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Item 7. Management’s Discussion and Analysis

2021-03-31 compared with 2020-03-30 · 313 added, 158 removed, 258 unchanged (65% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Part II, Item 6.

Selected Financial Data in this Annual Report on Form 10-K and our accompanying consolidated financial statements and notes thereto.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our accompanying consolidated financial statements and notes thereto.

See also the Cautionary Note Regarding Forward-Looking Statements section preceding Part I of this Annual Report on Form 10-K.

For a comparison of the years ended December 31, 2018 and 2017, see Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

For a comparison of the years ended December 31, 2019 and 2018, see Item 7 .

Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company’s Annual Report on Form 10-K for the year ended December 31, 201 9 .

We were formed on July 27, 2010, and we elected to be taxed, and currently qualify, as a REIT for U.S.

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We commenced our principal operations on April 13, 2012, when we satisfied the conditions of our escrow agreement regarding the minimum offering and issued approximately 308,000 shares of our common stock.

We have no paid employees and are externally managed by CMFT Management.

We have no paid employees and are externally managed by CMFT Management and, with respect to investments in securities, our Investment Advisor.

CIM indirectly owns and/or controls CMFT Management;

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We ceased issuing shares in our Offering on April 4, 2014 and in the Initial DRIP Offering effective as of June 30, 2016, but will continue to issue shares of common stock under the Secondary DRIP Offering until certain liquidity events occur, such as the listing of our shares, on a national securities exchange or the sale of our company, or the Secondary DRIP Offering is otherwise terminated by our Board.

We suspended issuing shares of common stock under our Secondary DRIP Offering on August 30, 2020, in connection with our entry into the Merger Agreements.

On March 25, 2021, the Board approved reinstating the DRIP effective April 1, 2021.

We expect that property acquisitions in 2021 and future periods will be funded by proceeds from financing of the acquired properties, cash flows from operations and the strategic sale of properties and other asset acquisitions.

Our operating results and cash flows are primarily influenced by rental and other property income from our commercial properties, interest expense on our indebtedness and acquisition and operating expenses.

As 94.6% of our rentable square feet was under lease, including any month-to-month agreements, as of December 31, 2019 with a weighted average remaining lease term of 8.6 years, we believe our exposure to changes in commercial rental rates on our portfolio is substantially mitigated, except for vacancies caused by tenant bankruptcies or other factors.

CMFT Management regularly monitors the creditworthiness of our tenants by reviewing each tenant’s financial results, any available credit rating agency reports on the tenant or guarantor, the operating history of the property with such tenant, the tenant’s market share and track record within its industry segment, the general health and outlook of the tenant’s industry segment and other information for changes and possible trends.

As 94.1% of our rentable square feet

was under lease, including any month-to-month agreements, as of December 31, 2020 with a weighted average remaining lease term of 8.8 years, we believe our exposure to changes in commercial rental rates on our portfolio is substantially mitigated, except for vacancies caused by tenant bankruptcies or other factors, including due to circumstances related to COVID-19.

Our manager regularly monitors the creditworthiness of our tenants by reviewing each tenant’s financial results, any available credit rating agency reports on the tenant or guarantor, the operating history of the property with such tenant, the tenant’s market share and track record within its industry segment, the general health and outlook of the tenant’s industry segment and other information for changes and possible trends.

If CMFT Management identifies significant changes or trends that may adversely affect the creditworthiness of a tenant, it will gather a more in-depth knowledge of the tenant’s financial condition and, if necessary, attempt to mitigate the tenant credit risk by evaluating the possible sale of the property or identifying a possible replacement tenant should the current tenant fail to perform on the lease.

We have primarily acquired core commercial real estate assets principally consisting of necessity retail properties located throughout the United States.

We have primarily acquired core commercial real estate assets principally consisting of retail properties located throughout the United States.

As of December 31, 2020, we owned 516 properties, comprising 21.3 million rentable square feet of commercial space located in 45 states.

In April of 2019, we announced our intention to pursue a more diversified investment strategy across the capital structure, ultimately transitioning to a mortgage REIT, by balancing our existing portfolio of core commercial real estate assets with our future investments in a portfolio of commercial mortgage loans and other real estate-related credit investments that we would originate, acquire, finance and manage.

In April 2019, we announced our intention to pursue a more diversified investment strategy across the capital structure by balancing our existing portfolio of core commercial real estate assets with our future investments in a portfolio of commercial mortgage loans and other real estate-related credit investments, in which our sponsor and its affiliates have expertise, that we would originate, acquire, finance and manage.

As of December 31, 2020, our loan portfolio consisted of 206 loans with a net book value of $892.3 million.

As of December 31, 2019 , we had $126.8 million reserved for settlement of broadly syndicated loan purchases included in cash and cash equivalents in the accompanying consolidated balance sheet.

Pursuant to our strategy, during the year ended December 31, 2019 , we disposed of 497 properties, including nine properties previously owned through a consolidated joint venture arrangement, encompassing approximately 7.5 million gross rentable square feet.

As of December 31, 2019 , our portfolio consisted of 334 retail properties, 59 anchored shopping centers and three industrial properties representing 33 industry sectors.

As of December 31, 2020, we had $41.0 million of unsettled broadly syndicated loan purchases included in cash and cash equivalents, and investments in real estate-related securities of $38.2 million.

Pursuant to our strategy, during the year ended December 31, 2020, we disposed of 30 properties, encompassing 1.7 million gross rentable square feet.

We previously expected to sell a substantial portion of our anchored-shopping center portfolio and certain single-tenant properties within 24 months of December 31, 2019, subject to market conditions.

In light of current market conditions brought on by the COVID-19 pandemic, we cannot provide assurance that these properties will be sold within such 24-month period.

As a result, we placed 15 properties with a carrying value of $228.4 million that were previously classified as held for sale back in service as real estate assets in the consolidated balance sheets during the year ended December 31, 2020.

As of December 31, 2020, our portfolio consisted of 455 retail properties, 56 anchored shopping centers, four industrial properties and one office property representing 34 industry sectors.

See Note 4 — Real Estate Assets to the consolidated financial statements in this Annual Report on Form 10-K for a discussion of the disposition of individual properties during the year ended December 31, 2020.

The COVID-19 outbreak and the associated “shelter-in-place” or “stay-at-home” orders or other quarantine mandates or public health guidance issued by local, state or federal authorities has adversely affected a number of our tenants’ businesses.

The extent to which the COVID-19 pandemic continues to impact our operations and those of our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others.

During the year ended December 31, 2020, we provided lease concessions, either in the form of rental deferrals or abatements, to certain tenants in response to the impact of the COVID-19 pandemic.

As of December 31, 2020, we granted total rent deferrals with an aggregate deferral amount of $6.2 million.

Additionally, as of December 31, 2020, we granted rent abatements to tenants with an abatement amount of $4.1 million, which reduced revenues during the year ended December 31, 2020.

As of March 24, 2021 , we have collected approximately 98% of rental payments billed to tenants during the three months ended December 31, 2020.

There have been no significant changes in rent collections subsequent to December 31, 2020.

Additionally, COVID-19 has caused us to materially increase our provision for credit losses related to our mezzanine loans.

During the year ended December 31, 2020, we recorded a $58.0 million net increase in our provision for credit losses related to our mezzanine loans.

This provision for credit losses reflects, among other things, the macroeconomic impact of the COVID-19 pandemic on commercial real estate markets generally, as well as certain loans assessed for impairment in our portfolio.

Further, this reserve is not reflective of what we expect our provision for credit losses to be absent the current and potential future impacts of the COVID-19 pandemic.

If the adverse macroeconomic effects of the COVID-19 pandemic persist or worsen, we may further materially increase our provision for credit losses, which may have a material adverse effect on our business, financial condition, results of operations and ability to make distributions.

We are actively managing our response to the COVID-19 pandemic in collaboration with our tenants and business partners and are assessing potential impacts to our financial position and operating results, as well as potential adverse developments in our business.

On April 20, 2020, our Board decided to make a determination as to the amount and timing of distributions on a monthly, instead of a quarterly, basis, and to value our assets for the purpose of updated the estimated per share NAV on a quarterly, rather than annual basis, until such time that we had greater visibility into the impact that the COVID-19 pandemic would have on our tenants’ ability to continue to pay rent on their leases on a timely basis or at all, the degree to which federal, state or local governmental authorities grant rent relief or other relief or amnesty programs applicable to our tenants, our ability to access the capital markets, and on the United States and worldwide financial markets and economy.

