Creative Media & Community Trust Corp 10-Q

Item 1. Financial Statements CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (In thousands, except share and per share amounts) (Unaudited) June 30, 2021 December 31, 2020 ASSETS Investments in real estate, net $ 498,521 $ 506,040 Cash and cash equivalents 59,730 33,636 Restricted cash 9,804 10,013 Loans receivable, net 81,942 83,135 Accounts receivable, net 1,795 1,737 Deferred rent receivable and charges, net 36,339 35,956 Other intangible assets, net 5,754 6,313 Loan servicing asset, net and other assets 10,939 8,787 TOTAL ASSETS $ 704,824 $ 685,617 LIABILITIES, REDEEMABLE PREFERRED STOCK, AND EQUITY LIABILITIES: Debt, net $ 260,717 $ 324,313 Accounts payable and accrued expenses 13,678 20,327 Intangible liabilities, net 388 587 Due to related parties 10,632 6,706 Other liabilities 12,413 9,733 Total liabilities 297,828 361,666 COMMITMENTS AND CONTINGENCIES (Note 13) REDEEMABLE PREFERRED STOCK: Series A cumulative redeemable preferred stock, $ 0.001 par value; 36,000,000 shares authorized; 1,845,681 and 1,844,881 shares issued and outstanding, respectively, as of June 30, 2021 and 2,008,256 and 2,007,856 shares issued and outstanding, respectively, as of December 31, 2020; liquidation preference of $ 25.00 per share, subject to adjustment 42,470 45,837 EQUITY: Series A cumulative redeemable preferred stock, $ 0.001 par value; 36,000,000 shares authorized; 5,408,954 and 5,253,377 shares issued and outstanding, respectively, as of June 30, 2021 and 4,484,376 and 4,377,762 shares issued and outstanding, respectively, as of December 31, 2020; liquidation preference of $ 25.00 per share, subject to adjustment 130,595 108,729 Series D cumulative redeemable preferred stock, $ 0.001 par value; 32,000,000 shares authorized; 31,025 shares issued and outstanding as of June 30, 2021 and 19,145 shares issued and outstanding as of December 31, 2020; liquidation preference of $ 25.00 per share, subject to adjustment 764 473 Series L cumulative redeemable preferred stock, $ 0.001 par value; 9,000,000 shares authorized; 8,080,740 and 5,387,160 shares issued and outstanding, respectively, as of June 30, 2021 and December 31, 2020; liquidation preference of $ 28.37 per share, subject to adjustment 152,834 152,834 Common stock, $ 0.001 par value; 900,000,000 shares authorized; 23,369,331 shares issued and outstanding as of June 30, 2021 and 14,827,410 shares issued and outstanding as of December 31, 2020. 24 15 Additional paid-in capital 868,929 794,127 Distributions in excess of earnings ( 788,957 ) ( 778,519 ) Total stockholders’ equity 364,189 277,659 Noncontrolling interests 337 455 Total equity 364,526 278,114 TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK, AND EQUITY $ 704,824 $ 685,617 The accompanying notes are an integral part of these consolidated financial statements. 1 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 REVENUES: Rental and other property income $ 13,309 $ 13,700 $ 26,658 $ 28,519 Hotel income 3,130 869 4,862 8,628 Interest and other income 6,234 1,941 10,032 4,898 Total Revenues 22,673 16,510 41,552 42,045 EXPENSES: Rental and other property operating 9,115 7,492 17,405 20,007 Asset management and other fees to related parties 2,260 2,376 4,519 5,021 Expense reimbursements to related parties—corporate 454 615 1,059 1,427 Expense reimbursements to related parties—lending segment 433 998 1,164 1,680 Interest 2,673 2,896 5,305 6,063 General and administrative 1,146 1,668 3,768 3,402 Depreciation and amortization 5,069 5,197 10,106 10,455 21,150 21,242 43,326 48,055 INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES 1,523 ( 4,732 ) ( 1,774 ) ( 6,010 ) Provision (benefit) for income taxes 996 ( 691 ) 1,370 ( 713 ) NET INCOME (LOSS) 527 ( 4,041 ) ( 3,144 ) ( 5,297 ) Net loss (income) attributable to noncontrolling interests 3 ( 2 ) 4 ( 6 ) NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY 530 ( 4,043 ) ( 3,140 ) ( 5,303 ) Redeemable preferred stock dividends declared or accumulated (Note 9) ( 4,621 ) ( 3,990 ) ( 9,087 ) ( 9,346 ) Redeemable preferred stock deemed dividends (Note 9) ( 106 ) ( 52 ) ( 163 ) ( 213 ) Redeemable preferred stock redemptions (Note 9) ( 13 ) ( 56 ) ( 26 ) ( 66 ) NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS $ ( 4,210 ) $ ( 8,141 ) $ ( 12,416 ) $ ( 14,928 ) NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS PER SHARE: Basic $ ( 0.28 ) $ ( 0.55 ) $ ( 0.83 ) $ ( 1.02 ) Diluted $ ( 0.28 ) $ ( 0.55 ) $ ( 0.83 ) $ ( 1.02 ) WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING: Basic 15,102 14,782 14,956 14,690 Diluted 15,102 14,782 14,956 14,690 The accompanying notes are an integral part of these consolidated financial statements. 2 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES Consolidated Statements of Equity (In thousands, except share and per share amounts) (Unaudited) Six Months Ended June 30, 2021 Common Stock Preferred Stock Shares Par Value Shares Par Value Additional Paid-in Capital Distributions in Excess of Earnings Total Stockholders’ Equity Non-controlling Interests Total Equity Balances, December 31, 2020 14,827,410 $ 15 9,784,067 $ 262,036 $ 794,127 $ ( 778,519 ) $ 277,659 $ 455 $ 278,114 Contributions to noncontrolling interests — — — — — — — — — Distributions to noncontrolling interests — — — — — — — ( 114 ) ( 114 ) Stock-based compensation expense — — — — 60 — 60 — 60 Common dividends ($ 0.075 per share) — — — — — ( 1,112 ) ( 1,112 ) — ( 1,112 ) Dividends to holders of Series A Preferred Stock ($ 0.34375 per share) — — — — — ( 2,350 ) ( 2,350 ) — ( 2,350 ) Issuance of Series D Preferred Stock — — 4,045 99 ( 3 ) — 96 — 96 Dividends to holders of Series D Preferred Stock ($ 0.35313 per share) — — — — — ( 9 ) ( 9 ) — ( 9 ) Reclassification of Series A Preferred Stock to permanent equity — — 366,991 9,144 ( 901 ) — 8,243 — 8,243 Redeemable Preferred Stock deemed dividends — — — — — ( 57 ) ( 57 ) — ( 57 ) Redemption of Series A Preferred Stock — — ( 29,462 ) ( 733 ) 61 ( 13 ) ( 685 ) — ( 685 ) Net loss — — — — — ( 3,670 ) ( 3,670 ) ( 1 ) ( 3,671 ) Balances, March 31, 2021 14,827,410 $ 15 10,125,641 $ 270,546 $ 793,344 $ ( 785,730 ) $ 278,175 $ 340 $ 278,515 Stock-based compensation expense 20,332 — — — 50 — 50 — 50 Common dividends ($ 0.075 per share) — — — — — ( 1,114 ) ( 1,114 ) — ( 1,114 ) Dividends to holders of Series A Preferred Stock ($ 0.34375 per share) — — — — — ( 2,511 ) ( 2,511 ) — ( 2,511 ) Issuance of Series D Preferred Stock — — 7,835 192 ( 7 ) — 185 — 185 Dividends to holders of Series D Preferred Stock ($ 0.35313 per share) — — — — — ( 13 ) ( 13 ) — ( 13 ) Reclassification of Series A Preferred Stock to permanent equity — — 556,587 13,915 ( 1,434 ) — 12,481 — 12,481 Redeemable Preferred Stock deemed dividends — — — — — ( 106 ) ( 106 ) — ( 106 ) Redemption of Series A Preferred Stock — — ( 18,501 ) ( 460 ) 42 ( 13 ) ( 431 ) — ( 431 ) Issuance of Common Stock 8,521,589 9 — — 76,934 — 76,943 — 76,943 Net (loss) income — — — — — 530 530 ( 3 ) 527 Balances, June 30, 2021 23,369,331 $ 24 10,671,562 $ 284,193 $ 868,929 $ ( 788,957 ) $ 364,189 $ 337 $ 364,526 (Continued) 3 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES Consolidated Statements of Equity (Continued) (In thousands, except share and per share amounts) (Unaudited) Six Months Ended June 30, 2020 Common Stock Preferred Stock Shares Par Value Shares Par Value Additional Paid-in Capital Distributions in Excess of Earnings Total Stockholders’ Equity Non-controlling Interests Total Equity Balances, December 31, 2019 14,602,149 $ 15 8,224,254 $ 223,467 $ 794,825 $ ( 740,617 ) $ 277,690 $ 505 $ 278,195 Stock-based compensation expense — — — — 56 — 56 — 56 Common dividends ($ 0.075 per share) — — — — — ( 1,095 ) ( 1,095 ) — ( 1,095 ) Issuance of Series A Preferred Warrants — — — — 28 — 28 — 28 Dividends to holders of Series A Preferred Stock ($ 0.68750 per share) — — — — — ( 3,252 ) ( 3,252 ) — ( 3,252 ) Issuance of Series D Preferred Stock — — 5,980 150 ( 5 ) — 145 — 145 Dividends to holders of Series D Preferred Stock ($ 0.588542 per share) — — — — — ( 3 ) ( 3 ) — ( 3 ) Reclassification of Series A Preferred Stock to permanent equity — — 304,274 7,588 ( 640 ) — 6,948 — 6,948 Redeemable Preferred Stock deemed dividends — — — — — ( 161 ) ( 161 ) — ( 161 ) Redemption of Series A Preferred Stock — — ( 2,452 ) ( 61 ) 5 ( 10 ) ( 66 ) — ( 66 ) Net (loss) income — — — — — ( 1,260 ) ( 1,260 ) 4 ( 1,256 ) Balances, March 31, 2020 14,602,149 $ 15 8,532,056 231,144 $ 794,269 $ ( 746,398 ) 279,030 $ 509 $ 279,539 Distributions to noncontrolling interests — — — — — — — ( 45 ) ( 45 ) Stock-based compensation expense 21,912 — — — 56 — 56 — 56 Issuance of shares of Common Stock in exchange for asset management fees 203,349 — — — 2,359 — 2,359 — 2,359 Common dividends ($ 0.075 per share) — — — — — ( 1,112 ) ( 1,112 ) — ( 1,112 ) Issuance of Series D Preferred Stock — — 920 23 ( 1 ) — 22 — 22 Dividends to holders of Series D Preferred Stock ($ 0.35313 per share) — — — — — ( 3 ) ( 3 ) — ( 3 ) Dividends to holders of Series A Preferred Stock ($ 0.34375 per share) — — — — — ( 1,886 ) ( 1,886 ) — ( 1,886 ) Reclassification of Series A Preferred Stock to permanent equity — — 427,064 10,638 ( 899 ) — 9,739 — 9,739 Redeemable Preferred Stock deemed dividends — — — — — ( 52 ) ( 52 ) — ( 52 ) Redemption of Series A Preferred Stock — — ( 5,532 ) ( 138 ) 11 ( 56 ) ( 183 ) — ( 183 ) Net (loss) income — — — — — ( 4,043 ) ( 4,043 ) 2 ( 4,041 ) Balances, June 30, 2020 14,827,410 $ 15 8,954,508 241,667 $ 795,795 $ ( 753,550 ) 283,927 $ 466 $ 284,393 The accompanying notes are an integral part of these consolidated financial statements. 4 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (In thousands) (Unaudited) Six Months Ended June 30, 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 3,144 ) $ ( 5,297 ) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization, net 10,095 10,244 Amortization of deferred loan costs 635 548 Amortization of premiums and discounts on debt 15 ( 51 ) Unrealized premium adjustment 1,457 518 Amortization and accretion on loans receivable, net ( 279 ) ( 261 ) Write-offs of uncollectible receivables 1,076 302 Deferred income taxes ( 13 ) ( 867 ) Stock-based compensation 110 112 Loans funded, held for sale to secondary market ( 45,464 ) ( 9,303 ) Proceeds from sale of guaranteed loans 49,207 10,902 Principal collected on loans subject to secured borrowings 291 2,613 Other operating activity ( 925 ) ( 407 ) Changes in operating assets and liabilities: Accounts receivable ( 1,089 ) 586 Other assets ( 2,191 ) ( 552 ) Accounts payable and accrued expenses ( 553 ) ( 2,902 ) Deferred leasing costs ( 413 ) ( 332 ) Other liabilities 2,680 ( 1,554 ) Due to related parties 6,345 942 Net cash provided by operating activities 17,840 5,241 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to investments in real estate ( 823 ) ( 9,545 ) Loans funded ( 19,746 ) ( 18,567 ) Principal collected on loans 15,747 4,710 Other investing activity — 59 Net cash used in investing activities ( 4,822 ) ( 23,343 ) CASH FLOWS FROM FINANCING ACTIVITIES: Payment of revolving credit facilities, mortgages payable, term notes and principal on SBA 7(a) loan-backed notes ( 94,351 ) ( 10,370 ) Proceeds from revolving credit facilities and term notes 30,396 76,966 Payment of principal on secured borrowings ( 291 ) ( 2,613 ) Payment of deferred preferred stock offering costs ( 268 ) ( 501 ) Payment of deferred costs ( 125 ) ( 203 ) Payment of common dividends ( 2,226 ) ( 2,207 ) Proceeds from issuance of Common Stock 78,825 — Payment of Common Stock offering costs ( 325 ) — Net proceeds from issuance of Series A Preferred Warrants — 29 Net proceeds from issuance of Preferred Stock 15,484 21,466 Payment of preferred stock dividends ( 12,965 ) ( 12,589 ) Redemption of Preferred Stock ( 1,173 ) ( 1,626 ) Noncontrolling interests’ distributions ( 114 ) ( 45 ) Net cash provided by financing activities 12,867 68,307 (Continued) 5 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Continued) (In thousands) (Unaudited) Six Months Ended June 30, 2021 2020 NET INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH 25,885 50,205 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH: Beginning of period 43,649 35,947 End of period $ 69,534 $ 86,152 RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS: Cash and cash equivalents $ 59,730 $ 75,192 Restricted cash 9,804 10,960 Total cash and cash equivalents and restricted cash $ 69,534 $ 86,152 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest $ 4,582 $ 5,567 Federal income taxes paid $ 425 $ 100 SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES: Accrued capital expenditures, tenant improvements and real estate developments $ 390 $ 3,761 Accrued preferred stock offering costs $ 984 $ 616 Accrual of dividends payable to preferred stockholders $ 3,260 $ 2,428 Preferred stock offering costs offset against redeemable preferred stock $ 250 $ 305 Reclassification of Series A Preferred Stock from temporary equity to permanent equity $ 20,724 $ 16,687 Accrued deferred costs $ 1 $ 457 Reclassification of loans receivable, net to real estate owned $ — $ 174 Redeemable preferred stock deemed dividends $ 163 $ 213 Accrued redeemable preferred stock fees $ 640 $ 249 Equity-based payment for management fees $ 2,419 $ 2,359 Accrued Common Stock offering costs included in additional paid-in capital $ 1,557 $ — The accompanying notes are an integral part of these consolidated financial statements. 6 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) 1. ORGANIZATION AND OPERATIONS CIM Commercial Trust Corporation (“CIM Commercial” or the “Company”), a Maryland corporation and real estate investment trust (“REIT”), together with its wholly-owned subsidiaries, primarily owns and operates Class A and creative office real assets in vibrant and improving metropolitan communities throughout the United States. The Company, supported by the broad real estate capabilities of CIM Group, L.P. (“CIM Group”), seeks to focus on the acquisition, ownership, operation and development of cash flowing creative office, multifamily, retail, parking, infill industrial and limited service hospitality real assets in communities qualified by CIM Group. 