CMCT — Q2 2026 Financial Report Analysis

Overview

Creative Media & Community Trust (CMCT) is a small real estate investment trust (REIT), a company that owns property and passes most of its taxable income to shareholders. It owns office buildings in Los Angeles, Oakland and Austin, apartment buildings in Oakland and Los Angeles, and a 505-room Sheraton hotel in Sacramento. It is externally managed by an affiliate of CIM Group. In the second quarter of 2026 (April–June), revenue was flat at $29.7 million. The net loss attributable to common stockholders narrowed to $11.0 million from $14.3 million. That smaller loss did not come from the buildings. It came from turning most of the company's preferred stock into common shares, which cut the preferred dividends charged against common holders by $4.3 million. Over the same six months the number of common shares rose more than a hundredfold.

The properties themselves had a mixed quarter. Apartments and the hotel improved, with apartment occupancy at 93.6% against 83.4% a year earlier and hotel revenue per available room up 8.2%. The office portfolio is still only 71.9% occupied. On July 1, two days after the quarter ended, CMCT failed to repay the $97.1 million mortgage on its Oakland office tower when it came due. The company chose not to put in the extra capital a refinancing would have needed, and the lender's servicer has demanded full payment.

At a glance

• Net loss to common stockholders: $(11.0) million, against $(14.3) million a year ago. The improvement is all lower preferred dividends ($1.0 million against $5.3 million). Before preferred dividends, the loss attributable to the company widened to $9.9 million from $9.0 million.
• Common shares outstanding: 2.95 million at June 30, against 26,997 at December 31, 2025, after two 1-for-10 reverse stock splits. Nearly all of the new shares were issued to redeem preferred stock. Existing common holders now own a far smaller slice of the company.
• $97.1 million Oakland office mortgage in default since July 1, 2026. The loan is non-recourse, meaning the lender's claim is mainly against that building, not the whole company. Rents from the building now belong to the lender, and the unpaid balance can accrue a default rate of up to 9.14% (the 4.14% loan rate plus 5 points).

Q2 2026 results

FFO (funds from operations) is the REIT industry's standard earnings measure. It adds back depreciation and property write-downs, which are accounting charges rather than cash costs. Core FFO also strips out one-off items such as debt-prepayment costs and preferred-stock redemption charges. NOI (net operating income) is rent and hotel revenue minus the costs of running the properties, before interest, corporate overhead and depreciation. RevPAR is room revenue divided by available rooms. Both FFO measures and NOI excluding joint-venture losses are the company's own non-GAAP figures.

Takeaway: CMCT's common stockholders lost less money this quarter because the company swapped most of its preferred stock for common shares, not because the properties earned more. The swap removed about $4.3 million a quarter of preferred dividends and multiplied the share count. Core FFO is still negative at $(3.4) million, so the business is not yet covering its interest and overhead from operations. The $97.1 million Oakland default and two more mortgage maturities in 2027 (about $145 million combined) now matter more than any operating trend.

Where the money came from, and where it went

The properties: hotel and apartments up, offices down. The company has three property segments:

• Hotel: segment NOI rose to $4.6 million from $4.2 million. Occupancy was 80.7% against 78.4%, and the average daily room rate was $223.67 against $212.92. The Sacramento Sheraton has now finished renovating all 505 rooms, and its lobby and public-space work is substantially complete, with $9.2 million of an estimated $11.6 million spent.
• Multifamily: segment NOI more than tripled from a small base, to $638,000 from $189,000. Occupancy was 93.6% against 83.4%, and rent per occupied unit was $2,560 against $2,458. Management says 78% of its apartment units are in the Bay Area and that in-place rents there are about 12% below current asking rents. If that holds, rents can rise as leases roll over.
• Office: segment NOI fell to $4.0 million from $5.5 million. The filing attributes the drop mainly to fair-value markdowns of real estate at two unconsolidated office joint ventures, which flow through segment NOI as CMCT's share of their losses. The consolidated office buildings did slightly better, with higher rent and tenant reimbursements in Los Angeles and lower property taxes and admin costs. Occupancy rose to 71.9% from 68.1%, but annualized rent per occupied square foot fell to $58.69 from $60.96. CMCT signed only 16,176 square feet of new leases longer than 12 months, which is small for a 1.3-million-square-foot portfolio.

