Creative Media & Community Trust Corp 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations This section includes many forward-looking statements. For cautions about relying on such forward-looking statements, please see “Forward-Looking Statements” at the beginning of this report immediately prior to “Item 1 —Business” in this Annual Report on Form 10-K. Overview The following discussion focuses on recent developments expected to have material current and future impacts on the results of our business, trends and uncertainties within our industry and business model that may impact our financial results, our recent results of operations, and our liquidity and capital resources. Executive Summary Business Overview Creative Media & Community Trust Corporation is a Maryland corporation and REIT. We primarily acquire, develop, own and operate both premier multifamily properties situated in vibrant communities throughout the United States and Class A and creative office real assets in markets with similar business and employment characteristics to our multifamily investments. We seek to apply the expertise of CIM Group to the acquisition, development and operation of premier multifamily properties and creative office assets that cater to rapidly growing industries such as technology, media and entertainment. All of our real estate assets are and will generally be located in communities qualified by CIM Group as described further below. These communities are located in areas that include traditional downtown areas and suburban main streets, which have high barriers to entry, high population density, positive population trends and a propensity for growth. We believe that the critical mass of redevelopment in such areas creates positive externalities, which enhance the value of real estate assets in the area. We believe that these assets will provide greater returns than similar assets in other markets, as a result of the population growth, public commitment and significant private investment that characterize these areas. CIM Group is headquartered in Los Angeles, California and has offices in Atlanta, Georgia, Chicago, Illinois, Dallas, Texas, New York, New York, Orlando, Florida, Phoenix, Arizona, London, U.K. and Tokyo, Japan. CIM also maintains additional offices with distribution staff and JV partnerships. Properties As of December 31, 2025, our real estate portfolio consisted of 27 assets, all of which were fee-simple properties and five of which we own through investments in Unconsolidated Joint Ventures. Our Unconsolidated Joint Ventures contain one office property, three multifamily properties (one of which has been partially converted from office into multifamily units and is now being classified as a multifamily property) and one commercial development site. As of December 31, 2025, our 12 office properties, totaling approximately 1.3 million rentable square feet, were 74.8% occupied and our one 505-room hotel with an ancillary parking garage, had RevPAR of $152.70 for the year ended December 31, 2025 and our five multifamily properties were 85.3% occupied. Additionally, as of December 31, 2025, we had eight development sites (two of which were being used as parking lots). 51 Rental Rate Trends Office Statistics: The following table sets forth occupancy rates and annualized rent per occupied square foot across our office portfolio as of the specified periods (includes 100% of our properties partially owned through Unconsolidated Joint Ventures): As of December 31, 2025 2024 Occupancy (1) 74.8 % 70.6 % Annualized rent per occupied square foot (1)(2) $ 58.78 $ 60.48 (1) The information presented in this table represents historical information as of the date indicated without giving effect to any property sales occurring thereafter. (2) Represents gross monthly base rent under leases commenced as of the specified periods, multiplied by 12. 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. Total abatements, representing lease incentives in the form of free rent, for the twelve months ended December 31, 2025 and 2024 were approximately $1.6 million and $1.1 million, respectively. Giving effect to abatements, net annualized rent per occupied square foot was $54.90 and $59.93 as of December 31, 2025 and 2024, respectively (See Definitions for more detail). Over the next four quarters, we expect to see expiring cash rents as set forth in the table below (includes 100% of our properties partially owned through Unconsolidated Joint Ventures): For the Three Months Ended March 31, 2026 June 30, 2026 September 30, 2026 December 31, 2026 Expiring Cash Rents: Expiring square feet (1) 20,003 35,226 30,978 21,607 Expiring rent per square foot (2) $ 44.49 $ 56.38 $ 49.26 $ 55.77 (1) Month-to-month tenants occupying a total of 4,193 square feet are included in the expiring leases in the first quarter listed. (2) Represents gross monthly base rent, as of December 31, 2025, under leases expiring during the periods above, multiplied by 12. This amount reflects total cash rent before abatements. Where applicable, annualized rent has been grossed up by adding annualized expense reimbursements to base rent. During the year ended December 31, 2025, we executed leases with terms longer than 12 months totaling 182,120 square feet. The table below sets forth information on certain of our executed leases during the year ended December 31, 2025, excluding space that was vacant for more than one year, month-to-month leases, leases with an original term of less than 12 months, related party leases, and space where the previous tenant was a related party: New Cash Expiring Cash Number of Rentable Rents per Square Rents per Square Leases (1) Square Feet Foot (2) Foot (2) Year Ended December 31, 2025 26 93,931 $ 45.04 $ 60.51 (1) Based on the number of tenants that signed leases. (2) Cash rents represent gross monthly base rent, multiplied by 12. This amount reflects total cash rent before abatements. Where applicable, annualized rent has been grossed up by adding annualized expense reimbursements to base rent. Fluctuations in submarkets, buildings and terms of leases cause large variations in these numbers and make predicting the changes in rent in any specific period difficult. Our rental and occupancy rates are impacted by general economic conditions, including the pace of regional and economic growth, and access to capital. Therefore, we cannot give any assurance that leases will be renewed or that available space will be re-leased at rental rates equal to or above the current market rates. Additionally, decreased demand and other negative trends or unforeseeable events that impair our ability to timely renew or re 52 lease space could have a material adverse effect on our business, financial