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. The Company was originally organized in 1993 as PMC Commercial Trust (“PMC Commercial”), a Texas real estate investment trust. On July 8, 2013, PMC Commercial entered into a merger agreement with CIM Urban REIT, LLC (“CIM REIT”), an affiliate of CIM Group, and subsidiaries of the respective parties. CIM REIT was a private commercial REIT and was the owner of CIM Urban Partners, L.P. (“CIM Urban”). The merger was completed on March 11, 2014 (the “Acquisition Date”). The Company’s common stock, $ 0.001 par value per share (“Common Stock”), is currently traded on the Nasdaq Global Market (“Nasdaq”) under the ticker symbol “CMCT”, and on the Tel Aviv Stock Exchange (the “TASE”) under the ticker symbol “CMCT-L.” The Company’s Series L preferred stock, $ 0.001 par value per share (“Series L Preferred Stock”), is currently traded on Nasdaq and on the TASE, in each case under the ticker symbol “CMCTP.” The Company has authorized for issuance 900,000,000 shares of common stock and 100,000,000 shares of preferred stock (“Preferred Stock”). The Company filed Articles of Amendment (the “Reverse Stock Split Amendment”) to effectuate a one-for-three reverse stock split of the Company’s Common Stock, effective on September 3, 2019 (the “Reverse Stock Split”). Pursuant to the Reverse Stock Split Amendment, every three shares of Common Stock issued and outstanding immediately prior to the effective time of the Reverse Stock Split were converted into one share of Common Stock, par value $ 0.003 per share. In connection with the Reverse Split Amendment, the Company filed Articles of Amendment to revert the par value of the Common Stock issued and outstanding from $ 0.003 per share to $ 0.001 per share, effective as of September 3, 2019, following the effective time of the Reverse Split Amendment. All Common Stock and per share of Common Stock amounts set forth in this Quarterly Report on Form 10-Q have been adjusted to give retroactive effect to the Reverse Stock Split, unless otherwise stated. The Company conducted a continuous public offering of Series A Preferred Units from October 2016 through January 2020, where each Series A Preferred Unit consisted of one share of Series A Preferred Stock, par value $ 0.001 per share, of the Company (collectively, the “Series A Preferred Stock”) with an initial stated value of $ 25.00 per share, subject to adjustment (the “Series A Preferred Stock Stated Value”), and one warrant (collectively, the “Series A Preferred Warrants”) to purchase 0.25 of a share of Common Stock, subject to adjustment (Note 10). Proceeds and expenses from the sale of the Series A Preferred Units were allocated to the Series A Preferred Stock and Series A Preferred Warrants using their relative fair values on the date of issuance. Since February 2020, the Company has been conducting a continuous public offering of Series A Preferred Stock and Series D preferred stock, par value $ 0.001 per share (the “Series D Preferred Stock”), with an initial stated value of $ 25.00 per share, subject to adjustment (the “Series D Preferred Stock Stated Value”). The selling price of the Series A Preferred Stock in the offering has been, and is expected to continue to be, $ 25.00 per share and the selling price of the Series D Preferred Stock was $ 25.00 per share for all sales that occurred from the beginning of the offering to and including June 28, 2020 and is expected to be, and since June 29, 2020, has been, $ 24.50 per share through the end of the life of the offering. In June 2021, the Company conducted a rights offering (the “Rights Offering”) pursuant to which the Company issued an aggregate of 8,521,589 shares of Common Stock at a subscription price of $ 9.25 per share for aggregate gross proceeds of $ 78.8 million before issuance costs of $ 1.9 million . CIM Commercial has qualified and intends to continue to qualify as a REIT, as defined in the Internal Revenue Code of 1986, as amended. 7 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES For more information regarding the Company’s significant accounting policies and estimates, please refer to “Basis of Presentation and Summary of Significant Accounting Policies” contained in Note 2 to the Company’s consolidated financial statements for the year ended December 31, 2020, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 16, 2021 and amended on April 30, 2021 (the “2020 Form 10-K”). Interim Financial Information —The accompanying interim consolidated financial statements of CIM Commercial have been prepared by the Company’s management in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Certain information and note disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the interim consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. The accompanying financial information reflects all adjustments which are, in the opinion of the Company’s management, of a normal recurring nature and necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 given, among other things, the uncertain impact of the novel coronavirus (“COVID-19”) on the Company’s operations during the remainder of the year. The accompanying interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto, included in the 2020 Form 10-K. Principles of Consolidation —The consolidated financial statements include the accounts of CIM Commercial and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. In determining whether the Company has controlling interests in an entity and the requirement to consolidate the accounts in that entity, the Company analyzes its investments in real estate in accordance with standards set forth in GAAP to determine whether they are variable interest entities (“VIEs”), and if so, whether the Company is the primary beneficiary. The Company’s judgment with respect to its level of influence or control over an entity and whether the Company is the primary beneficiary of a VIE involves consideration of various factors, including the form of the Company’s ownership interest, the Company’s voting interest, the size of the Company’s investment (including loans), and the Company’s ability to participate in major policy-making decisions. The Company’s ability to correctly assess its influence or control over an entity affects the presentation of these investments in real estate on the Company’s consolidated financial statements. As of June 30, 2021, the Company determined that the trust formed for the benefit of the note holders (the “Trust”) for the securitization of the unguaranteed portion of certain of the Company’s SBA 7(a) loans receivable is considered a VIE. Applying the consolidation requirements for VIEs, the Company determined that it is the primary beneficiary based on its power to direct activities through its role as servicer and its obligations to absorb losses and right to receive benefits. (Note 6) Investments in Real Estate —Investments in real estate are stated at depreciated cost. Depreciation and amortization are recorded on a straight-line basis over the estimated useful lives as follows: Buildings and improvements 15 - 40 years Furniture, fixtures, and equipment 3 - 5 years Tenant improvements Lesser of useful life or lease term The Company capitalizes project costs, including pre-construction costs, interest expense, property taxes, insurance, and other costs directly related and essential to the development, redevelopment, or construction of a project, while activities are ongoing to prepare an asset for its intended use. Costs incurred after a project is substantially complete and ready for its intended use are expensed as incurred. Improvements and replacements are capitalized when they extend the useful life, increase capacity, or improve the efficiency of the asset. Ordinary repairs and maintenance are expensed as incurred. Recoverability of Investments in Real Estate —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 requires significant judgment and estimates and is measured by a comparison of the carrying amount to the future undiscounted cash flows expected to be generated by the assets and their 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 fair value of the assets. The 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 8 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) discount rates and terminal capitalization rates. For the Company’s hotel property, additional inputs considered include revenue per available room and average daily rate. 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. Any asset held for sale is reported at the lower of the asset’s carrying amount or fair value, less costs to sell. When an asset is identified by the Company as held for sale, the Company will cease recording depreciation and amortization of the asset. For the three and six months ended June 30, 2021 and 2020, the Company recognized no impairment of long-lived assets ( Note 3 ). Revenue Recognition —At the inception of a revenue-producing contract, the Company determines if a contract qualifies as a lease and if not, then as a customer contract. Based on this determination, the appropriate treatment in accordance with GAAP is applied to the contract, including its revenue recognition. Revenue from leasing activities The Company operates as a lessor of real estate assets. The Company determined that the Company’s contracts with its tenants explicitly identify the premises and that any substitution rights to relocate tenants to other premises within the same building stated in the contract are not substantive. Additionally, so long as payments are made timely under such contracts, the Company’s tenants have the right to obtain substantially all the economic benefits from the use of the identified asset and can direct how and for what purpose the premises are used to conduct their operations. Therefore, the contracts with the Company’s tenants constitute leases. All leases are classified as operating leases and minimum rents are recognized on a straight-line basis over the terms of the leases when collectability is probable and the tenant has taken possession or controls the physical use of the leased asset. The excess of rents recognized over amounts contractually due pursuant to the underlying leases is recorded as deferred rent. If the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or the Company. When the Company is the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is considered the owner of the improvements, any tenant improvement allowance that is funded is treated as an incentive. Lease incentives paid to tenants are included in other assets and amortized as a reduction to rental revenue on a straight-line basis over the term of the related lease. As of June 30, 2021 and December 31, 2020, lease incentives of $ 3.9 million and $ 4.0 million, respectively, are presented net of accumulated amortization of $ 2.5 million and $ 2.4 million, respectively. Reimbursements from tenants, consisting of amounts due from tenants for common area maintenance, real estate taxes, insurance, and other recoverable costs, are recognized as revenue and are included in rental and other property income in the period the expenses are incurred, with the corresponding expenses included in rental and other property operating expense. Tenant reimbursements are recognized and presented on a gross basis when the Company is primarily responsible for fulfilling the promise to provide the specified good or service and control that specified good or service before it is transferred to the tenant. The Company has elected not to separate lease and non-lease components as the pattern of revenue recognition does not differ for the two components, and the non-lease component is not the primary component in the Company’s leases. In addition to minimum rents, certain leases, including the Company’s parking leases with third-party operators, provide for additional rents based upon varying percentages of tenants’ sales in excess of annual minimums. Percentage rent is recognized once lessees’ specified sales targets have been met. For the three and six months ended June 30, 2021 and 2020, the Company recognized rental income as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Rental and other property income Fixed lease payments (1) $ 12,066 $ 12,567 $ 24,510 $ 25,912 Variable lease payments (2) 1,243 1,133 2,148 2,607 Rental and other property income $ 13,309 $ 13,700 $ 26,658 $ 28,519 ______________________ (1) Fixed lease payments include contractual rents under lease agreements with tenants recognized on a straight-line basis over the lease term, including amortization of acquired above-market leases, below-market leases and lease incentives. 9 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) (2) Variable lease payments include expense reimbursements billed to tenants and percentage rent, net of bad debt expense from the Company’s operating leases. The Company continually reviews whether collection of lease-related receivables, including any straight-line rent, and current and future operating expense reimbursements from tenants is probable. The determination of whether collectability is probable takes into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. Upon the determination that the collectability of a receivable is not probable, the Company will record a reduction to rental and other property income for amounts previously recorded and a decrease in the outstanding receivable. Revenue from leases where collection is deemed to be not probable is recorded on a cash basis until collectability becomes probable. Management’s estimate of the collectability of lease-related receivables is based on the best information available at the time of estimate. The Company does not use a general reserve approach and lease-related receivables are adjusted and taken against rental and other property income only when collectability becomes not probable. As of June 30, 2021 and December 31, 2020, the Company had identified certain tenants where collection was no longer considered probable and decreased outstanding receivables by $ 3.0 million and $ 1.9 million, respectively, across all operating leases. Revenue from lending activities Interest income included in interest and other income is comprised of interest earned on loans and the Company’s short-term investments and the accretion of net loan origination fees and discounts. Interest income on loans is accrued as earned with the accrual of interest suspended when the related loan becomes a Non-Accrual Loan (as defined below). Revenue from hotel activities At contract inception, the Company assesses the goods and services promised in its contracts with customers and identifies a performance obligation for each promise to transfer to the customer a good or service (or bundle of goods or services) that is distinct. To identify the performance obligations, the Company considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or implied by customary business practices. Various performance obligations of hotel revenues can be categorized as follows: • cancellable and noncancelable room revenues from reservations and • ancillary services including facility usage and food or beverage. Cancellable reservations represent a single performance obligation of providing lodging services at the hotel. The Company satisfies its performance obligation and recognizes revenues associated with these reservations over time as services are rendered to the customer. The Company satisfies its performance obligation and recognizes revenues associated with noncancelable reservations at the earlier of (i) the date on which the customer cancels the reservation or (ii) over time as services are rendered to the customer. Ancillary services include facilities usage and providing food and beverage. The Company satisfies its performance obligation and recognizes revenues associated with these services at a point in time as the good or service is delivered to the customer. At inception of these contracts with customers for hotel revenues, the contractual price is equivalent to the transaction price as there are no elements of variable consideration to estimate. The Company presents hotel revenues net of sales, occupancy, and other taxes. 