CMCT (CMCT) Q2 2026 Earnings Call Transcript

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DATE

Friday, Aug. 14, 2026 at 12:00 p.m. ET

CALL PARTICIPANTS

• Portfolio Oversight-Stephen Altebrando
• Chief Executive Officer-David Thompson
• Chief Financial Officer-Brandon Hill

TAKEAWAYS

• Segment Net Operating Income: $9.3 million, compared to $9.8 million in the second quarter of 2025.
• Funds From Operations (FFO): negative $3.5 million, or negative $1.28 per diluted share, representing an improvement from negative $7.9 million in the prior-year period.
• Core FFO: negative $3.4 million, or negative $1.25 per diluted share, compared to negative $7 million a year ago.
• Consolidated Net Operating Income: $12.5 million when excluding unconsolidated entity losses, an increase from $10.3 million in the prior-year period.
• Multifamily Net Operating Income: $638,000, representing 238% year-over-year growth driven by increased occupancy and lower property taxes in Oakland.
• Same-Store Multifamily Occupancy: 95.3%, an improvement of 1,190 basis points compared to the second quarter of 2025.
• Office Segment Net Operating Income: $4 million, a decrease from $5.5 million in the prior-year period due to a $2.4 million increase in joint venture losses.
• Office Leased Occupancy: 84.4% when excluding the Oakland office asset, reflecting a 470 basis point increase year over year.
• Hotel Net Operating Income: $4.6 million, an 11% increase from $4.2 million in the prior-year period following room and public space renovations.
• Loss from Unconsolidated Entities: $3.2 million, compared to $437,000 a year ago, primarily due to non-cash fair value adjustments at two office and two multifamily entities.
• Preferred Stock Dividends: $4.3 million reduction year over year, serving as a primary driver for improved FFO.
• Transaction-Related Costs: $786,000 decrease due to lower volume of contemplated transactions and reduced debt deal costs.
• Depreciation and Amortization: $807,000 increase, driven by tenant improvement amortization in Beverly Hills and hotel renovation projects.
• Asset Management Fees: $510,000 increase, reflecting higher net asset value following the issuance of common stock in the first quarter of 2026.
• Casualty Loss: $455,000, resulting from water damage at the company's hotel property.
• Multifamily Rent Gap: 12%, representing the amount in-place rents at Bay Area properties are below current asking rents.
• L.A. Multifamily Conversion: 94.1% occupancy at 701 South Hudson, a partial conversion from office to residential units.
• Echo Park Development: 58.3% leased at 1915 Park, a 36-unit project that delivered in the fourth quarter.
• Oakland Office Debt Service: $445,000 in income generated by the asset after debt service during the second quarter.
• Mortgage Refinancing: Extension of the mortgage at 1150 Clay in Oakland until mid-2027.
• Office Leasing Activity: 16,000 square feet of leases executed during the second quarter.

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RISKS

• Altebrando stated, "We elected not to invest the additional capital in the asset that would have been required to refinance the mortgage," regarding the company's Oakland office property where the nonrecourse debt matured in early July.

SUMMARY

Creative Media & Community Trust Corporation (NASDAQ:CMCT) reported improved core financial metrics and operational strengthening across its multifamily and hotel segments during the second quarter. Management focused on the recovery of the Bay Area residential market, where high demand and low supply led to significant occupancy gains and rent growth. The company successfully reduced its preferred dividend obligations following a large-scale redemption earlier in the year, which contributed to an improvement in funds from operations. While the office segment faced pressure from fair value adjustments in joint ventures and challenges in the Oakland submarket, the company completed major renovations at its Sacramento hotel and continued leasing progress in Los Angeles and Austin.