condition, results of operations, cash flow or our ability to satisfy our debt service obligations or to maintain our level of distributions on our Preferred Stock or renew dividends on our Common Stock. Multifamily Statistics: The following table sets forth occupancy rates and the monthly rent per occupied unit across our multifamily portfolio for the specified periods (includes 100% of our properties partially owned through an Unconsolidated Joint Venture): As of December 31, 2025 2024 Occupancy 85.3 % 81.7 % Monthly rent per occupied unit (1) $ 2,497 $ 2,468 ______________________ (1) Represents gross monthly base rent under leases commenced as of the specified period, divided by occupied units. This amount reflects total cash rent before concessions. Net of rent concessions granted in the specified period, monthly rent per occupied unit was $2,127 and $2,319 as of December 31, 2025 and 2024, respectively. Hotel Statistics: The following table sets forth the occupancy, ADR and RevPAR for our hotel in Sacramento, California for the specified periods: For the Year Ended December 31, 2025 2024 Occupancy 72.5 % 67.2 % ADR $ 210.54 $ 202.26 RevPAR $ 152.70 $ 135.90 Seasonality Our revenues and expenses for our hotel property are subject to seasonality during the year. Generally, our hotel revenues are greater in the first and second quarters than the third and fourth quarters. This seasonality can be expected to cause quarterly fluctuations in revenues, segment net operating income, net income and cash provided by operating activities. In addition, the hotel industry is cyclical and demand generally follows, on a lagged basis, key macroeconomic factors. Lending Segment Prior to the divestiture described in this paragraph, we were a national lender that primarily originated loans to small businesses. As previously announced on November 12, 2025, the Company and First Western entered into the Membership Interest Purchase Agreement with the Buyer. The Closing occurred on January 21, 2026. At the Closing, pursuant to the Membership Interest Purchase Agreement, and upon the terms and subject to the conditions therein, Buyer purchased from the Company all of the issued and outstanding equity interests of First Western SBLC, LLC for a purchase price of approximately $44.9 million (which is net of the outstanding balance of debt related to the 2023 securitization of certain loan receivables), subject to adjustment. At the Closing and upon giving effect to the payment of other debt, transaction expenses and other matters, the Transactions yielded net cash proceeds to the Company of approximately $31.2 million. 53 2025 Results of Operations Net Loss and FFO Year Ended December 31, Change 2025 2024 $ % (dollars in thousands) Total revenues $ 116,669 $ 124,512 $ (7,843) (6.3) % Total expenses $ 152,666 $ 148,658 $ 4,008 2.7 % Gain on sale of real estate $ 679 $ — $ 679 N/A Net loss $ (39,575) $ (25,750) $ (13,825) 53.7 % The Company had a net loss of $39.6 million for the year ended December 31, 2025, representing an increase of $13.8 million compared to a net loss of $25.8 million for the year ended December 31, 2024. The increase was primarily due to a decrease of $7.2 million in segment net operating income (discussed in more detail below in “Summary Segment Results”), an increase in interest expense not allocated to our operating segments of $4.1 million, an increase in impairment of real estate of $3.7 million, and an increase in expense reimbursements to related parties - corporate of $1.2 million. These were partially offset by a decrease in loss on early extinguishment of debt of $1.3 million and a gain on sale of real estate of $679,000 recognized in the current year. Funds from Operations We believe that funds from operations (“FFO”), a non-GAAP measure, is a widely recognized and appropriate measure of the performance of a REIT and that it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO represents net income (loss) attributable to common stockholders, computed in accordance with GAAP, which reflects the deduction of redeemable preferred stock dividends accumulated, excluding gains (or losses) 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”). Like any metric, FFO should not be used as the only measure of our performance because it excludes depreciation and amortization and captures neither the changes in the value of our real estate properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our operating results. Other REITs may not calculate FFO in accordance with the standards established by the NAREIT; accordingly, our FFO may not be comparable to the FFOs of other REITs. Therefore, FFO should be considered only as a supplement to net income (loss) as a measure of our performance and should not be used as a supplement to or substitute measure for cash flows from operating activities computed in accordance with GAAP. FFO should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends. The following table sets forth a historical reconciliation of net (loss) attributable to common stockholders to FFO attributable to holders of common stockholders: Year Ended December 31, 2025 2024 (in thousands) Net loss attributable to common stockholders (1) $ (61,648) $ (73,343) Depreciation and amortization 27,081 27,373 Noncontrolling interests’ proportionate share of depreciation and amortization (233) (306) Impairment of real estate 3,692 — Loss on assets held for sale 298 — Gain on sale of real estate (679) — FFO attributable to common stockholders (1) $ (31,489) $ (46,276) 54 (1) During the years ended December 31, 2025 and 2024, we recognized $1.4 million and $17.7 million, respectively, of redeemable preferred stock redemptions. Such amounts are included in, and have the effect of increasing, net loss attributable to common stockholders and decreasing FFO attributable to common stockholders because redeemable preferred stock redemptions are not an adjustment prescribed by NAREIT. FFO attributable to common stockholders, which is a non-GAAP measure, was $(31.5) million for the year ended December 31, 2025, an increase of $14.8 million compared to $(46.3) million for the year ended December 31, 2024. The increase in FFO was primarily attributable to a decrease in redeemable preferred stock redemptions of $16.3 million, a decrease in redeemable preferred stock dividends of $8.5 million and a decrease in loss on early extinguishment of debt of $1.3 million. These were partially offset by a decrease of $7.2 million in segment net operating income (discussed in more detail below in “Summary Segment Results”) and an increase in interest expense not allocated to our operating segments of $4.1 million. 