CMCT.NASDAQCreative Media & Community Trust CORP

DEF: Creative Media & Community Trust Corporation Seeks Shareholder Approval for Reverse Stock Split to Maintain Nasdaq Listing

Sentiment:

Proxy Statement 27 June 2025 4:51 PM

📋All filings for Creative Media & Community Trust CORP

Creative Media & Community Trust Corporation (CMCT) is holding its 2025 Annual Meeting to vote on the election of directors, executive compensation, auditor ratification, and critical proposals for a reverse stock split to address Nasdaq listing compliance.

Capital raiseThe proposed reverse stock splits, by reducing the number of outstanding shares and increasing the proportion of authorized but unissued shares, will increase the Company's flexibility to issue additional shares for future financings and equity incentive plans.The Company has been redeeming Preferred Stock by paying in Common Stock to increase its common equity as a percentage of assets and improve liquidity, which is a form of capital management through equity issuance.The Company has an ongoing public offering of Series A1 Preferred Stock, for which CCO Capital, an affiliate, acts as the exclusive dealer manager, earning fees and commissions (e.g., $546,000 in 2024 and $1.4 million in 2023).

Worse than expectedThe Company previously failed to comply with the Nasdaq Minimum Bid Price Rule ($1.00 minimum bid price), indicating a history of stock price underperformance relative to listing requirements.The Common Stock bid price has been under significant downward pressure since August 2024, primarily due to the Company's decision to redeem Preferred Stock by issuing Common Stock, which dilutes existing shares and signals a need to manage capital structure through equity issuance.The proposed reverse stock splits (1:4, 1:7, or 1:10) are a reactive measure explicitly aimed at adjusting the bid price upward to regain or maintain Nasdaq compliance, rather than a reflection of strong operational performance.The Company reported net losses of $(25,750) thousand in 2024 and $(51,456) thousand in 2023, indicating negative financial performance in recent periods.

Summary

The 2025 Annual Meeting of Stockholders will be held virtually on August 1, 2025, at 11:00 a.m. Pacific Time.
Stockholders of record as of June 6, 2025, are entitled to vote.
Key proposals include the election of seven directors, a non-binding advisory vote on executive compensation, and the ratification of Deloitte & Touche LLP as the independent registered public accounting firm for the fiscal year ending December 31, 2025.
The Board is seeking approval for amendments to the Company's Charter to effect a reverse stock split of Common Stock by a ratio of 1:4, 1:7, or 1:10, at the Board's sole discretion, at any time prior to August 1, 2026.
The primary reason for the proposed reverse stock split is to adjust the bid price of the Common Stock upward to maintain compliance with Nasdaq Listing Rule 5550(a)(2), which requires a minimum bid price of $1.00.
The Company previously failed to comply with the Nasdaq Minimum Bid Price Rule and is no longer eligible for a grace period, meaning immediate delisting could occur if compliance is not maintained.
Downward pressure on the Common Stock bid price has been significant since August 2024, attributed to the Company's redemption of Preferred Stock by paying in Common Stock.
As of the record date, June 6, 2025, the Company had 754,607 shares of common stock outstanding.
Net income (loss) for the Company was $(25,750) thousand in 2024, $(51,456) thousand in 2023, and $5,945 thousand in 2022.
Barry N. Berlin, Chief Financial Officer and Secretary, received total compensation of $228,568 in 2024 and $141,333 in 2023, primarily for time spent on the Company's lending business, with his CFO compensation borne by an affiliate.
Independent directors received an annual board retainer of $55,000 and restricted shares valued at $55,000 in 2024; the Audit Committee Chair received an additional $20,000 retainer.

Sentiment

Score: 3

Explanation: The sentiment is negative due to the underlying reasons for the reverse stock split (past Nasdaq non-compliance, significant stock price pressure from preferred stock redemptions, and recent net losses). While the company is taking steps to address the listing issue, these are reactive measures to adverse conditions, and there's no guarantee of long-term success or proportional stock price increase.

Positives

The Company is proactively addressing its Nasdaq listing compliance issue by proposing a reverse stock split, which is crucial for maintaining its public trading status.
The Board has provided flexibility by seeking approval for three different reverse stock split ratios (1:4, 1:7, 1:10), allowing them to respond to prevailing market conditions.
The Company is currently in compliance with the Nasdaq Minimum Bid Price Rule, indicating a temporary stability while long-term solutions are pursued.
The Board recommends a 'FOR' vote on all proposals, including the reverse stock splits, indicating unified management support for these strategic actions.

