated to the Series A1 Preferred Stock. Such costs include commissions, dealer manager fees and other offering fees and expenses but do not include non-issuance-specific costs of $10.0 million related to the Company’s offering of Series A Preferred Stock, Series A Preferred Warrants, Series A1 Preferred Stock and Series D Preferred Stock. As of June 30, 2023, the Company had reclassified and allocated $2.7 million from deferred charges to Series A1 Preferred Stock as a reduction to the gross proceeds received. Such reclassification was based on the cumulative number of securities issued relative to the maximum number of securities expected to be issued under the offering.

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As of June 30, 2023, there were 8,160,099 shares of Series A1 Preferred Stock outstanding and 34,000 shares of Series A1 Preferred Stock had been redeemed.

Series A Preferred Stock—The Company conducted a continuous public offering of Series A Preferred ~~Units~~Stock (with each ~~unit (“Series A Preferred Unit”) consisting of 1~~issued share of Series A Preferred Stock, ~~and,~~ initially 1accompanied by one warrant (“Series A Preferred Warrant”) to purchase 0.25 of a share of Common Stock, subject to adjustment) from October 2016 through January 2020, where each Series A Preferred Unit consisted of 1 share of Series A Preferred Stock, par value $0.001 per share, of the Company with an initial stated value of $25.00 per share, subject to adjustment, and 1 warrant to purchase 0.25 of a share of Common Stock.2020. Proceeds and expenses from the sale ~~of the Series A Preferred Units~~ were allocated to the Series A Preferred Stock and Series A Preferred Warrants using their relative fair values on the date of issuance.

From February 2020 through June 2022, the Company conducted a continuous public offering with respect to shares of the Company’s Series A Preferred Stock, which, since February 2020, was no longer being issued as a unit with an accompanying Series A Preferred Warrant. In June 2022, the Company concluded the offering of Series A Preferred Stock.

As of June 30, 2023, the Company had issued in registered public offerings 8,251,657 shares of Series A Preferred Stock and 4,603,287 Series A Preferred Warrants and received gross proceeds of $205.4 million and $761,000, respectively, and additionally, had issued 568,681 shares of Series A Preferred Stock as payment for services to the Administrator, for which no cash proceeds were received. In connection with the cumulative issuance of Series A Preferred Stock and Series A Preferred Warrants, $17.0 million and $142,000 of costs specifically identifiable to the offering of the Series A Preferred Stock and Series A Preferred Warrants, respectively, were allocated to the Series A Preferred Stock and Series A Preferred Warrants, respectively. Such costs include commissions, dealer manager fees and other offering fees and expenses but do not include non-issuance-specific costs of $10.0 million related to the Company’s offering of Series A Preferred Stock, Series A Preferred Warrants, Series A1 Preferred Stock and Series D Preferred Stock. As of June 30, 2023, the Company had reclassified and allocated $1.9 million and $5,000 from deferred charges to Series A Preferred Stock and Series A Preferred Warrants, respectively, as a reduction to the gross proceeds received. Such reclassification was based on the cumulative number of securities issued relative to the maximum number of securities expected to be issued under the offering.

Net proceeds from the issuance of shares of Series A Preferred Stock were initially recorded in temporary equity at an amount equal to the gross proceeds allocated to such shares of Series A Preferred Stock minus the costs specifically identifiable to the issuance of such shares and the non-issuance specific offering costs allocated to such shares. If the net proceeds from the issuance of shares of Series A Preferred Stock were less than the redemption value of such shares at the time they were issued, or if the redemption value of such shares subsequently becomes greater than the carrying value of such shares, an adjustment was recorded to increase the carrying amount of such shares to their redemption value as of the balance sheet date. Such adjustment was considered a deemed dividend for purposes of calculating basic and diluted EPS. ~~For~~During the three and six months ended June 30, 2023, the Company recorded no redeemable preferred stock deemed dividends related to such adjustments. During the three and six months ended June 30, 2022, the Company recorded redeemable preferred stock deemed ~~dividends of~~ ~~$4,000~~ ~~and~~ ~~$19,000, respectively,~~ ~~related to such adjustments. For the three and six months ended June 30, 2021, the Company recorded redeemable preferred stock deemed~~ dividends of ~~$106,000~~$4,000 and ~~$163,000,~~$19,000, respectively, related to such adjustments.

On the first anniversary of the issuance of a particular share of Series A Preferred Stock, the Company reclassifies such share of Series A Preferred Stock from temporary equity to permanent equity because the feature giving rise to temporary equity classification, the requirement to satisfy redemption requests in cash, lapses on the first anniversary date. As of June 30, ~~2022,~~2023, the Company had reclassified an aggregate of ~~$163.6~~$199.6 million in net proceeds from temporary equity to permanent equity.

As of June 30, 2023, there were 7,881,958 shares of Series A Preferred Stock outstanding and 938,380 shares of Series A Preferred Stock had been redeemed.

Series D Preferred Stock—From February 2020 through June 2022, the Company conducted a continuous public offering with respect to shares of its Series D Preferred Stock, par value $0.001 per share, subject to adjustment. The selling price of the Series D Preferred Stock was $25.00 per share for all sales that occurred from the beginning of the offering to and including June 28, 2020 and $24.50 per share thereafter. Shares of Series D Preferred Stock were recorded in permanent equity at the time of their issuance. In June 2022, the Company concluded the offering of its Series D Preferred Stock.

As of June 30, 2023, the Company had issued in registered public offerings 56,857 shares of Series D Preferred Stock and received gross proceeds of $1.4 million. In connection with such issuance, $35,000 of costs specifically identifiable to the offering of Series D Preferred Stock were allocated to the Series D Preferred Stock. Such costs include commissions, dealer manager fees and other offering fees and expenses but do not include non-issuance-specific costs of $10.0 million related to the Company’s offering of Series A Preferred Stock, Series A Preferred Warrants, Series A1 Preferred Stock and Series D Preferred Stock. As of June 30, 2023, the Company had reclassified and allocated $13,000 from from deferred charges to Series D Preferred Stock as a reduction to the gross proceeds received. Such reclassification was based on the cumulative number of securities issued relative to the maximum number of securities expected to be issued under the offering.

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As of June 30, 2023, there were 48,447 shares of Series D Preferred Stock outstanding and 8,410 shares of Series D Preferred Stock had been redeemed.

Series L Preferred Stock—On November 21, 2017, the Company issued 8,080,740 shares of Series L Preferred Stock having an initial stated value of $28.37 per share (“Series L Preferred Stock Stated Value”), subject to adjustment. The Company received gross proceeds of $229.3 million from the sale of the Series L Preferred Stock, which was reduced by issuance-specific offering ~~costs, such as commissions, dealer manager fees, and other offering fees and expenses, totaling $15.9 million, a discount~~costs.

On September 15, 2022, the Company repurchased 2,435,284 shares of ~~$2.9 million, and non-issuance-specific costs of $2.5 million. These fees have been recorded as a reduction to the gross proceeds in permanent equity.~~

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~~June 30, 2022 (Unaudited) – (Continued)~~

~~Until the fifth anniversary of the date of original issuance of the~~its Series L Preferred Stock in a privately negotiated transaction (the “Series L Repurchase”). The shares were repurchased at a purchase price of $27.40 per share (a 3.4% discount to the ~~Company is prohibited from issuing any shares~~stated value of ~~preferred stock ranking senior~~$28.37 per share) plus $1.12 per share of accrued and unpaid dividends (or $2.7 million accrued and unpaid dividends in the aggregate). The total cost to ~~or on parity~~complete the Series L Repurchase, including transactions costs of $700,000 (or $0.29 per share), was $70.1 million. In connection with the Series L ~~Preferred Stock with respect to~~Repurchase, the ~~payment~~Company recognized redeemable preferred stock redemptions of ~~dividends, other distributions, liquidation,~~$4.8 million on its consolidated statement of operations for the three months ended September 30, 2022. The $4.8 million of redeemable preferred stock redemptions represents the difference between the repurchase price (including $0.29 per share of transaction costs) and ~~or dissolution or winding up~~the carrying value of the ~~Company unless the Minimum Fixed Charge Coverage Ratio, calculated in accordance with the Articles Supplementary describing the~~repurchased Series L Preferred Stock ~~is equal to or greater than 1.25:1.00. As~~(representing the stated value of ~~June 30, 2022 and~~ ~~December 31, 2021, the Company was in compliance with the Series L Preferred Stock Minimum Fixed Charge Coverage Ratio.~~

~~Refer to Note 13 for a discussion~~$28.37 per share reduced by $2.65 per share of certain payments the Company has made in shares of Common Stock and in shares of Preferred Stock and may make in shares of Preferred Stock in lieu of cash payments in order to remain in compliance with the Series L Preferred Stock Minimum Fixed Charge Coverage Ratio.stock offering costs).

Dividends—With respect to the payment of dividends the Series A1 Preferred Stock, as well as the Series A Preferred Stock and Series D Preferred Stock, ranks senior to the Series L Preferred Stock and the Common Stock. The Series L Preferred Stock ranks senior to the Common Stock (except with respect to and only to the extent of the Initial Dividend) and junior to the Series A Preferred Stock, Series A Preferred Stock, Series D Preferred Stock and Common Stock (with respect to and only to the extent of the Initial Dividend). With respect toor the distribution of amounts upon liquidation, dissolution or winding-up, the Series A1 Preferred Stock, ~~ranks on parity with~~ the Series A Preferred Stock, Series D Preferred Stock and Series L Preferred Stock, to the extent of the Series L Preferred Stock Stated Value, and otherwise ranks senior to the Series L Preferred Stock and the Common Stock. With respect to the distribution of amounts upon liquidation, dissolution or winding-up, the Series L Preferred Stock ranks senior to the Common Stock, both (i) to the extent of the Series L Preferred Stock Stated Value and (ii) following payment to holders of the Common Stock of an amount equal to any unpaid Initial Dividend, to the extent of any accrued and unpaid dividends on the Series L Preferred Stock, on parity with the Series A1 Preferred Stock, Series A Preferred Stock and Series D Preferred Stock to the extent of the Series L Preferred Stock Stated Value and junior to the Series A1 Preferred Stock, Series A Preferred Stock, Series D Preferred Stock and Common Stock (to the extent of the Initial Dividend), in all instancesrank on parity with respect to ~~any accrued~~each other and ~~unpaid dividends on~~senior to the ~~Series L Preferred~~Common Stock.

Holders of Series A1 Preferred Stock are entitled to receive, if, as and when authorized by the Company’s Board of Directors, and declared by the Company out of legally available funds, cumulative cash dividends ~~(“Series~~(the “Series A1 Dividend”) on each share of Series A1 Preferred Stock at the greater of (i) an annual rate of 6.0% of the Series A1 Preferred Stock Stated Value (i.e., the equivalent of $0.3750 per share per quarter) and (ii) the Federal Funds (Effective) Rate for such quarter and plus 2.5% of the Series A1 Preferred Stock Stated Value divided by four, up to a maximum of 2.5% of the Series A1 Preferred Stock Stated Value per quarter. Holders of Series A Preferred Stock are entitled to receive, if, as and when authorized by the Company’s Board of Directors, and declared by the Company out of legally available funds, cumulative cash dividends on each share of Series A Preferred Stock at an annual rate of 5.50% of the Series A Preferred Stock Stated Value (i.e., the equivalent of $0.34375 per share per quarter) (the “Series A Dividend”). Holders of Series D Preferred Stock are entitled to receive, if, as and when authorized by the Company’s Board of Directors, and declared by the Company out of legally available funds, cumulative cash dividends on each share of Series D Preferred Stock at an annual rate of 5.65% of the Series D Preferred Stock Stated Value (i.e., the equivalent of $0.35313 per share per quarter) (the “Series D Dividend”). Dividends on each share of Series A1 Preferred Stock, Series A Preferred Stock and Series D Preferred Stock begin accruing on, and are cumulative from, the date of issuance.

The Company expects to pay the Series A1 Dividend, Series A Dividend and Series D Dividend in arrears on a monthly basis in accordance with the foregoing provisions, unless the Company’s results of operations, general financing conditions, general economic conditions, applicable requirements of the MGCL or other factors make it imprudent to do so. The timing and amount of the Series A1 Dividend, Series A Dividend and the Series D Dividend will be determined by the Company’s Board of Directors, in its sole discretion, and may vary from time to time.

Holders of Series L Preferred Stock are entitled to receive, if, as and when authorized by the Company’s Board of Directors, and declared by the Company out of legally available funds, cumulative cash dividends on each share of Series L Preferred Stock at an annual rate of 5.50% of the Series L Preferred Stock Stated Value (i.e., the equivalent of $1.56035 per share per year). Dividends on each share of Series L Preferred Stock began accruing on, and are cumulative from, the date of issuance.

The Company expects to pay dividends on the Series L Preferred Stock in arrears on an annual basis in accordance with the foregoing provisions, unless the Company’s results of operations, general financing conditions, general economic conditions, applicable requirements of the MGCL or other factors make it imprudent to do so. If the Company fails to timely declare distributions or fails to timely pay distributions on the Series L Preferred Stock, the annual dividend rate of the Series L Preferred Stock will temporarily increase by 1.00% per year, up to a maximum rate of 8.50% per annum. However, prior to the payment of any distributions on Series L Preferred Stock in respect of a given year, the Company must first declare and pay

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~~June 30, 2022 (Unaudited) – (Continued)~~

dividends on the Common Stock in respect of such year in an aggregate amount equal to the Initial Dividend announced by the Company’s Board of Directors at the end of the prior fiscal year. On December 29, 2021, the Company announced an Initial Dividend on shares of its Common Stock for fiscal year 2022 in the aggregate amount of $7,010,799, of which $3,972,000 had been paid as of June 30, 2022.

During the six months ended June 30, ~~2022,~~2023, the Company paid $5.5 million, $5.6 million, ~~$40,000~~$35,000 and ~~$8.4~~$4.6 million of cash dividends on the Series A1 Preferred Stock, Series A Preferred Stock, Series D Preferred Stock and Series L Preferred Stock, respectively. During the six months ended June 30, ~~2021,~~2022, the Company paid ~~$4.5~~$0, $5.6 million, ~~$16,000~~$40,000 and $8.4 million of cash dividends on the Series A1 Preferred Stock, Series A Preferred Stock, Series D Preferred Stock and Series L Preferred Stock, respectively.

Redemptions—The Company’s Series A1 Preferred Stock, Series A Preferred Stock and Series D Preferred Stock are redeemable at the option of the holder or the Company. The redemption schedule of the Series A1 Preferred Stock, Series A Preferred Stock and Series D Preferred Stock allows redemptions at the option of the holder of Series A1 Preferred Stock, Series A Preferred Stock or Series D Preferred Stock from the date of original issuance of any such shares at the Series A1 Preferred Stock Stated Value, Series A Preferred Stock Stated Value or Series D Preferred Stock Stated Value, respectively, less a redemption fee applicable prior to the fifth anniversary of the issuance of such shares, plus accrued and unpaid dividends. The Company has the right to redeem the Series A1 Preferred Stock after the date that is twenty-four months following the original issuance of such shares of Series A1 Preferred Stock at the Series A1 Preferred Stock Stated Value, plus accrued and unpaid dividends. The Company has the right to redeem the Series A Preferred Stock or Series D Preferred Stock after the fifth

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June 30, 2023 (Unaudited) – (Continued)

anniversary of the date of original issuance of such shares at the Series A Preferred Stock Stated Value or Series D Preferred Stock Stated Value, respectively, plus accrued and unpaid dividends. With respect to redemptions of the Series A1 Preferred Stock, Series A Preferred Stock or Series D Preferred Stock, at the Company’s discretion, the redemption price will be paid in cash and/or in Common Stock based on the volume weighted average price of the Company’s Common Stock for the 20 trading days prior to the redemption; provided that the redemption price of any shares of Series A Preferred Stock redeemed prior to the first anniversary of the date of original issuance of such shares must be paid in cash.

~~From and after the fifth anniversary of the date of original issuance of the Series L Preferred Stock, each holder will have the right to require the~~The Company ~~to redeem, and the Company will also have the option to redeem (subject to certain conditions), such~~redeemed all outstanding shares of Series L Preferred Stock ~~at a~~in cash in January 2023. The total cost to complete the redemption, ~~price equal to~~including transaction costs of $93,000, was $83.8 million. The accrued and unpaid dividends on the redeemed shares of Series L Preferred Stock ~~Stated Value, plus, provided certain conditions are met, all~~through December 31, 2022 of $1.56 per share (or $4.6 million accrued and unpaid distributions. Notwithstanding the foregoing, a holder of shares of the Company’s Series L Preferred Stock may require the Company to redeem such shares at any time prior to the fifth anniversary of the date of original issuance of the Series L Preferred Stock if (1) the Company does not declare and pay in full the distribution on the Series L Preferred Stock for any annual period prior to such fifth anniversary or (2) the Company does not declare and pay all accrued and unpaid distributions on the Series L Preferred Stock for all past dividend periods prior to the applicable holder redemption date. The applicable redemption price payable upon redemption of any Series L Preferred Stock will be made,dividends in the Company’s sole discretion, in the form of (A) cash in ILS at the then-current currency exchange rate determined in accordance with the Articles Supplementary defining the terms of the Series L Preferred Stock, (B) in equal value through the issuance of shares of Common Stock, with the value of such Common Stock to be deemed the lower of (i) the NAV per share of the Company’s Common Stock as most recently published by the Company as of the effective date of redemption and (ii) the volume-weighted average price of the Company’s Common Stock, determined in accordance with the Articles Supplementary defining the terms of the Series L Preferred Stock, or (C) in a combination of cash in ILS and the Company’s Common Stock, based on the conversion mechanisms set forth in (A) and (B), respectively.aggregate) were also paid January 25, 2023.

~~11.~~12. STOCKHOLDERS’ EQUITY

Dividends

Holders of the Company’s Common Stock are entitled to receive dividends, if, as and when authorized by the Board of Directors and declared by the Company out of legally available funds. In determining the Company’s dividend policy, the Board of Directors considers many factors including the amount of cash resources available for dividend distributions, capital spending plans, cash flow, the Company’s financial position, applicable requirements of the MGCL, any applicable contractual restrictions, and future growth in NAV and cash flow per share prospects. Consequently, the dividend rate on a quarterly basis

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does not necessarily correlate directly to any individual factor. Cash dividends per share of Common Stock ~~declared~~paid in respect of the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 consist of the following:

Declaration Date

Payment Date

Type

Cash Dividend Per Share of Common Stock

June 27, 2023

July 24, 2023

Regular Quarterly

0.085

March 20, 2023

April 11, 2023

Regular Quarterly

0.085

June 10, 2022

July 5, 2022

Regular Quarterly

0.085

March 8, 2022

April 1, 2022

Regular Quarterly

0.085

~~June 7, 2021~~

~~June 30, 2021~~

~~Regular Quarterly~~

~~0.075~~

~~March 5, 2021~~

~~March 30, 2021~~

~~Regular Quarterly~~

~~0.075~~

Series A Preferred Warrants

Prior to February 2020, the Series A Preferred Stock was sold as a unit that included 1one share of Series A Preferred Stock and 1one Series A Preferred Warrant that could be exercised to purchase 0.25 of a share of Common Stock. The Series A Preferred Warrants are exercisable beginning on the first anniversary of the date of their original issuance until and including the fifth anniversary of the date of such issuance. At the time of issuance, the exercise price of each Series A Preferred Warrant was at a 15.0% premium to the per share estimated NAV of the Company’s Common Stock then most recently published and designated as the applicable NAV. However, in accordance with the terms of the Series A Preferred Warrants, the exercise price of each Series A Preferred Warrant issued prior to the Reverse Stock Split was automatically adjusted to reflect the effect of the Reverse Stock Split and, in the discretion of the Company’s Board of Directors, the exercise price and the number of shares issuable upon exercise of each Series A Preferred Warrant issued prior to the Special Dividend was adjusted to reflect the effect of the Special Dividend.