55 Summary Segment Results During the years ended December 31, 2025 and 2024, we operated in four segments: office, hotel and multifamily properties and lending. Set forth and described below are summary segment results for our operating segments. Year Ended December 31, Change 2025 2024 $ % (dollars in thousands) Revenues: Office $ 50,140 $ 54,283 $ (4,143) (7.6) % Hotel $ 41,341 $ 39,407 $ 1,934 4.9 % Multifamily $ 15,783 $ 19,515 $ (3,732) (19.1) % Lending $ 8,960 $ 10,756 $ (1,796) (16.7) % Expenses: Office $ 25,804 $ 27,327 $ (1,523) (5.6) % Hotel $ 29,598 $ 27,955 $ 1,643 5.9 % Multifamily $ 12,786 $ 13,715 $ (929) (6.8) % Lending $ 4,838 $ 7,556 $ (2,718) (36.0) % Income (Loss) From Unconsolidated Entities Office $ (254) $ 462 $ (716) NM* Multifamily $ (3,506) $ (1,268) $ (2,238) NM* Non-Segment Revenue and Expenses: Interest and other income $ 445 $ 551 $ (106) (19.2) % Asset management and other fees to related parties $ (1,356) $ (1,797) $ 441 (24.5) % Expense reimbursements to related parties—corporate $ (3,496) $ (2,281) $ (1,215) 53.3 % Interest expense $ (37,720) $ (33,589) $ (4,131) 12.3 % General and administrative $ (4,434) $ (4,267) $ (167) 3.9 % Transaction-related costs $ (1,475) $ (1,382) $ (93) 6.7 % Depreciation and amortization $ (27,081) $ (27,373) $ 292 (1.1) % Loss on early extinguishment of debt $ (88) $ (1,416) $ 1,328 (93.8) % Impairment of real estate $ (3,692) $ — $ (3,692) N/A Loss on assets held for sale $ (298) $ — $ (298) N/A Gain on sale of real estate $ 679 $ — $ 679 N/A Provision for income taxes $ (497) $ (798) $ 301 (37.7) % ______________________ (*) Percentage changes in excess of 100% are deemed to be not meaningful (“NM”) Revenues Office Revenue: Office revenue includes rental revenue, expense reimbursements and lease termination income from office properties. Office revenue decreased to $50.1 million for the year ended December 31, 2025 from $54.3 million for the year ended December 31, 2024. The decrease was primarily due to a decrease in rental revenues at office properties in Oakland, California, Los Angeles, California, and San Francisco, California as a result of lower occupancies, partially offset by an increase in rental revenues at office properties in Beverly Hills, California and Austin, Texas as a result of increased occupancy and rental rates. Hotel Revenue: Hotel revenue increased to $41.3 million for the year ended December 31, 2025, compared to $39.4 million for the year ended December 31, 2024. The increase was primarily due to an increase in occupancy and average daily rate during the year ended December 31, 2025 as compared to year ended December 31, 2024. 56 Multifamily Revenue: Multifamily revenue decreased to $15.8 million for the year ended December 31, 2025, compared to $19.5 million for the year ended December 31, 2024. The decrease was primarily attributed to lower occupancy and decreased monthly rent per occupied unit, net of rent concessions during the year ended December 31, 2025 as compared to year ended December 31, 2024. Lending Revenue: Lending revenue represents revenue from our lending subsidiaries, including interest income on loans and other loan related fee income. Lending revenue decreased to $9.0 million for the year ended December 31, 2025, compared to $10.8 million for the year ended December 31, 2024. The decrease was primarily due to a decrease in interest income due to loan payoffs and a decrease in interest rates as well as loans funded. Income (Loss) From Unconsolidated Office Entities: Income from our office Unconsolidated Joint Ventures included in office segment net operating income decreased to a loss of $254,000 for the year ended December 31, 2025, compared to income of $462,000 for the year ended December 31, 2024. The decrease is due to changes in the valuation of investments in real estate at our unconsolidated office entities, which recognized a net unrealized loss during the year ended December 31, 2025, compared to a net unrealized gain during the year ended December 31, 2024. (Loss) Income From Unconsolidated Multifamily Entity: The loss from our Unconsolidated Joint Venture included in multifamily segment net operating income increased to a loss of $3.5 million for the year ended December 31, 2025, compared to a loss of $1.3 million for the year ended December 31, 2024. The increase is due to changes in the valuation of investments in real estate at our unconsolidated multifamily entities, which recognized a larger unrealized loss during the year ended December 31, 2025, compared to the year ended December 31, 2024. Interest and Other Income: Interest and other income, which has not been allocated to our operating segments, decreased to $445,000 for the year ended December 31, 2025, compared to $551,000 for the year ended December 31, 2024. The decrease was primarily related to a decrease in interest earned on money market accounts during the year ended December 31, 2025. Expenses Office Expenses: Office expenses decreased to $25.8 million for the year ended December 31, 2025, compared to $27.3 million for the year ended December 31, 2024. The decrease was primarily due to lower operating expenses at an office property in Oakland, California resulting from lower occupancy, as well as lower operating expenses at an office property in Beverly Hills, California as result of property tax refunds received during the year ended December 31, 2025, partially offset by increased property taxes at an office property in Austin, Texas and at an office property in San Francisco, California during the year ended December 31, 2025. Hotel Expenses: Hotel expenses were $29.6 million for the year ended December 31, 2025, compared with $28.0 million for the year ended December 31, 2024. The increase is due to increased occupancy during the year ended December 31, 2025 compared to the prior year period. Multifamily Expenses: Multifamily expenses decreased to $12.8 million for the year ended December 31, 2025, compared to $13.7 million for the year ended December 31, 2024. The decrease was primarily due to a decrease in real estate tax expense as well as decreases in repairs and maintenance expenses at our multifamily properties during the year ended December 31, 2025 compared to the prior year period. Lending Expenses: Lending expenses represent expenses from our lending subsidiaries, including interest expense, general and administrative expenses and fees to related parties. Lending expenses were $4.8 million for the year ended December 31, 2025, compared with $7.6 million for the year ended December 31, 2024. The decrease was primarily due to the reversal of the CECL balance during the year ended December 31, 2025 as a result of the loans receivable portfolio being reclassified as held for sale as of December 31, 2025 in connection with the sale of First Western in January 