Negatives

The Company previously failed to comply with the Nasdaq Minimum Bid Price Rule, indicating past stock performance issues.
The Common Stock bid price has experienced significant downward pressure since August 2024, primarily due to the Company's strategy of redeeming Preferred Stock with Common Stock, which increases the supply of common shares.
There is no assurance that the reverse stock split will proportionally increase the stock price, prevent it from falling below $1.00 again, or maintain the Company's market capitalization.
The Company reported net losses of $(25,750) thousand in 2024 and $(51,456) thousand in 2023, indicating ongoing financial challenges.
The Common Stock will cease to be listed on the Tel Aviv Stock Exchange (TASE) as of August 15, 2025, potentially reducing international liquidity.

Risks

Failure to maintain compliance with the Nasdaq Minimum Bid Price Rule could lead to immediate delisting from Nasdaq.
Delisting from Nasdaq could result in limited market quotations, reduced liquidity, designation as a 'penny stock' (leading to more stringent broker rules and reduced trading activity), limited news and analyst coverage, and decreased ability to issue additional securities or obtain financing.
If delisted, the Company might be unable to redeem Preferred Stock with Common Stock if cash is unavailable and state securities laws prevent such issuance.
The reverse stock split may not increase the market price of Common Stock proportionally or sustain it above $1.00, and the price could decline due to unrelated factors.
The implementation of a reverse stock split may decrease the liquidity of the Common Stock due to a reduced number of outstanding shares.
The increased proportion of unissued authorized capital stock resulting from the reverse stock split could have anti-takeover effects by allowing for dilutive issuances, potentially making it harder for stockholders to change Board composition or for tender offers to succeed.

Future Outlook

The Board may elect, in its sole discretion, to implement one of the approved reverse stock split proposals (1:4, 1:7, or 1:10) at any time prior to August 1, 2026, or to implement none of them. The Company expects that a reverse stock split, if effected, will increase the market price of its Common Stock to maintain compliance with the Nasdaq Minimum Bid Price Rule. However, there is no assurance that the market price will increase proportionally, remain above $1.00, or that the Company's market capitalization will be maintained. The next advisory vote on executive compensation is expected at the 2026 annual meeting.

Management Comments

David Thompson, CEO: "On behalf of our Board of Directors, I thank you for your continued support."
Barry N. Berlin, CFO: "Your vote is important to us and our business. I encourage you to complete, date, sign and return the accompanying proxy card whether or not you plan to attend the virtual Annual Meeting."
Board of Directors: "Providing the Company with discretion to select the exchange ratio at which to effect a reverse stock split... affords the Company flexibility to respond to prevailing market conditions, achieve its objectives with the reverse stock split, and act in the best interests of the Company."
Board of Directors: "We believe that the significant volume of Common Stock issued to meet redemption requests and in connection with redemptions at the Companys option has placed significant downward pressure on the bid price of our Common Stock."
Board of Directors: "Our Board believes that that the [1:4, 1:7, 1:10] Reverse Stock Split ratio of [1:4, 1:7, 1:10] is in the best interest of the Company and that such ratio will improve the price level of our Common Stock so that we are able to comply with the Nasdaq Minimum Bid Price Rule."
Board of Directors: "The Board does not intend for the [1:4, 1:7, 1:10] Reverse Stock Split to have any anti-takeover effects."
Compensation Committee: "Our executive compensation system is designed to promote the Companys financial and operational success by (i) attracting, motivating and assisting in the retention of highly qualified and talented executives... and (ii) reinforcing desired financial business results... and motivating them to make decisions that produce such results."
Company: "The Company believes that any comparison between CAP Amounts and total stockholder returns or net income is not meaningful." (Regarding executive compensation vs. performance).

Industry Context

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Policy Adoption	The Board has adopted a set of Governance Principles, providing a framework for the Company's governance.	NA	Enhances transparency and formalizes governance practices.
Policy Adoption	The Board has adopted a Code of Business Conduct and Ethics applicable to all directors, officers, and employees.	NA	Promotes ethical conduct and compliance with laws and regulations.
Committee Oversight	The Audit Committee oversees the Company's policies with respect to risk assessment and risk oversight, particularly for financial reporting matters, and supervises compliance with the SEC's cybersecurity rule.	NA	Strengthens internal controls and risk management framework.
Committee Composition	The Audit Committee is comprised entirely of independent directors (Elaine Wong (chair), John Hope Bryant, Marcie Edwards) who meet Nasdaq and SEC independence and financial literacy requirements. Elaine Wong is designated as an audit committee financial expert.	NA	Ensures robust independent oversight of financial reporting and auditing functions.
Committee Composition	The Compensation Committee consists of two independent directors (Douglas Bech (chairman), Elaine Wong).	NA	Ensures independent oversight of executive and director compensation decisions.
Committee Composition	The Nominating and Corporate Governance Committee is comprised of two independent directors (Douglas Bech (chairman), Marcie Edwards).	NA	Ensures independent oversight of board composition and corporate governance practices.
Policy Adoption	The Company has adopted an insider trading policy prohibiting speculative transactions (e.g., put/call options, short selling, hedging) and requiring approval for pledging securities.	NA	Aims to prevent insider trading and maintain market integrity.
Policy Adoption	The Board has adopted a written related person transaction policy requiring approval by a committee solely of independent directors.	NA	Ensures fairness and transparency in dealings with related parties.