Proceeds and expenses from the sale of the Series A Preferred ~~Units~~Stock and Series A Preferred Warrants were allocated to the Series A Preferred Stock and Series A Preferred Warrants using their relative fair values on the date of issuance. As of June 30, ~~2022,~~2023, the Company had ~~4,294,512~~2,449,039 Series A Preferred Warrants outstanding to purchase ~~1,113,569~~631,901 shares of Common Stock in connection with the Company’s offering of Series A Preferred Units and allocated net proceeds of ~~$584,000,~~$443,000, after specifically identifiable offering costs and allocated general offering costs, to the Series A Preferred Warrants in permanent equity.

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Share Repurchase Program

In May 2022, the Company’s Board of Directors approved a repurchase program of up to $10.0 million of the Company’s Common Stock (the “SRP”). Under the SRP, the Company, in its discretion, may purchase shares of its Common Stock from time to time in the open market or in privately negotiated transactions. The amount and timing of purchases of shares will depend on a number of factors, including, without limitation, the price and availability of shares, trading volume, general market conditions and compliance with applicable securities law. The SRP has no termination date and may be suspended or discontinued at any time.

There were no repurchases during the three and six months ended June 30, 2023. As of June 30, ~~2022, share repurchases executed under~~2023, the ~~SRP were as follows:~~
Period Shares Repurchased Average price paid per share Cumulative amount of shares repurchased
(in thousands)
Three months ended June 30, 2022 41,374 $7.32 $303
Company had repurchased 662,462 shares of Common Stock for $4.7 million.

~~12.~~13. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company determines the estimated fair value of financial assets and liabilities utilizing a hierarchy of valuation techniques based on whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. The hierarchy for inputs used in measuring fair value is as follows:

Level 1 Inputs—Quoted prices in active markets for identical assets or liabilities

Level 2 Inputs—Observable inputs other than quoted prices in active markets for identical assets and liabilities

Level 3 Inputs—Unobservable inputs

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In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

Management’s estimation of the fair value of the Company’s financial instruments is based on a Level 3 valuation in the fair value hierarchy established ~~f or~~for disclosure of how a company values its financial instruments. In general, quoted market prices from active markets for the identical financial instrument (Level 1 inputs), if available, should be used to value a financial instrument. If quoted prices are not available for the identical financial instrument, then a determination should be made if Level 2 inputs are available. Level 2 inputs include quoted prices for similar financial instruments in active markets for identical or similar financial instruments in markets that are not active (i.e., markets in which there are few transactions for the financial instruments, the prices are not current, price quotations vary substantially, or in which little information is released publicly). There is limited reliable market information for the Company’s financial instruments and the Company utilizes other methodologies based on unobservable inputs for valuation purposes since there are no Level 1 or Level 2 inputs available. Accordingly, Level 3 inputs are used to measure fair value.

In general, estimates of fair value may differ from the carrying amounts of the financial assets and liabilities primarily as a result of the effects of discounting future cash flows. Considerable judgment is required to interpret market data and develop estimates of fair value. Accordingly, the estimates presented are made at a point in time and may not be indicative of the amounts the Company could realize in a current market exchange.

The following describes the methods the Company uses to estimate the fair value of the Company’s financial assets and liabilities.

Debt—The carrying amounts of the Company’s secured borrowings—government guaranteed loans, SBA 7(a) loan-backed notes, ~~2018~~2022 Revolving Credit Facility and ~~borrowed funds from the Federal Reserve through the PPPLF~~variable rate mortgages payable approximate their fair values, as the interest rates on these securities are variable and approximate current market interest rates. The Company determines the fair value of mortgage notes payable and junior subordinated notes by performing discounted cash flow analyses using an appropriate market discount rate. The Company calculates the market discount rate for its mortgage notes payable by obtaining period-end treasury or swap rates, as applicable, for maturities that correspond to the maturities of the Company’s debt and then adding an appropriate credit spread. These credit spreads take into account factors such as the Company’s credit standing, the maturity of the debt, whether the debt is secured or unsecured, and the loan-to-value ratios of the debt. When estimating the fair value of the Company’s mortgages payable as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company used a rate of ~~5.23%~~6.86% and ~~3.22%~~6.48%, respectively. The rate used to estimate the fair value of the Company’s junior subordinated notes was ~~6.54%~~9.80% and ~~4.46%~~9.02% as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

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Loans Receivable—The Company determines the fair value of loans receivable by performing a present value analysis for the anticipated future cash flows using an appropriate market discount rate taking into consideration the credit risk and using an anticipated prepayment rate. The value of the government guaranteed portions of loans held for sale is based primarily on the anticipated proceeds to be received upon sale. The following summarizes the ranges of discount rates and prepayment rates used to arrive at the estimated fair values of the Company’s loans receivable:

June 30, 2022 December 31, 2021
Discount Rate Prepayment Rate Discount Rate Prepayment Rate
SBA 7(a) loans receivable, subject to credit risk 8.00% - 10.00% 4.33% - 17.50% 6.25% - 8.25% 5.00% - 17.50%
SBA 7(a) loans receivable, subject to loan-backed notes 7.50% - 9.50% 5.00% - 17.50% 5.75% - 7.75% 5.00% - 17.50%
SBA 7(a) loans receivable, paycheck protection program 1.00% N/A 1.00% N/A
SBA 7(a) loans receivable, subject to secured borrowings 8.75% - 9.50% 5.00% - 17.50% 7.00% - 7.75% 5.00% - 17.50%


	June 30, 2023		December 31, 2022
	Discount Rate	Prepayment Rate	Discount Rate	Prepayment Rate
SBA 7(a) loans receivable, subject to credit risk	11.00% - 11.25%	4.67% - 17.00%	11.00% - 11.25%	5.00% - 17.00%
SBA 7(a) loans receivable, subject to loan-backed notes	11.00% - 11.25%	4.67% - 17.00%	N/A	N/A
SBA 7(a) loans receivable, subject to secured borrowings	11.00% - 11.25%	5.00% - 17.00%	11.00% - 11.25%	5.00% - 17.00%

Derivative Instruments — The Company’s derivative instruments are comprised of interest rate caps. All derivative instruments are carried at fair value and are valued using Level 2 inputs. The fair value of these instruments is determined using interest rate market pricing models. In addition, credit valuation adjustments are incorporated into the fair values to account for the Company’s potential nonperformance risk and the performance risk of the respective counterparties.

Other Financial Instruments—The carrying amounts of the Company’s cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued expenses approximate their fair values due to their short-term maturities at June 30, ~~2022~~2023 and December 31, ~~2021.~~2022. Due to the short-term maturities of these instruments, Level 1 inputs are utilized to estimate the fair value of these financial instruments.

The estimated fair values of those financial instruments which are not recorded at fair value on a recurring basis on the Company’s consolidated balance sheets are as follows (dollar amounts in thousands):

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~~June 30, 2022 (Unaudited) – (Continued)~~


		June 30, 2022				December 31, 2021						June 30, 2023				December 31, 2022
		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value		Level		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value		Level
Assets:	Assets:										Assets:
SBA 7(a) loans receivable, subject to credit risk	SBA 7(a) loans receivable, subject to credit risk	$	44,895	$	46,246	$	42,416	$	44,399	3	SBA 7(a) loans receivable, subject to credit risk	$	4,522	$	4,541	$	56,237	$	58,432	3
SBA 7(a) loans receivable, subject to loan-backed notes	SBA 7(a) loans receivable, subject to loan-backed notes	$	15,988	$	17,283	$	18,077	$	19,635	3	SBA 7(a) loans receivable, subject to loan-backed notes	$	49,768	$	52,418	$	—	$	—	3
SBA 7(a) loans receivable, paycheck protection program		$	197	$	204	$	4,903	$	5,050	3
SBA 7(a) loans receivable, subject to secured borrowings	SBA 7(a) loans receivable, subject to secured borrowings	$	6,419	$	6,501	$	6,891	$	6,976	3	SBA 7(a) loans receivable, subject to secured borrowings	$	5,422	$	5,497	$	6,158	$	6,237	3
SBA 7(a) loans receivable, held for sale	SBA 7(a) loans receivable, held for sale	$	1,041	$	1,044	$	1,256	$	1,355	3	SBA 7(a) loans receivable, held for sale	$	739	$	781	$	152	$	126	3
Liabilities:	Liabilities:										Liabilities:
Mortgages payable (1)		$	97,100	$	93,287	$	97,100	$	100,838	2, 3
Fixed rate mortgage payable (1)											Fixed rate mortgage payable (1)	$	97,100	$	89,957	$	97,100	$	90,002	2, 3
Junior subordinated notes (1)	Junior subordinated notes (1)	$	27,070	$	24,732	$	27,070	$	24,378	3	Junior subordinated notes (1)	$	27,070	$	25,185	$	27,070	$	25,067	3

______________________

(1)The carrying amounts for the mortgage payable and junior subordinated notes represents the principal outstanding amounts, excluding deferred debt issuance costs and discounts.

~~13.~~14. RELATED-PARTY TRANSACTIONS

Asset Management and Other Fees to Related Parties

Asset Management Fees; Administrative Fees and Expenses—CIM Urban and CIM Capital, LLC, an affiliate of CIM REIT and CIM Group (“CIM Capital”), have an investment management agreement, pursuant to which CIM Urban engaged CIM Capital to provide certain services to CIM Urban (the “Investment Management Agreement”). CIM Capital has assigned its duties under the Investment Management Agreement to its 4four wholly-owned subsidiaries: CIM Capital Securities Management, LLC, a securities manager, CIM Capital RE Debt Management, LLC, a debt manager, CIM Capital Controlled Company Management, LLC, a controlled company manager, and CIM Capital Real Property Management, LLC, a real property manager. The “Operator” refers to CIM Capital and its 4four wholly-owned subsidiaries.

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The Company and its subsidiaries have a master services agreement (the “Master Services Agreement”) with CIM Service Provider, LLC (the “Administrator”), an affiliate of CIM Group, pursuant to which the Administrator provides, or arranges for other service providers to provide, management and administration services to the Company and its subsidiaries. Pursuant to the Master Services Agreement, the Company appointed an affiliate of CIM Group as the administrator of Urban Partners GP, LLC.

On January 5, 2022, the Company and certain of its subsidiaries entered into a Fee Waiver (the “Fee Waiver”) with the Operator and the Administrator with respect to fees that are payable to them. The Fee Waiver is effective retroactively to January 1, 2022 (the “Effective Date”). Pursuant to the Fee Waiver, the Administrator agreed to voluntarily waive any fees in excess of those set forth in the Fee Waiver, to the extent it would otherwise have been entitled to such additional compensation under the Master Service Agreement, and the Operator agreed to voluntarily waive any fees in excess of those set forth in the Fee Waiver, to the extent it would otherwise have been entitled to such additional compensation under the Investment Management Agreement. Following the end of each quarter, the Administrator will deliver to the Company (i) a calculation of the cumulative fees earned by the Operator and the Administrator under the methodology prescribed by the Fee Waiver from the Effective Date through the end of such quarter and (ii) a calculation of the cumulative fees that would have been earned by the Operator and the Administrator during such period under the Master Services Agreement and the Investment Management Agreement without giving effect to the Fee Waiver. If, in respect of any quarter, the aggregate fees that are payable under the methodology prescribed by the Fee Waiver exceed the aggregate fees that would have been payable under the Master Services Agreement and the Investment Management Agreement, without giving effect to the Fee Waiver, such quarter will be deemed an “Excess Quarter”. For any quarter following an Excess Quarter, the Company (upon the direction of the independent members of the Board) may, at its option and upon written notice to Administrator, elect to calculate all fees due to the Administrator and the Operator in accordance with the Master Services Agreement and the Investment Management Agreement, without giving effect to the Fee Waiver, from and after such Excess Quarter. Any such election by the Company will be irrevocable, and all fees due to the Administrator and the Operator from and after such election will be calculated in accordance with the Master Services Agreement and the Investment Management Agreement, without giving effect to the Fee Waiver.

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The fees payable to the Operator and the Administrator are determined as follows under the Fee Waiver.

1.Base Fee: A base asset management fee (the “Base Fee”) is payable quarterly in arrears to the Operator in an amount equal to an annual rate of 1% (or 0.25% per quarter) of the average of the “Net Asset Value Attributable to Common Stockholders” as of the first and last day of the applicable quarter. Net Asset Value Attributable to Common stockholders is defined as (a) the sum of the Company’s (1) investments in real estate at fair value, (2) cash, (3) loans receivable at fair value and (4) the book value of the other assets of the Company, excluding deferred costs and net of other liabilities at book value, less (b) the Company’s (i) debt at face value, (ii) outstanding preferred stock at stated value, and (iii) non-controlling interests at book value; provided, that, non-controlling interests in any UPREIT operating partnership relating to the Company shall not be excluded.

Subject to applicable laws and regulations under Nasdaq and the TASE and the agreement of the Operator, the Company will pay the Base Fee owed with respect to the first quarter of 2022 in shares of its Series A Preferred Stock and it is likely that the Company will pay some or part of the remainder of the Base Fees incurred during the year ended December 31, 2022 in shares of Series A Preferred Stock.

2.Incentive Fee: An incentive fee (the “Revised Incentive Fee”) is payable quarterly in arrears to the Administrator with respect to the quarterly core funds from operations in excess of a quarterly threshold equal to 1.75% (i.e., 7.00% on an annualized basis) of the Company’s “Adjusted Common Equity” (as defined below) for such quarter (“Excess Core FFO”) as follows: (i) no Revised Incentive Fee in any quarter in which the Excess Core FFO is $0; (ii) 100% of any Excess Core FFO up to an amount equal to the product of (x) the average of the Adjusted Common Equity as of the first and last day of the applicable quarter and (y) 0.4375%; and (iii) 20% of any Excess Core FFO thereafter. Revised Incentive Fees payable for any partial quarter will be appropriately prorated.

“Adjusted Common Equity” means Common Equity plus Excluded Depreciation and Amortization. “Common Equity” means Total Stockholders’ Equity minus Excluded Equity. “Total Stockholders’ Equity” means the amount reflected as total stockholders’ equity in accordance with GAAP on the consolidated balance sheet of the Company and its subsidiaries as of the last day of a given quarter. “Excluded Equity” means the sum of all preferred securities of the Company and its subsidiaries classified as permanent equity in accordance with GAAP on the consolidated balance sheet of the Company and its subsidiaries as of the last day of a given quarter. “Excluded Depreciation and Amortization” means, for a given quarter, the amount of all accumulated depreciation and amortization of (i) the

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Company and its subsidiaries and (ii) to the extent allocable to the Company and its subsidiaries, the unconsolidated affiliates, in each case as of the last day of such quarter that corresponds to the periodic depreciation and amortization expense calculated in each case in accordance with GAAP that is a permitted add back to net income calculated in accordance with GAAP when calculating funds from operations.

3.Capital Gains Fee: A capital gains fee (the “Capital Gains Fee”) is payable quarterly in arrears to the Administrator in an amount equal to (i) 15% of the cumulative aggregate realized capital gains minus the cumulative aggregate realized capital losses (in each case since the Effective Date), minus (ii) the aggregate capital gains fees paid since the Effective Date. Realized capital gains and realized capital losses are calculated by subtracting from the sales price of a property: (a) any costs incurred to sell such property, and (b) the current gross value of the property (meaning the property’s original acquisition price plus any subsequent, non-reimbursed capital improvements thereon paid for by the Company).

In lieu of cash payment of the Base Fee, the Company has issued to the Operator shares of its Series A1 Preferred Stock in July 2022 as payment for the quarterly Base Fee for the three months ended March 31, 2022. Subject to applicable laws and regulations under Nasdaq and TASE and the agreement of the Operator, and it is likely the Company will issue shares of its Series A1 Preferred Stock in lieu of cash payment of the Base Fee for the remainder of 2022.

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~~June 30, 2022 (Unaudited) – (Continued)~~

Pursuant to the Investment Management Agreement, the asset management fee prior to January 1, 2022 fee was calculated (without giving effect to the Fee Waiver) as a percentage of the daily average adjusted fair value of CIM Urban’s assets as follows (dollar amounts in thousands):


Daily Average Adjusted Fair Value of CIM Urban’s Assets
				Quarterly Fee Percentage
From Greater of		To and Including

$	—	$	500,000	0.2500%
$	500,000	$	1,000,000	0.2375%
$	1,000,000	$	1,500,000	0.2250%
$	1,500,000	$	4,000,000	0.2125%
$	4,000,000	$	20,000,000	0.1000%

~~In lieu of cash payment, the Company has issued to the Operator shares of its Series A1 Preferred Stock~~Asset management fees are included in ~~July 2022 as payment for the quarterly~~ asset management ~~fee for~~and other fees to related parties in the ~~three months ended December 31, 2021.~~accompanying consolidated statements of operations.

Under the Master Services Agreement, for fiscal quarters prior to April 1,2020, the Company paid a base service fee (the “Base Service Fee”) to the Administrator initially set at $1.0 million per year (subject to an annual escalation by a specified inflation factor beginning on January 1, 2015), payable quarterly in arrears. On May 11, 2020, the Master Services Agreement was amended to replace the Base Service Fee with an incentive fee pursuant to which the Administrator was entitled to receive, on a quarterly basis, 15.00% of the Company’s quarterly core funds from operations in excess of a quarterly threshold equal to 1.75% (i.e., 7.00% on an annualized basis) of the Company’s average Adjusted Common Equity (defined above) for such quarter. The amendment was effective as of April 1, 2020 and was further modified by the Fee Waiver described above. No such incentive fee was paid by the Company.

In addition, pursuant to the terms of the Master Services Agreement, the Administrator may receive compensation and or reimbursement for performing certain services for the Company and its subsidiaries that are not covered by the Base Service Fee. During the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, such services performed by the Administrator and its affiliates included accounting, tax, reporting, internal audit, legal, compliance, risk management, IT, human resources, corporate communications, operational and on-going support in connection with the Company’s offering of Preferred Stock. The Administrator’s compensation is based on the salaries and benefits of the employees of the Administrator and or its affiliates who performed these services (allocated based on the percentage of time spent on the affairs of the Company and its subsidiaries). The expense for such services is included in expense reimbursements to related parties—corporate in the accompanying consolidated statements of operations.

Property Management Fees and Reimbursements—CIM Management, Inc. and certain of its affiliates (collectively, the “CIM Management Entities”), all affiliates of CIM REIT and CIM Group, provide property management, leasing, and development services to CIM Urban. Property management fees earned by the CIM Management entities and onsite management costs incurred on behalf of CIM Urban are included in rental and other property operating expenses in the accompanying consolidated statements of ~~operations.~~operations, with the exception of certain onsite management costs which are capitalized in some cases. Leasing commissions earned are capitalized to deferred charges on the accompanying consolidated balance sheets. Construction management fees and development management reimbursements are capitalized to investments in real estate on the accompanying consolidated balance sheets.

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Lending Segment Expenses—The Company has a Staffing and Reimbursement Agreement with CIM SBA Staffing, LLC (“CIM SBA”), an affiliate of CIM Group, and the Company’s subsidiary, PMC Commercial Lending, LLC. The agreement provides that CIM SBA will provide personnel and resources to the Company and that the Company will reimburse CIM SBA for the costs and expenses of providing such personnel and resources. The expense for such services is included in expense reimbursements to related parties—lending segment in the accompanying consolidated statements of operations.

