CIM Commercial Trust Corporation Stock

Good afternoon, and welcome to the Creative Media & Community Trust Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the call over to Steve Altebrando, Portfolio Oversight. Please go ahead.

Hello, everyone, and thank you for joining us. My name is Steve Altebrando, the portfolio oversight for CMCT. Also on the call today are David Thompson, our Chief Executive Officer; and Brandon Hill, 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. Hello, everyone, and thank you for joining us today. I'll begin with an update on our strategic priorities before reviewing our second quarter operating results. Starting with our strategic priorities. First, we remain focused on improving our funds from operations in 2026 and 2027. We continue to see operating trends strengthening across our multifamily portfolio, our Los Angeles and Austin office assets and at our hotel asset in Sacramento. These improvements are translating into stronger operating results. Excluding our JV loss in the quarter, which was primarily impacted by large noncash items, our net operating income increased 22% from the prior year period, driven by our multifamily, office and hotel segments.

Second, we continue to strengthen our balance sheet while still funding critical growth initiatives such as office leasing and our hotel renovations. Despite a $2.8 million increase in our JV losses, which was primarily driven by noncash items, our core FFO still improved by $3.6 million compared to the second quarter of last year. The improvement was primarily due to a reduction in preferred dividends.

Third, we continue to evaluate the potential sale of one or more of our real estate assets. We believe executing on this strategy will further strengthen our balance sheet while also helping close what we view as a significant gap between our current share price and the intrinsic value of the portfolio.

Turning now to our operating performance by segment. Beginning with multifamily, we believe CMCT is well positioned to benefit from the continued recovery in the Bay Area residential market. Approximately 78% of our multifamily units are located in the Bay Area, where leasing demand has continued to improve. Same-store multifamily occupancy reached 95.3% as of June 30, 2026, an increase of 1,190 basis points from a year ago. As a result, multifamily NOI increased 238% year-over-year.

In addition, in-place rents at our Bay Area multifamily properties are approximately 12% below current asking rents, providing a meaningful opportunity to continue NOI growth as new leases roll to market. Within our Office Segment, leasing trends continue to improve. Excluding our Oakland office asset, leased occupancy increased to 84.4% at quarter end, up 470 basis points from the second quarter of 2025. Office NOI declined to $4 million from $5.5 million due to a $2.4 million increase in our JV loss. The JV loss was primarily driven by noncash items. Excluding our JV loss, consolidated NOI increased year-over-year, primarily due to improved performance at our Wilshire office assets.

Our hotel property in Sacramento also delivered improved operating performance. Following the completion of recent renovations, hotel NOI increased 11% year-over-year. We believe the property remains well positioned to generate additional NOI growth. Overall, we're encouraged by the continued improvement we're seeing across each of our operating segments, and we believe we are positioned to continue to grow our FFO.

With that, I'll turn the call over to Steve to provide more color on our refinancing activities and property level performance in the quarter.

Thanks, David. The actions we've taken over the past several quarters have significantly improved our balance sheet, and we believe will improve our funds from operations. We are positioned to benefit from improving fundamentals, particularly in our multifamily assets in the Bay Area. Today, CMCT owns 621 residential units across 2 premier Class A assets in the market. The Bay Area recovery continues to gain momentum, bolstered by growth in AI-related employment and investment. In the adjacent San Francisco market, multifamily rents increased by approximately 11% in the second quarter after increasing approximately 6% in 2025. This rent growth represents a 25-plus year high. And vacancy has declined to 3.7%, which is a 25-year low.

In Oakland, rent growth was 7.6% in the second quarter, also the highest rate of growth in over 25 years, while vacancy declined to 7% at the end of the second quarter, down from a peak of approximately 18% in 2021. Supply growth in the market remains very low, and we anticipate that it will remain low for the foreseeable future given the elevated costs of construction.

At the end of the second quarter, occupancy at CMCT's multifamily properties increased to 96.1%, representing an improvement of over 1,200 basis points compared to the end of the second quarter of last year. We have seen concessions in the markets normalize. And at the end of the second quarter of '26, our in-place rents were approximately 12% below our current asking rents. This should support solid NOI growth over the next year.

Turning to Los Angeles. We have made good progress across our 2 new L.A. multifamily assets. At 701 South Hudson, our partial conversion of office to residential is now 94.1% occupied. We continue to work on predevelopment on the 50 units we are entitled to build on the surface lot. We anticipate having the option to start that project later this year. At 1915 Park, our ground-up development in Echo Park, we achieved 58.3% leased at the quarter end. This 36-unit project delivered in the fourth quarter and is located in the highly desirable walkable submarket with significant dining and entertainment options. Including our joint ventures, we now have 5 operating multifamily assets.

Turning to the Office Segment. We executed approximately 16,000 square feet of leases in the second quarter. We are seeing steady leasing interest at the few assets where we have some vacancy in L.A. and Austin. Excluding the company's one Oakland office asset, our lease percentage stood at 84.4% at the end of the second quarter, representing an improvement of 470 basis points year-over-year.