Given the relative stability of the Company’s rent collections and the per share NAV for the quarters ended March 31, 2020 and June 30, 2020, the Board determined that it is in the best interests of the Company and its stockholders to cease incurring the additional costs associated with quarterly valuations and return to updating the Company’s per share NAV on an annual basis in accordance with its valuation policies.

On March 25, 2021, the Board resumed declaring distributions on a quarterly basis by declaring a monthly per share distribution for the months of March, April, May and June.

See Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Distributions for a further discussion of distributions declared.

On December 21, 2020, we completed the Mergers pursuant to the Merger Agreements dated August 30, 2020, as amended, with CCIT III Merger Sub and CCPT V Merger Sub each surviving as a wholly owned subsidiary of ours.

In accordance with the MGCL, the separate existence of CCIT III and CCPT V ceased.

Through the Mergers, we acquired 146 properties with a total of 3.8 million square feet, all of which had an aggregate gross real estate value of approximately $763.0 million.

The combined company after the Mergers retained the name “CIM Real Estate Finance Trust, Inc.” Each Merger qualified as a “reorganization” under, and within the meaning of, Section 368(a) of the Code.

Additionally, on August 30, 2020, we, along with Cole Office & Industrial REIT (CCIT II), Inc.

(“CCIT II”) and Thor II Merger Sub, LLC, a wholly owned subsidiary of ours (“CCIT II Merger Sub”), entered into an Agreement and Plan of Merger (the “CCIT II Merger Agreement”).

Subject to the terms and conditions of the CCIT II Merger Agreement, CCIT II would have merged with and into CCIT II Merger Sub (the “CCIT II Merger”), with CCIT II Merger Sub surviving the CCIT II Merger, such that following the CCIT II Merger, the surviving entity would continue as a wholly owned subsidiary of ours.

On October 29, 2020, CCIT II terminated the CCIT II Merger Agreement pursuant to Sections 9.1(c)(ii) and 9.2 of the CCIT II Merger Agreement and entered into an agreement (the “Termination Notice”) with us reflecting such termination and pursuant to which, among other things, CCIT II paid the termination fee equal to $7.38 million to us in accordance with the CCIT II Merger Agreement, and agreed to pay to us the amount of our expenses up to $3.69 million, required to be paid pursuant to the terms of the CCIT II Merger Agreement (such amounts together, the “CCIT II Termination Payment”).

Operating Highlights and Key Performance Indicators

2020 Activity

Acquired one property for an aggregate purchase price of $6.2 million .

Acquired four senior mezzanine loans with a principal balance of $62.1 million and originated three senior loans with a principal balance of $154.3 million.

Entered into a new revolving credit and security agreement that provides for borrowings up to $300.0 million which shall consist primarily of broadly syndicated senior secured loans subject to certain eligibility criteria under the agreement.

As of December 31, 2019, we had broadly syndicated loans with a net book value of $2.8 million and $126.8 million reserved for settlement of broadly syndicated loan purchases.

Disposed of 497 properties, consisting of 482 retail properties, one industrial property and 14 anchored shopping centers, excluding a related outparcel of land, for an aggregate sales price of $1.65 billion .

Reduced total debt by $918.4 million , from $2.5 billion to $1.6 billion .

In connection with the sale of 444 properties that closed in December 2019, total consideration included the assumption by the Purchaser (as defined in Note 4 — Real Estate Assets ) of existing mortgage debt totaling $130.8 million , the repayment of $101.3 million of certain mortgage notes due to the disposition of the underlying properties, the repayment of $165.0 million on the unsecured term loan balance and repayment of the $266.0 million unsecured revolving loan balance.

• Completed the Mergers, which included the acquisition of 146 properties with an aggregate value of $763.0 million and the assumption of debt totaling $379.7 million.

• In addition to the property acquisitions related to the Mergers, we acquired four properties for an aggregate purchase price of $35.5 million.

• Invested $582.7 million in broadly syndicated loans and sold broadly syndicated loans for an aggregate gross sales price of $42.0 million.

• Received payment in full on one senior loan totaling $40.8 million.

• Disposed of 30 properties, consisting of 20 retail properties and 10 anchored shopping centers, for an aggregate sales price of $270.4 million.

• Entered into two repurchase agreements that provide up to $800.0 million to finance a portfolio of existing and future commercial real estate mortgage loans.

• Increased total debt by $303.3 million, from $1.6 billion to $2.1 billion.

Portfolio Information

The following table shows the carrying value of our portfolio by investment type as of December 31, 2020 and 2019:

As of December 31,

Asset Count Carrying Value Asset Count Carrying Value

Loan Held-For-Investment

Mezzanine loans 8 $ 147,475 3.5 % 8 $ 146,060 4.7 %

Senior loans 4 341,546 8.1 % 3 152,820 4.9 %

Broadly syndicated loans 194 473,603 11.3 % 1 2,750 0.1 %

Allowance for credit losses (70,358) (1.7) % — — %

Total loans-held-for-investment and related receivable, net 206 892,266 21.2 % 12 301,630 9.7 %

Real Estate-Related Securities

CMBS 4 38,194 0.9 % — — — %

Total real estate assets and intangible lease liabilities, net 516 3,278,905 77.9 % 396 2,800,709 90.3 %

Total Investment Portfolio 726 $ 4,209,365 100.0 % 408 $ 3,102,339 100.0 %

The following table details overall statistics of our credit portfolio as of December 31, 2020 (dollar amounts in thousands):

Mezzanine Loans (1) (2)

Senior Loans (1) (2)

Broadly Syndicated Loans CMBS

Number of loans 8 4 194 4

Net book value $ 89,437 $ 338,956 $ 463,873 $ 38,194

Weighted-average interest rate 14.1 % 4.9 % 3.8 % 6.8 %

Weighted-average maximum years to maturity 0.4 3.0 4.9 8.0

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(1) As of December 31, 2020, 100% of the our loans by principal balance earned a floating rate of interest, primarily indexed to U.S.

dollar LIBOR.

(2) Maximum maturity date assumes all extension options are exercised by the borrowers;

however, our CRE loans may be repaid prior to such date.

Real Estate Portfolio Information

As of December 31, 2020, we owned 516 properties located in 45 states, the gross rentable square feet of which was 94.1% leased, including any month-to-month agreements, with a weighted average lease term remaining of 8.8 years.

During the year ended December 31, 2019 , we disposed of 497 properties, for an aggregate gross sales price of $1.65 billion .

During the year ended December 31, 2020, we disposed of 30 properties, for an aggregate gross sales price of $270.4 million.

The following table shows the property statistics of our real estate assets as of December 31, 2020 and 2019:

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Rentable square feet (in thousands) (1)

21,309 19,103

Percentage of rentable square feet leased 94.1 % 94.6 %

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38.0 % 36.9 %

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(1) Includes square feet of buildings on land parcels subject to ground leases.

Investment-grade tenants are those with a credit rating of BBB- or higher by Standard & Poor’s or a credit rating of Baa3 or higher by Moody’s.

(2) Investment-grade tenants are those with a credit rating of BBB- or higher by Standard & Poor’s Financial Services LLC (“Standard & Poor’s”) or a credit rating of Baa3 or higher by Moody’s Investor Service, Inc.

The ratings may reflect those assigned by Standard & Poor’s or Moody’s to the lease guarantor or the parent company, as applicable.

The weighted average credit rating is weighted based on annualized rental income and is for only those tenants rated by Standard & Poor’s.

weighted average credit rating is weighted based on annualized rental income and is for only those tenants rated by Standard & Poor’s.

The following table summarizes our real estate acquisition activity during the years ended December 31, 2020 and 2019:

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2020 2020 Percentage of

Rental Income

of Leases (1)

(in thousands) (2)

Total Leased Annualized Annualized 2020

Number Square Feet Rental Income Rental Income Annualized

Tenant of Leases (1)

(in thousands) (2)

per Square Foot (2)

(in thousands) per Square Foot (2)

Rental Income

Walgreens 37 544 $ 13,429 $ 24.69 5 %

Lowe’s 15 1,899 13,270 6.99 5 %

Academy Sports 7 2,016 12,311 6.11 5 %

CVS 42 529 11,920 22.53 4 %

United Oil 4 64 10,928 170.75 4 %

Fitness 9 410 7,860 19.17 3 %

PetSmart 28 485 7,745 15.97 3 %

Home Depot 4 555 7,408 13.35 3 %

Dick’s Sporting Goods 13 572 6,894 12.05 3 %

Cabela’s 1 403 6,544 16.24 2 %

Other 872 12,566 168,865 13.44 63 %

1,032 20,043 $ 267,174 $ 13.33 100 %

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(1) Includes leases which are master lease agreements.

