CMCT - Earnings call transcript Q2 2024 | Creative Media & Community Trust Corporation

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Operator

Good day, and welcome to the Creative Media & Community Trust Second Quarter 2024 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Steve Altebrando, Portfolio Oversight. Please go ahead.

Stephen Altebrando

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

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

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

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

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

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

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

David Thompson

and income Thanks, estate and operating This second Net results. thank call segments, first real across multifamily quarter operating XXXX all released today. office, joining morning, quarter our we our from hotel. our Steve, the improved everyone, for you,

from last rental rates to at we pleased this interest market continued soft our known office and assets. with While impacted challenges cash our flow widely are Area continues by the quarter, improvement be rates, short-term elevated in multifamily the Bay

our sheet balance improving our cash strengthening on and focused are flow. We

other debt to overall and such, to As sales both reduce debt. we continue recourse our asset ways evaluate and

debt and the down dividends benefit from expected over lower time. We on Fed to also floating is as SOFR eventually preferred expect rate come our lower funds rate to

X% funds Preferred our greater a X.X%. or reminder, Series Dividend is a As Fed plus AX of

of make to of at X ahead X schedule and We and are our active pipeline, projects. progress our development we redevelopment continue on

the hotel provide in details in we at July. projects moment. X room and a more commenced have We will Steve multifamily renovation underway, our one

the an quarter our quarter, of We price our increased an same-store $X.X XX,XXX leases JV percentage increase the year-over-year office to XX.X%, in XXXX, The results the our in quarter approximately million. unrealized X% the in driven quarter by in Overall, was office had whereas primarily NOI income. office for second remained As of increase segment an second XXXX, our driven and a we unrealized in primarily values. gain had quarter. stable This of lease by square loss. in we the at feet executed was

our to in expect do we occupancy decline However, third the quarter.

a July XXX,XXX large gave the square X end Oakland. approximately office Kaiser at building previously disclosed, that tenant we in back have feet of As at our Plaza

hotel the room segment daily year increased primarily rate. due to improving NOI prior from to X% average million, $X.X Our

the increase end Our to of the XX.X% to in from quarter The multifamily segment driven the the $X.X of compared of NOI second quarter quarter NOI by XXXX. at $XXX,XXX end gain, XXXX. XX.X% occupancy was of the generated in at million first which improved of

XXXX continues located expectations. be However, properties, the at our House largest rental Clay below X in Channel Oakland to and our rate

resulting The Steve interest development that, With loan-backed our amount $XXX,XXX. due will was to further year-over-year in increase pipeline to it I XX% increased NOI segment portfolio. over turn a X(a) on provide notes. and from repayments lending principal decrease expense SBA our Our to update a primarily on of the to the

Stephen Altebrando

floors have X-story office preserved creative XXX% which XXXX high-end property project underway, and top projects and been previously housing Starting office a office L.A. completion. Hancock with for supply is with have X projects and in the our the in residential nearing is ground multifamily residential X pipeline, is Starting This was at we X leased, hotel units. to space, where XXXX Park affluent multifamily, in Sacramento. residential room renovation David. rent XX Wilshire submarket Wilshire development of We our to Thanks, is converting floor building. we located the L.A. constrained.

We announced residential are we units has South weeks. complete the line on track fourth launched to to previously the time and in start have of the XXX The component properties quarter. the been of renamed ahead project lease Hudson, expect website third in quarter and for the marketing the coming

which entry and We CMCT's premier are to creative project, high is in we office invest to this which about assets and multifamily markets. excited reflects strategy develop -- and believe barrier

Echo XXXX highly of with units. Our expected section options. dine-in the Echo of neighborhood will entertainment Los is X-story feature in mid-XXXX an building Park is walkable Upon a the and desirable Park new second Angeles delivery. dozens Park XX development completion, with

room Turning to in million renovation the Grand refresh at renovation of includes XXX July, $XX rooms. Sacramento. approximately began the Sheraton we The all an hotel. a In

located Convention We Sacramento's expect the solid just the a itself directly completed is street the will generate investment. end a XXXX. and return hotel of this complete renovation and hotels expansion Center, to major X of project from around across XXXX believe The renovation which X on in

at end leases Now rents. first multifamily consolidated occupancy XX.X% executing at In and higher quarter. up On in rates substantially of new quarter to year-end. XXXX new Park, our quarter quarter, XXXX our Echo basis basis portfolio. at for segment asset turning XX.X% from from was the at the tenants XX the the increased our of multifamily points operating fourth XX.X% than XX.X% end, been Park We've Los a our at to in-place occupied, the up Angeles end

for rents. this and an we exceeds In $X,XXX unit from we Oakland, XX% year occupied of in-place our quarter. make the our NOI the a from improving increase per $X,XXX progress, end to rate increase of second continue as a month, more represents than and generally in per rent Monthly tenants This a quarter. increase new occupancy was ago, X% had

XXXX local it's need economical in at see increase XXXX. referenced, XXXX rate as would supply as through in construction. the dramatically and have believe of Channel below new before Clay Oakland expectations the absorbs to However, the David level to House been our multifamily rental We market high added rents

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

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

Barry Berlin

multifamily Steve. $XX.X be which highlights of you, the our in segments. was million prior $XXX,XXX hotel million over Thank in year for Starting of million NOI, financial quarter. increase and million $X.X both was morning. going of with to our segment our the increases for segment million some $XX the Good I comparable will office and compared of $X.X second by $X.X second period. This lending XXXX driven our in in segment quarter segment,

to increased the in million comparable prior from $X.X million $X.X period. NOI Our office segment million year by $X.X

