CIM Commercial Trust Corporation Reports 2020 Third Quarter Results

DALLAS–(BUSINESS WIRE)–CIM Commercial Trust Corporation (NASDAQ: CMCT) (TASE: CMCT-L) (“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 metropolitan communities throughout the United States (including improving and developing such assets), today reported operating results for the three and nine months ended September 30, 2020.

Third Quarter 2020 Highlights

  • Annualized rent per occupied square foot(1) on a same-store(2) basis increased 5.1% to $50.39 as of September 30, 2020 compared to $47.96 as of September 30, 2019.
  • Our same-store(2) office portfolio was 80.2% leased as of September 30, 2020 compared to 87.8% as of September 30, 2019. The decrease is primarily due to the completion of the development of a former surface parking lot at 3601 S Congress Avenue into approximately 44,000 square feet of additional office space during the second quarter of 2020 as well as a decrease in occupancy at our office property in Beverly Hills, California.
  • During the third quarter of 2020, we executed 9,759 square feet of leases with terms longer than 12 months, of which 8,159 square feet were recurring leases executed at our same-store(2) office portfolio, representing same-store(2) cash rent growth per square foot of 0.7% as compared to the prior lease.
  • Net loss attributable to common stockholders was $9,678,000, or $(0.65) per diluted share, for the third quarter of 2020 compared to net loss attributable to common stockholders of $1,622,000, or $(0.11) per diluted share, for the third quarter of 2019.
  • Same-store(2) office segment net operating income(3) (“NOI”) decreased 13.3%, while same-store(2) office cash NOI(4), excluding lease termination income, decreased 2.7%, for the third quarter of 2020 as compared to the corresponding period in 2019.
  • Funds from operations (“FFO”) attributable to common stockholders(5) was $(4,405,000), or $(0.30) per diluted share, for the third quarter of 2020 compared to $3,256,000, or $0.22 per diluted share, for the third quarter of 2019.
  • Core FFO attributable to common stockholders(6) was $(4,036,000), or $(0.27) per diluted share, for the third quarter of 2020 compared to $3,596,000, or $0.25 per diluted share, for the third quarter of 2019.

Management Commentary

“We are pleased to announce that we have collected 97% of third quarter rents (excluding parking),” said David Thompson, Chief Executive Officer of CIM Commercial. “We have high quality assets in dynamic markets, and we believe we have a significant opportunity to increase same-store net operating income over the next several years. We are focused on executing on this growth opportunity in order to create value for our shareholders. In the interim, we have taken steps to improve our financial flexibility and reduce costs at both the property and corporate levels, including through the elimination of the base service fee that we announced earlier this year.”

The steps we took to adapt to the difficult business environment in which we operate and to strengthen our business to position our business to thrive post COVID-19 include (i) reducing our corporate overhead expenses by realigning certain support functions and reducing employee compensation at CIM Group, including not appointing a replacement for our President who retired during the third quarter, (ii) focusing on appropriate cost-reduction measures at our properties, (iii) temporarily suspending the vast majority of activities related to the repositioning of our office building at 4750 Wilshire Boulevard in Los Angeles, California and renovations at the Sheraton Grand Hotel in Sacramento, California, (iv) increasing liquidity by entering into a new unsecured revolving credit facility in May, accessing the Federal Reserve Paycheck Protection Program Liquidity Facility in June and entering into an amendment to our existing revolving credit facility in September, and (v) amending our Master Services Agreement to eliminate the base service fee.

Financial Highlights

As of September 30, 2020, our real estate portfolio consisted of 11 assets, all of which are fee-simple properties. The portfolio included eight office properties and one development site, which is being used as a parking lot, totaling approximately 1.3 million rentable square feet, and one 503-room hotel with an ancillary parking garage. We also own and operate a lending business.