2026. Asset Management and Other Fees to Related Parties: Asset management fees and other fees to related parties, which have not been allocated to our operating segments decreased to $1.4 million for the year ended December 31, 2025, compared to $1.8 million for the year ended December 31, 2024. The decrease was a result of a reduction in asset management fees related to a decrease in our net asset value, primarily resulting from a reduction in the fair value of our investments in real estate as of the end of both 2024 and 2025. Expense Reimbursements to Related Parties—Corporate : The Administrator receives compensation and/or reimbursement for performing certain services for the Company and its subsidiaries. Expense reimbursements to related parties—corporate were $3.5 million for the year ended December 31, 2025, an increase from $2.3 million for the year ended 57 December 31, 2024. The increase was primarily due to an increase in expense allocation related to activities at our lending division as well as an increase in legal services. Interest Expense: Interest expense, which has not been allocated to our operating segments, increased to $37.7 million for the year ended December 31, 2025, compared to $33.6 million for the year ended December 31, 2024. The increase was primarily attributable to a higher average outstanding principal balance on our debt as a result of new mortgage loans closed during the fourth quarter of 2024 and first and second quarters of 2025, partially offset by paydowns on our 2022 Credit Facility as well as one of our mortgage loans. General and Administrative Expenses: General and administrative expenses, which have not been allocated to our operating segments, were $4.4 million for the year ended December 31, 2025, generally consistent with $4.3 million for the year ended December 31, 2024. Transaction-Related Costs: Transaction-related costs were $1.5 million for the year ended December 31, 2025, generally consistent with $1.4 million for the year ended December 31, 2024. Depreciation and Amortization Expense: Depreciation and amortization expense decreased to $27.1 million for the year ended December 31, 2025, compared to $27.4 million for the year ended December 31, 2024. The decrease was due to a decrease in leasing cost amortization at an office property in Oakland, California as a result of a large lease termination during the third quarter of 2024, partially offset by incremental increases to the depreciable asset base at our hotel property. Loss on Early Extinguishment of Debt: Loss on early extinguishment of debt of decreased to $88,000 for the year ended December 31, 2025, compared to $1.4 million for the year ended December 31, 2024. The decrease was due to larger amounts that were recognized related to the payoff of the 2022 Credit Facility during year ended December 31, 2024. Impairment of Real Estate: Impairment of real estate was $3.7 million for the year ended December 31, 2025 due to an impairment charge recognized in connection with an office property in Austin, Texas and a multifamily development site in Oakland, California. No such amounts were incurred during the prior year period. Gain on Sale of Real Estate: The Company recognized a gain on sale of real estate of $679,000 for the year ended December 31, 2025, resulting from the sale of a land parcel in Oakland, California. There were no dispositions during the year ended December 31, 2024. Loss on Assets Held For Sale: The Loss on assets held for sale of $298,000 during the year ended December 31, 2025, was related to the reclassification of First Western to held for sale as of December 31, 2025, after which the carrying value of the assets held for sale were written down to be recorded at fair value, less costs to sell, subsequent to the reversal of CECL discussed in Lending Expenses above. There were no assets reclassified as held for sale during the year ended December 31, 2024. Provision for Income Taxes: Provision for income taxes decreased to $497,000 for the year ended December 31, 2025, compared to $798,000 for the year ended December 31, 2024. The decrease is primarily due to lower taxable income at our taxable REIT subsidiaries during the year ended December 31, 2025 as compared to the year ended December 31, 2024. Cash Flow Analysis Our cash flows from operating activities are primarily dependent upon the real estate assets owned, occupancy level of our real estate assets, the rental rates achieved through our leases, the occupancy and ADR of our hotel, the collectability of rent and recoveries from our tenants, and loan related activity. Our cash flows from operating activities are also impacted by fluctuations in operating expenses and other general and administrative costs. Net cash provided by operating activities was $5.8 million for the year ended December 31, 2025 as compared to $17.0 million during the same period in 2024. The decrease is primarily due to an increase in net loss adjusted for depreciation and amortization expense and other non-cash items of $11.9 million. Our cash flows from investing activities are primarily related to property acquisitions and dispositions, expenditures for the development or repositioning of properties, capital expenditures and cash flows associated with loans originated at our lending segment. Net cash used in investing activities was $12.0 million for the year ended December 31, 2025, compared to $22.3 million for the year ended December 31, 2024. The decrease in cash used in investing activities was primarily due to a $2.5 million decrease in capital expenditures, an increase in the receipt of key money of $4.7 million, and a decrease in cash used to fund loans of $3.3 million during the year ended December 31, 2025. Our cash flows from financing activities are generally impacted by borrowings and capital activities. Net cash used in financing activities for the year ended December 31, 2025 was $4.6 million, compared to cash provided by financing activities 58 of $13.9 million for the year ended December 31, 2024. The decrease of $18.5 million was primarily due to a decrease in net proceeds from debt of $17.5 million during year ended December 31, 2025 and a $40.6 million decrease in net proceeds from the issuance of redeemable preferred stock. These were partially offset by a decrease in cash redemptions of redeemable preferred stock of $25.4 million, a decrease in common stock dividends of $5.8 million, a decrease in redeemable preferred stock dividends of $3.6 million, and a decrease in the payment of deferred costs of $1.9 million. Liquidity and Capital Resources General On a short-term basis, our principal demands for funds will be for the acquisition of assets, development or repositioning of properties (as