Earnings call transcript Q4 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Hello, and welcome to the Creative Media & Community Trust Q4 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Steve Altebrando, Portfolio Oversight for CMCT. Please go ahead.

Steve Altebrando

thank joining and everyone, morning, you us. for Good the for CMCT. name is Oversight Altebrando, Steve My Portfolio Also call, Officer; Officer; David our on Chief Financial Thompson, our the Chief our today is Chief Executive Officer. and Berlin, Kuba, Barry Shaul Investment

be being Relations the our where will of find also archived you on This call can and our temporarily is website, webcast Investor section earnings release.

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

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

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

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

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

David Thompson

Thanks, our Steve, earnings. quarter everyone, and of FFO pleased call joining generated $X.XX. We're CMCT report core fourth to that XXXX we morning, thank today. This our you, announced for

see We improvement we also in our strong saw a continue quarter. hotel to an the from our in rebound asset, prior and office NOI

increased despite We number and nationally to headwinds year. team. percentage XXXX, quality speaks for sector in into lease expirations lease our of high the office we and this portfolio office our the addition, had leasing In believe of the the coming

Austin. Hills, as and markets desirable Culver highly such in assets quality City, and Hollywood have Beverly We submarkets

L.A. like believe like Penfield following we VA the more Our trends, office minutes and in Hills, and buildings immune office Medical Wilshire, or Angeles West Oakland or location, fall from located in Beverly from Center. Kaiser is Ultra-prime assets XXXX that one XXXXX specialty that just generally are medical Wilshire had office we UCLA Los Medical the from in Austin concentration categories: and the work into best-in-class, home like at XXXXX Center

As strategy. to like would we a about our points continue into few XXXX, key I highlight

are balance to office announced to creative side plan and our more portfolio achieve of multifamily executing we our between First, multifamily. grow on previously the

premier seeking newer markets. high assets vintage, and are We highly amenitized, to multifamily entry barrier

For year, the Bay example, the acquired investments. in multifamily Area Los color in exciting these in of Angeles, more and one first units. XXX quarter this we totaling will assets give on Shaul two

closed earlier apartments. construction our Angeles. progress is property value-add building development that month Second, we co-investment to converted on the this we luxury we residential our a loan and and of unleased portion announced in made Most being at The Los pipeline. notably, now Wilshire XXXX

have own. a significant multifamily development we already We opportunities land pipeline on of

development co-invest value-add fee advantageous. income previously mentioned, As will increase returns diversification and supplement look to and when for to we have our we assets, by generating

Third, in our was XX% we in management reduction the our by XXXX. team. reduced corporate driven by permanent overhead This

becoming more This the extremely is and and consider environment our And scarce liquidity took future to opportunities. balance improve fourth, is where steps we important and expensive as in current sheet. capital we

I would Kuba. now turn to over the like Shaul to call

Shaul Kuba

the the Thank exciting provide highlight our I'd our reset to to status you, acquisition update of time pipeline. like some an David. and development on take of

growing we are of the multifamily focused on As last quarter, discussed portfolio. side we our

our premier asset vintage, highly acquisition high focused on have to barrier amenitized we described, entry targets in David As market. new

seller. off-market apartment from adjacent the XXXX Echo XXXX Angeles, building in acquired in West in Sunset, a Avenue, to is year building an The acquired transaction. we a creative building Los Park Park same First, we office XX-unit last

thriving in Echo building of and dozen to our walkable We grow submarket entertainment option. a footprint are Park, excited a with

is at cost substantially approximately in was Avenue basis for Park building constructed we in a highly attractive believe below XXXX. XXXX per replacement which is Our $XXX,XXX that door

XXX-unit channel building. Next, and in the we X-story house, premier XXXX. apartment a Clay, XXXX Auckland, building were buildings acquired Both XXX-unit, apartment Class assets completed A XX-story a that in are a

The expect through the to Oakland income we occupied net currently operating was end of XX% XXXX was At supply increase. the House in lease-up, growth significant Channel are that submarket assets Clay and from and XXXX, a is XX% occupied. significantly XXXX saw XXXX.

top forward, development the new average U.S. the pipeline the for for XX However, is below significantly market. going

San Channel of significantly below a And San and located Square, Downtown direct cost to is Jack is our BART estimate to both block station, dining, from Clay heart retail, an XXXX we Francisco community given Francisco. access easy The view House easy the San in replacement walk inflation, and is to one London Francisco and Oakland. waterfront Oakland basis access Downtown costs. of with offering

We door $XXX per have XXXX of we basis attractive for very and believe for per $XXX,XXX door channel a approximately house Clay.