Third Quarter 2020

Net loss attributable to common stockholders was $9,678,000, or $(0.65) per diluted share of common stock, for the three months ended September 30, 2020, compared to net loss attributable to common stockholders of $1,622,000, or $(0.11) per diluted share of common stock, for the three months ended September 30, 2019. The decrease is primarily attributable to a decrease of $6,285,000 in segment NOI(3) (primarily as a result of the adverse impact of COVID-19), as well as a decrease of $1,346,000 in interest and other income not allocated to our operating segments. The decrease in interest and other income not allocated to our operating segments primarily relates to interest earned during the three months ended September 30, 2019 on the proceeds from the sale of eight office properties, one development site, and one parking garage during the nine months ended September 30, 2019.

FFO attributable to common stockholders(5) was $(4,405,000), or $(0.30) per diluted share of common stock, for the three months ended September 30, 2020, compared to $3,256,000, or $0.22 per diluted share of common stock, for the three months ended September 30, 2019. The decrease in FFO attributable to common stockholders(5) is primarily attributable to a decrease of $6,285,000 in segment NOI(3) (primarily as a result of the adverse impact of COVID-19), as well as a decrease of $1,346,000 in interest and other income not allocated to our operating segments, partially offset by a decrease of $203,000 in redeemable preferred stock dividends declared or accumulated.

Core FFO attributable to common stockholders(6) was $(4,036,000), or $(0.27) per diluted share of common stock, for the three months ended September 30, 2020, compared to $3,596,000, or $0.25 per diluted share of common stock, for the three months ended September 30, 2019. The decrease in core FFO attributable to common stockholders(6) is primarily attributable to a decrease of $6,285,000 in segment NOI(3) (primarily as a result of the adverse impact of COVID-19), as well as a decrease of $1,346,000 in interest and other income not allocated to our operating segments.

Year to Date 2020

Net loss attributable to common stockholders was $24,606,000, or $(1.67) per diluted share of common stock, for the nine months ended September 30, 2020, compared to net income attributable to common stockholders of $334,269,000, or $21.24 per diluted share of common stock, for the nine months ended September 30, 2019.

FFO attributable to common stockholders was $(8,878,000), or $(0.60) per diluted share of common stock, for the nine months ended September 30, 2020, compared to $(7,840,000), or $(0.54) per diluted share of common stock, for the nine months ended September 30, 2019.

Core FFO attributable to common stockholders was $(8,230,000), or $(0.56) per diluted share of common stock, for the nine months ended September 30, 2020, compared to $21,264,000, or $1.39 per diluted share of common stock, for the nine months ended September 30, 2019.

Segment Information

Our reportable segments during the three months ended September 30, 2020 and 2019 consisted of two types of commercial real estate properties, namely, office and hotel, as well as a segment for our lending business. Net loss attributable to common stockholders was $9,678,000, or $(0.65) per diluted share of common stock, for the three months ended September 30, 2020, compared to net loss attributable to common stockholders of $1,622,000, or $(0.11) per diluted share of common stock, for the three months ended September 30, 2019, which represents a decrease of $8,056,000, or $0.54 per diluted share of common stock. Total segment NOI(3) was $6,642,000 for the three months ended September 30, 2020, compared to $12,927,000 for the three months ended September 30, 2019.

Office

Same-Store

Same-store(2) office segment NOI(3) decreased 13.3%, while same-store(2) office cash NOI(4), excluding lease termination income, decreased 2.7% for the three months ended September 30, 2020 compared to the three months ended September 30, 2019. The decrease in same-store(2) office segment NOI(3) is primarily due to lower revenues at an office property in Beverly Hills, California due to a decrease in occupancy as compared to the third quarter of 2019.

The annualized rent per occupied square foot(1) on a same-store(2) basis was $50.39 at September 30, 2020 compared to $47.96 at September 30, 2019. During the three months ended September 30, 2020, the Company executed 8,159 square feet of recurring leases at our same-store(2) office portfolio, representing same-store(2) cash rent growth per square foot of 0.7% as compared to the prior lease. At September 30, 2020, the Company’s same-store(2) office portfolio was 79.5% occupied, a decrease of 770 basis points year-over-year on a same-store(2) basis, and 80.2% leased, a decrease of 760 basis points year-over-year on a same-store(2) basis. The lower occupancy is partly due to the completion of the development of a former surface parking lot at 3601 S Congress Avenue into approximately 44,000 square feet of additional office space. We are actively marketing this new building to prospective tenants.

