Creative Media & Community Trust (CMCT) 28 Mar 242023 Q4 Earnings call transcript

Good day, and welcome to the Creative Media & Community Trust Fourth Quarter 2023 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Steve Altebrando. Please go ahead, sir.

you us. thank and everyone, for joining Hello, My CMCT. Steve Altebrando, Oversight for the Portfolio name is the today Officer; on David our Also call Financial Thompson, Investment our Chief our Officer; Chief Chief Executive Officer. and Berlin, is Barry Shaul Kuba, be being Relations the our where will of find also archived you on This call can and our temporarily is website webcast Investor section earnings release.

a reconciliation discussed call. measures of during financial includes non-GAAP release earnings Our today's

of, we will based make forward-looking made forward-looking currently These information are beliefs call, statements. on statements available the this assumptions us. and by During to

unknown actual trends, are be Our ability will affected results control our and by to that known factors and risks, other predict. or uncertainties beyond

are can and those Although differ incorrect. to not they expectations, be are future be from our our be will may we our guarantees future actual expected prove believe Therefore, assumptions to results reasonable, material. performance that differences of and some

refer filings, section found For risks, over description of detailed potential to please website. David our of the SEC to turn in that, Thompson. With a the our I'll call be can Investor more which Relations

spoke. thank CMCT and to interest from costs Despite year had short-term since the the appreciation shareholders difficult last and common market, strong as our a CMCT rise our estate can in given call come rates, our through for our savings of estate Steve, markets, challenging positioned a XXXX Thanks, everyone, amplify structure of on capital highlights for for the a top-tier interest that differentiated real down. interest we for expectation number in a given recovery sharp rates Even is market, you, well believe joining today. real benefit asset base

multifamily has our our asset with like stable, made we to discuss continued percentage improved, progress at occupancy first the liquidity multifamily continuing projects, strength of multifamily saw remains and our office our segment at portfolio. new our rate Our lease our in our strong. I'd additional X hotel remained pipeline progress development construction

at properties of from acquired Oakland and believe to substantially the busier multifamily significant February, in end NOI year, as are phase, progress income see of X we we X occupancy XXX we basis in-place last assets XX leasing rents spring the points third that the asset Angeles, third multifamily the net the the We head improved additional summer operating of and are units. market. to and believe in improved Also, As season. into X we make we opportunity totaling continue our will quarter. still as in XX.X%, those up X today's Los the X lease-up growth below has will

multifamily deliver at multifamily for square XXX,XXX units. operating our we our assets have approximately XXXX. multifamily made development totaling XX.X% implementing pipeline, segment, X challenging portfolio our Los this will We the full to to office our Angeles, percentage and remained quarter have in the our leases quarter the grow square more the one and properties we headway feet development year feet Between we investments significant one plan for between stable lease of in assets. In and executed in side office in As creative acquired multifamily our and mid-XXXX. X later of of Office completed, in XX,XXX When fourth on balance achieve a sector. expect in XXX and year assets activity,

the decreased a hotel to quarter fourth faced segment as compared prior X% Our we comp. NOI challenging year

period. increased hotel the to year in However, earlier by compared NOI XX% XXXX

due securitization to primarily decreased NOI completed which ago, a lending Our to year-over-year segment. that increased attributable interest year the expense

turn preferred the cash had revolver, of under pipeline. million on and continue AX raise end the over update for million of Shaul that, fourth $XX As to our development call we our I of to Series we the $XX to hand, give our on will an liquidity, quarter, at availability stock. With

Thank you.

