AP NEWS

CIM Commercial Trust Corporation Reports 2018 Third Quarter Results

November 13, 2018

DALLAS--(BUSINESS WIRE)--Nov 13, 2018--CIM Commercial Trust Corporation (NASDAQ & TASE: CMCT) (“we”, “our”, “CMCT”, “CIM Commercial”, or the “Company”), a real estate investment trust (“REIT”) that primarily acquires, owns, and operates Class A and creative office assets in vibrant and improving urban communities throughout the United States, today reported operating results for the three months ended September 30, 2018.

Third Quarter 2018 Highlights

Annualized rent per occupied square foot 1 on a same-store basis increased 6.8% to $43.30 as of September 30, 2018 compared to $40.54 as of September 30, 2017; annualized rent per occupied square foot across all properties was $44.86 as of September 30, 2018. Our same-store office portfolio was 94.2% leased as of September 30, 2018. During the third quarter of 2018, we executed 40,567 square feet of leases with terms longer than 12 months, of which 34,026 square feet were recurring leases executed at our same-store office portfolio, representing same-store cash rent growth per square foot of 25.0%. Net loss attributable to common stockholders was $4,448,000, or $0.10 per diluted share, for the third quarter of 2018. Same-store office segment net operating income (“NOI”), excluding lease termination income, 2 increased 3.9%, and same-store office cash NOI, excluding lease termination income, 2 increased 3.0%, for the third quarter of 2018 from the corresponding period in 2017. Same-store office segment NOI 2 decreased 7.0%, while same-store office cash NOI 2 increased 2.7%, for the third quarter of 2018 from the corresponding period in 2017. Funds from operations (“FFO”) attributable to common stockholders was $8,862,000, or $0.20 per diluted share, for the third quarter of 2018.

Potential Recapitalization

As previously announced, CMCT is actively exploring a potential recapitalization plan with the purpose of, among other things, unlocking embedded value, enhancing growth prospects and improving the trading liquidity of its common stock. There can be no guarantee that the potential recapitalization will occur or, if any or all of the steps of the potential recapitalization occur, that the potential recapitalization will occur in the form currently contemplated. If any or all of the potential recapitalization occurs, the financial information reported herein may not necessarily be indicative of future operating results or operating conditions.

If the potential recapitalization is consummated, CMCT’s remaining portfolio would primarily consist of approximately 725,000 rentable square feet of office space, a 503-room hotel and ancillary parking garage, and properties with development opportunities located in Oakland, California, Washington, D.C., Austin, Texas, and Sacramento, California. The Company believes that these existing development opportunities, as well as CMCT’s operating properties in Los Angeles, San Francisco and Austin with below market in-place office rents, would position CMCT for growth.

Following the potential recapitalization, the Company would remain principally focused on Class A and creative office assets. For the benefit of all classes of CMCT shareholders, the Company may also participate more actively in additional urban real estate strategies and product types of CIM Group in order to more fully leverage CIM Group’s large-scale platform and capabilities.

The Company intends to continue to maintain a highly-flexible capital structure and expects to continue to target a 45% common equity percentage of total capitalization, based on fair value.

Financial Highlights

As of September 30, 2018, our real estate portfolio consists of 21 assets, all of which are fee-simple properties. The portfolio includes 19 office properties (including one parking garage and two development sites, one of which is being used as a parking lot), totaling approximately 3.4 million rentable square feet and one hotel, which has 503 rooms and an ancillary parking garage. We also operate a lending business.

Third Quarter 2018

Net loss attributable to common stockholders was $4,448,000, or $0.10 per diluted share of common stock, for the three months ended September 30, 2018, compared to net income attributable to common stockholders of $72,257,000, or $1.25 per diluted share of common stock, for the three months ended September 30, 2017. The decrease is primarily attributable to the gain on sale of real estate of $74,715,000 recognized during the three months ended September 30, 2017, $3,152,000 in redeemable preferred stock dividends accumulated during the three months ended September 30, 2018, a decrease of $2,567,000 in net operating income of our operating segments, and an increase of $631,000 in redeemable preferred stock dividends declared, partially offset by a decrease of $2,911,000 in interest expense not allocated to our operating segments, and a decrease of $670,000 in asset management and other fees to related parties not allocated to our operating segments.

