CIM Group’s CMCT faces trouble on Oakland multifamily floating-rate loan

Creative Media & Community Trust, a publicly traded arm of Los Angeles-based CIM Group, is facing trouble paying off a loan tied to a multifamily property in Oakland, about 18 months after buying it. 

CMCT is in negotiations with its lenders to refinance or restructure a floating-rate loan on Channel House, a 333-unit apartment complex at 40 Harrison Street in Oakland’s waterfront neighborhood Jack London Square, according to a quarterly report filed with the U.S. Securities and Exchange Commission this week. 

“Rent payments from the property will likely be insufficient to meet debt service payments under the mortgage,” CMCT said in the filing.

CMCT bought a 90 percent stake in the building last year for $134.6 million, or roughly $404,000 per unit, from CIM Group, which built the property in 2021, according to financial filings and county records. 

It’s unclear if CIM, which did not respond to a request for comment, still owns the remaining 10 percent.

It holds an $87 million, non-recourse loan on the property, with an interest rate equal to the Secured Overnight Financing Rate plus 3.4 percent. The loan is due in July 2025, though CMCT has an extension option if it meets certain conditions. 

CMCT did not disclose the lender on the property, though financial filings show CMCT bought the property with an existing loan from PIMCO Commercial Real Estate. 

As of May 16, SOFR stands at about 5.32 percent, meaning CMCT is paying about 8.7 percent in interest on the loan. In January 2023, when CMCT bought the building, it was paying about 7.7 percent interest on the debt. 

Many firms that used floating-rate debt to buy multifamily properties started to face issues paying off their loans when rates rose. Since then, interest rates have remained persistently high, while many borrowers have not been able to hike rents or fill apartments fast enough to meet their costlier mortgage payments. 

Oakland apartment owners have been hit particularly hard, with many choosing to walk away from projects. The average rent for a one-bedroom apartment in Oakland has dropped 7 percent over the last year, according to Zumper. Nationally, rents have dropped less than 1 percent during the same time period. 

Channel House was 72 percent occupied as of December 2023, according to an annual report, down from 77 percent at the end of September, according to a CMCT investor presentation. 

If CMCT and the lender don’t come to an agreement on the loan, CMCT may fail to make its mortgage payments. That failure would count as a default, according to CMCT, and the lender could declare the entire loan due immediately. 

CIM Group owns about 42 percent of CMCT’s outstanding shares, according to investor documents and financial filings.