Below the property level. Total interest expense fell 11.1% to $9.0 million from $10.2 million. Part of the drop is the lending business's own interest cost falling away. For the corporate debt (interest not charged to any one segment, $9.0 million against $9.6 million), the 10-Q gives two reasons: a smaller Channel House mortgage after last year's $6.0 million paydown, and lower variable interest rates. Depreciation rose to $7.1 million from $6.3 million. The filing attributes this to higher tenant-improvement amortization at a Beverly Hills office building and to the hotel renovation adding assets that are now being depreciated. "Interest and other income" fell by $1.9 million because CMCT sold its small-business lending arm, First Western, on January 21, 2026. That sale removed a revenue line, but it also removed $678,000 of lending-segment costs and brought in $45.6 million of net cash. Asset management fees paid to the CIM affiliate rose to $859,000 from $349,000.

The preferred-to-common swap

This is the main story of 2026 so far. CMCT had funded itself partly with preferred stock. Preferred shareholders get a fixed dividend paid before common shareholders get anything, and they can ask the company to buy their shares back. Since September 2024 the company has redeemed about $397.7 million of preferred stock by paying in newly issued common shares instead of cash. The largest batch was on March 16, 2026: 7.54 million Series A1 shares, 1.87 million Series A shares and 21,760 Series D shares.

The effects show up across the statements:

• Preferred dividends charged against common holders fell to $980,000 in Q2 from $5.28 million a year earlier.
• Preferred stock on the balance sheet fell from about $310 million at year-end to $67.7 million at June 30. Series A1 dropped to $25.3 million from $217.5 million.
• Common shares rose from 26,997 to 2,947,493, even after the two 1-for-10 reverse splits in March and April 2026. A reverse split merges shares (10 old shares become 1 new one) to lift the share price. The company did them to keep its Nasdaq listing; Nasdaq requires a minimum $1.00 bid price.
• A one-time $22.3 million charge in the first quarter ("redeemable preferred stock redemptions") recorded the gap between the preferred stock's redemption value and its book value. That is why the six-month loss to common stockholders was $(45.7) million.

Management says that, apart from the March redemption, it does not currently plan to redeem more preferred stock in common shares at its own election. It will still handle holder requests in cash or stock at its discretion. Holders kept asking after the quarter ended. In 8-K filings, CMCT reported issuing another 269,702 common shares between August 19 and September 9, 2026 to settle redemption requests, about 9% more than the June 30 count. The issue prices were roughly $3.98 to $4.55 per share, based on the trailing 20-day average trading price. The company reports an "undepreciated common book value" of $130.58 per share, which is equity before accumulated depreciation and excluding preferred stock. The market price at which new shares are being issued is about 3% of that figure. Every new share issued at that price takes a larger slice of the company from existing holders.