Offering-Related Fees—CCO Capital, LLC (“CCO Capital”) became the exclusive dealer manager for the Company’s public offering of the Series A Preferred ~~Units~~Stock and Series A Preferred Warrants effective as of May 31, 2019. CCO Capital is a registered broker dealer and is under common control with the Operator and the Administrator. The Company’s offering of the Series A Preferred ~~Units~~Warrants ended at the end of January 2020. On January 28, 2020, the Company entered into the Second Amended and Restated Dealer Manager Agreement, pursuant to which CCO Capital acted as the exclusive dealer manager for the Company’s public offering of its Series A Preferred Stock and Series D Preferred Stock. ~~Thereunder, the Company agreed to compensate CCO Capital, as the dealer manager for the offering, as follows: (1) an upfront dealer manager fee of up to 1.25% of the selling price~~

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of each share of Preferred Stock sold, (2) selling commissions of up to 5.50% of the selling price of each share of Series A Preferred Stock sold (with no selling commissions payable in respect of shares of Series D Preferred Stock sold) and (3) a trailing dealer manager fee that accrues daily in an amount equal to 1/365th of 0.25% per annum of the selling price of each share of Preferred Stock sold. CCO Capital, in its sole discretion, may reallow to another broker-dealer authorized by it to sell shares in the offering a portion of the upfront dealer manager fee earned by it in respect of shares sold by such broker-dealer.

~~On April 9, 2020, the Company entered into Amendment No. 1 to the~~The Second Amended and Restated Dealer Manager Agreement ~~pursuant~~was subsequently amended by the Company and CCO Capital to ~~which the~~address changes to, among other things, selling commissions were increased from up to 5.50% to up to 7.00% of the selling price of each share of Series A Preferred Stock sold thereafter. The Company was informed that CCO Capital generally reallowed 100% of the selling commissions on sales of Series A Preferred Stock and ~~generally reallowed substantially all of the upfront~~ dealer manager ~~fee on sales of Series A Preferred Stock and Series D Preferred Stock, to participating broker-dealers.~~

On September 22, 2021, the Company entered into Amendment No. 2 to the Second Amended and Restated Dealer Manager Agreement, pursuant to which the upfront dealer manager fee payable to the Dealer Manager was changed to up to 3.00% and the trailing dealer manager fee with respect to the sale of shares of Series A Preferred Stock sold in the Offering on or after September 9, 2021 was eliminated.fees.

On June 16, 2022, the Company entered into the Third Amended and Restated Dealer Manager Agreement, pursuant to which CCO Capital ~~acts~~has been acting as the exclusive dealer manager for the Company’s public offering of its Series A1 Preferred Stock. Thereunder, the Company agreed to compensate CCO Capital, as the dealer manager for the offering, as follows: (1) a dealer manager fee of up to 3.00% of the selling price of each share of Series A1 Preferred Stock sold and (2) selling commissions of up to 7.00% of the selling price of each share of Series A1 Preferred Stock sold. The Company has been informed that CCO Capital generally reallows 100% of the selling commissions on sales of Series A1 Preferred Stock and generally reallows substantially all of the dealer manager fee on sales of Series A1 Preferred Stock, to participating broker-dealers. In addition, pursuant to the Third Amended and Restated Dealer Manager Agreement, CCO Capital will ~~not~~no longer solicit or make any offers for the sale of shares of Series A Preferred Stock or Series D Preferred Stock.

The Company recorded fees and expense reimbursements as shown in the table below for services provided by related parties related to the services described above during the periods indicated (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30, 2022					Three Months Ended June 30,				Six Months Ended June 30, 2023
		2022		2021		2022		2021			2023		2022		2023		2022
Asset Management Fees:	Asset Management Fees:									Asset Management Fees:
Asset management fees(1)	Asset management fees(1)	$	920	$	2,260	$	1,841	$	4,519	Asset management fees(1)	$	627	$	920	$	1,347	$	1,841
Property Management Fees and Reimbursements:	Property Management Fees and Reimbursements:									Property Management Fees and Reimbursements:
Property management fees(2)	Property management fees(2)	$	413	$	404	$	851	$	807	Property management fees(2)	$	551	$	413	$	1,028	$	851
Onsite management and other cost reimbursement(3)		$	806	$	755	$	1,231	$	1,564
Onsite management and other cost reimbursements(3)										Onsite management and other cost reimbursements(3)	$	1,461	$	806	$	2,531	$	1,231
Leasing commissions(4)	Leasing commissions(4)	$	27	$	33	$	105	$	48	Leasing commissions(4)	$	37	$	27	$	76	$	105
Construction management fees~~(4)~~(5)	Construction management fees~~(4)~~(5)	$	138	$	22	$	198	$	35	Construction management fees~~(4)~~(5)	$	52	$	138	$	170	$	198
Development management reimbursements(6)										Development management reimbursements(6)	$	653	$	—	$	653	$	—
Administrative Fees and Expenses:	Administrative Fees and Expenses:									Administrative Fees and Expenses:
Expense reimbursements to related parties - corporate	Expense reimbursements to related parties - corporate	$	526	$	454	$	948	$	1,059	Expense reimbursements to related parties - corporate	$	677	$	526	$	1,205	$	948
Lending Segment Expenses:	Lending Segment Expenses:									Lending Segment Expenses:
Expense reimbursements to related parties - lending segment(5)		$	604	$	433	$	1,073	$	1,164
Expense reimbursements to related parties - lending segment(7)										Expense reimbursements to related parties - lending segment(7)	$	910	$	604	$	1,518	$	1,073
Offering-Related Fees:	Offering-Related Fees:									Offering-Related Fees:
Upfront dealer manager and trailing dealer manager fees(6)		$	152	$	272	$	274	$	422
Non-issuance specific offering costs (7)		$	50	$	43	$	89	$	64
Upfront dealer manager and trailing dealer manager fees(8)										Upfront dealer manager and trailing dealer manager fees(8)	$	370	$	152	$	690	$	274
Non-issuance specific offering costs (9)										Non-issuance specific offering costs (9)	$	162	$	50	$	306	$	89

______________________

(1)The ~~Company issued to the Operator 179,762 shares of Series A Preferred Stock in lieu of cash payment of the asset management fees incurred during the six months ended June 30, 2021. In July 2022, the~~ Company issued to the Operator 36,843 shares of Series A1 Preferred Stock in lieu of cash payment offor the asset management ~~fee~~fees incurred during the three months ended March 31, 2022.

(2)Does not include the company’s share of the property management fees from the Unconsolidated Joint ~~Venture~~Ventures of $20,000 and and $37,000 for the three and six months ended June 30, 2023, respectively, and $11,000 and $15,000 for the three and six months ended June 30, 2022, respectively.

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(3)Does not include the ~~company’s~~Company’s share of the onsite management and other cost reimbursements from the Unconsolidated Joint ~~Venture~~Ventures of $112,000 and $141,000 for the three and six months ended June 30, 2023, respectively, and $21,000 and $33,000 for the three and six months ended June 30, 2022, respectively.

(4)Does not include the ~~company’s~~Company’s share of the leasing commissions from the Unconsolidated Joint Ventures of $2,000 and $14,000 for the three and six months ended June 30, 2023, respectively.

(5)Does not include the Company’s share of the construction management fees from the Unconsolidated Joint ~~Venture~~Ventures of $55,000 and $59,000 for the three and six months ended June 30, 2023, respectively, and $2,000 and $3,000 for the three and six months ended June 30, ~~2022, respectively.~~2022.

~~(5)~~(6)Does not include the Company’s share of the development management reimbursements from the Unconsolidated Joint Ventures of $187,000 for the three and six months ended June 30, 2023.

(7)Expense reimbursements to related parties - lending segment do not include personnel costs capitalized to deferred loan origination costs of $30,000 and $61,000 for the three and six months ended June 30, 2023, respectively, and $105,000 and $174,000 for the three and six months ended June 30, 2022, ~~and 2021,~~ respectively.

~~(6)~~(8)Represents fees earned by CCO Capital and allocated to Series A1 Preferred Stock, Series A Preferred Stock and Series D Preferred Stock.

~~(7)~~(9)As of June 30, ~~2022~~2023 and June 30, ~~2021, $2.3~~2022, $2.5 million and ~~$2.0~~$2.3 million, respectively, was included in deferred costs as reimbursable expenses incurred pursuant to the Master Services Agreement and the then applicable dealer manager agreement with CCO Capital. These non-issuance specific costs are allocated against the gross proceeds from the sale of the Series A1 Preferred Stock, Series A Preferred Stock and ~~the~~ Series D Preferred Stock on a pro rata basis for each issuance as a percentage of the total offering.

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, due to related parties consisted of the following (in thousands):


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Asset management fees	Asset management fees	$	4,083	$	2,244	Asset management fees	$	634	$	812
Property management fees and reimbursements	Property management fees and reimbursements	865		320		Property management fees and reimbursements	2,270		1,214
Expense reimbursements - corporate	Expense reimbursements - corporate	883		692		Expense reimbursements - corporate	680		466
Expense reimbursements - lending segment	Expense reimbursements - lending segment	360		341		Expense reimbursements - lending segment	681		124
Upfront dealer manager and trailing dealer manager fees	Upfront dealer manager and trailing dealer manager fees	555		638		Upfront dealer manager and trailing dealer manager fees	371		454
Non-issuance specific offering costs	Non-issuance specific offering costs	198		143		Non-issuance specific offering costs	98		17
Other amounts due to the CIM Management Entities and certain of its affiliates		69		163
Other amounts due (from) to the CIM Management Entities and certain of its affiliates						Other amounts due (from) to the CIM Management Entities and certain of its affiliates	(9)		68
Total due to related parties	Total due to related parties	$	7,013	$	4,541	Total due to related parties	$	4,725	$	3,155

Affiliate Investments

In February 2022, the Company invested with the CIM JV Partner, a CIM-managed separate account, ~~(the “CIM JV Partner”)~~ in the Unconsolidated Joint Venture which purchased an office property in Los Angeles, California for a gross purchase price of approximately $51.0 million, ~~gross of proration amounts,~~ of which the Company initially contributed approximately $22.4 million and the CIM JV Partner initially contributed the remaining balance. See Note 2 and Note 4 for more information.

In February 2023, the Company and the 1902 Park JV Partner invested in the 1902 Park JV, which purchased a multifamily property in the Echo Park neighborhood of Los Angeles, California for a gross purchase price of $19.1 million. The Company owns 50% of the 1902 Park JV. In connection with the closing in February 2023, the 1902 Park JV obtained financing of $9.6 million through the 1902 Park Mortgage Loan. The Company and the 1902 Park JV Partner both initially contributed $6.6 million to the 1902 Park JV. See Note 2 and Note 4 for more information.

During the six months ended June 30, 2023, the Company acquired an interest in four assets from entities indirectly wholly-owned by a fund that is managed by affiliates of CIM Group Management, LLC for $282.9 million (exclusive of transactions costs). See Note 23 and Note 47 for more information.

Other

On May 15, 2019, CIM Group entered into an approximately 11-year lease for approximately 32,000 rentable square feet with respect to a property owned by the ~~Company.~~Company (4750 Wilshire). The lease was amended on August 7, 2019 to reduce

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023 (Unaudited) – (Continued)

the rentable square feet to approximately 30,000 rentable square feet. ~~For~~In February 2023, the Company sold an 80% interest in 4750 Wilshire and now holds its retained 20% interest in the property through the 4750 Wilshire JV. Prior to the sale, for the three ~~and six~~ months ended ~~both June 30, 2022 and 2021,~~March 31, 2023, the Company recorded rental and other property income related to this tenant of $194,000 and for the three and six months ended June 30, 2022, recorded rental and other property income from the tenant of $370,000 and $740,000 respectively. For the three and six months ended June 30, 2023, the Company’s share of the income from the tenant earned by the 4750 Wilshire JV was $53,000 and $90,000, respectively.

~~14.~~15. COMMITMENTS AND CONTINGENCIES

Loan Commitments—Commitments to extend credit are agreements to lend to a customer when the terms established in the contract are met. The Company’s outstanding commitments to fund loans were ~~$7.1~~$7.8 million as of June 30, ~~2022, the majority~~2023, all of which are for prime-based loans to be originated by the Company’s subsidiary engaged in SBA 7(a) Small Business Loan Program lending, the government guaranteed portion of which is intended to be sold. Commitments generally have fixed expiration dates. Since some commitments are expected to expire without being drawn upon, total commitment amounts do not necessarily represent future cash requirements.

General—In connection with the ownership and operation of real estate properties, the Company has certain obligations for the payment of tenant improvement allowances and lease commissions in connection with new leases and renewals. The Company had a total of ~~$6.0~~$6.5 million in future obligations under leases to fund tenant improvements and other future construction obligations as of June 30, ~~2022.~~2023. As of June 30, ~~2022,~~2023, $2.5 million was funded to reserve accounts included in restricted cash on the Company’s consolidated balance sheet for these tenant improvement obligations in connection with the mortgage loan agreement entered into in June 2016.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022 (Unaudited) – (Continued)~~

Employment Agreements—The Company has an employment agreement with 1one of its officers. Under certain circumstances, this employment agreement provides for (1) severance payment equal to the annual base salary paid to the officer and (2) death and disability payments in an amount equal to 2two times and 1one time, respectively, the annual base salary paid to the officer.

Litigation—The Company is not currently involved in any material pending or threatened legal proceedings nor, to the Company’s knowledge, are any material legal proceedings currently threatened against the Company, other than routine litigation arising in the ordinary course of business. In the normal course of business, the Company is periodically party to certain legal actions and proceedings involving matters that are generally incidental to the Company’s business. While the outcome of these legal actions and proceedings cannot be predicted with certainty, in management’s opinion, the resolution of these legal proceedings and actions will not have a material adverse effect on the Company’s business, financial condition, results of operations, cash flow or the Company’s ability to satisfy its debt service obligations or to maintain its level of distributions on Common Stock or Preferred Stock.

A subsidiary of the Company is a defendant in a lawsuit in connection with injuries sustained by a third-party contractor at a property previously owned by such subsidiary. While it is possible that a loss may be incurred, the Company is unable to estimate a range of potential losses due to the complexity and current status of the lawsuit. However, the Company maintains insurance coverage to mitigate the impact of adverse exposures in lawsuits of this nature and do not expect this lawsuit to have a material adverse effect on the Company’s business, financial condition, results of operations, cash flow or the Company ability to satisfy its debt service obligations or to maintain the level of distributions on the Company’s Common Stock or Preferred Stock.

SBA Related—If the SBA establishes that a loss on an SBA guaranteed loan is attributable to significant technical deficiencies in the manner in which the loan was originated, funded or serviced under the PPP or the SBA 7(a) Small Business Loan Program, the SBA may seek recovery of the principal loss related to the deficiency from the Company. As of June 30, ~~2022,~~2023, the Company serviced an aggregate of ~~$265.5~~$241.4 million of the guaranteed portion of SBA 7(a) loans. With respect to the guaranteed portion of SBA loans that have been sold, the SBA will first honor its guarantee and then seek compensation from the Company in the event that a loss is deemed to be attributable to technical deficiencies. Based on historical experience, the Company does not expect that this contingency is probable to be asserted. However, if asserted, it could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flow or the Company’s ability to satisfy its debt service obligations or to maintain its level of distributions on Common Stock or Preferred Stock.

Environmental Matters—In connection with the ownership and operation of real estate properties, the Company may be potentially liable for costs and damages related to environmental matters, including asbestos-containing materials. The Company has not been notified by any governmental authority of any noncompliance, liability, or other claim in connection

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023 (Unaudited) – (Continued)

with any of the properties, and the Company is not aware of any other environmental condition with respect to any of the properties that management believes will have a material adverse effect on the Company’s business, financial condition, results of operations, cash flow or the Company’s ability to satisfy its debt service obligations or to maintain its level of distributions on Common Stock or Preferred Stock.

~~15.~~16. LEASES

Future minimum rental revenue under long-term operating leases as of June 30, ~~2022,~~2023, excluding tenant reimbursements of certain costs, are as follows (excludes unconsolidated properties, in thousands):

Years Ending December 31, Total
2022 (Six months ending December 31, 2022) $ 22,785
2023 43,637
2024 42,198
2025 26,095
2026 18,641
Thereafter 36,637
$ 189,993


Years Ending December 31,	Total
2023 (Six months ending December 31, 2023)	$	31,246
2024	49,236
2025	30,060
2026	21,776
2027	14,294
Thereafter	47,803
	$	194,415

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~~CREATIVE MEDIA & COMMUNITY TRUST CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022 (Unaudited) – (Continued)~~

~~16.~~17. SEGMENT DISCLOSURE

The Company’s reportable segments during the three and six months ended June 30, ~~2022 and 2021~~2023 consist of 2three types of commercial real estate properties, namely, office, hotel and multifamily, as well as a segment for the Company’s lending business. The Company’s reportable segments during the three and six months ended June 30, 2022 consist of two types of commercial real estate properties, namely, office and hotel, as well as a segment for the Company’s lending business. Management internally evaluates the operating performance and financial results of the segments based on net operating income. The Company also has certain general and administrative level activities, including public company expenses, legal, accounting, and tax preparation that are not considered separate operating segments. The reportable segments are accounted for on the same basis of accounting as described in the notes to the Company’s audited consolidated financial statements for the year ended December 31, ~~2021~~2022 included in the ~~2021~~2022 Form 10-K.

For the Company’s real estate segments, the Company defines net operating income (loss) as rental and other property income and expense reimbursements less property related expenses, and excludes non-property income and expenses, interest expense, depreciation and amortization, corporate related general and administrative expenses, gain (loss) on sale of real estate, gain (loss) on early extinguishment of debt, impairment of real estate, transaction costs, and provision (benefit) for income taxes. For the Company’s lending segment, the Company defines net operating income as interest income net of interest expense and general overhead expenses.