Finally, in our hotel segment, we have substantially completed the renovation of the property's public spaces following the full renovation of all 505 guestrooms. This marks the first comprehensive renovation of the asset since its acquisition in 2008 and positions the hotel well for improved performance in 2026 and beyond. We are also evaluating an opportunity to add 8 new guestrooms by converting currently underutilized space, which we believe will be highly accretive.

Turning to financing. During the quarter, we extended our mortgage at 1150 Clay, our Class A Oakland multifamily asset until mid-2027. We are working to refinance our mortgage on the Sheraton Grand. With the renovation now substantially complete, we believe there's an opportunity to both increase the loan balance and reduce the borrowing spread.

Finally, at our Oakland office property, our nonrecourse mortgage matured in early July. We elected not to invest the additional capital in the asset that would have been required to refinance the mortgage. We continue to engage with the servicer on a long-term resolution. For context, in the second quarter of 2026, this asset generated approximately $445,000 of income after debt service.

With that, I'll turn it to Brandon.

Thank you, Steve. Good afternoon. I'm going to spend a few minutes going over the comparative financial highlights for the second quarter of 2026 versus the second quarter of 2025, starting with our segment NOI, which was $9.3 million in the second quarter of 2026, compared to $9.8 million in the prior year comparable period. Loss from unconsolidated entities was $3.2 million in the second quarter of 2026, compared to $437,000 in the prior year comparable period, primarily driven by fair value adjustments to real estate at 2 of our unconsolidated office entities and 2 of our unconsolidated multifamily entities.

Excluding loss from unconsolidated entities, Segment NOI was $12.5 million in Q2 2026, compared to $10.3 million in Q2 2025. Broken down by segment, the decrease in Segment NOI of approximately $510,000 was driven by a decrease of $1.5 million from our office properties, partially offset by increases of $449,000 from our multifamily properties and $466,000 from our hotel property.

Our Hotel Segment NOI for Q2 2026 was $4.6 million versus $4.2 million in Q2 2025. The increase was primarily driven by increased occupancy, which resulted in increased room revenues and food and beverage revenues. These increases were partially offset by higher room, food and beverage and general and administrative expenses for the 3 months ended June 30, 2026, compared to the prior year comparable period.

Our Office Segment NOI for Q2 2026 was $4 million versus $5.5 million in Q2 2025. The decrease was primarily driven by fair value adjustments to real estate at 2 of our unconsolidated office entities during Q2 2026. The change was partially offset by an increase in rental revenue and tenant reimbursement revenue, together with a decrease in real estate taxes and administrative costs at office properties in Los Angeles, California, an increase in tenant reimbursement revenue at our office property in Oakland, California and a decrease in administrative costs at our office property in Austin, Texas during Q2 2026, compared to the prior year period.

Our Multifamily Segment net operating income increased to $638,000 for the 3 months ended June 30, 2026, compared to $189,000 for the same period in 2025, primarily driven by increased occupancy, coupled with a decrease in real estate taxes at our multifamily properties in Oakland, California. As of June 30, 2026, our multifamily segment was 93.6% occupied, compared to 83.4% as of Q2 2025. Below the Segment NOI line, depreciation and amortization expense increased $807,000, primarily due to an increase in tenant improvement, amortization at an office property located in Beverly Hills, California and increased depreciation at our hotel property due to renovation projects, which have increased depreciable assets.

Asset management fees increased $510,000, driven by an increase in our net asset value attributable to common stockholders, resulting from the issuance of additional shares of common stock, primarily during the first quarter of 2026. We also incurred a $455,000 casualty loss during Q2 2026 due to water damage at our hotel property. These increases were partially offset by a decrease in transaction costs of $786,000 due to a lower volume of contemplated transactions and reduced debt deal costs incurred during Q2 2026, compared to the prior year period.

Our FFO was negative $3.5 million or negative $1.28 per diluted share, compared to negative $7.9 million or negative $981.63 per diluted share in the prior year comparable period. The increase in FFO was primarily attributable to a decrease in redeemable preferred stock dividends of $4.3 million and a decrease in transaction-related costs of $786,000, partially offset by a decrease in segment net operating income of $510,000.

Our Core FFO was negative $3.4 million or negative $1.25 per diluted share, compared to negative $7 million or negative $870.25 per diluted share in the prior year comparable period. The increase in Core FFO is primarily attributable to the aforementioned changes in FFO. Unlike FFO, Core FFO was not impacted by the aforementioned decrease in transaction-related costs as these are excluded from our Core FFO calculation.

With that, we can open the line for questions.

[Operator Instructions] Showing no questions, this concludes our question-and-answer session, and the conference has also now concluded. Thank you for attending today's presentation. You may now disconnect.

Good afternoon and welcome to the Creative Media & Community Trust First Quarter 2026 Earnings Conference Call. [Operator Instructions] 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 Altebrando, the Portfolio Oversight for CMCT. Also on the call today are David Thompson, our Chief Executive Officer; and Brandon Hill, 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, and 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. Hello, everyone, and thank you for joining us today. I'd like to begin with an update on the strategic plan we outlined on prior calls to strengthen our balance sheet, improve liquidity and sharpen our focus on premier multifamily assets and the meaningful progress we've made against those priorities in the first quarter.