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2020 2020 Percentage of

Rental Income

of Leases (1)

(in thousands) (2)

Total Leased Annualized Annualized 2020

Number Square Feet Rental Income Rental Income Annualized

Industry of Leases (1)

(in thousands) (2)

per Square Foot (2)

(in thousands) per Square Foot (2)

Rental Income

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Discount store 117 2,627 27,050 10.30 10 %

Pharmacy 79 1,073 25,349 23.62 9 %

Grocery and supermarket 39 1,696 21,038 12.40 8 %

Gas and convenience 12 91 13,156 144.57 5 %

Casual dining 77 453 12,436 27.45 4 %

Pet supply 40 635 10,115 15.93 4 %

Apparel and jewelry 68 716 9,949 13.90 4 %

Gas and convenience

Hobby, books and music

Entertainment and recreation 20 554 9,412 16.99 4 %

Other 491 5,534 76,148 13.76 29 %

1,032 20,043 $ 267,174 $ 13.33 100 %

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(1) Includes leases which are master lease agreements.

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2020 2020 Percentage of

Rental Income

(in thousands) (1)

(in thousands)

per Square Foot (1)

Total Rentable Annualized Annualized 2020

Number of Square Feet Rental Income Rental Income Annualized

Location Properties (in thousands) (1)

(in thousands) per Square Foot (1)

Rental Income

California 61 833 $ 28,161 $ 33.81 11 %

Ohio 38 1,879 21,157 11.26 8 %

Georgia 20 1,770 20,348 11.50 8 %

Texas 56 1,315 18,887 14.36 7 %

Illinois 20 1,216 14,501 11.93 5 %

Florida 30 1,138 14,229 12.50 5 %

Indiana 24 1,184 13,606 11.49 5 %

Wisconsin 16 1,113 13,455 12.09 5 %

North Carolina 25 1,085 12,996 11.98 5 %

Alabama 27 951 11,639 12.24 4 %

Other 199 8,825 98,195 11.13 37 %

516 21,309 $ 267,174 $ 12.54 100 %

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(1) Includes square feet of the buildings on land parcels subject to ground leases.

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2020 2020 Percentage of

Rental Income

Property Type

(in thousands) (1)

(in thousands)

per Square Foot (1)

Total Rentable Annualized Annualized 2020

Number of Square Feet Rental Income Rental Income Annualized

Property Type Properties (in thousands) (1)

(in thousands) per Square Foot (1)

Rental Income

Retail 455 10,686 $ 150,316 $ 14.07 56 %

Anchored shopping centers 56 8,614 104,655 12.15 39 %

Industrial 4 1,788 9,392 5.25 4 %

Office 1 221 2,811 12.72 1 %

516 21,309 $ 267,174 $ 12.54 100 %

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(1) Includes square feet of the buildings on land parcels subject to ground leases.

Although there are variations in the specific terms of the leases of our properties, the following is a summary of the general structure of our current leases.

Generally, the leases of the properties acquired provide for initial terms of ten or more years and

provide the tenant with one or more multi-year renewal options, subject to generally the same terms and conditions as the initial lease term.

Generally, the leases of the properties acquired provide for initial terms of ten or more years and provide the tenant with one or more multi-year renewal options, subject to generally the same terms and conditions as the initial lease term.

Certain leases also provide that in the event we wish to sell the property subject to that lease, we first must offer the lessee the right to purchase the property on the same terms and conditions as any offer which we intend to accept for the sale of the property.

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The following table shows lease expirations of our real estate portfolio, as of December 31, 2020, during each of the next ten years and thereafter, assuming no exercise of renewal options:

Percentage of

Rental Income

Year of Lease Expiration

(in thousands) (2)

Total Leased Annualized 2020 Percentage of

Number Square Feet Rental Income Annualized 2020

of Leases Expiring Expiring Rental Income Annualized

Year of Lease Expiration Expiring (1)

(in thousands) (2)

per Square Foot (2)

(in thousands) per Square Foot (2)

Rental Income

2021 97 804 $ 10,433 $ 12.98 4 %

2022 84 845 10,113 11.97 4 %

2023 133 1,358 21,465 15.81 8 %

2024 127 1,758 23,300 13.25 9 %

2025 112 1,576 19,481 12.36 7 %

2026 72 1,546 18,208 11.78 7 %

2027 61 1,406 13,906 9.89 5 %

2028 56 1,082 12,358 11.42 4 %

2029 71 1,020 15,690 15.38 6 %

2030 47 903 15,993 17.71 6 %

Thereafter 172 7,745 106,227 13.72 40 %

1,032 20,043 $ 267,174 $ 13.33 100 %

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(1) Includes leases which are master lease agreements.

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Results of Operations

We are not aware of any material trends or uncertainties, other than the recent outbreak of COVID-19, and national economic conditions affecting real estate in general, that may reasonably be expected to have a material impact on our results from the acquisition, management and operations of properties other than those listed in Part I, Item 1A — Risk Factors.

Due to the recent outbreak of COVID-19 in the United States and globally, our tenants, our operating partners, and we may be impacted.

The impact of COVID-19 on our future results could be significant and will largely depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19, the success of action taken to contain or treat COVID-19, and reactions by consumers, companies, governmental entities and capital markets.

For a comparison of the years ended December 31, 2018 and 2017 , see Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 .

We are not aware of any material trends or uncertainties, other than the effects of the outbreak of COVID-19, and national economic conditions affecting real estate in general, that may reasonably be expected to have a material impact on our results from the acquisition, management and operation of properties other than those listed in Part I, Item 1A — Risk Factors.

Currently, we are unable to predict the impact that the COVID-19 pandemic will have on our financial condition, results of operations and cash flows in future periods due to numerous uncertainties.

For a comparison of the years ended December 31, 2019 and 2018, see Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Same Store Analysis

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Net operating income is considered by management to be a helpful supplemental performance measure, as it enables management to evaluate the impact of occupancy, rents, leasing activity, and other controllable property operating results at our real estate properties, and it provides a consistent method for the comparison of our properties.

We define net operating income as operating revenues less operating expenses, which exclude (i) depreciation and amortization, (ii) interest expense and other non-property related revenue and expense items such as (a) general and administrative expenses, (b) management and advisory fees and expenses, (c) transaction-related expenses, (d) real estate impairment, (e) provision for credit losses, (f) gain on disposition of real estate, net, (g) merger-related items and (h) interest income.

Our net operating income may not be comparable to that of other REITs and should not be considered to be more relevant or accurate in evaluating our operating performance than the current GAAP methodology used in calculating net income (loss).

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For the Year Ended December 31,

2020 2019 Change

Net income $ (23,518) $ 183,020 $ (206,538)

Loss on extinguishment of debt 4,841 7,227 (2,386)

1 unchanged sentence

Operating income 45,439 289,212 (243,773)

Merger termination fee income (7,380) — (7,380)

Merger-related expenses, net 2,193 — 2,193

Gain on disposition of real estate, net (27,518) (180,666) 153,148

Provision for credit losses 68,356 — 68,356

Real estate impairment 16,737 72,939 (56,202)

Depreciation and amortization 80,973 107,867 (26,894)

Transaction-related

Transaction-related expenses 905 2,278 (1,373)

Management and advisory fees and expenses 44,743 42,339 2,404

General and administrative

Interest and other income

General and administrative expenses 15,385 13,729 1,656

Interest income (29,393) (20,132) (9,261)

Net operating income $ 210,440 $ 327,566 $ (117,126)

Our operating segments include credit and real estate.

Refer to Note 17 — Segment Reporting to our consolidated financial statements for further discussion of our operating segments.

Credit Segment

Interest Income

The increase in interest income of $9.3 million for the year ended December 31, 2020, compared to the same period in 2019, was due to an increase in credit investments.

As of December 31, 2020, we held investments in 194 broadly syndicated loans, 12 CRE loans held-for-investment and four CMBS.

As of December 31, 2019, we held investments in one broadly syndicated loan and 11 CRE loans held-for-investment.