David we progress on make pipeline. our development continue to mentioned, As

deliver Los the in to multifamily We expect Angeles X building within next year.

later. multifamily XXXX. adjacent below and start in luxury Echo project XXXX in given are unit in an portfolio. national Hancock to in extremely believe growth constrained in multimillion-dollar XX% in continue, our a Currently, Angeles were We rate The add Our we partial XX its units to Los leasing Wilshire expect and Park. to of the conversion fourth to or Boulevard residential supply XXXX neighborhood office multifamily X of to stable, This Wilshire very is the At properties increase location while rental our work the is unit development at new will XXXX Park, single-family XXX XX supply well which attractive will average. assets, multifamily delivered investment this is a quarter that homes. across

Boulevard. development apartment entitlement its multifamily is is of adjacent construction building international a in units. is of New entertainment over underway lot on option. to the the Park, property X which as X.X%, just venture creative who professional a CMCT to percentage trendy The in value in after we between on XX-unit dining totaling Mid-Wilshire Park now is parcel see building, our a Echo office building and build below young Jefferson XXX inventory Echo investor. submarket at XXXX joint numerous on the our by We at national submarket average. Construction West have a In Southwestern enjoy is Park, highly Xx preferred walkable institutional Sunset a sought which and nearly

are process We of with this development the co-investors. discussing in opportunity

increase necessary Whenever we another developer believe obtain approval progress For of as pipeline, own for well on the making good. to our to to asset. development, if elect forward meets an design the development our our to elect move complete all We work pipeline value work. our sell balance of it criteria or with as to we the continue

return by mentioned that, Wilshire. With just have turn co-investors I generating supplement at we and further look for Steve fee will advantages, to on calls, update we have done over development bring the portfolio. income our we previously will increase when As to XXXX on diversification to to provide asset those like in

our update multifamily. multifamily quarter. assets, at the XX.X% was like on to a at third Thanks, provide end segment our Shaul. with compared basis operating I would the of XX.X% end, quarter occupied consolidated an starting to On

activity XXXX, to of strong point basis to a occupancy end by leasing which XX thanks in XX.X% from quarter. improved of early the However, end the is February, the third increase

market well significant increased There growth from and supply it's and our as over Oakland and construction. to initial multifamily been their up Class are rates. are well David believe XXX early leasing A which in spring of below we both new head when mentioned, at into still Bay busier time. In for XXXX assets economic Area, we the East in the positioned are X As XXXX the market to positioned Los we the Echo in summer season. In Bay before pipeline in acquired that we we Angeles and new our was lease-up phase. local premier the at new year, last are growth, points time, by new rate is assets in for cost excess market, substantial this occupancy compared discount us will assets U.S. we average at at of well allowed the to in below The see substantially which to through gains to part dramatically believe February, acquired for to end first of leases in-place replacement is the today. these the The believe well executing what is development markets, XX% tenants take basis absorbing this need asset rents some supply. process increase the while to we XX rents XXXX we've is think And these Occupancy for we end Park, the our quarter, asset. acquire multifamily would a Park, continue but top higher

and for tenants. of this we list units have We increased rents the for strength demonstrating a waiting X-bedroom demand recently new asking for asset,

Turning Office our fourth segment. leased full in year. the approximately to quarter square for XX,XXX square XXX,XXX feet the feet and We

basis was the XX our from XX.X%, up quarter from quarter. rate the prior points Our up was end prior basis fourth the at of and XX.X%, percentage occupancy leasing quarter, XXX the points

year to to Our compared leasing we a reflect turn are expiring on I'll leases rents declining than of the Leasing remained our stable, Barry. that, X% full it over from of achieving basis. With XXXX. the rates same-suite spreads spreads less

Thank you, Steve.

to financial on Moving highlights.

fourth which segment acquired Office first NOI an by of This Multifamily segment, assets Lending XXXX. our $X.X Let's from was in in our decrease quarter when was the start with partially of $XXX,XXX commenced XXXX was segment. of million Hotel the the from operations and to $XX.X decreases quarter $X.X compared This million our million prior $XX.X of million in segment around for million NOI, $X driven by $XXX,XXX our period. our offset which comparable NOI increase we year of during segment, from