• CEO Thompson noted that multifamily occupancy reached 95.3%, stating that "these improvements are translating into stronger operating results."
• Portfolio Oversight Altebrando highlighted the Bay Area recovery, noting that San Francisco multifamily vacancy reached a "25-year low" of 3.7%.
• Management indicated that in-place rents at Bay Area multifamily properties remain approximately 12% below current asking rates, which is expected to support future net operating income growth.
• The Sheraton Grand Sacramento hotel completed substantial renovations of its public spaces and 505 guestrooms, which Thompson believes positions the property "to generate additional NOI growth."
• Management is exploring the conversion of underutilized space at its hotel property to add eight new guestrooms, a project described as "highly accretive."

INDUSTRY GLOSSARY

• Basis Points: A unit of measure for interest rates and other percentages in finance, where one basis point equals 0.01%.
• Class A: A classification of real estate referring to high-quality buildings with premier amenities and locations.
• Core FFO: A supplemental financial measure that adjusts FFO by excluding non-recurring or non-operating items like transaction costs and debt extinguishment gains or losses.
• FFO (Funds From Operations): A measure used by REITs to define cash flow from operations, calculated by adding depreciation and amortization to earnings and subtracting gains on sales of assets.
• JV (Joint Venture): A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task.
• NOI (Net Operating Income): A formula used to calculate the profitability of income-generating real estate investments by subtracting all reasonably necessary operating expenses from all revenue.
• Non-GAAP: Financial measures that are not calculated in accordance with Generally Accepted Accounting Principles.
• RevPAR: Revenue per available room, a performance metric in the hotel industry calculated by dividing a hotel's total guestroom revenue by the room count and the number of days in the period being measured.

Full Conference Call Transcript

Operator: Good afternoon, and welcome to the Creative Media & Community Trust Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the call over to Steve Altebrando, Portfolio Oversight. Please go ahead.

Stephen Altebrando: Hello, everyone, and thank you for joining us. My name is Steve Altebrando, the portfolio oversight for CMCT. Also on the call today are David Thompson, our Chief Executive Officer; and Brandon Hill, our Chief Financial Officer. This call is being webcast and will be temporarily archived on the Investor Relations section of our website, where you can also find our earnings release. Our earnings release includes a reconciliation of non-GAAP financial measures discussed during today's call. During this call, we will make forward-looking statements. These forward-looking statements are based on the beliefs of assumptions made by and information currently available to us.

Our actual results will be affected by known and unknown risks, trends, uncertainties and other factors that are beyond our control or ability to predict. Although we believe that our assumptions are reasonable, they are not guarantees of future performance and some will prove to be incorrect. Therefore, our actual future results can be expected to differ from our expectations, and those differences may be material. For a more detailed description of potential risks, please refer to our SEC filings, which can be found in the Investor Relations section of our website. With that, I'll turn the call over to David Thompson.

David Thompson: Thanks, Steve. Hello, everyone, and thank you for joining us today. I'll begin with an update on our strategic priorities before reviewing our second quarter operating results. Starting with our strategic priorities. First, we remain focused on improving our funds from operations in 2026 and 2027. We continue to see operating trends strengthening across our multifamily portfolio, our Los Angeles and Austin office assets and at our hotel asset in Sacramento. These improvements are translating into stronger operating results. Excluding our JV loss in the quarter, which was primarily impacted by large noncash items, our net operating income increased 22% from the prior year period, driven by our multifamily, office and hotel segments.

Second, we continue to strengthen our balance sheet while still funding critical growth initiatives such as office leasing and our hotel renovations. Despite a $2.8 million increase in our JV losses, which was primarily driven by noncash items, our core FFO still improved by $3.6 million compared to the second quarter of last year. The improvement was primarily due to a reduction in preferred dividends. Third, we continue to evaluate the potential sale of one or more of our real estate assets. We believe executing on this strategy will further strengthen our balance sheet while also helping close what we view as a significant gap between our current share price and the intrinsic value of the portfolio.

Turning now to our operating performance by segment. Beginning with multifamily, we believe CMCT is well positioned to benefit from the continued recovery in the Bay Area residential market. Approximately 78% of our multifamily units are located in the Bay Area, where leasing demand has continued to improve. Same-store multifamily occupancy reached 95.3% as of June 30, 2026, an increase of 1,190 basis points from a year ago. As a result, multifamily NOI increased 238% year-over-year. In addition, in-place rents at our Bay Area multifamily properties are approximately 12% below current asking rents, providing a meaningful opportunity to continue NOI growth as new leases roll to market. Within our Office Segment, leasing trends continue to improve.