Over the past several months, we've taken actions to position CMCT for long-term stability and growth. During the quarter, we completed the redemption of $243 million of preferred stock into common stock. This was a transformational step for the company that significantly improved our balance sheet and will improve our funds from operations starting in the second quarter of 2026. We expect the redemption to increase our FFO by approximately $16 million per year and returns to the company's capital structure back in line with our long-term targets.

Since first announcing our plan to strengthen our balance sheet and improve liquidity in September 2024, the company has redeemed approximately $396 million of preferred stock into common stock. In parallel, we have also shifted our financing strategy towards an asset-based approach. We have completed financings on 9 assets and have fully retired our recourse credit facility. As a result, we now operate with minimal recourse debt significantly reducing risk and improving our flexibility.

We also sold our lending division in January of 2026. After accounting for debt repayment, transaction expenses and other related items, this transaction yielded net cash proceeds to the company of approximately $31 million.

In summary, we believe that we have restored the company to a position of financial health. With a stronger balance sheet, improved liquidity and a more focused portfolio, we are now well positioned for growth.

Going forward, our primary focus is on improving FFO in 2026 and 2027. We believe there are 2 key levers that will enable us to achieve this. First, we are focused on improving property level performance across our portfolio. And second, we expect a substantial reduction in preferred dividend obligations. As a reminder, we completed the redemption near the end of the first quarter, so the impact of that action was only minimally reflected in our first quarter FFO. The full benefit of that redemption will begin in the second quarter.

In addition, we are continuing to take proactive steps to further strengthen our financial profile. We are actively working to extend debt maturities on a handful of assets. And at the same time, we will continue to evaluate selective asset sales where we see opportunities to unlock value, improve portfolio quality or redeploy capital more efficiently.

We believe that executing on these priorities is critical to reducing what we believe is a substantial gap between our current share price and the intrinsic value of the portfolio. To put that in perspective, on a cost basis, our undepreciated book value was approximately $147 per share at the end of the first quarter. We believe this highlights the underlying value of our assets and reinforces the opportunity ahead as we translate operational improvements and capital structure efficiencies into stronger financial performance.

Now turning to net operating income and trends for the first quarter. Starting with Office, NOI declined approximately $600,000 year-over-year. This was primarily driven by a onetime benefit in the prior year period related to a tax appeal we won and which should not recur this year. Excluding our Oakland office asset, our office lease percentage was approximately 85.7% at the end of the first quarter, representing a 470 basis point increase year-over-year.

In our Multifamily segment, performance was notably stronger. Excluding our joint venture properties, NOI increased 64% year-over-year. When including our JV properties, NOI increased modestly, primarily due to noncash changes in appraised values. Occupancy across the multifamily portfolio improved to 89.6% at quarter end, an increase of 940 basis points compared to the prior year. Importantly, after several very challenging years in Oakland, we are beginning to see early signs of recovery supported by improving fundamentals in that market.

Turning to our Hotel asset. NOI declined by approximately $700,000 year-over-year. This was largely attributable to temporary factors, including renovation-related disruptions early in the quarter and an issue in one of the mechanical systems that temporarily removed the number of rooms from service in March. However, I'm pleased to report that the renovation was substantially completed during the first quarter. Over the past 2 years, we have renovated all 505 guest rooms along with the property's common areas, positioning the asset for improved performance going forward.

In summary, we continue to see encouraging operating trends across the multifamily portfolio as well as in our Los Angeles and Austin office assets and at the company's hotel property in Sacramento. With that, I'll turn the call over to Steve to provide additional color on our refinancing activities and property level performance.

Thanks, David. The actions we've taken over the past several quarters have significantly improved our balance sheet and will strengthen our funds from operations, and we are now well positioned to benefit from improving fundamentals, particularly in our Multifamily assets in the Bay Area. Today, CMCT owns 621 residential units across 2 premier Class A assets in the market. After several challenging years, we're beginning to see the recovery gain momentum supported by a strengthening San Francisco residential market with demand increasingly bolstered by growth in AI-related employment and investment.

At the end of the first quarter, our Oakland multifamily occupancy increased to 91.9%, representing an improvement of 860 basis points compared to the end of the first quarter last year. In addition, we are also seeing concessions ease in the market, particularly at our 1150 Clay asset.

More broadly, in the adjacent downtown San Francisco market, multifamily fundamentals have rebounded significantly. In 2025, rent growth reached 7.6%, the highest growth rate in 25 years, followed by an additional 7% increase in the first quarter of 2026. Vacancy has declined to 4.3%, the lowest level in nearly 20 years.

In Oakland, we are also seeing encouraging signs of recovery. Vacancy has declined to 7.8% at the end of the first quarter, down from a peak of approximately 18% in 2021. Importantly, rent growth turned positive in 2025 after 3 consecutive years of decline and increased by 2.9% in the first quarter of 2026.

Turning to Los Angeles. We have made solid progress across our 2 new L.A. multifamily assets. At 701 South Hudson, our partial conversion of office to residential is now 88.2% occupied. As we mentioned on our last call, we received entitlements in the first quarter of 2026 to build an additional 50 units on the back surface lot of the property. We are currently working on predevelopment and anticipate having the option to start that project later this year.

