Creative Media

Good day, and welcome to the Creative Media and Community Trust Corporation's first quarter 2024 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a content 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 1 on a touch-tone phone. If you need to withdraw your question, please press star, then 2. Please note this event is being recorded. And now, I would like to turn the conference over to Steve Altibrando. Please, go ahead.

Hello, everyone, and thank you for joining us. My name is Steve Altibrando, 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 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. Following our last call seven weeks ago, where we gave some insights into our intra-quarter occupancy and development activity, we were pleased to report our first quarter 2024 results. Overall, we saw improvement from the fourth quarter of 2023, which was primarily due to higher net operating income in our office and hotel segments, the latter of which was largely due to seasonality. Even with the improvement from last quarter, our cash flow continues to be impacted by elevated short-term interest rates. we are evaluating ways to strengthen our balance sheet and improve our cash flow, including potentially selling assets and reducing our debt. In addition, we expect to eventually benefit from lower SOFR on our floating rate debt and lower preferred dividends as the Fed funds rate is expected to come down over time. As a reminder, our Series A1 preferred dividend is a greater of 6% or Fed funds plus 2.5%. As for our results in the quarter, Our same-store office NOI increased 9% year-over-year to $7.4 million, primarily due to improved NOI at our Beverly Hills property, driven by the commencing of our 20-year lease with the Rolls-Royce dealership. We are working on the build-out for the lease and anticipate the grand opening toward the end of this year or early next. Overall, our office lease percentage remains stable in the quarter at 84%, and we executed approximately 37,000 square feet of office leases in the quarter. While our fourth quarter hotel segment NOI increased quarter over quarter, largely a result of seasonality, it was a consistent $4.1 million for both Q1 2024 and Q1 2023. Hotel trends are still strong, and we anticipate starting our long-planned renovation on our hotel asset in the second half of this year. We believe this renovation will significantly benefit the asset as a hotel is one of two hotels located directly across the street from Sacramento's Convention Center, which itself underwent a major renovation and expansion in 2021. Our lending segment NOI decreased year over year, primarily due to what we have previously described on these calls, the impact of the securitization completed a year ago, which increased interest expense attributable to that segment, but also generated significant proceeds for CMCT. Our multifamily segment generated $900,000 of NOI in the quarter. Our occupancy improved significantly to 86.2% at the end of the first quarter from 79.3% at the end of 2023. Although the rental rate at our two largest properties, Channel House and 1150 Clay located in Oakland, has been below our expectations. Turning to our development pipeline, we don't have much new to report since we just recently spoke. However, we do continue to be on track to deliver two new multifamily assets in Los Angeles, one later this year at 4750 Wilshire and one in mid 2025 at 1915 Park Avenue. Between our required properties and development activity, we're trying to grow the multifamily side of our portfolio and achieve more balance between creative office and multifamily assets. With that, I will turn it over to Steve to provide a further update on the portfolio. Thanks, David.