CMCT - Earnings call transcript Q1 2024 | Creative Media & Community Trust Corporation

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Operator

Good day, and welcome to the Creative Media and Community Trust Corporation First Quarter 2024 Earnings Conference Call. [Operator Instructions] And now I would like to turn the conference over to Steve Altebrando. Please go ahead.

Stephen Altebrando

Hello, everyone, and thank you for joining us. My name is Steve Altebrando, the portfolio oversight for CMCT. today Berlin, Thompson, our call Officer; Chief the Barry and Chief on are our David Executive Also Financial Officer. being Relations website, is on find call webcast be release. will This temporarily our the earnings Investor you section where our of can also and archived

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

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

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

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

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

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

David Thompson

call thank and you, Steve, Thanks, joining everyone, our today. for

call X first quarter we development pleased our report our intra-quarter gave to activity, results. we Following and our into weeks XXXX occupancy last insights are some where ago,

in was Overall, be office the Even fourth by improvement from income XXXX, hotel impacted to from cash of was and with rates. due largely elevated last which due saw improvement to to net latter continues the operating quarter of primarily segments, higher short-term our flow we which the our seasonality. interest quarter,

improve and balance our and reducing strengthen our selling flow, debt. to ways sheet evaluating are our including cash We potentially assets

Fed over to lower preferred on from funds [ the ] and floating to our rate benefit eventually addition, as expected time. debt come rate is expect lower we In down dividends sulfur

or Series plus greater of reminder, Fed AX the is preferred dividend our funds a X.X%. As X%

by in the of working million, due opening driven the for the this year build-out next. X% Beverly commencing lease to and lease with dealership. office improved the year-over-year our grand We're of on anticipate $X.X Rolls-Royce or increased the end early Hills XX-year to NOI primarily property our the the our quarter, our same-store at NOI results As for toward

stable XX% approximately lease Overall, the office remained of XX,XXX our quarter. leases percentage the we office and in quarter square executed in feet at

largely segment fourth a million our and quarter QX increased hotel both seasonality. quarter-over-quarter, was NOI QX result for consistent It of a XXXX. $X.X While XXXX

anticipate trends and Hotels of second are half in long-planned on year. still asset strong our our we hotel renovation starting this the

is the We and XXXX. a underwent directly major renovation Sacramento's hotel itself significantly in X benefit which located as Center, this believe expansion renovation X street the across will hotels asset our from of Convention

year-over-year, lending completed we impact these year significant for the to segment primarily that the securitization have on a previously Our decreased CMCT. NOI also increased interest of expense what proceeds attributable which due segment but ago calls, generated to described

of NOI generated segment Our the $XXX,XXX multifamily quarter. in

the XX.X% expectations. and Our our has although occupancy XXXX, at the of of House end Clay end Oakland, XX.X% Channel first our improved to the been rate largest significantly properties, quarter the two in below from at located XXXX at rental

just recently we Turning since don't spoke. to development to We much pipeline. new have our report

in do XXXX at on in one Avenue. we multifamily new be this However, Park later to to at one mid-XXXX Wilshire assets Los continue two and deliver XXX track year Angeles,

assets. trying required between balance to multifamily our development office more Between we creative properties activity, our of portfolio achieve are and multifamily and grow side the and

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

Stephen Altebrando

provide I update would David. multifamily. our on assets, Thanks, like an with starting operating to

segment end, quarter fourth a our occupied As to quarter. at David at consolidated mentioned, multifamily basis XX.X% compared the XX.X% the end was on of

the the points occupancy from increased XXXX asset up multifamily XX.X% to Park Los of end year-end. the Echo at basis In our quarter Park, at Angeles XXX at XXXX

at substantially executing been leases have in-place new tenants rents. new rates our for We higher than

as exceeds $X,XXX ago. about per tenants was represents generally unit the occupied our new month, from a a And from end of year for quarter. per of $X,XXX XX% XX% rate the in-place rents. rent This more increase first Monthly a our increase than

we But significant at occupancy. as below progress continue our improving XXXX rental have rate make referenced, to Oakland, David and Clay expectations. in Channel In been House

we the there was previously significant through As XXXX. have market supply discussed, XXXX from in growth Oakland

to The that our secure before is to it at increase these new excess economical to we market would this It's see continues believe important multifamily leases and construction. are to local we note supply, properties. by absorb encouraged to rents ability need dramatically

is the development So we below for expect XX minimal for East the markets. future. Bay well pipeline The U.S. in top supply new average foreseeable for the

Turning XX,XXX approximately to the in feet quarter. our office leased square segment. first We