further described below) (including pre-construction costs such as obtaining entitlements and permits and architectural work), or re-leasing of space in existing properties, capital expenditures, paying interest and principal on current and any future debt financings, and paying distributions on our Preferred Stock. We may finance our future activities through one or more of the following methods: (i) offerings of shares of Common Stock, Preferred Stock or other equity and/or debt securities of the Company; (ii) issuances of interests in our operating partnership in exchange for properties; (iii) credit facilities and term loans; (iv) the addition of senior recourse or non-recourse debt using target acquisitions as well as existing assets as collateral; (v) the sale of existing assets; and/or (vi) cash flows from operations . Our long-term liquidity needs will consist primarily of funds necessary for acquisitions of assets, development or repositioning of properties, or re-leasing of space in existing properties, capital expenditures, paying interest and principal on debt financings, refinancing of indebtedness, paying distributions on our Preferred Stock or any other preferred stock we may issue, any future repurchase of Common Stock and/or redemption of our Preferred Stock (if we choose, or are required, to pay the redemption price in cash instead of in shares of our Common Stock) and any renewed distributions on our Common Stock. To the extent we decide to proceed with development work on any of our development sites (in addition to those discussed below), we will have increased liquidity needs. Construction has been substantially completed on the Rooms Renovation Project at our Sheraton Grand Hotel in Sacramento, California, with total costs incurred of $21.2 million as of December 31, 2025. We also started our renovation of Sheraton Grand Hotel’s lobbies and common areas (the “Lobby Renovation Project”) during the third quarter of 2025. The estimated cost for the Lobby Renovation Project is approximately $11.6 million, of which $7.4 million had been incurred as of December 31, 2025. Both the Rooms Renovation Project and Lobby Renovation Project are being funded by a combination of draws on the mortgage loan at the property and key money from the Sheraton Grand Hotel’s franchisor. From and after September 2024, at our option, we redeemed 2,589,606 and 2,150,076 shares of Series A1 Preferred Stock and Series A Preferred Stock, respectively, in shares of Common Stock and we have paid holder-requested redemptions of 718,649, 671,058, and 4,122 shares of Series A1 Preferred Stock, Series A Preferred Stock, and Series D Preferred Stock respectively, in shares of Common Stock. On or about March 16, 2026, the Company expects to redeem approximately 1,957,023 shares of Series A Preferred Stock, approximately 7,767,609 shares of Series A1 Preferred Stock and approximately 21,760 shares of Series D Preferred Stock in shares of Common Stock (the “March 2026 Redemption”). Other than the March 2026 Redemption, the company does not currently intend to redeem, at the Company’s election, additional Preferred Stock in shares of Common Stock. However, the Company will evaluate redemption requests submitted by holders of its shares of Preferred Stock at the time it receives them and may elect to redeem those Preferred Shares in Common Stock or cash, at the Company’s discretion. The measures noted above, taken together, are expected to strengthen our balance sheet and improve liquidity. These actions are also intended to better position the Company to take advantage of opportunities that are expected to arise in a recovering real estate market. We may not have sufficient funds on hand or may not be able to obtain additional financing to cover all of our long-term cash requirements. The nature of our business, and the requirements imposed by REIT rules that we distribute a substantial majority of our REIT taxable income on an annual basis in the form of dividends, may cause us to have substantial liquidity needs over the long-term. While we will seek to satisfy such needs through one or more of the methods described in this Annual Report on Form 10-K, our ability to take such actions is highly uncertain and cannot be predicted, and could be affected by various risks and uncertainties, including, but not limited to, the risks detailed in “Item 1A—Risk Factors” of this Annual Report on Form 10-K. If we cannot obtain funding for our long-term liquidity needs, our assets may generate lower cash flows or decline in value, or both, which may cause us to sell assets at a time when we would not otherwise do so which could have a material adverse effect on our business, financial condition, results of operations, cash flow or our ability to satisfy our debt service obligations or to maintain our level of distributions on our Preferred Stock or any renewed distributions on our Common Stock. 59 We must meet certain financial and liquidity criteria to maintain the listing of our Common Stock on Nasdaq. If we violate Nasdaq’s listing requirements or fail to meet its listing standards, our Common Stock may be delisted. On November 7, 2024, we received written notice from the Listing Qualifications Department of Nasdaq indicating that we had fallen out of compliance with the Bid Price Requirement. To regain compliance, the closing bid price of our Common Stock had to be a minimum of $1.00 per share for a minimum of ten consecutive business days prior to May 6, 2025. On May 1, 2025, we received a letter from the Nasdaq Listing Qualification Department informing the Company that it had regained compliance with the Bid Price Requirement as of April 30, 2025 due to the price of our Common Stock maintaining a minimum bid price in excess of $1.00 for ten consecutive business days. However, our ability to maintain compliance with the Nasdaq’s listing standards requirements in the future, including the Bid Price Requirement, is not guaranteed. We believe that delisting our Common Stock from Nasdaq could have significant adverse consequences, including a decreased ability to issue additional shares of Common Stock to raise additional financing in the future due to the increased lack of liquidity that would result in our Common Stock due to the factors described in “We may not be able to maintain a listing of our Common Stock on Nasdaq” in “Item 1A—Risk Factors.” In addition, delisting may result in the inability to redeem Preferred Stock when all other criteria for redemption have been met if registration under applicable state securities or “blue sky” laws is not able to be accomplished in a particular state and the cash required for such redemption is not available. Sources and Uses of Funds Mortgages We have mortgage