Provision for Credit Losses

The increase in provision for credit losses of $68.4 million during the year ended December 31, 2020, as compared to the same period in 2019, was primarily due to the adoption of current expected credit losses (“CECL”) on January 1, 2020 and management’s determination that the fair value of the collateral of the Company’s loans held-for-investment, which is based on comparable market sales, decreased compared to the amortized cost basis, which resulted in recording $68.4 million in credit losses during the year ended December 31, 2020.

No such losses were recorded during the year ended December 31, 2019.

Real Estate Segment

A total of 365 properties were acquired before January 1, 2019 and represent our “same store” properties during the years ended December 31, 2020 and 2019.

“Non-same store” properties, for purposes of the table below, includes properties acquired on or after January 1, 2018 .

“Non-same store” properties, for purposes of the table below, includes properties acquired or disposed of on or after January 1, 2019.

The following table details the components of net operating income broken out between same store and non-same store properties (dollar amounts in thousands):

Non-Same Store (1)

For the Year Ended December 31,

Total Same Store Non-Same Store

For the Year Ended December 31, For the Year Ended December 31, For the Year Ended December 31,

2020 2019 Change 2020 2019 Change 2020 2019 Change

Rental and other property income $ 261,530 $ 393,224 $ (131,694) $ 246,556 $ 255,869 $ (9,313) $ 14,974 $ 137,355 $ (122,381)

3 unchanged sentences

Net operating income $ 210,440 $ 327,566 $ (117,126) $ 198,611 $ 205,667 $ (7,056) $ 11,829 $ 121,899 $ (110,070)

______________________

Includes income from properties disposed of during the period.

Loss on Extinguishment of Debt

The increase in loss on extinguishment of debt of $7.2 million for the year ended December 31, 2019 , as compared to the same period in 2018 , was due to the termination of certain mortgage notes in connection with the disposition of the underlying properties during the year ended December 31, 2019 .

The decrease in loss on extinguishment of debt of $2.4 million for the year ended December 31, 2020, as compared to the same period in 2019, was due to a decrease in the number of mortgage notes terminated in connection with the disposition of the underlying properties during the year ended December 31, 2020.

During the year ended December 31, 2020, we recorded losses on the extinguishment of mortgage loans with an aggregate carrying value of $97.0 million, as compared to recording losses on the extinguishment of mortgage loans with an aggregate carrying value of $258.0 million during the year ended December 31, 2019.

Interest Expense and Other, Net

Interest expense and other, net also includes amortization of deferred financing costs.

The increase in interest expense and other, net, of $1.1 million for the year ended December 31, 2019 , as compared to the same period in 2018 , was due to increases in the weighted average interest rate during the first half of 2019, as compared to the same period in 2018 , partially offset by debt repayments in connection with the disposition of the underlying properties during the year ended December 31, 2019 .

The decrease in interest expense and other, net, of $34.8 million for the year ended December 31, 2020, as compared to the same period in 2019, was primarily due to a decrease in the average aggregate amount of debt outstanding from $2.2 billion for the year ended December 31, 2019 to $1.8 billion for the year ended December 31, 2020, as a result of debt repayments in connection with the disposition of the underlying properties.

In addition, the weighted average interest rate decreased from 3.9% as of December 31, 2019 to 3.4% as of December 31, 2020.

Merger Termination Fee Income

In connection with the Termination Notice, we received a termination fee of $7.4 million during the year ended December 31, 2020.

No such fees were received during the year ended December 31, 2019.

Merger-Related Expenses, Net

In connection with the Mergers, we incurred fees and expenses of $2.2 million during the year ended December 31, 2020.

No such fees were incurred during the year ended December 31, 2019.

Gain on Disposition of Real Estate, Net

The increase in gain on disposition of real estate during the year ended December 31, 2019 , as compared to the same period in 2018 , was due to the disposition of 497 properties, including the sale of 444 properties that closed in December 2019 pursuant to a purchase and sale agreement further discussed in Note 4 — Real Estate Assets .

The dispositions resulted in a gain of $180.7 million during the year ended December 31, 2019 compared to the disposition of 21 properties for a gain of $6.3 million during the year ended December 31, 2018 .

Impairments increased $40.0 million during the year ended December 31, 2019 , as compared to the same period in 2018 , due to 34 properties that were deemed to be impaired, resulting in impairment charges of $72.9 million during the year ended December 31, 2019 , compared to 22 properties that were deemed to be impaired, resulting in impairment charges of $33.0 million during the year ended December 31, 2018 .

The decrease in gain on disposition of real estate, net of $153.1 million during the year ended December 31, 2020, as compared to the same period in 2019, was due to the disposition of 30 properties for a gain of $27.5 million during the year ended December 31, 2020 compared to the disposition of 497 properties for a gain of $180.7 million during the year ended December 31, 2019.

The decrease in impairments of $56.2 million during the year ended December 31, 2020, as compared to the same period in 2019, was due to 12 properties that were deemed to be impaired, resulting in impairment charges of $16.7 million during the

year ended December 31, 2020, compared to 34 properties that were deemed to be impaired, resulting in impairment charges of $72.9 million during the year ended December 31, 2019.

Depreciation and Amortization

The decrease in depreciation and amortization expenses of $33.1 million during the year ended December 31, 2019 , as compared to the same period in 2018 , was primarily due to the disposition of 497 properties.

The decrease in depreciation and amortization expenses of $26.9 million during the year ended December 31, 2020, as compared to the same period in 2019, was primarily due to the disposition of 30 properties during the year ended December 31, 2020, partially offset by recognizing a full period of depreciation and amortization expenses on the one property acquired in 2019.

Transaction-Related Expenses

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and (4) the principal amount of any loan we originated.

We also reimbursed CMFT Management or its affiliates for transaction-related expenses incurred in the process of acquiring a property or the origination or acquisition of a loan, so long as the total acquisition fees and expenses relating to the transaction did not exceed 6.0% of the contract purchase price, unless otherwise approved by a majority of our

Board, including a majority of our independent directors, as commercially competitive, fair and reasonable to us.

Other transaction-related expenses, such as advisor reimbursements for disposition activities, are expensed as incurred.

The decrease in transaction-related expenses of $323,000 during the year ended December 31, 2019 , as compared to the same period in 2018 , was primarily due to acquisition fees paid to the advisor pursuant to the Prior Advisory Agreement related to the acquisition of $62.1 million of loans held-for-investment during the year ended December 31, 2019 , compared to acquisition fees paid to the advisor related to the origination of $89.3 million of loans held-for-investment during the year ended December 31, 2018 .

Other transaction-related expenses, such as manager reimbursements for disposition activities, are expensed as incurred.

The decrease in transaction-related expenses of $1.4 million during the year ended December 31, 2020, as compared to the same period in 2019, was primarily due to a decrease in reimbursements to our manager for expenses related to the 30 dispositions that occurred during the year ended December 31, 2020 for an aggregate sales price of $270.4 million, compared to such expenses related to the 497 dispositions that occurred during the year ended December 31, 2019 for an aggregate gross sales price of $1.7 billion.

Management and Advisory Fees and Expenses

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Beginning on August 20, 2019, we pay CMFT Management a management fee pursuant to the Management Agreement, payable quarterly in arrears, equal to the greater of (a) $250,000 per annum ($62,500 per quarter) and (b) 1.50% per annum (0.375% per quarter) of the Company’s Equity (as defined in the Management Agreement).

Additionally, we may be required to reimburse certain expenses incurred by CMFT Management in providing advisory services, subject to limitations as set forth in the Management Agreement (as discussed in Note 11 — Related-Party Transactions and Arrangements ).

The decrease in management and advisory fees and expenses of $1.1 million during the year ended December 31, 2019 , as compared to the same period in 2018 , was due to a decrease in our average invested assets to $5.0 billion for the period through August 20, 2019, compared to $5.4 billion over the year ended December 31, 2018 .

In addition, beginning on August 20, 2019, we began paying CMFT Management a management fee and ceased paying an advisory fee.

Additionally, we may be required to reimburse certain expenses incurred by CMFT Management in providing management services, subject to limitations as set forth in the Management Agreement (as discussed in Note 12 — Related-Party Transactions and Arrangements).

