• Segment NOI: $7.6 million for Q3 2024, down from $11.2 million in Q3 2023.
• Office Segment NOI: Decreased by $3.9 million to $5.4 million.
• Hotel Segment NOI: Decreased by $950,000 to $970,000.
• Multifamily Segment NOI: Increased by $900,000 to $510,000.
• Lending Division NOI: Increased by $325,000 to $690,000.
• Depreciation and Amortization: Significant decrease of $9.7 million.
• Preferred Stock Redemption: $2.6 million shares of Series A1 and $2.2 million shares of Series A redeemed.
• FFO: Negative $1 per diluted share, compared to negative 31 in Q3 2023.
• Core FFO: Negative 40 per diluted share, compared to negative 29 in Q3 2023.
• Office Lease Percentage: Declined to 72.9% from 83.5% last quarter.
• Multifamily Occupancy: 92% occupied, up from 79.3% at the end of 2023.

• Warning! GuruFocus has detected 8 Warning Signs with CMCT.

Release Date: November 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Creative Media & Community Trust (NASDAQ:CMCT) is committed to increasing its multifamily portfolio and reducing traditional office assets, aligning with current market trends.
• The company is in advanced stages of refinancing several assets, including the Sheraton Grant Hotel and high-quality Los Angeles office assets, to improve liquidity and cash flow.
• CMCT completed an office-to-multifamily conversion at 4750 Wilshire and is on track to complete a 36-unit multifamily development in Echo Park, Los Angeles.
• The company successfully closed a co-investment in a premier Class A apartment property at 1902 Park Avenue, providing cash distribution and recurring management fees.
• Occupancy rates in CMCT's multifamily segment improved significantly, reaching about 92% at the end of the quarter, driven by better performance in Oakland properties.

Negative Points

• CMCT continues to face challenges in the real estate market, particularly with traditional office assets and soft rental rates in the Bay Area.
• The company's office lease percentage declined to 72.9% from 83.5% last quarter, primarily due to lower occupancy at the One Oakland office building.
• Renovation disruptions at the Sacramento hotel significantly impacted results, although completion is expected by year-end.
• Net Operating Income (NOI) decreased by $3.6 million compared to the prior year, with notable declines in the office and hotel segments.
• The company's Funds from Operations (FFO) was negative, driven by preferred stock redemptions and decreased segment NOI.

Q & A Highlights

Q: Can you provide some color on the drivers behind the decision to convert preferred shares into common equity, and is there potential for more conversions going forward? A: David Thompson, CEO: The conversion is part of our strategy to strengthen the balance sheet, improve cash flow, and focus on liquidity. Our target capital structure includes about 40% common equity, and this conversion helps align with that target. Future conversions will depend on various factors, including trading conditions and board decisions.

Q: Is there a specific conversion price that might deter further conversions, given the current stock performance? A: David Thompson, CEO: Several factors will be considered, including trading prices and benefits to liquidity and capital structure. The board will ultimately decide on future conversions.

Q: Regarding planned future refinancings, is there an expected range of interest rate savings? A: Steve Altebrando, IR Contact Officer: Interest rate savings are possible, but the primary focus is shifting to a property-level financing strategy to reduce overall enterprise risk and extend debt maturities.

Q: Will refinancings create more capital, and will the focus be on fixed or floating rates? A: Steve Altebrando, IR Contact Officer: There is potential to free up capital, and the focus will primarily be on fixed rates, except for the hotel, which will have a floating rate due to its business plan.

Q: Are there plans for asset dispositions or other capital-raising activities now that the preferred pipeline is suspended? A: Steve Altebrando, IR Contact Officer: We are evaluating all assets for potential sale to raise capital and position the portfolio for future growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.