XX.X% Our of was compared of XX.X% the of was and to XX%, end about occupancy points end the XX our end the rate from basis XXXX. lease quarter at down percentage the first XXXX, at

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

Barry Berlin

financial Moving to on highlights.

period. to segment comparable Let's increases year offset start a increase in of $XX.X of partially $XX in in our decrease $XXX,XXX $XXX,XXX driven with compared was our segment. and NOI for prior segment which quarter multifamily by by the the million were $X.X lending office around $XXX,XXX our which XXXX NOI, our from million of in This million of first was segment,

unconsolidated $X.X in office of prior at The higher by Our period. NOI was from office property in addition and in increased decrease Echo an Angeles driven in office $X.X Beverly Los the million higher during year an segment Los quarter. from to in Park million million to California primarily Angeles, revenues the Hills, to property rental $X.X California, comparable office due occupancy entity income an increased

first and $X.X Our million XXXX the hotel of quarter remained NOI XXXX. at segment consistent for

For in interest securitization primarily with expense. from debt issued segment to level. the expensed the period, our Lending We the $X.X due $XXX,XXX transaction through securitization decreased increased comparable at being division, million in year the a year interest relating March to to directly prior last NOI lending the

another in reporting Los in XXXX. a late Angeles late NOI Oakland in well two segment venture in Lastly, multifamily investment. March acquired multifamily and XX-XX began property January quarter properties through the of as in we we joint first as invested After multifamily

the the period. The first we first prior during during of the properties for million of to quarter NOI around During comparable of approximately to of XXXX, operations NOI during reported operations XXXX, Oakland XXXX due properties $XXX,XXX of quarter of multifamily quarter the the entire multifamily provided not due the largely the year $X.X of of approximately an first segment, compared segment compared to occurring quarter. quarter having breakeven the to $XXX,XXX acquisition

$XXX,XXX offset during of the partially increase of a in quarter in equity XXXX. of was from in JV XXXX approximately $X.X to net the first first our $XXX,XXX the This NOI pickup quarter of loss swing million during a NOI from investment by

intangible nonsegment quarter decrease expense amortization depreciation multifamily was to our a which expenses, of had acquired Oakland, and we primarily in due For in properties amortization which our in-place the million, been XXXX. lease in of decrease first fully have prior for assets a amortized $X

around result acquisitions a costs transaction-related million of been of multifamily in had the in Oakland have also We elevated during quarter that decrease period. property as first $X.X the which XXXX a of

in the primarily offsetting interest by borrowing was increase on acquisition and market connection nonsegment decreases around of was properties mortgages our connection two with revolver rise with increased interest these in expense rate assumption The allocated Partially in increase and Oakland of our the multifamily an million. in the to expense, acquisitions. $X.X due nonsegment which

negative year diluted core year in share the share compared per was positive compared prior a comparable period. $X.XX per the $X.XX per to $X.XX negative was share in our And FFO FFO prior diluted $X.XX to Our period. negative

of stock an These dividends well in as reductions primarily driven as in the increase redeemable increase were million. by approximately preferred interest expense $X.X

from Finally, sale during an AX the quarter, proceeds additional preferred of raised net our Series regarding stock. liquidity million the in we $XX.X

although by short-term As David continues our rates. improved core our from flow last mentioned, cash be to interest FFO impacted elevated quarter,

we reducing balance to sheet that note to improve are is assets and ways cash debt. our selling flow, important our and including evaluating It our potentially strengthen

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

Operator

a we'll from And Brandon McCarthy may you Sidoti. [Operator from Instructions]. Brandon, proceed. question with start

Stephan Guillaume

This is Stephan on McCarthy. Guillaume Brendan for

how First dependent any now? I environment? flow is And deal rate lower regarding asset the you question describe sales, would on have sales on potential

David Thompson

let take Yes, that. me

think portfolio an obviously, our in I interest today we higher rates. environment when assets low short-term assets, cap of pretty have, living The view pretty we mean, portfolio. still at But look that think desirable that with will we got we've I you we're a rates. at trade

asset our sales are cash to flow. accretive So

allow really that's our is to be in a And will real a potential goal us here the in what better road. the position participate that estate and cash see opportunities to to down flow improve be that we'll recovery expect we

that way enough And significantly assets thinking credit our what potentially goal of the a process pay terms kind we here broadly sell of we fully. sell. now. our evaluating assets is And That's it. that about really we're so right of would to In the overall can down refi in we're

Stephan Guillaume

how in All and talk have renewables about progressed? right. costs rent Can also you spreads portfolio

Stephen Altebrando

I sure. can that. Yes, take

I for but unusual think first did which sample a -- quarter. large on about XX,XXX size, So not leasing, they square sprint feet the the is of nothing unchanged about were side. they're We

Stephan Guillaume

recent guess fair outlook say in the With Got it. positive me. is last now? occupancy as operating to one net portfolio, gain for obvious it I office the like income a

David Thompson

NOI I pick do see. some an see this coming easier quarter did way. -- still a fourth quarter think office of comp. the think have I I up we But mean quite expirations we we're our we'll is bit

terms think to we of in I So yes, wood still some have chop renewals.