Furthermore, as discussed in Note 12 — Related-Party Transactions and Arrangements, pursuant to the Investment Advisory and Management Agreement, for management of investments in the Managed Assets (as defined in the Investment Advisory and Management Agreement), CMFT Securities pays the Investment Advisor the Investment Advisory Fee, payable quarterly in arrears, equal to 1.50% per annum (0.375% per quarter) of CMFT Securities’ Equity (as defined in the Investment Advisory and Management Agreement).

Pursuant to the Investment Advisory and Management Agreement, CMFT Securities reimburses the Investment Advisor for costs and expenses incurred by the Investment Advisor on its behalf.

Because the Managed Assets are excluded from the calculation of management fees payable by the Company to CMFT Management pursuant to the Management Agreement, the total management and advisory fees payable by the Company to its external advisors are not increased as a result of the Investment Advisory and Management Agreement.

In addition, pursuant to the Sub-Advisory Agreement, in connection with providing investment management services with respect to the corporate credit-related securities held by CMFT Securities, on a quarterly basis, the Investment Advisor designates 50% of the sum of the Investment Advisory Fee payable to the Investment Advisor as sub-advisory fees.

The increase in management and advisory fees and expenses of $2.4 million during the year ended December 31, 2020, as compared to the same period in 2019, was due to the management fee we began paying CMFT Management beginning on August 20, 2019.

During the year ended December 31, 2020, we incurred management fees of $40.0 million.

General and Administrative Expenses

The primary general and administrative expense items are certain expense reimbursements to our advisor, escrow and trustee fees, state franchise and income taxes, office expenses and accounting fees.

The decrease in general and administrative expenses of $398,000 for the year ended December 31, 2019 , compared to the same period in 2018 , was primarily due to decreases in operating expense reimbursements to our advisor.

Interest Income

The increase in interest income of $18.5 million for the year ended December 31, 2019 , compared to the same period in 2018 , was due to the acquisition and origination of seven loans held-for-investment during the year ended December 31, 2019 , compared to the acquisition and origination of four loans held-for-investment in November 2018.

The primary general and administrative expense items are certain expense reimbursements to our manager, banking fees and escrow and trustee fees.

The increase in general and administrative expenses of $1.7 million for the year ended December 31, 2020, compared to the same period in 2019, was primarily due to an increase in unused fees related to our credit facility, partially offset by a decrease in state franchise and income tax expenses.

Net Operating Income

Same store property net operating income decreased $7.1 million during the year ended December 31, 2020, as compared to the same period in 2019.

The decrease was primarily due to the decrease in same store occupancy to 94.6% from 95.0% as of December 31, 2019 and 2018 , respectively.

Additionally, tenant bankruptcies at 12 same store properties account for $3.1 million of the net decrease in rental income for the year ended December 31, 2019 .

The decrease was primarily due to reductions in rental and other property income of $3.8 million for amounts deemed not probable of collection at 39 properties during the year ended December 31, 2020 due to the impact of the COVID-19 pandemic.

Additionally, overall same store occupancy was 93.2% as of December 31, 2020, compared to 95.0% as of December 31, 2019.

Non-same store property net operating income decreased $110.1 million during the year ended December 31, 2020, as compared to the same period in 2019.

The decrease is primarily due to the disposition of 497 properties during the year ended December 31, 2019 , offset by recognizing a full period of net operating income for the one property acquired during the year ended December 31, 2018 .

The decrease is primarily due to the disposition of 497 properties during the year ended December 31, 2019 and the disposition of 30 properties during the year ended December 31, 2020, offset by recognizing a full period of net operating income for the one property acquired during the year ended December 31, 2019 and partial period of net operating income for the properties acquired during the year ended December 31, 2020.

Distributions

On a quarterly basis, our Board authorizes a daily distribution for the succeeding quarter.

Prior to April 1, 2020, on a quarterly basis, our Board authorized a daily distribution for the succeeding quarter.

Our Board authorized the following daily distribution amounts per share for the periods indicated below:

Period Commencing

Period Ending

Daily Distribution Amount

Period Commencing Period Ending Daily Distribution Amount

April 14, 2012 December 31, 2012 $0.001707848

January 1, 2013 December 31, 2015 $0.001712523

January 1, 2016 December 31, 2016 $0.001706776

January 1, 2017 December 31, 2019 $0.001711452

January 1, 2020 March 31, 2020 $0.001706776

On April 20, 2020, our Board decided to make a determination as to the amount and timing of distributions on a monthly, instead of a quarterly, basis until such time that we had greater visibility into the impact that the COVID-19 pandemic would have on our tenants’ ability to continue to pay rent on their leases on a timely basis or at all, the degree to which federal, state or local governmental authorities grant rent relief or other relief or amnesty programs applicable to our tenants, our ability to access the capital markets, and on the United States and worldwide financial markets and economy.

On March 25, 2021, the Board resumed declaring distributions on a quarterly basis by declaring a monthly per share distribution for the months of March, April, May and June of 2021.

Since April of 2020, our Board authorized the following monthly distribution amounts per share for the periods indicated below:

Record Date Distribution Amount

April 30, 2020 $0.0130

December 31, 2012

January 1, 2013

December 31, 2015

January 1, 2016

December 31, 2016

January 1, 2017

May 31, 2020 $0.0130

June 30, 2020 $0.0161

July 30, 2020 $0.0304

August 28, 2020 $0.0303

September 29, 2020 $0.0303

October 29, 2020 $0.0303

November 27, 2020 $0.0303

December 30, 2020 $0.0303

January 28, 2021 $0.0303

February 25, 2021 $0.0303

March 29, 2021 $0.0303

April 29 2021 $0.0303

May 28, 2021 $0.0303

June 29, 2021 $0.0303

As of December 31, 2020, we had distributions payable of $11.0 million.

Our Board has reaffirmed the declaration and payment of distributions for the month of March 2020 at the rate previously declared on November 5, 2019, which distributions will be paid on or around April 1, 2020.

Given the impact of the COVID-19 outbreak, our Board has decided to defer making a determination as to the amount and timing of distributions for the second quarter of 2020 until such time that we have greater visibility into the impact that the COVID-19 outbreak will have on our tenants’ ability to continue to pay rent on their leases on a timely basis or at all, the degree to which federal, state or local governmental authorities grant rent relief or other relief or amnesty programs applicable to our tenants, our ability to access the capital markets, and on the United States and worldwide financial markets and economy.

The following table presents distributions and source of distributions for the periods indicated below (dollar amounts in thousands):

Year Ended December 31,

Amount Percent Amount Percent

Distributions paid in cash $ 90,655 73 % $ 112,083 58 %

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$ 115,985 93 % $ 194,471 100 %

Proceeds from the issuance of common stock 8,308 (3) 7 % — — %

Proceeds from the issuance of debt 553 (4) — % — — %

Total sources $ 124,846 100 % $ 194,471 100 %

____________________________________

(1) Net cash provided by operating activities for the years ended December 31, 2020 and 2019 was $106.4 million and $188.6 million, respectively.

(2) Our distributions covered by cash flows from operating activities include cash flows from prior periods of $5.9 million .

(2) Our distributions covered by cash flows from operating activities for the years ended December 31, 2020 and 2019 include cash flows from operating activities in excess of distributions from prior periods of $9.6 million and $5.9 million, respectively.

(3) In accordance with GAAP, certain real estate acquisition-related fees and expenses, such as expenses and fees incurred in connection with property acquisitions accounted for as business combinations, are expensed, and therefore reduce net cash flows from operating activities.

Therefore, for consistency, proceeds from the issuance of common stock used as a source of distributions for the year ended December 31, 2020 include the amount by which real estate acquisition-related fees and expenses have reduced net cash flows from operating activities in those prior periods.

(4) Net proceeds on the credit facilities and notes payable for the year ended December 31, 2020 was $159.0 million.

Share Redemptions

Our share redemption program permits our stockholders to sell their shares of common stock back to us, subject to certain conditions and limitations.

We will not redeem in excess of 5.0% of the weighted average number of shares outstanding during the trailing 12 months prior to the end of the fiscal quarter for which the redemptions are being paid.

Our Amended Share Redemption Program permits our stockholders to sell their shares of common stock back to us, subject to certain conditions and limitations.

Funding for the redemption of shares will be limited to the cumulative net proceeds we receive from the sale of shares under the Secondary DRIP Offering, net of shares redeemed to date.

In addition, we will generally limit quarterly redemptions to approximately 1.25% of the weighted average number of shares outstanding during the trailing 12 -month period ending on the last day of the fiscal quarter for which the redemptions are being paid, and to the net proceeds we receive from the sale of shares in the respective quarter under the Secondary DRIP Offering.

