Creative Media & Community Trust Corporation (NASDAQ and TASE: CMCT) (“we”, “our”, “CMCT”, or the “Company”), today reported operating results for the three and nine months ended September 30, 2023.

Third Quarter 2023 Highlights

Real Estate Portfolio

• Same-store office portfolio⁽²⁾ was 83.9% leased.
• Executed 29,291 square feet of leases with terms longer than 12 months.

Financial Results

• Net loss attributable to common stockholders of $22.9 million, or $1.01 per diluted share.
• Funds from operations (“FFO”) attributable to common stockholders⁽³⁾ was $(7.5) million, or $(0.33) per diluted share.
• Core FFO attributable to common stockholders⁽⁴⁾ was $(7.1) million, or $(0.31) per diluted share.

Management Commentary

“We made additional strides improving multifamily occupancy,” said David Thompson, Chief Executive Officer of Creative Media & Community Trust Corporation. “Two of the three assets that we acquired this year are still in their lease-up phase following completion of construction. We believe the continued lease-up of these two assets will lead to improving funds from operations.”

“We made significant additional progress in our value-add and development pipeline in the third quarter,” said Shaul Kuba, Chief Investment Officer of Creative Media & Community Trust Corporation.

“In Culver City, we were very pleased to have just received entitlements to redevelop our existing single story office building on Washington Boulevard into a multi-story creative office building. This asset is located in a supply constrained, highly desirable sub market and is surrounded by top tier technology companies. We are now proceeding towards design and permitting of the building.”

Third Quarter 2023 Results

Real Estate Portfolio

As of September 30, 2023, our real estate portfolio consisted of 26 assets, all of which were fee-simple properties, including two office properties (one of which is being partially converted into multifamily units and one of which also includes a multifamily development site) and one multifamily property which the Company has an ownership interest in through investments in unconsolidated joint ventures. The portfolio included 13 office properties totaling approximately 1.3 million of rentable square feet, three multifamily properties with a total of 696 units, eight development sites (two being used as parking lots), and one 503-room hotel with an ancillary parking garage.

Financial Results

Net loss attributable to common stockholders was $22.9 million, or $1.01 per diluted share of common stock, for the three months ended September 30, 2023, compared to a net loss attributable to common stockholders of $11.7 million, or $0.50 per diluted share of common stock, for the same period in 2022. The increase in net loss attributable to common stockholders was driven by the $885,000 decrease in FFO discussed below as well as an increase in depreciation and amortization expense of $11.0 million.

FFO attributable to common stockholders⁽³⁾ was $(7.5) million, or $(0.33) per diluted share of common stock, for the three months ended September 30, 2023, a decrease of $885,000 compared to $(6.6) million, or $(0.28) per diluted share of common stock, for the same period in 2022. The decrease in FFO was primarily attributable to an increase in interest expense not allocated to our operating segments of $6.5 million, an increase in provision for income taxes of $367,000, an increase in general and administrative expenses of $250,000 and an increase in redeemable preferred stock dividends of $225,000. These were partially offset by a decrease in the consolidated statement of operations impact of redeemable preferred stock redemptions of $4.5 million, an increase of $1.1 million in segment net operating income (discussed in more detail in the following Segment Information), an increase in net loss attributable to noncontrolling interests, adjusted for their share of depreciation and amortization expense, of $253,000, an increase of $219,000 in interest and other income and a decrease of $192,000 in asset management fees.

Core FFO attributable to common stockholders⁽⁴⁾ was $(7.1) million, or $(0.31) per diluted share of common stock, for the three months ended September 30, 2023, compared to $(1.5) million, or $(0.07) per diluted share of common stock, for the same period in 2022. The decrease in Core FFO is attributable to the aforementioned changes in FFO, while not impacted by the increase in redeemable preferred stock redemptions as these are excluded from our Core FFO calculation.

Segment Information

Our reportable segments during the three months ended September 30, 2023 and 2022 consisted of three types of commercial real estate properties, namely, office, hotel and multifamily, as well as a segment for our lending business. Total segment net operating income (“NOI”)⁽⁵⁾ was $11.2 million for the three months ended September 30, 2023, compared to $10.1 million for the same period in 2022.

