CMCT(CMCT) - 2025 Q2 - Quarterly Report

PART I. Financial Information This section provides comprehensive unaudited financial statements, management's discussion and analysis, and disclosures on market risk and internal controls Item 1. Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements of Creative Media & Community Trust Corporation, including balance sheets, statements of operations, equity, and cash flows, along with detailed notes Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing its assets, liabilities, and equity at specific reporting dates Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $885,024 | $889,555 | | Investments in real estate, net | $704,775 | $709,194 | | Cash and cash equivalents | $27,769 | $20,262 | | Total Liabilities | $584,250 | $562,492 | | Debt, net | $535,605 | $505,732 | | Total Equity | $288,270 | $306,264 | - Total assets slightly decreased to $885.0 million as of June 30, 2025, from $889.6 million at the end of 2024, accompanied by an increase in total liabilities to $584.3 million and a decrease in total equity to $288.3 million[10] Consolidated Statements of Operations This section details the company's financial performance over specific periods, outlining revenues, expenses, and net loss Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $29,689 | $34,439 | $61,984 | $68,437 | | Total Expenses | $38,245 | $36,126 | $75,540 | $73,433 | | Net Loss | $(9,151) | $(852) | $(15,423) | $(4,757) | | Net Loss Attributable to Common Stockholders | $(14,279) | $(9,667) | $(26,177) | $(21,962) | | Basic and Diluted EPS | $(18.94) | $(98.64) | $(39.36) | $(224.10) | - The company's net loss widened significantly in Q2 2025 to $9.2 million from $0.9 million in Q2 2024, and for the first six months, the net loss grew to $15.4 million in 2025 from $4.8 million in 2024, driven by lower revenues and higher expenses[11] Consolidated Statements of Equity This section presents the changes in the company's equity components, including net income, dividends, and stock transactions - Total equity decreased from $306.3 million at the end of 2024 to $288.3 million as of June 30, 2025, primarily driven by a net loss of $9.15 million and preferred stock dividends of $5.3 million in Q2 2025[12] - During the six months ended June 30, 2025, the company redeemed Series A1 and Series A Preferred Stock by issuing 96,283 and 192,144 shares of common stock, respectively[12] Consolidated Statements of Cash Flows This section outlines the company's cash inflows and outflows from operating, investing, and financing activities over specific periods Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(1,271) | $5,540 | | Net cash used in investing activities | $(10,226) | $(1,388) | | Net cash provided by financing activities | $16,487 | $2,460 | | Net Increase in Cash | $4,990 | $6,612 | - For the first six months of 2025, the company experienced a net cash outflow from operations of $1.3 million, a significant reversal from a $5.5 million inflow in the same period of 2024, primarily due to a higher net loss[15] Notes to Consolidated Financial Statements This section provides detailed explanations and additional information supporting the figures presented in the consolidated financial statements - The company primarily acquires, develops, owns, and operates premier multifamily properties and Class A/creative office assets, also including a hotel and an SBA 7(a) loan origination platform[18] - The company effected two reverse stock splits in 2025: a 1-for-10 split in January and a 1-for-25 split in April, with all share and per-share amounts retroactively adjusted[20][22] - During Q2 2025, the company recognized an impairment charge of $0.221 million on an office property in Austin, Texas, reducing its carrying value to an estimated fair value of $1.9 million[74] - As of June 30, 2025, the company had $535.6 million in net debt, an increase from $505.7 million at year-end 2024, and in April 2025, it repaid and terminated its 2022 Credit Facility, resulting in a loss on early extinguishment of debt of $0.088 million[100][107] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and operational results, highlighting increased net losses due to lower revenues and higher expenses, alongside strategic shifts towards multifamily properties and liquidity management efforts Executive Summary This section provides an overview of the company's strategic focus on multifamily properties and a snapshot of its current portfolio performance - The company's strategy is to increase its focus on acquiring, developing, and operating premier multifamily properties, while opportunistically disposing of assets that do not fit this strategy[215][217] Portfolio Snapshot as of June 30, 2025 | Segment | Metric | Value | | :--- | :--- | :--- | | Office Properties | Occupancy | 68.1% | | Multifamily Properties | Occupancy | 83.4% | | Hotel | RevPAR (H1 2025) | $171.63 | - The decrease in office portfolio occupancy to 68.1% from 82.5% a year prior was primarily due to a tenant exercising a partial termination option at an office property in Oakland, California[223][229] 2025 Results of Operations (Comparison of the Three Months Ended June 30, 2025 to 2024) This section analyzes the company's financial performance for the second quarter of 2025 compared to the same period in 2024, highlighting key revenue and expense trends Q2 2025 vs Q2 2024 Performance (in thousands) | Metric | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $29,689 | $34,439 | $(4,750) | (13.8)% | | Total Expenses | $38,245 | $36,126 | $2,119 | 5.9% | | Net Loss | $(9,151) | $(852) | $(8,299) | NM | - The increase in net loss for Q2 2025 was primarily due to a $6.4 million decrease in segment net operating income and a $1.3 million increase in interest expense[239] - FFO attributable to common stockholders decreased by $4.6 million to $(7.9) million in Q2 2025 from $(3.3) million in Q2 2024, mainly due to lower segment net operating income and higher interest expense[244] - Office revenue decreased by 15.8% due to lower occupancy in an Oakland property, while multifamily revenue dropped 27.6% due to lower occupancy and rents[249][251] 2025 Results of Operations (Comparison of the Six Months Ended June 30, 2025 to 2024) This section analyzes the company's financial performance for the first half of 2025 compared to the same period in 2024, detailing revenue and expense trends H1 2025 vs H1 2024 Performance (in thousands) | Metric | H1 2025 | H1 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $61,984 | $68,437 | $(6,453) | (9.4)% | | Total Expenses | $75,540 | $73,433 | $2,107 | 2.9% | | Net Loss | $(15,423) | $(4,757) | $(10,666) | 224.2% | - The increased net loss for the first half of 2025 was primarily driven by an $8.3 million decrease in segment net operating income and a $2.4 million increase in interest expense[268] - FFO attributable to common stockholders for H1 2025 was $(13.3) million, a decrease of $4.1 million from $(9.2) million in H1 2024, driven by lower segment operating income and higher interest expense, partially offset by lower preferred stock dividends and redemptions[272] Cash Flow Analysis This section provides an analysis of the company's cash flow changes across operating, investing, and financing activities - Net cash used in operating activities was $1.3 million for H1 2025, a significant decrease from $5.5 million provided by operations in H1 2024, primarily due to a higher net loss[295] - Net cash used in investing activities increased to $10.2 million in H1 2025 from $1.4 million in H1 2024, mainly due to a $9.0 million increase in capital expenditures[296] - Net cash provided by financing activities increased to $16.5 million in H1 2025 from $2.5 million in H1 2024, driven by higher net proceeds from debt and lower cash redemptions and dividends for preferred stock[297] Liquidity and Capital Resources This section discusses the company's ability to meet its financial obligations and fund operations, including sources and uses of capital - The company's principal demands for funds include asset acquisitions, property development, debt service, and preferred stock distributions/redemptions[298] - The company plans to satisfy some or all redemption requests for its Preferred Stock with shares of Common Stock during 2025 to preserve liquidity[304] - In June 2025, a subsidiary entered into a new $20.0 million revolving credit facility secured by SBA 7(a) loans, with $8.3 million outstanding and no additional availability as of June 30, 2025[313] - The company regained compliance with the Nasdaq minimum bid price requirement in April 2025 but notes that maintaining compliance is not guaranteed[308] Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to market risks, primarily interest rate fluctuations, and its strategies for mitigation - As of June 30, 2025, 17.7% ($96.0 million) of the company's debt was floating rate[331] - A 50 basis point change in the SOFR interest rate would impact annual earnings by approximately $0.48 million[331] - The company utilizes interest rate cap agreements with a total notional amount of $176.8 million to manage its exposure to interest rate fluctuations[332] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls during the quarter - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[334] - No material changes were made to the company's internal control over financial reporting during the quarter ended June 30, 2025[335] PART II. Other Information This section provides additional information including legal proceedings, risk factors, equity sales, and other relevant disclosures Legal Proceedings The company is not currently involved in any material legal proceedings beyond routine litigation arising in the ordinary course of business - The company states it is not currently involved in any material pending or threatened legal proceedings outside of routine litigation incidental to its business[337] Risk Factors No material changes to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K were reported - No material changes to the risk factors disclosed in the 2024 Form 10-K were reported[338] Unregistered Sales of Equity Securities and Use of Proceeds The company made no common stock repurchases during the three and six months ended June 30, 2025, under its $10.0 million share repurchase program - No common stock repurchases were made during the three and six months ended June 30, 2025[339] - As of June 30, 2025, the company has repurchased a total of 2,650 shares for $4.7 million under its existing share repurchase program[339] Other Information The company plans to delist its Common Stock from the Tel Aviv Stock Exchange by August 15, 2025, while maintaining its Nasdaq Capital Market listing - The company has filed to voluntarily delist its Common Stock from the Tel Aviv Stock Exchange (TASE), with the delisting expected to be effective on August 15, 2025[344] - The company's common stock will continue to be listed for trading on the Nasdaq Capital Market[344]