~~The net operating income (loss) of the Company’s segments for the three and six months ended June 30, 2022 and 2021 is as follows (in thousands):~~

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Office:
Revenues $ 14,077 $ 13,356 $ 28,182 $ 26,883
Property expenses:
Operating 6,402 5,687 12,523 11,342
General and administrative 35 83 125 168
Total property expenses 6,437 5,770 12,648 11,510
Income from unconsolidated entity 260 — 380 0
Segment net operating income—office 7,900 7,586 15,914 15,373
Hotel:
Revenues 9,576 3,477 17,369 5,355
Property expenses:
Operating 6,305 3,428 11,676 6,063
General and administrative 24 51 52 101
Total property expenses 6,329 3,479 11,728 6,164
Segment net operating income (loss)—hotel 3,247 (2) 5,641 (809)
Lending:
Revenues 2,750 5,839 5,634 9,313
Lending expenses:
Interest expense 119 182 226 373
Expense reimbursements to related parties—lending segment 604 433 1,073 1,164
General and administrative 338 177 898 623
Total lending expenses 1,061 792 2,197 2,160
Segment net operating income—lending 1,689 5,047 3,437 7,153
Total segment net operating income $ 12,836 $ 12,631 $ 24,992 $ 21,717

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023 (Unaudited) – (Continued)

The net operating income (loss) of the Company’s segments for the three and six months ended June 30, 2023 and 2022 is as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Office:
Revenues	$	13,975	$	14,077	$	27,462	$	28,182
Property expenses:
Operating	6,369		6,402		12,892		12,523
General and administrative	57		35		157		125
Total property expenses	6,426		6,437		13,049		12,648
(Loss) income from unconsolidated entities	(710)		260		(774)		380
Segment net operating income—office	6,839		7,900		13,639		15,914
Hotel:
Revenues	11,668		9,576		23,160		17,369
Property expenses:
Operating	7,543		6,305		14,882		11,676
General and administrative	12		24		20		52
Total property expenses	7,555		6,329		14,902		11,728
Segment net operating income—hotel	4,113		3,247		8,258		5,641
Multifamily:
Revenues	4,078		—		5,301		—
Property expenses:
Operating	3,067		—		4,430		—
General and administrative	295		—		312		—
Total property expenses	3,362		—		4,742		—
(Loss) income from unconsolidated entity	(194)		—		638		—
Segment net operating income—multifamily	522		—		1,197		—
Lending:
Revenues	2,963		2,750		5,673		5,634
Lending expenses:
Interest expense	1,315		119		1,560		226
Expense reimbursements to related parties—lending segment	910		604		1,518		1,073
General and administrative	214		338		713		898

Total lending expenses	2,439		1,061		3,791		2,197
Segment net operating income—lending	524		1,689		1,882		3,437
Total segment net operating income	$	11,998	$	12,836	$	24,976	$	24,992

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023 (Unaudited) – (Continued)

A reconciliation of segment net operating income to net income attributable to the Company for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 is as follows (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Total segment net operating income	Total segment net operating income	$	12,836	$	12,631	$	24,992	$	21,717	Total segment net operating income	$	11,998	$	12,836	$	24,976	$	24,992
Interest and other income	Interest and other income	—		1		—		1		Interest and other income	76		—		76		—
Asset management and other fees to related parties	Asset management and other fees to related parties	(920)		(2,260)		(1,841)		(4,519)		Asset management and other fees to related parties	(627)		(920)		(1,347)		(1,841)
Expense reimbursements to related parties—corporate	Expense reimbursements to related parties—corporate	(526)		(454)		(948)		(1,059)		Expense reimbursements to related parties—corporate	(677)		(526)		(1,205)		(948)
Interest expense	Interest expense	(2,284)		(2,491)		(4,347)		(4,932)		Interest expense	(7,394)		(2,284)		(13,385)		(4,347)
General and administrative	General and administrative	(880)		(835)		(2,017)		(2,876)		General and administrative	(1,106)		(880)		(2,407)		(2,017)

Transaction-related costs										Transaction-related costs	—		—		(3,360)		—
Depreciation and amortization	Depreciation and amortization	(4,974)		(5,069)		(9,978)		(10,106)		Depreciation and amortization	(20,472)		(4,974)		(29,974)		(9,978)

Income (loss) before provision for income taxes		3,252		1,523		5,861		(1,774)
Gain on sale of real estate										Gain on sale of real estate	—		—		1,104		—
(Loss) income before provision for income taxes										(Loss) income before provision for income taxes	(18,202)		3,252		(25,522)		5,861
Provision for income taxes	Provision for income taxes	(321)		(996)		(628)		(1,370)		Provision for income taxes	(159)		(321)		(415)		(628)
Net income (loss)		2,931		527		5,233		(3,144)
Net (income) loss attributable to noncontrolling interests		(9)		3		(14)		4
Net income (loss) attributable to the Company		$	2,922	$	530	$	5,219	$	(3,140)
Net (loss) income										Net (loss) income	(18,361)		2,931		(25,937)		5,233
Net loss (income) attributable to noncontrolling interests										Net loss (income) attributable to noncontrolling interests	1,002		(9)		1,627		(14)
Net (loss) income attributable to the Company										Net (loss) income attributable to the Company	$	(17,359)	$	2,922	$	(24,310)	$	5,219

The condensed assets for each of the segments as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, along with capital expenditures and loan originations for the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, are as follows (in thousands):


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Condensed assets:	Condensed assets:					Condensed assets:
Office	Office	$	470,779	$	449,843	Office	$	419,446	$	471,677
Hotel	Hotel	99,211		101,308		Hotel	98,609		99,082
Multifamily						Multifamily	295,410		—
Lending	Lending	83,033		96,729		Lending	82,807		76,148
Non-segment assets(1)		24,722		12,986
Non-segment assets						Non-segment assets	23,423		43,341
Total assets	Total assets	$	677,745	$	660,866	Total assets	$	919,695	$	690,248


		Six Months Ended June 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Capital expenditures(2) and loan originations:
Capital expenditures(1) and loan originations:						Capital expenditures(1) and loan originations:
Office	Office	$	4,304	$	818	Office	$	3,414	$	4,304
Hotel	Hotel	963		128		Hotel	1,842		963
Multifamily						Multifamily	5,814		—
Total capital expenditures	Total capital expenditures	5,267		946		Total capital expenditures	11,070		5,267
Loan originations	Loan originations	30,682		65,210		Loan originations	18,128		30,682
Total capital expenditures and loan originations	Total capital expenditures and loan originations	$	35,949	$	66,156	Total capital expenditures and loan originations	$	29,198	$	35,949

______________________

(1)~~Includes investments in real estate of $8.3 million representing 2 development sites which the Company intends to develop into multifamily assets.~~

~~(2)~~Represents additions and improvements to real estate investments, excluding acquisitions. Includes the activity for dispositions through their respective disposition dates.

~~17.~~

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023 (Unaudited) – (Continued)

18. SUBSEQUENT EVENTS

On ~~July 1, 2022,~~August 2, 2023, the Company ~~acquired from an unrelated third-party a 100% fee-simple interest in a 1,352 square foot office property located in Austin, Texas for a purchase price~~granted stock awards totaling 48,888 restricted shares of ~~$1.9 million.~~its Common Stock to the independent members of the Board of Directors. The ~~property has approximately 7,450 square feet~~shares will vest after one year of ~~land which the Company intends to further develop.~~continuous service.

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), which are intended to be covered by the safe harbors created thereby. These statements include the plans and objectives of management for future operations, including plans and objectives relating to future growth of our business and availability of funds. Such forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “will,” “project,” “target,” “expect,” “intend,” “might,” “believe,” “anticipate,” “estimate,” “could,” ~~“would,”~~“would” “continue,” “pursue,” “potential,” “forecast,” “seek,” “plan,” or “should” or “goal” or the negative thereof or other variations or similar words or phrases. Such forward-looking statements also include, among others, statements about ~~CMCT’s~~our plans and objectives relating to future growth and ~~outlook, and the trading liquidity of CMCT’s Common Stock.~~outlook. Such forward-looking statements are based on particular assumptions that our management ~~of CMCT~~ has made in light of its experience, as well as its perception of expected future developments and other factors that it believes are appropriate under the circumstances. Forward-looking statements are necessarily estimates reflecting the judgment of ~~CMCT’s~~our management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These risks and uncertainties include those associated with (i) the scope, severity and duration of the current pandemic of COVID-19, and actions taken to contain the pandemic or mitigate its impact, (ii) the adverse effect of COVID-19 on the financial condition, results of operations, cash flows and performance of CMCT and its tenants and business partners, the real estate market and the global economy and financial markets, among others, (iii) the timing, form, and operational effects of ~~CMCT’s~~our development activities, ~~(iv) the~~(ii) our ability ~~of CMCT~~ to raise in place rents to existing market rents and to maintain or increase occupancy levels, ~~(v)~~(iii) fluctuations in market rents, ~~including as a result of COVID-19, (vi)~~(iv) the effects of inflation and higher interest rates on ~~the~~our operations and profitability ~~of CMCT~~ and ~~(vii)~~(v) general economic, market and other conditions. Additional important factors that could cause ~~CMCT’s~~our actual results to differ materially from ~~CMCT’s~~our expectations are discussed under the section “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March ~~16, 2022~~30, 2023 (the ~~“2021~~“2022 Form 10-K”). The forward-looking statements included herein are based on current expectations and there can be no assurance that these expectations will be attained. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond ~~CMCT’s~~our control. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Form 10-Q will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements ~~included~~expressed or implied herein, the inclusion of such information should not be regarded as a representation by ~~CMCT~~us or any other person that ~~CMCT’s~~our objectives and plans will be achieved. Readers are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date they are made. ~~CMCT does~~We do not undertake to update them to reflect changes that occur after the date they are ~~made.~~made, except as may be required by applicable securities laws.

The following discussion of our financial condition as of June 30, ~~2022~~2023 and results of operations for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 should be read in conjunction with the ~~2021~~2022 Form 10-K. For a more detailed description of the risks affecting our financial condition and results of operations, see “Risk Factors” in Part I, Item 1A of the ~~2021~~2022 Form 10-K and in Part II, Item 1A of this Quarterly Report. Capitalized terms used herein, but not otherwise defined, shall have the meaning ascribed to those terms in “Part I — Financial Information” of this Quarterly Report on Form 10-Q, including the notes to the consolidated financial statements contained therein. The terms “we,” “us,” “our” and the “Company” refer to Creative Media & Community Trust Corporation and its subsidiaries.

Definitions

We use certain defined terms throughout this Quarterly Report on Form 10-Q that have the following meanings:

The phrase “ADR” represents average daily rate. It is calculated as trailing ~~3-month~~six-month room revenue divided by the number of rooms occupied. For sold properties, ADR is presented for the Company’s period of ownership only.

The phrase “annualized rent” represents gross monthly base rent, or gross monthly contractual rent under parking and retail leases, multiplied by 12. This amount reflects total cash rent before abatements. Where applicable, annualized rent has been grossed up by adding annualized expense reimbursements to base rent.

The phrase “RevPAR” represents revenue per available room. It is calculated as trailing ~~3-month~~six-month room revenue divided by the number of available rooms. For sold properties, RevPAR is presented for the Company’s period of ownership only.

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Executive Summary

Business Overview

Creative Media & Community Trust Corporation (formerly known as CIM Commercial Trust Corporation) is a Maryland corporation and REIT. We primarily acquire, develop, own and operate both premier multifamily properties situated in vibrant communities throughout the United States and Class A and creative office real assets in ~~vibrant~~markets with similar business and ~~improving metropolitan communities throughout the United States. We seek~~employment characteristics to ~~acquire, operate and develop premier~~our multifamily ~~and creative office assets that cater to rapidly growing industries such as technology, media and entertainment in vibrant and emerging communities throughout the United States.~~investments. We seek to apply the expertise of CIM Group to the acquisition, development and operation of ~~top-tier~~premier multifamily properties ~~situated in dynamic markets with similar business~~ and ~~employment characteristics to its~~ creative office ~~investments.~~assets that cater to rapidly growing industries such as technology, media and entertainment. All of our real estate assets are and will generally be located in communities qualified by CIM Group as described further below. These communities are located in areas that include traditional downtown areas and suburban main streets, which have high barriers to entry, high population density, positive population trends and a propensity for growth. We believe that the critical mass of redevelopment in such areas creates positive externalities, which enhance the value of real estate assets in the area. We believe that these assets will provide greater returns than similar assets in other markets, as a result of the population growth, public commitment and significant private investment that characterize these areas. ~~We intend that no investment will exceed 10% of our gross asset value at the time of investment but management may ultimately determine to execute on more significant acquisitions.~~

~~We are operated by affiliates of CIM Group. CIM is a community-focused real estate and infrastructure owner, operator, lender and developer.~~ CIM is headquartered in Los Angeles, CA, with offices in Atlanta, GA, ~~Bethesda, MD,~~ Chicago, IL, Dallas, TX, London, UK, New York, NY, Orlando, FL, Phoenix, AZ, and Tokyo, Japan. CIM also maintains additional offices across the United States, as well as in Korea and Hong Kong ~~and the United Kingdom~~ to support its platform.

~~COVID~~-19

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. Since then, COVID-19 has spread worldwide, causing significant disruptions to the U.S. and world economies. Additionally, the spread of COVID-19 in the United States and the resulting restrictions on travel, meetings and social gatherings that have been implemented from time to time have impacted, and may continue to impact, the operations of our hotel in Sacramento, California.

The extent to which COVID-19 will continue to impact our operations and those of our tenants, business partners and borrowers will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of any new outbreaks involving variants of COVID-19 and actions taken to contain or mitigate such outbreaks, the distribution and acceptance of vaccines, the impacts on the U.S. and international economies and the extent to which federal, state and local governments provide relief or assistance to those affected by COVID-19. We cannot predict the significance, extent or duration of any adverse impact of COVID-19 on our business, financial condition, results of operations, cash flow or our ability to satisfy our debt service obligations or to maintain our level of distributions on its Common Stock or Preferred Stock. However, our business, financial condition, results of operations, and liquidity have been adversely affected and may continue to be adversely affected during 2022.

Properties

As of June 30, ~~2022,~~2023, our real estate portfolio consisted of 1725 assets, all of which were fee-simple properties, including two office properties (one of which is being partially converted into multifamily units) and one ~~office~~multifamily property, which we own through our investment in an unconsolidated joint ~~venture~~ventures (the “Unconsolidated Joint ~~Venture”~~Ventures”). As of June 30, ~~2022,~~2023, our 1213 office properties, totaling approximately ~~1.4~~1.3 million rentable square feet, were ~~78.1%~~83.0% occupied, ~~and~~ our one hotel with an ancillary parking garage, which has a total of 503 rooms, had RevPAR of ~~$127.98~~$163.18 for the six months ended June 30, ~~2022.~~2023 and our three multifamily properties were 83.9% occupied. Additionally, as of June 30, ~~2022,~~2023, we had ~~three~~seven development sites ~~(one~~(with two being used as a parking ~~lot)~~lots).

Strategy

We are a Maryland corporation and REIT. Our portfolio of investments currently consists of premier multifamily, Class A and creative office real assets in vibrant and improving metropolitan communities throughout the United States. We also own one hotel in northern California and a lending platform that originates loans under the Small Business Administration (“SBA”) 7(a) loan program. We seek to ~~acquire, operate~~apply the expertise of CIM Group to the acquisition, development and ~~develop~~operation of premier multifamily properties situated in vibrant communities throughout the United States. We also seek to acquire, develop and operate creative office assets that cater to rapidly growing industries such as technology, media and entertainment in vibrant and emerging communities throughout the United States. We seek to apply the expertise of CIM Group to the acquisition, development and operation of top-tier multifamily properties situated in dynamic markets with similar business and employment characteristics to ~~its creative office~~our multifamily investments. All of our multifamily and creative office assets are and will generally be located in communities qualified by CIM Group as described

~~Table of Contents~~

further below. These communities are located in areas that include traditional downtown areas and suburban main streets, which have high barriers to entry, high population density, positive population trends and a propensity for growth. We believe that the critical mass of redevelopment in such areas creates positive externalities, which enhance the value of real estate assets in the area. We believe that these assets will provide greater returns than similar assets in other markets, as a result of the population growth, public commitment and significant private investment that characterize these areas.

Our investments in multifamily and creative office assets may take different forms, including direct equity or preferred investments, real estate development activities, side-by-side investments or co-investments with vehicles managed or owned by CIM Group and/or originating loans that are secured directly or indirectly by properties primarily located in qualified communities (“Qualified Communities”) that meet our strategy. ~~We intend that no investment will exceed 10%~~Further, we leverage the investor relationships of ~~our gross asset value at the time of investment but management may ultimately determine~~CIM Group to execute on our investment pipeline using an asset-light approach for certain of our investments. Under this approach, we coinvest with one or more ~~significant acquisitions.~~third parties on an asset-level basis by raising capital from such third parties, maintain an economic interest in the asset and, in some cases, earn a management fee and a percentage of the profits. We believe this is a compelling model that is expected to contribute to strong returns on invested capital while reducing risk by reducing our capital outlay.

We intend to dispose of assets that do not fit into our strategy over time and opportunistically (i.e., we do not have any specific time frame with respect to such dispositions). Further, as a matter of prudent management, we regularly evaluate each asset within our portfolio as well as our strategy. Such review may result in dispositions when, among other things, we believe the proceeds generated from the sale of an asset can be redeployed in one or more assets that will generate better returns, or the market value of such asset is equal to or exceeds our view of its intrinsic value. ~~If we dispose~~

Table of ~~any of these assets, we intend to reinvest the proceeds in assets that fit our strategy.~~Contents

CIM Group Operations

CIM Group believes that a vast majority of the risks associated with acquiring real estate are mitigated by accumulating local market knowledge of the community where the asset is located. As a result, CIM Group typically spends significant resources over a period of between six months and five years evaluating communities prior to making any acquisitions. The distinct districts that CIM Group identifies through this process as targets for acquisitions are referred to as “Qualified Communities.” Qualified Communities typically have dedicated resources to become, or are currently, vibrant communities where people can live, work, shop and be entertained, all within walking distance or close proximity to public transportation. These areas, which include traditional downtown areas and suburban main streets, generally have high barriers to entry, high population density, positive population trends, a propensity for growth and support for investment. CIM Group believes that the critical mass of redevelopment in such Qualified Communities creates positive externalities, which enhance the value of real estate assets in the area. CIM Group targets acquisitions of diverse types of real estate assets, including retail, residential, office, parking, hotel, signage and mixed-use through CIM Group’s extensive network and its current opportunistic activities.

CIM Group seeks to maximize the value of its holdings through active onsite property management and leasing. CIM Group has extensive in-house research, acquisition, credit analysis, development, finance, leasing and onsite property management capabilities, which leverage its deep understanding of metropolitan communities to position properties for multiple uses and to maximize operating income. As a vertically-integrated owner and operator, CIM Group has in-house onsite property management and leasing capabilities. Property managers prepare annual capital and operating budgets and monthly operating reports, monitor results and oversee vendor services, maintenance and capital improvement schedules. In addition, they ensure that revenue objectives are met, lease terms are followed, receivables are collected, preventative maintenance programs are implemented, vendors are evaluated and expenses are controlled. In addition, CIM Group’s real assets management committee (the “Real Assets Management Committee”) reviews and approves strategic ~~plans for each asset, including~~decisions related to financing ~~leasing, marketing~~strategies and ~~property positioning, as well as~~ hold/sell analyses and performance tracking relative to the overall business plan. CIM Group’s organizational structure provides for continuity through multi-disciplinary teams responsible for an asset from the time of the original investment recommendation, through the implementation of the asset’s business plan, and any repositions or ultimate disposition activities.

CIM Group’s Investments and Development teams are separate groups that work very closely together on transactions requiring development or redevelopment. While the Investments team is ultimately responsible for acquisition analysis, both the Investments and Development teams perform due diligence, evaluate and determine underwriting assumptions and participate in the development management and ongoing asset management of CIM Group’s assets under development. The Development team is also responsible for the oversight and or execution of securing entitlements and the development/repositioning process. In instances where CIM Group is not the lead developer, CIM Group’s in-house Development team continues to provide development and construction oversight to co-sponsors through a shadow team that oversees the progress of the development from beginning to end to ensure adherence to the budgets, schedules, quality and scope of the project in order to maintain CIM Group’s vision for the final product. Both the Investments and Development teams interact as a cohesive team when sourcing, underwriting, acquiring, executing and managing the business plan of an opportunistic acquisition.

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Financing Strategy

We may finance our future activities through one or more of the following methods: (i) offerings of shares of our common stock, par value $0.001 per share (“Common Stock”), preferred stock or other equity and or debt securities of the Company; (ii) credit facilities and term loans; (iii) the addition of senior recourse or non-recourse debt using target acquisitions as well as existing assets as ~~collateral;~~collateral, including the securitization of portions of our loan portfolio; (iv) the sale of existing assets; (v) partnering with co-investors; and or ~~(v)~~(vi) cash flows from operations.

Rental Rate Trends

Office Statistics: The following table sets forth occupancy rates and annualized rent per occupied square foot across our office portfolio as of the specified periods (includes ~~property~~100% of our properties partially owned through ~~the Unconsolidated Joint Venture)~~unconsolidated joint ventures):


		As of June 30,							As of June 30,
		2022			2021				2023			2022
Occupancy ~~(1)~~(2)	Occupancy ~~(1)~~(2)	78.1		%	78.0		%	Occupancy ~~(1)~~(2)	83.0		%	78.1		%
Annualized rent per occupied square foot ~~(2)~~(3)	Annualized rent per occupied square foot ~~(2)~~(3)	$	54.13		$	52.32		Annualized rent per occupied square foot ~~(2)~~(3)	$	56.71		$	54.13

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(1)The information presented in this table represents historical information as of the date indicated without giving effect to any property sales occurring thereafter.