Related Party Transactions

The Company is externally operated by the Operator (an affiliate of CIM Group, L.P.) under an Investment Management Agreement, and receives administrative services from the Administrator (a subsidiary of CIM Group, LLC) under a Master Services Agreement.
A Fee Waiver, effective January 1, 2022, limits fees payable to the Operator and Administrator under their respective agreements.
The Operator earned asset management fees of $1.8 million in 2024 and $2.6 million in 2023.
CIM Management Entities (affiliates of CIM Group) provide property management, leasing, and development services to CIM Urban.
Property management fees paid to CIM Management Entities were $2.3 million in 2024 and $2.1 million in 2023.
The Company reimbursed CIM Management Entities $7.7 million in 2024 and $5.8 million in 2023 for onsite management costs.
Leasing commissions paid to CIM Management Entities were $808,000 in 2024 and $101,000 in 2023.
Construction management fees paid to CIM Management Entities were $1.1 million in 2024 and $308,000 in 2023.
Development management reimbursements to CIM Management Entities were $1.7 million in 2024 and $1.3 million in 2023.
The Administrator and its affiliates were reimbursed $2.3 million in both 2024 and 2023 for various services including accounting, tax, legal, and IT.
The Company incurred $2.6 million in both 2024 and 2023 for personnel and resources provided by CIM SBA Staffing, LLC (an affiliate of CIM Group) under a Staffing and Reimbursement Agreement.
CCO Capital, LLC (under common control with the Operator and Administrator) is the exclusive dealer manager for the Company's public offering of Series A1 Preferred Stock.
CCO Capital incurred non-issuance specific costs of $606,000 in 2024 and $623,000 in 2023.
CCO Capital earned upfront and trailing dealer manager fees of $546,000 in 2024 and $1.4 million in 2023.
In February 2022, the Company invested approximately $22.4 million in the 1910 Sunset JV, an unconsolidated joint venture with a CIM-managed separate account, to purchase an office property for $51.0 million.
In February 2023, the Company and a CIM-managed interval fund (1902 Park JV Partner) purchased a multifamily property for $19.1 million, with the Company initially owning a 50% interest, later reduced to 25.5% in October 2024 after a new co-investor joined.
In October 2023, the Company and a co-investor affiliated with CIM Group acquired a plot of land for $18.0 million (1015 Mansfield JV), with the Company owning 28.8%.
During 2023, the Company acquired an interest in four assets from entities indirectly wholly owned by a CIM Group-managed fund for $282.9 million.
An affiliate of CIM Group leases space at 4750 Wilshire, a property in which the Company holds a 20% interest through an unconsolidated joint venture; the Company's share of income from this tenant was $342,000 in 2024 and $170,000 in 2023.
In December 2024, Company subsidiaries received a $105 million mortgage loan, with a customary non-recourse carveout guaranty provided by the Company and CIM Group Investments, LLC (a CIM affiliate).

Stakeholder Impact

Shareholders face potential dilution from past Preferred Stock redemptions paid in Common Stock and the inherent risks of a reverse stock split, including no guarantee of proportional price increase or sustained Nasdaq compliance, and potential reduced liquidity and increased trading costs for odd lots.
Shareholders will vote on critical corporate governance matters, including director elections, executive compensation, and the reverse stock split, directly influencing the Company's future structure and market presence.
Employees are indirectly impacted by the Company's financial health and Nasdaq listing status, though the document states compensation policies are not expected to have a material adverse effect.
Creditors, particularly those involved in the $105 million mortgage loan, are impacted by the Company's financial stability and the terms of the non-recourse carveout guaranty, which includes net worth and liquid asset requirements for the guarantors.

Next Steps

Stockholders are encouraged to authorize a proxy to vote their shares as soon as possible for the Annual Meeting.
The 2025 Annual Meeting of Stockholders will be held virtually on August 1, 2025, at 11:00 a.m. Pacific Time.
If approved, the Board may elect, in its sole discretion, to implement one of the approved reverse stock split ratios (1:4, 1:7, or 1:10) at any time prior to August 1, 2026, or to implement none of the proposals.
If a reverse stock split is effected, the Company will issue a press release announcing the effective date and file Articles of Amendment with the Maryland SDAT.
The Company's Common Stock will cease to be listed on the Tel Aviv Stock Exchange (TASE) as of August 15, 2025.
The next non-binding advisory vote on executive compensation is expected to occur at the 2026 annual meeting of stockholders.
Stockholders may submit proposals for the 2026 Annual Meeting by February 27, 2026, in accordance with Rule 14a-8, or between January 28, 2026, and February 27, 2026, under the Company's bylaws.
Stockholders intending to solicit proxies for nominees for the 2026 Annual Meeting must comply with Exchange Act Rule 14a-19, including providing notice by June 2, 2026.