Turning development to our pipeline.

year last Area already can As where develop on Austin, Los on review, we previously we and believe in an unit we Based review the own, value. additional than to of we we extensive can Angeles, mentioned, we create land more our the multifamily evaluate Sacramento. portfolio X,XXX did Bay

the start construction on option to two XXXX. in have ground-up Los Angeles will opportunity We in

land just multifamily adjacent Sunset This XXXX on we asset I Echo be we for to in adjacent working Avenue, have an recently West XXXX apartment to office on described. XX-unit also building First, Park, and been parcel building Park plans at the the at acquired property. Boulevard own a will

both of Angeles, Jefferson property development where sides. about multifamily made we develop have in the of Park section on we units plan to Next, progress there, our two Los XXX across

for ground and of first break XX receiving the site to XXXX towards will a have We units. are in the total on the option approval necessary working

the Culver about X.X path developments Southern they as excited of in proximity in just of University are We located strategically those from miles are California. and to growth close City

the allow believe of pipeline, For the necessary which growth. in increase value as we of holding work, our all process will the and well approval the are design obtaining balance of those as completing we future

update to an provide over portfolio. turn will on to Steve I the that, With it

Steve Altebrando

update provide I'll Shaul. announced activity. co-investment Thanks, and our leasing recently our an on

international As in office David ground closed of of mix to mentioned, investors first Los and office XX apartments. multifamily with leased the building luxury co-investment a an new Boulevard institutional three for quarter, space a from conversion Angeles level that XXX% today Wilshire in the we XXXX is on

We project located will take ownership ultimately in the the we in to constrained. also conversion XX%. supply closed and unleased our rentals where is conversion XXXX on a began of in into construction loan is this believe a XX The residential housing quarter, of portion at co-investment multifamily the on March, highly reduce Wilshire months. project. expect to about submarket fully the is funding the XXXX We L.A., as attractive affluent Park and Wilshire Hancock building The

creation asset of fee and to benefit we'll as a as opportunity an promote. management expect expected earn from also We and value to well the the earn

XX,XXX fourth square leasing. quarter XX,XXX and square first We through approximately feet another to XXXX. leased in two the feet of months the Turning

square the For leased square year leases lease full year commenced of yet earlier. XX.X% year-end. signed increased to at feet of feet not we We from and XX.X% that a XXX,XXX XXXX, percentage had have approximately our approximately XX,XXX

will over this XX%. our XXXX entered year, XX% with we more renew of of And leases XX% we leases. We manageable estimate is these it XXXX much and in expiring total, a in nearly

in We Barry. it over over that, have expiration feet tenant only to XXXX. XX,XXX With turn the I'll one size of square

Barry Berlin

Steve. you, Thank

on to financial Moving highlights.

$X.X reduced change offset million reduction to by a partially to Our million the By income this a Lending business segment and $XXX,XXX operating net in of NOI year NOI, $XX.X million in prior $XX.X NOI. Hotel office by out our broken in segment $XXX,XXX comparable our segment increase in was as compared around period. million segment, is increase our an $X.X segment

tax due in from in estate partially by $X.X prior to increase same-store Austin, comparable the our into increased segments, million California revenues a period, an Francisco, a property deeper segment business decrease and NOI to decrease the by property $X.X our in Drilling an office office occupancy. for office in properties, Office offset in decrease Texas, driven due first, primarily expenses San rental at NOI year our in to in a an million real

to did signed activity of XX,XXX feet the segment quarter. and approximately improved Office Our leases during see continue we square