(2)In connection with the 4750 Wilshire Project (as defined later), the Company is no longer classifying approximately 110,000 square feet of vacant space at its property at 4750 Wilshire Boulevard in Los Angeles, California as rentable office square footage as of June 30, 2023.

(3)Represents gross monthly base rent under leases commenced as of the specified periods, multiplied by 12. This amount reflects total cash rent before abatements. Total abatements, representing lease incentives in the form of free rent, for the twelve months ended June 30, ~~2022~~2023 and ~~2021~~2022 were approximately ~~$2.2~~$2.8 million and ~~$1.3~~$2.2 million, respectively. Where applicable, annualized rent has been grossed up by adding annualized expense reimbursements to base rent. Annualized rent for certain office properties includes rent attributable to retail.

Over the next four quarters, we expect to see expiring cash rents as set forth in the table below (includes ~~property~~100% of our properties partially owned through ~~the Unconsolidated Joint Venture)~~unconsolidated joint ventures):


		For the Three Months Ended									For the Three Months Ended
		September 30, 2022		December 31, 2022		March 31, 2023		June 30, 2023			September 30, 2023		December 31, 2023		March 31, 2024		June 30, 2024
Expiring Cash Rents:	Expiring Cash Rents:									Expiring Cash Rents:
Expiring square feet (1)	Expiring square feet (1)	55,126		42,368		29,477		45,916		Expiring square feet (1)	25,847		17,854		46,016		28,241
Expiring rent per square foot (2)	Expiring rent per square foot (2)	$	49.45	$	49.64	$	51.12	$	53.03	Expiring rent per square foot (2)	$	62.33	$	47.38	$	46.09	$	48.12

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(1)Month-to-month tenants occupying a total of ~~15,552~~8,921 square feet are included in the expiring leases in the first quarter listed.

(2)Represents gross monthly base rent, as of June 30, ~~2022,~~2023, under leases expiring during the periods above, multiplied by 12. This amount reflects total cash rent before abatements. Where applicable, annualized rent has been grossed up by adding annualized expense reimbursements to base rent.

During the three and six months ended June 30, ~~2022,~~2023, we executed leases with terms longer than 12 months totaling ~~39,392~~29,212 and ~~60,870~~73,099 square feet, respectively. The table below sets forth information on certain of our executed leases during the three and six months ended June 30, ~~2022,~~2023, excluding space that was vacant for more than one year, month-to-month leases, leases with an original term of less than 12 months, related party leases, and space where the previous tenant was a related party:

Number of
Leases (1) Rentable
Square
Feet New Cash
Rents per
Square
Foot (2) Expiring
Cash
Rents per
Square
Foot (2)
Three months ended June 30, 2022 7 26,766 $ 35.11 $ 33.18
Six months ended June 30, 2022 14 41,737 $ 44.60 $ 43.57


	Number of Leases (1)	Rentable Square Feet	New Cash Rents per Square Foot (2)		Expiring Cash Rents per Square Foot (2)
Three months ended June 30, 2023	4	15,356	$	60.37	$	60.92
Six months ended June 30, 2023	12	47,992	$	56.02	$	55.90

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(1)Based on the number of tenants that signed leases.

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(2)Cash rents represent gross monthly base rent, multiplied by twelve. This amount reflects total cash rent before abatements. Where applicable, annualized rent has been grossed up by adding annualized expense reimbursements to base rent.

Fluctuations in submarkets, buildings and terms of leases cause large variations in these numbers and make predicting the changes in rent in any specific period difficult. Our rental and occupancy rates are impacted by general economic conditions, including the pace of regional and economic growth, and access to capital. Therefore, we cannot give any assurance that leases will be renewed or that available space will be re-leased at rental rates equal to or above the current market rates. Additionally, decreased demand and other negative trends or unforeseeable events that impair our ability to timely renew or re lease space could have a material adverse effect on our business, financial condition, results of operations, cash flow or our ability to satisfy our debt service obligations or to maintain our level of distributions on our Common Stock or Preferred Stock.

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Multifamily Statistics: The following table sets forth occupancy rates and the monthly rent per occupied unit across our multifamily portfolio for the specified periods (includes 100% of our property partially owned through an unconsolidated joint venture):


	As of June 30,
	2023			2022
Occupancy	83.9		%	N/A
Monthly rent per occupied unit (1)	$	2,914		N/A

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(1)Represents gross monthly base rent under leases commenced as of the specified period, divided by occupied units. This amount reflects total cash rent before concessions.

Hotel Statistics: The following table sets forth the occupancy, ADR and RevPAR for our hotel in Sacramento, California for the specified periods:


		For the Six Months Ended June 30,							For the Six Months Ended June 30,
		2022			2021				2023			2022
Occupancy	Occupancy	73.3		%	38.8		%	Occupancy	80.9		%	73.3		%
ADR	ADR	$	174.48		$	119.99		ADR	$	201.59		$	174.48
RevPAR	RevPAR	$	127.98		$	46.52		RevPAR	$	163.18		$	127.98

Seasonality

Our revenues and expenses for our hotel property are subject to seasonality during the year. Generally, our hotel revenues are greater in the first and second quarters than the third and fourth quarters. This seasonality can be expected to cause quarterly fluctuations in revenues, segment net operating income, net income and cash provided by operating activities. In addition, the hotel industry is cyclical and demand generally follows, on a lagged basis, key macroeconomic factors.

Lending Segment

Through our loans originated under the SBA 7(a) Program, we are a national lender that primarily originates loans to small businesses. We identify loan origination opportunities through personal contacts, internet referrals, attendance at trade shows and meetings, direct mailings, advertisements in trade publications and other marketing methods. We also generate loans through referrals from real estate and loan brokers, franchise representatives, existing borrowers, lawyers and accountants. In addition, as an SBA 7(a) licensee, we originated loans as an authorized lender under the Paycheck Protection Program (“PPP”), which was enacted during the year ended December 31, 2020 and completed during 2021. Originations under the PPP have ended and we had a remaining outstanding balance of ~~$205,000~~ ~~in PPP loans outstanding as of June 30, 2022.~~

The SBA 7(a) Loan Program is the SBA’s most common loan ~~program and is considered to be the best SBA assisted loan option when real estate is part of a business purchase.~~program. The maximum loan amount for an SBA 7(a) loan is $5.0 million. Key eligibility factors are based on what the business does to generate its income, its credit history, the liquidity of the borrower, size standards and where the business operates. We ~~assist in~~work with potential borrowers to identity the ~~identification of which~~ type of loan ~~is best suited~~that would be appropriate for ~~a potential~~each such borrower’s needs. Our SBA 7(a) term loans have monthly repayment terms of principal and interest and are originated with variable interest rates based on the prime rate. Most of our SBA 7(a) loans have maturities of approximately 25 years.

The PPP provided lenders who originated loans under the program with a 100% guaranty of repayment (provided certain conditions are met) and provided small businesses with uncollateralized and unguaranteed loans at an interest rate of 1.00%. We obtained all funds to originate loans under the PPP from the Federal Reserve on a basis that correlated to the outstanding principal balance due from our borrowers pursuant to the PPP on a dollar-for-dollar basis with a cost of funds of 0.35%. As of June 30, 2022, substantially all loans originated under the PPP have been repaid (with a concomitant reduction in our obligations to the Federal Reserve).

While we have focused on originating real estate loans almost exclusively to the limited service and mid-scale hospitality industry, we intend to increase our efforts to originate other real estate collateralized loans. These loans are anticipated to be concentrated in industries in which we previously had positive experience, including convenience store, RV park and single purpose building owner-occupied restaurant operations and may include owner-occupied industrial operations/warehouse buildings.

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Property Concentration

Kaiser Foundation Health Plan, Incorporated, ~~(“Kaiser”),~~ which occupied space in one of our Oakland, California properties, accounted for ~~29.2%~~29.3% of our annualized office rental income for the three months ended June 30, ~~2022.~~2023.

~~2022~~

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2023 Results of Operations

Comparison of the Three Months Ended June 30, ~~2022~~2023 to the Three Months Ended June 30, ~~2021~~2022

Net (Loss) Income and FFO


		Three Months Ended June 30,				Change					Three Months Ended June 30,				Change
		2022		2021		$		%			2023		2022		$		%
		(dollars in thousands)									(dollars in thousands)
Total revenues	Total revenues	$	26,403	$	22,673	$	3,730	16.5	%	Total revenues	$	32,760	$	26,403	$	6,357	24.1	%
Total expenses	Total expenses	$	23,411	$	21,150	$	2,261	10.7	%	Total expenses	$	50,058	$	23,411	$	26,647	*

Net income		$	2,931	$	527	$	2,404	456.2	%
Net (loss) income										Net (loss) income	$	(18,361)	$	2,931	$	(21,292)	*

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(*)Percentage changes in excess of 100% are deemed to be not meaningful

Net loss was $18.4 million for the three months ended June 30, 2023 compared to net income ~~increased to $2.9~~of $2.9 million ~~or by $2.4 million,~~ for the three months ended June 30, 2022, ~~compared to net income~~a decrease of ~~$527,000~~ ~~for the three months ended June 30, 2021.~~$21.3 million. The ~~increase~~decrease was primarily due to an increase in ~~office~~depreciation and amortization expense of $15.5 million and an increase in interest expense not allocated to our operating segments of $5.1 million, and a decrease of $838,000 in segment net operating income of ~~$314,000, an increase~~(discussed in ~~hotel segment net operating income of $3.2 million, a decrease in asset management fees of~~ ~~$1.3 million~~ ~~and a decrease in provision for income taxes of~~ ~~$675,000, partially offset by a decrease in lending segment net operating income of~~ ~~$3.4 million.~~more detail below).

Funds from Operations

We believe that funds from operations (“FFO”), a non-GAAP measure, is a widely recognized and appropriate measure of the performance of a REIT and that it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO represents net income (loss) attributable to common stockholders, computed in accordance with GAAP, which reflects the deduction of redeemable preferred stock dividends accumulated, excluding gains (or losses) from sales of real estate, impairment of real estate, and real estate depreciation and amortization. We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts (the “NAREIT”).

Like any metric, FFO should not be used as the only measure of our performance because it excludes depreciation and amortization and captures neither the changes in the value of our real estate properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our operating results. Other REITs may not calculate FFO in accordance with the standards established by the NAREIT; accordingly, our FFO may not be comparable to the FFOs of other REITs. Therefore, FFO should be considered only as a supplement to net income (loss) as a measure of our performance and should not be used as a supplement to or substitute measure for cash flows from operating activities computed in accordance with GAAP. FFO should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends.

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The following table sets forth a historical reconciliation of net loss attributable to common stockholders to FFO attributable to common stockholders (in thousands):


		Three Months Ended June 30,					Three Months Ended June 30,
		2022		2021			2023		2022
Net loss attributable to common stockholders(1)	Net loss attributable to common stockholders(1)	$	(2,349)	$	(4,210)	Net loss attributable to common stockholders(1)	$	(23,815)	$	(2,349)
Depreciation and amortization	Depreciation and amortization	4,974		5,069		Depreciation and amortization	20,472		4,974

Noncontrolling interests’ proportionate share of depreciation and amortization						Noncontrolling interests’ proportionate share of depreciation and amortization	(883)		—

FFO attributable to common stockholders(1)	FFO attributable to common stockholders(1)	$	2,625	$	859	FFO attributable to common stockholders(1)	$	(4,226)	$	2,625

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(1)During the three months ended June 30, ~~2022~~2023 and ~~2021,~~2022, we recognized ~~$106,000~~$315,000 and ~~$13,000,~~$106,000, respectively, of redeemable preferred stock redemptions and ~~$4,000~~$0 and ~~$106,000,~~$4,000, respectively, of redeemable preferred stock deemed dividends. Such amounts are included in, and have the effect of ~~reducing, net loss attributable to common stockholders and FFO attributable to common stockholders, because redeemable preferred stock redemptions are not an adjustment prescribed by NAREIT.~~

FFO attributable to common stockholders was $2.6 million for the three months ended June 30, 2022, an increase of $1.8 million compared to $859,000 for the three months ended June 30, 2021. The increase in FFO is ~~primarily attributable to an increase in office segment net operating income of~~ ~~$314,000, an increase in hotel segment net operating income of $3.2 million, a decrease in asset management fees of~~ ~~$1.3 million and a~~ ~~decrease in provision for income taxes of~~ ~~$675,000, partially offset by a decrease in lending segment net operating income of~~ ~~$3.4 million~~ ~~as well as an increase in redeemable preferred stock dividends declared or accumulated of $540,000~~.

~~Summary Segment Results~~

During the three months ended June 30, 2022 and 2021, we operated in three segments: office and hotel properties and lending. Set forth and described below are summary segment results for our operating segments (dollar amounts in thousands).

Three Months Ended June 30, Change
2022 2021 $ %
Revenues:
Office $ 14,077 $ 13,356 $ 721 5.4 %
Hotel $ 9,576 $ 3,477 $ 6,099 175.4 %
Lending $ 2,750 $ 5,839 $ (3,089) (52.9) %
Expenses:
Office $ 6,437 $ 5,770 $ 667 11.6 %
Hotel $ 6,329 $ 3,479 $ 2,850 81.9 %
Lending $ 1,061 $ 792 $ 269 34.0 %
Income From Unconsolidated Entity
Office $ 260 $ — $ 260 100.0 %
Non-Segment Revenue and Expenses:
Interest and other income $ — $ 1 $ (1) (100.0) %
Asset management and other fees to related parties $ (920) $ (2,260) $ 1,340 (59.3) %
Expense reimbursements to related parties - corporate $ (526) $ (454) $ (72) 15.9 %
Interest expense $ (2,284) $ (2,491) $ 207 (8.3) %
General and administrative $ (880) $ (835) $ (45) 5.4 %
Depreciation and amortization $ (4,974) $ (5,069) $ 95 (1.9) %
Provision for income taxes $ (321) $ (996) $ 675 (67.8) %

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~~Revenues~~

~~Office Revenue:~~ Office revenue includes rental revenue, expense reimbursements and lease termination income from office properties. Office revenue increased to $14.1 million, or by 5.4%, for the three months ended June 30, 2022 compared to $13.4 million for the three months ended June 30, 2021. The increase is primarily due to increased rental revenue at an office property in Austin, Texas as a result of higher occupancy for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.

~~Hotel Revenue:~~ Hotel revenue increased to $9.6 million, or by 175.4%, for the three months ended June 30, 2022, compared to $3.5 million for the three months ended June 30, 2021, primarily due to an increase in occupancy and average daily rate during the second quarter of 2022 as compared to the second quarter of 2021 as a result of the hospitality industry recovering from the impact of COVID-19.

~~Lending Revenue:~~ Lending revenue represents revenue from our lending subsidiaries, including interest income on loans and other loan related fee income. Lending revenue decreased to $2.8 million, or by 52.9%, for the three months ended June 30, 2022, compared to $5.8 million for the three months ended June 30, 2021. The decrease is primarily due to lower premium income as a result of lower loan sale volume and a reduction in the market premium achieved during the three months ended June 30, 2022, compared to the three months ended June 30, 2021. We expect lending revenue to be lower materially for the second half of 2022, when compared to the second half of 2021 because of lower loan origination volume compared to 2021, a year when the SBA temporarily increased guaranteed percentages for SBA 7(a) loan originations, decreased demand for variable rate loans in the current inflationary economic environment, which we believe tends to lead borrowers to seek fixed rate loan products, and lower revenue from servicing assets retained for servicing the government guaranteed portion of our loans due to expected increases in prepayment. These factors were partially offset by acceleration of income-recognition from any principal discounts recorded on our loans due to increased prepayment.

~~Expenses~~

~~Office Expenses:~~ Office expenses increased to $6.4 million, or by 11.6%, for the three months ended June 30, 2022, compared to $5.8 million for the three months ended June 30, 2021. The increase is primarily due to an increase in operating expenses at an office property in Austin, Texas, primarily as a result of increased real estate tax expense, as well as at an office property in Beverly Hills, California and an office property in Oakland, California, primarily as a result of higher maintenance expenses.

~~Hotel Expenses:~~ Hotel expenses increased to $6.3 million, or by 81.9%, for the three months ended June 30, 2022, compared to $3.5 million for the three months ended June 30, 2021, primarily as a result of increased occupancy at the hotel as compared to the first quarter of 2021 as a result of the hospitality industry recovering from the impact of COVID-19.

~~Lending Expenses:~~ Lending expenses represent expenses from our lending subsidiaries, including interest expense, general and administrative expenses and fees to related parties. Lending expenses increased to $1.1 million, or by 34.0%, for the three months ended June 30, 2022, compared to $792,000 for the three months ended June 30, 2021. The increase was primarily due to an increase in salary expenses (largely due to a reduction in costs being capitalized as a result of lower loan origination volume) as well as an increase in general and administrative expenses.

~~Income From Unconsolidated Entity:~~ Income from our unconsolidated entity included in office segment net operating income was $260,000 for the three months ended June 30, 2022. As our investment in the unconsolidated entity was made in February 2022, there was no comparable income for the three months ended June 30, 2021.

~~Asset Management and Other Fees to Related Parties:~~ Asset management fees and other fees to related parties, which have not been allocated to our operating segments, were $920,000 for the three months ended June 30, 2022, a decrease of 59.3%, compared to $2.3 million for the three months ended June 30, 2021. The decrease was a result of the Fee Waiver which became effective January 1, 2022 and resulted in the new Base Fee calculated at an annual rate of 1% (or 0.25% per quarter) of the average net asset value attributable to common stockholders at the beginning and end of the period.

~~Expense Reimbursements to Related Parties~~—~~Corporate:~~ The Administrator receives compensation and or reimbursement for performing certain services for the Company and its subsidiaries that are not covered by the Incentive Fee. Expense reimbursements to related parties-corporate were $526,000 for the three months ended June 30, 2022, an increase of 15.9%, compared to $454,000 for the three months ended June 30, 2021 due to increases in allocated payroll.

~~Interest Expense:~~ Interest expense, which has not been allocated to our operating segments, was $2.3 million for the three months ended June 30, 2022, a decrease of 8.3% compared to $2.5 million for the three months ended June 30, 2021. The decrease is primarily due to a lower average outstanding principal balance on our 2018 Revolving Credit Facility compared to

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the three months ended June 30, 2021, partially offset by increases in the LIBOR component of interest rates on our variable-rate debt for the three months ended June 30, 2022 compared to the three months ended June 30, 2021.

~~General and Administrative Expenses:~~ General and administrative expenses, which have not been allocated to our operating segments, were $880,000 for the three months ended June 30, 2022, consistent with $835,000 for the three months ended June 30, 2021.

~~Depreciation and Amortization Expense:~~ ~~Depreciation and amortization expense was consistent at $5.0 million for both the three months ended June 30, 2022 and 2021.~~

~~Provision for Income Taxes:~~ Provision for income taxes was $321,000 for the three months ended June 30, 2022 as compared to $996,000 for the three months ended June 30, 2021. The decrease in provision for income taxes is due to a decrease in taxable income at our taxable REIT subsidiaries, largely due to the operations of the lending division during the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.

~~2022 Results of Operations~~

~~Comparison of the Six Months Ended June 30, 2022 to the Six Months Ended June 30, 2021~~

~~Net Income (Loss) and FFO~~

Six Months Ended June 30, Change
2022 2021 $ %
Total revenues $ 51,185 $ 41,552 $ 9,633 23.2 %
Total expenses $ 45,704 $ 43,326 $ 2,378 5.5 %
Net income (loss) $ 5,233 $ (3,144) $ 8,377 (266.4) %

Net income increased to $5.2 million, or by $8.4 million, for the six months ended June 30, 2022, compared to net loss of $3.1 million for the six months ended June 30, 2021. The increase is primarily attributable to an increase of $541,000 in office segment net operating income, an increase of $6.5 million in hotel segment net operating income, a decrease of $2.7 million in asset management fees, a decrease of $859,000 in general and administrative expenses, a decrease of $585,000 in interest expense and a decrease of $742,000 in provision for income taxes, partially offset by a decrease of $3.7 million in lending segment net operating income.

