This article first appeared on GuruFocus .
-
Segment NOI:$9.3 million in Q2 2026, compared to $9.8 million in Q2 2025.
-
Segment NOI (excluding JV loss):$12.5 million in Q2 2026, compared to $10.3 million in Q2 2025, a 22% increase.
-
Multifamily NOI:Increased 238% year-over-year, reaching $638,000 in Q2 2026 versus $189,000 in Q2 2025.
-
Office NOI:Declined to $4 million from $5.5 million, primarily due to a $2.4 million increase in JV loss driven by noncash items.
-
Hotel NOI:Increased 11% year-over-year to $4.6 million in Q2 2026, compared to $4.2 million in Q2 2025.
-
Same-Store Multifamily Occupancy:Reached 95.3% as of June 30, 2026, an increase of 1,190 basis points from a year ago.
-
Multifamily Occupancy:93.6% as of June 30, 2026, compared to 83.4% in Q2 2025.
-
Office Leased Occupancy (excluding Oakland):Increased to 84.4% at quarter end, up 470 basis points from Q2 2025.
-
FFO:Negative $3.5 million, or negative $1.28 per diluted share, compared to negative $7.9 million in the prior year period.
-
Core FFO:Negative $3.4 million, or negative $1.25 per diluted share, compared to negative $7 million in the prior year period.
-
Loss from Unconsolidated Entities:$3.2 million in Q2 2026, compared to $437,000 in Q2 2025, primarily driven by fair value adjustments.
-
Casualty Loss:$455,000 incurred during Q2 2026 due to water damage at the hotel property.
Release Date: August 14, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
-
Multifamily NOI surged 238% year-over-year, driven by a 1,190 basis point increase in same-store occupancy to 95.3%.
-
Bay Area multifamily market is experiencing record rent growth (11% in San Francisco, 7.6% in Oakland) and historically low vacancy, positioning CMCT for continued gains.
-
In-place rents at Bay Area multifamily properties are 12% below asking rents, offering a clear path to further NOI growth as leases roll.
-
Hotel NOI increased 11% year-over-year following the completion of comprehensive renovations, with potential for additional growth from adding 8 new guestrooms.
-
Core FFO improved by $3.6 million year-over-year, primarily due to a reduction in preferred dividends, despite higher JV losses.
-
Excluding JV losses, consolidated NOI increased 22% year-over-year, reflecting strong performance across multifamily, office, and hotel segments.
-
Office leasing momentum continues, with leased occupancy (excluding Oakland) up 470 basis points to 84.4%.
-
The company is actively evaluating asset sales to strengthen the balance sheet and close the gap between share price and intrinsic value.
-
Successful refinancing of the 1150 Clay mortgage and plans to refinance the Sheraton Grand at a lower spread and higher loan balance enhance financial flexibility.
Negative Points
-
FFO remained negative at -$3.5 million, and Core FFO was also negative at -$3.4 million, indicating ongoing profitability challenges.
-
Loss from unconsolidated entities increased significantly to $3.2 million from $437,000, driven by noncash fair value adjustments at multiple properties.
-
Office segment NOI declined to $4 million from $5.5 million, primarily due to the increased JV loss.
-
The company incurred a $455,000 casualty loss due to water damage at its hotel property.
-
Asset management fees increased by $510,000 due to the issuance of additional common shares, adding to costs.
-
The Oakland office asset's mortgage matured, and the company chose not to refinance, leading to ongoing engagement with the servicer and potential uncertainty.
-
Depreciation and amortization expense increased by $807,000, partly due to renovation projects, which could pressure future earnings.
-
The multifamily segment NOI, while improved, remains relatively low at $638,000, indicating the segment is still in early recovery.
-
The company's strategic priority to sell assets has not yet resulted in completed transactions, leaving balance sheet strengthening incomplete.
Q & A Highlights
Q: What were the key drivers behind the improvement in Core FFO for the second quarter of 2026? A: Brandon Hill, CFO, stated that Core FFO improved by $3.6 million year-over-year, primarily due to a $4.3 million decrease in redeemable preferred stock dividends and a $786,000 decrease in transaction-related costs. This was partially offset by a $510,000 decrease in segment net operating income.
Q: Can you provide more detail on the multifamily segment's performance and the Bay Area market recovery? A: Stephen Altebrando, Portfolio Oversight, highlighted that multifamily NOI increased 238% year-over-year, driven by a 1,190 basis point increase in same-store occupancy to 95.3%. He noted that Bay Area rents are surging, with San Francisco seeing an 11% increase in Q2 2026, a 25-year high, and vacancy at a 25-year low of 3.7%. In-place rents at CMCT's Bay Area properties are approximately 12% below asking rents, positioning the company for continued NOI growth.
Q: What is the company's strategy regarding the potential sale of real estate assets? A: David Thompson, CEO, reiterated that the company continues to evaluate the sale of one or more assets. The goal is to strengthen the balance sheet and close the significant gap between the current share price and the intrinsic value of the portfolio.
Q: What caused the increase in losses from unconsolidated entities in the quarter? A: Brandon Hill explained that the loss from unconsolidated entities increased to $3.2 million from $437,000, primarily driven by noncash fair value adjustments to real estate at two unconsolidated office entities and two unconsolidated multifamily entities. Excluding this JV loss, consolidated NOI increased 22% year-over-year.
Q: Can you provide an update on the office segment and its leasing activity? A: Stephen Altebrando noted that excluding the Oakland office asset, leased occupancy increased to 84.4%, up 470 basis points year-over-year. The company executed approximately 16,000 square feet of leases in Q2 and is seeing steady leasing interest at assets with vacancy in Los Angeles and Austin. Office NOI declined to $4 million from $5.5 million, but this was primarily due to the $2.4 million increase in JV loss.
Q: What is the status of the hotel renovation and its impact on performance? A: Stephen Altebrando stated that the renovation of the Sheraton Grand's public spaces is substantially complete, following the full renovation of all 505 guestrooms. This has positioned the hotel for improved performance, with hotel NOI increasing 11% year-over-year. The company is also evaluating adding 8 new guestrooms by converting underutilized space, which is expected to be highly accretive.
Q: What are the latest developments regarding the company's financing activities? A: Stephen Altebrando mentioned that the company extended its mortgage on 1150 Clay, a Class A Oakland multifamily asset, until mid-2027. They are also working to refinance the Sheraton Grand mortgage, aiming to increase the loan balance and reduce the borrowing spread given the completed renovations.
Q: What is the plan for the Oakland office property, given its mortgage maturity? A: Stephen Altebrando confirmed that the nonrecourse mortgage on the Oakland office property matured in early July. The company elected not to invest additional capital to refinance and is engaging with the servicer on a long-term resolution. The asset generated approximately $445,000 of income after debt service in Q2 2026.
Q: How are the new multifamily assets in Los Angeles performing? A: Stephen Altebrando reported that 701 South Hudson, a partial office-to-residential conversion, is now 94.1% occupied, with predevelopment work ongoing for 50 entitled units on the surface lot. At 1915 Park, a ground-up development in Echo Park, the property achieved 58.3% leased by quarter end.
Q: What is the outlook for supply growth in the multifamily markets where CMCT operates? A: Stephen Altebrando noted that supply growth in the Bay Area and Oakland markets remains very low and is anticipated to stay low for the foreseeable future due to elevated construction costs. This constrained supply, combined with strong demand from AI-related employment growth, is expected to support continued rent growth and occupancy improvements.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