segment improved prior Hotel $XXX saw XX% improved which room occupancy, the for by ADR, Second, $X.X we and NOI $XXX from increased which around XX% in per driven period. to from comparable million to our $X.X year increased up per went was This room. million to

each months our of our by X(a) It of million XXXX, lending of in NOI $X.X quarters the around end NOI to million government ended loan market up loan COVID-driven more government loan we SBA significant which Third, support last decreased division at and $X.X product, for the XX, the to year in XXXX. additional normalized of had quarter three This bump end to fact million support due sales, in that is note that in important fourth a XXXX. the premiums. XXXX a $X.X of did to drove increased had December a significant origination

For overhead, the fees, over fee due to period from around corporate $XXX,XXX $X.X into asset prior waiver around interest reduction effect by was of reduced $XXX,XXX. year administrative and was which $XXX,XXX decrease in expense partially is to and in increase offset that million just largest our comparable management an increase by the expenses $X.X an million went general X, in around level in by the the January XXXX. This

preferred stock activity. we Below the Company line, net a income recorded

our of in L December associated the As stock of we those million Series costs $X.X upfront stock and the the portion expensing preferred loss issuance remaining of preferred securities. announced XXXX, redemption recognized due to in repurchased with

stock dividends to the decrease declaration our in million $X D quarter stock to XXXX. quarter fourth prior to preferred as declared We change fourth or period. dividends approximately compared of a in comparable of accumulated related also our $X.X in of was on the million AX, timing and Series had the compared preferred the the A of This year

quarter our a to $X.X a our net reduced year negative comparable a of diluted was of result of stockholders loss prior in consumable common in of FFO to a million attributable to positive $X.X our in to quarter $X.XXX XXXX the fourth Therefore, share million, $X.XX as per Primarily redemption loss the fourth stock was costs the period. compared the XXXX. preferred $X.X million compared

with extended credit that option We one-year giving years and borrowing our of facility total two are the extensions. facility and for in us million another $XXX.X pleased a December XXXX to closed of capacity report three on recast revolving the we

As of for million million December, future $XX.X with facility end outstanding the borrowings. had credit on of our $XXX available we

of to available million Due of earlier, activities, this facilities our as million robust date had $XXX future $XX approximately for mentioned we borrowings. with call, acquisition on the the outstanding

Series where during proceeds cash we the Another was fourth in our quarter AX positive during the million generated an increase of issuance quarter. $XX fourth the preferred of around

that, With now our turn over call for the hosts can questions.

Operator

Hutton. E.F. with Instructions] Today's Mehta first comes [Operator question from Gaurav

Gaurav Mehta

wanted your but on question the on ask cap assets wondering provide some these you said, you of And [leases], acquisitions? these if First one to is acquisitions? you on I I fully could on was color any are was opportunities there value-add in the acquisitions. stabilized rate these

Steve Altebrando

a in a profile made, of -- if not process in return acquisitions the term. get of So that at would to all cost well, X% the three for medium assets process target cap two at on a overly you relevant, and is longer seven term, multifamily I somewhere the be so Oakland more to would like the in-place around say, that they're are a look the leasing like over our the in up, deal rate we least

the targeting we're time XX% at with really but So of what acquisition, about occupied. they those that's were assets,

And those for rents from of were significantly the both an which standpoint, the Echo below XXXX. Park is open are market. deal, however, then stabilized; in When buildings occupancy

and -- a area. it So -- is housing-constrained constraint

over on to an that target be would to X% asset trying cost. get would that a medium similarly, return about we term So the about

Gaurav Mehta

Okay.

stock? on similar Second expect on sheet. the that last year? saw demand provide preferred for Should your Are you you seeing some you question Can balance color changes? demand any we the

Steve Altebrando

$XX been have generally month, seeing normalized a of inflows. roughly million We

So I think that's the forward. project best going way to

Gaurav Mehta

every $XX month? of So inflows million

Steve Altebrando

Correct.