~~Funds from Operations~~

~~The following table sets forth a historical reconciliation of net loss attributable to common stockholders to FFO attributable to common stockholders (in thousands):~~

Six Months Ended June 30,
2022 2021
Net loss attributable to common stockholders $ (5,160) $ (12,416)
Depreciation and amortization 9,978 10,106
FFO attributable to common stockholders $ 4,818 $ (2,310)

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~~(1)~~During the six months ended June 30, 2022 and 2021, we recognized $181,000 and $26,000, respectively, of redeemable preferred stock redemptions and $19,000 and $163,000, respectively, of redeemable preferred stock deemed dividends. Such amounts are included in, and have the effect of reducing,increasing net loss attributable to common stockholders and FFO attributable to common stockholders because redeemable preferred stock redemptions are not an adjustment prescribed by NAREIT.

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FFO attributable to common stockholders was ~~$4.8~~$(4.2) million for the ~~six~~three months ended June 30, ~~2022, an increase~~2023, a decrease of ~~$7.1~~$6.8 million compared to ~~$(2.3)~~$2.6 million for the ~~six~~three months ended June 30, ~~2021.~~ 2022. The ~~increase~~decrease in FFO iswas primarily ~~attributable~~due to an increase of $541,000 in office segment net operating income, an increase of $6.5 million in hotel segment net operating income, a decrease of $2.7 million in asset management and other fees to related parties, a decrease of $859,000 in general and administrative expenses, a decrease of $585,000 in interest expense ~~and a decrease~~not allocated to our operating segments of ~~$742,000 in provision for income taxes, partially offset by a decrease of $3.7~~$5.1 million, ~~in lending segment net operating income and by~~ an increase in redeemable preferred stock dividends ~~declared or accumulated~~and redeemable preferred stock redemptions of ~~$1.1 million.~~$1.0 million and $209,000, respectively, and a decrease of $838,000 in segment net operating income (discussed in more detail below).

Summary Segment Results

During the ~~six~~three months ended June 30, ~~2022~~2023 we operated in four segments: office, hotel and ~~2021,~~multifamily properties and lending. During the three months ended June 30, 2022, we operated in three segments: office and hotel properties and lending. Set forth and described below are summary segment results for our operating segments (dollar amounts in thousands).


		Six Months Ended June 30,	Change						Three Months Ended June 30,				Change
			2022		2021		$			%			2023		2022		$		%
Revenues:	Revenues:											Revenues:
Office	Office		$	28,182	$	26,883	$	1,299		4.8	%	Office	$	13,975	$	14,077	$	(102)	(0.7)	%
Hotel	Hotel		$	17,369	$	5,355	$	12,014		224.4	%	Hotel	$	11,668	$	9,576	$	2,092	21.8	%
Multifamily												Multifamily	$	4,078	$	—	$	4,078	N/A
Lending	Lending		$	5,634	$	9,313	$	(3,679)		(39.5)	%	Lending	$	2,963	$	2,750	$	213	7.7	%

Expenses:	Expenses:											Expenses:
Office	Office		$	12,648	$	11,510	$	1,138		9.9	%	Office	$	6,426	$	6,437	$	(11)	(0.2)	%
Hotel	Hotel		$	11,728	$	6,164	$	5,564		90.3	%	Hotel	$	7,555	$	6,329	$	1,226	19.4	%
Multifamily												Multifamily	$	3,362	$	—	$	3,362	N/A
Lending	Lending		$	2,197	$	2,160	$	37		1.7	%	Lending	$	2,439	$	1,061	$	1,378	—	%

Income From Unconsolidated Entity
(Loss) income from unconsolidated entities												(Loss) income from unconsolidated entities
Office	Office		$	380	$	—	$	380		100.0	%	Office	$	(710)	$	260	$	(970)	N/A
Multifamily												Multifamily	$	(194)	$	—	$	(194)	N/A

Non-Segment Revenue and Expenses:	Non-Segment Revenue and Expenses:											Non-Segment Revenue and Expenses:
Interest and other income	Interest and other income		$	—	$	1	$	(1)		(100.0)	%	Interest and other income	$	76	$	—	$	76	N/A
Asset management and other fees to related parties	Asset management and other fees to related parties		$	(1,841)	$	(4,519)	$	2,678		(59.3)	%	Asset management and other fees to related parties	$	(627)	$	(920)	$	293	(31.8)	%
Expense reimbursements to related parties - corporate	Expense reimbursements to related parties - corporate		$	(948)	$	(1,059)	$	111		(10.5)	%	Expense reimbursements to related parties - corporate	$	(677)	$	(526)	$	(151)	28.7	%
Interest expense	Interest expense		$	(4,347)	$	(4,932)	$	585		(11.9)	%	Interest expense	$	(7,394)	$	(2,284)	$	(5,110)	*
General and administrative	General and administrative		$	(2,017)	$	(2,876)	$	859		(29.9)	%	General and administrative	$	(1,106)	$	(880)	$	(226)	25.7	%

Depreciation and amortization	Depreciation and amortization		$	(9,978)	$	(10,106)	$	128		(1.3)	%	Depreciation and amortization	$	(20,472)	$	(4,974)	$	(15,498)	*

Provision for income taxes	Provision for income taxes		$	(628)	$	(1,370)	$	742		(54.2)	%	Provision for income taxes	$	(159)	$	(321)	$	162	(50.5)	%

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(*)Percentage changes in excess of 100% are deemed to be not meaningful

Revenues

Office Revenue: Office revenue includes rental revenue, expense reimbursements and lease termination income from office properties. Office revenue ~~increased to $28.2~~of $14.0 million ~~or by 4.8%,~~ for the ~~six~~three months ended June 30, 2023 remained consistent with $14.1 million for the three months ended June 30, 2022 ~~compared to $26.9 million for the six months ended June 30, 2021. The~~as an increase ~~is primarily due to increased~~in rental ~~revenue~~revenues at an office property in ~~Austin, Texas~~Beverly Hills, California, due to increased occupancy and rental rates, was offset by a decrease in rental revenues as a result of ~~higher occupancy as compared to~~ the ~~six months ended June 30, 2021.~~disposition of an 80% interest in an office property in Los Angeles, California in February 2023.

Hotel Revenue: Hotel revenue increased to ~~$17.4~~$11.7 million, or by ~~224.4%~~21.8%, for the ~~six~~three months ended June 30, ~~2022,~~2023, compared to ~~$5.4~~$9.6 million for the ~~six~~three months ended June 30, ~~2021, primarily~~2022, due to an increase in occupancy and average daily rate

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during the second quarter of 2023 as compared to the second quarter of 2022 as a result of the hospitality industry continuing to recover from the impact of COVID-19.

Multifamily Revenue: Multifamily revenue was $4.1 million for the three months ended June 30, 2023. As our multifamily properties were acquired during the six months ended June 30, ~~2022 as compared to~~2023, there was no comparable revenue for the ~~six~~three months ended June 30, ~~2021 as a result of the hospitality industry recovering from the impact of COVID-19.~~2022.

Lending Revenue: Lending revenue represents revenue from our lending subsidiaries, including interest income on loans and other loan related fee income. Lending revenue ~~decreased~~increased to ~~$5.6~~$3.0 million, or by ~~39.5%~~7.7%, for the ~~six~~three months ended June 30, ~~2022,~~2023, compared to ~~$9.3~~$2.8 million for the ~~six~~three months ended June 30, ~~2021.~~2022. The ~~decrease~~increase is ~~primarily~~ due to ~~lower~~increased interest income from an increase in interest rates, partially offset by decreased premium income as a result of lower loan sale volume ~~and~~during the three months ended June 30, 2023, compared to the three months ended June 30, 2022.

Loss From Unconsolidated Office Entities: The income from our unconsolidated entities included in office segment net operating income decreased to a ~~reduction~~loss of $710,000 for the three months ended June 30, 2023 compared to income of $260,000 for the three months ended June 30, 2022. The decrease was primarily due to an increase in mortgage interest expense during the ~~market premium achieved~~three months ended June 30, 2023.

Income From Unconsolidated Multifamily Entity: The loss from our unconsolidated entity included in multifamily segment net operating income was $194,000 for the three months ended June 30, 2023. As our unconsolidated multifamily property was acquired during the six months ended June

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30, ~~2022, compared to~~2023, there was no comparable income for the ~~six~~three months ended June 30, ~~2021. We expect lending revenue~~2022.

Interest and Other Income: Interest and other income, which has not been allocated to ~~be lower materially~~our operating segments, was $76,000 for the ~~second half of 2022, when compared~~three months ended June 30, 2023, primarily related to interest earned on money market accounts. There was no comparable income for the second half of 2021 because of lower loan origination volume compared to 2021, a year when the SBA temporarily increased guaranteed percentages for SBA 7(a) loan originations, decreased demand for variable rate loans in the current inflationary economic environment, which we believe tends to lead borrowers to seek fixed rate loan products, and lower revenue from servicing assets retained for servicing the government guaranteed portion of our loans due to expected increases in prepayment. These factors were partially offset by acceleration of income-recognition from any principal discounts recorded on our loans due to increased prepayment.three months ended June 30, 2022.

Expenses

Office Expenses: Office expenses ~~increased to $12.6~~of $6.4 million ~~or by 9.9%,~~ for the ~~six~~three months ended June 30, ~~2022, compared to $11.5~~2023, remained consistent with $6.4 million for the ~~six~~three months ended June 30, 2021. The increase is primarily due to an increase in operating expenses at an office property in Austin, Texas, primarily as a result of increased real estate tax expense, and an office property in Oakland, California, primarily as a result of higher maintenance expenses. and an office property in Oakland, California as compared to the six months ended June 30, 2021.2022.

Hotel Expenses: Hotel expenses increased to ~~$11.7~~$7.6 million, or by ~~90.3%~~19.4%, for the ~~six~~three months ended June 30, ~~2022,~~2023, compared to ~~$6.2~~$6.3 million for the ~~six~~three months ended June 30, ~~2021,~~2022, primarily as a result of increased occupancy at the hotel ~~during~~ as a result of the hospitality industry ~~recovering~~continuing to recover from the impact of COVID-19.

Multifamily Expenses: Multifamily expenses were $3.4 million for the three months ended June 30, 2023. As our multifamily properties were acquired during the six months ended June 30, 2023, there were no comparable expenses for the three months ended June 30, 2022.

Lending Expenses: Lending expenses represent expenses from our lending subsidiaries, including interest expense, general and administrative expenses and fees to related ~~party.~~parties. Lending expenses ~~were $2.2~~increased to $2.4 million, for ~~both~~ the ~~six~~three months ended June 30, ~~2022 and 2021.~~2023, compared to $1.1 million for the three months ended June 30, 2022. The increase was primarily due to an increase in interest expense related to the issuance of new SBA 7(a) loan-backed notes in connection with the securitization that closed in March 2023 as well as an increase in allocated payroll expense.

Asset Management and Other Fees to Related Parties: Asset management fees and other fees to related parties, which have not been allocated to our operating segments, were ~~$1.8 million~~$627,000 for the ~~six~~three months ended June 30, ~~2022,~~2023, a decrease of ~~59.3%~~31.8%, compared to ~~$4.5 million~~$920,000 for the ~~six~~three months ended June 30, ~~2021.~~2022. The decrease was a result of ~~the Fee Waiver which became effective January 1, 2022 and resulted~~a reduction in ~~the new Base Fee calculated at an annual rate of 1% (or 0.25% per quarter) of the average~~asset management fees related to a decrease in our net asset value, ~~attributable to common stockholders at~~primarily resulting from a reduction in the ~~beginning and~~fair value of our investments in real estate as of the end of ~~the period.~~2022.

Expense Reimbursements to Related Parties—Corporate: The Administrator receives compensation and or reimbursement for performing certain services for the Company and its ~~subsidiaries that are not covered by the Incentive Fee.~~subsidiaries. Expense reimbursements to related parties-corporate ~~were $948,000~~increased by 28.7% to $677,000 for the ~~six~~three months ended June 30, 2023, compared to $526,000 for the three months ended June 30, 2022, ~~a decrease of 10.5%, compared to $1.1 million for the six months ended June 30, 2021. The decrease was~~ primarily due to ~~reductions~~increases in allocated ~~payroll.~~payroll expenses related to the multifamily asset acquisitions in Oakland, California during the first quarter of 2023.

Interest Expense: Interest expense, which has not been allocated to our operating segments, ~~was $4.3~~increased to $7.4 million for the ~~six~~three months ended June 30, ~~2022, a decrease of 11.9%~~2023, compared to ~~$4.9~~$2.3 million for the ~~six~~three months ended June 30, ~~2021. The decrease~~2022. This is ~~primarily~~ due to ~~a lower average~~higher outstanding principal ~~balance~~balances on our ~~2018~~2022 revolving line of credit facility ~~during~~for the ~~six~~three months ended June 30, ~~2022~~2023 compared to our 2018 revolving line of credit facility for the ~~six~~three months ended June 30, ~~2021, partially offset by increases in the~~2022. Additionally LIBOR ~~component~~and SOFR components of interest rates on our variable-rate debt increased for the ~~six~~three months ended June 30, 2023 as compared to

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the three months ended June 30, 2022, ~~as compared to six months ended June 30, 2021.~~given the increased interest rate environment. In addition, two variable-rate mortgages were assumed in connection with our multifamily acquisitions during the first quarter of 2023.

General and Administrative Expenses: General and administrative expenses, which have not been allocated to our operating segments, were ~~$2.0~~$1.1 million for the ~~six~~three months ended June 30, ~~2022, a decrease of 29.9%~~2023 as compared to ~~$2.9 million~~$880,000 for the ~~six~~three months ended June 30, ~~2021.~~2022. The ~~decrease is~~increase was primarily due to ~~a decrease~~increases in non-recurring legal ~~fees as compared to the six months ended June 30, 2021.~~fees.

Depreciation and Amortization Expense: Depreciation and amortization expense ~~was $10.0~~increased to $20.5 million for the ~~six~~three months ended June 30, ~~2022, consistent with $10.1~~2023, compared to $5.0 million for the ~~six~~three months ended June 30, ~~2021.~~2022. The increase is primarily due to an increase in acquired in-place lease intangible assets amortization at multifamily properties located in Oakland, California acquired during the first quarter of 2023 as well as incremental increases to fixed asset depreciation expense related to the acquired properties.

Provision for Income Taxes: Provision for income taxes ~~was $628,000~~decreased by 50.5% to $159,000 for the ~~six~~three months ended June 30, ~~2022, a decrease of 54.2%~~2023 as compared to ~~$1.4 million~~$321,000 for the ~~six~~three months ended June 30, ~~2021.~~2022. The decrease ~~in provision for income taxes~~ is due to a decrease in taxable income at our taxable REIT subsidiaries ~~largely~~as a result of the operations of the lending division during the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

2023 Results of Operations

Comparison of the Six Months Ended June 30, 2023 to the Six Months Ended June 30, 2022

Net (Loss) Income and FFO


	Six Months Ended June 30,				Change
	2023		2022		$		%
	(dollars in thousands)
Total revenues	$	61,672	$	51,185	$	10,487	20.5	%
Total expenses	$	88,162	$	45,704	$	42,458	92.9	%

Net income (loss)	$	(25,937)	$	5,233	$	(31,170)	*

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(*)Percentage changes in excess of 100% are deemed to be not meaningful

Net loss was $25.9 millionfor the six months ended June 30, 2023 compared to net income of $5.2 million for the six months ended June 30, 2022, a decrease of $31.2 million. The decrease was primarily due to an increase in depreciation and amortization expense of $20.0 million, an increase in interest expense not allocated to our operating segments of $9.0 million and an increase in transaction-related costs of $3.4 million (primarily related to transfer tax expenses in connection with the acquisition of two multifamily properties in Oakland, California during the three months ended June 30, 2023) and an increase in general and administrative expenses of $390,000. These were partially offset by a gain of $1.1 million recognized during the six months ended June 30, 2023 in connection with the sale of 80% of our interest in an office property and a decrease of $494,000 in asset management and other fees to related parties.

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Funds from Operations

The following table sets forth a historical reconciliation of net loss attributable to common stockholders to FFO attributable to common stockholders (in thousands):


	Six Months Ended June 30,
	2023		2022
Net loss attributable to common stockholders(1)	$	(36,530)	$	(5,160)
Depreciation and amortization	29,974		9,978

Noncontrolling interests’ proportionate share of depreciation and amortization	(1,360)		—
Gain on sale of real estate	(1,104)		—
FFO attributable to common stockholders(1)	$	(9,020)	$	4,818

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(1)During the six months ended June 30, 2023 and 2022, we recognized $688,000 and $181,000, respectively, of redeemable preferred stock redemptions and $— and $19,000, respectively, of redeemable preferred stock deemed dividends. Such amounts are included in, and have the effect of increasing net loss attributable to common stockholders and FFO attributable to common stockholders because redeemable preferred stock redemptions are not an adjustment prescribed by NAREIT.

FFO attributable to common stockholders was $(9.0) million for the six months ended June 30, 2023, a decrease of $13.8 million compared to $4.8 million for the six months ended June 30, 2022. The decrease in FFO was primarily due to an increase in interest expense not allocated to our operating segments of $9.0 million and an increase in transaction-related costs of $3.4 million (primarily related to transfer tax expenses in connection with the acquisition of two multifamily properties in Oakland, California during the three months ended June 30, 2023), an increase in redeemable preferred stock dividends and redeemable preferred stock redemption expense of $1.4 million and $507,000, respectively, and an increase in general and administrative expenses of $390,000. These were partially offset by a decrease of $494,000 in asset management and other fees to related parties.

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Summary Segment Results

During the six months ended June 30, 2023 we operated in four segments: office, hotel and multifamily properties and lending. During the six months ended June 30, 2022, we operated in three segments: office and hotel properties and lending. Set forth and described below are summary segment results for our operating segments (dollar amounts in thousands).


	Six Months Ended June 30,				Change
	2023		2022		$		%
Revenues:
Office	$	27,462	$	28,182	$	(720)	(2.6)	%
Hotel	$	23,160	$	17,369	$	5,791	33.3	%
Multifamily	$	5,301	$	—	$	5,301	N/A
Lending	$	5,673	$	5,634	$	39	0.7	%

Expenses:
Office	$	13,049	$	12,648	$	401	3.2	%
Hotel	$	14,902	$	11,728	$	3,174	27.1	%
Multifamily	$	4,742	$	—	$	4,742	N/A
Lending	$	3,791	$	2,197	$	1,594	72.6	%

(Loss) income from unconsolidated entities
Office	$	(774)	$	380	$	(1,154)	N/A
Multifamily	$	638	$	—	$	638	N/A

Non-Segment Revenue and Expenses:
Interest and other income	$	76	$	—	$	76	N/A
Asset management and other fees to related parties	$	(1,347)	$	(1,841)	$	494	(26.8)	%
Expense reimbursements to related parties - corporate	$	(1,205)	$	(948)	$	(257)	27.1	%
Interest expense	$	(13,385)	$	(4,347)	$	(9,038)	*
General and administrative	$	(2,407)	$	(2,017)	$	(390)	19.3	%
Transaction-related costs	$	(3,360)	$	—	$	(3,360)	N/A
Depreciation and amortization	$	(29,974)	$	(9,978)	$	(19,996)	*


Gain on sale of real estate	$	1,104	$	—	$	1,104	N/A
Provision for income taxes	$	(415)	$	(628)	$	213	(33.9)	%

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(*)Percentage changes in excess of 100% are deemed to be not meaningful

Revenues

Office Revenue: Office revenue includes rental revenue, expense reimbursements and lease termination income from office properties. Office revenue decreased to $27.5 million, or by (2.6)%, for the six months ended June 30, 2023 compared to $28.2 million for the six months ended June 30, 2022. The decrease is primarily due to decreased rental revenues at an office property in Los Angeles, California as a result of lower occupancy, and the disposition of an 80% interest in an office property in Los Angeles, California in February 2023, partially offset by higher rental revenues at an office property in Beverly Hills, California due to higher occupancy and rental rates.

