CMCT Upshares Strategy to Rebalance Towards Multifamily Focus

Strategic Shift Towards Multifamily Assets

CMCT has announced significant actions to realign its investment strategy towards premier multifamily properties, marking a decisive transition from traditional office assets. As part of this initiative, CMCT aims to bolster its balance sheet and improve liquidity amid changing market conditions.

Enhancing Capital Structure and Asset Management

To navigate recent challenges in the real estate market, particularly the decline in office space valuations, CMCT is re-evaluating its capital structure. Initially targeting a capital framework of 40% common equity, 30% preferred equity, and 30% debt, the company found itself with a lower common equity ratio. This realization led CMCT to explore potential sales of high-quality assets to address the disparity. However, when a buyer failed to finalize the transaction, the company opted to pursue refinancing options instead. This strategy involves placing property-level financing on various assets and dedicating part of those proceeds to pay off its corporate-level credit facility.

Investment Focus on Multifamily Properties

Future investments resulting from these financing strategies will be primarily directed towards acquiring and developing multifamily properties. This strategic pivot not only addresses immediate financial metrics but also positions CMCT to exploit opportunities as the real estate market trends toward recovery.

Suspension of Preferred Stock Offering

In a bid to further enhance its common equity ratio, CMCT announced the suspension of its Series A1 Preferred Stock offering. Additionally, the company will redeem approximately 2.2 million shares of Series A Preferred Stock and 2.6 million shares of Series A1 Preferred Stock. This redemption will be conducted using common stock, adhering to the established terms of both preferred stock series. Furthermore, CMCT is adjusting all of its preferred stock’s dividend payments from a monthly to a quarterly schedule, although the already declared dividends for the third quarter will still be disbursed as originally planned.

Implications of these Actions

These steps are strategically designed to strengthen CMCT’s financial outlook, increase liquidity, and expedite the transition toward multifamily properties. The company is optimistic that these changes will better prepare it to capitalize on emerging opportunities within a recovering real estate landscape.

Quarterly Common Stock Dividend Announcement

In addition to the strategic shifts, CMCT's Board of Directors has approved a quarterly dividend of $0.04 per share of common stock, with payment structured in common shares. Scheduled for distribution on October 8, 2024, this dividend will reflect the stockholder records as of September 25, 2024, calculated based on the closing price from September 13, 2024.

About CMCT

Creative Media & Community Trust Corporation (“CMCT”) stands as a prominent real estate investment trust dedicated to owning, operating, and developing premier multifamily and creative office assets within vibrant urban communities. Known for its pioneering role in creative office space, CMCT has successfully positioned itself to serve fast-evolving sectors like technology, media, and entertainment. With the expertise derived from CIM Group Management, LLC, CMCT is committed to enhancing its portfolio of multifamily assets, primarily located in dynamic markets affiliated with its creative office interests. The company also manages a hotel property in Northern California and operates a lending platform that provides loans under the Small Business Administration’s 7(a) loan program. Under the management of CIM Group, L.P., CMCT benefits from a vertically-integrated operational structure that encompasses in-depth research, acquisition, credit analysis, development, and property management capabilities.

Frequently Asked Questions

What strategic changes is CMCT implementing?

CMCT is pivoting its focus from traditional office properties to premier multifamily assets to enhance liquidity and strengthen its balance sheet.

How will the redemptions of preferred stock affect investors?

The redemptions aim to improve the company's equity position and align its capital structure more effectively with its investment goals.

What is the planned dividend for common shareholders?

CMCT has declared a quarterly dividend of $0.04 per share of common stock, payable in stock.

What are the future investment plans for CMCT?

The company intends to invest in acquiring and developing more multifamily properties leveraging existing assets.

Who manages CMCT and what expertise do they bring?

CMCT is managed by CIM Group, L.P., which provides extensive real estate expertise and supports various operational capabilities within the organization.

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