At 1915 Park, our ground-up development in Echo Park, we achieved 52.8% leased at quarter end. This 36-unit project delivered in the fourth quarter is located in a highly desirable walkable submarket with significant dining and entertainment options. The development is a joint venture with an international pension fund who was built on land adjacent to our office property at 1910 West Sunset. Including our joint ventures, we now have 5 operating multifamily assets.

Turning to the Office segment. We executed approximately 20,562 square feet of leases in the first quarter and continuing to see an active pipeline of activity, particularly in L.A. and Austin. Excluding the company's one Oakland office asset, our lease percentage stood at 85.7% at the end of the first quarter, representing an improvement of 470 basis points year-over-year.

At 11620 Wilshire Boulevard, we recently commenced the renovation program focused on several small suites. We believe this targeted investment will enhance leasing activity and tenant demand. This project is expected to be completed over the next few months.

Finally, in our Hotel segment, we have substantially completed the renovation of the property's public spaces following the full renovation of all 505 guest rooms. This marks the first comprehensive renovation of the asset since its acquisition in 2008 and positions the hotel well for improved performance in 2026 and beyond. We are also evaluating the opportunity to add 8 new guest rooms by converting currently underutilized space, which we believe would be highly accretive.

Turning to financing. We are actively engaged in 3 initiatives: At the Sheraton Grand with the renovation now substantially complete, we believe there's an opportunity to both increase the loan balance and reduce the borrowing spread. At 1150 Clay, we are in active discussions with the lender and anticipate securing a 1-year extension on the mortgage as we continue to work to improve the asset's NOI.

Finally, at our Oakland office property, we are seeking extension of the loan maturity. However, we cannot guarantee we will reach an agreement with the lender. For context, in the first quarter of 2025, this asset generated approximately $800,000 of cash flow after debt service. With that, I'll turn the call over to Brandon.

Thank you, Steve. Good afternoon. I'm going to spend a few minutes going over the comparative financial highlights for the first quarter of 2026 versus the first quarter of 2025, starting with our segment NOI, which was $9.8 million in the first quarter of 2026, compared to $11.8 million in the prior year comparable period. Broken down by segment, the decrease of approximately $1.9 million was driven by decreases of $728,000 from our hotel property, $602,000 from our office properties and $590,000 from our lending business.

Our Hotel segment NOI for Q1 2026 was $4 million versus $4.7 million in Q1 2025. This decrease was largely attributable to temporary factors including a renovation-related disruption early in the quarter and an issue in one of the mechanical systems that temporarily removed a number of rooms from service in March.

Our Office segment NOI for Q1 2026 was $6.5 million versus $7.1 million in Q1 2025. The decrease was primarily driven by a decrease in tenant reimbursement revenue at an office property in Oakland, California and an increase in real estate tax expense at an office property in Beverly Hills, California, driven by a tax refund recorded in the prior year period. In January 2026, we completed the sale of our lending business, First Western, for a purchase price of approximately $44.9 million.

As the lending segment activity was de minimis during the period, it remained in our ownership during Q1 2026, the related amounts were excluded from segment level activity. Our lending division NOI was $590,000 in the prior year comparable period. Our multifamily segment net operating loss of $613,000 remained fairly consistent compared to the prior year comparable period.

Below the segment NOI line, we had an increase in depreciation and amortization expense of $1.2 million, primarily due to an increase in tenant improvement amortization at an office property located in Beverly Hills, California, as well as an increase at our hotel property due to renovation projects, which have increased depreciable assets. We also had an increase in loss on early extinguishment of debt of $705,000, which was incurred in connection with the full payoff of our Lending division revolving credit facility during the first quarter of 2026. These were partially offset by a gain on sale of $1.7 million as a result of our sale of First Western during Q1 2026.

Our FFO was negative $28.8 million or negative $58.47 per diluted share compared to negative $5.4 million or negative $900.83 per diluted share in the prior year comparable period. The decrease in our FFO was primarily driven by an increase in preferred stock redemptions of $21.9 million, a decrease of approximately $1.9 million in total segment NOI and an increase of $705,000 in loss on early extinguishment of debt, partially offset by a decrease of $1.3 million in redeemable preferred stock dividends.

Our core FFO was negative $5.9 million or negative $11.89 per diluted share compared to negative $5.1 million or a negative $846.50 per diluted share in the prior year comparable period. This decrease in core FFO is attributable to the previously discussed changes in FFO while not impacted by the increase in loss on early extinguishment of debt or the increase in redeemable preferred stock redemptions as these are excluded from our core FFO calculation. With that, we can open the line for questions.

[Operator Instructions] Showing no questions, this concludes our question-and-answer session, and the conference has also now concluded. Thank you for attending today's presentation. You may now disconnect.

Good afternoon, and welcome to the Creative Media & Community Trust Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]

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 Altebrando, the Portfolio Oversight for CMCT. Also on the call today are David Thompson, our Chief Executive Officer; and Brandon Hill, 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. Good afternoon, and thanks, everyone, for joining us today. We continue to execute on the strategic plan we have discussed on previous calls. We are making significant progress in accelerating our focus towards premier multifamily assets, strengthening our balance sheet and improving liquidity.

