Creative Media & Community Trust Corporation (CIM Commercial Trust Corporation)
Business context and reporting period. The supplied filing is CIM Commercial Trust Corporation’s unaudited Form 10-Q for the quarter ended March 31, 2021; this differs from the company name in the request metadata. The REIT’s operations comprise office properties, a Sacramento hotel and an SBA lending business.
Financial performance and position
- Revenue and earnings: Revenue was $18.9 million, down 26.1% from $25.5 million. Net loss was $3.7 million versus $1.3 million; loss attributable to common stockholders was $8.2 million, or $0.55 per share, versus $6.8 million, or $0.46 per share. Expenses declined 17.3% to $22.2 million.
- Segment performance: Office net operating income (NOI) was $7.8 million, down from $8.8 million; hotel NOI was a loss of $0.8 million versus income of $1.8 million; lending NOI rose to $2.1 million from $1.0 million. Total segment NOI fell to $9.1 million from $11.5 million. Office occupancy was 78.7%, versus 85.8%; hotel occupancy was 29.8% versus 65.8%, and RevPAR was $34.60 versus $109.58.
- Cash flow: Operating activities provided $4.6 million, compared with $6.0 million. Investing activities used $3.6 million and financing activities used $0.2 million. Cash and restricted cash increased by $0.8 million to $44.5 million.
- Debt and liquidity: Debt, net, was $331.8 million, up from $324.3 million at year-end. Cash and cash equivalents were $34.6 million. The secured 2018 revolving facility had $171.5 million outstanding and approximately $23.0 million available; the separate unsecured facility had $10.0 million available. The company also had $18.1 million outstanding under the Federal Reserve PPP Liquidity Facility.
- Other metrics: Total assets were $685.9 million. Loan receivables, net, were $84.4 million, including $17.3 million of PPP loans; loan-loss reserves were $1.0 million. Preferred dividends paid during the quarter totaled approximately $10.6 million; common dividends paid were $1.1 million.
Material changes versus the prior-year quarter
- Revenue fell chiefly because hotel revenue dropped 77.2% to $1.9 million amid COVID-19 impacts; office revenue declined 9.2% to $13.5 million. Lending revenue increased 45.7% to $3.5 million.
- Net loss increased by $2.4 million, primarily reflecting a $2.4 million decline in segment NOI. FFO attributable to common stockholders was negative $3.2 million, compared with negative $1.5 million.
- General and administrative expense increased 66.9% to $2.0 million, primarily due to higher legal fees. Interest expense declined 15.1% to $2.4 million.
Outlook, risks and unusual items
- Management said COVID-19 had adversely affected, and would likely continue to affect, the company at least through the first half of 2021. It expected hotel NOI to remain negative for at least that period. Parking tenant collections for the quarter were 22.5% collected, 8.6% abated and 68.9% recorded as bad debt; office and retail collections were generally consistent with pre-pandemic levels.
- The company’s SBA lending credit exposure was highly concentrated in hospitality: 99.3% of loans subject to credit risk were concentrated in that industry, although 98.7% were current. Management warned that further borrower stress could require increased reserves or lead to material losses.
- Office portfolio concentration is notable: one tenant accounted for 30.9% of annualized rental income, and California properties accounted for 84.1%. A $60.0 million loan-funding commitment was outstanding, mostly for loans whose guaranteed portions were intended for sale.
- Planned but temporarily suspended projects included an estimated $14.5 million office repositioning and $26.3 million of hotel renovations; $2.3 million and $2.9 million, respectively, had been paid by quarter-end. Future tenant improvement and construction obligations totaled $7.6 million.
- The 2018 revolving facility’s COVID-related deferral provisions, including a $15.0 million minimum liquid-assets requirement, were scheduled to run through June 30, 2021. The facility matures in October 2022. Management provided no quantified earnings or full-year guidance.
- Other exposures include a pending lawsuit seeking recovery of $11.8 million paid in San Francisco real-property-transfer-tax penalties, interest and legal fees, and an injury lawsuit for which potential losses could not be estimated. The company also disclosed possible SBA recovery claims if technical deficiencies are found in loan origination, funding or servicing.
Important facts for investors to verify
- Whether office occupancy and rent collections recover, and the pace of lease expirations and renewals.
- Hotel demand, RevPAR and the timing and cost of restarting suspended renovations.
- Hospitality borrower performance, PPP forgiveness and any resulting changes in loan-loss reserves.
- Available borrowing capacity, compliance with credit-facility requirements and refinancing needs ahead of the 2022 revolver maturity.
- The cash cost and sustainability of preferred and common distributions, alongside planned capital spending and loan commitments.