Operator

Riley question comes Securities. with B. from Craig The next Kucera

Craig Kucera

Can quarter where terms I to the want you the in those assumed acquisitions debt. this or did maybe you on coupons of color you what back anything give first several in that us some else to and -- the are circle regard? the

Steve Altebrando

sure. Yes,

mortgages today. below that which the two So the of actually market mortgages assume we because they basically of attractiveness part deal were are were did

they SOFR For in was spread both and was extension but of options -- plus through XXX mid-XXXX plus maturities, options. Channel run really XXX. Clay the SOFR about House House, they're And Channel have floaters, plus terms all extension but

Craig Kucera

going guess, is related had warrants. of I to forward? should how dependent? of diluted be share that really about Is you be kind your And helpful. significant going Great. obviously count Okay. of color we in diluted think pretty forward? a there any that change Or price kind that as share the would to the count Or part included going

Steve Altebrando

is not of It Yes. the because actually the price, warrants. share

way preferred out current you based you common. -- is price. the be So the the amount -- outstanding outstanding the into calculation stock assume stock And works will that -- that on converted the -- effectively the that is shares shares

but So it's because preferred why runs that added share a converting calculation stock, of these calculation bit not way. the a little it's in price that we're count, common to levels That's any interested of the into common. quirky

Craig Kucera

conversion holder? that the at is your And discretion versus

Steve Altebrando

our discretion. Correct. at It's

Craig Kucera

covered. my about And it. questions most of Got which uses, and you were sources

for that's me. it So

Operator

question comes Moran next from Co. with The Robotti & John

John Moran

position of on elaborate your I XX. March was you can wondering liquidity if as

rights sloppy. had And but And you stock about I on do guess and your the buyback to have just balance it restructuring the liquidity. the trading like you reason was I cash plan, don't from guess the down I $XX left that on much in the since repurchase tie you would offering. asking you that to these not in So I and said I your only down at how transactions place line million and just levels XXXX execute XX% wanted sheet? -- with know, that's be your XX% on think have It's, seems

issue wondering with what -- on the -- elaborate anyway, buyback? in just an I March XX if to be that's So correct could respect liquidity and at would am you

David Thompson

Barry, do numbers about talk buyback touch we a you little or then can bit general. the on want liquidity the Steve, more to in

Barry Berlin

plus you mentioned I the availability I today we're the the for think cash think, available, around roughly on that million line. $XX

David Thompson

where And Again, we'll to in find for shares. the stock, back at of opportunistic it's looking us I repurchase think we at. continue that we've with think we to going opportunities the think we're needs terms we're the look balance again, in to number the and market. see side want talked the capital about to development and that of opportunities a on we things that And buying

were CMCT want we Affiliates So in in the as balance been past. And purchasing that active and quarters have last in stock year. we well. second, certainly, repurchased of shares to third XXXX

we'll something to at. take it's So continue a look

Operator

McCarthy Brendan Sidoti. question next The with from comes

Brendan McCarthy

on to sorry, roadblocks -- into guess, could light government I XXXX shed or with you -- the on rezoning that I regards wondering was you Yes. if do some you issues? the any with or have to I'm transition Wilshire multifamily? any office run rezoning issues

Steve Altebrando

Yes.

was over no. the So but speaking, answer office residential community user. from supportive multifamily, particular to we mean, found asset that what get for short did of we pretty generally they have to because prefer re-entitled is generally, the would, an was that office property I the

able a And we March. the were start to was So -- then fortunately, through just received entitlements it of in and got we permitting. -- getting permit the then we then year matter last construction

for excited about should take months. we're that XX project So

Brendan McCarthy

more funding about light Obviously, if profile. was funding shed large in the what of the like to might one funding profile you some capital wondering a portion I preferred just the road And structure? profile, question is think on of the look but could down you years it. four terms two Got also

Steve Altebrando

the more advantages, term, revolver a we would then But we portfolio, we're a And stabilized has of have near and this combination would to additional using larger mortgages really, preferred the we could certainly which Ideally, of unsecured expect we size flexibility utilizing. more for cash source be that certainly flow. financing, that's our point some the to which and in to would where having Yes. get multifamily be a is potentially, Company.