In addition, we will generally limit quarterly redemptions to approximately 1.25% of the weighted average number of shares outstanding during the trailing 12-month period ending on the last day of the fiscal quarter for which the redemptions are being paid, and to the net

proceeds we receive from the sale of shares in the respective quarter under the Secondary DRIP Offering.

Any of the foregoing limits might prevent us from accommodating all redemption requests made in any fiscal quarter or in any 12-month period.

We received redemption requests of approximately 20.6 million shares for $178.5 million in excess of the net proceeds we received from the issuance of shares under the Secondary DRIP Offering during the three months ended December 31, 2019 .

Management, in its discretion, limited the amount of shares redeemed for the three months ended December 31, 2019 to an amount equal to net proceeds we received from the sale of shares pursuant to the Secondary DRIP Offering during the respective period.

During the year ended December 31, 2019 , we received valid redemption requests under our share redemption program totaling approximately 88.6 million shares, of which we redeemed approximately 7.2 million shares as of December 31, 2019 for $62.4 million (at an average redemption price of $8.65 per share) and approximately 2.3 million shares subsequent to December 31, 2019 for $19.5 million at an average redemption price of $8.65 per share.

The remaining redemption requests relating to approximately 79.1

million shares went unfulfilled.

In addition, our Board may choose to amend the terms of, suspend or terminate our Amended Share Redemption Program at any time in its sole discretion if it believes that such action is in the best interest of us and our stockholders.

Any material modifications or suspension of the Amended Share Redemption Program will be disclosed to our stockholders as promptly as practicable in our reports filed with the SEC and via our website.

In connection with the Mergers, our Board suspended our Amended Share Redemption Program on August 30, 2020, and therefore, no shares were redeemed from our stockholders after that date until the Amended Share Redemption Program was reinstated, effective April 1, 2021, by our Board on March 25, 2021.

During the year ended December 31, 2020, we received valid redemption requests under our Amended Share Redemption Program totaling approximately 48.3 million shares, of which we redeemed approximately 3.8 million shares as of December 31, 2020 for $28.5 million (at an average redemption price of $7.60 per share).

The remaining redemption requests relating to approximately 44.5 million shares went unfulfilled.

During the year ended December 31, 2019, we received valid redemption requests under our share redemption program totaling approximately 88.6 million shares, of which we redeemed approximately 7.2 million shares as of December 31, 2019 for $62.4 million (at an average redemption price of $8.65 per share) and approximately 2.3 million shares subsequent to December 31, 2019 for $19.5 million at an average redemption price of $8.65 per share.

The remaining redemption requests relating to approximately 79.1 million shares went unfulfilled.

A valid redemption request is one that complies with the applicable requirements and guidelines of our share redemption program then in effect.

A valid redemption request is one that complies with the applicable requirements and guidelines of the share redemption program then in effect.

The share redemptions were funded with proceeds from the Secondary DRIP Offering.

See the discussion of our share redemption program in Part II, Item 5.

See the discussion of our Amended Share Redemption Program in Part II, Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Share Redemption Program in this Annual Report on Form 10-K.

Liquidity and Capital Resources

We are continuing to monitor the outbreak of COVID-19 and its impact on our tenants, operating partners and the economy as a whole.

The magnitude and duration of the pandemic and its impact on our operations and liquidity is uncertain as of the filing date of our report as this continues to evolve globally.

However, if the outbreak continues on its current trajectory, such impacts could grow and become material.

To the extent that our tenants and operating partners continue to be impacted by the COVID-19 outbreak, or by the other risks disclosed in our annual report, this could materially disrupt our business operations.

We expect to utilize proceeds from real estate dispositions, cash flows from operations and future proceeds from secured or unsecured financing to complete future acquisitions and for general corporate uses.

We expect to utilize proceeds from real estate dispositions, sales proceeds and principal payments received on credit investments, cash flows from operations and future proceeds from secured or unsecured financing to complete future acquisitions and for general corporate uses.

The sources of our operating cash flows will primarily be provided by the rental and other property income received from current and future leased properties.

As of December 31, 2019 , we had an unsecured credit facility with JPMorgan Chase Bank, N.A., as administrative agent (the “Credit Facility”) that provided for borrowings of up to $1.24 billion , which includes a $885.0 million unsecured term loan (the “Term Loan”) and up to $350.0 million in unsecured revolving loans.

As of December 31, 2019 , we had $349.4 million in unused capacity under the Credit Facility, subject to borrowing availability.

As of December 31, 2020, we had an unsecured credit facility with JPMorgan Chase Bank, N.A., as administrative agent (the “CMFT Credit Facility”) that provided for borrowings of up to $1.24 billion, which includes a $885.0 million unsecured term loan (the “CMFT Term Loan”) and up to $350.0 million in unsecured revolving loans (the “CMFT Revolving Loans”).

During the year ended December 31, 2020, as a result of the Merger with CCPT V, we assumed CCPT V’s obligations pursuant to the credit agreement by and among Cole Operating Partnership V, LP, the operating partnership of CCPT V, JPMorgan Chase Bank, N.A.

as administrative agent, and the lender parties thereto (the “CCPT V Credit Agreement”), including as guarantor under a guaranty provided by CCPT V.

The CCPT V Credit Agreement allows for borrowings of up to $350.0 million (the “CCPT V Credit Facility,” and together with the CMFT Credit Facility, the “Credit Facilities”).

The CCPT V Credit Facility includes $220.0 million in term loans (the “CCPT V Term Loans,” and together with the CMFT Term Loan, the “Term Loans”) and up to $130.0 million in revolving loans (the “CCPT V Revolving Loans,” and together with the CMFT Revolving Loans, the “Revolving Loans”).

As of December 31, 2020, we had $480.0 million in unused capacity under the Credit Facilities, subject to borrowing availability.

We had available borrowings of $135.5 million as of December 31, 2020.

As of December 31, 2019 , we also had cash and cash equivalents of $466.0 million , which included $126.8 million reserved for settlement of investment security purchases.

On December 31, 2019 (the “Closing Date”), CMFT Corporate Credit Securities, LLC, one of our indirect wholly-owned, bankruptcy-remote subsidiaries, entered into a revolving credit and security agreement (the “Credit and Security Agreement”) with the lenders from time to time parties thereto, Citibank, N.A.

(“Citibank”), as administrative agent, CMFT Securities Investments, LLC, a wholly-owned subsidiary of ours, as equityholder and as collateral manager, Citibank (acting through its Agency & Trust division), as both a collateral agent and as a collateral custodian, and Virtus Group, LP, as collateral administrator.

The Credit and Security Agreement provides for borrowings in an aggregate principal amount up to $300.0 million (the “Credit Securities Revolver”), which may be increased from time to time pursuant to the Credit and Security Agreement.

As of December 31, 2019 , there were no amounts borrowed or outstanding under the Credit Securities Revolver.

As of December 31, 2020, we also had cash and cash equivalents of $121.4 million, which included $41.0 million of unsettled broadly syndicated loan purchases.

As of December 31, 2020, CMFT Corporate Credit Securities, LLC, our indirect wholly-owned subsidiary, had a revolving credit and security agreement with Citibank N.A.

(“Citibank”), as administrative agent (the “Credit and Security Agreement”) that provided for borrowings in an aggregate principal amount up to $500.0 million (the “Credit Securities Revolver”), which may be increased from time to time pursuant to the Credit and Security Agreement.

Borrowings under the Credit and Security Agreement are secured by substantially all of the assets held by CMFT Corporate Credit Securities, LLC, which shall primarily consist of broadly-syndicated senior secured loans subject to certain eligibility criteria under the Credit and Security Agreement.

As of December 31, 2020, the amounts borrowed and outstanding under the Credit Securities Revolver totaled $231.5 million.

As of December 31, 2020, CMFT RE Lending RF Sub CB, LLC, our indirect wholly-owned subsidiary, had a Master Repurchase Agreement with Citibank (the “Citibank Repurchase Agreement”), which provided up to $300.0 million of financing primarily through Citibank’s purchase of our CRE mortgage loans and future funding advances (the “Citibank Repurchase Facility”).