10 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) Below is a reconciliation of the hotel revenue from contracts with customers to the total hotel segment revenue disclosed in Note 15 (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Hotel properties Hotel income $ 3,130 $ 869 $ 4,862 $ 8,628 Rental and other property income 334 227 465 689 Interest and other income 13 18 28 50 Hotel revenues $ 3,477 $ 1,114 $ 5,355 $ 9,367 Tenant recoveries outside of the lease agreements Tenant recoveries outside of the lease agreements are related to construction projects in which the Company’s tenants have agreed to fully reimburse the Company for all costs related to construction. These services include architectural, permit expediter and construction services. At inception of the contract with the customer, the contractual price is equivalent to the transaction price as there are no elements of variable consideration to estimate. While these individual services are distinct, in the context of the arrangement with the customer, all of these services are bundled together and represent a single package of construction services requested by the customer. The Company satisfies its performance obligation and recognizes revenues associated with these services over time as the construction is completed. No such amounts were recognized for tenant recoveries outside of the lease agreements for each of the three and six months ended June 30, 2021 and 2020. As of June 30, 2021, there were no remaining performance obligations associated with tenant recoveries outside of the lease agreements. Loans Receivable —The Company’s loans receivable are carried at their unamortized principal balance less unamortized acquisition discounts and premiums, deferred origination fees, retained loan discounts and loan loss reserves. Acquisition discounts or premiums, origination fees and retained loan discounts are amortized as a component of interest and other income using the effective interest method over the life of the respective loans, or on a straight-line basis when it approximates the effective interest method. All loans were originated pursuant to programs sponsored by the Small Business Administration (the “SBA”). The programs consist of loans originated under the SBA 7(a) Small Business Loan Program and, commencing with the quarter ended June 30, 2020, the Paycheck Protection Program (the “PPP”). Pursuant to the SBA 7(a) Small Business Loan Program, the Company sells the portion of the loan that is guaranteed by the SBA. Upon sale of the SBA guaranteed portion of the loans, which are accounted for as sales, the unguaranteed portion of the loan retained by the Company is recorded at fair value and a discount is recorded as a reduction in basis of the retained portion of the loan. Unamortized retained loan discounts were $ 9.0 million and $ 7.8 million as of June 30, 2021 and December 31, 2020, respectively. At the Acquisition Date, the carrying value of the Company’s loans was adjusted to estimated fair market value and acquisition discounts of $ 33.9 million were recorded, which are being accreted to interest and other income using the effective interest method. Acquisition discounts of $ 438,000 and $ 492,000 remained as of June 30, 2021 and December 31, 2020, respectively. A loan receivable is generally classified as non-accrual (a “Non-Accrual Loan”) if (i) it is past due as to payment of principal or interest for a period of 60 days or more, (ii) any portion of the loan is classified as doubtful or is charged-off or (iii) the repayment in full of the principal and or interest is in doubt. Generally, loans are charged-off when management determines that the Company will be unable to collect any remaining amounts due under the loan agreement, either through liquidation of collateral or other means. Interest income, included in interest and other income, on a Non-Accrual Loan is recognized on the cost recovery basis. Loan Loss Reserves —On a quarterly basis, and more frequently if indicators exist, the Company evaluates the collectability of its loans receivable. The Company’s evaluation of collectability involves significant judgment, estimates, and a review of the ability of the borrower to make principal and interest payments, the underlying collateral and the borrowers’ business models and future operations. For the three and six months ended June 30, 2021, the Company recorded a net recovery of $ 88,000 and a net impairment of $ 4,000 , respectively, on its loans receivable. For the three and six months ended June 30, 2020, the Company recorded a net impairment of $ 36,000 and a net recovery of $ 16,000 , respectively, on its loans receivable. There were no material loans receivable subject to credit risk which were considered to be impaired as of June 30, 2021 or December 31, 2020. The Company considers a loan to be impaired when the Company does not expect to collect all of the 11 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) contractual interest and principal payments as scheduled in the loan agreements. The Company also establishes a general loan loss reserve when available information indicates that it is probable a loss has occurred based on the carrying value of the portfolio and the amount of the loss can be reasonably estimated. Significant judgment is required in determining the general loan loss reserve, including estimates of the likelihood of default and the estimated fair value of the collateral. The general loan loss reserve includes those loans, which may have negative characteristics which have not yet become known to the Company. In addition to the reserves established on loans not considered impaired that have been evaluated under a specific evaluation, the Company establishes the general loan loss reserve using a consistent methodology to determine a loss percentage to be applied to loan balances. These loss percentages are based on many factors, primarily cumulative and recent loss history and general economic conditions. As of June 30, 2021 and December 31, 2020, the Company had loan loss reserves of $ 930,000 and $ 885,000 , respectively. Deferred Rent Receivable and Charges —Deferred rent receivable and charges consist of deferred rent, deferred leasing costs, deferred offering costs (Note 9) and other deferred costs. Deferred leasing costs, which represent lease commissions and other direct costs associated with the acquisition of tenants, are capitalized and amortized on a straight-line basis over the terms of the related leases. Deferred offering costs represent direct costs incurred in connection with the Company’s offerings of Series A Preferred Units, and, after January 2020, Series A Preferred Stock and Series D Preferred Stock, excluding costs specifically identifiable to a closing, such as commissions, dealer-manager fees, and other offering fees and expenses. Generally, for a specific issuance of securities, issuance-specific offering costs are recorded as a reduction of proceeds raised on the issuance date and offering costs incurred but not directly related to a specifically identifiable closing of a security are deferred. Deferred offering costs are first allocated to each issuance of a security on a pro-rata basis equal to the ratio of the number of securities issued in a given issuance to the maximum number of securities that are expected to be issued in the related offering. In the case of the Series A Preferred Units, which were issued prior to February 2020, the issuance-specific offering costs and the deferred offering costs allocated to such issuance were further allocated to the Series A Preferred Stock and Series A Preferred Warrants issued in such issuance based on the relative fair value of the instruments on the date of issuance. The deferred offering costs allocated to the Series A Preferred Stock and Series A Preferred Warrants are reductions to temporary equity and permanent equity, respectively. As of June 30, 2021 and December 31, 2020, deferred rent receivable and charges consist of the following (in thousands): June 30, 2021 December 31, 2020 Deferred rent receivable $ 21,200 $ 20,470 Deferred leasing costs, net of accumulated amortization of $ 8,420 and $ 7,742 , respectively 8,275 8,950 Deferred offering costs 6,373 6,046 Other deferred costs 491 490 Deferred rent receivable and charges, net $ 36,339 $ 35,956 Redeemable Preferred Stock —Beginning on the date of original issuance of any given shares of Series A Preferred Stock or Series D Preferred Stock, and from and after the fifth anniversary date of the original issuance of the Series L Preferred Stock, the holder of such shares has the right to require the Company to redeem such shares, subject to certain limitations as discussed in Note 9. The Company records the activity related to the Series A Preferred Warrants, Series D Preferred Stock and Series L Preferred Stock in permanent equity. In the event a holder of Series A Preferred Stock requests redemption of such shares and such redemption takes place prior to the first anniversary of the date of original issuance, the Company is required to pay such redemption in cash. As a result, the Company records issuances of Series A Preferred Stock in temporary equity. On the first anniversary of the date of original issuance of a particular share of Series A Preferred Stock, the Company reclassifies such share of Series A Preferred Stock from temporary equity to permanent equity because the feature giving rise to temporary equity classification, the requirement to satisfy redemption requests in cash, lapses on the first anniversary date. Noncontrolling Interests —Noncontrolling interests represent the interests in various properties owned by third-parties. Restricted Cash —The Company’s mortgage loan and hotel management agreements provide for depositing cash into restricted accounts reserved for capital expenditures, free rent, tenant improvement and leasing commission obligations. Restricted cash also includes cash required to be segregated in connection with certain of the Company’s loans receivable. 12 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) Reclassifications —Certain prior period amounts have been reclassified to conform with the current period presentation. These reclassifications had no effect on previously reported totals or subtotals. The reclassifications have been made to the consolidated statement of cash flows for the six months ended June 30, 2020 as follows (in thousands): Six Months Ended June 30, 2020 As previously reported Reclassification As Revised Consolidated Statements of Cash Flows Depreciation and amortization, net $ 10,455 $ ( 211 ) $ 10,244 Deferred rent and amortization of intangible assets, liabilities and lease inducements $ ( 1,341 ) $ 1,341 $ — Other assets $ 578 $ ( 1,130 ) $ ( 552 ) Payment of revolving credit facilities, mortgages payable, term notes and principal on SBA 7(a) loan-backed notes $ — $ ( 10,370 ) $ ( 10,370 ) Payment of principal on SBA 7(a) loan-backed notes $ ( 5,370 ) $ 5,370 $ — Payment of unsecured revolving lines of credit, revolving credit facility and or term note $ ( 5,000 ) $ 5,000 $ — Proceeds from revolving credit facilities and term notes $ — $ 76,966 $ 76,966 Proceeds from unsecured revolving lines of credit, revolving credit facility and or term note $ 61,500 $ ( 61,500 ) $ — Borrowed funds from the Federal Reserve through the Paycheck Protection Program Liquidity Facility $ 15,466 $ ( 15,466 ) $ — Payment of deferred costs $ ( 70 ) $ ( 133 ) $ ( 203 ) Payment of deferred loan costs $ ( 133 ) $ 133 $ — Net proceeds from issuance of Preferred Stock $ 21,296 $ 170 $ 21,466 Net proceeds from issuance of Series D Preferred Stock $ 170 $ ( 170 ) $ — Additions to deferred loan costs included in accounts payable and accrued expenses $ 292 $ ( 292 ) $ — Accrued deferred costs $ 165 $ 292 $ 457 Preferred stock offering costs offset against redeemable preferred stock $ 303 $ 2 $ 305 Preferred stock offering costs offset against redeemable preferred stock in permanent equity $ 2 $ ( 2 ) $ — Accrued redeemable preferred stock fees $ 247 $ 2 $ 249 Redeemable Series D Preferred Stock fees included in accounts payable and accrued expenses $ 2 $ ( 2 ) $ — Use of Estimates —The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company bases such estimates on historical experience, information available at the time, and assumptions the Company believes to be reasonable under the circumstances and at such time, including the impact of extraordinary events such as COVID-19. Actual results could differ from those estimates. Recently Issued Accounting Pronouncements —In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , which was subsequently amended by ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses (“ASU 2018-19”) in November 2018. Subsequently, the FASB issued ASU No. 2019-04, ASU No. 2019-05, ASU No. 2019-10, ASU No. 2019-11 and ASU No. 2020-02 to provide additional guidance on the credit losses standard. ASU 2016-13 and the related updates improve financial reporting requiring more timely recognition of credit losses on loans and other financial instruments that are not accounted for at fair value through net income, including loans held-for-investment, held-to-maturity debt securities, net investment in leases and other such commitments. ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU 2016-13 require the Company to measure all expected credit losses based upon historical experience, current conditions, and reasonable and 13 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) supportable forecasts that affect the collectability of the financial assets and eliminates the “incurred loss” methodology under current GAAP. ASU 2018-19 clarified that receivables arising from operating leases are not within the scope of Topic 326. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASU No. 2016-02, Leases (Topic 842). For smaller reporting companies, public entities that are not SEC filers, and entities that are not public business entities, the ASU is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2022. Early adoption is permitted for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2018. The Company has not yet adopted ASU 2016-13 and the related updates and remains in the process of evaluating the impact of adoption of this new accounting guidance on its consolidated financial statements. On April 10, 2020, the FASB issued a question-and-answer document (the “Q&A”) to address stakeholder questions on the application of the lease accounting guidance for lease concessions related to the effects of COVID-19. The lease modification guidance in Topic 842, Leases , (or Topic 840, Leases ) would require the Company to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was made pursuant to the enforceable rights and obligations of the existing lease agreement (precluded from applying the lease modification accounting framework). However, the Q&A provides that the Company may bypass the lease by lease analysis if certain criteria are met, and instead elect to either consistently apply, or consistently not apply, the lease modification framework to groups of leases with similar characteristics and similar circumstances. As described below, the Company has elected not to apply the lease modification guidance to concessions related to the effects of COVID-19 that do not result in a substantial increase in the Company’s rights as lessor, including concessions that result in the total payments required by the modified lease being substantially the same as or less than the total payments required by the original lease. 3. INVESTMENTS IN REAL ESTATE Investments in real estate consist of the following (in thousands): June 30, 2021 December 31, 2020 Land $ 139,397 $ 139,397 Land improvements 2,611 2,611 Buildings and improvements 451,909 450,741 Furniture, fixtures, and equipment 4,983 4,969 Tenant improvements 29,926 31,414 Work in progress 8,079 8,073 Investments in real estate 636,905 637,205 Accumulated depreciation ( 138,384 ) ( 131,165 ) Net investments in real estate $ 498,521 $ 506,040 The Company recorded depreciation expense of $ 4.2 million and $ 4.3 million for the three months ended June 30, 2021 and 2020, respectively, and $ 8.5 million and $ 8.6 million for the six months ended June 30, 2021 and 2020, respectively. The fair value of real estate acquired is recorded to the acquired tangible assets, consisting primarily of land, land improvements, building and improvements, tenant improvements, furniture, fixtures, and equipment, and identified intangible assets and liabilities, consisting of the value of acquired above-market and below-market leases, in-place leases and ground leases, if any, based in each case on their respective fair values. Loan premiums, in the case of above-market rate loans, or loan discounts, in the case of below-market rate loans, are recorded based on the fair value of any loans assumed in connection with acquiring the real estate. 2021 and 2020 Transactions —There were no acquisitions or dispositions during the six months ended June 30, 2021 or June 30, 2020. 14 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) 4. LOANS RECEIVABLE Loans receivable consist of the following (in thousands): June 30, 2021 December 31, 2020 SBA 7(a) loans receivable, subject to credit risk $ 37,185 $ 32,226 SBA 7(a) loans receivable, subject to loan-backed notes 22,059 23,631 SBA 7(a) loans receivable, Paycheck Protection Program 12,408 14,484 SBA 7(a) loans receivable, subject to secured borrowings 8,469 8,786 SBA 7(a) loans receivable, held for sale 1,896 4,009 Loans receivable 82,017 83,136 Deferred capitalized costs, net 855 884 Loan loss reserves ( 930 ) ( 885 ) Loans receivable, net $ 81,942 $ 83,135 SBA 7(a) Loans Receivable, Subject to Credit Risk —Represents the unguaranteed portions of loans originated under the SBA 7(a) Small Business Loan Program which were retained by the Company. SBA 7(a) Loans Receivable, Subject to Loan-Backed Notes —Represents the unguaranteed portions of loans originated under the SBA 7(a) Small Business Loan Program which were transferred to a trust and are held as collateral in connection with a securitization transaction. The proceeds received from the transfer are reflected as loan-backed notes payable (Note 6). These loans are subject to credit risk. SBA 7(a) Loans Receivable, Paycheck Protection Program —As a SBA 7(a) licensee, the Company is an authorized lender under the PPP and has originated $ 26.4 million in loans under the program with $ 12.4 million outstanding as of June 30, 2021. The Company expects a significant portion of these loans will be forgiven and repaid, either in part or in full, by the SBA, including both principal and accrued interest. SBA 7(a) Loans Receivable, Subject to Secured Borrowings —Represents the government guaranteed portions of loans originated under the SBA 7(a) Small Business Loan Program which were sold with the proceeds received from the sale reflected as secured borrowings—government guaranteed loans. There is no credit risk associated with these loans since the SBA has guaranteed payment of the principal. SBA 7(a) Loans Receivable, Held for Sale — Represents the government guaranteed portion of loans held for sale at the end of the period or that had been sold but in respect of which proceeds had not been received as of the end of the period. Other As of June 30, 2021 and December 31, 2020, the Company’s loans subject to credit risk were 99.7 % and 99.1 %, respectively, concentrated in the hospitality industry. As of June 30, 2021 and December 31, 2020, 99.9 % and 98.8 %, respectively, of the Company’s loans subject to credit risk were current. The Company classifies loans with negative characteristics in substandard categories ranging from special mention to doubtful. As of both June 30, 2021 and December 31, 2020, $ 1.4 million of loans subject to credit risk were classified in substandard categories. 15 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) 5. OTHER INTANGIBLE ASSETS AND LIABILITIES A schedule of the Company’s intangible assets and liabilities and related accumulated amortization and accretion as of June 30, 2021 and December 31, 2020 is as follows (in thousands): June 30, 2021 December 31, 2020 Intangible lease assets: Acquired in-place leases, net of accumulated amortization of $ 8,744 and $ 9,228 , respectively, with an average useful life of 9 and 8 years, respectively $ 2,763 $ 3,316 Acquired above-market leases, net of accumulated amortization of $ 21 and $ 15 , respectively, both with an average useful life of 6 years 34 40 Trade name and license 2,957 2,957 Total intangible lease assets, net $ 5,754 $ 6,313 Intangible lease liabilities: Acquired below-market leases, net of accumulated amortization of $ 1,174 and $ 1,786 , respectively, with an average useful life of 5 and 4 years, respectively $ 388 $ 587 Amortization of the acquired above-market leases is recorded as a reduction to rental and other property income, and amortization of the acquired in-place leases is included in depreciation and amortization in the accompanying consolidated statements of operations. Amortization of the acquired below-market leases is recorded as an increase to rental and other property income in the accompanying consolidated statements of operations. During the three and six months ended June 30, 2021 and 2020, the Company recognized amortization related to its intangible assets and liabilities as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Acquired above-market lease amortization $ 3 $ 1 $ 6 $ 7 Acquired in-place lease amortization $ 257 $ 303 $ 553 $ 744 Acquired below-market lease amortization $ 84 $ 148 $ 199 $ 402 A schedule of future amortization and accretion of acquired intangible assets and liabilities as of June 30, 2021, is as follows (in thousands): Assets Liabilities Years Ending December 31, Acquired Above-Market Leases Acquired In-Place Leases Acquired Below-Market Leases 2021 (Six months ending December 31, 2021) $ 6 $ 496 $ ( 150 ) 2022 12 813 ( 236 ) 2023 10 470 ( 2 ) 2024 5 374 — 2025 1 171 — Thereafter — 439 — $ 34 $ 2,763 $ ( 388 ) 16 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) 6. DEBT The following table summarizes the debt balances as of June 30, 2021 and December 31, 2020, and the debt activity for the six months ended June 30, 2021 (in thousands): During the Six Months Ended June 30, 2021 Balances as of December 31, 2020 Debt Issuances & Assumptions Repayments & Modifications Accretion & (Amortization) Balances as of June 30, 2021 Mortgage Payable: Outstanding Balance $ 97,100 $ — $ — $ — $ 97,100 Deferred loan costs — Mortgage Payable ( 147 ) — — 13 ( 134 ) Total Mortgage Payable 96,953 — — 13 96,966 Secured Borrowings — Government Guaranteed Loans: Outstanding Balance 8,457 — ( 291 ) — 8,166 Unamortized premiums 457 — — ( 30 ) 427 Total Secured Borrowings — Government Guaranteed Loans 8,914 — ( 291 ) ( 30 ) 8,593 Other Debt: 2018 revolving credit facility 166,500 20,000 ( 79,500 ) — 107,000 2020 unsecured revolving credit facility — — — — — Junior subordinated notes 27,070 — — — 27,070 SBA 7(a) loan-backed notes 14,230 — ( 2,379 ) — 11,851 Borrowed funds from the Federal Reserve through the Paycheck Protection Program Liquidity Facility 14,484 10,396 ( 12,472 ) — 12,408 Deferred loan costs — other debt ( 2,155 ) — — 622 ( 1,533 ) Discount on junior subordinated notes ( 1,683 ) — — 45 ( 1,638 ) Total Other Debt 218,446 30,396 ( 94,351 ) 667 155,158 Total Debt, Net $ 324,313 $ 30,396 $ ( 94,642 ) $ 650 $ 260,717 Mortgage Payable —The mortgage payable is secured by a deed of trust on a property and assignments of rents receivable. As of June 30, 2021, the Company’s mortgage payable had a fixed interest rate of 4.14 % per annum, with monthly payments of interest only, due on July 1, 2026. The loan is nonrecourse. Secured Borrowings-Government Guaranteed Loans —Secured borrowings-government guaranteed loans represent sold loans which are treated as secured borrowings because the loan sales did not meet the derecognition criteria provided for in ASC 860-30, Secured Borrowing and Collateral . These loans included cash premiums that are amortized as a reduction to interest expense over the life of the loan using the effective interest method and are fully amortized when the underlying loan is repaid in full. As of June 30, 2021, the Company’s secured borrowings-government guaranteed loans included $ 5.5 million of loans sold for a premium and excess spread, with a variable rate, reset quarterly, based on prime rate with weighted average coupon rate of 3.86 %, and $ 2.7 million of loans sold for an excess spread, with a variable rate, reset quarterly, based on prime rate with weighted average coupon rate of 1.56 %. 2018 Revolving Credit Facility —In October 2018, CIM Commercial entered into a secured revolving credit facility with a bank syndicate that, as amended, allows CIM Commercial to borrow up to $ 209.5 million, subject to a borrowing base calculation (the “2018 revolving credit facility”). In September 2020, the 2018 revolving credit facility was amended (the “2018 Credit Facility Modification”) to remedy the effect that COVID-19 had on CIM Commercial’s ability to borrow under the 2018 revolving credit facility during the period from September 2, 2020 through August 14, 2021 (the “Deferral Period”). The 2018 revolving credit facility bears interest (i) during the Deferral Period at (A) the base rate plus 1.05 % or (B) LIBOR plus 2.05 % 17 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) and (ii) after the Deferral Period, at (A) the base rate plus 0.55 % or (B) LIBOR plus 1.55 %. As of June 30, 2021 and December 31, 2020, the variable interest rate was 2.13 % and 2.20 %, respectively. The 2018 revolving credit facility is also subject to an unused commitment fee of 0.15 % or 0.25 % depending on the amount of aggregate unused commitments. The 2018 revolving credit facility is secured by deeds of trust on certain of the Company’s properties. During the Deferral Period, the Company’s borrowing capacity is subject to a $ 15.0 million reserve, which may be reduced by certain capital expenditures made in respect of the Company’s properties securing the 2018 revolving credit facility, and the requirement that the Company maintain a minimum balance of “liquid assets” of $ 15.0 million, which are defined as (1) unencumbered cash and cash equivalents and (2) up to $ 5.0 million unfunded availability under the 2018 revolving credit facility. Other than as described in the preceding sentence, the 2018 revolving credit facility contains customary covenants and is not subject to any financial covenants (though the amount the Company may borrow under the 2018 revolving credit facility is determined by a borrowing base calculation). The 2018 revolving credit facility matures in October 2022 and provides for one one-year extension option under certain conditions. As of June 30, 2021 and December 31, 2020, $ 107.0 million and $ 166.5 million, respectively, was outstanding under the 2018 revolving credit facility, and approximately $ 87.5 million and $ 28.0 million, respectively, was available for future borrowings. 