Brendan McCarthy

one Great. I in environment? noticed your just lending more the lending mortgage comment a the other financing could aspect. question or significant relationships, relationships Have around you guess quick the of maybe recent you Or with banking on environment? recent tightening

David Thompson

in of I the I are means rates, Yes, higher, renewed higher borrowing mean seeing mean for of cap certainly, impact facility of we've gotten just felt good end higher XXXX. at -- And the we're that. are the getting shape think tighter. terms I rates credit in we're we us, it's costs. which

extensions. fixed have for one we we is So not is years, three due until mortgage which have other one-year really good a The rate, significant the that's mortgage on plus Kaiser, only two CMBS XXXX.

of also facility. credit having particularly So sheet, from portfolio that certainly, where terms debt, we of in shape have side in balance the again, we're the things gotten I but up, the -- good environment just we're assets underlying renewed has think and the tightened and have the tougher, pretty and

Operator

Gaurav Next question with Mehta a from follow-up is Hutton. E.F.

Gaurav Mehta

up on to on wanted say just clarify, debt, mortgage the Wanted follow XXX again plus SOFR to to guys I and the you acquisition XXX? the rate did

Steve Altebrando

correct. That's

Gaurav Mehta

these imply financing right? on And so that like mid-X% a would acquisitions,

Steve Altebrando

implies of meaningfully, pretty is but of as you today, know, That correct today. as curve down that's the as coming the but forward correct yes, rate

Gaurav Mehta

what's And I these dollar two third and see of the amount saw in the the for for didn't acquisitions? your think amount acquisitions dollar I dollar these of Okay. one? filing the

Steve Altebrando

Yes.

Park deal, a with XXXX $XX.X XX% about it's million XX% -- CMCT, has was interest. So a

Clay for equity is about XXX our Yes, that. So about Square for and XXX half was House CMCT portion, of London sorry, portion our around about portion. is Jack XXX was our -- and for Channel

Operator

follow-up from with The John Co. next question a is also Moran Robotti&

John Moran

is those? -- disruptive you prospect with And multifamily difficult near-term to do Yes, to co-investors? it more to mean, be on been the it this expect you in any into to has it's first I did market respect bring quarter, environment business? your the in that deals there co-investors that on get

Steve Altebrando

we where Area really co-invest. -- obviously, Bay pricing acquirer. led Oakland that was struggles, to high-quality there assets. thought some And an deals has part was for very was that we like look where saw to the Those we the reasons at And potentially of in that a place to two pricing was Yes. when are the being deals would could attractive but be that we coming the

as in thriving office and parking And XXXX, Area. the amount a when market mostly large assets a sold was in Bay of It was market. we a the reminder, really

the this question, we time, So But now bring your but attractive co-investors. think the to at reenter, we it side. cycle, like to on direct would, in over to thought I in point was multifamily

where uncertainty are I of there's think just sense general. commercial the private others, like in real reacting a today markets just estate around

So time, like but those bring to for may over we in not immediate, it co-investors would be assets.

John Moran

like -- mean, feel without cost the buying you co-investors, hopefully business a replacement I be to and or rate is or is on more. plan understand cap and cost something as little you're the a price without probably and those preferred does -- higher, Do to makes funding -- business that plan, sense funding does your is I that X% X% plan with I fund when targeted make return me. mean essentially would below that say that with I stabilized or that this that that That bit much stock program. cost it stock but of preferred type business a confusing sense properties exit acquisition on

Steve Altebrando

view makes in we returns think I expectation certainly of like look Oakland the assets, teens. our at returns sense. deals target when mean low are or or it the we mean, our I

fees in still those push think, that through well. it, deals. materially then And we the is But co-investors, as without even bring So attractive potential us. and promote you co-investors, a certainly they're if returns very even certainly, you for management attractive [indiscernible] without it's return higher

Operator

question-and-answer you session. concluded. lines are in today's concludes This Thank this our attending The there queue. no time now for At has call the more presentation.

may disconnect. You now

Creative Media & Community Trust (CMCT) 31 Mar 232022 Q4 Earnings call transcript