Key Dates

Date	Description
1992	Barry N. Berlin became Chief Financial Officer of the Company's wholly owned subsidiary lending business.
June 1993	Barry N. Berlin became Chief Financial Officer of the Company's predecessor.
1994	CIM Group, L.P. co-founded by Shaul Kuba, Richard Ressler, and Avraham Shemesh.
May 2005	Elaine Wong joined Perry Capital, LLC as an associate.
April 2007	Elaine Wong joined CIM as an associate in investor relations.
October 2008	Barry N. Berlin became Executive Vice President and Treasurer of the Company.
2009	David Thompson joined CIM Group, L.P.
February 2010	Elaine Wong became Vice President, Fundraising & Investor Relations at CIM.
February 2012	Elaine Wong became 1st Vice President, Global Head of Fundraising and Investor Relations at CIM.
March 2014	Douglas Bech, Shaul Kuba, Richard Ressler, and Avraham Shemesh became directors of the Company. David Thompson became Chief Financial Officer of the Company. Barry N. Berlin's Executive Employment Agreement became effective upon merger of Company's predecessor.
February 2015	Elaine Wong became a member of CIM's Investment Committee and Global Head of Partner & Co-investor Relations.
2017	Barry N. Berlin began serving in various finance and accounting roles within CIM Group and its affiliates.
May 2018	Elaine Wong became Principal and Head of Marketing & Communications at CIM Group.
February 2019	David Thompson became Chief Executive Officer and Trustee of CIM Real Assets & Credit Fund. Richard Ressler became CEO, President, and Director of CMFT.
May 15, 2019	An affiliate of CIM Group entered into an approximately 11-year lease for 4750 Wilshire, a property owned by the Company.
May 31, 2019	CCO Capital, LLC became the exclusive dealer manager for the Company's public offering of Series A Preferred Stock and Series A Preferred Warrants.
August 7, 2019	The lease for 4750 Wilshire was amended to reduce rentable square feet.
October 2019	Elaine Wong became a director of CMFT, CIM Income NAV, CCPT V, and CCIT II.
January 2020	The Company's offering of Series A Preferred Warrants ended.
January 28, 2020	The Company entered into the Second Amended and Restated Dealer Manager Agreement with CCO Capital.
April 1, 2020	Effective date of the Master Services Agreement amendment to replace the Base Service Fee with an incentive fee.
May 11, 2020	The Master Services Agreement was amended.
February 11, 2021	Marcie Edwards was appointed as a director of the Company.
January 1, 2022	Effective date of the Fee Waiver with the Operator and Administrator.
February 2022	The Company invested in the 1910 Sunset JV, purchasing an office property in Los Angeles.
May 2022	Elaine Wong became a director of the Company.
June 16, 2022	The Company entered into the Third Amended and Restated Dealer Manager Agreement with CCO Capital for the Series A1 Preferred Stock offering.
August 10, 2022	Barry N. Berlin was appointed Chief Financial Officer and Secretary of the Company.
November 2022	John Hope Bryant became a director of the Company.
February 2023	The Company and a CIM-managed interval fund purchased a multifamily property (1902 Park JV). The Company also sold an 80% interest in 4750 Wilshire.
March 2023	Shaul Kuba became Chief Investment Officer of the Company.
October 2023	The Company and a co-investor affiliated with CIM Group acquired a plot of land in Los Angeles (1015 Mansfield JV).
August 2024	The Company announced its intention to redeem, and has redeemed, shares of its Series A Preferred Stock and Series A1 Preferred Stock, paying the redemption price in shares of Common Stock, which placed significant downward pressure on the bid price.
October 2024	The 1902 Park JV admitted a new third-party co-investor, leading to mortgage loan satisfaction and a distribution to the Company.
December 27, 2024	Lenders originated a $105 million first lien mortgage loan to Company subsidiaries.
December 31, 2024	Fiscal year end for which Deloitte is appointed auditor; also the date for 2024 financial data and unvested restricted shares.
June 2, 2026	Deadline for notice under Exchange Act Rule 14a-19(b) for proxy solicitations for the 2026 Annual Meeting.
August 1, 2026	Latest date by which the Company may elect to implement one of the approved reverse stock split proposals.

Recommendation

hold

Keywords

Creative Media & Community Trust Corporation, CMCT, SEC Filing, Proxy Statement, Reverse Stock Split, Nasdaq Listing, Stockholder Vote, Corporate Governance, Executive Compensation, Auditor Ratification, Preferred Stock Redemption, Common Stock, Financial Reporting, Risk Management, Related Party Transactions

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