loan agreements with outstanding balances of $477.0 million as of December 31, 2025. Our mortgage loans mature on various dates from June 7, 2026 through January 11, 2030. In regards to the mortgage payable with a balance of $66.3 million as of December 31, 2025 maturing on June 7, 2026 (the “1150 Clay Mortgage”), the Company executed the final one-year extension option under the mortgage in June 2025. The Company intends to work with the lender in order to refinance the 1150 Clay Mortgage beyond its stated maturity date of June 7, 2026. Although the Company believes it is likely it will be able to refinance the 1150 Clay Mortgage prior to June 7, 2026, there can be no assurance that such refinancing will occur. If the Company and the lender under the 1150 Clay Mortgage cannot agree on an extension of the mortgage and the Company fails to repay the loan in full upon its contractual maturity date, such failure would constitute an event of default under the mortgage and would allow the lender to, among other remedies, take possession of the property. With regards to the mortgage payable with a balance of $81.0 million as of December 31, 2025 secured by a multifamily property in Oakland, California (the “Channel House Mortgage”), on August 4, 2025 the Company reached an agreement with the lender to extend the maturity date through January 31, 2027 (the “Channel House Mortgage Extension”). In connection with the Channel House Mortgage Extension, the Company made a repayment of $6.0 million under the Channel House Mortgage, reducing it from its previous balance of $87.0 million. Although the Company believes it is likely it will be able to refinance the Channel House Mortgage prior to January 31, 2027, there can be no assurance that such refinancing will occur. If the Company and the lender under the Channel House Mortgage cannot agree on an extension of the mortgage and the Company fails to repay the loan in full upon its contractual maturity date, such failure would constitute an event of default under the mortgage and would allow the lender to, among other remedies, take possession of the property. In regards to the mortgage payable with a balance of $97.1 million as of December 31, 2025 maturing on July 1, 2026 (the “1 Kaiser Mortgage”), the Company intends to work with the lender in order to refinance the 1 Kaiser Mortgage beyond its stated maturity date of July 1, 2026. Although the Company believes it is likely it will be able to refinance the 1 Kaiser Mortgage prior to July 1, 2026, there can be no assurance that such refinancing will occur. If the Company and the lender under the 1 Kaiser Mortgage cannot agree on an extension of the mortgage and the Company fails to repay the loan in full upon its contractual maturity date, such failure would constitute an event of default under the mortgage and would allow the lender to, among other remedies, take possession of the property. Revolving Credit Facilities On April 3, 2025, the Company completed the refinancing of an office property in Austin, Texas and used a portion of the proceeds from such refinancing to repay its then outstanding credit facility (the “2022 Credit Facility”) in full and, in connection with such repayment, the 2022 Credit Facility was terminated. In June 2025, a subsidiary of the Company, as borrower, entered into an agreement (the “Lending Division Revolving Credit Facility”) with a bank that included a $20.0 million revolving credit facility secured by the unguaranteed portion of certain of such subsidiary’s SBA 7(a) loans receivable and other assets of such subsidiary, subject to a borrowing base calculation, and fully guaranteed by the Company. As previously announced on November 12, 2025, the Company and First Western entered into the Membership Interest Purchase Agreement with the Buyer. The Closing contemplated by the 60 Membership Interest Purchase Agreement occurred on January 21, 2026. At the Closing, Buyer purchased from the Company all of the issued and outstanding equity interests of First Western SBLC, LLC, and the remaining balance of $10.5 million under the Lending Division Revolving Credit Facility was paid in full, resulting in the termination of the Lending Division Revolving Credit Facility. Other Financing Activity We have junior subordinated notes with a variable interest rate that resets quarterly based on the three-month SOFR plus 3.51%, with quarterly interest‑only payments. The junior subordinated balance is due at maturity on March 30, 2035. The junior subordinated notes may be redeemed at par at our option. The aggregate principal balance of the junior subordinated notes was $27.1 million as of December 31, 2025. Securities Offerings We conducted a continuous public offering of Series A Preferred Stock from October 2016 through January 2020, where one Series A Preferred Warrant was issued along with each issued share of Series A Preferred Stock. During the tenure of the offering, we issued 4,603,287 Series A Preferred Stock and Series A Preferred Warrants and received aggregate net proceeds of $105.2 million after commissions, fees and allocated costs. As of December 31, 2025, all of the Series A Preferred Warrants had expired. From February 2020 through June 2022, we conducted a continuous public offering of our Series A Preferred Stock and Series D Preferred Stock. From June 2022 through September 2024, we conducted a public offering with respect to shares of its Series A1 Preferred Stock. We used the net proceeds from the offerings for general corporate purposes. We have suspended our offering of Series A1 Preferred Stock. As of December 31, 2025, we had issued 12,040,878 shares of Series A1 Preferred Stock, 8,251,657 shares of Series A Preferred Stock and 56,857 shares of Series D Preferred Stock and received aggregate net proceeds of $459.1 million after commissions, fees and allocated costs. Dividends on and Redemptions of Preferred Stock Holders of Series A1 Preferred Stock, Series A Preferred Stock and Series D Preferred Stock are entitled to receive, if, as and when authorized by our Board of Directors, and declared by us out of legally available funds, cumulative cash dividends on each share as follows: (1) at the of greater of (i) an annual rate of 6.0% of the Series A1 Preferred Stock Stated Value (i.e., the equivalent of $0.3750 per share per quarter) and (ii) the Federal Funds (Effective) Rate for such quarter and plus 2.5% of the Series A1 Preferred Stock Stated Value divided by four, up to a maximum of 2.5% of the Series A1 Preferred Stock Stated Value per quarter, (2) 5.50% of the Series A Preferred Stock Stated Value (i.e., the equivalent of $0.34375 per share per quarter), and (3) 5.65% of the Series D Preferred Stock Stated Value (i.e., the equivalent of $0.35313 per share per quarter), respectively. We expect to pay dividends on the Series A1 Preferred Stock, Series A Preferred Stock and Series D Preferred Stock in arrears on a monthly basis, unless our results of operations, our general financing conditions, general economic conditions, applicable requirements of the MGCL or other factors make it imprudent to do so. The timing and amount of dividends declared and paid on our Preferred Stock will be determined by our Board of Directors, in its sole discretion, and may vary from time to time. From the date of issuance until the fifth anniversary of the date of issuance, holders of Series A1 Preferred Stock, Series A Preferred Stock and Series D Preferred Stock may require us to redeem such shares at a discount to the Series A1 Preferred Stock, Series A Preferred Stated Value and Series D Preferred Stated Value, respectively. From and after the fifth anniversary of the date of original issuance of any share of our Preferred Stock, we generally (subject to certain conditions) have the right (but not the obligation) to redeem, and the holder of such share may require us to redeem, such share at a redemption price equal to 100% of the stated value of such share, plus any accrued but unpaid dividends in respect of such share as of the effective date of the redemption. The redemption price in respect of any share of Preferred Stock, whether redeemed at our option or at the option of a holder, may be paid in cash or in shares of Common Stock in our sole discretion. Through December 31, 2025, we had redeemed 5,151,320 shares of Series A Preferred Stock, 3,491,336 shares of Series A1 Preferred Stock, and 12,532 of Series D Preferred Stock. On or about March 16, 2026, the Company expects to redeem approximately 1,957,023 shares of Series A Preferred Stock, approximately 7,767,609 shares of Series A1 Preferred Stock and approximately 21,760 shares of Series D Preferred Stock (collectively “Preferred Stock”) in shares of Common Stock (the “March 2026 Redemption”). Other than the March 2026 Redemption, the company does not currently intend to redeem, at the Company’s election, additional Preferred Stock in shares of Common Stock. However, the Company will evaluate redemption 61 requests submitted by holders of its shares of Preferred Stock at the time it receives them and may elect to redeem those Preferred Shares in Common Stock or cash, at the Company’s discretion. Of the 5,151,320 shares of Series A Preferred Stock that have been redeemed, the redemption of 2,330,186 shares of Series A Preferred Stock were paid in cash, 2,313,106 of which were redeemed at the option of the holders and 17,080 of which were redeemed at the option of the Company. As of December 31, 2025, the Company, at its option, redeemed 2,150,076 shares of Series A Preferred Stock, all of which were paid in shares of Common Stock, including all accrued and unpaid dividends as of each redemption date, and in addition, as of 671,058 shares redeemed at the option of the holders were paid in shares of Common Stock, including all accrued and unpaid dividends as of the redemption date (collectively, the “Series A In-Kind Redemptions”). The Series A In-Kind Redemptions resulted in the aggregate issuance of 1,352,410 shares of Common Stock. Of the 3,491,336 shares of Series A1 Preferred Stock that have been redeemed, the redemption of 183,081 shares of Series A1 Preferred Stock were paid in cash (all of which were redeemed at the option of the holders). As of December 31, 2025, the Company, at its option, redeemed 2,589,606 shares of Series A1 Preferred Stock, all of which were paid in shares of Common Stock, including all accrued and unpaid dividends as of each redemption date, and in addition, as of December 31, 2025, 718,649 shares redeemed at the option of the holders were paid in shares of Common Stock, including all accrued and unpaid dividends as of the redemption date (collectively, the “Series A1 In-Kind Redemptions”). The Series A1 In-Kind Redemptions resulted in the aggregate issuance of 1,202,761 shares of Common Stock. Of the 12,532 shares of Series D Preferred Stock that have been redeemed, the redemption of 8,410 shares of Series D Preferred Stock were paid in cash and 4,122 shares of Series D Preferred Stock were paid in shares of Common Stock, including all accrued and unpaid dividends as of the redemption date (collectively, the “Series D In-Kind Redemptions”). All such redemptions were redeemed at the option of the holders. The Series D In-Kind Redemptions resulted in the aggregate issuance of 11,556 shares of Common Stock. Dividends on Common Stock Holders of our Common Stock are entitled to receive dividends, if, as and when authorized by the Board of Directors and declared by us out of legally available funds. In determining our dividend policy, the Board of Directors considers many factors including the amount of cash resources available for dividend distributions, capital spending plans, cash flow, our financial position, applicable requirements of the MGCL, any applicable contractual restrictions, and future growth in NAV and cash flow per share prospects. Consequently, the dividend rate on a quarterly basis does not necessarily correlate directly to any individual factor. We have not paid dividends on our Common Stock since 2024, and we cannot predict with certainty if or when we may be able to resume paying such dividends on our Common Stock. Off Balance Sheet Arrangements As of December 31, 2025, we did not have any off-balance sheet arrangements. Critical Accounting Policies and Estimates and Recently Issued Accounting Pronouncements The discussion and analysis of our historical financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While we believe that our estimates are based on reasonable assumptions and judgments at the time they are made, some of our assumptions, estimates and judgments will inevitably prove to be incorrect. As a result, actual results could differ from our estimates, and those differences could be material. We believe the following critical accounting policy, among others, affects our more significant estimates and assumptions used in preparing our consolidated financial statements. For a discussion of recently issued accounting literature, see Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K. Recoverability of Investments in Real Estate As described in Note 2 to the consolidated financial statements included in this Annual Report on Form 10-K, investments in real estate are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If, and when, such events or changes in circumstances are present, the recoverability of assets to be held and used is measured by a comparison of the carrying amount to the future undiscounted