2020 Unsecured Revolving Credit Facility —In May 2020, to further enhance its liquidity position and maintain financial flexibility, CIM Commercial entered into an unsecured revolving credit facility with a bank (the “2020 unsecured revolving credit facility”) pursuant to which CIM Commercial can borrow up to a maximum of $ 10.0 million. Outstanding advances under the 2020 unsecured revolving credit facility bear interest at the rate of 1.00 %. CIM Commercial also pays a revolving credit facility fee of 1.12 % with each advance under the 2020 unsecured revolving credit facility, which fee is subject to a cap of $ 112,000 in the aggregate. The 2020 unsecured revolving credit facility contains certain customary covenants including a maximum leverage ratio and a minimum fixed charge coverage ratio, as well as certain other conditions. The 2020 unsecured revolving credit facility matures in May 2022. As of June 30, 2021, $ 0 was outstanding under the 2020 unsecured revolving credit facility and $ 10.0 million was available for future borrowings. Junior Subordinated Notes —The Company has junior subordinated notes with a variable interest rate which resets quarterly based on the three-month LIBOR plus 3.25 %, 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 the Company’s option. SBA 7(a) Loan-Backed Notes —SBA 7(a) loan-backed notes are secured by deeds of trust or mortgages. On May 30, 2018, the Company completed a securitization of the unguaranteed portion of certain of its SBA 7(a) loans receivable with the issuance of $ 38.2 million of unguaranteed SBA 7(a) loan-backed notes. The SBA 7(a) loan-backed notes are collateralized solely by the right to receive payments and other recoveries attributable to the unguaranteed portions of certain of the Company’s SBA 7(a) loans receivable. The SBA 7(a) loan-backed notes mature on March 20, 2043, with monthly payments due as payments on the collateralized loans are received. Based on the anticipated repayments of the Company’s collateralized SBA 7(a) loans, at issuance, the Company estimated the weighted average life of the SBA 7(a) loan-backed notes to be approximately two years . The SBA 7(a) loan-backed notes bear interest at the lower of the one-month LIBOR plus 1.40 % or the prime rate less 1.08 %. The Company reflects the SBA 7(a) loans receivable as assets on its consolidated balance sheets and the SBA 7(a) loan-backed notes as debt on its consolidated balance sheets. The restricted cash on the Company’s consolidated balance sheets included funds related to the Company’s SBA 7(a) loan-backed notes of $ 1.1 million and $ 1.2 million as of June 30, 2021 and December 31, 2020, respectively. Paycheck Protection Program Liquidity Facility —In June 2020, the Company commenced borrowing funds from the Federal Reserve through the PPP Liquidity Facility (the “PPPLF”). Advances under the PPPLF carry an interest rate of 0.35%, are made on a dollar-for-dollar basis based on the amount of loans originated under the PPP and are secured by loans made by the Company under the PPP. The PPPLF contains customary covenants but is not subject to any financial covenants. The maturity date of PPPLF borrowings is the same as the maturity date of the loans pledged to secure the extension of credit, generally two years. At maturity, both principal and accrued interest are due. The maturity date of a PPPLF borrowing will be accelerated if, among other things, the Company has been reimbursed by the SBA for a loan forgiveness (to the extent of the forgiveness), the Company has received payment from the SBA representing exercise of the loan guarantee or the Company has received payment from the underlying borrower (to the extent of the payment received). The Company borrowed money under the PPPLF to finance all the loans the Company originated under the PPP. As of June 30, 2021, $ 12.4 million was outstanding under the PPPLF. As of July 31, 2021, no new extensions of credit may be made under the PPPLF, unless the Federal Reserve Board and the United States Department of the Treasury decide to extend the PPPLF. Deferred loan costs, which represent legal and third-party fees incurred in connection with the Company’s borrowing activities, are capitalized and amortized to interest expense on a straight-line basis over the life of the related loan, 18 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) approximating the effective interest method. Deferred loan costs are presented net of accumulated amortization and are a reduction to total debt. As of June 30, 2021 and December 31, 2020, accrued interest and unused commitment fees payable of $ 613,000 and $ 564,000 , respectively, were included in accounts payable and accrued expenses. Future principal payments on the Company’s debt (face value) as of June 30, 2021 are as follows (in thousands): Years Ending December 31, Mortgage Payable Secured Borrowings Principal (1) 2018 Revolving Credit Facility Other (1) (2) Total 2021 (Six months ending December 31, 2021) $ — $ 471 $ — $ 1,783 $ 2,254 2022 — 431 107,000 3,296 110,727 2023 — 444 — 3,575 4,019 2024 — 458 — 3,716 4,174 2025 — 472 — 3,386 3,858 Thereafter 97,100 5,890 — 35,573 138,563 $ 97,100 $ 8,166 $ 107,000 $ 51,329 $ 263,595 ______________________ (1) Principal payments on secured borrowings and SBA 7(a) loan-backed notes, which are included in Other, are generally dependent upon cash flows received from the underlying loans. The Company’s estimate of their repayment is based on scheduled payments on the underlying loans. The Company’s estimate will differ from actual amounts to the extent the Company experiences prepayments and or loan liquidations or charge-offs. No payment is due unless payments are received from the borrowers on the underlying loans. (2) Represents the junior subordinated notes, SBA 7(a) loan-backed notes, and borrowed funds from the Federal Reserve through the PPPLF. 19 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) 7. STOCK-BASED COMPENSATION PLANS On April 3, 2015, the Company’s board of directors (the “Board of Directors”) unanimously approved the CIM Commercial Trust Corporation 2015 Equity Incentive Plan (the “2015 Equity Incentive Plan”), which was approved by the Company’s stockholders. Under the 2015 Equity Incentive Plan, the Company granted awards of restricted shares of Common Stock to each of the independent members of the Board of Directors as follows: Grant Date (1) Vesting Date Restricted Shares of Common Stock - Individual Restricted Shares of Common Stock - Aggregate May 2019 May 2020 889 3,556 July 2019 May 2020 (2) 81 324 May 2020 February 2021 (3) 5,478 5,478 May 2020 May 2021 5,478 16,434 May 2021 (4) 5,083 20,332 ______________________ (1) Compensation expense related to these restricted shares of Common Stock is recognized over the vesting period, and generally vests based on one year of continuous service. The Company recorded compensation expense related to these restricted shares of Common Stoc k in the amount of $ 50,000 and $ 56,000 for the three months ended June 30, 2021 and 2020, respectively, and $ 110,000 an d $ 112,000 for the six months ended June 30, 2021 and 2020 , respectively. (2) These shares vested in May 2020 concurrent with the vesting of the restricted shares of Common Stock granted in May 2019. (3) On February 11, 2021, the Company’s Board of Directors approved the immediate vesting of 5,478 shares that had been granted in May 2020 to a former independent member of the Board of Directors following his death. (4) These shares will vest after one year of continuous service. As of June 30, 2021, there was $ 183,000 of total unrecognized compensation expense related to restricted shares of Common Stock which will be recognized ratably over the remaining vesting period. 8. EARNINGS PER SHARE (“EPS”) The computations of basic EPS are based on the Company’s weighted average shares outstanding. The basic weighted average number of shares of Common Stock outstanding was 15,102,000 and 14,782,000 for the three months ended June 30, 2021 and 2020, respectively, and 14,956,000 and 14,690,000 for the six months ended June 30, 2021 and 2020, respectively. For the three and six months ended June 30, 2021, there was no difference in the diluted weighted average number of shares of Common Stock outstanding as compared the basic weighted average number of shares of Common Stock outstanding. In order to calculate the diluted weighted average number of shares of Common Stock outstanding for the three and six months ended June 30, 2020, the basic weighted average number of shares of Common Stock outstanding was increased by 0 and 162 shares, respectively, to reflect the dilutive effect of certain shares of the Company’s Series A Preferred Stock. No shares of Series D Preferred Stock outstanding as of June 30, 2021 had a dilutive effect and no shares of Series D Preferred Stock were outstanding as of June 30, 2020. Outstanding Series A Preferred Warrants were not included in the computation of diluted EPS for the three and six months ended June 30, 2021 and 2020 because their impact was either anti-dilutive or such warrants were not exercisable during such periods (Note 10). Outstanding shares of Series L Preferred Stock were not included in the computation of diluted EPS for the three and six months ended June 30, 2021 and 2020 because such shares were not redeemable during such periods. EPS for the year-to-date period may differ from the sum of quarterly EPS amounts due to the required method for computing EPS in the respective periods. In addition, EPS is calculated independently for each component and may not be additive due to rounding. 20 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) The following table reconciles the numerator and denominator used in computing the Company’s basic and diluted per-share amounts for net loss attributable to common stockholders for the three and six months ended June 30, 2021 and 2020 (in thousands, except per share amounts): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Numerator: Net loss attributable to common stockholders $ ( 4,210 ) $ ( 8,141 ) $ ( 12,416 ) $ ( 14,928 ) Redeemable preferred stock dividends declared on dilutive shares — — — ( 1 ) Diluted net loss attributable to common stockholders $ ( 4,210 ) $ ( 8,141 ) $ ( 12,416 ) $ ( 14,929 ) Denominator: Basic weighted average shares of Common Stock outstanding 15,102 14,782 14,956 14,690 Effect of dilutive securities—contingently issuable shares — — — — Diluted weighted average shares and common stock equivalents outstanding 15,102 14,782 14,956 14,690 Net loss attributable to common stockholders per share: Basic $ ( 0.28 ) $ ( 0.55 ) $ ( 0.83 ) $ ( 1.02 ) Diluted $ ( 0.28 ) $ ( 0.55 ) $ ( 0.83 ) $ ( 1.02 ) 21 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) 9. REDEEMABLE PREFERRED STOCK The table below provides information regarding the issuances, reclassifications and redemptions of each class of the Company’s preferred stock in permanent equity during the three and six months ended June 30, 2021 and 2020 (dollar amounts in thousands): Preferred Stock Series A Series D Series L Total Shares Amount Shares Amount Shares Amount Shares Amount Balances, December 31, 2019 2,837,094 $ 70,633 — $ — 5,387,160 $ 152,834 8,224,254 $ 223,467 Issuance of Series D Preferred Stock — — 5,980 150 — — 5,980 150 Reclassification of Series A Preferred Stock to permanent equity 304,274 7,588 — — — — 304,274 7,588 Redemption of Series A Preferred Stock ( 2,452 ) ( 61 ) — — — — ( 2,452 ) ( 61 ) Balances, March 31, 2020 3,138,916 $ 78,160 5,980 $ 150 5,387,160 $ 152,834 8,532,056 $ 231,144 Issuance of Series D Preferred Stock — — 920 23 — — 920 23 Reclassification of Series A Preferred Stock to permanent equity 427,064 10,638 — — — — 427,064 10,638 Redemption of Series A Preferred Stock ( 5,532 ) ( 138 ) — — — — ( 5,532 ) ( 138 ) Balances, June 30, 2020 3,560,448 $ 88,660 6,900 $ 173 5,387,160 $ 152,834 8,954,508 $ 241,667 Balances, December 31, 2020 4,377,762 $ 108,729 19,145 $ 473 5,387,160 $ 152,834 9,784,067 $ 262,036 Issuance of Series D Preferred Stock — — 4,045 99 — — 4,045 99 Reclassification of Series A Preferred Stock to permanent equity 366,991 9,144 — — — — 366,991 9,144 Redemption of Series A Preferred Stock ( 29,462 ) ( 733 ) — — — — ( 29,462 ) ( 733 ) Balances, March 31, 2021 4,715,291 $ 117,140 23,190 $ 572 5,387,160 $ 152,834 10,125,641 $ 270,546 Issuance of Series D Preferred Stock — — 7,835 192 — — 7,835 192 Reclassification of Series A Preferred Stock to permanent equity 556,587 13,915 — — — — 556,587 13,915 Redemption of Series A Preferred Stock ( 18,501 ) ( 460 ) — — — — ( 18,501 ) ( 460 ) Balances, June 30, 2021 5,253,377 $ 130,595 31,025 $ 764 5,387,160 $ 152,834 10,671,562 $ 284,193 As of June 30, 2021, the Company had iss ued in regist ered public offerings 6,956,163 shares of Series A Preferred Stock, 4,603,287 Series A Preferred Warrants and 31,025 shares of Series D Preferred Stock and received gross proceeds of $ 174.7 million ($ 173.1 million of which was allocated to the Series A Preferred Stock, $ 761,000 of which was allocated to the Series A Preferred Warrants, and $ 764,000 of which was allocated to the Series D Preferred Stock) and, additionally, had issued 298,472 shares of Series A Preferred Stock as payment for services to the Administrator, for which no cash proceeds were received. In connection with such issuance, costs specifically identifiable to the offering of Series A Preferred Stock, Series A Preferred Warrants and Series D Preferred Stock, such as commissions, dealer manager fees and other offering fees and expenses, totaled $ 14.6 million ($ 14.4 million of which was allocated to the Series A Preferred Stock, $ 142,000 of which was allocated to the Series A Preferred Warrants, and $ 27,000 of which was allocated to the Series D Preferred Stock). In addition, as of June 30, 2021, non-issuance-specific costs related to this offering totaled $ 7.9 million. As of June 30, 2021, the Company had reclassified and allocated $ 1.5 million, $ 5,000 and $ 7,000 from deferred charges to Series A Preferred Stock, 22 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) Series A Preferred Warrants and Series D Preferred Stock, respectively, as a reduction to the gross proceeds received. Such reclassification was based on the cumulative number of securities issued relative to the maximum number of securities expected to be issued under the offering. As of June 30, 2021, there were 7,098,258 shares of Series A Preferred Stock outstanding, 4,603,287 Series A Preferred Warrants to purchase 1,194,159 shares of Common Stock outstanding, and 31,025 shares of Series D Preferred Stock outstanding. As of June 30, 2021, 156,377 shares of Series A Preferred Stock and no shares of Series D Preferred Stock had been redeemed. Series A Preferred Stock —The Company conducted a continuous public offering of Series A Preferred Units from October 2016 through January 2020, where each Series A Preferred Unit consisted of one share of Series A Preferred Stock, par value $ 0.001 per share, of the Company with an initial stated value of $ 25.00 per share, subject to adjustment, and one warrant to purchase 0.25 of a share of Common Stock. Proceeds and expenses from the sale of the Series A Preferred Units were allocated to the Series A Preferred Stock and Series A Preferred Warrants using their relative fair values on the date of issuance. Since February 2020, the Company has been conducting a continuous public offering with respect to shares of the Company’s Series A Preferred Stock, which, since such time, is no longer being issued as a unit with an accompanying Series A Preferred Warrant. Net proceeds from the issuance of shares of Series A Preferred Stock are initially recorded in temporary equity at an amount equal to the gross proceeds allocated to such shares of Series A Preferred Stock minus the costs specifically identifiable to the issuance of such shares and the non-issuance specific offering costs allocated to such shares. If the net proceeds from the issuance of shares of Series A Preferred Stock are less than the redemption value of such shares at the time they are issued, or if the redemption value of such shares subsequently becomes greater than the carrying value of such shares, an adjustment is recorded to increase the carrying amount of such shares to their redemption value as of the balance sheet date. Such adjustment is considered a deemed dividend for purposes of calculating basic and diluted EPS. For the three and six months ended June 30, 2021, the Company recorded redeemable preferred stock deemed divid ends of $ 106,000 