FFO attributable to common stockholders was $8,862,000, or $0.20 per diluted share of common stock, for the three months ended September 30, 2018, compared to $11,014,000, or $0.19 per diluted share of common stock, for the three months ended September 30, 2017. The decrease in FFO attributable to common stockholders was primarily attributable to $3,152,000 in redeemable preferred stock dividends accumulated during the three months ended September 30, 2018, a decrease of $2,567,000 in net operating income of our operating segments, and an increase of $631,000 in redeemable preferred stock dividends declared, partially offset by a decrease of $2,911,000 in interest expense not allocated to our operating segments, and a decrease of $670,000 in asset management and other fees to related parties not allocated to our operating segments.

Year to Date 2018

Net loss attributable to common stockholders was $9,350,000, or $0.21 per diluted share of common stock, for the nine months ended September 30, 2018, compared to net income attributable to common stockholders of $357,447,000, or $4.86 per diluted share of common stock, for the nine months ended September 30, 2017.

FFO attributable to common stockholders was $30,433,000, or $0.69 per diluted share of common stock, for the nine months ended September 30, 2018, compared to $37,279,000, or $0.51 per diluted share of common stock, for the nine months ended September 30, 2017.

Segment Information

Our reportable segments during the three months ended September 30, 2018 consisted of two types of commercial real estate properties, namely, office and hotel, as well as a segment for our lending business. Our reportable segments during the three months ended September 30, 2017 consisted of three types of commercial real estate properties, namely, office, hotel and multifamily, as well as a segment for our lending business. Aggregate segment NOI was $25,332,000 for the three months ended September 30, 2018, compared to $27,899,000 for the three months ended September 30, 2017.

Office

Same-Store

Same-store office segment NOI decreased 7.0% on a GAAP basis and increased 2.7% on a cash basis for the three months ended September 30, 2018 compared to the three months ended September 30, 2017. The decrease in same-store segment NOI was primarily due to a decrease in lease termination income at one of our California properties, a decrease in expense reimbursements at one of our California properties, and an increase in operating expenses at certain of our California properties, partially offset by an increase in revenue at certain of our California and Washington D.C. properties due to increases in occupancy and or rental rates.

At September 30, 2018, the Company’s same-store office portfolio was 93.5% occupied, a decrease of 70 basis points year-over-year on a same-store basis and 94.2% leased, a decrease of 10 basis points year-over-year on a same-store basis. The annualized rent per occupied square foot on a same-store basis was $43.30 at September 30, 2018 compared to $40.54 at September 30, 2017. For the three months ended September 30, 2018, the Company executed 34,026 square feet of recurring leases at our same-store office portfolio, representing same-store cash rent growth per square foot of 25.0%.

Total

Office segment NOI decreased to $21,898,000 for the three months ended September 30, 2018, from $22,560,000 for the three months ended September 30, 2017. The decrease was primarily attributable to a decrease in lease termination income at one of our California properties, the sale of three office properties during the last six months of 2017, a decrease in expense reimbursements at one of our California properties, and an increase in operating expenses at certain of our California properties, partially offset by an increase due to the acquisition of two office properties in December 2017 and January 2018 and an increase in rental revenue at certain of our California and Washington D.C. properties due to increases in occupancy and or rental rates.

Hotel

Hotel segment NOI was $2,596,000 for the three months ended September 30, 2018, compared to $2,433,000 for the three months ended September 30, 2017.

Multifamily

During the three months ended September 30, 2017, we sold one of our two remaining multifamily properties and we sold the remaining multifamily property in December 2017. Multifamily segment NOI was $1,293,000 for the three months ended September 30, 2017.

Lending

Our lending segment primarily consists of our SBA 7(a) lending platform, which is a national lender that primarily originates loans to small businesses in the hospitality industry. Lending segment NOI was $838,000 for the three months ended September 30, 2018, compared to $1,613,000 for the three months ended September 30, 2017. The decrease was primarily due to a decrease in premium income from the sale of the guaranteed portion of our SBA 7(a) loans, an increase in interest expense that commenced in May 2018 as a result of the issuance of the SBA 7(a) loan-backed notes, and an increase in interest expense in connection with our secured borrowings, partially offset by an increase in interest income due to an increase in the principal balance of our loan portfolio as well as increases in the prime rate, and higher revenue as a result of the recognition of accretion for discounts related to increased prepayments on our loans.

Debt and Equity

During the three months ended September 30, 2018, we issued 307,856 Series A preferred units, with each Series A preferred unit consisting of one share of Series A preferred stock and one warrant to purchase 0.25 shares of our common stock, resulting in net proceeds of approximately $7,083,000. Net proceeds represent gross proceeds offset by costs specifically identifiable to the offering of the Series A preferred units, such as commissions, dealer manager fees, and other offering fees and expenses.

