Creative Media

Good day and welcome to the Creative Media and Community Trust second quarter 2024 earnings call. All participants will be in less than only mode. Should you need assistance during the call, please signal a conference specialist by pressing the start key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press start then one on your telephone keypad. to which are your questions, please press start and choose. Please note, this event is being recorded. I would now like to turn the conference over to Steve Altebrando, Portfolio Oversight. Please go ahead.

Hello, everyone, and thank you for joining us. My name is Steve Altibranda, 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. This morning we released our second quarter 2024 results that operating income improved from the first quarter across all our real estate operating segments office multifamily and hotel. We are pleased with this improvement from last quarter our cash flow continues to be impacted by elevated short term interest rates, the widely known challenges in the office market and continued soft rental rates at our Bay area multifamily assets. We are focused on strengthening our balance sheet and improving our cash flow. As such, we continue to evaluate asset sales and other ways to reduce both our recourse debt and overall debt. We also 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%. We continue to make progress on our development and redevelopment pipeline, and we are ahead of schedule at two of our three active projects. We have two multifamily projects underway, and we commenced the room renovation at our one hotel in July. Steve will provide more details in a moment. As for our results in the quarter, our same store office segment NOI increased 9% year over year to $7.6 million. The increase was primarily driven by an increase in our JV income. We had an unrealized gain in the second quarter of 2024, whereas in the second quarter of 2023, we had an unrealized loss. This is primarily driven by appraised values. Overall, our office lease percentage remains stable in the quarter at 83.5%, and we executed approximately 52,000 square feet of office leases in the quarter. However, we do expect our occupancy to decline in the third quarter. As previously disclosed, we have a large tenant that gave back approximately 130,000 square feet at the end of July at our one Kaiser Plaza office building in Oakland. Our hotel segment NOI increased 5% from the prior year to $4.3 million, primarily due to improving average daily room rate. Our multifamily segment generated $2.3 million of NOI in the quarter compared to $900,000 of NOI in the first quarter of 2024. The increase was driven by occupancy gain, which improved to 92.5% at the end of the second quarter from 79.3% at the end of 2023. However, the rental rated our two largest properties, Channel House and 1150 Clay, located in Oakland, continues to be below our expectations. Our lending segment NOI increased 42% year-over-year to $743,000. The increase was primarily due to a decrease in interest expense resulting from the amount of principal repayments on our SBA 7 loan-backed notes. With that, I will turn it over to Steve to provide a further update on our development pipeline and the portfolio.