Creative Media

Hello and welcome to the Creative Media and Community Trust third quarter 2023 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw from the question queue, please press star, then two. Please note, this event is being recorded. I would now like to turn the call over to Steve Alto Brando. Please go ahead.

Hello, everyone, and thank you for joining us. My name is Steve Alto Brando, the Portfolio Oversight for CMCT. Also on the call today are David Thompson, our Chief Executive Officer, and Barry Berlin, 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 the course of 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.

Thanks, Steve, and thank you, everyone, for joining our call today. Starting off with some highlights of our third quarter, we continued to execute on our strategy to grow the multifamily portion of our portfolio. Our development pipeline made additional progress. Our office lease percentage remained stable. We saw continued strength at our hotel asset, and our liquidity remained strong. First, I'd like to touch on our progress in multifamily. At the end of the third quarter, our overall multifamily occupancy improved 84.1%, up 20 basis points from the prior quarter. As we've discussed before, we've been focused on growing the multifamily side of our portfolio to achieve more balance between creative office and multifamily assets. We added 696 units to our portfolio earlier this year from the acquisition of two multifamily assets in Oakland and one multifamily property in Los Angeles. Two of those three assets are still in lease up, and the third asset has significant NOI growth opportunity as the in-place rents are substantially below today's market. We believe the continued lease up of these assets will continue to improve our funds from operations. Turn to our development pipeline. During the quarter, we made significant progress, most notably in Culver City, where we recently received entitlement to redevelop our office building on Washington Boulevard. I'll provide more details on this exciting update in a moment. In our office segment, our lease percentage remained stable in the third quarter at 84.3%. We executed about 29,000 square feet of office leases in the quarter, and our office NOI increased by 43% compared to the prior year period. Our third quarter hotel segment NOI decreased compared to the prior period. However, year to date, hotel NOI increased by 27% from the prior year period, a continued strong rebound from the pandemic. Lastly, our lending NOI decreased year over year, primarily due to the securitization completed in the first quarter, which increased interest expense attributable to that segment. At the end of the third quarter, we had $19 million of cash on hand, $73 million of availability under our revolver, and we continue to raise Series A1 preferred stock. Turning back to our development pipeline, we have some positive updates. Starting in Culver City, we received our entitlement to redevelop our single-story office building on Washington Boulevard into a new creative office building. The existing building is about 24,000 square feet, and the entitlement allows for about 64,000 square feet, as well as 180 parking stalls. Our plans for this new creative office include a roof deck, bike parking stalls, a locker room and showers for employee use, public art space, a solar PV system, and intended LEED certification. The next phase of the project will be design and permitting work. We're very excited about this potential redevelopment. Culver City is a walkable, supply-constrained, highly desirable submarket that commands some of the highest offer strengths in Los Angeles. Our property is just a few minutes' walk from the light rail and is surrounded by numerous shopping and dining options. Some notable companies in the submarket include Apple, Amazon, HBO, Microsoft, TikTok, Sony, Beats, and more. Work continues at our office to multifamily conversion at 4750 Wilshire Boulevard in Los Angeles, and we expect to start leasing units in the fourth quarter of 2024. This will add 68 luxury residential units to the portfolio. We believe this is a very attractive project given its location in Hancock Park, another supply-constrained neighborhood that is adjacent to multi-million dollar single-family homes. In the Echo Park section of Los Angeles, we're starting construction on our 36-unit multifamily development, which is a joint venture between CMCT and an international institutional investor. This parcel is adjacent to our creative office building at 1910 West Sunset Boulevard, which is now 87% leased, up from 80% a year ago. In Jefferson Park, we believe we'll be able to start construction at 3101 and 3022 Southwestern in 2024. In total, this would add about 120 units. For the balance of our development pipeline, we continue to work to obtain all the necessary approvals as well as complete design work. We believe making progress on this pipeline increases the value of an asset if we elect to sell to another developer or supports our growth if we elect to develop. As we previously mentioned, for development assets, we will look to bring in co-investors to increase our diversification and supplement returns by generating fee income when advantageous, just like we've done at 4750 Wilshire. With that, I will turn it over to Steve to provide a further update on the portfolio.