In October 2018, CIM Commercial entered into a revolving credit facility with a bank syndicate pursuant to which CIM Commercial can borrow up to a maximum of $250,000,000, subject to a borrowing base calculation. The revolving credit facility is secured by deeds of trust on certain properties. Outstanding advances under the revolving credit facility bear interest at (i) the base rate plus 0.55% or (ii) LIBOR plus 1.55%. The revolving credit facility is also subject to an unused commitment fee of 0.15% or 0.25% depending on the amount of aggregate unused commitments. The revolving credit facility matures in October 2022 and provides for one one-year extension option under certain conditions. We expect the revolving credit facility to remain in place following the potential recapitalization (if it were to occur). On October 30, 2018, we borrowed $170,000,000 on this facility to repay outstanding borrowings on our unsecured term loan facility.

Dividends

On August 22, 2018, CIM Commercial’s board of directors (the “Board of Directors”) approved, and we declared, a quarterly cash dividend of $0.125 per common share. The dividend was paid on September 25, 2018 to stockholders of record on September 5, 2018.

In addition, the Board of Directors approved, and we declared, a quarterly cash dividend of $0.34375 per share of Series A preferred stock. For shares of Series A preferred stock issued during the third quarter of 2018, the dividend was prorated from the time of issuance. The dividend was paid on October 15, 2018 to stockholders of record on October 5, 2018.

About CMCT

CIM Commercial is a real estate investment trust that primarily acquires, owns, and operates Class A and creative office assets in vibrant and improving urban communities throughout the United States. Its properties are primarily located in Los Angeles, the San Francisco Bay Area and Washington, D.C. CIM Commercial is operated by affiliates of CIM Group, L.P., a vertically-integrated owner and operator of real assets with multi-disciplinary expertise and in-house research, acquisition, credit analysis, development, finance, leasing, and asset management capabilities ( www.cimcommercial.com ).

FORWARD-LOOKING STATEMENTS

The information set forth herein contains “forward-looking statements.” You can identify these statements by the fact that they do not relate strictly to historical or current facts or discuss the business and affairs of CIM Commercial on a prospective basis. Further, statements that include words such as “may,” “will,” “project,” “might,” “expect,” “target,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “continue,” “pursue,” “potential”, “forecast”, “seek”, “plan”, or “should” or the negative or other words or expressions of similar meaning, may identify forward-looking statements.

CIM Commercial bases these forward-looking statements on particular assumptions that it has made in light of its experience, as well as its perception of expected future developments and other factors that it believes are appropriate under the circumstances. These forward-looking statements are necessarily estimates reflecting the judgment of CIM Commercial and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors, including, but not limited to, those associated with (i) the approval of the potential sale by the Board of Directors and, if required, the stockholders of CIM Commercial, (ii) CIM Commercial’s ability to consummate the Potential Recapitalization, including the potential sale and the potential return of capital event, (iii) the extent to which directors and officers reinvest proceeds from the potential sale into newly issued shares of the Company’s common stock, (iv) the terms and timing of the potential sale, including the price at which assets are sold, (v) the development and redevelopment of properties of CIM Commercial and (vi) changes in market rental rates. For a further list and description of the risks and uncertainties inherent in the forward looking statements, see CIM Commercial’s filings with the Securities and Exchange Commission, including CIM Commercial’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, the Registration Statement on Form S-11 (Reg. No. 333-210880) relating to the Series A preferred stock, the Registration Statement on Form S-3 (Reg. No. 333-203639) relating to the sale of common stock by a selling shareholder and the Registration Statement on Form S-4 (Reg. No. 333-227707) relating to the potential exchange offer for shares of our Series L preferred stock.

As you read and consider the information herein, you are cautioned to not place undue reliance on these forward-looking statements. These statements are not guarantees of performance or results and speak only as of the date hereof. These forward-looking statements involve risks, uncertainties and assumptions. In light of these risks and uncertainties, there can be no assurance that the results and events contemplated by the forward-looking statements contained herein will in fact transpire. New factors emerge from time to time, and it is not possible for CIM Commercial to predict all of them. Nor can CIM Commercial assess the impact of each such factor or the extent to which any factor, or combination of factors may cause results to differ materially from those contained in any forward looking statement. CIM Commercial undertakes no obligation to publicly update or release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law.

This article has been truncated. You can see the rest of this article by visiting http://www.businesswire.com/news/home/20181113006223/en.

AP RADIO
Update hourly