SEC Filing Summary
Business context and reporting period
CIM Commercial Trust Corporation and subsidiaries (NASDAQ: CMCT), a Maryland REIT focused primarily on urban office properties, reported unaudited results for the three months ended March 31, 2017. The filing identifies the registrant as CIM Commercial Trust Corporation; verify this against the requested company name, Creative Media & Community Trust Corp.
At quarter-end, the portfolio included 23 office properties, five multifamily properties and one hotel, alongside an SBA 7(a) lending business. The filing states that 2017 results are not necessarily indicative of full-year results.
Financial performance and position
| Metric | Q1 2017 | Q1 2016 / prior date |
|---|---|---|
| Total revenue | $66.9 million | $68.6 million |
| Net income | $193.9 million | $27.0 million |
| Net income available to common stockholders | $193.9 million; $2.31 per share | $27.0 million; $0.28 per share |
| FFO available to common stockholders | $23.4 million | $20.3 million |
| Segment net operating income | $42.1 million | $35.3 million |
| Net cash from operating activities | $13.6 million | $7.1 million |
| Cash and cash equivalents | $404.3 million | $144.4 million at December 31, 2016 |
| Total debt, net | $939.3 million | $967.9 million at December 31, 2016 |
Net income included a $187.7 million gain on the sale of 211 Main Street in San Francisco; excluding real-estate sale gains and adding back real-estate depreciation and amortization, the company’s reported FFO was $23.4 million. Revenue declined 2.4%, while total expenses fell 9.7%. Interest expense rose to $9.8 million from $6.8 million. The filing does not provide a directly comparable consolidated operating-margin measure.
Q1 investing cash flow was positive $291.1 million, principally reflecting $289.9 million in net property-sale proceeds. Financing cash flow was negative $44.8 million, including $26.5 million of mortgage repayments and $18.4 million of common dividends. Cash excludes $27.8 million of restricted cash. The $200 million revolving credit facility was undrawn and available; management reported compliance with its financial covenants. Debt includes a $385 million unsecured term loan, effectively fixed at 3.16% through May 8, 2020 using swaps.
Material changes versus the prior period
- Net income rose sharply, mainly because the 211 Main Street sale generated a $187.7 million gain, versus a $24.7 million real-estate sale gain in Q1 2016.
- FFO increased $3.1 million, reflecting $6.8 million higher segment NOI, partly offset by higher interest expense and the absence of $0.7 million of discontinued-operations income.
- Office segment revenue increased 6.6% to $49.1 million; hotel revenue fell 31.2% to $10.5 million, principally following two 2016 hotel sales. Multifamily revenue decreased 1.1% to $5.0 million.
- Office occupancy was 84.5%, versus 83.2% a year earlier; multifamily occupancy was 93.1%, versus 93.5%. Hotel occupancy was 81.7%, with ADR of $168.59 and RevPAR of $137.71.
- Weighted-average common shares fell to 84.0 million from 97.7 million, following prior share repurchases. The company paid a $0.21875-per-share common dividend for the quarter.
Outlook, risks and unusual items
- No formal earnings or FFO guidance was provided. Management expected office and multifamily revenue to decline as planned property dispositions close, and hotel revenue and expenses to remain materially lower following prior hotel sales.
- Five sale agreements covering office, parking and multifamily properties had aggregate stated consideration of approximately $409.4 million; closings were expected in Q2 and Q3 2017. Approximately $60.6 million of related mortgage debt was expected to be repaid or assumed by buyers. Management said further dispositions were possible and contemplated using a substantial portion of proceeds to provide common-stockholder liquidity.
- Management expected interest expense to increase in 2017 as 2016 mortgage financing remained outstanding for a full year, partly offset by debt repayments associated with dispositions. The $200 million revolver’s extended maturity was September 2017.
- In April 2017, San Francisco filed suit against subsidiaries seeking approximately $11.5 million of real-property transfer tax, penalties and interest for a prior-year transaction. The company intends to contest the claim, said loss was not then considered probable and estimable, and recorded no liability at March 31.
- Other exposures include $39.4 million of future tenant-improvement and construction obligations, $11.8 million of SBA loan-funding commitments, and possible SBA recourse for technical deficiencies in guaranteed loans. Government tenants generated 19.5% of rental and other property income; California represented 63.2% of property revenue. Management cited leasing, economic, financing, interest-rate and funding risks.
- An April 2017 special cash dividend of $0.28 per common share was declared and paid. The filing reports no material change in previously disclosed risk factors and no material pending litigation apart from the San Francisco matter.
Important facts for investors to verify
- Confirm the registrant and ticker are the intended company, given the name discrepancy in the request and filing.
- Assess the sustainability of recurring earnings and FFO apart from the $187.7 million property-sale gain, including the effect of planned dispositions on NOI and cash flows.
- Verify closing status, final proceeds, debt treatment and use of proceeds for the approximately $409.4 million of pending property sales.
- Review the September 2017 revolver maturity, refinancing plans, debt covenants and liquidity after property sales and distributions.
- Monitor the San Francisco tax litigation, tenant-improvement obligations, SBA loan performance and related-party fees.