Operator

Riley. B. question comes next Massocca from John our And from

John Massocca

back you the maybe I activity going specific strategic the types disposition property be to to dispositions, considering? any might So maybe there is mean, elements or

David Thompson

portfolio, in part would mean, have. -- Again, of office process product that we I that our the right now. think it at the obviously, largest we're really of the evaluating still I if remain look you the

a at. that's key look So be to and we'll probably that place start likely

and historically I office balanced getting the get on trying talked and between call to we've well, going the And more multifamily forward. as this, creative the about mentioned

So place be us that's to start. for to a logical I think going

John Massocca

that on Okay. outlooks projects, what term some of development are some the the of returns particularly for And ones these kind then in pipeline? are near the of maybe more the

David Thompson

XX cost mean our rate. think we're point And in track. terms I cap generally spread versus I current on the of target to basis on points market XXX basis Yes. we return

We the two assets -- achievable. which that have are is think underway, we

it's candidly, tougher where think costs market I are the cap and in rates today construction are. given to develop where

are not more a that haven't So pipeline, the but necessarily been expectations. meeting return because really much hurdles have to development rushing our start we just we significant

doing little a So but waiting work, bit little we're a better for environment. predevelopment

John Massocca

in I how big in the in between multifamily Okay. And just terms Angeles. of mean, seeing fundamentals versus the divergence Los what then environment, operating you're terms of is Oakland

Just will online new be in some Angeles, it your sounds products coming like? given of where Los

David Thompson

market that Oakland, it's and really coming Whereas are of developers strong. more once, mean, just there where seeing we're definitely hit submarket a affordable pretty Well, Yes. projects that mandate a was housing the supply was just at moment amount because an better large at start place. Yes. I of really a a all before L.A. wanting trends to result was challenging into

development And result, at as at a of a start once. lot all

So a And we've hit off. to time excess that's unusual market, much being it how -- supply it's of just to take once. It's some absorbed. going that just work supply an seen lot that

at the I point, vacancy. think one XX%. was There's XX% market

less Now than XX%. it's

going definitely just take it's there's there an been So time. improvement some on occupancy, but the to

John Massocca

some And with it's broadly property the I mean, impact Sacramento Okay. revenue hotel then contribution redevelopment the from undergoing to the asset, that potential what's while activity?

David Thompson

Yes.

it the looking this. not expecting but we're to will some disruption -- way we're be limited, manage So

we'll floors doing a be at few effectively, So once.

the and by buffer, making we're other just up, So guests sure the floor not there's floor impacted. go to floor are a going the down, floor so basically

a to at we're that rooms some really period will really without renovation be X-month all certainly, times NOI, impact complete large will we So really hoping but about a for have this offline. to

be -- we'll but -- not there NOI. So not we're falloff it expecting will -- be a it's it that be will major would some in disruption,

John Massocca

just maybe mean then me, to stock that, more about increase think the liquidity picture. anything could to size common I it the institutionally And stock overall I leverage. Okay. the too, other can in But or you you maybe talked mean, you for strategically potential bigger last of to levers reduce pull maybe maybe make there one of just of relevant? slightly common side is

of being I'm trying kind to beyond are around think there's just other selling the kind deleveraging? picture of if big assets bounced and of ideas that

David Thompson

bit we balance up one -- quite way sheet Well, set I a does really us think our give of flexibility. the

mortgages. We nonrecourse have

common. to assets preferred have We portfolio. -- cumbered that's outstanding, or have the And converted which obviously credit is X secured which the is borrowing which stock a facility, be base our we then facility within by can senior X being

I improve like it lot clearly, the the a tougher company a levers set time. up did And way really balance up, that we and balance and for for flow think is potential of leverage what set our the we're give does think flexibility I sheet environment, today. So over improve us sheet cash seeing the to the

that, into the quite without balance detail getting the on we based have we but more So I think flexibility way than a set of sheet. do up bit

Operator

And you the attending question-and-answer as session this well today's the Thank presentation. concludes as for so much conference.

You day. may now disconnect. Have great a

Creative Media & Community Trust (CMCT) 16 May 242024 Q1 Earnings call transcript