$X.X $X.X to a at segment, For million recognized due was quarter year during period. in the decrease unconsolidated from loss one the decreased prior Office our the an at in a California offset These increase as revenues at increased California rates. rental due decrease an well termination. an as the by early Hills, of and an occupancy in due impact unrealized venture of driven to loss our partially comparable in million rental of largely office property Beverly revenues were Oakland, of from investments properties office NOI property office joint an to by million an to $X.X The lease

period, $X.X to primarily invested $X.X in of Angeles million to hotel Oakland first investment. and Los an late operating as quarter We well increase multifamily X the property after segment in we a March fourth million the expenses. XX-XX due January Multifamily late acquired as multifamily Our joint began in another prior quarter decreased in venture in in from segment XXXX NOI through reporting in NOI properties

new of During from $X.X reported Multifamily million we fourth quarter, the the segment. NOI

interest expensed to lending issuance transaction million decrease in further us prior the NOI strategic March to due the in in through including debt a related securitization at to our related turn, period. the directly of allow from million segment XXXX. to comparable capital is division Lastly, the to the $X.X expense business year was up increased This $X.X primarily which lending level, closed acquisitions. decreased the Interest model, to freed our multifamily that securitization

nonsegment impact rises to in increase increase nonsegment million. XXXX, with Oakland, the market quarter was the revolver assumption allocated X properties interest during due was in borrowing primarily first multifamily rate our our of acquisition which those in around For including on $X.X the related acquisitions. The mortgages with expenses, in connection connection of our an largest and X expense, increased by of the interest

in assist our incremental XXXX we first and Additionally, increase our and the $X.X estate incurred to in an from of primarily investments million, in to potential the the properties of in related estate of acquisition quarter due increases organizational transaction costs in costs increase resulting future real to real Oakland depreciation acquisitions. multifamily an saw expense amortization during in

FFO per compared per prior due our a expense compared period. negative to $X.XX negative by share per was in were in diluted negative Our core to our share largely increase period reductions positive FFO share $X.XX $X.XX and diluted driven the comparable $X.XX multifamily the the These interest primarily to in prior year year acquisitions. was

mentioned to portfolio properly position we is NOI opportunity reasons significantly NOI. there result in growth multifamily the believe will that and earlier, remain our our multifamily an growth by efforts For grow for optimistic in David the our to our

Finally, AX during proceeds from sale liquidity our million an net raising additional was our Series the quarter. of in bolstered $XX.X by stock preferred the

the proceeds. With call For turn we can in million over $XXX.X net host of raised total that, XXXX, now questions. a for our

will question first the Brendan with And Instructions] from Sidoti. come McCarthy [Operator

want to off just pipeline. the in I multifamily development start

Jefferson those progress or When phase. see lease-up about asset units should the assets, leasing of you can expect say, or of talk through -- Park I at to can the leasing Looking activity? we kind the the timing

Sure.

really We So conversion. got to multifamily be and so units. about now, that immediately development building would that the to conversion have -- under small start is with the Wilshire, luxury and a lease-up the XXXX of to expect which fairly a time. assets are It's complete respect in office XX that we right to only X quarter fourth partial at

the much off as would Park assets. larger lease-up would lease-up. that lot or year soon the right is expected we apartments unit. would more asset make about you these again, would But And had a which So stabilize take on the online Park to a comes on little to come are progress think then online to be a the would you generally on than an asset, start mid-XXXX. a I And see but bit hopefully progress and Jefferson typically to in fully speaking, we progress. And again, can a in process. Echo that accelerate really we stabilize smaller unit to bat building, look the And it mentioned quicker to expect start hope the to more other XX as to smaller making expect we sites, then

entitled So the to really developments right like marketing do to equity. but potential we we and what most because those now co-investors with to ready, are on basically additional proceed those are fund is would bringing the help of shovel we partners assets

So now, commenced yet has on X. right the those construction not

XXXX Got that How has been look expect can same sale investors, the the ballpark front? Wilshire asset? co-investors? potential maybe follow-up, you it. I XX% to a process interest has a the of on And the international investors marketing typically been for then interest in know as that sold in

Yes.

to mean right the returns challenging make cap and it's we we're environment rates have So where that are just given the little just development elevated more of in, costs the higher. process the I started investors. penciled are bit now, a to really speaking

is the tougher returns the assets, in have little can penciling So a small environment. be mean investment those current the land a particular we I basis. in -- pretty bit in X