Office

Same-Store

Same-store⁽²⁾ office segment NOI⁽⁵⁾ increased to $7.4 million for the three months ended September 30, 2023, compared to $6.6 million in the same period in 2022, while same-store⁽¹⁾ office Cash NOI⁽⁶⁾ increased to $7.9 million for the three months ended September 30, 2023, compared to $6.9 million in the same period in 2022. The increases in same-store⁽¹⁾ office Cash NOI⁽⁶⁾ and same-store⁽²⁾ office segment NOI⁽⁵⁾ were primarily attributable to an increase in rental revenue at an office property in Beverly Hills, California, due to increased occupancy and rental rates as well as a decrease in real estate tax expenses at an office property in Austin, Texas .

At September 30, 2023, the Company’s same-store⁽²⁾ office portfolio was 82.1% occupied, a decrease of 70 basis points year-over-year on a same-store⁽²⁾ basis, and 83.9% leased, a decrease of 180 basis points year-over-year on a same-store⁽²⁾ basis. The annualized rent per occupied square foot⁽⁷⁾ on a same-store⁽²⁾ basis was $57.04 at September 30, 2023 compared to $54.47 at September 30, 2022. During the three months ended September 30, 2023, the Company executed 29,291 square feet of leases with terms longer than 12 months at our same-store⁽²⁾ office portfolio.

Total

Office Segment NOI⁽⁵⁾ increased to $9.3 million for the three months ended September 30, 2023, from $6.5 million for the same period in 2022. The increase is due to the increase in same-store⁽²⁾ office segment NOI⁽⁵⁾ discussed above as well as an increase in non-same-store⁽²⁾ office Segment NOI⁽⁵⁾ of $2.0 million, which was driven by income from an unconsolidated office entity primarily due to an unrealized gain on the value of its investments in real estate recognized during the three months ended September 30, 2023.

Hotel

Hotel Segment NOI⁽⁵⁾ decreased to $1.9 million for the three months ended September 30, 2023, from $2.4 million for the same period in 2022, primarily due to a decrease in food and beverage revenue and parking revenue. Additionally, hotel occupancy decreased while average daily rate increased.

Multifamily

Our Multifamily Segment consists of two multifamily buildings located in Oakland, California as well as an investment in a multifamily building in the Echo Park neighborhood of Los Angeles, California through a 50% joint-venture partnership, all of which were acquired during the first quarter of 2023. Our Multifamily Segment NOI⁽⁵⁾ was $(391,000) for the three months ended September 30, 2023. As of September 30, 2023, our Multifamily Segment was 84.1% occupied and the monthly rent per occupied unit⁽⁸⁾ was $2,869.

Lending

Our lending segment primarily consists of our SBA 7(a) lending platform, which is a national lender that primarily originates loans to small businesses in the hospitality industry. Lending Segment NOI⁽⁵⁾ was $366,000 for the three months ended September 30, 2023, compared to $1.2 million for the same period in 2022. The decrease was primarily due to an increase in interest expense related to the issuance of new SBA 7(a) loan-backed notes in connection with the securitization that closed in March 2023, partially offset by an increase in revenues driven by an increase in interest income as a result of the raising interest rate environment.

Debt and Equity

During the three months ended September 30, 2023, we issued 1,094,386 shares of Series A1 Preferred Stock for aggregate net proceeds of $25.1 million. Net proceeds represent gross proceeds offset by costs specifically identifiable to the offering, such as commissions, dealer manager fees and other offering fees and expenses. Additionally, during the three months ended September 30, 2023, we had net incremental paydowns of $15.0 million on our revolving credit facility.

Dividends

On September 27, 2023, we declared a quarterly cash dividend of $0.0850 per share of our common stock, which was paid on October 23, 2023.

