Q2 2025 Earnings Conference Call Transcript from CMCT Corporation
Date: Wednesday, August 13, 2025 at 12 p.m. ET
In a recent financial update, Creative Media & Community Trust Corporation (CMCT) reported a decline in net operating income (NOI) for Q2 2025, despite a significant increase in leasing activity and new leases secured.
Leasing Activity and New Leases
CMCT reported a more than 55% year-over-year increase in leasing activity, with approximately 140,000 square feet of lease executed through July. The largest leasing activity was at the Penfield Creative office property, with a nearly eleven-year lease with Boston Scientific for approximately 31,000 square feet.
New leasing activity in Los Angeles and Austin offices is expected to drive anticipated future NOI growth.
Decline in Net Operating Income (NOI)
Despite the strong leasing momentum, the decline in NOI was primarily due to unrealized losses and lower revenues in specific segments.
The unrealized loss on investment in real estate in an unconsolidated joint venture contributed significantly to the NOI decline. Lower rents and occupancy declines in the Oakland multifamily segment also reduced NOI. The office NOI declined by $1.6 million from the prior quarter, which was mainly attributed to the loss of real estate tax benefits that positively impacted the previous quarter’s results.
Despite these headwinds, the hotel segment showed long-term growth potential, although it faced some NOI pressure due to ongoing renovation costs.
Financial Highlights
- The overall office leasing pipeline has seen an uptick, with approximately 140,000 square feet of lease executed through July.
- The office lease percentage was 70%, and 80% at period end when excluding the Oakland property.
- The overall net operating income decreased to $9.8 million from $11.8 million in the prior quarter.
- FFO was negative $7.9 million or negative $10.42 per diluted share compared to negative $3.3 million or negative $3.46 per diluted share in the prior year comparable period.
Other Developments
- A $20 million revolving credit facility was closed in June 2025 to help support originations.
- The multifamily property maturities at 1150 Clay and Channel House were extended to 2026 and January 2027, respectively.
- Management disclosed ongoing evaluation of asset sales as part of a broader strategic plan.
- The recent $8 million of 'key money' received as part of an extended hotel management agreement is being used to partially fund an approximately $11 million common-area renovation at the Sheraton Grand Sacramento.
- Management expects the ongoing renovations to improve the hotel asset's competitive stance in 2026.
- Property Level Financing: Secured financing on seven assets since September, enabling the full repayment and retirement of a $109 million recourse credit facility outstanding at the end of 2024.
In conclusion, while CMCT experienced strong leasing activity and operational improvements in certain areas, the decline in Q2 2025 NOI was primarily due to unrealized investment losses, lower multifamily rents and occupancy in Oakland, and reduced office segment benefits like tax credits. The ongoing evaluation of asset sales is part of a broader strategic plan to address these challenges and position CMCT for long-term growth.
Participants: Chief Executive Officer - David Thompson, Chief Financial Officer - Barry Berlin, Senior Vice President, Portfolio Operations - Steve Altebrando.
- The decline in Creative Media & Community Trust Corporation's (CMCT) net operating income (NOI) for Q2 2025 was due, in part, to unrealized losses in real estate investments and lower revenues in specific segments.
- The ongoing evaluation of asset sales by CMCT's management is part of a broader strategic plan to address the challenges faced in Q2 2025, including investment losses and reduced benefits like tax credits.
- To support originations, CMCT closed a $20 million revolving credit facility in June 2025, and has also securitied financing on seven assets since September, enabling the repayment of a $109 million recourse credit facility from the end of 2024.