Additionally, on September 21, 2020, CMFT RE Lending RF Sub BB, LLC, our indirect wholly-owned

subsidiary, entered into a second Master Repurchase Agreement with Barclays Bank PLC (“Barclays”) (the “Barclays Repurchase Agreement”), which provided up to $500.0 million of financing primarily through Barclays’ purchase of the our CRE mortgage loans and future funding advances (the “Barclays Repurchase Facility”, and collectively with the Citibank Repurchase Facility, the “Repurchase Facilities”).

The Citibank Repurchase Agreement and the Barclays Repurchase Agreement provide for simultaneous agreements by Citibank and Barclays to re-sell such purchased CRE mortgage loans back to CMFT RE Lending RF Sub CB, LLC and CMFT RE Lending RF Sub BB, LLC at a certain future date or upon demand.

As of December 31, 2020, we had four senior loans with an aggregate carrying value of $341.5 million financed with $235.4 million under the Repurchase Facilities, $109.1 million of which was financed under the Barclays Repurchase Facility and $126.3 million of which was financed under the Citibank Repurchase Facility.

As of December 31, 2020, we believe that we were in compliance with the financial covenants of our second amended and restated unsecured credit agreement (the “Second Amended and Restated Credit Agreement”), the CCPT V Credit Agreement the Citibank Repurchase Agreement and the Barclays Repurchase Agreement, as well as the financial covenants under our various fixed and variable rate debt agreements, with the exception of one mortgage note, as further discussed in Note 9 — Credit Facilities, Notes Payable and Repurchase Facilities to our consolidated financial statements.

Short-term Liquidity and Capital Resources

On a short-term basis, our principal demands for funds will be for the acquisition of investment securities, real estate and real estate-related assets and the payment of acquisition-related fees and expenses, operating expenses, distributions, redemptions and interest and principal on current and any future debt financings, including principal repayments of $165.7 million within the next 12 months.

On a short-term basis, our principal demands for funds will be for the acquisition of real estate-related securities, real estate and real estate-related assets and the payment of acquisition-related fees and expenses, operating expenses, distributions, redemptions and interest and principal on current and any future debt financings, including principal repayments of $138.2 million within the next 12 months.

We expect to meet our short-term liquidity requirements through cash proceeds from real estate asset dispositions, net cash provided by operations and proceeds from the Secondary DRIP Offering, as well as secured or unsecured borrowings from banks and other lenders to finance our future acquisitions and loan originations.

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We believe that the resources stated above will be sufficient to satisfy our operating requirements for the foreseeable future, and we do not anticipate a need to raise funds from sources other than those described above within the next 12 months.

In connection with the sale of 444 properties during the year ended December 31, 2019 , total consideration included the assumption by the buyer of existing mortgage debt totaling $130.8 million , the repayment of $101.3 million of certain mortgage notes due to the disposition of the underlying properties, the repayment of $165.0 million on the unsecured term loan balance and repayment of $266.0 million on the unsecured revolving loan balance.

Management intends to use the remaining proceeds from the sale to, among other things, acquire additional high-quality net-lease properties and credit investments in

furtherance of our investment objectives, satisfy potential income tax provisions that may arise in the future, and for other general corporate purposes.

Management intends to use the proceeds from the disposition of properties to, among other things, acquire additional high-quality net-lease properties and credit investments in furtherance of our investment objectives and for other general corporate purposes.

Long-term Liquidity and Capital Resources

On a long-term basis, our principal demands for funds will be for the acquisition of investment securities, real estate and real estate-related assets and the payment of tenant improvements, acquisition-related fees and expenses, operating expenses, distributions and redemptions to stockholders and interest and principal on any current and future indebtedness.

Generally, we expect to meet our long-term liquidity requirements through proceeds from cash flows from operations, borrowings on the Credit Facility, proceeds from secured or unsecured borrowings from banks and other lenders, and proceeds raised pursuant to the Secondary DRIP Offering.

On a long-term basis, our principal demands for funds will be for the acquisition of real estate-related securities, real estate and real estate-related assets and the payment of tenant improvements, acquisition-related fees and expenses, operating expenses, distributions and redemptions to stockholders and interest and principal on any current and future indebtedness.

Generally, we expect to meet our long-term liquidity requirements through proceeds from cash flows from operations, borrowings on the Credit Facilities, proceeds from secured or unsecured borrowings from banks and other lenders, and proceeds raised pursuant to the Secondary DRIP Offering.

We expect that substantially all net cash flows from operations will be used to pay distributions to our stockholders after certain capital expenditures, including tenant improvements and leasing commissions, are paid;

however, we have used, and may continue to use, other sources to fund distributions, as necessary, including borrowings on the Credit Facility and/or future borrowings on our unencumbered assets.

however, we have used, and may continue to use, other sources to fund distributions, as necessary, including borrowings on the Credit Facilities and/or future borrowings on our unencumbered assets.

To the extent that cash flows from operations are lower due to fewer properties being acquired or lower than expected returns on the properties, distributions paid to our stockholders may be lower.

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As of December 31, 2020, we had debt outstanding with a carrying value of $2.1 billion and a weighted average interest rate of 3.4%.

See Note 8 — Credit Facilities and Notes Payable to our consolidated financial statements in this Annual Report on Form 10-K for certain terms of our debt outstanding.

See Note 9 — Credit Facilities, Notes Payable and Repurchase Facilities to our consolidated financial statements in this Annual Report on Form 10-K for certain terms of our debt outstanding.

Our contractual obligations as of December 31, 2020 were as follows (in thousands):

Payments due by period (1)

Total Less Than 1

Year 1-3 Years 3-5 Years More Than

Principal payments — fixed rate debt (2)

$ 578,096 $ 138,210 $ 348,794 $ 91,092 $ —

Interest payments — fixed rate debt (3)

Principal payments — credit facility

Interest payments — credit facility (4)

48,040 20,328 25,999 1,713 —

Principal payments — credit facilities (4)

1,336,500 — 1,105,000 231,500 —

Interest payments — credit facilities (4)

67,548 45,900 17,237 4,411 —

Principal payments — repurchase facilities (5)

235,380 — 235,380 — —

Interest payments — repurchase facilities (5)

15,530 6,052 9,478 — —

Total $ 2,281,094 $ 210,490 $ 1,741,888 $ 328,716 $ —

____________________________________

(1) The table does not include amounts due to CMFT Management or its affiliates pursuant to our Management Agreement because such amounts are not fixed and determinable.

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We used the effective interest rates fixed under our interest rate swap agreements to calculate the debt payment obligations in future periods.

As of December 31, 2019 , the Term Loan outstanding totaled $885.0 million , $811.7 million of which is subject to interest rate swap agreements (the “Swapped Term Loan”).

As of December 31, 2019 , the weighted average all-in interest rate for the Swapped Term Loan was 4.0% .

The remaining $73.3 million outstanding under the Credit Facility had a weighted average interest rate of 3.8% as of December 31, 2019 .

(4) As of December 31, 2020, the Term Loans outstanding totaled $1.1 billion, $1.0 billion of which is subject to interest rate swap agreements (the “Swapped Term Loans”).

As of December 31, 2020, the weighted average all-in interest rate for the Swapped Term Loans was 3.9%.

The remaining $73.3 million outstanding under the Credit Facilities had a weighted average interest rate of 1.9% as of December 31, 2020.

As of December 31, 2020, the amounts outstanding under the Credit Securities Revolver (as defined in Note 9 — Credit Facilities, Notes Payable and Repurchase Facilities to our consolidated financial statements in this Annual Report on Form 10-K) totaled $231.5 million and had a weighted average interest rate of 1.9%.

(5) As of December 31, 2020, the amount outstanding under the Citibank Repurchase Facility (as defined in Note 9 — Credit Facilities, Notes Payable and Repurchase Facilities to our consolidated financial statements in this Annual Report on Form 10-K) was $126.3 million at a weighted average interest rate of 2.3%, and the amount outstanding under the Barclays Repurchase Facility (as defined in Note 9 — Credit Facilities, Notes Payable and Repurchase Facilities to our consolidated financial statements in this Annual Report on Form 10-K) was $109.1 million at a weighted average interest rate of 2.9%.

We expect to incur additional borrowings in the future to acquire additional properties and other real estate-related assets.

There is no limitation on the amount we may borrow against any single improved property.

Consistent with CMFT Management’s approach toward the moderate use of leverage, our Board has adopted a policy to further limit our borrowings to 60% of the greater of cost (before deducting depreciation or other non-cash reserves) or fair market value of our gross assets, unless excess borrowing is approved by a majority of the independent directors and disclosed to our stockholders in the next quarterly report along with a justification for such excess borrowing.