On October 13, 2023, we declared a quarterly cash dividend of $0.34375 per share of our Series A Preferred Stock for the third quarter of 2023. The dividend will be payable monthly as follows: $0.114583 per share to be paid on November 15, 2023 to Series A Preferred Stockholders of record on November 5, 2023; $0.114583 per share to be paid on December 15, 2023 to Series A Preferred Stockholders of record on December 5, 2023; and $0.114583 per share to be paid on January 15, 2024 to Series A Preferred Stockholders of record on January 5, 2024.

On October 13, 2023, we declared a quarterly cash dividend of $0.489375 per share of our Series A1 Preferred Stock for the third quarter of 2023. The quarterly cash dividend of $0.489375 per share represents an annualized dividend rate of 7.83% (2.5% plus the federal funds rate of 5.33% on the applicable determination date). The dividend will be payable monthly as follows: $0.163125 per share to be paid on November 15, 2023 to Series A1 Preferred Stockholders of record on November 5, 2023; $0.163125 per share to be paid on December 15, 2023 to Series A1 Preferred Stockholders of record on December 5, 2023; and $0.163125 per share to be paid on January 15, 2024 to Series A1 Preferred Stockholders of record on January 5, 2024. For shares of Series A1 Preferred Stock issued in the fourth quarter of 2023, the dividend will be prorated from the date of issuance, and the monthly dividend payments will reflect such proration.

On July 12, 2023, we declared a quarterly cash dividend of $0.353125 per share of our Series D Preferred Stock for the fourth quarter of 2023. The dividend will be payable monthly as follows: $0.117708 per share to be paid on November 15, 2023 to Series D Preferred Stockholders of record on November 5, 2023; $0.117708 per share to be paid on December 15, 2023 to Series D Preferred Stockholders of record on December 5, 2023; and $0.117708 per share to be paid on January 15, 2024 to Series D Preferred Stockholders of record on January 5, 2024.

Acquisitions

The following table details our acquisition activity during the nine months ended September 30, 2023:

About the Data

Descriptions of certain performance measures, including Segment NOI, Cash NOI, FFO attributable to common stockholders, and Core FFO are provided below. Refer to the subsequent tables for reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure.

FORWARD-LOOKING STATEMENTS

This press release contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), which are intended to be covered by the safe harbors created thereby. These statements include the plans and objectives of management for future operations, including plans and objectives relating to future growth of CMCT’s business and availability of funds. Such forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “will,” “project,” “target,” “expect,” “intend,” “might,” “believe,” “anticipate,” “estimate,” “could,” “would,” “continue,” “pursue,” “potential,” “forecast,” “seek,” “plan,” or “should,” or “goal” or the negative thereof or other variations or similar words or phrases. Such forward-looking statements also include, among others, statements about CMCT’s plans and objectives relating to future growth and outlook. Such forward-looking statements are based on particular assumptions that management of CMCT has made in light of its experience, as well as its perception of expected future developments and other factors that it believes are appropriate under the circumstances. Forward-looking statements are necessarily estimates reflecting the judgment of CMCT’s management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These risks and uncertainties include those associated with (i) the timing, form, and operational effects of CMCT’s development activities, (ii) the ability of CMCT to raise in place rents to existing market rents and to maintain or increase occupancy levels, (iii) fluctuations in market rents, (iv) the effects of inflation and higher interest rates on the operations and profitability of CMCT and (vii) general economic, market and other conditions. Additional important factors that could cause CMCT’s actual results to differ materially from CMCT’s expectations are discussed under the section “Risk Factors” in CMCT’s Annual Report on Form 10-K for the year ended December 31, 2022 and in CMCT’s Quarterly Report on Form 10-Q for the period ended March 31, 2023. The forward-looking statements included herein are based on current expectations and there can be no assurance that these expectations will be attained. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond CMCT’s control. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included herein will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements expressed or implied herein, the inclusion of such information should not be regarded as a representation by CMCT or any other person that CMCT’s objectives and plans will be achieved. Readers are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date they are made. CMCT does not undertake to update them to reflect changes that occur after the date they are made, except as may be required by applicable securities law.

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