At the same time, operating trends within the portfolio are moving in the right direction across our multifamily portfolio our Los Angeles and Austin office assets and the company's hotel asset in Sacramento. Since announcing our strategic plan in September 2024, we've taken actions to significantly improve our balance sheet.

We completed financing on 9 assets since September 2024 and fully retired our recourse credit facility in April 2025. We completed the sale of our lending division in January 2026 and we redeemed approximately $153.3 million of preferred stock into common stock since September of 2024.

Building on that progress, the company announced today that it is redeeming approximately 2 million shares of Series A preferred stock, approximately 7.8 million shares of Series A1 preferred stock and approximately 22,000 shares of the Series D preferred stock with a redemption price to be paid in shares of common stock. This redemption is expected to improve CMCT's annual funds from operations by approximately $16 million per year and returns the company's capital structure back to our long-term target, approximately 38% common equity, 7% preferred equity and 55% debt on a fair value basis adjusted for the redemption.

Importantly, given the company's significantly improved financial position, we do not currently intend to initiate at our election additional preferred stock redemptions into common stock.

However, we will continue to evaluate redemption requests submitted by holders of our preferred stock as they are received and may elect to redeem those shares in common stock or cash at the city's discretion.

With respect to asset sales, as we mentioned, we completed the sale of our lending division in January for a purchase price of approximately $44.9 million, net of the outstanding debt related to the 2023 securitization of certain loan receivables and subject to customer closing adjustments. After giving up to the repayment of other debt, transaction expenses and related items, the transaction generated approximately $31.2 million of net cash proceeds to the company. We continue to actively evaluate additional ad sales as part of our broader effort to enhance liquidity and optimize our balance sheet.

In terms of operating trends, looking ahead, we see opportunities to improve cash flow in 2026 supported by several key drivers across the portfolio.

First, net operating income continues to improve across all segments. In our office portfolio, lease occupancy reached 88.5% at the end of 2025, excluding our Oakland asset, representing a 190 basis point increase from the third quarter of 2025, a 680 basis point improvement over year-end '24.

And multifamily, excluding our building and Echo Parking Los Angeles, which just began lease-up during Q4, and our occupancy increased to 88.5% at the end of 2025, up 320 basis points from the third quarter of 2025 and then 680 basis points year-over-year.

At our hotel property, we substantially completed the upgrades to the public spaces in the first quarter of 2026, following the renovation to all 505 guest rooms a year ago. With these improvements largely complete, the property is well positioned to drive strong performance in 2026 and beyond. We also anticipate lower interest expense supported by a potentially more favorable rate environment and the opportunity to refinance the hotel following the completion of its renovation.

Finally, as mentioned earlier, the conversion of preferred equity omenstock is expected to improve annual FFO by approximately $16 million. Turning to our fourth quarter results. Our core FFO was negative $5.9 million. Our overall net operating income was $10.9 million compared to $7 million in the prior quarter.

Within our Office segment, NOI increased by approximately $1.4 million from the third quarter, largely due to higher appraised value of one of our JVs. NOI also modestly increased at our wholly owned properties.

Hotel NOI was $2.1 million in the quarter compared to $850,000 in the third quarter, primarily reflecting a greater disruption from our renovation of the public space in the prior quarter. Our multifamily NOI decreased by approximately $1.7 million from the prior quarter. The decrease was primarily due to a lower appraisal of 2 of our JVs in the current quarter. With that, I'll turn the call over to Steve to give more color on our refinancing activities and property level performance.

Thanks, David. As David mentioned, we continue to make progress on improving our balance sheet and liquidity and while also investing in key growth initiatives across the portfolio.

Since we announced this plan, we have completed 9 refinancing fully retired our $169 million recourse credit facility and retired our lending warehouse facility upon sale of that business.

We are currently working on the extension of 2 more assets that we expect to complete in the second quarter of 2026. We are also planning to refinance our Sheraton Grand Hotel now that we've substantially completed its renovation.

These steps have been critical to the company as they have provided proceeds to, first, significantly reduce our recourse debt through the retirement of our credit facility; second, fund important growth initiatives, including lease-up activity in our multifamily and office portfolios as well as the renovation of our hotel Third, continue to fund loan originations in our lending business, allowing us to maximize the value of that business prior to its sale and fourth, continue to meet our preferred dividend obligations.

Turning to our operations. We remain focused on improving property level performance across all segments and growing our premier newer vintage multifamily portfolio. Including our joint ventures, we now have 5 operating multifamily assets, 1150 Clay and Channel House in the Bay Area and 701 South Hudson 1902 Park Avenue and 1915 Park Avenue in Los Angeles.

Starting in Los Angeles, we are making progress on the lease-up of 701 South Hudson, the residential portion of our partial office to residential conversion completed late last year.

Multifamily occupancy at the property was approximately 83.8% at the end of the fourth quarter, up from 80.9% at the end of the third quarter. As a reminder, the top 2 floors of the building were converted into 68 high-end residential units, while the ground floor creative office component known as 750 Wilshire remains 100% leased. We mentioned on prior calls that we believe there's an opportunity to develop additional units on the back surface lot of the property given recent zoning changes.

We are pleased that we received entitlements in the first quarter of 2026 to build an additional 50 units on this space. We are currently working on predevelopment and anticipate having the option to start the project later this year. Also in L.A., we completed 1915 Park in the fourth quarter.