Total

Office segment NOI(3) decreased to $7,442,000 for the three months ended September 30, 2020, from $9,639,000 for the three months ended September 30, 2019. The decrease is primarily due to the sale of two office properties in Washington, D.C., which was consummated in July 2019, and lower revenues at an office property in Beverly Hills, California due to a decrease in occupancy as compared to the third quarter of 2019.

Hotel

Hotel segment NOI(3) decreased to $(1,069,000) for the three months ended September 30, 2020, from $2,399,000 for the three months ended September 30, 2019, due to a decrease in occupancy, average daily rate, and food, beverage, and other sundry hotel services as a result of the outbreak of COVID-19.

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(3) was $269,000 for the three months ended September 30, 2020, compared to $889,000 for the three months ended September 30, 2019. The decrease is primarily due to a decrease in interest income resulting from a decrease in the prime rate, and an increase in costs incurred and expense reimbursements as a result of the allocation of $230,000 to the lending segment for a portion of the payment made to our former President who retired effective September 16, 2020, partially offset by a decrease in interest expense as a result of a reduction in the outstanding balances of our SBA 7(a) loan-backed notes and secured borrowings.

Debt and Equity

During the three months ended September 30, 2020, we issued 487,582 shares of Series A preferred stock and 11,837 shares of Series D preferred stock for aggregate net proceeds of $11,464,000. Net proceeds represent gross proceeds offset by costs specifically identifiable to the offering of Series A preferred stock and Series D preferred stock, such as commissions, dealer manager fees, and other offering fees and expenses.

Dividends

On September 2, 2020, we declared a quarterly cash dividend of $0.075 per share of our common stock, which was paid on September 29, 2020 to stockholders of record at the close of business on September 14, 2020.

On September 2, 2020, we declared a quarterly cash dividend of $0.34375 per share of our Series A preferred stock, or portion thereof for issuances during the period from October 1, 2020 to December 31, 2020. The dividend is payable as follows: $0.114583 per share on November 16, 2020 to stockholders of record at the close of business on November 5, 2020, $0.114583 per share on December 15, 2020 to stockholders of record at the close of business on December 5, 2020, and $0.114583 per share on January 15, 2021 to stockholders of record at the close of business on January 5, 2021.

On September 2, 2020, we declared a quarterly cash dividend of $0.353125 per share of our Series D Preferred Stock, or portion thereof for issuances during the period from October 1, 2020 to December 31, 2020. The dividend is payable as follows: $0.117708 per share on November 16, 2020 to stockholders of record at the close of business on November 5, 2020, $0.117708 per share on December 15, 2020 to stockholders of record at the close of business on December 5, 2020, and $0.117708 per share on January 15, 2021 to stockholders of record at the close of business on January 5, 2021.

Incentive Fee

No incentive fee is payable under our Master Services Agreement with respect to the third quarter of 2020 because CIM Commercial’s core funds from operations did not exceed the applicable $0.21 per share threshold for such quarter. Based on the expected performance of CIM Commercial for the remainder of 2020, we will pay no incentive fee in 2020; it is also very likely that we will not pay any Incentive Fee in 2021.

About CIM Commercial

CIM Commercial is a real estate investment trust that primarily acquires, owns, and operates Class A and creative office assets in vibrant and improving metropolitan communities throughout the United States (including improving and developing such assets). Its properties are primarily located in Los Angeles and the San Francisco Bay Area. 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 onsite property management capabilities (www.cimcommercial.com).

Definitions

(1)

Annualized rent per occupied square foot: represents gross monthly base rent under leases commenced as of the specified periods, multiplied by twelve. This amount reflects total cash rent before abatements. Where applicable, annualized rent has been grossed up by adding annualized expense reimbursements to base rent. Annualized rent for certain office properties includes rent attributable to retail.

 

(2)

Same-store properties: are properties that we have owned and operated in a consistent manner and reported in our consolidated results during the entire span of the periods being reported. We excluded from our same-store property set this quarter any properties (i) acquired on or after July 1, 2019; (ii) sold or otherwise removed from our consolidated financial statements on or before September 30, 2020; or (iii) that underwent a major repositioning project we believed significantly affected its results at any point during the period commencing on July 1, 2019 and ending on September 30, 2020. When determining our same-store properties as of September 30, 2020, no properties were excluded pursuant to (i) and (iii) above and four properties were excluded from the 2019 period pursuant to (ii) above.