So be. -- to the be need respect But bringing co-investors is it afford said in to the of what to we potential wait have up past assets. for with ownership, if then would basically our we can we to open XX% really and

ownership So where XX% bring come at that we're like ownership have down. that we And in, would interest. if to did we least is a would our co-investors obviously -- percentage maintain

would it our probably the depending probably ownership to on would in be XX% the generally -- range say XX% I deal. So

you just I million The fourth think gears to just statement. little $X want at Got change the was that? it. then -- the bit line transaction drove for what item it helpful. -- Can about to And the That's gears switch above looking a quarter. a income cost, talk on

that. address Brendan, this can is David. I

an OP down the leg potentially of to capital allow to us some potentially. we're again, just But or we incurring raise do or place. that be spending And maybe So structure way forward. to putting kind that in things that us of relating in do that, the think going do UPREIT has that potentially a legal an we of costs with to lot were we will kind that something it's to couple the UPREIT accretive behind some issue structure assets through will, would enable a more work to that One acquire want to units of separately easily extent of raise issue units structure. the further capital line,

the the you know think, noticed helpful, of multifamily David. from Can at about a in That's the here. debt maybe AX the one piece? about of was talk pay revolver. And was about just structure one Great. that think the And quarter. -- a, then Series of And to And you in for kind I I plan were was I the there the used summer I XXXX there 'XX. also Clay down that -- mortgages. some I guess, talk looking then the also preferred another refinanced the then asset? mortgage talk of fourth proceeds debt refinance coming due the talk multifamily Can about was that

Yes, sure.

is maturity So the do -- channel other we also today's an pretty the extension market. Clay, rate in its been XXXX the house, pushed -- And then put place mortgage refinance of which And that with mid-XXXX. did have option. in X.XX% into we for attractive a we fixed

whether extension And maturity right as it's that really, or through of to we're now So mortgage a in the the is process an looking extend refi. mid-XXXX. well,

renewals? as the of me, a of due office coming it, about at on looking XX.X% Got expirations outlook of far office one kind percent Can rent, more Maybe as just annualized the your kind there in Got lease you for just it. 'XX. side Steve. the talk as

Yes.

So generally of a XX% renewal speaking, we seeing are rate. north

part, for we have giving the we tenant across some presentation. board. mentioned But most the pretty is the space particular We that high one renewal back seeing investor that are rates in

know Got spreads. it. mentioned And it. I Got you

-- you maybe office you into on mentioned on they spreads. the are the can lease still detail side. think go positive the Are spreads I in introduction, there just

Sure.

have So a publicized, for has part. office generally generally, what are up market we been challenging. the most -- But the although we seen bit seeing rate well little hold

the that L.A., we that So with are X%. pleased has hold Bay on what where Area We're rate. spreads mentioned up also given were we environment. bit the I -- case West softer just so particularly But Austin. say we seeing been in rate down a little that's the would And in generally

I One may. it. question, Got if more

after fourth looking outlook of going in would that of kind talk you the to the differentiation kind there? Can quarter about in of just -- NOI. going the negative phase. really that Is Obviously 'XX. quarter 'XX of be that forward? of at does just strong Is a quarter -- and lumpy third kind Just lease-up multifamily the that from

a there's highly segment. in mean with opportunity very lot costs ground Generally, pick to up to fixed respect for I Multifamily -- your Yes. on the NOI multifamily. us of in are

have So XX% the the lot a channels bottom the revenue get of building house figure, when should a leased just that's stabilized incremental sub-XX% flow leased, towards line. or to as of mid-XXs one just we you

see leasing of in in later our because summer, specifically should spring the half that activity we into would we the start pickup the expect NOI year. continued benefit back So seeing -- pick as the year will and to up we

should So progressively I it see improving. year, think we throughout really the

higher have real quarter estate expect Although really next over benefit But adjustment. a to of we a that, bit I fourth X out trending little continue onetime outside NOI would tax we to a point of from quarters. would in be really the the

well today. you attending Thank for our session call as conclude conference as will for question-and-answer today's This presentation. our

disconnect. now may You