and $ 163,000 , respectively, related to such adjustments. For the three and six months ended June 30, 2020, the Company recorded redeemable preferred stock deemed divid ends of $ 52,000 and $ 213,000 , respectively, related to such adjustments. On the first anniversary of the issuance of a particular share of Series A Preferred Stock, the Company reclassifies such share of Series A Preferred Stock from temporary equity to permanent equity because the feature giving rise to temporary equity classification, the requirement to satisfy redemption requests in cash, lapses on the first anniversary date. As of June 30, 2021, the Company had reclassified an aggregate of $ 121.2 million in net proceeds from temporary equity to permanent equity. Series D Preferred Stock —Since February 2020, the Company has been conducting a continuous public offering with respect to shares of its Series D Preferred Stock, par value $ 0.001 per share, subject to adjustment. The selling price of the Series D Preferred Stock was $ 25.00 per share for all sales that occurred from the beginning of the offering to and including June 28, 2020 and is expected to be, and since June 29, 2020, has been, $ 24.50 per share through the end of the life of the offering. Shares of Series D Preferred Stock are recorded in permanent equity at the time of their issuance. Series L Preferred Stock —On November 21, 2017, the Company issued 8,080,740 shares of Series L Preferred Stock having an initial stated value of $ 28.37 per share (“Series L Preferred Stock Stated Value”), subject to adjustment. The Company received gross proceeds of $ 229.3 million from the sale of the Series L Preferred Stock, which was reduced by issuance-specific offering costs, such as commissions, dealer manager fees, and other offering fees and expenses, totaling $ 15.9 million, a discount of $ 2.9 million, and non-issuance-specific costs of $ 2.5 million. These fees have been recorded as a reduction to the gross proceeds in permanent equity. Until the fifth anniversary of the date of original issuance of the Series L Preferred Stock, the Company is prohibited from issuing any shares of preferred stock ranking senior to or on parity with the Series L Preferred Stock with respect to the payment of dividends, other distributions, liquidation, and or dissolution or winding up of the Company unless the Minimum Fixed Charge Coverage Ratio, calculated in accordance with the Articles Supplementary describing the Series L Preferred Stock, is equal to or greater than 1.25 :1.00. As of June 30, 2021 and December 31, 2020 , the Company was in compliance with the Series L Preferred Stock Minimum Fixed Charge Coverage Ratio. Refer to Note 12 for a discussion of certain payments the Company has made in shares of Common Stock and in shares of Preferred Stock and may make in shares of Preferred Stock in lieu of cash payments in order to remain in compliance with the Series L Preferred Stock Minimum Fixed Charge Coverage Ratio. Dividends —With respect to the payment of dividends, the Series A Preferred Stock ranks senior to the Series L Preferred Stock and the Common Stock, and on parity with the Series D Preferred Stock. The Series L Preferred Stock ranks 23 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) senior to the Common Stock (except with respect to and only to the extent of the Initial Dividend) and junior to the Series A Preferred Stock, Series D Preferred Stock and Common Stock (with respect to and only to the extent of the Initial Dividend). With respect to the distribution of amounts upon liquidation, dissolution or winding-up, the Series A Preferred Stock ranks on parity with the Series D Preferred Stock and Series L Preferred Stock, to the extent of the Series L Preferred Stock Stated Value, and otherwise ranks senior to the Series L Preferred Stock and the Common Stock. With respect to the distribution of amounts upon liquidation, dissolution or winding-up, the Series L Preferred Stock ranks senior to the Common Stock, both (i) to the extent of the Series L Preferred Stock Stated Value and (ii) following payment to holders of the Common Stock of an amount equal to any unpaid Initial Dividend, to the extent of any accrued and unpaid dividends on the Series L Preferred Stock, on parity with the Series A Preferred Stock and Series D Preferred Stock, to the extent of the Series L Preferred Stock Stated Value and junior to the Series A Preferred Stock, Series D Preferred Stock and Common Stock (to the extent of the Initial Dividend), in all instances with respect to any accrued and unpaid dividends on the Series L Preferred Stock. Holders of Series A Preferred Stock are entitled to receive, if, as and when authorized by the Company’s Board of Directors, and declared by the Company out of legally available funds, cumulative cash dividends on each share of Series A Preferred Stock at an annual rate of 5.50 % of the Series A Preferred Stock Stated Value (i.e., the equivalent of $ 0.34375 per share per quarter) (the “Series A Dividend”). Holders of Series D Preferred Stock are entitled to receive, if, as and when authorized by the Company’s Board of Directors, and declared by the Company out of legally available funds, cumulative cash dividends on each share of Series D Preferred Stock at an annual rate of 5.65 % of the Series D Preferred Stock Stated Value (i.e., the equivalent of $ 0.35313 per share per quarter) (the “Series D Dividend”). Dividends on each share of Series A Preferred Stock and Series D Preferred Stock begin accruing on, and are cumulative from, the date of issuance. The Company expects to pay the Series A Dividend and Series D Dividend in arrears on a monthly basis in accordance with the foregoing provisions, unless the Company’s results of operations, 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 the Series A Dividend and the Series D Dividend will be determined by the Company’s Board of Directors, in its sole discretion, and may vary from time to time. Holders of Series L Preferred Stock are entitled to receive, if, as and when authorized by the Company’s Board of Directors, and declared by the Company out of legally available funds, cumulative cash dividends on each share of Series L Preferred Stock at an annual rate of 5.50 % of the Series L Preferred Stock Stated Value (i.e., the equivalent of $ 1.56035 per share per year). Dividends on each share of Series L Preferred Stock began accruing on, and are cumulative from, the date of issuance. The Company expects to pay dividends on the Series L Preferred Stock in arrears on an annual basis in accordance with the foregoing provisions, unless the Company’s results of operations, general financing conditions, general economic conditions, applicable requirements of the MGCL or other factors make it imprudent to do so. If the Company fails to timely declare distributions or fails to timely pay distributions on the Series L Preferred Stock, the annual dividend rate of the Series L Preferred Stock will temporarily increase by 1.00 % per year, up to a maximum rate of 8.50 % per annum. However, prior to the payment of any distributions on Series L Preferred Stock in respect of a given year, the Company must first declare and pay dividends on the Common Stock in respect of such year in an aggregate amount equal to the Initial Dividend announced by the Company’s Board of Directors at the end of the prior fiscal year. On December 22, 2020, the Company announced an Initial Dividend on shares of its Common Stock for fiscal year 2021 in the aggregate amount of $ 4,448,223 , of which $ 2,226,000 had been paid as of June 30, 2021. During the six months ended June 30, 2021, the Company paid $ 4.5 million, $ 16,000 and $ 8.4 million of cash dividends on the Series A Preferred Stock, Series D Preferred Stock and Series L Preferred Stock, respectively. During the six months ended June 30, 2020, the Company paid $ 4.2 million, $ 1,000 and $ 8.4 million of cash dividends on the Series A Preferred Stock, Series D Preferred Stock and Series L Preferred Stock, respectively. Redemptions —The Company’s Series A Preferred Stock and Series D Preferred Stock are redeemable at the option of the holder or CIM Commercial. The redemption schedule of the Series A Preferred Stock and Series D Preferred Stock allows redemptions at the option of the holder of Series A Preferred Stock or Series D Preferred Stock from the date of original issuance of any such shares at the Series A Preferred Stock Stated Value or Series D Preferred Stock Stated Value, respectively, less a redemption fee applicable prior to the fifth anniversary of the issuance of such shares, plus accrued and unpaid dividends. CIM Commercial has the right to redeem the Series A Preferred Stock or Series D Preferred Stock after the fifth anniversary of the date of original issuance of such shares at the Series A Preferred Stock Stated Value or Series D Preferred Stock Stated Value, respectively, plus accrued and unpaid dividends. At the Company’s discretion, the redemption price will be paid in cash or in Common Stock based on the volume weighted average price of the Company’s Common Stock for the 20 trading days 24 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) prior to the redemption; provided that the redemption price of any shares of Series A Preferred Stock redeemed prior to the first anniversary of the date of original issuance of such shares must be paid in cash. From and after the fifth anniversary of the date of original issuance of the Series L Preferred Stock, each holder will have the right to require the Company to redeem, and the Company will also have the option to redeem (subject to certain conditions), such shares of Series L Preferred Stock at a redemption price equal to the Series L Preferred Stock Stated Value, plus, provided certain conditions are met, all accrued and unpaid distributions. Notwithstanding the foregoing, a holder of shares of the Company’s Series L Preferred Stock may require the Company to redeem such shares at any time prior to the fifth anniversary of the date of original issuance of the Series L Preferred Stock if (1) the Company does not declare and pay in full the distribution on the Series L Preferred Stock for any annual period prior to such fifth anniversary or (2) the Company does not declare and pay all accrued and unpaid distributions on the Series L Preferred Stock for all past dividend periods prior to the applicable holder redemption date. The applicable redemption price payable upon redemption of any Series L Preferred Stock will be made, in the Company’s sole discretion, in the form of (A) cash in ILS at the then-current currency exchange rate determined in accordance with the Articles Supplementary defining the terms of the Series L Preferred Stock, (B) in equal value through the issuance of shares of Common Stock, with the value of such Common Stock to be deemed the lower of (i) the NAV per share of the Company’s Common Stock as most recently published by the Company as of the effective date of redemption and (ii) the volume-weighted average price of the Company’s Common Stock, determined in accordance with the Articles Supplementary defining the terms of the Series L Preferred Stock, or (C) in a combination of cash in ILS and the Company’s Common Stock, based on the conversion mechanisms set forth in (A) and (B), respectively. 10. STOCKHOLDERS’ EQUITY Dividends 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. Cash dividends per share of Common Stock paid in respect of the six months ended June 30, 2021 and 2020 consist of the following: Declaration Date Payment Date Type Cash Dividend Per Share of Common Stock June 7, 2021 June 30, 2021 Regular Quarterly $ 0.075 March 5, 2021 March 30, 2021 Regular Quarterly $ 0.075 June 3, 2020 June 29, 2020 Regular Quarterly $ 0.075 March 2, 2020 March 25, 2020 Regular Quarterly $ 0.075 Rights Offering In June 2021, the Company conducted the Rights Offering pursuant to which the Company issued an aggregate of 8,521,589 shares of Common Stock at a subscription price of $ 9.25 per share for aggregate gross proceeds of $ 78.8 million. Offering costs of $ 1.9 million were incurred in connection with the Rights Offering and recorded as a reduction to additional paid-in capital. Series A Preferred Warrants Prior to February 2020, the Series A Preferred Stock was sold as a unit that included one share of Series A Preferred Stock and one Series A Preferred Warrant that could be exercised to purchase 0.25 of a share of Common Stock. The Series A Preferred Warrants are exercisable beginning on the first anniversary of the date of their original issuance until and including the fifth anniversary of the date of such issuance. At the time of issuance, the exercise price of each Series A Preferred Warrant was at a 15.0 % premium to the per share estimated NAV of the Company’s Common Stock then most recently published and designated as the Applicable NAV. However, in accordance with the terms of the Series A Preferred Warrants, the exercise price of each Series A Preferred Warrant issued prior to the Reverse Stock Split was automatically adjusted to reflect the effect of the Reverse Stock Split and, in the discretion of the Company’s Board of Directors, the exercise price and the number of 25 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) shares issuable upon exercise of each Series A Preferred Warrant issued prior to the Special Dividend was adjusted to reflect the effect of the Special Dividend. Proceeds and expenses from the sale of the Series A Preferred Units were allocated to the Series A Preferred Stock and Series A Preferred Warrants using their relative fair values on the date of issuance. As of June 30, 2021, the Company had issued 4,603,287 Series A Preferred Warrants to purchase 1,194,159 shares of Common Stock in connection with the Company’s offering of Series A Preferred Units and allocated net proceeds of $ 614,000 , after specifically identifiable offering costs and allocated general offering costs, to the Series A Preferred Warrants in permanent equity. 11. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company determines the estimated fair value of financial assets and liabilities utilizing a hierarchy of valuation techniques based on whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. The hierarchy for inputs used in measuring fair value is as follows: Level 1 Inputs —Quoted prices in active markets for identical assets or liabilities Level 2 Inputs —Observable inputs other than quoted prices in active markets for identical assets and liabilities Level 3 Inputs —Unobservable inputs In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. Management’s estimation of the fair value of the Company’s financial instruments is based on a Level 3 valuation in the fair value hierarchy established for disclosure of how a company values its financial instruments. In general, quoted market prices from active markets for the identical financial instrument (Level 1 inputs), if available, should be used to value a financial instrument. If quoted prices are not available for the identical financial instrument, then a determination should be made if Level 2 inputs are available. Level 2 inputs include quoted prices for similar financial instruments in active markets for identical or similar financial instruments in markets that are not active (i.e., markets in which there are few transactions for the financial instruments, the prices are not current, price quotations vary substantially, or in which little information is released publicly). There is limited reliable market information for the Company’s financial instruments and the Company utilizes other methodologies based on unobservable inputs for valuation purposes since there are no Level 1 or Level 2 inputs available. Accordingly, Level 3 inputs are used to measure fair value. In general, estimates of fair value may differ from the carrying amounts of the financial assets and liabilities primarily as a result of the effects of discounting future cash flows. Considerable judgment is required to interpret market data and develop estimates of fair value. Accordingly, the estimates presented are made at a point in time and may not be indicative of the amounts the Company could realize in a current market exchange. The following describes the methods the Company uses to estimate the fair value of the Company’s financial assets and liabilities. Debt —The carrying amounts of the Company’s secured borrowings—government guaranteed loans, SBA 7(a) loan-backed notes, 2018 revolving credit facility and borrowed funds from the Federal Reserve through the PPPLF approximate their fair values, as the interest rates on these securities are variable and approximate current market interest rates. The Company determines the fair value of mortgage notes payable and junior subordinated notes by performing discounted cash flow analyses using an appropriate market discount rate. The Company calculates the market discount rate for its mortgage notes payable by obtaining period-end treasury or swap rates, as applicable, for maturities that correspond to the maturities of the Company’s debt and then adding an appropriate credit spread. These credit spreads take into account factors such as the Company’s credit standing, the maturity of the debt, whether the debt is secured or unsecured, and the loan-to-value ratios of the debt. When estimating the fair value of the Company’s mortgages payable as of June 30, 2021 and December 31, 2020, the Company used a rate of 3.30 % and 3.38 %, respectively. The rate used to estimate the fair value of the Company’s junior subordinated notes was 4.40 % and 4.49 % as of June 30, 2021 and December 31, 2020, respectively. Loans Receivable —The Company determines the fair value of loans receivable by performing a present value analysis for the anticipated future cash flows using an appropriate market discount rate taking into consideration the credit risk and using an anticipated prepayment rate. The value of the government guaranteed portions of loans held for sale is based 26 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) primarily on the anticipated proceeds to be received upon sale. The following summarizes the ranges of discount rates and prepayment rates used to arrive at the estimated fair values of the Company’s loans receivable: June 30, 2021 December 31, 2020 Discount Rate Prepayment Rate Discount Rate Prepayment Rate SBA 7(a) loans receivable, subject to credit risk 6.50 % - 8.25 % 4.00 % - 17.50 % 6.50 % - 8.25 % 4.00 % - 17.50 % SBA 7(a) loans receivable, subject to loan-backed notes 5.50 % - 8.00 % 4.88 % - 17.50 % 5.50 % - 8.00 % 4.88 % - 17.50 % SBA 7(a) loans receivable, paycheck protection program 1.00 % N/A 1.00 % N/A SBA 7(a) loans receivable, subject to secured borrowings 7.00 % - 7.75 % 5.00 % - 17.50 % 7.00 % - 7.75 % 5.00 % - 17.50 % Other Financial Instruments —The carrying amounts of the Company’s cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued expenses approximate their fair values due to their short-term maturities at June 30, 2021 and December 31, 2020. The estimated fair values of those financial instruments which are not recorded at fair value on a recurring basis on the Company’s consolidated balance sheets are as follows (dollar amounts in thousands): June 30, 2021 December 31, 2020 Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value Level Assets: SBA 7(a) loans receivable, subject to credit risk $ 37,517 $ 37,728 $ 32,509 $ 32,397 3 SBA 7(a) loans receivable, subject to loan-backed notes 22,015 22,740 23,606 24,850 3 SBA 7(a) loans receivable, paycheck protection program 11,916 12,409 14,089 14,484 3 SBA 7(a) loans receivable, subject to secured borrowings 8,504 8,593 8,822 8,914 3 SBA 7(a) loans receivable, held for sale 1,990 2,150 4,109 4,527 3 Liabilities: Mortgages payable (1) 97,100 100,855 97,100 100,799 3 Junior subordinated notes (1) 27,070 24,293 27,070 24,236 3 ______________________ (1) The carrying amounts for the mortgage payable and junior subordinated notes represents the principal outstanding amounts, excluding deferred loan costs and discounts. 12. RELATED-PARTY TRANSACTIONS Asset Management and Other Fees to Related Parties Asset Management Fees — CIM Urban and CIM Capital, LLC, an affiliate of CIM REIT and CIM Group (“CIM Capital”), have an investment management agreement, pursuant to which CIM Urban engaged CIM Capital to provide certain services to CIM Urban (the “Investment Management Agreement”). CIM Capital has assigned its duties under the Investment Management Agreement to its four wholly-owned subsidiaries: CIM Capital Securities Management, LLC, a securities manager, CIM Capital RE Debt Management, LLC, a debt manager, CIM Capital Controlled Company Management, LLC, a controlled company manager, and CIM Capital Real Property Management, LLC, a real property manager. The “Operator” refers to CIM Capital and its four wholly-owned subsidiaries. 27 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) CIM Urban pays asset management fees to the Operator on a quarterly basis in arrears. The fee is calculated as a percentage of the daily average adjusted fair value of CIM Urban’s assets (dollar amounts in thousands): Daily Average Adjusted Fair Value of CIM Urban’s Assets Quarterly Fee Percentage From Greater of To and Including $ — $ 500,000 0.2500 % $ 500,000 $ 1,000,000 0.2375 % $ 1,000,000 $ 1,500,000 0.2250 % $ 1,500,000 $ 4,000,000 0.2125 % $ 4,000,000 $ 20,000,000 0.1000 % Asset management fees are included in asset management and other fees to related parties in the accompanying consolidated statements of operations. In lieu of cash payment of the asset management fee, the Company has issued to the Operator shares of its Common Stock and shares of its Series A Preferred Stock. Subject to applicable laws and regulations under Nasdaq and the TASE and the agreement of the Operator, it is likely that the Company will seek to pay some or part of the asset management fees during 2021 in shares of Series A Preferred Stock. Property Management Fees and Reimbursements — CIM Management, Inc. and certain of its affiliates (collectively, the “CIM Management Entities”), all affiliates of CIM REIT and CIM Group, provide property management, leasing, and development services to CIM Urban. Property management fees earned by the CIM Management entities and onsite management costs incurred on behalf of CIM Urban are included in rental and other property operating expenses in the accompanying consolidated statements of operations. Leasing commissions earned are capitalized to deferred charges on the accompanying consolidated balance sheets. Construction management fees are capitalized to investments in real estate on the accompanying consolidated balance sheets. Administrative Fees and Expenses — CIM Commercial and its subsidiaries have a master services agreement (the “Master Services Agreement”) with CIM Service Provider, LLC (the “Administrator”), an affiliate of CIM Group, pursuant to which the Administrator provides, or arranges for other service providers to provide, management and administration services to CIM Commercial and its subsidiaries. Pursuant to the Master Services Agreement, the Company appointed an affiliate of CIM Group as the administrator of Urban Partners GP, LLC. Under the Master Services Agreement, CIM Commercial paid a base service fee (the “Base Service Fee”) to the Administrator initially set at $ 1.0 million per year (subject to an annual escalation by a specified inflation factor beginning on January 1, 2015), payable quarterly in arrears. On May 11, 2020, the Master Services Agreement was amended to replace the Base Service Fee with an incentive fee (the “Incentive Fee”) pursuant to which the Administrator receives, on a quarterly basis, 15.00 % of CIM Commercial’s quarterly core funds from operations in excess of a quarterly threshold equal to 1.75 % (i.e., 7.00 % on an annualized basis) of CIM Commercial’s average adjusted common stockholders’ equity (i.e., common stockholders’ equity plus accumulated depreciation and amortization) for such quarter. The amendment is effective as of April 1, 2020. The Base Service Fee is included in asset management and other fees to related parties in the accompanying consolidated statements of operations. In addition, pursuant to the terms of the Master Services Agreement, the Administrator may receive compensation and or reimbursement for performing certain services for CIM Commercial and its subsidiaries that are not covered by the Base Service Fee or the Incentive Fee, as the case may be. During the six months ended June 30, 2021 and 2020, such services performed by the Administrator and its affiliates included accounting, tax, reporting, internal audit, legal, compliance, risk management, IT, human resources, corporate communications, operational and on-going support in connection with the Company’s offering of Preferred Stock. The Administrator’s compensation is based on the salaries and benefits of the employees of the Administrator and or its affiliates who performed these services (allocated based on the percentage of time spent on the affairs of CIM Commercial and its subsidiaries). The expense for such services is included in expense reimbursements to related parties—corporate in the accompanying consolidated statements of operations. Lending Segment Expenses — The Company has a Staffing and Reimbursement Agreement with CIM SBA Staffing, LLC (“CIM SBA”), an affiliate of CIM Group, and the Company’s subsidiary, PMC Commercial Lending, LLC. The agreement provides that CIM SBA will provide personnel and resources to the Company and that the Company will reimburse 28 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) CIM SBA for the costs and expenses of providing such personnel and resources. The expense for such services is included in expense reimbursements to related parties—lending segment in the accompanying consolidated statements of operations. Offering-Related Fees — The Company had an Amendment, Assignment and Assumption Agreement (the “Assignment Agreement”) with CCO Capital, LLC (“CCO Capital”). CCO Capital is a registered broker dealer and is under common control with the Operator and the Administrator. As a result of the Assignment Agreement, CCO Capital became the exclusive dealer manager for the Company’s public offering of the Series A Preferred Units effective as of May 31, 2019. The Company’s offering of the Series A Preferred Units ended at the end of January 2020. On January 28, 2020, the Company entered into the Second Amended and Restated Dealer Manager Agreement, pursuant to which CCO Capital acts as the exclusive dealer manager for the Company’s public offering of its Series A Preferred Stock and Series D Preferred Stock. Thereunder, the Company agreed to pay CCO Capital, as the dealer manager for the offering, (1) an upfront dealer manager fee of up to 1.25 % of the selling price of each share of Preferred Stock sold, (2) selling commissions of up to 5.50 % of the selling price of each share of Series A Preferred Stock sold (with no selling commissions payable in respect of shares of Series D Preferred Stock sold) and (3) a trailing dealer manager fee that accrues daily in an amount equal to 1/365 th of 0.25 % per annum of the selling price of each share of Preferred Stock sold. CCO Capital, in its sole discretion, may reallow to another broker-dealer authorized by it to sell shares in the offering a portion of the upfront dealer manager fee earned by it in respect of shares sold by such broker-dealer. On April 9, 2020, the Company entered into Amendment No. 1 to the Second Amended and Restated Dealer Manager Agreement, pursuant to which the selling commissions were increased from up to 5.50 % to up to 7.00 % of the selling price of each share of Series A Preferred Stock sold thereafter. The Company has been informed that CCO Capital generally reallows 100 % of the selling commissions on sales of Series A Preferred Stock and generally reallows substantially all of the upfront dealer manager fee on sales of Series A Preferred Stock and Series D Preferred Stock, to participating broker-dealers. The Company recorded fees and expense reimbursements as shown in the table below for services provided by related parties related to the services described above during the periods indicated (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Asset Management Fees: Asset management fees (1) $ 2,260 $ 2,376 $ 4,519 $ 4,739 Property Management Fees and Reimbursements: Property management fees $ 404 $ 370 $ 807 $ 797 Onsite management and other cost reimbursement $ 755 $ 615 $ 1,564 $ 1,584 Leasing commissions $ 33 $ 43 $ 48 $ 83 Construction management fees $ 22 $ 107 $ 35 $ 277 Administrative Fees and Expenses: Base service fee (2) $ — $ — $ — $ 282 Expense reimbursements to related parties - corporate $ 454 $ 615 $ 1,059 $ 1,427 Lending Segment Expenses: Expense reimbursements to related parties - lending segment $ 433 $ 998 $ 1,164 $ 1,680 Offering-Related Fees: Upfront dealer manager and trailing dealer manager fees $ 272 $ 350 $ 422 $ 589 Non-issuance specific offering costs (3) $ 43 $ 21 $ 64 $ 45 ______________________ (1) For the three and six months ended June 30, 2020, the Company issued to the Operator 203,349 shares of Common Stock, in lieu of cash payment of the asset management fee for the first quarter of 2020, and 95,245 shares of our Series A Preferred Stock , in lieu of cash payment of the asset management fee for the second quarter of 2020 . Subsequent to June 30, 2021, the Company issued to the Operator 89,338 shares of Series A Preferred Stock in lieu of cash payment of the asset management fee for the first quarter of 2021 . (2) For the three and six months ended June 30, 2020, the Company issued to the Administrator 11,273 shares of Series A Preferred Stock, in lieu of cash as payment of the Base Service Fee for the first quarter of 2020. 