 

(3)

Segment net operating income (“segment NOI”): for our real estate segments represents rental and other property income and expense reimbursements less property related expenses and excludes non-property income and expenses, interest expense, depreciation and amortization, corporate related general and administrative expenses, gain (loss) on sale of real estate, gain (loss) on early extinguishment of debt, impairment of real estate, transaction costs, and benefit (provision) for income taxes. For our lending segment, segment NOI represents interest income net of interest expense and general overhead expenses. Please see our reconciliations of office, hotel, lending, and total cash NOI to Segment NOI and net income (loss) attributable to common stockholders starting on page 12.

 

(4)

Cash net operating income (“cash NOI”): for our real estate segments, represents segment NOI adjusted to exclude the effect of the straight lining of rents, acquired above/below market lease amortization and other adjustments required by generally accepted accounting principles (“GAAP”). For our lending segment, there is no distinction between cash NOI and segment NOI. Please see our reconciliations of office, hotel, lending, and total cash NOI to segment NOI and net income (loss) attributable to common stockholders starting on page 12.

 

(5)

Funds from operations attributable to common stockholders (“FFO attributable to common stockholders”): represents net income (loss) attributable to common stockholders, computed in accordance with GAAP, which reflects the deduction of redeemable preferred stock dividends declared or accumulated, redeemable preferred stock deemed dividends, and redeemable preferred stock redemptions, excluding gain (or loss) from sales of real estate, impairment of real estate, and real estate depreciation and amortization. We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts (the “NAREIT”). Please see our reconciliations of net income (loss) attributable to common stockholders to FFO attributable to common stockholders on page 10, and the discussion of the benefits and limitations of FFO as a supplemental measure of operating performance.

 

(6)

Core funds from operations attributable to common stockholders (“core FFO attributable to common stockholders”): represents FFO attributable to common stockholders (computed as described above), excluding gain (loss) on early extinguishment of debt, redeemable preferred stock deemed dividends, redeemable preferred stock redemptions, gain (loss) on termination of interest rate swaps, and transaction costs. Please see our reconciliations of net income (loss) attributable to common stockholders to core FFO attributable to common stockholders on page 11, and the discussion of the benefits and limitations of core FFO as a supplemental measure of operating performance.

FORWARD-LOOKING STATEMENTS

This press release contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), which are intended to be covered by the safe harbors created thereby. Such forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “will,” “project,” “target,” “expect,” “intend,” “might,” “believe,” “anticipate,” “estimate,” “could,” “would,” “continue,” “pursue,” “potential,” “forecast,” “seek,” “plan,” or “should” or the negative thereof or other variations or similar words or phrases. Such forward-looking statements include, among others, statements about CMCT’s plans and objectives relating to future growth and availability of funds, and the trading liquidity of CMCT’s common stock. Such forward-looking statements are based on particular assumptions that management of CMCT 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. Forward-looking statements are necessarily estimates reflecting the judgment of CMCT’s management 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 risks and uncertainties include those associated with (i) the scope, severity and duration of the current pandemic of COVID-19, and actions taken to contain the pandemic or mitigate its impact, (ii) the adverse effect of COVID-19 on the financial condition, results of operations, cash flows and performance of CMCT and its tenants and business partners, the real estate market and the global economy and financial markets, among others, (iii) the timing, form, and operational effects of CMCT’s development activities, (iv) the ability of CMCT to raise in place rents to existing market rents and to maintain or increase occupancy levels, (v) fluctuations in market rents, including as a result of COVID-19, and (vi) general economic, market and other conditions. Additional important factors that could cause CMCT’s actual results to differ materially from CMCT’s expectations are discussed under the section “Risk Factors” in CMCT’s Annual Report on Form 10-K for the year ended December 31, 2019 and the Quarterly Report on Form 10-Q for the quarter ended September 30, 2020. The forward-looking statements included herein are based on current expectations and there can be no assurance that these expectations will be attained. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond CMCT’s control. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included herein will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by CMCT or any other person that CMCT’s objectives and plans will be achieved. Readers are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date they are made. CMCT does not undertake to update them to reflect changes that occur after the date they are made.

CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited and in thousands, except share and per share amounts)

 

 

 

September 30, 2020

 

December 31, 2019

ASSETS

 

 

 

 

Investments in real estate, net

 

$

504,341

 

 

$

508,707

 

Cash and cash equivalents

 

 

32,111

 

 

 

23,801

 

Restricted cash

 

 

9,877

 

 

 

12,146

 

Loans receivable, net

 

 

89,314

 

 

 

68,079

 

Accounts receivable, net

 

 

1,634

 

 

 

3,520

 

Deferred rent receivable and charges, net

 

 

35,330

 

 

 

34,857

 

Other intangible assets, net

 

 

6,205

 

 

 

7,260

 

Other assets

 

 

9,301

 

 

 

9,222

 

TOTAL ASSETS

 

$

688,113

 

 

$

667,592

 

LIABILITIES, REDEEMABLE PREFERRED STOCK, AND EQUITY

 

 

 

 

LIABILITIES:

 

 

 

 

Debt, net

 

$

326,546

 

 

$

307,421

 

Accounts payable and accrued expenses

 

 

14,220

 

 

 

24,309

 

Intangible liabilities, net

 

 

730

 

 

 

1,282

 

Due to related parties

 

 

8,119

 

 

 

9,431

 

Other liabilities

 

 

9,137

 

 

 

10,113

 

Total liabilities

 

 

358,752

 

 

 

352,556

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

REDEEMABLE PREFERRED STOCK: Series A cumulative redeemable preferred stock, $0.001 par value; 36,000,000 shares authorized; 1,898,187 and 1,875,387 shares issued and outstanding, respectively, as of September 30, 2020 and 1,630,821 and 1,630,421 shares issued and outstanding, respectively, as of December 31, 2019; liquidation preference of $25.00 per share, subject to adjustment

 

 

42,642

 

 

 

36,841

 

EQUITY:

 

 

 

 

Series A cumulative redeemable preferred stock, $0.001 par value; 36,000,000 shares authorized; 4,104,867 and 4,040,429 shares issued and outstanding, respectively, as of September 30, 2020 and 2,853,555 and 2,837,094 shares issued and outstanding, respectively, as of December 31, 2019; liquidation preference of $25.00 per share, subject to adjustment

 

 

100,386

 

 

 

70,633

 

Series D cumulative redeemable preferred stock, $0.001 par value; 32,000,000 shares authorized; 18,737 shares issued and outstanding as of September 30, 2020 and no shares issued and outstanding as of December 31, 2019; liquidation preference of $25.00 per share, subject to adjustment

 

 

463

 

 

 

 

Series L cumulative redeemable preferred stock, $0.001 par value; 9,000,000 shares authorized; 8,080,740 and 5,387,160 shares issued and outstanding, respectively, as of September 30, 2020 and December 31, 2019; liquidation preference of $28.37 per share, subject to adjustment

 

 

152,834

 

 

 

152,834

 

Common stock, $0.001 par value; 900,000,000 shares authorized; 14,827,410 shares issued and outstanding as of September 30, 2020 and 14,602,149 shares issued and outstanding as of December 31, 2019.

 

 

15

 

 

 

15

 

Additional paid-in capital

 

 

794,807

 

 

 

794,825

 

Distributions in excess of earnings

 

 

(762,245

)

 

 

(740,617

)

Total stockholders’ equity

 

 

286,260

 

 

 

277,690

 

Noncontrolling interests

 

 

459

 

 

 

505

 

Total equity

 

 

286,719

 

 

 

278,195

 

TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK, AND EQUITY

 

$

688,113

 

 

$

667,592

 

Contacts

For CIM Commercial Trust Corporation

Media Relations:

Bill Mendel, 212-397-1030

[email protected]

or

Shareholder Relations:

Steve Altebrando, 646-652-8473

[email protected]

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