Hotel Revenue: Hotel revenue increased to $23.2 million, or by 33.3%, for the six months ended June 30, 2023, compared to $17.4 million for the six months ended June 30, 2022, due to an increase in occupancy and average daily rate as a result of the hospitality industry continuing to recover from the impact of COVID-19.

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Multifamily Revenue: Multifamily revenue was $5.3 million for the six months ended June 30, 2023. As our multifamily properties were acquired during the six months ended June 30, 2023, there was no comparable revenue for the six months ended June 30, 2022.

Lending Revenue: Lending revenue represents revenue from our lending subsidiaries, including interest income on loans and other loan related fee income. Lending revenue was $5.7 million for the six months ended June 30, 2023, consistent with revenue of $5.6 million for the six months ended June 30, 2022.

(Loss) Income From Unconsolidated Office Entities: The income from our unconsolidated entities included in office segment net operating income decreased to a loss of $774,000 for the six months ended June 30, 2023 compared to income of $380,000 for the six months ended June 30, 2022. The decrease was primarily due to an increase in mortgage interest expense and an unrealized loss related to one of our unconsolidated office entities’ investment in real estate during the six months ended June 30, 2023 as well as an additional incremental loss related to an office entity with respect to which we sold an 80% interest in during the first quarter of 2023 and now hold a 20% investment through an unconsolidated joint venture.

Income From Unconsolidated Multifamily Entity: The income from our unconsolidated entity included in multifamily segment net operating income was $638,000 for the six months ended June 30, 2023. As our unconsolidated multifamily property was acquired during the six months ended June 30, 2023, there was no comparable income for the six months ended June 30, 2022.

Interest and Other Income: Interest and other income, which has not been allocated to our operating segments, was $76,000 for the six months ended June 30, 2023, primarily related to interest earned on money market accounts. There was no comparable income for the six months ended June 30, 2022.

Expenses

Office Expenses: Office expenses increased to $13.0 million, or by 3.2%, for the six months ended June 30, 2023, compared to $12.6 million for the six months ended June 30, 2022. The increase is primarily due to an increase in operating expenses at an office property in Austin, Texas primarily as a result of higher utilities and real estate tax expenses.

Hotel Expenses: Hotel expenses increased to $14.9 million, or by 27.1%, for the six months ended June 30, 2023, compared to $11.7 million for the six months ended June 30, 2022, primarily as a result of increased occupancy at the hotel as a result of the hospitality industry continuing to recover from the impact of COVID-19.

Multifamily Expenses: Multifamily expenses were $4.7 million for the six months ended June 30, 2023. As our multifamily properties were acquired during the six months ended June 30, 2023, there were no comparable expenses for the six months ended June 30, 2022.

Lending Expenses: Lending expenses represent expenses from our lending subsidiaries, including interest expense, general and administrative expenses and fees to related parties. Lending expenses increased to $3.8 million, or by 72.6%, for the six months ended June 30, 2023, compared to $2.2 million for the six months ended June 30, 2022. The increase was primarily due to an increase interest expense related to the issuance of new SBA 7(a) loan-backed notes in connection with the securitization that closed in March 2023 as well as an increase in allocated payroll expenses.

Asset Management and Other Fees to Related Parties: Asset management fees and other fees to related parties, which have not been allocated to our operating segments, were $1.3 million for the six months ended June 30, 2023, a decrease of 26.8%, compared to $1.8 million for the six months ended June 30, 2022. The decrease was a result of a reduction in asset management fees related to a decrease in our net asset value, primarily resulting from a reduction in the fair value of our investments in real estate as of the end of 2022.

Expense Reimbursements to Related Parties—Corporate: The Administrator receives compensation and or reimbursement for performing certain services for the Company and its subsidiaries. Expense reimbursements to related parties-corporate increased by 27.1% to $1.2 million for the six months ended June 30, 2023, compared to $0.9 million for the six months ended June 30, 2022, primarily due to increases in allocated payroll primarily due to the transactions that occurred during the six months ended June 30, 2023.

Interest Expense: Interest expense, which has not been allocated to our operating segments, increased to $13.4 million for the six months ended June 30, 2023, compared to $4.3 million for the six months ended June 30, 2022. This is due to higher outstanding principal balances on our 2022 revolving line of credit facility for the six months ended June 30, 2023 compared to our 2018 revolving line of credit facility for the six months ended June 30, 2022. Additionally LIBOR and SOFR components of interest rates on our variable-rate debt increased for the six months ended June 30, 2023 as compared to the six months ended

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June 30, 2022, given the increased interest rate environment. In addition, two variable-rate mortgages were assumed in connection with our multifamily acquisitions during the six months ended June 30, 2023.

General and Administrative Expenses: General and administrative expenses, which have not been allocated to our operating segments, were $2.4 million for the six months ended June 30, 2023 as compared to $2.0 million for the six months ended June 30, 2022. The increase was primarily due to increases in non-recurring legal fees.

Transaction-Related Costs: Transaction-related costs of $3.4 million for the six months ended June 30, 2023 were primarily related to transfer tax expenses in connection with the acquisition of two multifamily properties in Oakland, California. There were no transaction-related costs incurred during the six months ended June 30, 2022.

Depreciation and Amortization Expense: Depreciation and amortization expense increased to $30.0 million for the six months ended June 30, 2023, compared to $10.0 million for the six months ended June 30, 2022. The increase is primarily due to an increase in acquired in-place lease intangible assets amortization at multifamily properties located in Oakland, California acquired during the six months ended June 30, 2023 as well as incremental increases to fixed asset depreciation expense related the acquired properties.

Gain on sale of real estate: Gain on sale of real estate of $1.1 million for the six months ended June 30, 2023 was related to the sale of 80% of our interest in an office property in Los Angeles, California. There were no dispositions during the six months ended June 30, 2022.

Provision for Income Taxes: Provision for income taxes decreased by 33.9% to $415,000 for the six months ended June 30, 2023 as compared to $628,000 for the six months ended June 30, 2022. The decrease is due to a decrease in taxable income at our taxable REIT subsidiaries as a result of the operations of the lending division during the six months ended June 30, ~~2022~~2023 as compared to the six months ended June 30, ~~2021.~~2022.

Cash Flow Analysis

Our cash flows from operating activities are primarily dependent upon the real estate assets owned, occupancy level of our real estate assets, the rental rates achieved through our leases, the occupancy and ADR of our hotel, the collectability of rent and recoveries from our tenants, and loan related activity. Our cash flows from operating activities are also impacted by fluctuations in operating expenses and other general and administrative costs. Net cash provided by operating activities

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~~increased~~ decreased by ~~$7.4~~$15.9 million for the six months ended June 30, ~~2022,~~2023, as compared to the same period in ~~2021.The increase~~2022. The decrease was primarily due to ~~an increase~~a decrease in net income adjusted for depreciation and amortization expense ~~write-offs~~and other non-cash items of ~~uncollectible receivables~~$12.2 million and ~~income from our unconsolidated entity of $6.9 million, primarily as~~ a ~~result of increases in segment net operating income and a decrease in asset management fees, partially offset by a $1.5 million~~ decrease in net proceeds from the sale of ~~guaranteed~~ loans of $5.0 million, partially offset by a $1.4 million increase resulting from a higher level of net ~~of loan fundings, held for sale.~~working capital used compared to the prior period.

Our cash flows from investing activities are primarily related to property acquisitions and dispositions, expenditures for the development or repositioning of properties, capital expenditures and cash flows associated with loans originated at our lending segment. Net cash used in investing activities increased by ~~$30.9~~$41.9 million for the six months ended June 30, ~~2022,~~2023, as compared to the same period in ~~2021.~~2022. The increase in cash used in investing activities was primarily due to an increase ~~of $3.8 million~~ in ~~capital expenditures, primarily as a result of increased office leasing activity resulting in more tenant improvements, and~~ acquisitions of real estate of ~~$8.1~~$88.6 million, compared to ~~no purchases during~~ the same period in ~~2021, and~~2022. Partially offsetting net cash used in investing activities are $30.6 million in proceeds from the sale of a ~~cash outlay of $22.4 million related~~property to ~~our investment in~~ the ~~Unconsolidated Joint Venture~~4750 Wilshire JV during the six months ended June 30, ~~2022. Additionally, as a result of the ending of the PPP loan originations in 2021, there was~~2023 and a decrease in ~~net~~ cash ~~used in investing activities~~outlays of $15.7 million related to ~~net loan fundings of $3.4 million.~~our investments in unconsolidated joint ventures during the six months ended June 30, 2023, compared to the same period in 2022.

Our cash flows from financing activities are generally impacted by borrowings and capital activities. Net cash provided by financing activities ~~was $4.5~~increased by $54.6 million for the six months ended June 30, 2023, as compared to the same period in 2022, primarily as a result of net proceeds from our credit facility and mortgages of $71.3 million during the six months ended June 30, ~~2022,~~2023 compared to net cash provided by financing activities of $12.9 million in the same period in 2021. The decrease in net cash provided by financing activities of $8.4 million was primarily as a result of net proceeds from issuance of Common Stock during the six months ended June 30, 2021 of $78.5 million related to our rights offering completed in June 2021 as compared to the six months ended June 30, 2022 in which the Company repurchased $303,000 worth of its Common Stock and had no proceeds from Common Stock issuances. Partially offsetting the aforementioned decrease in net cash provided by financing activities, the Company had net proceeds from debt of $6.5 million during the six months ended June 30, 2022, ~~compared to~~the issuance of unguaranteed SBA 7(a) loan-backed notes for net ~~debt paydowns~~proceeds of ~~$64.0~~approximately $43.3 million, and an increase of $30.8 million in proceeds from the issuance of preferred stock during the six months ended June 30, 2023. The aforementioned amounts increasing net cash provided by financing activities were partially offset by an increase in redemption of preferred stock of $90.0 million during the six months ended June 30, ~~2021.~~2023.

Liquidity and Capital Resources

General

On a short-term basis, our principal demands for funds will be for the acquisition of assets, development or repositioning (including in each instance preparation thereof (e.g. obtaining entitlements and permits and drawing up plans)) of properties, or re-leasing of space in existing properties, capital expenditures, paying interest and principal on current and any future debt financings, SBA 7(a) loan originations, paying distributions on our Preferred Stock and Common Stock and making

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redemption payments on our Preferred Stock. We may finance our future activities through one or more of the following methods: (i) offerings of shares of Common Stock, preferred stock or other equity and or debt securities of the Company; (ii) credit facilities and term loans; (iii) the addition of senior recourse or non-recourse debt using target acquisitions as well as existing assets as collateral; (iv) the sale of existing assets; (v) partnering with co-investors; and or ~~(v)~~(vi) cash flows from operations. ~~With respect to the $50.0 million outstanding under the~~In December 2022, we completed a refinancing of our 2018 ~~Revolving Credit Facility as of August 3, 2022 that is scheduled~~credit facility, which was set to mature in October ~~2022, we are working~~2023, replacing it with a bank to refinance such indebtedness prior to its maturity date. There can, however, be no assurance that such refinancing will occur. In the interim, in order to preserve flexibility with respect to our liquidity, we submitted an extension notice in Julynew facility (the “2022 Credit Facility”). The 2022 ~~to extend the maturity of the 2018 Revolving~~ Credit Facility includes a $56.2 million term loan as well as a revolver allowing the Company to ~~October 2023. The extension is~~borrow up to $150.0 million, both of which are collectively subject to ~~the satisfaction of~~a borrowing base calculation. The 2022 Credit Facility matures in December 2025 and provides for two one-year extension options, subject to certain conditions ~~that we expect to be able to satisfy (if~~being satisfied. On December 23, 2022, the ~~refinancing does not occur). In November 2022, holders~~Company announced it would redeem all remaining outstanding shares of ~~the~~its Series L Preferred Stock ~~will have~~in cash on January 25, 2023 at its stated value of $28.37. The total cost to complete the ~~right to require us to redeem all or any~~Series L Redemption, including transaction costs, was $83.8 million. The payment for the Series L Redemption was made on January 25, 2023 together with payment of the accrued and unpaid dividends on the redeemed shares of Series L Preferred Stock ~~held~~through December 31, 2022 of $1.56 per share (or $4.6 million accrued and unpaid dividends in the aggregate) and was funded by ~~such holders. At~~a combination of proceeds from the ~~same time, we will also have the right to redeem any or all shares~~sale of our Series ~~L Preferred Stock. The redemption price, whether the redemption is at the request of a holder or by us, will be equal to 100% of the stated value of the Series L~~A1 Preferred Stock, ~~plus any accumulated~~draws on our 2022 Credit Facility, and ~~unpaid dividends. We can pay~~cash on hand. No additional dividends were owed on the redemption price, at our option and in our sole discretion, either in cash or in equal value through the issuance of shares of our Common Stock. We do not know whether holders of Series L Preferred Stock will exercise their redemption rights and, if so, in what amounts. We have been actively evaluating our options with respect to whether we will exercise our redemption right with respect to any or allredeemed shares of Series L Preferred Stock ~~as well as other alternatives.~~subsequent to December 31, 2022.

Our long-term liquidity needs will consist primarily of funds necessary for acquisitions of assets, development or repositioning (including in each instance preparation thereof) of properties, or re-leasing of space in existing properties, capital expenditures, paying interest and principal on debt financings, refinancing of indebtedness, SBA 7(a) loan originations, paying distributions on our Preferred Stock or any other preferred stock we may issue, any future repurchase of Common Stock and or redemption of our Preferred Stock (if we choose, or are required, to pay the redemption price in cash instead of in shares of our Common Stock) and distributions on our Common Stock. Additionally, our outstanding commitments to fund loans were ~~$7.1~~$7.8 million as of June 30, ~~2022,~~2023, substantially all of which reflect prime-based loans to be originated by our subsidiary engaged in SBA 7(a) Small Business Loan Program lending. ~~The~~A majority of these commitments have government guarantees of 75% (as the government guarantee has now reverted to 75% ~~from 90%~~) and we believe that we will be able to sell the guaranteed portion of these loans in a liquid secondary market upon fully funding these loans. Since

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some commitments are expected to expire without being drawn upon, total commitment amounts do not necessarily represent future cash requirements. Further, we are evaluating renovation of certain areas of our hotel in California and development of our development sites. To the extent we decide to proceed with renovating our hotel and/or conducting development work on any of our development sites, we will have increased liquidity needs.

We own a 20% interest in an unconsolidated joint venture (the “4750 Wilshire Joint Venture”) that is in the process of converting a portion of an office building in Los Angeles, California from office space into luxury for-rent residential units (the “4750 Wilshire Project”). The total cost of the 4750 Wilshire Project is expected to be approximately $31.0 million, which will be financed by a combination of equity contributions from us and co-investors as well as a mortgage loan from a third-party lender. In connection with the 4750 Wilshire Joint Venture, we have received and have commitments to receive cash proceeds from the joint venture partners, enhancing our liquidity. Further, we have earned and will continue to earn management fees from co-investors in connection with their co-investment in the 4750 Wilshire Project.

We may not have sufficient funds on hand or may not be able to obtain additional financing to cover all of our long-term cash requirements. The nature of our business, and the requirements imposed by REIT rules that we distribute a substantial majority of our REIT taxable income on an annual basis in the form of dividends, may cause us to have substantial liquidity needs over the long-term. While we will seek to satisfy such needs through one or more of the methods described in the first paragraph of this section, our ability to take such actions is highly uncertain and cannot be predicted, and could be affected by various risks and uncertainties, including, but not limited to, the ~~effects of COVID-19 and other~~ risks detailed in “Risk Factors” in ~~Part I, Item 1A~~“Item 1A—Risk Factors” of ~~the 2021~~this Annual Report on Form 10-K. If we cannot obtain funding for our long-term liquidity needs, our assets may generate lower cash flows or decline in value, or both, which may cause us to sell assets at a time when we would not otherwise do so which could have a material adverse effect on our business, financial condition, results of operations, cash flow or our ability to satisfy our debt service obligations or to maintain our level of distributions on our Common Stock or Preferred Stock.

Sources and Uses of Funds

Mortgages

We have ~~one~~ mortgage loan ~~agreement~~agreements with an outstanding ~~balance~~balances of ~~$97.1~~$262.8 million as of June 30, ~~2022.~~2023.

Revolving Credit Facilities

In October 2018, we entered into the 2018 ~~Revolving Credit Facility~~revolving credit facility that, as amended, ~~allows~~allowed us to borrow up to $209.5 million, subject to a borrowing base calculation. The 2018 revolving credit facility was secured by properties in the Company’s real estate portfolio: eight office properties and one hotel property. In December 2022, the Company refinanced its

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2018 credit facility and replaced it with a new 2022 Credit Facility, entered into with a bank syndicate, that includes a $56.2 million term loan (the “2022 Credit Facility Term Loan”) as well as a revolver allowing the Company to borrow up to $150.0 million (the “2022 Credit Facility Revolver”), both of which are collectively subject to a borrowing base calculation. The 2022 Credit Facility is secured by properties in the Company’s real estate portfolio: six office properties and one hotel property (as well as the hotel’s adjacent parking garage and retail property). The 2022 Credit Facility bears interest at (A) the base rate plus 1.50% or (B) SOFR plus 2.60%. As of June 30, ~~2022 and December 31, 2021,~~2023, the variable interest rate was ~~3.72%~~7.69%. The 2022 Credit Facility Revolver is also subject to an unused commitment fee of 0.15% or 0.25% depending on the amount of aggregate unused commitments. The 2022 Credit Facility is guaranteed by the Company and ~~2.15%, respectively.~~the Company is subject to certain financial maintenance covenants. The ~~2018 revolving credit facility~~2022 Credit Facility matures in ~~October 2022~~December 2025 and provides for ~~one~~two one-year extension ~~option under~~options, subject to certain conditions being satisfied, including providing notice of the election and paying an extension fee of 0.15% of each lender’s commitment being extended on the effective date of such extension. We expect to extend its maturity to October 2023, subject to satisfying certain conditions, and/or refinance such indebtedness. Based on our projected performance and current capital market conditions, we expect that we will be able to implement either or both options. As of August 3, ~~2022,~~2023, June 30, ~~2022,~~2023 and December 31, ~~2021, $50.0~~2022, $148.2 million, ~~$75.0~~$148.2 million, and ~~$60.0~~$56.2 million, respectively, was outstanding under the ~~2018 revolving credit facility~~2022 Credit Facility and approximately ~~$150.9~~$58.0 million, ~~$125.9~~$58.0 million and ~~$117.6~~$150.0 million, respectively, was available for future borrowings.

In June 2020, we commenced borrowing funds from the Federal Reserve through the PPPLF. Advances under the PPPLF carry an interest rate of 0.35%, are made on a dollar-for-dollar basis based on the amount of loans originated under the PPP and are secured by loans made by us under the PPP. The PPPLF contains customary covenants but is not subject to any financial covenants. The maturity date of PPPLF borrowings is the same as the maturity date of the loans pledged to secure the extension of credit, generally two years. At maturity, both principal and accrued interest are due. The maturity date of a PPPLF borrowing will be accelerated if, among other things, we have been reimbursed by the SBA for a loan forgiveness (to the extent of the forgiveness), we have received payment from the SBA representing exercise of the loan guarantee or we have received payment from the underlying borrower (to the extent of the payment received). We borrowed money under the PPPLF to finance all the loans we originated under the PPP. As of June 30, 2022, $205,000 was outstanding under the PPPLF.