29 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) (3) As of June 30, 2021 and December 31, 2020, $ 2.0 million and $ 1.5 million, respectively, was included in deferred costs as reimbursable expenses incurred pursuant to the Master Services Agreement and the then applicable dealer manager agreement with CCO Capital. These non-issuance specific costs are allocated against the gross proceeds from the sale of the Series A Preferred Stock and the Series D Preferred Stock on a pro rata basis for each issuance as a percentage of the total offering. As of June 30, 2021 and December 31, 2020, due to related parties consisted of the following (in thousands): June 30, 2021 December 31, 2020 Asset management fees $ 4,487 $ 2,386 Property management fees and reimbursements 1,926 1,662 Expense reimbursements - corporate 904 647 Expense reimbursements - lending segment 1,685 690 Upfront dealer manager and trailing dealer manager fees 655 493 Non-issuance specific offering costs 969 668 Other amounts due to the CIM Management Entities and certain of its affiliates 6 160 Total due to related parties $ 10,632 $ 6,706 Other During the year ended December 31, 2020 , the Company’s President, Jan F. Salit, retired effective as of September 16, 2020. Mr. Salit received a $ 450,000 payment, representing one year of his base salary, upon the satisfaction of certain conditions specified therein, including the execution of an agreement with the Company that contains, among other things, mutual release and non-disparagement provisions. Related to this payment, $ 287,000 was borne by the Company based on the time that Mr. Salit devoted to the Company relative to other matters relating to CIM Group. On October 1, 2015, an affiliate of CIM Group entered into a five-year lease renewal with respect to a property owned by the Company. The lease was amended to a month-to-month term in February 2019 and was terminated in October 2020. The Company recorded rental and other property income related to this tenant of $ 0 and $ 29,000 for the three months ended June 30, 2021 and 2020, respectively, and $ 0 and $ 58,000 for the six months ended June 30, 2021 and 2020, respectively. On May 15, 2019, CIM Group entered into an approximately 11-year lease for approximately 32,000 rentable square feet with respect to a property owned by the Company. The lease was amended on August 7, 2019 to reduce the rentable square feet to approximately 30,000 rentable square feet. The Company recorded rental and other property income related to this tenant of $ 370,000 and $ 740,000 for the three and six months, respectively, ended both June 30, 2021 and 2020, respectively. 13. COMMITMENTS AND CONTINGENCIES Loan Commitments —Commitments to extend credit are agreements to lend to a customer provided the terms established in the contract are met. The Company’s outstanding commitments to fund loans were $ 61.1 million as of June 30, 2021, the majority of which are for prime-based loans to be originated by the Company’s subsidiary engaged in SBA 7(a) Small Business Loan Program lending, the government guaranteed portion of which is intended to be sold. Commitments generally have fixed expiration dates. Since some commitments are expected to expire without being drawn upon, total commitment amounts do not necessarily represent future cash requirements. Purchase Commitments —As of June 30, 2021, the Company had entered into a purchase agreement with an unaffiliated third-party seller to acquire a 100 % interest in one office property, subject to meeting certain criteria, for an aggregate purchase price of $ 2.9 million, exclusive of closing costs. As of June 30, 2021, the Company had $ 150,000 of property escrow deposits held by an escrow agent in connection with this future property acquisition. This deposit is included in the accompanying consolidated balance sheets in loan servicing asset, net and other assets. This property was subsequently acquired in July 2021 (Note 16). General —In connection with the ownership and operation of real estate properties, the Company has certain obligations for the payment of tenant improvement allowances and lease commissions in connection with new leases and renewals. CIM Commercial had a total of $ 8.0 million in future obligations under leases to fund tenant improvements and other future construction obligations as of June 30, 2021. As of June 30, 2021, $ 2.5 million was funded to reserve accounts included 30 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) in restricted cash on the Company’s consolidated balance sheet for these tenant improvement obligations in connection with the mortgage loan agreement entered into in June 2016. Employment Agreements —The Company has an employment agreement with one of its officers. Under certain circumstances, this employment agreement provides for (1) severance payment equal to the annual base salary paid to the officer and (2) death and disability payments in an amount equal to two times and one time, respectively, the annual base salary paid to the officer. Litigation —The Company is not currently involved in any material pending or threatened legal proceedings nor, to the Company’s knowledge, are any material legal proceedings currently threatened against the Company, other than routine litigation arising in the ordinary course of business. In the normal course of business, the Company is periodically party to certain legal actions and proceedings involving matters that are generally incidental to the Company’s business. While the outcome of these legal actions and proceedings cannot be predicted with certainty, in management’s opinion, the resolution of these legal proceedings and actions will not have a material adverse effect on the Company’s business, financial condition, results of operations, cash flow or the Company’s ability to satisfy its debt service obligations or to maintain its level of distributions on Common Stock or Preferred Stock. In September 2018, the Company filed a lawsuit against the City and County of San Francisco seeking a refund of the $ 11.8 million in penalties, interest and legal fees paid by the Company for real property transfer tax allegedly due for a transaction in a prior year. The Company disputed that such penalties, interest and legal fees were payable but, in order to contest the asserted tax obligations, the Company had to pay such amounts to the City and County of San Francisco in August 2017. The Company has been vigorously pursuing this litigation and intend to continue to do so. A subsidiary of the Company is a defendant in a lawsuit in connection with injuries sustained by a third-party contractor at a property previously owned by such subsidiary. While it is possible that a loss may be incurred, the Company is unable to estimate a range of potential losses due to the complexity and current status of the lawsuit. However, the Company maintains insurance coverage to mitigate the impact of adverse exposures in lawsuits of this nature and do not expect this lawsuit to have a material adverse effect on the Company’s business, financial condition, results of operations, cash flow or the Company ability to satisfy its debt service obligations or to maintain the level of distributions on the Company’s Common Stock or Preferred Stock. SBA Related —If the SBA establishes that a loss on an SBA guaranteed loan is attributable to significant technical deficiencies in the manner in which the loan was originated, funded or serviced under the PPP or the SBA 7(a) Small Business Loan Program, the SBA may seek recovery of the principal loss related to the deficiency from the Company. With respect to the guaranteed portion of SBA loans that have been sold, the SBA will first honor its guarantee and then seek compensation from the Company in the event that a loss is deemed to be attributable to technical deficiencies. Based on historical experience, the Company does not expect that this contingency is probable to be asserted. However, if asserted, it could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flow or the Company’s ability to satisfy its debt service obligations or to maintain its level of distributions on Common Stock or Preferred Stock. Environmental Matters —In connection with the ownership and operation of real estate properties, the Company may be potentially liable for costs and damages related to environmental matters, including asbestos-containing materials. The Company has not been notified by any governmental authority of any noncompliance, liability, or other claim in connection with any of the properties, and the Company is not aware of any other environmental condition with respect to any of the properties that management believes will have a material adverse effect on the Company’s business, financial condition, results of operations, cash flow or the Company’s ability to satisfy its debt service obligations or to maintain its level of distributions on Common Stock or Preferred Stock. 31 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) 14. LEASES Future minimum rental revenue under long-term operating leases as of June 30, 2021, excluding tenant reimbursements of certain costs, are as follows (in thousands): Years Ending December 31, Total 2021 (Six months ending December 31, 2021) $ 22,321 2022 42,430 2023 39,143 2024 37,394 2025 21,811 Thereafter 40,472 $ 203,571 15. SEGMENT DISCLOSURE The Company’s reportable segments during the three and six months ended June 30, 2021 and 2020 consist of two types of commercial real estate properties, namely, office and hotel, as well as a segment for the Company’s lending business. Management internally evaluates the operating performance and financial results of the segments based on net operating income. The Company also has certain general and administrative level activities, including public company expenses, legal, accounting, and tax preparation that are not considered separate operating segments. The reportable segments are accounted for on the same basis of accounting as described in the notes to the Company’s audited consolidated financial statements for the year ended December 31, 2020 included in the 2020 Form 10-K. For the Company’s real estate segments, the Company defines net operating income (loss) as rental and other property income and expense reimbursements less property related expenses, and excludes non-property income and expenses, interest expense, depreciation and amortization, corporate related general and administrative expenses, gain (loss) on sale of real estate, gain (loss) on early extinguishment of debt, impairment of real estate, transaction costs, and provision (benefit) for income taxes. For the Company’s lending segment, the Company defines net operating income as interest income net of interest expense and general overhead expenses. 32 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) The net operating income (loss) of the Company’s segments for the three and six months ended June 30, 2021 and 2020 is as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Office: Revenues $ 13,356 $ 13,763 $ 26,883 $ 28,660 Property expenses: Operating 5,687 5,266 11,342 11,312 General and administrative 83 238 168 336 Total property expenses 5,770 5,504 11,510 11,648 Segment net operating income—office 7,586 8,259 15,373 17,012 Hotel: Revenues 3,477 1,114 5,355 9,367 Property expenses: Operating 3,428 2,226 6,063 8,695 General and administrative 51 6 101 19 Total property expenses 3,479 2,232 6,164 8,714 Segment net operating (loss) income—hotel ( 2 ) ( 1,118 ) ( 809 ) 653 Lending: Revenues 5,839 1,598 9,313 3,982 Lending expenses: Interest expense 182 189 373 480 Expense reimbursements to related parties—lending segment 433 998 1,164 1,680 General and administrative 177 521 623 921 Total lending expenses 792 1,708 2,160 3,081 Segment net operating income (loss)—lending 5,047 ( 110 ) 7,153 901 Total segment net operating income $ 12,631 $ 7,031 $ 21,717 $ 18,566 33 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) A reconciliation of segment net operating income to net income attributable to the Company for the three and six months ended June 30, 2021 and 2020 is as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Total segment net operating income $ 12,631 $ 7,031 $ 21,717 $ 18,566 Interest and other income 1 35 1 36 Asset management and other fees to related parties ( 2,260 ) ( 2,376 ) ( 4,519 ) ( 5,021 ) Expense reimbursements to related parties—corporate ( 454 ) ( 615 ) ( 1,059 ) ( 1,427 ) Interest expense ( 2,491 ) ( 2,707 ) ( 4,932 ) ( 5,583 ) General and administrative ( 835 ) ( 903 ) ( 2,876 ) ( 2,126 ) Depreciation and amortization ( 5,069 ) ( 5,197 ) ( 10,106 ) ( 10,455 ) Income (loss) before provision for income taxes 1,523 ( 4,732 ) ( 1,774 ) ( 6,010 ) (Provision) benefit for income taxes ( 996 ) 691 ( 1,370 ) 713 Net income (loss) 527 ( 4,041 ) ( 3,144 ) ( 5,297 ) Net loss (income) attributable to noncontrolling interests 3 ( 2 ) 4 ( 6 ) Net income (loss) attributable to the Company $ 530 $ ( 4,043 ) $ ( 3,140 ) $ ( 5,303 ) The condensed assets for each of the segments as of June 30, 2021 and December 31, 2020, along with capital expenditures and loan originations for the six months ended June 30, 2021 and 2020, are as follows (in thousands): June 30, 2021 December 31, 2020 Condensed assets: Office $ 461,207 $ 472,544 Hotel 100,711 100,285 Lending 106,817 94,626 Non-segment assets 36,089 18,162 Total assets $ 704,824 $ 685,617 Six Months Ended June 30, 2021 2020 Capital expenditures (1) and loan originations: Office $ 818 $ 7,087 Hotel 128 556 Total capital expenditures 946 7,643 Loan originations 65,210 27,870 Total capital expenditures and loan originations $ 66,156 $ 35,513 ______________________ (1) Represents additions and improvements to real estate investments, excluding acquisitions. Includes the activity for dispositions through their respective disposition dates. 34 Table of Contents CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) – (Continued) 16. SUBSEQUENT EVENTS The following events occurred subsequent to June 30, 2021: Property Acquisition In July 2021, the Company acquired from an unrelated third-party a 100 % fee-simple interest in an office property located in Los Angeles, California for a purchase price of $ 2.9 million, which excludes transaction costs of $ 44,000 that were incurred and capitalized in connection with this acquisition. The property has approximately 4,900 square feet of office space. Debt Subsequent to June 30, 2021, the Company repaid $ 25.0 million on its 2018 revolving credit facility. 35 Table of Contents