This 36-unit ground-up multifamily development is a joint venture with an international pension fund and is located adjacent to our office building at 1910 West Sunset and Echo Park a highly desirable walkable submarket with attractive dining and entertainment options.

The building was 52% leased at the end of February 2026. So it's off to a very strong start. In Oakland, we saw another pickup in occupancy during the quarter, and the market appears to be starting to recover. In adjacent downtown San Francisco, multifamily has had a significant rebound.

In 2025, rent growth was 7.6%, which was the highest growth rate in over 25 years, while the vacancy rate has declined to its lowest levels in 15 years. Oakland's vacancy rate has declined to 8% from a high of 18% in 2001, and rent growth has turned positive in 2025 after 3 straight years of declines. CMCT owned 621 units in Oakland across its 2 assets, 1150 Clay and Channel house.

Occupancy improved to 88.4% at year-end 2025 and 370 basis point increase from the end of the third quarter. Turning to the office segment. We executed approximately 182,000 square feet of leases during 2025. Excluding the company's One Oakland office building, the lease percentage was 88.5% at the end of 2025, which is a 190 basis point improvement from the third quarter and a 680 basis point improvement from the prior year period.

At 1130 Howard, occupancy increased to 100% during the fourth quarter from 38.9% in the third quarter of 2025. And at 11600 Wilshire Boulevard we recently commenced the renovation program on several small office suites, which we anticipate fueling leasing activity.

At our one office asset in Oakland, we continue to see soft demand. T mortgage of the asset matures in the third quarter of 2026, and the current -- the company is currently seeking an extension of the maturity, but cannot guarantee you reach an agreement with the lender. In the fourth quarter of 2025, the Oakland asset generated approximately $0.5 million of cash flow after debt service. And finally, hotel. As David mentioned, we substantially completed our $11 million renovation of the public space at the Sheraton Grand Sacramento in the first quarter.

This project includes upgrades to the ballroom, banquet space, public space and food and beverage areas. And this follows the renovation of all 505 guestrooms from last year, which we believe together sets the property up well for 2020 and beyond.

The renovation was the first large-scale renovation of the property since we acquired it in 2008. So we anticipate a big impact on profitability. With that, I'll turn the call over to Brandon, who will provide an update on our financial results.

Thank you, Steve. Good afternoon. I'm going to spend a few minutes going over the comparative financial highlights for the fourth quarter of 2025 versus the fourth quarter of 2024. Starting with our segment NOI, which was $10.9 million in the fourth quarter of 2025 and compared to $9.2 million in the prior year comparable period. Broken down by segment, the increase of $1.7 million was driven by increases of $2.3 million from our lending business and $1.2 million for our office properties, offset by a decrease of $1.7 million from our multifamily properties.

Our Office segment NOI for Q4 2025 was $6.4 million versus $5.2 million during Q4 of 2024. The increase was primarily driven by an increase in NOI at an office property in Austin, Texas due to an increase in occupancy and an office property in Beverly Hills, California, attributable to an increase in occupancy and rental rates as well as a decrease in property taxes.

These were partially offset by a decrease in rental revenues at an office property in Los Angeles, California due to a decrease in occupancy and then an office property in San Francisco, California due to a decrease in rental rates.

Our lending division NOI increased to $3.3 million compared to NOI of $980,000 in the prior year comparable period. primarily due to the reversal of CECL in connection with the reclassification of the assets and liabilities of First Western to held for sale. This was partially offset by a decrease in interest income as a result of loan payoffs and lower interest rates. Our lending segment was sold in January 2026.

Our hotel segment NOI for Q4 2025 was $2.1 million, which was consistent with the prior year comparable period. Our multifamily segment NOI decreased to a loss of $870,000 during compared to income of $855,000 from the prior year comparable period.

The decrease was primarily driven by an increase in the unrealized loss on investments in real estate at our unconsolidated joint ventures. Below the segment NOI line, we had an increase in impairment of real estate of $3.5 million due to an impairment charge on a multifamily development site in Oakland, California and an increase in interest expense of $941,000 driven by higher aggregate debt outstanding.

These were partially offset by an increase in segment net operating income of $1.7 million and a decrease in loss on early extinguishment of debt of $1.4 million, which was incurred in connection with the partial payoff of our revolving credit facility during the fourth quarter of 2024. Our FFO was negative $7.1 million or negative $4.49 per diluted share compared to negative $8.7 million or negative $23.21 per diluted share in the prior year comparable period.

The increase in our FFO was primarily driven by an increase of $1.7 million in total segment NOI, a decrease in loss on early extinguishment of debt of $1.4 million and a decrease of $923,000 in redeemable preferred stock dividends.

These were partially offset by an increase in interest expense, not allocated to our operating segments of $941,000 and an increase in preferred stock redemptions of $883,000 and an increase in general and administrative expenses of $617,000.

Our core FFO was negative $5.9 million or negative $3.74 per diluted share compared to negative $7 million or negative $18.64 per diluted share in the prior year comparable period. This increase in core FFO is attributable to the previously discussed changes in FFO, while not impacted by the decrease in loss on early addressment of debt or the increase in renewable preferred stock redemptions and as these are excluded from our core FFO calculation. With that, we can open the line for questions.

