Creative Media

Good day and welcome to the Creative Media and Community Trust Corporation second quarter 2025 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 your question, please press star then two. Please note this event is being recorded. I would now 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 to everyone for joining our call today. I'll start with an update on business trends, the progress we're making with our strategic initiatives, and then walk through our results for the quarter. Last quarter, we noted that we were seeing an uptick in our office leasing pipeline. We are pleased that this has translated into a significant increase in leasing activity. In 2025, we executed approximately 140,000 square feet of leases through the end of July. This represents an over 55% increase from the prior year period. This activity is primarily driven from our Los Angeles and Austin properties. At the same time, we continue to see uneven demand at our three Oakland assets, two of which are premier Class A multifamily assets. We're working hard to drive occupancy and contain costs and are encouraged by market improvements in the adjacent San Francisco market. Historically, Oakland has followed the San Francisco market. We remain focused on executing the full scope of the business plan we previously laid out. Today, our key areas of focus are improving our balance sheet and liquidity, improving property level performance, and evaluating asset sales as part of our broader strategic plan. In terms of our balance sheet and liquidity, we are pleased that we continue to make significant progress on the goals we outlined last September. Since then, we have successfully secured property level financing on seven of our assets. The proceeds from these financings have allowed us to fully replay and retire our recourse credit facility, which carried a balance of approximately $169 million at the end of the third quarter of 2024. In addition, the financings have supported key growth initiatives, including lease-up efforts at our Beverly Hills, Culver City, Brentwood, and Austin properties and renovations at our hotel property in Sacramento. We have also made significant progress in addressing our near term debt maturities. Specifically, we extended the debt maturity on our multifamily property at 1150 Clay in the Bay Area to the summer of 2026. And earlier this month, we closed on a modification of our other multifamily property in the Bay Area, Channel House, that pushes its maturity to January 2027. In addition, in June, our lending division closed a $20 million revolving credit facility to help support originations. These actions further enhance our financial flexibilities we continue executing on our strategic plan. With respect to improving property level performance, I'll start with our long-standing goal to grow the multifamily portion of the portfolio. Including joint ventures, we now have four operating assets, 1150 Clay and Channel House in the Bay Area and 701 South Hudson and 1902 Park Avenue in Los Angeles. Our fifth, 1915 Park in Los Angeles, remains on track to deliver this quarter. We believe there is significant opportunity to grow our multifamily net operating income through marking rents to the current market, improving occupancy, and lowering costs. The delivery of 1915 Park this quarter will also support improved NOI in this segment. In our office segment, as I noted earlier, we've seen a sharp increase in leasing activity in the first half of the year, with this momentum continuing into July. We believe the headwinds stemming from the pandemic are largely behind us, and we are starting to see sustained return to office tailwinds. In our hotel segment, as you know, we recently completed the renovation of all 500 plus guest rooms at our hotel asset, the Sheraton Grand Sacramento, which led to a sharp year-over-year increase in our Q1 NOI. As further detailed by Steve, the planned renovations of the hotel's common areas have impacted our Q2 results and will impact our results for the balance of the year. However, we believe these upgrades will position the asset well as we head into 2026 and beyond. Lastly, regarding asset sales, we continue to actively evaluate opportunities and will provide updates as soon as we have material developments to share. Turning to our second quarter results, our core FFO was negative $7.2 million. Our overall net operating income decreased to $9.8 million from $11.8 million in the prior quarter. Our office NOI declined by $1.6 million from the prior quarter largely due to real estate tax benefits we benefited from in Q1, the timing of tenant reimbursement revenue, and long-expected tenant vacancies at two of our properties in California. As I noted earlier, leasing has picked up and new leasing activity is not yet captured in our net operating income. Our hotel NOI was $4.2 million for the quarter compared to $4.7 million in Q1. First quarter is a seasonally strong period, and our planned renovation impacted bookings toward the end of the second quarter. Our multifamily NOI increased by approximately $800,000 from the prior quarter, primarily due to a decrease in the unrealized losses recognized at our unconsolidated multifamily entities and lower costs at our consolidated properties. Our lending NOI declined approximately $640,000 primarily due to higher reserves as well as lower revenue as a result of loan payoffs. Looking ahead, we believe there is a meaningful opportunity to grow NOI in 2026. This outlook is supported by several key drivers. The continued improvement in office leasing activity, the full completion of renovations at our hotel asset, and steady gains in the multifamily performance through higher rental rates, improved occupancy, and the delivery of new units, as well as the potential benefit of a declining interest rate environment. With that, I will turn it over to Steve to provide more details on the portfolio.