Excluding our Oakland office asset, leased occupancy increased to 84.4% at quarter end, up 470 basis points from the second quarter of 2025. Office NOI declined to $4 million from $5.5 million due to a $2.4 million increase in our JV loss. The JV loss was primarily driven by noncash items. Excluding our JV loss, consolidated NOI increased year-over-year, primarily due to improved performance at our Wilshire office assets. Our hotel property in Sacramento also delivered improved operating performance. Following the completion of recent renovations, hotel NOI increased 11% year-over-year. We believe the property remains well positioned to generate additional NOI growth.

Overall, we're encouraged by the continued improvement we're seeing across each of our operating segments, and we believe we are positioned to continue to grow our FFO. With that, I'll turn the call over to Steve to provide more color on our refinancing activities and property level performance in the quarter.

Stephen Altebrando: Thanks, David. The actions we've taken over the past several quarters have significantly improved our balance sheet, and we believe will improve our funds from operations. We are positioned to benefit from improving fundamentals, particularly in our multifamily assets in the Bay Area. Today, CMCT owns 621 residential units across 2 premier Class A assets in the market. The Bay Area recovery continues to gain momentum, bolstered by growth in AI-related employment and investment. In the adjacent San Francisco market, multifamily rents increased by approximately 11% in the second quarter after increasing approximately 6% in 2025. This rent growth represents a 25-plus year high. And vacancy has declined to 3.7%, which is a 25-year low.

In Oakland, rent growth was 7.6% in the second quarter, also the highest rate of growth in over 25 years, while vacancy declined to 7% at the end of the second quarter, down from a peak of approximately 18% in 2021. Supply growth in the market remains very low, and we anticipate that it will remain low for the foreseeable future given the elevated costs of construction. At the end of the second quarter, occupancy at CMCT's multifamily properties increased to 96.1%, representing an improvement of over 1,200 basis points compared to the end of the second quarter of last year. We have seen concessions in the markets normalize.

And at the end of the second quarter of '26, our in-place rents were approximately 12% below our current asking rents. This should support solid NOI growth over the next year. Turning to Los Angeles. We have made good progress across our 2 new L.A. multifamily assets. At 701 South Hudson, our partial conversion of office to residential is now 94.1% occupied. We continue to work on predevelopment on the 50 units we are entitled to build on the surface lot. We anticipate having the option to start that project later this year. At 1915 Park, our ground-up development in Echo Park, we achieved 58.3% leased at the quarter end.

This 36-unit project delivered in the fourth quarter and is located in the highly desirable walkable submarket with significant dining and entertainment options. Including our joint ventures, we now have 5 operating multifamily assets. Turning to the Office Segment. We executed approximately 16,000 square feet of leases in the second quarter. We are seeing steady leasing interest at the few assets where we have some vacancy in L.A. and Austin. Excluding the company's one Oakland office asset, our lease percentage stood at 84.4% at the end of the second quarter, representing an improvement of 470 basis points year-over-year.

Finally, in our hotel segment, we have substantially completed the renovation of the property's public spaces following the full renovation of all 505 guestrooms. This marks the first comprehensive renovation of the asset since its acquisition in 2008 and positions the hotel well for improved performance in 2026 and beyond. We are also evaluating an opportunity to add 8 new guestrooms by converting currently underutilized space, which we believe will be highly accretive. Turning to financing. During the quarter, we extended our mortgage at 1150 Clay, our Class A Oakland multifamily asset until mid-2027. We are working to refinance our mortgage on the Sheraton Grand.