[Operator Instructions] This concludes our question-and-answer session. And the conference is also now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the Creative Media and Community Trust Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. 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 Altebrando, 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 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 begin with an update on the progress we're making with our strategic initiatives and then review our results for the quarter. As a reminder, our key priorities remain focused on 2 main goals: strengthening our liquidity and our balance sheet and growing our multifamily business. To advance these objectives, which we first outlined last September, we've been executing a significant refinancing program and evaluating selective asset sales.

Earlier this week, we announced that we have entered into a definitive agreement to sell our lending business. This business is primarily focused on originating SBA 7(a) loans for limited service hotels, and it was considered a noncore asset for the company. As of September 30, the purchase price was estimated to be approximately $44 million and yield the company about $31 million after repayment of debt, transaction and other expenses.

The transaction remains subject to small business administration approval as well as certain closing conditions. At the same time, we continue to make meaningful progress on our refinancing initiatives. Since last September, we completed financings on 7 assets and put in place a warehouse facility for our lending division. This facility will be retired at the close of our sale transaction.

We are also working on an upside of our mortgage on Penn Field, our creative office asset in Austin. After closing this financing earlier this year, we executed a lease with an investment-grade tenant, which should allow us to upsize the loan. We're now finalizing the loan documents with the lender. Taken together, these actions were important steps for the company. They provided proceeds that allowed us to significantly reduce our recourse debt, including the full retirement of $169 million recourse credit facility earlier this year.

They also supported our growth initiatives, including lease-up activity at our Beverly Hills, Culver City, Brentwood, San Francisco and Austin properties, renovations at our hotel asset new loan originations in our lending business and enabled us to continue paying preferred dividends. Overall, we're encouraged by the progress we've made in improving liquidity.

We are working to position the company to benefit from a recovering commercial real estate market, which is supported by lower interest rates, a significant uptick in office leasing activity and improving economic conditions in the San Francisco Bay Area.

Turning to third quarter results. Our core FFO was negative $10.5 million, reflecting several items that impacted performance during the quarter. Our overall net operating income was $7 million compared to $9.8 million in the prior quarter.

Within our Office segment, NOI declined by approximately $500,000 from the second quarter, largely due to lower appraised value of one of our JVs. NOI modestly increased at our wholly owned properties. Hotel NOI was $850,000 in the quarter compared to $4.2 million in the second quarter, primarily reflecting disruption from our renovation of the public space. Q3 is also a seasonally slower quarter for the Hotel.

Our multifamily NOI increased by approximately $600,000 from the prior quarter. The improvement was primarily due to a lower appraisal of one of our JVs that impacted Q2 results as well as a decrease in real estate tax expense at our consolidated properties in Q3. And finally, NOI from our lending segment increased by approximately $360,000 primarily due to a higher reserve taken in the second quarter.

Looking ahead, we see opportunities to improve cash flow in 2026, supported by several key drivers: continued improvement in office leasing activity, the full completion of renovations at our hotel asset and steady gains in multifamily performance through higher rental rates, improved occupancy and delivery of new units. We also expect to benefit from a more favorable interest rate environment.

Before I turn the call over to Steve to provide more detail on the portfolio, I want to take a minute to thank Barry Berlin for his years of service. As part of the sale of our lending division, Barry will be stepping down as CFO and is joined the acquirer of the lending business. Brandon Hill will assume the role of CFO once the transaction is closed. Brandon has been intimately involved in CMCT for years, and we expect a seamless transition. Steve?

Thanks, David. We remain focused on improving property level performance across all segments and growing our premier newer vintage multifamily portfolio. This continues to be a key growth area for us, including our joint ventures, we now have 4 operating assets, 1150 Clay and Channel house in the Bay Area and 701 South Hudson and 1902 Park Avenue in Los Angeles. We're making steady progress on the lease-up of 701 South Hudson, the residential portion of our partial office to residential conversion completed late last year.

Multifamily occupancy at the property was approximately 81% at the end of the third quarter, up from 68% at the end of the second quarter. As a reminder, the top 2 floors of the building were converted into 68 high-end residential units, while the ground floor creative office component known as 4750 remains 100% leased. As mentioned on our prior calls, we believe there's an opportunity to develop additional units on the back surface lot of the property given recent zoning changes, and we continue to make progress on those plans.

Our fifth project, 1915 Park in Los Angeles will deliver this month. This 36-unit ground-up multifamily development is a joint venture with an international pension fund and is located adjacent to our office building at 1910 West Sunset in Echo Park, a highly desirable walkable submarket with attractive dining and entertainment options.

In Oakland, we saw a modest improvement in total occupancy during the quarter. We believe our properties will benefit from limited new construction in the Oakland residential market as well as the ongoing recovery across the broader Bay Area. In San Francisco, multifamily properties continue to improve with area vacancy at its lowest level since 2011. The third quarter rent growth of 5.2% in San Francisco is the strongest year-over-year growth rate since 2015.

