S-11/A: Creative Media & Community Trust Corporation Seeks to Raise $400 Million Through Series A1 Preferred Stock Offering

Creative Media & Community Trust Corporation aims to raise up to $400 million by offering Series A1 Preferred Stock to fund general corporate purposes, acquisitions, and investments.

Summary

• Creative Media & Community Trust Corporation (CMCT) is offering up to $400 million of Series A1 Preferred Stock at $25 per share.
• The offering aims to raise capital for general corporate purposes, including acquisitions, stock repurchases, and investments.
• CMCT is a REIT focused on multifamily properties and creative office assets, operated by affiliates of CIM Group Management, LLC.
• The Series A1 Preferred Stock has no voting rights and ranks senior to CMCT's common stock regarding dividends and liquidation distributions.
• Dividends are cumulative and paid quarterly at a rate that is the greater of 6.00% annually or the Federal Funds (Effective) Rate plus 2.50%, up to a maximum of 2.50% per quarter.
• The annual dividend rate for the first quarter of 2024 was 7.83%.
• Holders can request redemption of their shares at a price ranging from 91% to 100% of the stated value, depending on the holding period.
• CMCT can redeem the shares after twenty-four months at 100% of the stated value.
• The offering is managed by CCO Capital, LLC, an affiliate of CMCT, and is expected to conclude by May 19, 2026, with a possible extension to May 19, 2027.
• Net proceeds to CMCT are estimated at $364 million after deducting offering expenses of approximately $36 million.

Sentiment

Score: 6

Explanation: The document is primarily factual and descriptive, outlining the terms of the Series A1 Preferred Stock offering and providing background information on CMCT. The sentiment is neutral, with a focus on presenting information rather than expressing strong positive or negative views.

Positives

• The Series A1 Preferred Stock ranks senior to common stock in terms of dividend payments and liquidation distributions.
• Dividends are cumulative, providing a degree of income certainty for investors.
• Holders have the option to request redemption of their shares, providing potential liquidity.
• The company has the option to redeem shares after 24 months, which could benefit the company if market conditions change.
• The offering is managed by CCO Capital, LLC, an affiliate of CMCT.

Negatives

• The Series A1 Preferred Stock has no voting rights.
• There is no established public trading market for the Series A1 Preferred Stock, and one is not expected to develop.
• The company has the option to redeem shares for common stock, which ranks junior to the Series A1 Preferred Stock.
• The company's obligation to redeem shares is limited by available funds and legal restrictions.

Risks

• There is no public market for the Series A1 Preferred Stock, and one is not expected to develop.
• Holders of Series A1 Preferred Stock have no voting rights.
• Shares of Series A1 Preferred Stock may be redeemed for shares of Common Stock, which ranks junior to the Series A1 Preferred Stock in all respects.
• The cash distributions you receive in respect of Series A1 Preferred Stock and Common Stock may be less frequent or lower in amount than you expect.
• The terms of our Series A1 Preferred Stock do not contain any financial covenants.
• The Series A1 Preferred Stock ranks subordinate to all of our existing and future debt and liabilities.
• Our ability to redeem shares of Series A1 Preferred Stock, or to pay distributions on our Series A1 Preferred Stock and Common Stock, may be limited by Maryland law.
• Holders of our securities are subject to inflation risk.

Future Outlook

CMCT intends to use the net proceeds from this offering for general corporate purposes, acquisitions of shares of our Common Stock and Preferred Stock, whether through one or more tender offers, share repurchases, Preferred Stock redemptions or otherwise, acquisitions and/or additional investments consistent with our acquisition and asset management strategies.

Industry Context

The document positions CMCT within the REIT sector, highlighting its focus on multifamily and creative office assets. It emphasizes CIM Group's expertise and community-focused approach as competitive advantages. The document also acknowledges the cyclical nature of the lodging industry and the impact of external factors like pandemics on hotel operations.

Comparison to Industry Standards

• The document mentions that CMCT intends to employ indebtedness levels that are comparable to those of other commercial REITs engaged in business strategies similar to its own.
• The document mentions that CMCT competes with a number of developers, owners and operators of office real estate, many of which own properties similar to ours in the same markets in which our properties are located.
• The document mentions that CMCT competes with REITs, insurance companies, pension funds, private equity funds, sovereign wealth funds, hedge funds, mortgage banks, investment banks, commercial banks, savings and loan associations, specialty finance companies, and private and institutional investors and financial companies that pursue strategies similar to ours.

Related Party Transactions

• The offering is managed by CCO Capital, LLC, an affiliate of CMCT.
• CMCT pays fees to CIM Service Provider, LLC and CIM Investment Advisors, LLC for services provided.
• CCO Capital, LLC, a registered broker dealer and under common control with the Operator and the Administrator, which we refer to as CCO Capital, became the exclusive dealer manager for the Companys public offering of the Series A Preferred Stock effective as of May 31, 2019, subsequent to which the Company entered into the Second Amended and Restated Dealer Manager Agreement, pursuant to which CCO Capital acted as the exclusive dealer manager for the Companys public offering of its Series A Preferred Stock and Series D Preferred Stock.
• In May 2024, the Company entered into the Fifth Amended and Restated Dealer Manager Agreement, pursuant to which CCO Capital has been acting as the exclusive dealer manager for the Companys public offering of its Series A1 Preferred Stock.

Stakeholder Impact

• Potential dilution of existing common stockholders if the company elects to redeem preferred stock with common stock.
• Potential impact on preferred stockholders depending on the company's ability to generate sufficient cash flow to pay dividends and redeem shares.
• Potential impact on tenants and employees of properties depending on the company's investment and management decisions.

Next Steps

• CMCT will continue to offer and sell Series A1 Preferred Stock through CCO Capital on a reasonable best efforts basis.
• CMCT intends to use the net proceeds from this offering for general corporate purposes, acquisitions of shares of our Common Stock and Preferred Stock, whether through one or more tender offers, share repurchases, Preferred Stock redemptions or otherwise, acquisitions and/or additional investments consistent with our acquisition and asset management strategies.

Key Dates

Keywords

Series A1 Preferred Stock, REIT, Creative Media & Community Trust, CMCT, Real Estate Investment Trust, Preferred Stock, Offering, Dividends, Redemption, CCO Capital, CIM Group