Strategic Transformation and Portfolio Development
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Management converted the redemption of $243 million of preferred stock into common stock to align with the capital structure and long-term goals and to reduce equity obligations.
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The company switched to an asset-based financing strategy, effectively divesting its debt position to reduce business-level risk and improve operational flexibility.
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Strategic focus has shifted to prime multifamily properties, particularly in the Bay Area, where executives are seeing early signs of recovery in prime and residential properties.
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The sale of the loan segment in January 2026 for $31 million was an important step in sharpening the portfolio’s focus and improving liquidity.
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The performance of the office segment was impacted by the non-repetition of last year’s tax appeal, although leasing activity remains active in the Los Angeles and Austin markets.
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The decrease in the hotel segment was due to temporary equipment replacement problems and disruptions related to renovations, which management believes have now been resolved following the completion of a complete renovation of 505 rooms.
Growth Levers and Financial Outlook
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Management expects a significant improvement in Funds From Operations (FFO) beginning in the second quarter of 2026, driven by an approximately $16 million annual decrease in preferred equity obligations.
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The company is focused on the improvement of asset level performance as the main basis for FFO growth between 2026 and 2027.
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Strategic initiatives include evaluating selected asset sales to unlock value and close the gap between the current share price and the implied book value of $147 per share.
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Development plans include the possible start of a 50-unit residential project on a high-rise in Los Angeles later this year, following the acquisition of rights.
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Financing efforts focused on extending the debt maturities of certain Oakland properties and refinancing the Sheraton Grand to increase loan balances and reduce lending spreads.
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Operational Storms and Structural Adjustments
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A one-time tax refund benefit in the prior period created a difficult year-over-year comparison of the office segment’s NOI.
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The Company recorded a loss of $0.705 million on the early extinguishment of debt related to the full payment of the credit facility’s revolving credit facility.
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Executives flagged ongoing discussions about an extension of the Oakland office space loan growth, noting that an agreement with the lender is not guaranteed.
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Hotel NOI was particularly hard hit by a system failure in March that temporarily put a portion of its room inventory out of commission.
