Creative Media & Community Trust Charts FFO Turnaround

Creative Media & Community Trust Corporation ((CMCT)) has held its Q1 earnings call. Read on for the main highlights of the call.

Creative Media & Community Trust Corporation’s latest earnings call painted a mixed but cautiously optimistic picture. Management emphasized significant strategic moves that they believe will materially lift funds from operations over the next two years, even as current results show steep negative FFO, softer NOI across segments, and some unresolved refinancing risks that continue to weigh on the near-term outlook.

Preferred Stock Redemption Strengthens Capital Structure

The company has redeemed $243 million of preferred stock into common during the first quarter of 2026, bringing total redemptions since September 2024 to $396 million. Management expects this shift to reduce preferred dividend drag and increase annual FFO by about $16 million starting in 2026, with the full run-rate benefit flowing through from the second quarter.

Shift to Asset-Based Financing and Reduced Recourse Debt

Creative Media has completed financings on nine assets and used the proceeds to fully retire its recourse credit facility, leaving the balance sheet with minimal recourse exposure. Management framed this as a key de-risking step that enhances financial flexibility, better aligns debt with individual properties, and insulates the company from corporate-level lender pressure.

Sale of Lending Division Generates Cash and Gain

In January 2026, the company sold its lending arm, First Western, for approximately $44.9 million, realizing net cash proceeds of roughly $31 million after repaying associated debt and covering transaction costs. The deal also produced a gain on sale of about $1.7 million, simplifying the business and freeing capital for core real estate initiatives.

Multifamily NOI and Occupancy Improvements

The multifamily portfolio has emerged as a bright spot, with segment NOI up 64% year over year when joint ventures are excluded. Overall multifamily occupancy reached 89.6% at quarter-end, a surge of 940 basis points, while Oakland’s multifamily assets climbed to 91.9% occupancy, reflecting an 860 basis-point improvement.

Strong Market Fundamentals in San Francisco and Bay Area

Management highlighted strengthening demand in core Bay Area markets, citing 7.6% rent growth in downtown San Francisco in 2025 and roughly 7% in 2026. Vacancy in San Francisco has dropped to 4.3%, the lowest in nearly two decades, while Oakland vacancy has fallen to 7.8% from a peak near 18%, with rent growth turning positive and reaching 2.9% in 2026.

Office Leasing Momentum and Improved Lease Rates

The office portfolio is showing early signs of stabilization, with approximately 20.162 thousand square feet of leases executed in the first quarter of 2026. Excluding a challenged Oakland office asset, the office lease percentage rose to 85.7%, up 470 basis points from a year earlier, with leasing activity especially notable in Los Angeles and Austin.

Hotel Renovation Completed, Positioning for Recovery

At the company’s Sacramento hotel, all 505 guest rooms have been fully renovated and public space work is substantially complete, setting the stage for better performance in 2026. Management is also evaluating a conversion that could add eight additional guest rooms, which they believe would be accretive to earnings once market conditions normalize.

Undepreciated Book Value Per Share Indicates Asset Value

The company underscored that its undepreciated book value stands at roughly $147 per share, a metric management views as a proxy for underlying portfolio value. They argue that this figure highlights significant potential upside to intrinsic value if ongoing operational and capital structure initiatives successfully translate into higher FFO and market recognition.

Significant Decline in Reported FFO

Despite the strategic progress, reported FFO deteriorated sharply to negative $28.8 million, or negative $58.47 per diluted share, in the first quarter of 2026. This compares with negative $5.4 million, or negative $900.83 per diluted share, a year earlier, with the decline largely driven by a $21.9 million increase in preferred dividends and softer segment-level NOI.

Segment NOI Decrease Year-over-Year

Total segment NOI fell to $9.8 million in the quarter from $11.8 million in the prior-year period, a decline of roughly $2 million or around 17%. The drop was broad-based, with hotel NOI down about $0.728 million, office NOI lower by approximately $0.602 million, and lending segment NOI reduced by about $0.59 million before that business was sold.

Hotel NOI Impacted by Renovation Disruption and Mechanical Issue

Hotel NOI declined to $4.0 million in the first quarter from $4.7 million a year earlier, roughly a 15% decrease. Management attributed the weaker performance to renovation-related disruptions early in the quarter and a mechanical issue in March that temporarily removed rooms from service, pressuring both occupancy and rate.

Office NOI Pressure from Tax and Reimbursement Changes

Office NOI slipped to $6.5 million from $7.1 million, an 8.5% drop that was not purely demand-driven. The company cited lower tenant reimbursement revenue at one Oakland property and higher real estate tax expense in Beverly Hills, where a one-time tax appeal benefit in the prior year did not repeat, as the main factors behind the decline.

Core FFO Slightly Worse and Elevated Noncash and One-Time Items

Core FFO came in at negative $5.9 million compared with negative $5.1 million in the prior-year quarter, reflecting a modest deterioration of about 16%. The company also faced higher depreciation and amortization of approximately $1.2 million and recorded a $0.705 million loss on early extinguishment of debt tied to paying off the lending division’s revolving facility.

Continued Asset-Level Challenges and Refinancing Uncertainty

Management acknowledged ongoing challenges at certain properties, noting active efforts to secure refinancings or extensions at the Sheraton Grand, 1150 Clay, and an Oakland office loan. One Oakland office extension remains uncertain, and the asset produced only about $0.8 million in cash flow after debt service in 2025, underscoring refinancing and valuation risk at that location.

Multifamily Segment Still Showing a Small Loss

While occupancy and NOI trends are positive, the multifamily segment still posted a small net operating loss of $113,000 in the first quarter of 2026. This indicates that some properties, including those reflected through joint venture adjustments, have yet to fully return to profitability despite stronger leasing momentum and improving market fundamentals.

Forward-Looking Guidance and Path to Improved FFO

Looking ahead to 2026 and 2027, the company’s guidance centers on two primary levers: continued property-level performance gains and a substantial reduction in preferred dividend obligations from the large-scale preferred-to-common conversions. Management expects the $16 million annual FFO uplift from redemptions, combined with stronger multifamily, office leasing gains, hotel recovery, and a more flexible, asset-based balance sheet, to gradually move FFO into a healthier range over the next two years.

Creative Media & Community Trust’s earnings call ultimately balanced present pain with future promise, blending negative FFO, weaker NOI, and refinancing uncertainty with tangible capital structure progress and operational momentum in key markets. For investors, the story now hinges on execution: turning an improved balance sheet, stronger occupancy, and renovated assets into durable FFO growth and a closing of the gap to the company’s stated asset value.