What the headline numbers hide

• Operating cash flow was sharply negative, mostly because of a catch-up payment to the manager. Net cash used in operating activities was $(22.5) million for the first half, against $(1.3) million a year earlier. Nearly all of the gap is a $21.2 million drop in "due to related parties." The amount owed to CIM-affiliated entities fell from $22.8 million at year-end to $1.6 million. That included $13.6 million of property management fees and reimbursements down to $0.7 million, and $4.0 million of corporate expense reimbursements paid down to zero. Without that payment, first-half operating cash flow would have been roughly $(1.4) million. That is still slightly negative, with a $(18.4) million GAAP net loss over the same six months.
• The company was funded by an asset sale this half. Cash plus restricted cash fell by only about $1 million because the $45.6 million from selling First Western covered the related-party payment, $12.2 million of net debt repayment, $6.0 million of preferred dividends paid and $6.3 million of capital spending. That sale can't be repeated. The 10-Q says the company is evaluating further asset sales and "the potential private issuance of additional shares of Preferred Stock to one or more of our affiliates" for its short-term cash needs. Unrestricted cash was $12.8 million at June 30.
• Two segment NOI figures point in opposite directions. Total segment NOI fell 5.2%. Management's own measure excluding joint-venture losses rose 22.2%. The difference is a $3.2 million loss from unconsolidated entities, against $0.4 million a year ago, mostly fair-value markdowns at two office joint ventures. Management calls these one-time, but they are real declines in the value of buildings CMCT partly owns. The 22% figure is the better read on how the consolidated buildings are running. The 5% decline is the better read on what CMCT's stake in office property is worth.
• One-offs in both years. This quarter includes a $455,000 net casualty loss: $992,000 of water damage at the hotel, offset by $537,000 of expected insurance money. Last year's quarter had $803,000 of transaction costs, a $221,000 impairment and an $88,000 debt-prepayment loss. None of these changes the overall picture much.
• Per-share comparisons are meaningless this year. Diluted loss per share went from $(1,784.88) to $(4.03). That is because the weighted-average share count went from about 8,000 to about 2.7 million, not because results improved by 99.8%.
• No going-concern warning. The 10-Q contains no "substantial doubt" language about the company's ability to keep operating. It does warn that CMCT "may not have sufficient funds on hand or may not be able to obtain additional financing to cover all of our long-term cash requirements."

The debt picture

CMCT had $475.2 million of mortgage debt at June 30, plus $27.1 million of junior subordinated notes due 2035. Total debt on the balance sheet, net of fees, was $498.8 million against total equity of $246.0 million. About 87% of the debt is fixed-rate or capped, so a 0.5-point move in short-term rates changes annual earnings by only about $317,000. The pressure comes from maturities, not rates:

The Oakland office loan is non-recourse, so the main risk is losing the building, not a claim on the rest of the portfolio. The 8-K filed July 15 says CMCT stayed current on monthly interest but "elected not to invest additional capital in the asset." Two caveats from the 10-Q:

• The company has a guaranty on "certain obligations" of this loan that can be triggered "upon the occurrence of specified events." No liability has been recorded, because the company does not consider a payment probable.
• The building's rents now legally belong to the lender.

Handing the building back would shrink the office portfolio. That could raise reported office occupancy, which is 84.4% leased excluding this building against 72.3% including it. The cost would be the building's equity value, if any remains.

The two Oakland apartment loans, about $145 million together, both come due within the next twelve months. Management says it believes refinancing is "likely" for each. Separately, CMCT says it is in talks to refinance the Sheraton with an "upsized loan and a reduced interest rate," which would release cash if it happens.

Outlook

CMCT gives no earnings guidance. Its stated plan is to shift toward apartments, sell one or more assets and lease up its Los Angeles and Austin offices. One Los Angeles building, 11600 Wilshire, just finished a renovation. The operating trends in the filing support part of that plan. Apartments are close to full and have room to raise rents, and the renovated hotel is earning more per room. But core FFO is still negative at $(3.4) million a quarter, and the company is relying on asset sales, affiliate-placed preferred stock and loan extensions for cash. So the near-term questions are about financing:

1. How the Oakland default resolves: an extension, a negotiated handover of the building, or something that triggers the guaranty.
2. Whether the Sheraton refinancing closes and how much cash it releases.
3. Refinancing of Channel House (due January 2027) and 1150 Clay (due June 2027).
4. Further share issuance to settle preferred redemption requests at low share prices, which keeps shrinking existing holders' stake.

Our read is that CMCT's buildings are performing better than a year ago, apart from Oakland office. For common shareholders, though, results will depend more on the balance-sheet steps above than on occupancy over the next few quarters. The Q3 10-Q, expected around mid-November 2026, will be the first to show the Oakland default after it happened.