Other Financing Activity

On ~~May 30, 2018, we~~March 9, 2023, our lending division completed a securitization of the unguaranteed portion of certain of our SBA 7(a) loans receivable with the issuance of ~~$38.2~~$54.1 million of unguaranteed SBA 7(a) loan-backed ~~notes.~~notes (with net proceeds of approximately $43.3 million, after payment of fees and expenses in connection with the securitization and the funding of a reserve account and an escrow account). The SBA 7(a) loan-backed notes are collateralized by the right to receive payments and other recoveries attributable to the unguaranteed portions of certain of our SBA 7(a) loans receivable. The SBA 7(a) loan backed notes mature on March 20, ~~2043,~~2048, with monthly payments due as payments on the collateralized loans are received. ~~Based on the anticipated repayments of our collateralized SBA 7(a) loans, at issuance, we estimated the weighted average life of the SBA 7(a) loan-backed notes to be approximately two years.~~ The SBA 7(a) loan-backed notes bear interest at a per annum rate equal to the ~~lower~~lesser of ~~the one-month LIBOR~~(i) 30-Day average compounded SOFR plus ~~1.40% or the~~2.90% and (ii) prime rate ~~less 1.08%~~minus 0.35%. ~~The outstanding~~As of June 30, 2023, the variable interest rate was 7.83%. We reflect the SBA 7(a) loans receivable as assets on our consolidated balance ofsheet and the SBA 7(a) loan-backed notes as debt on ~~August 3, 2022, June 30, 2022, and December 31, 2021, was $3.8 million, $4.0 million and $7.7 million, respectively.~~our consolidated balance sheet.

We have junior subordinated notes with a variable interest rate that resets quarterly based on the three-month LIBOR plus 3.25%, with quarterly interest‑only payments. The junior subordinated balance is due at maturity on March 30, 2035. The junior subordinated notes may be redeemed at par at our option. The aggregate principal balance of the junior subordinated notes was $27.1 million as of June 30, ~~2022.~~

As an SBA 7(a) licensee, we are an authorized lender under the PPP and originated loans under the program. As of June 30, 2022, we had $205,000 outstanding in PPP loans. We expect that all of the outstanding PPP loans will be forgiven, either in part or in full, by the SBA or be repaid by the borrower, including both principal and accrued interest.

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2023.

Securities Offerings

We conducted a continuous public offering of Series A Preferred ~~Units~~Stock from October 2016 through January 2020, where ~~each~~one Series A Preferred ~~Unit consisted of one~~Warrant was issued along with each issued share of Series A Preferred ~~Stock and one Series A Preferred Warrant.~~Stock. During the tenure of the offering, we issued 4,603,287 Series A Preferred ~~Units~~Stock and Series A Preferred Warrants and received aggregate net proceeds of $105.2 million after commissions, fees and allocated costs.

The Series A Preferred Warrants are exercisable beginning on the first anniversary of the date of their original issuance until and including the fifth anniversary of the date of such issuance. At the time of issuance, the exercise price of each Series A Preferred Warrant was equal to a 15.0% premium to the per share estimated NAV of our Common Stock most recently published and designated as the applicable NAV by us at the time of issuance. However, in accordance with the terms of the Series A Preferred Warrants, the exercise price of each Series A Preferred Warrant issued prior to the ~~Reverse~~reverse stock split in 2019 (the “Reverse Stock ~~Split~~Split”) was automatically adjusted to reflect the effect of the Reverse Stock Split and, in the discretion of our Board of Directors, the exercise price and the number of shares issuable upon exercise of each Series A Preferred Warrant issued prior to the ~~Special Dividend~~special dividend in 2019 was adjusted to reflect the effect of the Special Dividend. As of June 30, ~~2022,~~2023, there were ~~4,294,512~~2,449,039 Series A Preferred Warrants to purchase ~~1,113,569~~631,901 shares of Common Stock outstanding.

From February 2020 through June 2022, we conducted a continuous public offering of our Series A Preferred Stock and Series D Preferred Stock. In June 2022, we concluded the offering of our Series A Preferred Stock and Series D Preferred Stock and have since conducted a continuous public offering of our Series A1 Preferred Stock of up to approximately $692.3 million. We intend to use the net proceeds from the offerings for general corporate purposes, acquisitions of shares of our Common Stock and Preferred Stock, whether through one or more tender offers, share repurchases or otherwise, and acquisitions consistent with our acquisition and asset management strategies. As of June 30, ~~2022,~~2023, we had issued ~~192,440~~7,994,099 shares of Series A1 Preferred Stock, 8,251,657 shares of Series A Preferred Stock and 56,857 shares of Series D Preferred Stock and received aggregate net proceeds of ~~$192.2~~$368.5 million after commissions, fees and allocated costs.

~~On March 16, 2020, we established an “at the market” (“ATM”) program through which we may, from time to time in our discretion, offer and sell shares~~

Table of Common Stock having an aggregate offering price of up to $25.0 million through an investment banking firm acting as the sales agent. Sales of Common Stock under the ATM program may be made directly on or through Nasdaq, among other methods. We intend to use the net proceeds from shares sold under the ATM program, if any, for general corporate purposes, acquisitions of shares of our Preferred Stock, whether through one or more tender offers, share repurchases or otherwise, and acquisitions consistent with our acquisition and asset management strategies. As of August 3, 2022, no sales of Common Stock have been made under the ATM program.Contents

Dividends on and Redemptions of Preferred Stock

Holders of Series A1 Preferred Stock, Series A Preferred Stock ~~Series D Preferred Stock~~ and Series LD Preferred Stock are entitled to receive, if, as and when authorized by our Board of Directors, and declared by us out of legally available funds, cumulative cash dividends on each share as follows: (1) at the of greater of (i) an annual rate of 6.0% of the Series A1 Preferred Stock Stated Value (i.e., the equivalent of $0.3750 per share per quarter) and (ii) the Federal Funds (Effective) Rate for such quarter and plus 2.5% of the Series A1 Preferred Stock Stated Value divided by four, up to a maximum of 2.5% of the Series A1 Preferred Stock Stated Value per quarter, (2) 5.50% of the Series A Preferred Stock Stated Value (i.e., the equivalent of $0.34375 per share per quarter), and (3) 5.65% of the Series D Preferred Stock Stated Value (i.e., the equivalent of $0.35313 per share per quarter), ~~and (4) 5.50% of the Series L Preferred Stock Stated Value (i.e., the equivalent of $1.56035 per share per year),~~ respectively. However, if we fail to timely declare distributions or fail to timely pay any distribution on the Series L Preferred Stock, the annual dividend rate of the Series L Preferred Stock will temporarily increase by 1.00% per year, up to a maximum annual rate of 8.50% of the Series L Preferred Stock Stated Value. Dividends on each share of Preferred Stock begin accruing on, and are cumulative from, the date of issuance. Prior to the payment of any distributions on Series L Preferred Stock in respect of a given year, we must first declare and pay dividends on the Common Stock in respect of such year in an aggregate amount equal to the Initial Dividend announced by our Board of Directors at the end of the prior fiscal year. On December 29, 2021, we announced an Initial Dividend on shares of our Common Stock for fiscal year 2022 in the aggregate amount of $7,010,799, of which $3,972,000 had been paid as of June 30, 2022.

We expect to pay dividends on the Series A1 Preferred Stock, Series A Preferred Stock and Series D Preferred Stock in arrears on a monthly ~~basis, and on the Series L Preferred Stock in arrears on a yearly~~ basis, unless our results of operations, our general financing conditions, general economic conditions, applicable requirements of the MGCL or other factors make it imprudent to do so. The timing and amount of dividends declared and paid on our Preferred Stock will be determined by our Board of Directors, in its sole discretion, and may vary from time to time.

Holders of our Common Stock are entitled to receive dividends, if, as and when authorized by the Board of Directors and declared by us out of legally available funds. In determining our dividend policy, the Board of Directors considers many

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factors including the amount of cash resources available for dividend distributions, capital spending plans, cash flow, our financial position, applicable requirements of the MGCL, any applicable contractual restrictions, and future growth in NAV and cash flow per share prospects. Consequently, the dividend rate on a quarterly basis does not necessarily correlate directly to any individual factor.

From the date of issuance until the fifth anniversary of the date of issuance, holders of Series A Preferred Stock and Series D Preferred Stock may require us to redeem such shares at a discount to the Series A1 Preferred Stock, Series A Preferred Stated Value and Series D Preferred Stated Value, respectively. From and after the fifth anniversary of the date of original issuance of any share of our Preferred Stock, we generally (subject to certain conditions) have the right (but not the obligation) to redeem, and the holder of such share may require us to redeem, such share at a redemption price equal to 100% of the stated value of such share, plus any accrued but unpaid dividends in respect of such share as of the effective date of the redemption. The redemption price in respect of any share of Preferred Stock, whether redeemed at our option or at the option of a holder, may be paid in cash or in shares of Common Stock in our sole discretion. During the three months ended June 30, ~~2022,~~2023, we redeemed ~~88,225~~183,809 shares of Series A Preferred Stock, ~~and no~~11,200 shares of Series A1 Preferred Stock, and 410 shares of Series D Preferred ~~Stock or~~Stock.

On September 15, 2022, we repurchased 2,435,284 shares of our Series L Preferred ~~Stock.~~Stock in a privately negotiated transaction (the “Series L Repurchase”). The shares were repurchased at a purchase price of $27.40 per share (a 3.4% discount to the stated value of $28.37 per share) plus $1.12 per share of accrued and unpaid dividends (or $2.7 million of accrued and unpaid dividends in the aggregate). The total cost to complete the Series L Repurchase, including of transactions costs of $700,000, was $70.1 million. In connection with the Series L Repurchase, we recognized redeemable preferred stock redemptions of $4.8 million on our consolidated statement of operations for the three and six months ended June 30, 2023.

As announced on December 23, 2022, we redeemed all remaining outstanding shares of our Series L Preferred Stock in cash on January 25, 2023 at its stated value of $28.37 (the “Series L Redemption). The total cost to complete the Series L Redemption, including transaction costs, was $83.8 million. In connection with the Series L Redemption, we recognized redeemable preferred stock redemptions of $7.9 million on our consolidated statement of operations for the year ended December 31, 2022. The $7.9 million of redeemable preferred stock redemptions represents the difference between the repurchase price and the carrying value of the repurchased Series L Preferred Stock (representing the stated value of $28.37 per share reduced by $2.65 per share of stock offering costs). As of December 31, 2022, $83.8 million was recorded in accounts payable and accrued expenses on our consolidated balance sheet in connection with the Series L Redemption. The accrued and unpaid dividends on the redeemed shares of Series L Preferred Stock through December 31, 2022 of $1.56 per share (or $4.6 million accrued and unpaid dividends in the aggregate) were also paid January 25, 2023. No additional dividends were owed on the redeemed shares of Series L Preferred Stock subsequent to December 31, 2022.

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Off-Balance Sheet Arrangements

As of June 30, ~~2022,~~2023, we did not have any off-balance sheet arrangements.

Recently Issued Accounting Pronouncements

Our recently issued accounting pronouncements are described in Note 2 to the consolidated financial statements included in this Quarterly Report on Form 10-Q.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

The fair value of our mortgage payable is sensitive to fluctuations in interest rates. Discounted cash flow analysis is generally used to estimate the fair value of our mortgage payable, using a rate of 5.23% and 3.22% as of June 30, 2022 and December 31, 2021, respectively. As of June 30, 2022 and December 31, 2021, our mortgage payable had a book value of $97.1 million, and a fair value of $93.3 million and $100.8 million, respectively.

Our future income, cash flow and fair values relevant to financial instruments are dependent upon prevalent market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. We are exposed to market risk in the form of changes in interest rates and the potential impact such changes may have on the cash flows from our floating rate debt or the fair values of our fixed rate debt. As of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (excluding premiums, discounts, and deferred loan costs), ~~$97.3~~$97.1 million (or ~~46.4%~~19.7%) and ~~$102.1~~$97.1 million (or ~~50.2%~~52.1%) of our debt, respectively, was fixed rate borrowings, and ~~$112.3~~$395.3 million (or ~~53.6%~~80.3%) and ~~$101.4~~$89.3 million (or ~~49.8%~~47.9%), respectively, was floating rate borrowings. Based on the level of floating rate debt outstanding as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, a 50 basis point change in LIBOR and SOFR would result in an annual impact to our earnings of approximately ~~$562,000~~$2.0 million and ~~$507,000,~~$446,000, respectively. We calculate interest rate sensitivity by multiplying the amount of floating rate debt by the respective change in rate. ~~The sensitivity analysis does not take into consideration possible changes in the balances or fair value of our floating rate debt.~~

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, regarding the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, as of June 30, ~~2022,~~2023, our Principal Executive Officer and Principal Financial Officer concluded, as of that time, that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms and include controls and procedures designed to ensure the information required to be disclosed by us in such reports is accumulated and communicated to management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

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Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended June 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

Other Information

Item 1. Legal Proceedings

We are not currently involved in any material pending or threatened legal proceedings nor, to our knowledge, are any material legal proceedings currently threatened against us, other than routine litigation arising in the ordinary course of business. In the normal course of business, we are periodically party to certain legal actions and proceedings involving matters that are generally incidental to our business. While the outcome of these legal actions and proceedings cannot be predicted with certainty, in management’s opinion, the resolution of these legal proceedings and actions will not have a material adverse effect on our business, financial condition, results of operations, cash flow or our ability to satisfy our debt service obligations or to maintain our level of distributions on our Common Stock or Preferred Stock.

Item 1A. Risk Factors

There have been no material changes to the risk factors disclosed in "Risk Factors" in Part I, Item 1A of the ~~2021~~2022 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In May 2022, the Company’s Board of Directors approved a repurchase program of up to $10.0 million of the Company’s Common Stock (the “SRP”). Under the SRP, the Company, in its discretion, may purchase shares of its Common Stock from time to time in the open market or in privately negotiated transactions. The amount and timing of purchases of shares will depend on a number of factors, including the price and availability of shares, trading volume and general market conditions. The SRP has no termination date and may be suspended or discontinued at any ~~time.~~

time.There were no repurchases during the three and six months ended June 30, 2023. As of June 30, ~~2022, share repurchases executed under~~2023, the ~~SRP were as follows:~~
Period Shares Repurchased Average price paid per share Cumulative amount of shares repurchased
(in thousands)
June 2022 41,374 $7.32 $303
Total 41,374 $7.32 $303
Company had repurchased 662,462 shares of Common Stock for $4.7 million.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~None.~~None of our officers or directors had any contract, instruction, or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c ) or any “non-Rule 10b5-1 trading arrangement” in effect at any time during the three months ended June 30, 2023.

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Item 6. Exhibits


Exhibit Number						Exhibit Description



~~10.1~~						~~Third Amended~~ ~~and~~ ~~Restated Dealer Manager Agreement, dated as of June 16, 2022, by and among Creative Media & Community Trust Corporation,~~ ~~CIM~~ ~~Service Provider, LLC~~ ~~and~~ ~~CCO Capital, LLC.~~ ~~(incorporated by reference to Exhibit 1.1 to the Registrant's Current Report on~~ ~~8-K filed with the SEC on~~ ~~June 17, 2021)~~


*31.1						Section 302 Officer Certification—Chief Executive Officer.
*31.2						Section 302 Officer Certification—Chief Financial Officer.
*32.1						Section 906 Officer Certification—Chief Executive Officer.
*32.2						Section 906 Officer Certification—Chief Financial Officer.
*101.INS						XBRL Instance Document — the instance document does not appear in the interactive data files because its XBRL on the Interactive Data File because its XBRL tags are embedded within the inline XBRL document
*101.SCH						XBRL Taxonomy Extension Schema Document
*101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
*101.DEF						XBRL Taxonomy Extension Definition Linkbase Document
*101.LAB						XBRL Taxonomy Extension Label Linkbase Document
*101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
*104						Cover page Interactive Data File, formatted in inline XBRL (included in Exhibit 101).

* Filed herewith.

5357

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CREATIVE MEDIA & COMMUNITY TRUST CORPORATION

Dated: August ~~9, 2022~~10, 2023

By:

/s/ DAVID THOMPSON

David Thompson

Chief Executive Officer

Dated: August ~~9, 2022~~10, 2023

By:

/s/ ~~NATHAN D. DEBACKER~~BARRY N. BERLIN

~~Nathan D. DeBacker~~Barry N. Berlin

Chief Financial Officer

5458


	Six Months Ended June 30, 2021
	Common Stock			Preferred Stock
	Shares	Par Value		Shares	Par Value		Additional Paid-in Capital		Distributions in Excess of Earnings		Total Stockholders’ Equity		Non-controlling Interests		Total Equity
Balances, December 31, 2020	14,827,410	$	15	9,784,067	$	262,036	$	794,127	$	(778,519)	$	277,659	$	455	$	278,114

Distributions to noncontrolling interests	—	—		—	—		—		—		—		(114)		(114)
Stock-based compensation expense	—	—		—	—		60		—		60		—		60
Common dividends ($0.075 per share)	—	—		—	—		—		(1,112)		(1,112)		—		(1,112)
Dividends to holders of Series A Preferred Stock ($0.34375 per share)	—	—		—	—		—		(2,350)		(2,350)		—		(2,350)
Issuance of Series D Preferred Stock	—	—		4,045	99		(3)		—		96		—		96
Dividends to holders of Series D Preferred Stock ($0.35313 per share)	—	—		—	—		—		(9)		(9)		—		(9)

Reclassification of Series A Preferred Stock to permanent equity	—	—		366,991	9,144		(901)		—		8,243		—		8,243
Redeemable preferred stock accretion	—	—		—	—		—		(57)		(57)		—		(57)
Redemption of Series A Preferred Stock	—	—		(29,462)	(733)		61		(13)		(685)		—		(685)
Net loss	—	—		—	—		—		(3,670)		(3,670)		(1)		(3,671)
Balances, March 31, 2021	14,827,410	$	15	10,125,641	$	270,546	$	793,344	$	(785,730)	$	278,175	$	340	$	278,515
Stock-based compensation expense	20,332	—		—	—		50		—		50		—		50
Common dividends ($0.075 per share) (1)	—	—		—	—		—		(1,114)		(1,114)		—		(1,114)
Dividends to holders of Series A Preferred Stock ($0.34375 per share)	—	—		—	—		—		(2,511)		(2,511)		—		(2,511)
Issuance of Series D Preferred Stock	—	—		7,835	192		(7)		—		185		—		185
Dividends to holders of Series D Preferred Stock ($0.35313 per share)	—	—		—	—		—		(13)		(13)		—		(13)
Reclassification of Series A Preferred Stock to permanent equity	—	—		556,587	13,915		(1,434)		—		12,481		—		12,481
Redeemable Preferred Stock deemed dividends	—	—		—	—		—		(106)		(106)		—		(106)
Redemption of Series A Preferred Stock	—	—		(18,501)	(460)		42		(13)		(431)		—		(431)
Issuance of Common Stock	8,521,589	9		—	—		76,934		—		76,943		—		76,943
Net income (loss)	—	—		—	—		—		530		530		(3)		527
Balances, June 30, 2021	23,369,331	$	24	10,671,562	$	284,193	$	868,929	$	(788,957)	$	364,189	$	337	$	364,526


Period	Shares Repurchased	Average price paid per share	Cumulative amount of shares repurchased (in thousands)
June 2022	41,374	$7.32	$303
Total	41,374	$7.32	$303