In addition, in January '26, Samuel Meritt University is opening its new campus, which is located just steps from our Class A multifamily asset at 1150 Clay. The new campus is expected to draw 2,000 students and 500 faculty members. We see meaningful opportunities to grow our multifamily net operating income through a combination of rising rents, increasing occupancy, lowering operating costs and the delivery of our fifth asset this month.

Turning to the Office segment. Earlier this year, we noted that our leasing pipeline was very active, and that translated into very strong leasing activity. Through the first 9 months of 2025, we executed approximately 159,000 square feet of leases, a 69% increase compared to the same period last year. This follows 176,000 square feet of leasing activity in the fourth quarter of 2024.

At the end of the third quarter, our office portfolio was 73.6% leased. Excluding our 1 Oakland office property, our lease percentage was 86.6%, which was up from 81.7% at the end of 2024. Importantly, we believe the headwinds from COVID are largely behind us, and we're now beginning to see the benefits of return to office trends, which are creating tailwinds for our portfolio.

Turning to our Hotel. We believe we're entering 2026 from a position of strength following a couple of years of renovation-related disruption. We're nearing completion of our $11 million renovation of the public space at the Sheraton Grand Sacramento. This project includes upgrades to the ballroom, banquet space, public space and food and beverage areas. The renovation was funded through a combination of $8 million of key money received as part of the extension of our management agreement with Marriott cash flow from the property and future funding on the mortgage. As a reminder, we also renovated all 505 guest rooms last year.

With that, I'll turn the call over to Barry, who will provide an update on our financial results.

Thank you, Steve. Good morning. I'm going to spend a few minutes going over the comparative year-over-year financial highlights for the third quarter of 2025 versus the third quarter of 2024.

Starting with our segment NOI which was $7 million in the third quarter of 2025 compared to $7.6 million in the prior year comparable period. Broken down by segment, a decrease of approximately $600,000 was driven by decreases of $400,000 for our Office properties, $374,000 from our lending business and $123,000 from our Hotel property, partially offset by an increase of $284,000 from our Multifamily properties.

Our Office segment NOI for Q3 2025 was $5 million versus $5.4 million during Q3 2024. The decrease was primarily driven by a decrease in NOI at an office property in Los Angeles, California, and at an office property in San Francisco, California, attributable to lower rental revenues resulting from a decline in occupancy as well as NOI in an office property in Austin, Texas as a result of higher real estate taxes.

Our lending division NOI decreased to $314,000 compared to $688,000 in the prior year comparable period, primarily due to a decrease in interest income as a result of loan payoffs and lower interest rates, partially offset by a decrease in interest expense resulting from net loan paydowns and a decrease in additions to current expected credit losses.

Our Hotel segment NOI for Q3 2025 was $850,000 compared to $1 million in the prior year comparable period. The decrease was driven by a decrease in food and beverage sale revenues, partially offset by an increase in room revenue. Operations at our Hotel property were negatively impacted by our lobby renovation project during Q3 2025 in our room renovation project during Q3 2024.

Our Multifamily segment NOI was $792,000 during Q3 2025 compared to $508,000 from the prior year comparable period. The increase was primarily driven by reductions in real estate taxes at our multifamily properties in Oakland, California during the third quarter of 2025, partially offset by a decrease in revenues at our Multifamily properties in Oakland, California as a result of declines in occupancy and monthly rent per occupied unit net of rent concessions compared to the prior year comparable period.

Below the segment NOI line, we had an increase in depreciation and amortization expense of $922,000 due to incremental increases to the depreciable asset base at our hotel property following our renovation projects as well as an increase in interest expense of $782,000 driven by higher aggregate debt outstanding.

Our FFO was negative $11.1 million or negative $14.75 per diluted share compared to negative $28.4 million in the prior year comparable period. The positive results in our FFO was primarily driven by decreases in redeemable preferred stock redemption expense of $16.1 million and through a reduction in redeemable preferred stock dividends of $2.7 million, partially offset by the previously discussed decrease in total segment NOI and the increase in interest expense.

Our core FFO was negative $10.5 million or negative $13.96 per diluted share compared to negative $11.5 million in the prior year comparable period. This increase in core FFO is attributable to the previously discussed reductions in redeemable preferred stock dividends, offset by the decrease in segment NOI and higher interest expense. Core FFO calculations exclude reconciliation items to determine FFO that relate to preferred stock redemptions, transaction-related costs and deemed dividends.

I would like to conclude by thanking David Thompson for his guidance over my roles with CMCT since becoming public in 2014 and more importantly, as my mentor for my roles in CIM since then. Thank you, David.

And while I'm very excited to be following the lending division over to its new home and I'm looking forward to helping its ownership grow and expand its horizons in the lending arena. I will truly miss the interaction with the ownership and executive management team at CIM that has supported me in my roles with the firm.

And lastly, to the amazing teams that I've had the pleasure to work with and that have made my job easier. That includes Brandon Hill, who is on the call today. who has guided the financial oversight for CMCT since before I took the CFO position and who has patiently awaited has opportunity to take on the job as CFO. He is well suited to take on the role and I congratulate him on being provided this opportunity. With that, we could open the line for questions.

[Operator Instructions].

It appears there are no questions. I would like to conclude the conference. Thank you for attending today's presentation. You may now disconnect.