With the renovation now substantially complete, we believe there's an opportunity to both increase the loan balance and reduce the borrowing spread. Finally, at our Oakland office property, our nonrecourse mortgage matured in early July. We elected not to invest the additional capital in the asset that would have been required to refinance the mortgage. We continue to engage with the servicer on a long-term resolution. For context, in the second quarter of 2026, this asset generated approximately $445,000 of income after debt service. With that, I'll turn it to Brandon.

Brandon Hill: Thank you, Steve. Good afternoon. I'm going to spend a few minutes going over the comparative financial highlights for the second quarter of 2026 versus the second quarter of 2025, starting with our segment NOI, which was $9.3 million in the second quarter of 2026, compared to $9.8 million in the prior year comparable period. Loss from unconsolidated entities was $3.2 million in the second quarter of 2026, compared to $437,000 in the prior year comparable period, primarily driven by fair value adjustments to real estate at 2 of our unconsolidated office entities and 2 of our unconsolidated multifamily entities. Excluding loss from unconsolidated entities, Segment NOI was $12.5 million in Q2 2026, compared to $10.3 million in Q2 2025.

Broken down by segment, the decrease in Segment NOI of approximately $510,000 was driven by a decrease of $1.5 million from our office properties, partially offset by increases of $449,000 from our multifamily properties and $466,000 from our hotel property. Our Hotel Segment NOI for Q2 2026 was $4.6 million versus $4.2 million in Q2 2025. The increase was primarily driven by increased occupancy, which resulted in increased room revenues and food and beverage revenues. These increases were partially offset by higher room, food and beverage and general and administrative expenses for the 3 months ended June 30, 2026, compared to the prior year comparable period.

Our Office Segment NOI for Q2 2026 was $4 million versus $5.5 million in Q2 2025. The decrease was primarily driven by fair value adjustments to real estate at 2 of our unconsolidated office entities during Q2 2026. The change was partially offset by an increase in rental revenue and tenant reimbursement revenue, together with a decrease in real estate taxes and administrative costs at office properties in Los Angeles, California, an increase in tenant reimbursement revenue at our office property in Oakland, California and a decrease in administrative costs at our office property in Austin, Texas during Q2 2026, compared to the prior year period.

Our Multifamily Segment net operating income increased to $638,000 for the 3 months ended June 30, 2026, compared to $189,000 for the same period in 2025, primarily driven by increased occupancy, coupled with a decrease in real estate taxes at our multifamily properties in Oakland, California. As of June 30, 2026, our multifamily segment was 93.6% occupied, compared to 83.4% as of Q2 2025. Below the Segment NOI line, depreciation and amortization expense increased $807,000, primarily due to an increase in tenant improvement, amortization at an office property located in Beverly Hills, California and increased depreciation at our hotel property due to renovation projects, which have increased depreciable assets.

Asset management fees increased $510,000, driven by an increase in our net asset value attributable to common stockholders, resulting from the issuance of additional shares of common stock, primarily during the first quarter of 2026. We also incurred a $455,000 casualty loss during Q2 2026 due to water damage at our hotel property. These increases were partially offset by a decrease in transaction costs of $786,000 due to a lower volume of contemplated transactions and reduced debt deal costs incurred during Q2 2026, compared to the prior year period. Our FFO was negative $3.5 million or negative $1.28 per diluted share, compared to negative $7.9 million or negative $981.63 per diluted share in the prior year comparable period.

The increase in FFO was primarily attributable to a decrease in redeemable preferred stock dividends of $4.3 million and a decrease in transaction-related costs of $786,000, partially offset by a decrease in segment net operating income of $510,000. Our Core FFO was negative $3.4 million or negative $1.25 per diluted share, compared to negative $7 million or negative $870.25 per diluted share in the prior year comparable period. The increase in Core FFO is primarily attributable to the aforementioned changes in FFO. Unlike FFO, Core FFO was not impacted by the aforementioned decrease in transaction-related costs as these are excluded from our Core FFO calculation. With that, we can open the line for questions.

Operator: [Operator Instructions] Showing no questions, this concludes our question-and-answer session, and the conference has also now concluded. Thank you for attending today's presentation. You may now disconnect.

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