As entities on mentioned of losses of by real to the this estate an unconsolidated unconsolidated office was by our driven at David, office one comparable unrealized in aggregate our compared primarily entities period. the unrealized year at gain prior value

XXXX increased to available million comparable quarter the in for to revenue an increased to was of compared NOI $XXX,XXX the segment million in room prior driven year by per increase second ADR. $X.X hotel Our $X.X period, which attributed

principal of acquisitions our notes. reported period, to $XXX,XXX compared division which lending during the of decreased approximately the approximately resulting to expense prior period. in year And commenced X(a) $X.X quarter Our asset due amount loan-backed NOI for the with million multifamily comparable comparable segment, XXXX, increased first the SBA NOI from interest $XXX,XXX on primarily our repayments of $XXX,XXX prior the to from year

our revenues occupancy higher California monthly increase occupied from The increase rent and multifamily adjusted by an unit in at properties rent is from due primarily in to per Oakland, rental as increased concessions.

assets driven which significant lease assets. Our amortization was depreciation intangible million, by of and during XXXX in-place $XX a nonsegment Oakland in by the our expenses for decrease full amortization had the acquired

There allocated was nonsegment was our interest due decrease higher interest outstanding XXXX. expense, principal increase which revolver. for intangible primarily balances no to offsetting was Partially market non-segment lease expense $X rises on acquired a assets in million amortization rate in-place and during average the

compared by interest dividends the Stock Preferred was and FFO in that redeemable primarily the I was in million the share is XXXX, our note increase of a our during negative $X.XX line we bottom comparable our negative expense $X additional year AX of to increase in and share period stock million NOI, to increase per an recommenced The approximately in raised to June. wanted of also a quarter million. comparable an $X.XX These that driven $X.X $X.XX Series negative by per second core securities $X.X year during compared period. partially preferred diluted segment and were the diluted increases $X.XX from of prior prior our offset FFO proceeds $X.X the negative the an million a net in our sale of issuance of in

We questions. can for line open now the

Operator

Securities. question from John [Operator from comes Instructions] first B. The Riley Massocca

John Massocca

how just to in little a leasing maybe is merit So the more give space and like color can provide impact situation on back you at going go XQ? things -- --

Stephen Altebrando

Sure.

in is about currently of process which the the largest -- lease of they lease with about X/X Kaiser, today, tenant So the the building. negotiations building, we're in

So something ongoing. did about gave square XXX,XXX feet give of disclosed back we July. and those the is negotiations at back that this They are that they previously end

be -- footage square is That negotiation part the of that will not for lease. not future

extension of it but their part the and space -- of in we part negotiating expires an that in we're of process on are it So in XXXX XXXX.

John Massocca

in you of terms Oakland on what in Obviously, an market, seeing supply And like of then the the current maybe the multifamily of it But much in demand market? seems be on side are side things. multifamily shouldn't that issue.

Stephen Altebrando

had pretty I actually first the was good half mean, -- in occupancy, very as picking you which terms encouraging. see by numbers, a We up could we of

said or market than XX% couple is is we say much XX% Having think, I which we trough, so was which the So is -- seen would vacancy the in better still, that, a still, years XX%, of a pickup demand. I have ago. roughly market-wide

So but be in challenge to a -- we get and encouraging. high is which we market our we be occupancy continues what lot moment. concessions market seen, seen the But continues absorption, very where of And were XXs, I haven't to into a we velocity. able rate. really pickup it's lease -- a yet would in we've to the a the That it a a seen have overall say, just at was pickup low

John Massocca

little Where concessions before maybe pushing back pushing aggressively think, you rate? trend as assets need would and you Okay. bit in could you a on those on more start

Stephen Altebrando

occupied. somewhere XX% the in markets, Probably mid-XX overall, the mentioned, And I as around range.

John Massocca

of continue Anything How in seen but sheet you trend impact you've that refinancing? rates rates? for on today, the weeks. your the you've balance sheet seen interest the in moves balance does forward interest if or side last on the then the downward, in excluding to of pull moves things outlook out rates, And maybe fix maybe couple given rate long-term particularly could

Stephen Altebrando

Yes.

from good perspective. see our So been to it's certainly

for us. good come floating in that, down. some We some -- financing. have rates, referencing those more the pretty of addition of our savings to a But you're rates what rate amount is fix debt, which significant think on Short-term potentially there's I potential longer-term to rate

as And as quite something a will well a seen take kind down so we X-year look come that's of at the bit. we've

potentially, So -- swap now that there bit is from floating a us we're fixed for some some opportunity looking into -- little at potential longer-term rate to a debt. into right

John Massocca

assets deals? And the mean, recycling Or and of in Have you've one, still counterparties innings there past is it talks out opportunities or your dispositions? noncore maybe up? being disposition little capital picked last for gotten a bit some on in I then cheaper as and early any financing some kind might be there, especially has calls, negotiations talked that about

Stephen Altebrando

in more say, would our like we phase. to -- debt. we to reduce I both and still, like evaluation overall recourse would the would What We're

hotel really division. the I can where in include And we past, generate think to that an are discussed level the I basically value. also of and would in lending noncore them particularly doing as asset-by-asset the well, on work we evaluating assets we've that So see mix some some most the and

John Massocca

Was use the multifamily on of side proceeds still the in the same today? be markets you're in primary

Stephen Altebrando

look And now, really to really proceeds the focus today for a think primary we I as pay settles then would just down as want this debt at think the balance to potentially really bit. moment. acquirer. But little a be down use the an our back That's market I of debt. get bit, be to

Operator

also. concluded concludes attending This now presentation. today's you session, the has for question-and-answer and conference the Thank

may You disconnect. now

Creative Media & Community Trust (CMCT) 8 Aug 242024 Q2 Earnings call transcript