cash flows expected to be generated by the assets and its eventual disposition. If the undiscounted cash flows are less than the carrying amount of the assets, an impairment is recognized to the extent the carrying amount of the assets exceeds the estimated 62 fair value of the assets. Assets held for sale are reported at the lower of the asset’s carrying amount or fair value, less cost to sell. Our process for evaluating real estate impairment requires management to make significant assumptions related to certain inputs, including rental rates, lease-up period, occupancy, estimated holding periods, capital expenditures, growth rates, market discount rates and terminal capitalization rates. These inputs require a subjective evaluation based on the specific property and market. Changes in the assumptions could have a significant impact on either the fair value, the amount of impairment charge, if any, or both. FINRA Estimated Per Share Value We have prepared an estimate of the per share value of each of our Series A Preferred Stock, Series A1 Preferred Stock and Series D Preferred Stock as of December 31, 2025 in order to assist broker-dealers that are participating in our public offering of Series A1 Preferred Stock and broker-dealers that participated in our public offering of Series A Preferred Stock and Series D Preferred Stock in meeting their obligations under applicable FINRA rules. This estimate utilizes the fair values of our investments in real estate and certain lending assets as well as the carrying amounts of our other assets and liabilities, in each case as of December 31, 2025 (the “Calculated Assets and Liabilities”). Specifically, we divided (i) the fair values of our investments in real estate and certain lending assets and the carrying amounts of our other assets less the carrying amounts of our liabilities, in each case as of December 31, 2025, by (ii) the number of shares of Series A Preferred Stock, Series A1 Preferred Stock and Series D Preferred Stock outstanding as of that date. The fair values of our investments in real estate and certain lending assets were determined with material assistance from third-party appraisal firms engaged to value our investments in real estate and certain lending assets, in each case in accordance with standards set forth by the American Institute of Certified Public Accountants. We believe our methodology of determining the Calculated Assets and Liabilities conforms to standard industry practices and is reasonably designed to ensure it is reliable. The terms of the Series A Preferred Stock, Series A1 Preferred Stock and Series D Preferred Stock expressly provide that the amount that a holder of Series A Preferred Stock, Series A1 Preferred Stock or Series D Preferred Stock, as the case may be, would be entitled to receive upon the redemption of the Series A Preferred Stock, Series A1 Preferred Stock or Series D Preferred Stock, as the case may be, or our liquidation would be equal to the Series A Preferred Stock Stated Value, Series A1 Preferred Stated Value or Series D Preferred Stock Stated Value, as the case may be, plus, in each case, all accumulated, accrued and unpaid dividends thereon (the “Maximum Value”), subject to any applicable redemption fee in the case of a redemption by such holder. As a result, in no event would a holder of Series A Preferred Stock, Series A1 Preferred Stock or Series D Preferred Stock, as the case may be, be entitled to receive an amount greater than the Maximum Value upon the redemption of such shares or our liquidation. Accordingly, although the estimated value of the Series A Preferred Stock, Series A1 Preferred Stock and Series D Preferred Stock, calculated based on the Calculated Assets and Liabilities as described above, exceeded the Maximum Value, we determined that the estimated value of each of the Series A Preferred Stock, the Series A1 Preferred Stock and Series D Preferred Stock, as of December 31, 2025, was equal to $25.00 per share, plus accrued and unpaid dividends. Dividends As of December 31, 2025, there were 12,240,878 and 8,749,542 shares of Series A1 Preferred Stock issued and outstanding, respectively, 8,820,338 and 3,669,018 shares of Series A Preferred Stock issued and outstanding, respectively, 56,857 and 44,325 shares of Series D Preferred Stock issued and outstanding, respectively, and 2,699,686 shares of Common Stock issued and outstanding. Holders of Preferred Stock are entitled to receive, if, as and when authorized by our Board of Directors, and declared by us out of legally available funds, cumulative cash dividends as follows: Annual Rate of Dividend (as a % of stated value) Series A1 Preferred Stock (1) 6.00% Series A Preferred Stock 5.50% Series D Preferred Stock 5.65% (1) The terms of the Series A1 Preferred Stock provide for cumulative cash dividends (if, as and when authorized by the Board of Directors) on each share of Series A1 Preferred Stock at a quarterly rate of the greater of (i) an annual rate of 6.00% of the Series A1 Stated Value, divided by four (4) and (ii) the Federal Funds (Effective) Rate on the dividend determination date, plus 2.50%, of the Series A1 Stated Value, divided by four (4), up to a maximum of 2.50% of the 63 Series A1 Stated Value per quarter. The annual rate of dividend of the Series A1 Preferred Stock during the first quarter of 2026 is 6.39%. Dividends on each share of Preferred Stock begin accruing on, and are cumulative from, the date of issuance. We expect to timely pay dividends on the Preferred Stock in arrears on a monthly basis, unless our results of operations, our general financing conditions, general economic conditions, applicable requirements of the MGCL or other factors make it imprudent to do so. The timing and amount of dividends declared and paid on our Preferred Stock will be determined by our Board of Directors, in its sole discretion, and may vary from time to time. Holders of the Company’s Common Stock are entitled to receive dividends, if, as and when authorized by the Board of Directors and declared by the Company out of legally available funds. In determining the Company’s dividend policy, the Board of Directors considers many factors including the amount of cash resources available for dividend distributions, capital spending plans, cash flow, the Company’s financial position, applicable requirements of the MGCL, any applicable contractual restrictions, and future growth in NAV and cash flow per share prospects. Consequently, the dividend rate on a quarterly basis does not necessarily correlate directly to any individual factor. We have not paid dividends on our Common Stock since 2024, and we cannot predict with certainty if or when we may be able to resume paying such dividends on our Common Stock.