As of December 31, 2020, our ratio of debt to total gross assets net of gross intangible lease liabilities was 46.2% and our ratio of debt to the fair market value of our gross assets net of gross intangible lease liabilities was 45.8%.

Fair market value is based on the estimated market value of our real estate assets as

of December 31, 2018 that were used to determine our estimated per share NAV, and for those assets acquired from January 1, 2019 through December 31, 2019 is based on the purchase price.

Fair market value is based on the estimated market value of our real estate assets as of June 30, 2020 that were used to determine our estimated per share NAV, and for those assets acquired from July 1, 2020 through December 31, 2020 is based on the purchase price.

Our management reviews net debt as part of its management of our overall liquidity, financial flexibility, capital structure and leverage, and we therefore believe that the presentation of net debt provides useful information to stockholders.

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The following table provides a reconciliation of the notes payable and credit facility, net balance, as reported on our consolidated balance sheet, to net debt as of December 31, 2020 (dollar amounts in thousands):

Balance as of December 31, 2019

Credit facilities and notes payable, net

Balance as of

December 31, 2020

Credit facilities, notes payable and repurchase facilities, net $ 2,144,993

Deferred costs and net premiums (1)

Cash and cash equivalents (121,385)

Net debt $ 2,028,591

Gross real estate and related assets, net (2)

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______________________

(1) Deferred costs relate to mortgage notes payable and the term portion of the Credit Facility.

(1) Deferred costs relate to mortgage notes payable and the term portion of the Credit Facilities.

(2) Net of gross intangible lease liabilities.

Includes gross assets held for sale and loans held-for-investment principal balance of $297.4 million .

Includes gross assets held for sale, as well as real estate-related securities and loans held-for-investment principal balance, net of allowance for credit losses, of $949.1 million.

Cash Flow Analysis

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Net cash provided by operating activities decreased by $82.2 million for the year ended December 31, 2020, as compared to the same period in 2019.

The change was primarily due to lower net income after non-cash adjustments due to the disposition of 497 properties subsequent to December 31, 2018 .

The change was primarily due to lower net income after non-cash adjustments due to the disposition of 30 properties during the year ended December 31, 2020, and the disposition of 497 properties during the year ended December 31, 2019.

See “— Results of Operations” for a more complete discussion of the factors impacting our operating performance.

Investing Activities.

Net cash provided by investing activities increased by $1.2 billion for the year ended December 31, 2019 , as compared to the same period in 2018 .

The change was primarily due to an increase in proceeds from the disposition of real estate assets of $1.3 billion and principal payments received on loans held-for-investment of $17.2 million during the year ended December 31, 2019 , compared to the same period in 2018 .

These changes were offset by the origination and acquisition of seven loans for an aggregate cost of $217.0 million and the investment in broadly syndicated loans of $2.8 million during the year ended December 31, 2019 .

Net cash used in investing activities was $466.1 million for the year ended December 31, 2020, as compared to net cash provided by investing activities of $1.2 billion for the year ended December 31, 2019.

The change was primarily due to a decrease in net proceeds from disposition of real estate assets of $1.1 billion resulting from the disposal of 30 properties during the year ended December 31, 2020, as compared to the disposal of 497 properties during the year ended December 31, 2019.

The decrease was also due to the net investment in broadly syndicated loans and real estate-related securities of $614.1 million, partially offset by net proceeds from the sale of loans held-for investments of $80.7 million during the year ended December 31, 2020.

Financing Activities.

Net cash used in financing activities increased by $754.1 million for the year ended December 31, 2019 , as compared to the same period in 2018 .

The change was primarily due to an increase in net repayments on the Credit Facility and notes payable of $753.3 million in connection with the sale of 497 properties during the year ended December 31, 2019 .

Net cash provided by financing activities was $14.8 million for the year ended December 31, 2020, as compared to net cash used in financing activities of $910.2 million for the year ended December 31, 2019.

The change was primarily due to an increase in net proceeds on the credit facilities, notes payable and repurchase facilities of $871.5 million as a result of entering into the Credit Securities Revolver and the Repurchase Facilities (as defined in Note 9 — Credit Facilities, Notes Payable and Repurchase Facilities to our consolidated financial statements in this Annual Report on Form 10-K) and the repayment of debt obligations as part of the Mergers during the year ended December 31, 2020, coupled with decreases in distributions to stockholders and redemptions of common stock resulting from the Board’s suspension of the Amended Share Redemption Program.

Election as a REIT

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We will not be able to deduct distributions paid to our stockholders in any year in which we fail to maintain our qualification as a REIT.

We also will be disqualified for the

four taxable years following the year during which qualification was lost, unless we are entitled to relief under specific statutory provisions.

We also will be disqualified for the four taxable years following the year during which qualification was lost, unless we are entitled to relief under specific statutory provisions.

Such an event could materially adversely affect our net income and net cash available for distribution to stockholders.

However, we believe that we are organized and operate in such a manner as to maintain our qualification as a REIT for federal income tax purposes.

No provision for federal income taxes has been made in our accompanying consolidated financial statements.

No provision for federal income taxes has been made in our accompanying consolidated

financial statements.

We are subject to certain state and local taxes related to the operations of properties in certain locations, which have been provided for in our accompanying consolidated financial statements.

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Conflicts of Interest

Ressler, the chairman of our Board, chief executive officer and president, who is also a founder and principal of CIM and is an officer/director of certain of its affiliates, is the chairman of the board, chief executive officer and president of CCIT III and CIM Income NAV, a director of CCIT II and vice president of CMFT Management.

One of our directors, Avraham Shemesh, who is also a founder and principal of CIM and is an officer/director of certain of its affiliates, serves as the chairman of the board of CCIT II and CCPT V and as a director of CCIT III and CIM Income NAV, and is president and treasurer of CMFT Management.

Ressler, the chairman of our Board, chief executive officer and president, who is also a founder and principal of CIM and is an officer/director of certain of its affiliates including CMFT Management, is the chairman of the board, chief executive officer and president of CIM Income NAV.

One of our directors, Avraham Shemesh, who is also a founder and principal of CIM and is an officer/director of certain of its affiliates including CMFT Management, serves as a director of CIM Income NAV.

One of our directors, Elaine Y.

Wong, who is also a principal of CIM, also serves as a director of CCIT II, CCPT V and CIM Income NAV.

Wong, who is a principal of CIM, also serves as a director of CIM Income NAV.

One of our independent directors, W.

Brian Kretzmer, also serves as an independent director of CCIT III and CIM Income NAV.

Another one of our independent directors, Howard A.

Silver, also serves as an independent director of CCIT III.

Brian Kretzmer, also serves as an independent director of CIM Income NAV.

DeBacker, our chief financial officer and treasurer, who is also an officer of other real estate programs sponsored by CCO Group, is a vice president of CMFT Management and is an officer of certain of its affiliates.

In addition, affiliates of CMFT Management act as an advisor to CCPT V, CCIT II, CCIT III and CIM Income NAV, all of which are public, non-listed REITs sponsored or operated by CCO Group.

In addition, affiliates of CMFT Management act as an advisor to CIM Income NAV.

As such, there may be conflicts of interest where CMFT Management or its affiliates, while serving in the capacity as sponsor, general partner, officer, director, key personnel and/or advisor for CIM or another real estate program sponsored or operated by CIM or CCO Group, including other real estate offerings in registration, may be in conflict with us in connection with providing services to other real estate-related programs related to property acquisitions, property dispositions, and property management, among others.

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• The review of impairment indicators and subsequent determination of the undiscounted future cash flows could require us to reduce the carrying value of assets held and used to a fair value estimated by management and recognize an impairment loss.

The process for evaluating real estate impairment requires management to make significant assumptions related to certain inputs, including holding periods;

• The fair value of held for sale assets is estimated by management.

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• We determine whether any financing assumed is above- or below-market based upon comparison to similar financing terms for similar types of debt financing with similar maturities.

Allowance for Credit Losses

We have elected to use a discounted cash flow model to estimate the allowance for credit losses.

This model requires us to develop cash flows which project estimated credit losses over the life of the loan and discount these cash flows at the asset’s effective interest rate.

We then record an allowance for credit losses equal to the difference between the amortized cost basis of the asset and the present value of the expected cash flows.

Recently Issued Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis