What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-17 compared with 2020-11-13 · 508 added, 636 removed, 685 unchanged (63% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts) (Unaudited)

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Real estate assets:

2 unchanged sentences

Intangible lease assets 389,004 389,564

Condominium developments 201,031 —

Total real estate assets, at cost 3,927,775 3,761,490

18 unchanged sentences

Distributions payable 10,969 10,969

Derivative liabilities, deferred rental income and other liabilities 18,268 19,448

Deferred rental income, derivative liabilities and other liabilities 21,351 27,361

Total liabilities 2,555,670 2,261,183

5 unchanged sentences

Common stock, $ 0.01 par value per share;

490,000,000 shares authorized, 309,405,505 and 311,207,725 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

490,000,000 shares authorized, 362,001,968 shares issued and outstanding as of both March 31, 2021 and December 31, 2020

Capital in excess of par value 3,157,899 3,157,859

Accumulated distributions in excess of earnings ( 996,665 ) ( 961,006 )

Accumulated other comprehensive loss ( 7,193 ) ( 3,908 )

Accumulated other comprehensive income (loss) 1,330 ( 2,047 )

Total stockholders’ equity 2,166,184 2,198,426

4 unchanged sentences

(in thousands, except share and per share amounts) (Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Three Months Ended March 31,

Rental and other property income $ 76,930 $ 68,436

6 unchanged sentences

Management and advisory fees and expenses 13,014 11,090

Merger-related 1,207 — 1,207 —

Transaction-related 185 252

Depreciation and amortization 25,738 20,823

Impairment 476 24,008 15,983 57,163

Real estate impairment 4,300 11,676

Provision for credit losses 568 17,777

6 unchanged sentences

Total other expense ( 20,022 ) ( 20,149 )

Net income (loss) 4,179 2,573 ( 11,742 ) 20,430

Net income allocated to noncontrolling interest — 32 — 99

Net income (loss) attributable to the Company $ 4,179 $ 2,541 $ ( 11,742 ) $ 20,331

Net loss $ ( 2,753 ) $ ( 12,175 )

Weighted average number of common shares outstanding:

Basic and diluted 362,001,968 311,248,421

Net income (loss) per common share

Net loss per common share:

Basic and diluted $ ( 0.01 ) $ ( 0.04 )

3 unchanged sentences

(in thousands) (Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Net income (loss) $ 4,179 $ 2,573 $ ( 11,742 ) $ 20,430

Three Months Ended March 31,

Net loss $ ( 2,753 ) $ ( 12,175 )

Other comprehensive income (loss)

Unrealized gain on real estate-related securities 122 —

Unrealized loss on interest rate swaps ( 35 ) ( 600 ) ( 11,645 ) ( 12,401 )

Amount of loss (gain) reclassified from other comprehensive income (loss) into income as interest expense and other, net 3,979 ( 783 ) 8,299 ( 3,534 )

Unrealized gain (loss) on interest rate swaps 123 ( 10,805 )

Amount of loss reclassified from other comprehensive income (loss) into income as interest expense and other, net 3,132 977

Total other comprehensive income (loss) 3,377 ( 9,828 )

Comprehensive income (loss) $ 624 $ ( 22,003 )

Comprehensive income allocated to noncontrolling interest — 32 — 99

Comprehensive income (loss) attributable to the Company $ 8,164 $ 1,158 $ ( 15,027 ) $ 4,396

The accompanying notes are an integral part of these condensed consolidated financial statements.

8 unchanged sentences

Balance as of January 1, 2021 362,001,968 $ 3,620 $ 3,157,859 $ ( 961,006 ) $ ( 2,047 ) $ 2,198,426

311,207,725 $ 3,112 $ 2,606,925 $ ( 816,181 ) $ ( 3,908 ) $ 1,789,948

Cumulative effect of accounting changes

— — — ( 2,002 ) — ( 2,002 )

Issuance of common stock

2,223,298 22 19,209 — — 19,231

Equity-based compensation

2 unchanged sentences

— — — ( 32,906 ) — ( 32,906 )

Redemptions of common stock

( 2,256,037 ) ( 22 ) ( 19,492 ) — — ( 19,514 )

Changes in redeemable common stock

— — 283 — — 283

Comprehensive loss

— — — ( 12,175 ) ( 9,828 ) ( 22,003 )

Balance as of March 31, 2020

311,174,986 $ 3,112 $ 2,606,965 $ ( 878,690 ) $ ( 13,736 ) $ 1,717,651

Issuance of common stock

1,242,475 12 9,531 — — 9,543

Equity-based compensation

— — 40 — — 40

Distributions declared on common stock — $ 0.04 per common share

— — — ( 13,072 ) — ( 13,072 )

Redemptions of common stock

( 2,468,754 ) ( 25 ) ( 19,166 ) — — ( 19,191 )

Changes in redeemable common stock

— — 9,643 — — 9,643

Comprehensive (loss) income — — — ( 2,753 ) 3,377 624

Balance as of June 30, 2020 309,948,707 $ 3,099 $ 2,607,013 $ ( 895,508 ) $ ( 11,178 ) $ 1,703,426

Issuance of common stock

746,001 8 5,409 — — 5,417

Equity-based compensation

— — 40 — — 40

Distributions declared on common stock — $ 0.09 per common share

— — — ( 28,181 ) — ( 28,181 )

Redemptions of common stock

( 1,289,203 ) ( 13 ) ( 9,347 ) — — ( 9,360 )

Changes in redeemable common stock

— — 170,912 — — 170,912

Comprehensive income — — — 4,179 3,985 8,164

Balance as of September 30, 2020 309,405,505 $ 3,094 $ 2,774,027 $ ( 919,510 ) $ ( 7,193 ) $ 1,850,418

CIM REAL ESTATE FINANCE TRUST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts) (Unaudited) – (Continued)

Balance as of March 31, 2021 362,001,968 $ 3,620 $ 3,157,899 $ ( 996,665 ) $ 1,330 $ 2,166,184

Common Stock Capital in Excess

1 unchanged sentence

Distributions in Excess of Earnings Accumulated

Other Comprehensive Income (Loss) Total

Other Comprehensive Loss Total

Stockholders’

1 unchanged sentence

Balance as of January 1, 2020 311,207,725 $ 3,112 $ 2,606,925 $ ( 816,181 ) $ ( 3,908 ) $ 1,789,948

311,381,396 $ 3,114 $ 2,607,330 $ ( 804,617 ) $ 11,023 $ 1,816,850

Cumulative effect of accounting changes — — — ( 2,002 ) — ( 2,002 )

Issuance of common stock

8 unchanged sentences

— — 283 — — 283

Comprehensive income (loss)

— — — 8,817 ( 5,321 ) 3,496

Comprehensive loss — — — ( 12,175 ) ( 9,828 ) ( 22,003 )

Balance as of March 31, 2020 311,174,986 $ 3,112 $ 2,606,965 $ ( 878,690 ) $ ( 13,736 ) $ 1,717,651

311,330,500 $ 3,113 $ 2,606,819 $ ( 843,763 ) $ 5,702 $ 1,771,871

Issuance of common stock

2,436,153 25 21,048 — — 21,073

Equity-based compensation

— — 32 — — 32

Distributions declared on common stock — $ 0.16 per common share

— — — ( 48,487 ) — ( 48,487 )

Redemptions of common stock

( 2,440,984 ) ( 25 ) ( 21,090 ) — — ( 21,115 )

Changes in redeemable common stock

— — 42 — — 42

Comprehensive income (loss)

— — — 8,973 ( 9,231 ) ( 258 )

Balance as of June 30, 2019 311,325,669 $ 3,113 $ 2,606,851 $ ( 883,277 ) $ ( 3,529 ) $ 1,723,158

Cumulative effect of accounting changes

2,361,229 24 20,401 — — 20,425

Issuance of common stock

— — 34 — — 34

Distributions declared on common stock — $ 0.16 per common share

— — — ( 49,007 ) — ( 49,007 )

Redemptions of common stock

( 2,418,349 ) ( 24 ) ( 20,895 ) — — ( 20,919 )

Changes in redeemable common stock

— — 494 — — 494

Comprehensive income (loss) — — — 2,541 ( 1,383 ) 1,158

Balance as of September 30, 2019 311,268,549 $ 3,113 $ 2,606,885 $ ( 929,743 ) $ ( 4,912 ) $ 1,675,343

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(in thousands) (Unaudited)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Net (loss) income $ ( 11,742 ) $ 20,430

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Net loss $ ( 2,753 ) $ ( 12,175 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization, net 25,118 20,530

2 unchanged sentences

Amortization and accretion on deferred loan fees ( 376 ) ( 560 )

Amortization of premiums and discounts on broadly syndicated loans, net ( 387 ) —

Amortization of premiums and discounts on real estate-related securities 45 —

Capitalized interest income ( 539 ) ( 7,428 )

Amortization of premiums and discounts on credit investments ( 442 ) ( 21 )

Capitalized interest income on real estate-related securities ( 173 ) ( 539 )

Equity-based compensation 40 40

Straight-line rental income ( 1,706 ) ( 375 )

Write-offs for uncollectable lease-related receivables 5,334 754

Write-offs for uncollectible lease-related receivables 1,773 636

Gain on disposition of real estate assets, net — ( 13,110 )

Loss on sale of broadly syndicated loans 562 —

Amortization of gain on swap termination ( 11 ) ( 14 )

Loss on sale of credit investments, net 111 —

Amortization of fair value adjustment and gain on interest rate swaps ( 1,431 ) ( 5 )

Impairment of real estate assets 4,300 11,676

2 unchanged sentences

Changes in assets and liabilities:

Rents and tenant receivables ( 12,923 ) 2,299

Rents and tenant receivables, net 7,151 ( 238 )

Prepaid expenses and other assets ( 4,175 ) ( 484 )

Accounts payable and accrued expenses 5,344 7,638

Accrued expenses and accounts payable ( 435 ) 1,918

Deferred rental income and other liabilities ( 1,324 ) ( 7,271 )

6 unchanged sentences

Origination and acquisition of loans held-for-investment, net ( 185,652 ) ( 866 )

Origination and exit fees received on loans held-for-investment 2,043 61

Principal payments received on loans held-for-investment 51,650 6,853

Principal payments received on real estate-related securities 10 —

Origination and exit fees received on loans held-for-investment 3,200 497

Net proceeds from disposition of real estate assets 3,511 126,645

Net proceeds from sale of broadly syndicated loans 7,445 —

Payment of property escrow deposits ( 550 ) ( 350 )

Refund of property escrow deposits 250 350

Proceeds from the settlement of insurance claims — 20

Net cash (used in) provided by investing activities ( 488,898 ) 87,628

Net cash used in investing activities ( 242,510 ) ( 199,519 )

Cash flows from financing activities:

1 unchanged sentence

Distributions to stockholders ( 32,906 ) ( 29,148 )

Proceeds from credit facilities and repurchase facilities 461,194 402,000

Repayments of credit facilities and notes payable ( 219,143 ) ( 484,771 )

Payment of loan deposits ( 65 ) —

Proceeds from credit facility and repurchase facilities 282,323 100,000

Repayments of credit facility and notes payable ( 85,298 ) ( 97,129 )

Refund of loan deposits 65 —

Deferred financing costs paid ( 907 ) ( 115 )

Distributions to noncontrolling interest — ( 236 )

Net cash provided by (used in) financing activities 163,277 ( 45,906 )

9 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited)

March 31, 2021 (Unaudited)

NOTE 1 — ORGANIZATION AND BUSINESS

3 unchanged sentences

The Company operates a diversified portfolio of core commercial real estate assets primarily consisting of net leased properties located throughout the United States.

As of September 30, 2020, the Company owned 380 properties, comprising 17.9 million rentable square feet of commercial space located in 42 states.

As of September 30, 2020, the rentable square feet at these properties was 94.3 % leased, including month-to-month agreements, if any.

The Company intends to continue to pursue a more diversified investment strategy across the capital structure by balancing the Company’s existing core of commercial real estate assets leased to creditworthy tenants under long-term net leases with a portfolio of commercial mortgage loans and other credit investments in which the Company’s sponsor and its affiliates have expertise.

As of September 30, 2020, the Company’s loan portfolio consisted of 173 loans with a net book value of $ 857.9 million, and investments in real estate-related securities of $ 75.2 million.

Substantially all of the Company’s business is conducted through CIM Real Estate Finance Operating Partnership, LP, a Delaware limited partnership, of which the Company is the sole general partner and owns, directly or indirectly, 100 % of the partnership interests.

The Company continues to pursue a more diversified investment strategy across the capital structure by balancing the Company’s existing core of commercial real estate assets leased to creditworthy tenants under long-term net leases with a portfolio of commercial mortgage loans and other credit investments in which the Company’s sponsor and its affiliates have expertise.

As of March 31, 2021, the Company owned 515 properties, comprising 21.3 million rentable square feet of commercial space located in 45 states.

As of March 31, 2021, the rentable square feet at these properties was 93.7 % leased, including month-to-month agreements, if any.

As of March 31, 2021, the Company’s loan portfolio consisted of 227 loans with a net book value of $ 1.0 billion, and investments in real estate-related securities of $ 67.2 million.

During the three months ended March 31, 2021, the Company completed foreclosure proceedings to take control of the assets which previously secured its eight mezzanine loans, including 75 condominium units and 21 rental units across four buildings.

A majority of the Company’s business is conducted through CIM Real Estate Finance Operating Partnership, LP, a Delaware limited partnership, of which the Company is the sole general partner and owns, directly or indirectly, 100 % of the partnership interests.

The Company is externally managed by CIM Real Estate Finance Management, LLC, a Delaware limited liability company (“CMFT Management”), which is an affiliate of CIM Group, LLC (“CIM”).

CIM is a community-focused real estate and infrastructure owner, operator, developer and lender with multi-disciplinary expertise, including in acquisitions, management, development, leasing, research and capital markets.

CIM is headquartered in Los Angeles, California and has offices in Oakland, California;

Bethesda, Maryland;

Dallas, Texas;

New York, New York;

Chicago, Illinois;

Phoenix, Arizona;

Orlando, Florida;

Tokyo, Japan;

and Atlanta, Georgia.

CCO Group, LLC owns and controls CMFT Management, the Company’s advisor, and is the indirect owner of CCO Capital, LLC (“CCO Capital”), the Company’s dealer manager, and CREI Advisors, LLC (“CREI Advisors”), the Company’s property manager.

CCO Group, LLC and its subsidiaries (collectively, “CCO Group”) serve as the Company’s sponsor and as a sponsor to Cole Credit Property Trust V, Inc.

(“CCPT V”), Cole Office & Industrial REIT (CCIT II), Inc.

(“CCIT II”), Cole Office & Industrial REIT (CCIT III), Inc.

(“CCIT III”) and CIM Income NAV, Inc.

CIM is a community-focused real estate and infrastructure owner, operator, lender and developer.

Headquartered in Los Angeles, California, CIM has offices across the United States and in Tokyo, Japan.

CCO Group, LLC owns and controls CMFT Management, the Company’s manager, and is the indirect owner of CCO Capital, LLC (“CCO Capital”), the Company’s dealer manager, and CREI Advisors, LLC (“CREI Advisors”), the Company’s property manager.

CCO Group, LLC and its subsidiaries (collectively, “CCO Group”) serve as the Company’s sponsor and as a sponsor to CIM Income NAV, Inc.

(“CIM Income NAV”).

The Company relies upon CIM Capital IC Management, LLC, the Company’s investment advisor (the “Investment Advisor”) to provide substantially all of the Company’s day-to-day management with respect to investments in securities.

On January 26, 2012, the Company commenced its initial public offering on a “best efforts” basis of up to a maximum of $ 2.975 billion in shares of common stock (the “Offering”).

10 unchanged sentences

333-212832), which was filed with the SEC on August 2, 2016 and automatically became effective with the SEC upon filing.

The Company began to issue shares under the Secondary DRIP Offering on August 2, 2016 and continued to issue shares under the Secondary DRIP Offering until, on August 30, 2020, the Company’s board of directors (the “Board”) suspended the Secondary DRIP Offering in connection with the entry of the Company into the Merger Agreements (as defined below).

The Board establishes an updated estimated per share net asset value (“NAV”) of the Company’s common stock on at least an annual basis for purposes of assisting broker-dealers that participated in the Offering in meeting their customer account

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

reporting obligations under Financial Industry Regulatory Authority Rule 2231.

March 31, 2021 (Unaudited) – (Continued)

(“CCIT III”) and Cole Credit Property Trust V, Inc.

(“CCPT V”) (the “Mergers”).

On March 25, 2021, the Board reinstated the Secondary DRIP Offering, effective April 1, 2021.

Distributions are reinvested in shares of the Company’s common stock under the DRIP at the estimated per share NAV as determined by the Board.

Additionally, the estimated per share NAV as determined by the Board serves as the per share NAV for purposes of the share redemption program.

As of September 30, 2020, the estimated per share NAV of the Company’s common stock was $ 7.31 , which was established by the Board on August 11, 2020 using a valuation date of June 30, 2020.

As of March 31, 2021, the estimated per share NAV of the Company’s common stock was $ 7.31 , which was established by the Board on August 11, 2020 using a valuation date of June 30, 2020.

Commencing on August 14, 2020, $ 7.31 served as the per share NAV under the DRIP.

The Board previously established a per share NAV as of August 31, 2015, September 30, 2016, December 31, 2016, December 31, 2017, December 31, 2018, December 31, 2019, March 31, 2020 and June 30, 2020.

The Board previously established a per share NAV as of August 31, 2015, September 30, 2016, December 31, 2016, December 31, 2017, December 31, 2018, December 31, 2019, and March 31, 2020.

The Company’s estimated per share NAVs are not audited or reviewed by its independent registered public accounting firm.

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 believes 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.

Pending Mergers

On August 30, 2020, (i) the Company, CCIT III and Thor III Merger Sub, LLC, a wholly owned subsidiary of the Company (“CCIT III Merger Sub”), entered into an Agreement and Plan of Merger (as amended by Amendment No.

1 thereto dated November 3, 2020, the “CCIT III Merger Agreement”), pursuant to which CCIT III will merge with and into CCIT III Merger Sub (the “CCIT III Merger”), and (ii) the Company, CCPT V and Thor V Merger Sub, LLC, a wholly owned subsidiary of CMFT (“CCPT V Merger Sub”, and collectively with the CCIT III Merger Sub, the “Merger Subs”), entered into an Agreement and Plan of Merger (as subsequently amended on each of October 22, 2020, October 24, 2020 and October 29, 2020, the “CCPT V Merger Agreement”, and collectively with the CCIT III Merger Agreement, the “Merger Agreements”), pursuant to which CCPT V will merge with and into CCPT V Merger Sub (the “CCPT V Merger” and collectively with the CCIT III Merger, the “Mergers”).

Neither of the Mergers is contingent upon the completion of the other.

Subject to the terms and conditions of the Merger Agreements, CCIT III and CCPT V (collectively, the “Target REITs”) will each be merged into a wholly owned subsidiary of the Company.

In accordance with the applicable provisions of the Maryland General Corporation Law (the “MGCL”), the separate existence of each of the Target REITs shall cease at the effective time of the Mergers.

At the effective time of the Mergers and subject to the terms and conditions of the Merger Agreements, each issued and outstanding share of common stock of CCIT III and CCPT V will be converted into the right to receive 1.098 and 2.892 shares of the Company’s common stock, $ 0.01 par value per share, respectively, subject to the treatment of fractional shares in accordance with the Merger Agreements (the “Merger Consideration”).

At the effective time of the Mergers and subject to the terms and conditions of the Merger Agreements, each issued and outstanding share of common stock granted under each of the Target REITs’ 2018 Equity Incentive Plan, whether vested or unvested, will be cancelled in exchange for an amount equal to the applicable Merger Consideration.

The Merger Agreements contain customary representations, warranties and covenants, including covenants relating to the conduct of each of the Target REITs’ and the Company’s respective businesses during the period between the execution of the Merger Agreements and the completion of the Mergers, subject to certain exceptions.

Pursuant to the terms of the Merger Agreements, the Target REITs had a “go shop” period that ended on 11:59 p.m.

New York City time on October 7, 2020 (the “Go Shop Period End Time”) during which the Target REITs and its subsidiaries and representatives could initiate, solicit, provide information and enter into discussions concerning proposals relating to alternative business combination transactions.

Following the Go Shop Period End Time, the Target REITs and its subsidiaries and representatives may not solicit, provide information or enter into discussions concerning proposals relating to alternative business combination transactions, subject to certain limited exceptions set forth in the Merger Agreements.

The Merger Agreements also provide that prior to the applicable Stockholder Approval (as defined below), each of the Target REITs’ board of directors may, under specified circumstances, make an Adverse Recommendation Change (as defined in the Merger Agreements), including withdrawing its recommendation of the applicable Merger, subject to complying with certain conditions set forth in the applicable Merger Agreement.

The Merger Agreements may be terminated under certain circumstances, including by the applicable Target REIT or the Company if the Mergers have not been consummated on or before 11:59 p.m.

New York time on May 30, 2021 (the “Outside Date”), if a final and non-appealable order is entered permanently restraining or otherwise prohibiting the transactions contemplated by the applicable Merger Agreement, if the applicable Stockholder Approval has not been obtained at the

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

applicable Stockholders Meeting or upon a material uncured breach of the respective obligations, covenants or agreements by the other party that would cause the closing conditions in the applicable Merger Agreement not to be satisfied.

In addition, each of the Target REITs may terminate its respective Merger Agreement in order to enter into an Alternative Acquisition Agreement with respect to a Superior Proposal (each as defined in the Merger Agreements) at any time prior to receipt by the Target REIT of the Stockholder Approval pursuant to and subject to the terms and conditions of that Merger Agreement.

The Company may terminate the Merger Agreements at any time prior to the receipt of the applicable Stockholder Approval, in certain limited circumstances, including upon (i) an Adverse Recommendation Change, (ii) a tender offer or exchange offer that is commenced which the Target REIT Board fails to recommend against or (iii) a breach by the Target REITs, in any material respect, of their obligations under the go shop or no solicitation provisions set forth in the Merger Agreements.

If a Merger Agreement is terminated because the Merger was not consummated before the Outside Date or because the Stockholder Approval was not obtained, and (i) an Acquisition Proposal (as defined in that Merger Agreement) has been publicly announced or otherwise communicated to the Target REIT’s stockholders prior to the Stockholders Meeting and (ii) within 12 months after the date of such termination (A) the Target REIT consummates or enters into an agreement (that is thereafter consummated) in respect of an Acquisition Proposal for 50 % or more of the Target REIT’s equity or assets or (B) the Target REIT Board recommends or fails to recommend against an Acquisition Proposal structured as a tender or exchange offer for 50 % or more of the Target REIT’s equity and such Acquisition Proposal is actually consummated, then CCIT III and CCPT V must pay to the Company a termination fee of $ 710,000 and $ 9.85 million, respectively, and up to $ 130,000 and $ 1.79 million, respectively, as reimbursement for the Company’s Expenses (as defined in the Merger Agreements).

If either of the Merger Agreements is terminated in connection with the applicable Target REIT’s acceptance of a Superior Proposal or making an Adverse Recommendation Change, then CCIT III or CCPT V must pay to the Company a termination fee of $ 710,000 and $ 9.85 million, respectively, and up to $ 130,000 and $ 1.79 million, respectively, as reimbursement for CMFT’s Expenses, subject to certain exceptions set forth in applicable the Merger Agreement.

The obligation of each party to consummate the applicable Merger is subject to a number of customary conditions, including receipt of the approval of the Mergers (and of an amendment to each of the Target REIT’s charter that is required to consummate the Mergers) by holders of a majority of the outstanding shares of the applicable Target REIT’s common stock entitled to vote thereon (the “Stockholder Approval”), delivery of certain documents and legal opinions, the truth and correctness of the representations and warranties of the applicable parties (subject to the materiality standards contained in the applicable Merger Agreement) and the absence of a CCIT III Material Adverse Effect, CCPT V Material Adverse Effect or CMFT Material Adverse Effect (as each term is defined in the applicable Merger Agreement).

On August 30, 2020, the Company, CCIT II and CCIT II Merger Sub, entered into the CCIT II Merger Agreement, pursuant to which CCIT II would have merged with and into CCIT II Merger Sub, with CCIT II Merger Sub surviving the merger as the surviving entity such that following the merger, the surviving entity would have continued as a wholly owned subsidiary of the Company.

The CCIT II Merger Agreement was subsequently terminated on October 29, 2020 and, as a result, all provisions of the Merger Agreement relating to CCIT II or the CCIT II Merger Agreement are no longer applicable.

Concurrently with the entry into the Merger Agreements, each of the Target REITs and its respective advisor entered into a letter agreement (the “Termination Agreement”).

Pursuant to each Termination Agreement, the advisory agreement between the applicable Target REIT and its respective advisor (each, an “Advisory Agreement”) will be terminated at the effective time of the applicable Merger.

Also pursuant to each Termination Agreement, each of the Target REIT’s respective advisor agreed to waive any subordinated performance fee or disposition fee it otherwise would be entitled to pursuant to the Advisory Agreement related to the applicable Merger.

In the event either of the Merger Agreements is terminated in accordance with its terms, the applicable Termination Agreement will be automatically terminated.

In connection with the contemplated Mergers, on August 30, 2020, the Board approved the suspension of the DRIP, and, therefore, distributions paid after that date will be paid in cash to all stockholders unless and until the DRIP is reinstated.

Additionally, on August 30, 2020, the Board approved the suspension of the Company’s share redemption program, and therefore, no shares will be redeemed from the Company’s stockholders after that date unless and until the share redemption program is reinstated.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

CCIT II Merger

Also on August 30, 2020, the Company, CCIT II and Thor II Merger Sub, LLC, a wholly owned subsidiary of the Company (“CCIT II Merger Sub”), entered into an Agreement and Plan of Merger (the “CCIT II Merger Agreement”), pursuant to which CCIT II would merge with and into CCIT II Merger Sub (the “CCIT II Merger”).

At the effective time of the CCIT II Merger and subject to the terms and conditions of the CCIT II Merger Agreement, each issued and outstanding share of common stock of CCIT II would have converted into the right to receive 1.501 shares of the Company’s common stock, $ 0.01 par value per share, subject to the treatment of fractional shares in accordance with the CCIT II Merger Agreement.

The CCIT II Merger Agreement also provided that prior to the approval of the CCIT II Merger by holders of a majority of the outstanding shares of CCIT II common stock entitled to vote thereon (the “CCIT II Stockholder Approval”), CCIT II’s board of directors could, under specified circumstances, make an Adverse Recommendation Change (as defined in the CCIT II Merger Agreement), including withdrawing its recommendation of the CCIT II Merger, subject to complying with certain conditions set forth in the CCIT II Merger Agreement.

In addition, CCIT II could terminate the CCIT II Merger Agreement in order to enter into an Alternative Acquisition Agreement with respect to a Superior Proposal (each as defined in the CCIT II Merger Agreement) at any time prior to the CCIT II Stockholder Approval, pursuant to and subject to the terms and conditions of the CCIT II Merger Agreement.

Prior to the CCIT II Stockholder Approval, CCIT II received an acquisition proposal that CCIT II’s board of directors determined to be a Superior Proposal.

As a result, on October 29, 2020, CCIT II terminated the CCIT II Merger Agreement in order to enter into an Alternative Acquisition Agreement with respect to such Superior Proposal and, as a result, all provisions of the Merger Agreements relating to CCIT II or the CCIT II Merger Agreement are no longer applicable.

In accordance with the termination of the CCIT II Merger Agreement, CCIT II paid to the Company a termination fee of $ 7.38 million and agreed to pay up to $ 3.69 million as reimbursement for the Company’s expenses.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

11 unchanged sentences

Certain amounts in the Company’s prior period condensed consolidated financial statements have been reclassified to conform to the current period presentation.These reclassifications had no effect on previously reported totals or subtotals.

The Company is separately presenting expenses and losses related to the extinguishment of debt of $ 2.3 million for the nine months ended September 30, 2019, which was previously included in interest expense and other, net in the condensed consolidated statements of operations.

The Company is separately presenting the write-offs for uncollectable lease-related receivables of $ 754,000 for the nine months ended September 30, 2019, which was previously included in straight-line rental income, net in the condensed consolidated statements of cash flows.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

Additionally, the Company combined investment in real estate assets of $ 15.2 million and capital expenditures of $ 6.2 million for the nine months ended September 30, 2019 into a single financial statement line item, investment in real estate assets and capital expenditures, in the condensed consolidated statements of cash flows.

The Company is separately presenting the write-offs for uncollectible lease-related receivables of $ 636,000 for the three months ended March 31, 2020, which was previously included in straight-line rental income, net in the condensed consolidated statements of cash flows.

Use of Estimates

2 unchanged sentences

Actual results could differ from those estimates.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021 (Unaudited) – (Continued)

Real Estate Assets

13 unchanged sentences

reduced lease rates;

changes in anticipated holding periods;

or other circumstances.

and changes in anticipated holding periods.

When indicators of potential impairment are present, the Company assesses the recoverability of the assets by determining whether the carrying amount of the assets will be recovered through the undiscounted future cash flows expected from the use of the assets and their eventual disposition.

1 unchanged sentence

Generally, fair value is determined using a discounted cash flow analysis and recent comparable sales transactions.

During the nine months ended September 30, 2020, as part of the Company’s quarterly impairment review procedures, the Company recorded impairment charges of $ 16.0 million related to ten properties due to revised cash flow estimates as a result of market conditions and one property due to a tenant bankruptcy.

The Company’s impairment assessment as of September 30, 2020 was based on the most current information available to the Company, including expected holding periods.

During the three months ended March 31, 2021, as part of the Company’s quarterly impairment review procedures, the Company recorded impairment charges of $ 4.3 million related to five properties, of which impairment at three properties was due to sales prices that were less than their respective carrying values and impairment at two properties was due to vacancy.

The Company’s impairment assessment as of March 31, 2021 was based on the most current information available to the Company, including expected holding periods.

If the Company’s expected holding periods for assets change, subsequent tests for impairment could result in additional impairment charges in the future.

The Company cannot provide any assurance that additional material impairment charges with respect to the Company’s real estate assets will not occur during 2020 or in future periods, particularly with respect to any negative impacts to the Company that may result from the economic disruptions caused by the current novel coronavirus (“COVID-19”) pandemic.

If the effects of the COVID-19 pandemic cause economic and market conditions to continue to deteriorate or if the Company’s expected holding periods for assets change, subsequent tests for impairment could result in additional impairment charges in the future.

As of September 30, 2020, the Company has not identified any further impairments resulting from COVID-19 related impacts, including as a result of tenant requests for rent relief.

The Company generally intends to hold its assets for the long-term;

therefore, a temporary change in cash flows due to COVID-19 related impacts alone would not be an indicator of impairment.

However, the Company has yet to see the long-term effects of the COVID-19 pandemic on the economy and the extent to which it may impact the Company’s tenants in the future.

Indications of a tenant’s inabilit y to continue as a going concern, changes in the Company’s view or strategy relative to a tenant’s business or industry as a result of the economic impacts of the COVID-19 pandemic, or changes in the Company’s long-term hold strategies, could be indicative of an impairment indicator.

Accordingly, the Company will continue to monitor circumstances and events in future periods to determine whether the carrying value of the Company’s real estate assets are recoverable.

During the nine months ended September 30, 2019, the Company recorded impairment charges of $ 57.2 million related to 26 properties with revised expected holding periods.

The Company cannot provide any assurance that additional material impairment charges with respect to the Company’s real estate assets will not occur during 2021 or in future periods.

During the three months ended March 31, 2020, the Company recorded impairment charges of $ 11.7 million related to six properties due to revised cash flow estimates as a result of market conditions and one property due to a tenant bankruptcy.

The assumptions and uncertainties utilized in the evaluation of the impairment of real estate assets are discussed in detail in Note 3 — Fair Value Measurements.

See also Note 4 — Real Estate Assets for further discussion regarding real estate investment activity.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

Assets Held for Sale

1 unchanged sentence

If, in management’s opinion, the fair value, net of selling costs, of the asset is less than the carrying amount of the asset, an adjustment to the carrying amount is then recorded to reflect the estimated fair value of the property, net of selling costs.

As of December 31, 2019, the Company expected to sell a substantial portion of its anchored-shopping center portfolio and certain single-tenant properties within the next 24 months, subject to market conditions.

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

As a result, the Company 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 condensed consolidated balance sheets during the nine months ended September 30, 2020.

There were no assets identified as held for sale as of September 30, 2020.

As of December 31, 2019, the Company identified 29 properties with a carrying value of $ 351.9 million as held for sale.

As of March 31, 2021, the Company identified two properties with a fair value of $ 31.2 million as held for sale, which were sold subsequent to March 31, 2021 at a gain of $ 824,000 .

As of March 31, 2021, the Company had mortgage notes payable of $ 21.9 million related to one of the held for sale properties, which was repaid subsequent to March 31, 2021 in connection with the disposition of the underlying held for sale property.

As of December 31, 2020, the Company identified one property with a fair value of $ 3.5 million as held for sale, which was sold during the three months ended March 31, 2021.

No gain or loss was recognized on this disposition.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021 (Unaudited) – (Continued)

Disposition of Real Estate Assets

1 unchanged sentence

A discontinued operation includes only the disposal of a component of an entity and represents a strategic shift that has (or will have) a major effect on an entity’s financial results.

The Company’s property dispositions during the nine months ended September 30, 2020 and 2019 did not qualify for discontinued operations presentation, and, thus, the results of the properties that were sold will remain in operating income, and any associated gains or losses from the disposition are included in gain on disposition of real estate, net.

See Note 4 — Real Estate Assets for a discussion of the disposition of individual properties during the nine months ended September 30, 2020.

The Company’s property dispositions during the three months ended March 31, 2021 and 2020 did not qualify for discontinued operations presentation and thus, the results of the properties that were sold will remain in operating income, and any associated gains or losses from the disposition are included in gain on disposition of real estate, net.

See Note 4 — Real Estate Assets for a discussion of the disposition of individual properties during the three months ended March 31, 2021.

Allocation of Purchase Price of Real Estate Assets

6 unchanged sentences

The use of alternative estimates may result in a different allocation of the Company’s purchase price, which could materially impact the Company’s results of operations.

Acquisition-related fees and certain acquisition-related expenses related to asset acquisitions are capitalized and allocated to tangible and intangible assets and liabilities, as described above.

Certain acquisition-related expenses related to asset acquisitions are capitalized and allocated to tangible and intangible assets and liabilities, as described above.

Other acquisition-related expenses, such as manager expense reimbursements, continue to be expensed as incurred and are included in transaction-related expenses in the accompanying condensed consolidated statements of operations .

Restricted Cash

The Company had $ 5.9 million and $ 7.3 million in restricted cash as of September 30, 2020 and December 31, 2019, respectively.

Included in restricted cash was $ 2.6 million and $ 3.1 million held by lenders in lockbox accounts, as of September 30, 2020 and December 31, 2019, respectively.

The Company had $ 20.4 million and $ 7.0 million in restricted cash as of March 31, 2021 and December 31, 2020, respectively.

Included in restricted cash was $ 4.0 million and $ 3.6 million held by lenders in lockbox accounts, as of March 31, 2021 and December 31, 2020, respectively.

As part of certain debt agreements, rents from certain encumbered properties are deposited directly into a lockbox account, from which the monthly debt service payment is disbursed to the lender and the excess is disbursed to the Company.

Also included in restricted cash was $ 3.3 million and $ 4.2 million held by lenders in escrow accounts for real estate taxes and other lender reserves for certain properties, in accordance with the associated lender’s loan agreement, as of September 30, 2020 and December 31, 2019, respectively.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

Also included in restricted cash was $ 16.4 million and $ 3.4 million held by lenders in escrow accounts for real estate taxes and other lender reserves for certain properties, in accordance with the associated lender’s loan agreement, as of March 31, 2021 and December 31, 2020, respectively.

Real Estate-Related Securities

1 unchanged sentence

The Company determines the appropriate classification for real estate-related securities at the time of purchase and reevaluates such designation as of each balance sheet date.

As of September 30, 2020, the Company classified its investments as available-for-sale as the Company is not actively trading the securities;

As of March 31, 2021, the Company classified its investments as available-for-sale as the Company is not actively trading the securities;

however, the Company may sell them prior to their maturity.

These investments are carried at their estimated fair value with unrealized gains and losses reported in other comprehensive income (loss).

During the nine months ended September 30, 2020, the Company invested in five CMBS with an estimated aggregate fair value of $ 75.2 million as of September 30, 2020.

The Company monitors its available-for-sale securities for impairment.

A loss is recognized when the Company determines that a decline in the estimated fair value of a security below its amortized cost has resulted from a credit loss or other factors.

The Company records impairments related to credit losses through an allowance for credit losses.

During the three months ended March 31, 2021, the Company invested $ 28.5 million in CMBS.

As of March 31, 2021, the Company had investments in five CMBS with an estimated aggregate fair value of $ 67.2 million.

The Company monitors its available-for-sale securities for changes in fair value.

An allowance for credit losses is recorded when the Company acquires CMBS, and any subsequent impairment is recognized when the Company determines that a decline in the estimated fair value of a security below its amortized cost has resulted from a credit loss or other factors.

The Company records impairments related to credit losses through the allowance for credit losses.

However, the allowance is limited by the amount that the fair value is less than the amortized cost basis.

The Company considers many factors in determining whether a credit loss exists, including, but not limited to, the extent to which the fair value is less than the amortized cost basis, recent events specific to the security, industry or geographic area, the payment structure of the security, the failure of the issuer of the security to make scheduled interest or principal payments, and external credit ratings and recent changes in such ratings.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021 (Unaudited) – (Continued)

the failure of the issuer of the security to make scheduled interest or principal payments, and external credit ratings and recent changes in such ratings.

The analysis of determining whether a credit loss exists requires significant judgments and assumptions.

2 unchanged sentences

Upon the sale of a security, the realized net gain or loss is computed on the specific identification method.

Interest earned is either received in cash or capitalized to real estate-related securities in the Company’s condensed consolidated balance sheets.

Interest is capitalized when certain conditions are met as specified in each security agreement.

During the three months ended March 31, 2021, the Company recorded $ 12.0 million in interest income on its credit investments, $ 173,000 of which was capitalized to real estate-related securities.

No such amounts were capitalized during the three months ended March 31, 2020 as the Company began investing in real estate-related securities in June 2020.

Loans Held-for-Investment

4 unchanged sentences

Discounts or premiums, origination fees and exit fees are amortized as a component of interest 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.

Loan acquisition fees paid to CMFT Management or its affiliates are expensed as incurred and are included in transaction-related expenses on the accompanying condensed consolidated statements of operations.

Upon the sale of a loan, the realized net gain or loss is computed on the specific identification method.

1 unchanged sentence

Interest is capitalized when certain conditions are met as specified in each loan agreement.

During the nine months ended September 30, 2020, the Company recorded $ 19.4 million in interest income, of which $ 539,000 was capitalized to loans held-for-investment and related receivables, net.

During the three months ended March 31, 2020, the Company recorded $ 5.6 million in interest income on its credit investments, $ 539,000 of which was capitalized to loans held-for-investment and related receivables, net.

Accrual of interest income is suspended on nonaccrual loans.

2 unchanged sentences

Loans may be restored to accrual status when all principal and interest are current and full repayment of the remaining contractual principal and interest are reasonably assured.

As of September 30, 2020, the Company’s eight mezzanine loans with a net book value of $ 121.6 million were nonaccrual loans.

During the nine months ended September 30, 2020, the Company recorded $ 565,000 in interest income related to the nonaccrual loans.

As of March 31, 2021, the Company did no t have nonaccrual loans.

Allowance for Credit Losses

The Company adopted Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”), as further described in “Recent Accounting Pronouncements,” on January 1, 2020.

2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”), on January 1, 2020.

The allowance for credit losses required under ASU 2016-13 reflects the Company’s current estimate of potential credit losses related to the Company’s loans held-for-investment included in the condensed consolidated balance sheets.

The initial allowance for credit losses recorded on January 1, 2020 is reflected as a direct charge to retained earnings on the Company’s condensed

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

consolidated statements of stockholders’ equity;

The initial allowance for credit losses recorded on January 1, 2020 is reflected as a direct charge to retained earnings on the Company’s condensed consolidated statements of stockholders’ equity;

however, subsequent changes to the allowance for credit losses are recognized through net income on the Company’s condensed consolidated statements of operations.

4 unchanged sentences

The Company then records 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.

The Company considers loan investments that are both (i) expected to be substantially repaid through the operation or sale of the underlying collateral, and (ii) for which the borrower is experiencing financial difficulty, to be “collateral-dependent” loans.

The Company considers loan investments that are both (i) expected to be substantially repaid through the operation or sale of the underlying collateral, and

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021 (Unaudited) – (Continued)

(ii) for which the borrower is experiencing financial difficulty, to be “collateral-dependent” loans.

For such loans that the Company determines that foreclosure of the collateral is probable, the Company measures the expected losses based on the difference between the fair value of the collateral less costs to sell and the amortized cost basis of the loan as of the measurement date.

For collateral-dependent loans that the Company determines foreclosure is not probable, the Company applies a practical expedient to estimate expected losses using the difference between the collateral’s fair value (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of the loan.

For the Company’s broadly syndicated loans, the Company uses a probability of default and loss given default method using an underlying third-party CMBS/CRE loan database with historical loan losses from 1998 to 2019.

For the Company’s broadly syndicated loans, the Company uses a probability of default and loss given default method using an underlying third-party CMBS/Commercial Real Estate (“CRE”) loan database with historical loan losses from 1998 to 2019.

The Company may use other acceptable alternative approaches in the future depending on, among other factors, the type of loan, underlying collateral, and availability of relevant historical market loan loss data.

24 unchanged sentences

The portfolio company’s operations and/or balance sheet have demonstrated an adverse trend or deterioration which, while serious, has not reached the point where the liquidation of debt is jeopardized.

These weaknesses are generally considered correctable by the borrower in the normal course of business but may weaken the asset or inadequately protect the Company’s credit position if not

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

checked or corrected.

These weaknesses are generally considered correctable by the borrower in the normal course of business but may weaken the asset or inadequately protect the Company’s credit position if not checked or corrected.

Collateral performance, if appropriate, falls short of original underwriting, material differences exist from business plan, or both;

2 unchanged sentences

5- Default/Possibility of Loss — The debt investment is protected inadequately by the current enterprise value or paying capacity of the obligor or of the collateral, if any.

The underlying company’s operations has well-defined weaknesses based upon objective evidence, such as recurring or significant decreases in revenues and cash flows.

The underlying company’s operations have well-defined weaknesses based upon objective evidence, such as recurring or significant decreases in revenues and cash flows.

Major variance from business plan;

4 unchanged sentences

The Company generally assigns a risk rating of “3” to all newly originated or acquired loans held-for-investment during a most recent quarter, except in the case of specific circumstances warranting an exception.

Due to the COVID-19 pandemic and the dislocation it has caused to the national economy, the commercial real estate markets, and the capital markets, the Company’s ability to estimate key inputs for estimating the allowance for credit losses has been materially and adversely impacted.

Key inputs to the estimate include, but are not limited to, LTV, debt service coverage ratio, future operating cash flow and performance of collateral properties, the financial strength and liquidity of borrowers and sponsors, capitalization rates and discount rates used to value commercial real estate properties, and observable transactions involving the sale or financing of commercial properties.

Estimates made by management are necessarily subject to change due to the lack of observable inputs and uncertainty regarding the duration of the COVID-19 pandemic and its aftereffects.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021 (Unaudited) – (Continued)

The Company has lease agreements with lease and non-lease components.

5 unchanged sentences

Judgments include the nature of any options, including if they will be exercised, evaluation of implicit discount rates and the assessment and consideration of “fixed” payments for straight-line rent revenue calculations.

The Company has an investment in a real estate property that is subject to a ground lease, for which a lease liability and right of use (“ROU”) asset of $ 2.5 million was recorded as of September 30, 2020.

The Company has an investment in a real estate property that is subject to a ground lease, for which a lease liability and right of use (“ROU”) asset of $ 2.4 million was recorded as of both March 31, 2021 and December 31, 2020.

See Note 15 — Leases for a further discussion regarding this ground lease.

3 unchanged sentences

Upon successful lease execution, leasing commissions are capitalized.

Development Activities

Project costs and expenses, including interest incurred, associated with the development, construction and lease-up of a real estate project are capitalized as construction in progress.

During the three months ended March 31, 2021, the Company capitalized $ 514,000 of interest expense associated with the development of condominiums acquired via foreclosure, which is included in condominium developments in the accompanying condensed consolidated balance sheets.

There were no development projects during the three months ended March 31, 2020.

Revenue Recognition

3 unchanged sentences

Variable rental and other property income consists primarily of tenant reimbursements for recoverable real estate taxes and operating expenses which are included in rental and other property income in the period when such costs are incurred, with offsetting expenses in real estate taxes and property operating expenses, respectively, within the condensed consolidated statements of operations.

The Company defers the recognition of variable rental

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

and other property income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved.

The Company defers the recognition of variable rental and other property income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved.

The Company continually reviews whether collection of lease-related receivables, including any straight-line rent, and current and future operating expense reimbursements from tenants are probable.

4 unchanged sentences

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.

During the nine months ended September 30, 2020, the Company identified certain tenants where collection was no longer considered probable.

For these tenants, the Company made the determination to record revenue on a cash basis and wrote off total outstanding receivables of $ 6.7 million for the nine months ended September 30, 2020, which included $ 1.4 million related to certain tenant reimbursements.

These write-offs reduced rental and other property income during the nine months ended September 30, 2020.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021 (Unaudited) – (Continued)

During the three months ended March 31, 2021, the Company identified certain tenants where collection was no longer considered probable.

For these tenants, the Company made the determination to record revenue on a cash basis and wrote off total outstanding receivables of $ 1.8 million for the three months ended March 31, 2021, which included $ 29,000 of straight-line rental income and $ 1.1 million related to certain tenant reimbursements.

These write-offs reduced rental and other property income during the three months ended March 31, 2021.

Revenue from lending activities

2 unchanged sentences

Interest income on the Company’s broadly syndicated loans is accrued as earned beginning on the settlement date.

Reportable Segments

During the year ended December 31, 2020, the Company updated its reportable segment information to reflect how the chief operating decision makers regularly review and manage the business and determined that it has two reportable segments:

Credit — engages primarily in acquiring and originating loans related to real estate assets.

The Company may acquire first and second lien mortgage loans, mezzanine loans, bridge loans, wraparound mortgage loans, construction mortgage loans on real property and loans on leasehold interest mortgages.

This segment also includes investments in CMBS and broadly syndicated loans.

Real estate — engages primarily in acquiring and managing income-producing retail properties that are primarily single-tenant properties or anchored shopping centers, which are leased to creditworthy tenants under long-term net leases.

The commercial properties are geographically diversified throughout the United States and have similar economic characteristics.

See Note 16 — Segment Reporting for a further discussion regarding these segments.

Recent Accounting Pronouncements

1 unchanged sentence

Except as otherwise stated below, the Company is currently evaluating the effect that certain new accounting requirements may have on the Company’s accounting and related reporting and disclosures in the Company’s condensed consolidated financial statements.

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, 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 are intended to 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 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 ) (“ASC 842”) .

ASU 2016-13 and ASU 2018-19 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2019.

The Company adopted ASU 2016-13 during the first quarter of fiscal year 2020.

See Note 7 — Loans Held-For-Investment for a further discussion on the impact of the adoption of ASU 2016-13.

In August 2018, the FASB issued ASU No.

2018-13, Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”).

This ASU amends and removes several disclosure requirements including the valuation processes for Level 3 fair value measurements.

ASU 2018-13 also modifies some disclosure requirements and requires additional disclosures for changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements and requires the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.

The provisions of ASU 2018-13 are effective January 1, 2020 using a prospective transition method for amendments effecting changes in unrealized gains and losses, significant unobservable inputs used to develop Level 3 fair

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

value measurements and narrative description on uncertainty of measurements.

The remaining provisions of ASU 2018-13 are to be applied retrospectively, and early adoption is permitted.

The Company adopted ASU 2018-13 during the first quarter of fiscal year 2020, and has concluded that there is no material impact on its condensed consolidated financial statements.

In October 2018, the FASB issued ASU No.

2018-16, Inclusion of the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap (“OIS”) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes (“ASU 2018-16”).

The amendments in this ASU permit the use of the OIS rate based on SOFR as a U.S.

benchmark interest rate for hedge accounting purposes or another acceptable benchmark interest rate.

The SOFR is a volume-weighted median interest rate that is calculated daily based on overnight transactions from the prior day’s activity in specified segments of the U.S.

Treasury repo market.

It has been selected as the preferred replacement for the U.S.

dollar London Interbank Offered Rate (“LIBOR”), which will be phased out by the end of 2021.

ASU 2018-16 is effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

ASU 2018-16 is required to be adopted on a prospective basis for qualifying new or redesignated hedging relationships entered into on or after the date of adoption.

The Company currently uses LIBOR as its benchmark interest rate in the Company’s interest rate swaps associated with the Company’s LIBOR-based variable rate borrowings.

The Company has not entered into any new or redesignated hedging relationships on or after the date of adoption of ASU 2018-16.

The Company has evaluated the effect of this new benchmark interest rate option, and does not believe this ASU will have a material impact on its condensed consolidated financial statements.

In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810):

Targeted Improvements to Related Party Guidance for Variable Interest Entities (“ASU 2018-17”).

The guidance changes the guidance for determining whether a decision-making fee is a variable interest.

Under the new ASU, indirect interests held through related parties under common control will now be considered on a proportional basis when determining whether fees paid to decision makers and service providers are variable interests.

Such indirect interests were previously treated the same as direct interests.

ASU 2018-17 is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years.

The Company adopted ASU 2018-17 during the first quarter of fiscal year 2020, and has concluded that there is no material impact on its condensed consolidated financial statements.

In April 2020, the FASB issued a question and answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 pandemic.

Due to the business disruptions and challenges severely affecting the global economy caused by the COVID-19 pandemic, many lessors may be required to provide rent deferrals and other lease concessions to lessees.

3 unchanged sentences

The Company has elected to apply this guidance to avoid performing a lease by lease analysis for the lease concessions that (1) were granted as relief due to COVID-19 related impacts and (2) result in the cash flows remaining substantially the same or less than the original contract and will account for these lease concessions as if no changes were made to the leases.

During the three and nine months ended September 30, 2020, the Company 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 on those tenants.

As of September 30, 2020, the Company had granted rent deferrals of $ 4.4 million.

The deferral of rental payments affects the timing, but not the amount, of the lease payments and resulted in an increase of $ 4.4 million to the Company’s lease-related receivables balance as of September 30, 2020.

Additionally, as of September 30, 2020, the Company had granted rental abatements of $ 265,000 .

In addition, the Company entered into lease amendments during the three and nine months ended September 30, 2020 that provided for lease concessions, through rent abatements or rent deferrals, that represented substantive changes to the consideration in the original lease.

These lease amendments extended the lease periods ranging from 12 months to 84 months.

For these leases, the Company applied the lease modification accounting framework pursuant to ASC 842.

As of September 30, 2020 , these lease amendments resulted in rent abatements of $ 2.5 million and deferred rental income of $ 436,000 .

During the three months ended March 31, 2021, the Company 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 on those tenants.

During the three months ended March 31, 2021, the Company had granted rent deferrals of $ 427,000 .

The deferral of rental payments affects the timing, but not the amount, of the lease payments and resulted in an increase of $ 427,000 to the Company’s lease-related receivables balance as of March 31, 2021.

Additionally, during the three months ended March 31, 2021, the Company had granted rental abatements of $ 13,000 .

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

As of November 5, 2020, the Company has collected approximately 90 % of rental payments billed to tenants during the three months ended September 30, 2020 .

March 31, 2021 (Unaudited) – (Continued)

In addition, the Company entered into lease amendments during the three months ended March 31, 2021 that provided for lease concessions, through rent abatements or rent deferrals, that represented substantive changes to the consideration in the original lease.

These lease amendments extended the lease periods ranging from 12 months to 63 months.

For these leases, the Company applied the lease modification accounting framework pursuant to ASC 842.

During the three months ended March 31, 2021 , these lease amendments resulted in rent abatements of $ 235,000 and deferred rental income of $ 5,000 .

As of May 6, 2021, the Company has collected approximately 98 % of rental payments billed to tenants during the three months ended March 31, 2021 .

In January 2021, the Financial Accounting Standards Board (the “FASB”) issued ASU No.

2021-01, Reference Rate Reform (Topic 848) (“ASU 2021-01”).

The amendments in ASU 2021-01 clarify that certain optional expedients and exceptions for contract modifications and hedge accounting apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of the discontinuation of the use of the London Interbank Offered Rate (“LIBOR”) as a benchmark interest rate due to reference rate reform.

ASU 2021-01 is effective immediately for all entities with the option to apply retrospectively as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, and can be applied prospectively to any new contract modifications made on or after January 7, 2021.

The Company currently uses LIBOR as its benchmark interest rate for its derivative instruments, and has not entered into any new contracts on or after the effective date of ASU 2021-01.

The Company has evaluated the impact of this ASU’s adoption, and does not believe this ASU will have a material impact on its condensed consolidated financial statements.

NOTE 3 — FAIR VALUE MEASUREMENTS

12 unchanged sentences

Depending upon the significance of the fair value inputs used in determining these fair values, these securities are valued using either Level 2 or Level 3 inputs.

As of September 30, 2020, the Company concluded that $ 65.5 million of real estate-related securities fell under Level 2 and $ 9.7 million of real estate-related securities fell under Level 3.

As of March 31, 2021, the Company concluded that $ 27.4 million of real estate-related securities fell under Level 2 and $ 39.8 million of real estate-related securities fell under Level 3.

Credit facilities and notes payable — The fair value is estimated by discounting the expected cash flows based on estimated borrowing rates available to the Company as of the measurement date.

1 unchanged sentence

These financial instruments are valued using Level 2 inputs.

As of September 30, 2020, the estimated fair value of the Company’s debt was $ 1.84 billion, compared to a carrying value of $ 1.85 billion.

The estimated fair value of the Company’s debt as of December 31, 2019 was $ 1.60 billion, compared to a carrying value of $ 1.61 billion.

As of March 31, 2021, the estimated fair value of the Company’s debt was $ 2.45 billion, which approximated its carrying value.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021 (Unaudited) – (Continued)

estimated fair value of the Company’s debt as of December 31, 2020 was $ 2.14 billion, compared to a carrying value of $ 2.15 billion.

Derivative instruments — The Company’s derivative instruments are comprised of interest rate swaps.

3 unchanged sentences

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties.

However, as of September 30, 2020 and December 31, 2019, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives.

However, as of March 31, 2021 and December 31, 2020, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives.

As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

Loans held-for-investment — The Company’s loans held-for-investment are recorded at cost upon origination and adjusted by net loan origination fees and discounts.

The Company estimates the fair value of its commercial real estate (“CRE”) loans held-for-investment by performing a present value analysis for the anticipated future cash flows using an appropriate market discount rate taking into consideration the credit risk.

As a result, the Company has determined that its CRE loans held-for-investment are classified in Level 3 of the fair value hierarchy.

The Company estimates the fair value of its loans held-for-investment by performing a present value analysis for the anticipated future cash flows using an appropriate market discount rate taking into consideration the credit risk.

The Company has determined that its CRE loans held-for-investment are classified in Level 3 of the fair value hierarchy.

The Company’s broadly syndicated loans are classified as Level 2 or Level 3 depending on the number of market quotations or indicative prices from pricing services that are available, and whether the depth of the market is sufficient to transact at those prices in amounts approximating the Company’s investment position at the measurement date.

As of September 30, 2020, $ 302.1 million and $ 107.5 million of the Company’s broadly syndicated loans were classified in Level 2 and Level 3 of the fair value hierarchy, respectively.

As of September 30, 2020, the estimated fair value of the Company’s loans held-for-investment was $ 859.3 million, compared to its carrying value of $ 857.9 million.

As of March 31, 2021, $ 389.7 million and $ 107.6 million of the Company’s broadly syndicated loans were classified in Level 2 and Level 3 of the fair value hierarchy, respectively.

As of December 31, 2020, $ 359.6 million and $ 114.1 million of the Company’s broadly syndicated loans were classified in Level 2 and Level 3 of the fair value hierarchy, respectively.

As of March 31, 2021, the estimated fair value of the Company’s loans held-for-investment and related receivables, net was $ 1.03 billion, compared to its carrying value of $ 1.01 billion.

As of December 31, 2020, the estimated fair value of the Company’s loans held-for-investment was $ 907.8 million, compared to its carrying value of $ 892.3 million.

3 unchanged sentences

Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize, or be liable for, upon disposition of the financial assets and liabilities.

As of September 30, 2020 and December 31, 2019, there have been no transfer s of financial assets or liabilities between fair value hierarchy levels.

As of March 31, 2021 and December 31, 2020, there have been no transfer s of financial assets or liabilities between fair value hierarchy levels.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021 (Unaudited) – (Continued)

Items Measured at Fair Value on a Recurring Basis

In accordance with the fair value hierarchy described above, the following tables show the fair value of the Company’s financial assets and liabilities that are required to be measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019 (in thousands):

In accordance with the fair value hierarchy described above, the following tables show the fair value of the Company’s financial assets and liabilities that are required to be measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 (in thousands):

Balance as of

September 30, 2020 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)

March 31, 2021 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)

Financial assets:

9 unchanged sentences

Financial assets:

Interest rate swaps

$ 261 $ — $ 261 $ —

CMBS $ 38,194 $ — $ 27,461 $ 10,733

Total financial assets

$ 38,194 $ — $ 27,461 $ 10,733

Financial liability:

Interest rate swap

$ ( 4,181 ) $ — $ ( 4,181 ) $ —

Total financial liability

$ ( 4,181 ) $ — $ ( 4,181 ) $ —

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

The following are reconciliations of the changes in financial assets with Level 3 inputs in the fair value hierarchy for the nine months ended September 30, 2020 (in thousands):

Financial liabilities:

Interest rate swaps $ ( 12,308 ) $ — $ ( 12,308 ) $ —

Total financial liabilities $ ( 12,308 ) $ — $ ( 12,308 ) $ —

The following are reconciliations of the changes in financial assets with Level 3 inputs in the fair value hierarchy for the three months ended March 31, 2021 (in thousands):

Beginning Balance, January 1, 2021 $ 10,733

Total gains and losses:

Unrealized gain included in other comprehensive income, net

Unrealized loss included in other comprehensive income, net 70

Purchases and payments received:

Premiums (discounts), net

Discounts, net ( 5,676 )

Capitalized interest income 173

Principal payments received

Ending Balance, September 30, 2020

Ending Balance, March 31, 2021

Items Measured at Fair Value on a Non-Recurring Basis (Including Impairment Charges)

1 unchanged sentence

The Company’s process for identifying and recording impairment related to real estate assets and intangible assets is discussed in Note 2 — Summary of Significant Accounting Policies.

As discussed in Note 4 — Real Estate Assets, during the nine months ended September 30, 2020, real estate assets related to 11 properties were deemed to be impaired and their carrying values were reduced to an estimated fair value of $ 71.5 million, resulting in impairment charges of $ 16.0 million.

During the nine months ended September 30, 2019, real estate assets related to 26 properties were deemed to be impaired and their carrying values were reduced to an estimated fair value of $ 283.1 million, resulting in impairment charges of $ 57.2 million.

The Company estimates fair values using Level 3 inputs and using a combined income and market approach, specifically using discounted cash flow analysis and recent comparable sales transactions.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021 (Unaudited) – (Continued)

As discussed in Note 4 — Real Estate Assets, during the three months ended March 31, 2021, real estate assets related to five properties were deemed to be impaired and their carrying values were reduced to an estimated fair value of $ 31.3 million, resulting in impairment charges of $ 4.3 million.

During the three months ended March 31, 2020, real estate assets related to seven properties were deemed to be impaired and their carrying values were reduced to an estimated fair value of $ 52.6 million, resulting in impairment charges of $ 11.7 million.

The Company estimates fair values using Level 3 inputs and a combined income and market approach, specifically using discounted cash flow analysis and recent comparable sales transactions.

The evaluation of real estate assets for potential impairment requires the Company’s management to exercise significant judgment and to make certain key assumptions, including, but not limited to, the following:

5 unchanged sentences

There are inherent uncertainties in making these estimates such as market conditions and the future performance and sustainability of the Company’s tenants.

For the Company’s impairment tests for the real estate assets during the nine months ended September 30, 2020 , the Company used a range of discount rates from 7.9 % to 9.7 % and terminal capitalization rates from 7.4 % to 9.2 %.

The following table presents the impairment charges by asset class recorded during the nine months ended September 30, 2020 and 2019 (in thousands):

Nine Months Ended September 30,

The Company determined that the selling prices used to determine the fair values were Level 2 inputs.

The following summarizes the ranges of discount rates and terminal capitalization rates used for the Company’s impairment test for the real estate assets during the three months ended March 31, 2021:

Three Months Ended March 31, 2021

Discount Rate Terminal Capitalization Rate

7.9 % - 9.7 %

7.4 % - 9.2 %

The following table presents the impairment charges by asset class recorded during the three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended March 31,

Asset class impaired:

6 unchanged sentences

Property Acquisitions

During the nine months ended September 30, 2020, the Company acquired three commercial properties for an aggregate purchase price of $ 14.5 million (the “2020 Property Acquisitions”), which includes $ 111,000 of external acquisition-related expenses that were capitalized.

The Company funded the 2020 Property Acquisitions with proceeds from real estate dispositions and available borrowings.

During the three months ended March 31, 2021 and 2020, the Company did no t acquire any properties.

Assets Acquired Via Foreclosure

No land was acquired in connection with the foreclosure.

The following table summarizes the purchase price allocation for the real estate acquired via foreclosure (in thousands):

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

The following table summarizes the purchase price allocation for the 2020 Property Acquisitions (in thousands):

2020 Property Acquisitions

March 31, 2021 (Unaudited) – (Continued)

As of March 31, 2021

Buildings, fixtures and improvements 192,182

Acquired in-place leases and other intangibles 134

Intangible lease liabilities ( 326 )

Total purchase price $ 191,990

______________________

(1) The amortization period for acquired in-place leases and other intangibles is 14.7 years.

2020 Property Dispositions and Real Estate Assets Held for Sale

During the nine months ended September 30, 2020, the Company disposed of 19 properties, consisting of 12 retail properties and seven anchored shopping centers, for an aggregate gross sales price of $ 199.2 million, resulting in proceeds of $ 194.7 million after closing costs and disposition fees due to CMFT Management or its affiliates, and recorded a gain of $ 20.1 million.

The Company has no continuing involvement with these properties.

The gain on sale of real estate is included in gain on disposition of real estate, net in the condensed consolidated statements of operations.

The disposition of these properties did not qualify to be reported as discontinued operations since the disposition did not represent a strategic shift that had a major effect on the Company’s operations and financial results.

Accordingly, the operating results of these disposed properties are reflected in the Company’s results from continuing operations for all periods presented through their respective date of disposition.

In connection with the foreclosure, the Company assumed $ 102.6 million of mortgage notes payable related to the assets, as further discussed in Note 9 — Credit Facilities, Notes Payable and Repurchase Facilities.

2021 Condominium Development Project

During the three months ended March 31, 2021, the Company capitalized $ 1.5 million of expenses as construction in progress associated with the development of condominiums acquired via foreclosure, which is included in condominium developments in the accompanying condensed consolidated balance sheets.

2021 Property Disposition and Real Estate Assets Held for Sale

During the three months ended March 31, 2021, the Company disposed of one retail property for an aggregate gross sales price of $ 3.7 million, resulting in proceeds of $ 3.5 million after closing costs.

The Company has no continuing involvement with this property.

As of March 31, 2021, there were two properties classified as held for sale with a carrying value of $ 31.2 million included in assets held for sale in the accompanying condensed consolidated balance sheets.

Subsequent to March 31, 2021, the Company disposed of these properties, as further discussed in Note 17 — Subsequent Events.

2021 Impairment

1 unchanged sentence

See Note 2 — Summary of Significant Accounting Policies for a discussion of the Company’s accounting policies regarding impairment of real estate assets.

During the nine months ended September 30, 2020, 11 properties totaling approximately 699,000 square feet with a carrying value of $ 87.5 million were deemed to be impaired and their carrying values were reduced to an estimated fair value of $ 71.5 million, resulting in impairment charges of $ 16.0 million, which were recorded in the condensed consolidated statements of operations.

During the three months ended March 31, 2021, five properties totaling approximately 165,000 square feet with a carrying value of $ 35.6 million were deemed to be impaired and their carrying values were reduced to an estimated fair value of $ 31.3 million, resulting in impairment charges of $ 4.3 million, which were recorded in the condensed consolidated statements of operations.

See Note 3 — Fair Value Measurements for a further discussion regarding these impairment charges.

2019 Property Acquisition

During the nine months ended September 30, 2019, the Company acquired a 100 % interest in one commercial property for an aggregate purchase price of $ 6.2 million (the “2019 Property Acquisition”), which includes $ 165,000 of external acquisition-related expenses that were capitalized.

The Company funded the 2019 Property Acquisition with proceeds from real estate dispositions and available borrowings.

The following table summarizes the purchase price allocation for the 2019 Property Acquisition (in thousands):

2019 Property Acquisition

Buildings, fixtures and improvements 3,804

Acquired in-place leases and other intangibles (1)

Total purchase price $ 6,165

______________________

(1) The amortization period for acquired in-place leases and other intangibles is 19.8 years.

2020 Property Dispositions

During the nine months ended September 30, 2019, the Company disposed of 43 properties, consisting of 37 retail properties and six anchored shopping centers, excluding a related outparcel of land, for an aggregate gross sales price of $ 202.3 million, resulting in proceeds of $ 196.5 million after closing costs and disposition fees due to CMFT Management or its

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

affiliates, and a gain of $ 19.2 million.

During the three months ended March 31, 2020, the Company disposed of 12 properties, consisting of nine retail properties and three anchored shopping centers, for an aggregate gross sales price of $ 129.0 million, resulting in proceeds of $ 126.6 million after closing costs and disposition fees due to CMFT Management or its affiliates, and a gain of $ 13.1 million.

The Company has no continuing involvement with these properties.

The gain on sale of real estate is included in gain on disposition of real estate, net in the condensed consolidated statements of operations.

2020 Impairment

During the nine months ended September 30, 2019, 26 properties totaling approximately 2.6 million square feet with a carrying value of $ 340.3 million were deemed to be impaired and their carrying values were reduced to an estimated fair value of $ 283.1 million, resulting in impairment charges of $ 57.2 million, which were recorded in the condensed consolidated statements of operations.

During the three months ended March 31, 2020, seven properties totaling approximately 414,000 square feet with a carrying value of $ 64.3 million were deemed to be impaired and their carrying values were reduced to an estimated fair value of $ 52.6 million, resulting in impairment charges of $ 11.7 million, which were recorded in the condensed consolidated statements of operations.

See Note 3 — Fair Value Measurements for a further discussion regarding these impairment charges.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021 (Unaudited) – (Continued)

NOTE 5 — INTANGIBLE LEASE ASSETS AND LIABILITIES

Intangible lease assets and liabilities consisted of the following as of September 30, 2020 and December 31, 2019 (in thousands, except weighted average life remaining):

September 30, 2020 December 31, 2019

Intangible lease assets and liabilities consisted of the following as of March 31, 2021 and December 31, 2020 (in thousands, except weighted average life remaining):

March 31, 2021 December 31, 2020

Intangible lease assets:

5 unchanged sentences

Intangible lease liabilities:

Acquired below-market leases, net of accumulated amortization of $ 31,445 and $ 25,800 , respectively (with a weighted average life remaining of 6.6 years and 7.3 years, respectively)

Acquired below-market leases, net of accumulated amortization of $ 33,341 and $ 31,933 , respectively (both with a weighted average life remaining of 7.5 years)

$ 31,414 $ 32,718

1 unchanged sentence

Amortization of below-market leases is recorded as an increase to rental and other property income in the accompanying condensed consolidated statements of operations.

The following table summarizes the amortization related to the intangible lease assets and liabilities for the three and nine months ended September 30, 2020 and 2019 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

The following table summarizes the amortization related to the intangible lease assets and liabilities for the three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended March 31,

In-place lease and other intangible amortization $ 7,773 $ 5,940

1 unchanged sentence

Below-market lease amortization $ 1,466 $ 1,399

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

As of September 30, 2020, the estimated amortization relating to the intangible lease assets and liabilities is as follows (in thousands):

As of March 31, 2021, the estimated amortization relating to the intangible lease assets and liabilities is as follows (in thousands):

In-Place Leases and

8 unchanged sentences

NOTE 6 — REAL ESTATE-RELATED SECURITIES

During the nine months ended September 30, 2020, the Company invested in five CMBS with an estimated aggregate fair value of $ 75.2 million as of September 30, 2020.

The CMBS mature on various dates from October 2022 through March 2034 and have interest rates ranging from 2.7 % to 13.0 %.

The following is a summary of the Company’s real estate-related securities as of September 30, 2020 (in thousands):

As of March 31, 2021, the Company had CMBS investment securities with an aggregate estimated fair value of $ 67.2 million.

The CMBS mature on various dates from January 2024 through June 2058 and have interest rates ranging from 4.0 % to 13.0 %.

The following is a summary of the Company’s real estate-related securities as of March 31, 2021 (in thousands):

Real Estate-Related Securities

2 unchanged sentences

Total real estate-related securities $ 65,953 $ 1,269 $ 67,222

The following table provides the activity for the real estate-related securities during the nine months ended September 30, 2020 (in thousands):

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021 (Unaudited) – (Continued)

The following table provides the activity for the real estate-related securities during the three months ended March 31, 2021 (in thousands):

Amortized Cost Basis Unrealized Gain Fair Value

3 unchanged sentences

( 5,982 ) — ( 5,982 )

Amortization of discount (premium) on real estate-related securities

( 45 ) — ( 45 )

Amortization of discount on real estate-related securities 234 — 234

Capitalized interest income on real estate-related securities 173 — 173

Principal payments received on real estate-related securities ( 10 ) — ( 10 )

( 1,448 ) — ( 1,448 )

Unrealized gain on real estate-related securities — 122 122

Real estate-related securities as of September 30, 2020 $ 75,151 $ 61 $ 75,212

Real estate-related securities as of March 31, 2021 $ 65,953 $ 1,269 $ 67,222

During the three months ended March 31, 2021, the Company invested $ 28.5 million in CMBS.

Unrealized gains and losses on real estate-related securities are recorded in other comprehensive income (loss), with a portion of the amount subsequently reclassified into interest expense and other, net in the accompanying condensed consolidated statements of operations as securities are sold and gains and losses are recognized.

During the nine months ended September 30, 2020, the Company recorded $ 61,000 of unrealized gains on its real estate-relates securities.

The total unrealized gain on real estate-related securities of $ 61,000 as of September 30, 2020 is included in accumulated other comprehensive (loss) income in the accompanying condensed consolidated statement of stockholders’ equity.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

The scheduled maturities of the Company’s real estate-related securities as of September 30, 2020 are as follows (in thousands):

During the three months ended March 31, 2021, the Company recorded $ 122,000 of unrealized gains on its real estate-related securities included in accumulated other comprehensive (loss) income in the accompanying condensed consolidated statement of stockholders’ equity.

The scheduled maturities of the Company’s real estate-related securities as of March 31, 2021 are as follows (in thousands):

Available-for-sale securities

8 unchanged sentences

In estimating credit losses related to real estate-related securities, management considers a variety of factors, including (1) whether the Company has the intent to sell the impaired security before the recovery of its amortized cost basis, (2) whether the Company expects to hold the investment for a period of time sufficient to allow for anticipated recovery in fair value, and (3) whether the Company expects to recover the entire amortized cost basis of the security.

As of September 30, 2020, the Company had no credit losses related to real estate-related securities.

As of March 31, 2021, the Company had no credit losses related to real estate-related securities.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021 (Unaudited) – (Continued)

NOTE 7 — LOANS HELD-FOR-INVESTMENT

The Company’s loans held-for-investment consisted of the following as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands):

As of September 30, As of December 31,

The Company’s loans held-for-investment consisted of the following as of March 31, 2021 and December 31, 2020 (dollar amounts in thousands):

As of March 31, As of December 31,

Mezzanine loans $ — $ 147,475

4 unchanged sentences

Allowance for credit losses $ ( 12,888 ) $ ( 70,358 )

Total loans-held-for-investment and related receivables, net $ 857,856 $ 301,630

During the nine months ended September 30, 2020, the Company invested $ 475.0 million in broadly syndicated loans.

During the same period, the Company sold broadly syndicated loans for an aggregate gross sales price of $ 27.3 million, resulting in proceeds of $ 25.8 million after closing costs and a loss of $ 562,000 .

The loss was recorded as a decrease to interest expense and other, net in the condensed consolidated statements of operations.

As of September 30, 2020, the Company had $ 42.1 million of unsettled broadly syndicated loan purchases included in cash and cash equivalents in the accompanying condensed consolidated balance sheet.

As of September 30, 2020, the Company had $ 61.8 million of unfunded commitments related to CRE loans held-for-investment, the funding of which is subject to the satisfaction of borrower milestones.

Total loans held-for-investment and related receivable, net $ 1,009,391 $ 892,266

During the three months ended March 31, 2021, the Company invested $ 82.1 million in broadly syndicated loans.

During the same period, the Company received $ 51.6 million of principal payments on broadly syndicated loans and sold $ 7.6 million of broadly syndicated loans, resulting in proceeds of $ 7.4 million after closing costs and a loss of $ 111,000 .

The loss was recorded as an increase to interest expense and other, net in the condensed consolidated statements of operations.

As of March 31, 2021, the Company had $ 34.5 million of unsettled broadly syndicated loan purchases included in cash and cash equivalents in the accompanying condensed consolidated balance sheet.

As of March 31, 2021, the Company had $ 64.4 million of unfunded commitments related to CRE loans held-for-investment, the funding of which is subject to the satisfaction of borrower milestones.

These commitments are not reflected in the accompanying condensed consolidated balance sheet.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

The following table details overall statistics for the Company’s loans held-for-investment as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands):

The following table details overall statistics for the Company’s loans held-for-investment as of March 31, 2021 and December 31, 2020 (dollar amounts in thousands):

CRE Loans (1) (2)

Broadly Syndicated Loans

September 30, 2020 December 31, 2019 September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020 March 31, 2021 December 31, 2020

Number of loans 6 12 221 194

5 unchanged sentences

____________________________________

(1) As of September 30, 2020, 100 % of the Company’s CRE loans by principal balance earned a floating rate of interest, primarily indexed to U.S.

(1) As of March 31, 2021, 100 % of the Company’s CRE loans by principal balance earned a floating rate of interest, primarily indexed to U.S.

dollar LIBOR.

1 unchanged sentence

however, the Company’s CRE loans may be repaid prior to such date.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021 (Unaudited) – (Continued)

Activity relating to the Company’s loans held-for-investment portfolio was as follows (dollar amounts in thousands):

2 unchanged sentences

Balance, December 31, 2020 $ 959,215 $ ( 74,116 ) $ 7,167 $ 892,266

$ 300,135 $ ( 6,047 ) $ 7,542 $ 301,630

Loan originations and acquisitions 268,214 — — 268,214

3 unchanged sentences

Principal repayments received ( 51,650 ) — — ( 51,650 )

( 80,263 ) — — ( 80,263 )

Capitalized interest (2)

( 9,469 ) — — ( 9,469 )

Deferred fees and other items

1 unchanged sentence

Accretion and amortization of fees and other items

Foreclosure of assets (2)

( 127,320 ) 3,831 ( 7,167 ) ( 130,656 )

1 unchanged sentence

— 57,470 — 57,470

Balance, September 30, 2020

Balance, March 31, 2021

$ 1,031,396 $ ( 22,005 ) $ — $ 1,009,391

____________________________________

(1) Other items primarily consist of purchase discounts or premiums, accretion of exit fees and deferred origination expenses.

(2) Represents operating expenses paid by the Company on the borrower’s behalf in connection with the foreclosure proceedings that commenced during the three months ended September 30, 2020, as further discussed below in “Allowance for Credit Losses”.

(3) Includes the repayment of a $ 40.8 million senior loan prior to the maturity date.

(4) Represents accrued interest on loans whose terms do not require a current cash payment of interest.

(5) Includes the initial allowance for credit losses against the loans held-for-investment recorded on January 1, 2020 and the increase in allowance for credit losses related to its loans held-for-investment during the nine months ended September 30, 2020, as further discussed below in “Allowance for Credit Losses”.

(1) Other items primarily consist of allowance for credit losses (as discussed below), purchase discounts or premiums, accretion of exit fees and deferred origination expenses.

(2) During the three months ended March 31, 2021, the Company completed foreclosure of the assets which previously secured its eight mezzanine loans.

(3) Includes the reversal of the allowance for credit losses related to the mezzanine loans upon foreclosure of the assets which previously secured the loans, as further discussed below in “Allowance for Credit Losses,” partially offset by the increase in allowance for credit losses related to the Company’s loans held-for-investment during the three months ended March 31, 2021.

Allowance for Credit Losses

3 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

The following table presents the activity in the Company’s allowance for credit losses by loan type for the three months ended September 30, 2020 (dollar amounts in thousands):

March 31, 2021 (Unaudited) – (Continued)

The following table presents the activity in the Company’s allowance for credit losses by loan type for the three months ended March 31, 2021 (dollar amounts in thousands):

Mezzanine Loans Senior Loans Broadly Syndicated Loans Total

Allowance for credit losses as of December 31, 2020 $ 58,038 $ 2,590 $ 9,730 $ 70,358

Transition adjustment on January 1, 2020

Foreclosure of assets (1)

( 58,038 ) — — ( 58,038 )

Provision for credit losses — 1,295 ( 727 ) 568

13,047 341 4,389 17,777

Allowance for credit losses as of March 31, 2021 $ — $ 3,885 $ 9,003 $ 12,888

Provision for credit losses

____________________________________

Allowance for credit losses as of June 30, 2020 21,269 492 5,923 27,684

Provision for credit losses

3,601 1,390 2,364 7,355

Allowance for credit losses as of September 30, 2020 $ 24,870 $ 1,882 $ 8,287 $ 35,039

The Company’s initial allowance for credit losses against the loans held-for-investment of $ 2.0 million recorded on January 1, 2020 is reflected as a direct charge to retained earnings on the Company’s condensed consolidated statements of stockholders’ equity;

however, subsequent changes to the allowance for credit losses are recognized through net income on the Company’s condensed consolidated statements of operations.

During the nine months ended September 30, 2020, the Company recorded a $ 33.0 million increase in allowance for credit losses related to its loans held-for-investment, bringing the total allowance for credit losses to $ 35.0 million as of September 30, 2020.

During the year ended December 31, 2019, the borrower on the Company’s eight mezzanine loans, which represents approximately 3.9 % of total assets as of September 30, 2020, became delinquent on certain required reserve payments.

During the three months ended March 31, 2020, the borrower remained delinquent on the required reserve payments and became delinquent on principal and interest.

As a result, the Company recorded an allowance for credit losses on its mezzanine loans of $ 14.5 million for the three months ended March 31, 2020, which was the difference between the fair value of the collateral and the amortized cost basis of the loans.

Additionally, during the three months ended June 30, 2020, the fair value of the collateral, which is based on comparable market sales, further decreased compared to the amortized cost basis and as a result, the Company recorded an additional allowance for credit losses on its mezzanine loans of $ 6.7 million.

During the three months ended September 30, 2020, the Company commenced foreclosure proceedings to take control of the condominium properties in New York securing the mezzanine loans.

As a result, the Company recorded an additional net increase of $ 3.6 million to its provision for loan loss on the four loans to reflect the estimated fair value of the collateral, which included $ 6.4 million of provision for loan loss associated with a cure payments receivable for operating expenses paid by the Company on the borrower’s behalf during the nine months ended September 30, 2020.

(1) During the three months ended March 31, 2021, the Company completed foreclosure of the assets which previously secured its eight mezzanine loans.

Changes to the allowance for credit losses are recognized through net loss on the Company’s condensed consolidated statements of operations.

Troubled Debt Restructuring

An individual financial instrument is classified as a troubled debt restructuring when there is a reasonable expectation that the financial instrument’s contractual terms will be modified in a manner that grants concessions to the borrower who is experiencing financial difficulties.

Concessions could include term extensions, payment deferrals, interest rate reductions, principal forgiveness, forbearance, or other actions designed to maximize the Company’s collection on the financial instrument.

The allowance for credit losses for financial instruments that are trouble debt restructurings are determined individually.

The Company also classifies a financial instrument as a troubled debt restructuring when receivables from third parties, real estate, or other assets are transferred from the debtor to the creditor in order to fully or partially satisfy a debt, such as in the event of a foreclosure or repossession.

During the year ended December 31, 2019, the borrower on the Company’s eight mezzanine loans became delinquent on certain required reserve payments.

Throughout 2020, the borrower remained delinquent on the required reserve payments and became delinquent on principal and interest.

As a result, the Company classified the loans as a troubled debt restructuring and commenced foreclosure proceedings during the year ended December 31, 2020.

Upon completing foreclosure in January 2021, the Company took control of the assets which previously secured the loans, including 75 condominium units and 21 rental units across four buildings.

As a result of the foreclosure, the Company recorded a $ 58.0 million decrease to its provision for credit losses related to its mezzanine loans during the three months ended March 31, 2021.

During the same period, the Company recorded a $ 568,000 net increase to the provision for credit losses related to its senior loans and broadly syndicated loans to reflect the estimated fair value of such loans, bringing the total allowance for credit losses to $ 12.9 million as of March 31, 2021.

As further described in Note 2 — Summary of Significant Accounting Policies, the Company evaluates its loans held-for-investment portfolio on a quarterly basis.

4 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

March 31, 2021 (Unaudited) – (Continued)

The Company’s primary credit quality indicator is its risk ratings, which are further discussed above.

The following table presents the net book value of the Company’s loans-held-for-investment portfolio as of September 30, 2020 by year of origination, loan type, and risk rating (dollar amounts in thousands):

The following table presents the net book value of the Company’s loans held-for-investment portfolio as of March 31, 2021 by year of origination, loan type, and risk rating (dollar amounts in thousands):

Amortized Cost of Loans Held-For-Investment by Year of Origination (1)

As of September 30, 2020

2020 2019 2018 Total

Mezzanine loans by internal risk rating:

1 $ — $ — $ — $ —

5 — 57,045 89,471 146,516

Total mezzanine loans — 57,045 89,471 146,516

As of March 31, 2021

Number of Loans 2021 2020 2019 Total

Senior loans by internal risk rating:

15 unchanged sentences

In the normal course of business, the Company uses certain types of derivative instruments for the purpose of managing or hedging its interest rate risk.

During the nine months ended September 30, 2020, one of the Company’s interest rate swap agreements was partially terminated prior to the maturity date, resulting in a loss of $ 97,000 .

As a result of the partial termination, the effective date of the interest rate swap agreement was modified to May 27, 2020.

The loss was recorded as an increase to interest expense and other, net included in the accompanying consolidated statements of operations.

As of September 30, 2020, the Company had three interest rate swap agreements designated as hedging instruments.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

The following table summarizes the terms of the Company’s interest rate swap agreements designated as hedging instruments as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands):

During the three months ended March 31, 2021, one of the Company’s interest rate swap agreements matured.

As of March 31, 2021, the Company had four interest rate swap agreements designated as hedging instruments.

The following table summarizes the terms of the Company’s interest rate swap agreements designated as hedging instruments as of March 31, 2021 and December 31, 2020 (dollar amounts in thousands):

Outstanding Notional Fair Value of Liabilities as of

Balance Sheet Amount as of Interest Effective Maturity September 30, December 31,

Location September 30, 2020 Rates (1)

Balance Sheet Amount as of Interest Effective Maturity March 31, December 31,

Location March 31, 2021 Rates (1)

Dates Dates 2021 2020

Interest Rate Swaps Derivative liabilities, deferred rental income and other liabilities $ 865,266 2.55 % to 3.67 %

Interest Rate Swaps Deferred rental income, derivative liabilities and other liabilities $ 273,600 2.55 % to 4.50 %

6/29/2016 to 5/27/2020

2 unchanged sentences

____________________________________

(1) The interest rates consist of the underlying index swapped to a fixed rate and the applicable interest rate spread as of September 30, 2020.

(2) As of December 31, 2019, the Company had two interest rate swap agreements in an asset position with a notional amount of $ 60.0 million and a fair value of $ 261,000 included in prepaid expenses and other assets on the condensed consolidated balance sheets.

(1) The interest rates consist of the underlying index swapped to a fixed rate and the applicable interest rate spread as of March 31, 2021.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021 (Unaudited) – (Continued)

Additional disclosures related to the fair value of the Company’s derivative instruments are included in Note 3 — Fair Value Measurements.

3 unchanged sentences

The change in fair value of the derivative instruments that are designated as hedges is recorded in other comprehensive income (loss), with a portion of the amount subsequently reclassified to interest expense as interest payments are made on the Company’s variable rate debt.

For the three and nine months ended September 30, 2020, the amount of losses reclassified from other comprehensive income (loss) as an increase to interest expense was $ 4.0 million and $ 8.3 million, respectively.

For the three and nine months ended September 30, 2019, the amount of gains reclassified from other comprehensive income (loss) as a decrease to interest expense was $ 783,000 and $ 3.5 million, respectively.

The total unrealized loss on interest rate swaps of $ 7.3 million and $ 3.9 million as of September 30, 2020 and December 31, 2019, respectively, is included in accumulated other comprehensive income (loss) in the accompanying condensed consolidated statement of stockholders’ equity.

During the next 12 months, the Company estimates that $ 7.3 million will be reclassified from other comprehensive income (loss) as an increase to interest expense.

For the three months ended March 31, 2021 and 2020, the amount of losses reclassified from other comprehensive income (loss) as an increase to interest expense was $ 3.1 million and $ 977,000 , respectively.

The total unrealized gain on interest rate swaps was $ 61,000 as of March 31, 2021, and the total unrealized loss on interest rate swaps was $ 3.2 million as of December 31, 2020, which are included in accumulated other comprehensive income (loss) in the accompanying condensed consolidated statement of stockholders’ equity.

During the next 12 months, the Company estimates that $ 82,000 will be reclassified from other comprehensive income (loss) as an increase to interest expense.

The Company includes cash flows from interest rate swap agreements in net cash flows provided by operating activities on its condensed consolidated statements of cash flows, as the Company’s accounting policy is to present cash flows from hedging instruments in the same category in its condensed consolidated statements of cash flows as the category for cash flows from the hedged items.

The Company has agreements with each of its derivative counterparties that contain provisions whereby if the Company defaults on certain of its unsecured indebtedness, the Company could also be declared in default on its derivative obligations, resulting in an acceleration of payment.

If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value, inclusive of interest payments and accrued interest, of $ 8.0 million at September 30, 2020.

In addition, the Company is exposed to credit risk in the event of non-performance by its derivative counterparties.

1 unchanged sentence

The Company records credit risk valuation adjustments on its interest rate swaps based on the credit quality of the Company and the respective counterparty.

There were no termination events or events of default related to the interest rate swaps as of September 30, 2020.

There were no termination events or events of default related to the interest rate swaps as of March 31, 2021.

NOTE 9 — CREDIT FACILITIES, NOTES PAYABLE AND REPURCHASE FACILITIES

As of September 30, 2020, the Company had $ 1.8 billion of debt outstanding, including net deferred financing costs, with a weighted average years to maturity of 2.0 years and a weighted average interest rate of 3.3 %.

As of March 31, 2021, the Company had $ 2.4 billion of debt outstanding, including net deferred financing costs, with a weighted average years to maturity of 1.6 years and a weighted average interest rate of 2.8 %.

The weighted average years to maturity is computed using the scheduled repayment date as specified in each loan agreement where applicable.

The weighted average interest rate is computed using the interest rate in effect until the scheduled repayment date.

Should a loan not be repaid by its scheduled repayment date, the applicable interest rate will increase as specified in the respective loan agreement.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

The following table summarizes the debt balances as of September 30, 2020 and December 31, 2019, and the debt activity for the nine months ended September 30, 2020 (in thousands):

During the Nine Months Ended September 30, 2020

The following table summarizes the debt balances as of March 31, 2021 and December 31, 2020, and the debt activity for the three months ended March 31, 2021 (in thousands):

During the Three Months Ended March 31, 2021

Balance as of December 31, 2020 Debt Issuances & Assumptions (1)

Repayments & Modifications (2)

Accretion and (Amortization) Balance as of

September 30, 2020

Fixed rate debt $ 726,261 $ — $ ( 219,143 ) $ — $ 507,118

Repayments & Modifications Accretion and (Amortization) Balance as of

March 31, 2021

Notes payable – fixed rate debt $ 578,096 $ — $ ( 243 ) $ — $ 577,853

Notes payable – variable rate debt — 102,553 — — 102,553

Credit facilities 1,336,500 160,000 ( 85,000 ) — 1,411,500

6 unchanged sentences

Deferred costs – fixed rate debt ( 1,589 ) — — 586 ( 1,003 )

Deferred costs – variable rate debt — ( 621 ) — — ( 621 )

Total debt, net $ 2,144,993 $ 384,255 $ ( 85,298 ) $ 1,296 $ 2,445,246

1 unchanged sentence

(1) Includes deferred financing costs incurred during the period.

(2) In connection with the repayment of certain mortgage notes, the Company recognized a loss on extinguishment of debt of $ 4.8 million during the nine months ended September 30, 2020.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021 (Unaudited) – (Continued)

(2) Net premiums on mortgage notes payable were recorded upon the assumption of the respective debt instruments.

Amortization of these net premiums is recorded as a reduction to interest expense over the remaining term of the respective debt instruments using the effective-interest method.

(4) Deferred costs related to the term portion of the Credit Facility (as defined below).

(5) Represents deferred financing costs written off during the period resulting from debt repayments prior to the respective maturity dates.

(3) Deferred costs related to the term portion of the CMFT Credit Facility (as defined below).

Notes Payable

As of September 30, 2020, the fixed rate debt outstanding of $ 507.1 million included $ 53.6 million of variable rate debt that is fixed through interest rate swap agreements, which has the effect of fixing the variable interest rates per annum through the maturity date of the variable rate debt.

As of March 31, 2021, the fixed rate debt outstanding of $ 577.9 million included $ 53.6 million of variable rate debt that is fixed through interest rate swap agreements, which has the effect of fixing the variable interest rates per annum through the maturity date of the variable rate debt.

The fixed rate debt has interest rates ranging from 2.6 % to 5.0 % per annum.

The fixed rate debt outstanding matures on various dates from April 5, 2021 through May 10, 2024 .

The aggregate balance of gross real estate assets, net of gross intangible lease liabilities, securing the fixed rate debt outstanding was $ 860.7 million as of September 30, 2020.

The fixed rate debt outstanding matures on various dates from April 2021 to December 2024.

Should a loan not be repaid by its scheduled repayment date, the applicable interest rate may increase as specified in the respective loan agreement.

The aggregate balance of gross real estate assets, net of gross intangible lease liabilities, securing the fixed rate debt outstanding was $ 984.4 million as of March 31, 2021.

Each of the mortgage notes payable comprising the fixed rate debt is secured by the respective properties on which the debt was placed.

Upon completing foreclosure to take control of the assets which previously secured the Company’s mezzanine loans in January 2021, the Company assumed $ 102.6 million in variable rate debt related to the underlying properties.

As of March 31, 2021, the variable rate debt outstanding had a weighted average interest rate of 5.5 %.The variable rate debt outstanding is set to mature on May 9, 2021;

however, the Company may elect to extend the maturity date for one 12 -month period to May 9, 2022, which was elected subsequent to March 31, 2021.

Credit Facilities

The Company has a second amended and restated unsecured credit agreement (the “Second Amended and Restated Credit Agreement”) with JPMorgan Chase Bank, N.A.

as administrative agent (“JPMorgan Chase”), and the other lenders party thereto that provides for borrowings of up to $ 1.24 billion as of September 30, 2020, which includes a $ 885.0 million unsecured term loan (the “Term Loan”) and up to $ 350.0 million in unsecured revolving loans (the “Revolving Loans” and, collectively with the Term Loan, the “Credit Facility”).

The Term Loan matures on March 15, 2022 and the Revolving Loans mature on March 15, 2021 ;

however, the Company has the right to extend the maturity date of the Revolving Loans to March 15, 2022.

Depending upon the type of loan specified and overall leverage ratio, the Credit Facility bears interest at (i) the one-month, two-month, three-month or six-month LIBOR multiplied by the statutory reserve rate (the “Eurodollar Rate”) plus an interest rate spread ranging from 1.65 % to 2.25 % or (ii) a base rate, ranging from 0.65 % to 1.25 %, plus the greater of:

The Company has a second amended and restated unsecured credit agreement (the “CMFT Second Amended and Restated Credit Agreement”) with JPMorgan Chase Bank, N.A.

as administrative agent (“JPMorgan Chase”), and the other lenders party thereto that provides for borrowings of up to $ 1.24 billion as of March 31, 2021, which includes an $ 885.0 million unsecured term loan (the “CMFT Term Loan”) and up to $ 350.0 million in unsecured revolving loans (the “CMFT Revolving Loans” and, collectively with the CMFT Term Loan, the “CMFT Credit Facility”).

The CMFT Credit Facility matures on March 15, 2022.

Depending upon the type of loan specified and overall leverage ratio, the CMFT Credit Facility bears interest at (i) the one-month, two-month, three-month or six-month LIBOR multiplied by the statutory reserve rate (the “Eurodollar Rate”) plus an interest rate spread ranging from 1.65 % to 2.25 % or (ii) a base rate, ranging from 0.65 % to 1.25 %, plus the greater of:

(a) JPMorgan Chase’s prime rate;

(b) the Federal Funds Effective Rate (as defined in the Second Amended and Restated Credit Agreement) plus 0.50 %;

(b) the Federal Funds Effective Rate (as defined in the CMFT Second Amended and Restated Credit Agreement) plus 0.50 %;

or (c) the one-month LIBOR multiplied by the statutory reserve rate plus 1.00 %.

As of September 30, 2020, there was $ 110.0 million outstanding under the Revolving Loans at a weighted average interest rate of 1.8 %.

As of September 30, 2020, the Term Loan outstanding totaled $ 885.0 million, $ 811.7 million of which is subject to interest rate swap agreements (the “Swapped Term Loan”).

The interest rate swap agreements had the effect of fixing the Eurodollar Rate per annum of the Swapped Term Loan at an all-in rate of 3.7 %.

As of September 30, 2020, the Company had $ 995.0 million outstanding under the Credit Facility at a weighted average interest rate of 3.3 % and $ 240.0 million in unused capacity, subject to borrowing availability.

The Company had available borrowings of $ 60.8 million as of September 30, 2020.

On December 21, 2020, as a result of CCPT V’s merger with the Company, a subsidiary of the Company assumed CCPT V’s obligations pursuant to the credit agreement by and among Cole Operating Partnership V, LP, the operating partnership of CCPT V (“CCPT V OP”), JPMorgan Chase, as administrative agent, and the lender parties thereto (the “CCPT V Credit Agreement”), including as guarantor under a guaranty provided by CCPT V, and as modified by a modification agreement dated as of May 31, 2018 and subsequently modified following the consummation of CCPT V’s merger with the Company by a second modification agreement on December 21, 2020.

The CCPT V Credit Agreement allows for borrowings of up to $ 350.0 million (the “CCPT V Credit Facility”).

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

The CCPT V Credit Facility matures on March 15, 2022.

Depending upon the type of loan specified and overall leverage ratio, the CCPT V Credit Facility bears interest at (i) the one-month, two-month, three-month or six-month LIBOR multiplied by the statutory reserve rate (the “Adjusted LIBO Rate”) for the interest period plus an applicable rate ranging from 1.30 % to 1.70 %;

or (ii) a base rate ranging from 0.30 % to 0.70 %, plus the greater of:

(a) JPMorgan Chase’s Prime Rate (as defined in the CCPT V Credit Agreement);

(b) the NYFRB Rate (as defined in the CCPT V Credit Agreement) plus 0.50 %;

or (c) the Adjusted LIBO Rate for a period of one month plus 1.0 %.

As of March 31, 2021, there was $ 50.0 million outstanding under the CMFT Revolving Loans at a weighted average interest rate of 1.9 %, and there were no amounts outstanding under the CCPT V Revolving Loans (collectively, the “Revolving Loans”).

As of March 31, 2021, the CMFT Term Loan and CCPT V Term Loans (collectively the “Term Loans”) outstanding totaled $ 1.11 billion, $ 220.0 million of which is subject to interest rate swap agreements (the “Swapped Term Loans”).

The interest rate swap agreements had the effect of fixing the Eurodollar Rate per annum of the Swapped Term Loans at an all-in rate of 4.2 %.

As of March 31, 2021, the Company had $ 1.16 billion outstanding under the CMFT Credit Facility and CCPT V

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

The Second Amended and Restated Credit Agreement contains provisions with respect to covenants, events of default and remedies customary for facilities of this nature.

In particular, the Second Amended and Restated Credit Agreement requires the Company to maintain a minimum consolidated net worth greater than or equal to the sum of (i) $ 2.0 billion plus (ii) 75 % of the equity issued minus (iii) the aggregate amount of any redemptions or similar transaction from the date of the Second Amended and Restated Credit Agreement, a leverage ratio less than or equal to 60 %, a fixed charge coverage ratio greater than 1.50 , an unsecured debt to unencumbered asset value ratio equal to or less than 60 %, an unsecured debt service coverage ratio greater than 1.75 , a secured debt ratio equal to or less than 40 % and the amount of secured debt that is recourse debt at no greater than 15 % of total asset value.

The Company believes it was in compliance with the financial covenants under the Second Amended and Restated Credit Agreement, as well as the financial covenants under the Company’s various fixed and variable rate debt agreements, as of September 30, 2020, with the exception of one mortgage note serviced by JPMorgan Chase where the Company failed to meet the debt service coverage ratio covenant under the mortgage at September 30, 2020, and one mortgage note serviced by Wells Fargo, N.A.

(“Wells Fargo”) where the Company failed to meet the debt service coverage ratio covenant under the mortgage at September 30, 2020.

Pursuant to the loan agreements, non-compliance with the debt service coverage ratio covenant triggers a cash sweep of the underlying property’s operating cash flow, which was waived by JPMorgan Chase during the nine months ended September 30, 2020.

As of September 30, 2020, Wells Fargo had not initiated a cash sweep of the underlying property’s operating cash flow.

March 31, 2021 (Unaudited) – (Continued)

Credit Facility (collectively the “Credit Facilities”) at a weighted average interest rate of 2.3 % and $ 430.0 million in unused capacity, subject to borrowing availability.

The Company had available borrowings of $ 44.2 million as of March 31, 2021.

The CMFT Second Amended and Restated Credit Agreement and the CCPT V Credit Agreement (collectively, the “Credit Agreements”) contain provisions with respect to covenants, events of default and remedies customary for facilities of this nature.

In particular, the CMFT Second Amended and Restated Credit Agreement requires the Company to maintain a minimum consolidated net worth greater than or equal to the sum of $ 1.75 billion under the CMFT Second Amended and Restated Credit Agreement, and a leverage ratio less than or equal to 60 %.

The CCPT V Credit Agreement requires a minimum consolidated net worth not less than $ 225.0 million plus 75 % of the equity issued and a net leverage ratio less than or equal to 60 %.

Each of the Credit Agreements require a fixed charge coverage ratio greater than 1.50 , an unsecured debt to unencumbered asset value ratio equal to or less than 60 %, an unsecured debt service coverage ratio greater than 1.75 , a secured debt ratio equal to or less than 40 % and the amount of secured debt that is recourse debt at no greater than 15 % of total asset value.

The Company believes it was in compliance with the financial covenants under the CMFT Second Amended and Restated Credit Agreement and the CCPT V Credit Agreement, as well as the financial covenants under the Company’s various fixed and variable rate debt agreements, as of March 31, 2021.

On December 31, 2019 (the “Closing Date”), CMFT Corporate Credit Securities, LLC, an indirect wholly-owned, bankruptcy-remote subsidiary of the Company, 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 the Company, 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.

(“Citibank”), as administrative agent, CMFT Securities Investments, LLC, a wholly-owned subsidiary of the Company (“CMFT Securities”), 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 $ 500.0 million (the “Credit Securities Revolver”), which may be increased from time to time pursuant to the Credit and Security Agreement.

As of September 30, 2020, the amounts borrowed and outstanding under the Credit Securities Revolver totaled $ 176.5 million at a weighted average interest rate of 2.0 %.

As of March 31, 2021, the amounts borrowed and outstanding under the Credit Securities Revolver totaled $ 256.5 million at a weighted average interest rate of 1.9 %.

Borrowings under the Credit and Security Agreement will bear interest equal to the three-month LIBOR for the relevant interest period, plus an applicable rate.

8 unchanged sentences

The Citibank Repurchase Agreement and the Barclays Repurchase Agreement (collectively, the “Repurchase Agreements”) 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 (collectively, the “CMFT Lending Subs”) at a certain future date or upon demand.

Advances under the Repurchase Agreements accrue interest at per annum rates based on the one-month LIBOR, plus a spread to be determined on a case-by-case basis between Citibank or Barclays and the CMFT Lending Subs.

Advances under the Repurchase Agreements accrue interest at per annum rates based on the one-month LIBOR, plus a spread ranging from 2.00 % to 2.40 % to be determined on a case-by-case basis between Citibank or Barclays and the CMFT Lending Subs.

The Repurchase Facilities mature on various dates between June 2023 and September 2023, with two one-year extension options, subject to certain conditions set forth in the Repurchase Agreements.

In connection with the Repurchase Agreements, the Company (as the guarantor) entered into guaranties with Citibank and Barclays (the “Guaranties”), under which the Company agreed to guarantee up to 25 % of the CMFT Lending Subs’ obligations

As of March 31, 2021, the Company had six senior loans with an aggregate carrying value

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

under the Repurchase Agreements.

As of September 30, 2020, the Company had three senior loans with an aggregate carrying value of $ 256.1 million financed with $ 174.7 million under the Repurchase Facilities, $ 100.2 million of which was financed under the Barclays Repurchase Facility at a weighted average interest rate of 2.9 %, and $ 74.5 million of which was financed under the Citibank Repurchase Facility at a weighted average interest rate of 2.2 %.

March 31, 2021 (Unaudited) – (Continued)

of $ 525.4 million financed with $ 357.6 million under the Repurchase Facilities, $ 170.2 million of which was financed under the Barclays Repurchase Facility at a weighted average interest rate of 2.7 %, and $ 187.4 million of which was financed under the Citibank Repurchase Facility at a weighted average interest rate of 2.2 %.

The Repurchase Agreements and the Guaranties contain representations, warranties, covenants, conditions precedent to funding, events of default and indemnities that are customary for agreements of these types.

In addition, the Guaranties contains financial covenants that require the Company to maintain:

In addition, the Guaranties contain financial covenants that require the Company to maintain:

(i) minimum liquidity of not less than the lower of (a) $ 50.0 million and (b) the greater of (A) $ 10.0 million and (B) 5 % of the Company’s recourse indebtedness, as defined in the Guaranties;

2 unchanged sentences

and (iv) minimum interest coverage ratio of EBITDA (as defined in the Guaranties) to interest expense equal to or greater than 1.40 .

The Company believes it was in compliance with the financial covenants under the Repurchase Agreements as of September 30, 2020.

With respect to the $ 199.7 million of debt maturing within the next 12 months following the date these financial statements are issued, the Company believes cash on hand, proceeds from real estate asset dispositions, net cash provided by operations, borrowings available under the credit facilities or the entry into new financing arrangements will be sufficient in order to meet its debt obligations as they become due.

The following table summarizes the scheduled aggregate principal repayments for the Company’s outstanding debt subsequent to September 30, 2020 (in thousands):

The Company believes it was in compliance with the financial covenants under the Repurchase Agreements as of March 31, 2021.

Liquidity and Financial Condition — As of March 31, 2021, the Company had $ 1.4 billion of debt maturing within the next 12 months following the date these financial statements are issued.

The Company expects to enter into new financing arrangements or refinance existing arrangements to meet its obligations as they become due, which management believes is probable based on the current loan-to-value ratios, the occupancy of the Company’s properties and assessment of the current lending environment.

The Company believes cash on hand, proceeds from real estate asset dispositions, net cash provided by operations, borrowings available under the credit facilities or the entry into new financing arrangements will be sufficient to meet its obligations as they become due in the ordinary course of business for at least 12 months following the date these financial statements are issued.

The following table summarizes the scheduled aggregate principal repayments for the Company’s outstanding debt subsequent to March 31, 2021 (in thousands):

Principal Repayments

Remainder of 2021 $ 240,520

2022 1,184,391

Total $ 2,449,554

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021 (Unaudited) – (Continued)

NOTE 10 — SUPPLEMENTAL CASH FLOW DISCLOSURES

Supplemental cash flow disclosures for the nine months ended September 30, 2020 and 2019 are as follows (in thousands):

Nine Months Ended September 30,

Supplemental cash flow disclosures for the three months ended March 31, 2021 and 2020 are as follows (in thousands):

Three Months Ended March 31,

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

2 unchanged sentences

Accrued deferred financing costs $ 417 $ 8

Interest income capitalized to loans held-for-investment $ 539 $ 7,428

Real estate acquired via foreclosure $ 191,990 $ —

Foreclosure of assets securing the mezzanine loans $ ( 79,968 ) $ —

Mortgage notes payable assumed in connection with foreclosure of assets securing the mezzanine loans $ 102,553 $ —

Change in interest income capitalized to loans held-for-investment $ ( 9,469 ) $ 539

Common stock issued through distribution reinvestment plan $ — $ 19,231

Change in fair value of interest rate swaps $ 4,686 $ ( 9,823 )

Change in fair value of real estate-related securities $ 122 $ —

Supplemental Cash Flow Disclosures:

1 unchanged sentence

Cash paid for taxes $ 739 $ 138

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

NOTE 11 — COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

Unfunded Commitments

As of September 30, 2020, the Company had $ 61.8 million of unfunded commitments related to its existing CRE loans held-for-investment.

As of March 31, 2021, the Company had $ 64.4 million of unfunded commitments related to its existing CRE loans held-for-investment.

These commitments are not reflected in the accompanying condensed consolidated balance sheet.

Unsettled Broadly Syndicated Loans

As of September 30, 2020, the Company had $ 42.1 million of unsettled broadly syndicated loan acquisitions and $ 3.5 million of unsettled broadly syndicated loan sales, $ 28.6 million of which settled subsequent to September 30, 2020.

As of March 31, 2021, the Company had $ 34.5 million of unsettled broadly syndicated loan acquisitions, $ 711,000 of which settled subsequent to March 31, 2021.

Additionally, the Company had $ 4.3 million of unsettled broadly syndicated loan sales, $ 1.2 million of which settled subsequent to March 31, 2021.

Unsettled acquisitions are included in cash and cash equivalents in the accompanying condensed consolidated balance sheet.

Purchase Commitments

As of September 30, 2020, the Company had entered into purchase agreements with unaffiliated third-party sellers to acquire a 100 % interest in one property, subject to meeting certain criteria, for an aggregate purchase price of $ 20.8 million, exclusive of closing costs.

As of September 30, 2020, the Company had $ 300,000 of property escrow deposits held by escrow agents in connection with these future property acquisitions, which will be forfeited if the transactions are not completed under certain circumstances.

These deposits are included in the accompanying condensed consolidated balance sheets in prepaid expenses and other assets.

As of September 30, 2020, none of these escrow deposits had been forfeited.

Environmental Matters

5 unchanged sentences

The Company is not aware of any environmental matters which it believes are reasonably likely to have a material effect on its results of operations, financial condition or liquidity.

Merger Agreements

On August 30, 2020, the Company announced it had entered into the Merger Agreements.

In the event the Merger Agreements are terminated in connection with the applicable Target REIT’s acceptance of a Superior Proposal or an Adverse Recommendation Change, then CCIT III and CCPT V must pay to the Company a termination fee of $ 710,000 and $ 9.85 million, respectively, and up to $ 130,000 and $ 1.79 million, respectively, as reimbursement for the Company’s Expenses (as defined in the applicable Merger Agreements), subject to certain exceptions set forth in the applicable Merger Agreement.

If a Merger Agreement is terminated because the applicable Merger was not consummated before the Outside Date or because the applicable Stockholder Approval was not obtained, and (i) an Acquisition Proposal has been publicly announced or otherwise communicated to the Target REIT’s stockholders prior to the Stockholders Meeting and (ii) within 12 months after the date of such termination (A) the applicable Target REIT consummates or enters into an agreement (that is thereafter consummated) in respect of an Acquisition Proposal for 50 % or more of the applicable Target REIT’s equity or assets or (B) the board of directors of the applicable Target REIT recommends or fails to recommend against an Acquisition Proposal structured as a tender or exchange offer for 50 % or more of the applicable Target REIT’s equity and such Acquisition Proposal is actually consummated, then CCIT III and CCPT V must pay to the Company a termination fee of $ 710,000 and $ 9.85 million, respectively, and up to $ 130,000 and $ 1.79 million, respectively as reimbursement for CMFT’s Expenses.

No such fees were paid as of September 30, 2020.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

Also on August 30, 2020, the Company entered into the CCIT II Merger Agreement.

Prior to the approval of the CCIT II Merger by holders of a majority of the outstanding shares of CCIT II common stock entitled to vote thereon, CCIT II received an acquisition proposal that CCIT II’s board of directors determined to be a Superior Proposal.

As a result, on October 29, 2020, CCIT II terminated the CCIT II Merger Agreement in order to enter into an Alternative Acquisition Agreement with respect to such Superior Proposal.

In accordance with the termination of the CCIT II Merger Agreement, CCIT II paid to the Company a termination fee of $ 7.38 million and agreed to pay to the Company the amount of the Company’s expenses incurred in connection with the CCIT II Merger agreement up to $ 3.69 million.

March 31, 2021 (Unaudited) – (Continued)

NOTE 12 — RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS

1 unchanged sentence

On August 20, 2019, the Company and CMFT Management entered into an Amended and Restated Management Agreement (the “Management Agreement”), which amended and restated that certain Advisory Agreement between the parties dated January 24, 2012, as amended (the “Prior Advisory Agreement”).

Following the effective date of the Management Agreement, CMFT Management is no longer entitled to receive the advisory fee, acquisition fees, subordinated performance fee, or disposition fees pursuant to the Prior Advisory Agreement, as described below;

provided, however, that for the Company’s properties under contract to be sold or specifically identified in a broker agreement as being marketed for sale as of the effective date of the Management Agreement, CMFT Management may be entitled to receive a disposition fee in accordance with the terms of the Prior Advisory Agreement.

In addition, CMFT Management generally shall continue to be entitled to reimbursement for costs and expenses to the extent incurred on behalf of the Company in accordance with the Management Agreement;

provided, however, that the limits on reimbursement for organization and offering expenses, acquisition expenses and operating expenses as defined and provided in the Prior Advisory Agreement shall no longer be applicable.

Management and investment advisory fees

Pursuant to the Management Agreement, beginning on August 20, 2019, the Company pays CMFT Management a management fee, 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).

On December 6, 2019, CMFT Securities Investments, LLC (“CMFT Securities”), which is a wholly owned subsidiary of the Company, entered into an investment advisory and management agreement (the “Investment Advisory and Management Agreement”) with CIM Capital IC Management, LLC (the “Investment Advisor”).

The Company pays CMFT Management a management fee, 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).

CMFT Securities has an investment advisory and management agreement dated December 6, 2019 (the “Investment Advisory and Management Agreement”) with the Investment Advisor.

CMFT Securities was formed for the purpose of holding any securities investments made by the Company.

3 unchanged sentences

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, the Investment Advisor is eligible to receive a portion of the incentive compensation payable to CMFT Management pursuant to the Management Agreement, as discussed below.

In the event that the incentive compensation is earned and payable with respect to any quarter, CMFT Management calculates the portion of the incentive compensation that was attributable to the Managed Assets and payable to the Investment Advisor.

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.

In addition, on December 6, 2019, the Investment Advisor entered into a sub-advisory agreement (the “Sub-Advisory Agreement”) with OFS Capital Management, LLC (the “Sub-Advisor”) to act as an investment sub-advisor to CMFT Securities.

In addition, the Investment Advisor has a sub-advisory agreement dated December 6, 2019 (the “Sub-Advisory Agreement”) with OFS Capital Management, LLC (the “Sub-Advisor”) to act as an investment sub-advisor to CMFT Securities.

The Sub-Advisor is registered as an investment adviser under the Advisers Act and is an affiliate of the Investment Advisor.

1 unchanged sentence

On a quarterly basis, the Investment Advisor designates 50 % of the sum of the Investment Advisory Fee and incentive compensation payable to the Investment Advisor as sub-advisory fees.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

Incentive compensation

Pursuant to the Management Agreement, beginning on August 20, 2019, CMFT Management is entitled to receive incentive compensation, payable with respect to each quarter, which is generally equal to the excess of (a) the product of (i) 20 % and (ii) the excess of (A) Core Earnings (as defined in the Management Agreement) of the Company for the previous 12-month period, over (B) the product of (1) the Company’s Consolidated Equity (as defined in the Management Agreement) in the previous 12-month period, and (2) 7 % per annum, over (b) the sum of any incentive compensation paid to CMFT Management with respect to the first three calendar quarters of such previous 12-month period (or such lesser number of completed calendar quarters preceding the applicable period, if applicable).

During the three and nine months ended September 30, 2020 and 2019, no incentive compensation fees were incurred.

Acquisition fees and expenses

Pursuant to the Prior Advisory Agreement, through August 20, 2019, the Company paid CMFT Management or its affiliates acquisition fees of up to 2.0 % of:

(1) the contract purchase price of each property or asset the Company acquired;

(2) the amount paid in respect of the development, construction or improvement of each asset the Company acquired;

(3) the purchase price of any loan the Company acquired;

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

In addition, the Company reimbursed CMFT Management or its affiliates for acquisition-related expenses incurred in the process of acquiring properties, so long as the total acquisition fees and expenses relating to the transaction do not exceed 6.0 % of the contract purchase price, unless otherwise approved by a majority of the Board, including a majority of the Company’s independent directors, as commercially competitive, fair and reasonable to the Company.

Other transaction-related expenses, such as advisor reimbursements for disposition activities, are expensed as incurred and are included in transaction-related expenses on the condensed consolidated statements of operations.

Advisory fees and expenses

Pursuant to the Prior Advisory Agreement, through August 20, 2019, the Company paid CMFT Management a monthly advisory fee based upon the Company’s monthly average invested assets, which, effective January 1, 2019, was based on the estimated market value of such assets used to determine the Company’s estimated per share NAV as of December 31, 2018, and for those assets acquired subsequent to December 31, 2018, was based on the purchase price.

The monthly advisory fee was equal to the following amounts:

(1) an annualized rate of 0.75 % paid on the Company’s average invested assets that are between $ 0 and $ 2.0 billion;

(2) an annualized rate of 0.70 % paid on the Company’s average invested assets that are between $ 2.0 billion and $ 4.0 billion;

and (3) an annualized rate of 0.65 % paid on the Company’s average invested assets that are over $ 4.0 billion.

CMFT Management is entitled to receive incentive compensation, payable with respect to each quarter, which is generally equal to the excess of (a) the product of (i) 20 % and (ii) the excess of (A) Core Earnings (as defined in the Management Agreement) of the Company for the previous 12-month period, over (B) the product of (1) the Company’s Consolidated Equity (as defined in the Management Agreement) in the previous 12-month period, and (2) 7 % per annum, over (b) the sum of any incentive compensation paid to CMFT Management with respect to the first three calendar quarters of such previous 12-month period (or such lesser number of completed calendar quarters preceding the applicable period, if applicable).

During the three months ended March 31, 2021 and 2020, no incentive compensation fees were incurred.

In addition, the Investment Advisor is eligible to receive a portion of the incentive compensation payable to CMFT Management pursuant to the 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.

Operating expenses

The Company reimburses CMFT Management or its affiliates for certain expenses CMFT Management or its affiliates paid or incurred in connection with the services provided to the Company.

Through August 20, 2019, such reimbursements were subject to the limitation that the Company would not reimburse CMFT Management or its affiliates for any amount by which the operating expenses (including the advisory fee) at the end of the four preceding fiscal quarters exceeded the greater of:

(1) 2.0 % of average invested assets, or (2) 25.0 % of net income excluding any additions to reserves for depreciation or other similar non-cash reserves and excluding any gain from the sale of assets for that period.

Pursuant to the Management Agreement, beginning on August 20, 2019, such limits are no longer applicable.

The Company will reimburse CMFT Management or its affiliates for salaries and benefits paid to personnel who provide services to the Company including the Company’s executive officers and any portfolio management, acquisitions or investment professionals.

Disposition fees

Pursuant to the Prior Advisory Agreement, through August 20, 2019, if CMFT Management or its affiliates provided a substantial amount of services (as determined by a majority of the Company’s independent directors) in connection with the sale of one or more properties (or the Company’s entire portfolio), the Company paid CMFT Management or its affiliates a disposition fee in an amount equal to up to one-half of the real estate or brokerage commission paid by the Company to third parties on the sale of such property, not to exceed 1.0 % of the contract price of the property sold;

provided, however, in no event would the total disposition fees paid to CMFT Management, its affiliates and unaffiliated third parties exceed the lesser of the customary competitive real estate commission or an amount equal to 6.0 % of the contract sales price.

For the Company’s properties under contract to be sold or specifically identified in a broker agreement as being marketed for sale as of August 20, 2019, CMFT Management may be entitled to receive a disposition fee in accordance with the terms of the Prior Advisory Agreement.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

Subordinated performance fees

Pursuant to the Prior Advisory Agreement, through August 20, 2019, if the Company was sold or its assets were liquidated, CMFT Management was entitled to receive a subordinated performance fee equal to 15.0 % of the net sale proceeds remaining after stockholders received, from regular distributions plus special distributions paid from proceeds of such sale, a return of their net capital invested and an 8.0 % annual cumulative, non-compounded return.

Alternatively through August 20, 2019, if the Company’s shares were listed on a national securities exchange, CMFT Management was entitled to a subordinated performance fee equal to 15.0 % of the amount by which the market value of the Company’s outstanding stock plus all distributions paid by the Company prior to listing, exceeded the sum of the total amount of capital raised from stockholders and the amount of distributions necessary to generate an 8.0 % annual cumulative, non-compounded return to stockholders.

As an additional alternative, upon termination of the Prior Advisory Agreement, CMFT Management was entitled to a subordinated performance fee similar to the fee to which CMFT Management would have been entitled had the portfolio been liquidated (based on an independent appraised value of the portfolio) on the date of termination.

During the three and nine months ended September 30, 2020 and 2019, no subordinated performance fees were incurred related to any such events.

March 31, 2021 (Unaudited) – (Continued)

Disposition fees

If CMFT Management or its affiliates provided a substantial amount of services (as determined by a majority of the Company’s independent directors) in connection with the sale of one or more properties (or the Company’s entire portfolio), the Company paid CMFT Management or its affiliates a disposition fee in an amount equal to up to one-half of the real estate or brokerage commission paid by the Company to third parties on the sale of such property, not to exceed 1.0 % of the contract price of the property sold;

The Company recorded fees and expense reimbursements as shown in the table below for services provided by CMFT Management or its affiliates related to the services described above during the periods indicated (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Three Months Ended March 31,

Management fees and expenses $ 13,014 $ 11,090

1 unchanged sentence

Disposition fees $ — $ 341

Advisory fees and expenses $ — $ 6,200 $ — $ 26,410

Operating expenses $ 1,043 $ 810

Of the amounts shown above, $ 12.7 million and $ 7.4 million had been incurred, but not yet paid, for services provided by CMFT Management or its affiliates in connection with management and operating activities during the nine months ended September 30, 2020 and 2019, respectively, and such amounts were recorded as liabilities of the Company as of such dates.

Of the amounts shown above, $ 15.4 million and $ 12.6 million had been incurred, but not yet paid, for services provided by CMFT Management or its affiliates in connection with management and operating activities during the three months ended March 31, 2021 and 2020, respectively, and such amounts were recorded as liabilities of the Company as of such dates.

Due to Affiliates

As of September 30, 2020 and December 31, 2019, $ 12.7 million and $ 14.5 million, respectively, had been incurred primarily for management fees and operating expenses by CMFT Management or its affiliates, but had not yet been reimbursed by the Company.

As of March 31, 2021 and December 31, 2020, $ 15.4 million and $ 14.7 million, respectively, had been incurred primarily for management fees and operating expenses by CMFT Management or its affiliates, but had not yet been reimbursed by the Company.

These amounts were included in due to affiliates in the condensed consolidated balance sheets for such periods.

Development Management Agreements

On January 7, 2021, the Company completed foreclosure proceedings to take control of the assets which previously secured its mezzanine loans, including 75 condominium units and 21 rental units across four buildings in New York.

Upon foreclosure, and with the approval of the valuation, compensation and affiliate transactions committee of the Board, CIM NY Management, LLC, an affiliate of the Company’s manager CMFT Management, entered into a Development Management Agreement with the indirect wholly owned subsidiaries of the Company that own each of the four buildings (the “Building Owners”), wherein CIM NY Management, LLC will act as project manager in overseeing the development and construction of property improvements in accordance with each respective Development Management Agreement (the “Development Services”).

In consideration for the Development Services, CIM NY Management, LLC will receive a development management fee from the Building Owners equal to 4 % of the aggregate gross project costs expended during the term of the Development Management Agreement, subject to the conditions in each respective Development Management Agreement.

Additionally, CIM NY Management, LLC is reimbursed by the Building Owners for expenses incurred in connection with the Development Services, including services provided that are incidental to but not part thereof the Development Services.

The Development Management Agreement shall remain in effect until the project completion date, and is terminable by either party with fifteen days prior notice to the other party, with or without cause.

NOTE 13 — ECONOMIC DEPENDENCY

2 unchanged sentences

In the event that these companies are unable to provide the Company with these services, the Company would be required to find alternative providers of these services.

NOTE 14 — STOCKHOLDERS’ EQUITY

Equity-Based Compensation

On August 10, 2018, the Board approved the adoption of the Company’s 2018 Equity Incentive Plan (the “Plan”), under which 400,000 of the Company’s shares of common stock were reserved for issuance and awards of approximately 367,500 shares of common stock are available for future grant as of September 30, 2020.

As of September 30, 2020, the Company has granted awards of approximately 6,500 restricted shares to each of the independent members of the Board (approximately 32,500 restricted shares in aggregate) under the Plan.

As of September 30, 2020, 14,000 of the restricted shares had vested based on one year of continuous service.

The remaining 18,500 shares fully vested in October 2020.

The fair value of the Company’s share awards is determined using the Company’s per share NAV on

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

the date of grant.

Compensation expense related to these restricted shares is recognized over the vesting period.

The Company recorded compensation expense of $ 40,000 and $ 120,000 for the three and nine months ended September 30, 2020, respectively, and $ 34,000 and $ 98,000 for the three and nine months ended September 30, 2019, respectively, related to these restricted shares which is included in general and administrative expenses in the accompanying condensed consolidated statements of operations.

All of the total compensation expense related to these restricted shares was recognized ratably over the period of service prior to October 2020.

March 31, 2021 (Unaudited) – (Continued)

NOTE 14 — STOCKHOLDERS’ EQUITY

Equity-Based Compensation

On August 10, 2018, the Board approved the adoption of the Company’s 2018 Equity Incentive Plan (the “Plan”), under which 400,000 of the Company’s shares of common stock were reserved for issuance and awards of approximately 345,000 shares of common stock are available for future grant at March 31, 2021.

Under the Plan, the Board or a committee designated by the Board has the authority to grant restricted stock awards or deferred stock awards to non-employee directors of the Company, which will further align such directors’ interests with the interests of the Company’s stockholders.

The Board or a committee designated by the Board also has the authority to determine the terms of any award granted pursuant to the Plan, including vesting schedules, restrictions and acceleration of any restrictions.

The Plan may be amended or terminated by the Board at any time.

The Plan expires on August 9, 2028.

As of March 31, 2021, the Company has granted awards of approximately 11,000 restricted shares to each of the independent members of the Board (approximately 54,500 restricted shares in aggregate) under the Plan.

As of March 31, 2021, 32,500 of the restricted shares had vested based on one year of continuous service.

The remaining 22,000 restricted shares issued had not vested or been forfeited as of March 31, 2021.

The fair value of the Company’s share awards is determined using the Company’s per share NAV on the date of grant.

Compensation expense related to the restricted shares is recognized over the vesting period.

The Company recorded compensation expense of $ 40,000 for each of the three months ended March 31, 2021 and 2020, respectively, related to the restricted shares which is included in general and administrative expenses in the accompanying condensed consolidated statements of operations.

As of March 31, 2021, there was $ 80,000 of total unrecognized compensation expense related to these restricted shares, which will be recognized ratably over the remaining period of service prior to October 2021.

NOTE 15 — LEASES

5 unchanged sentences

Non-lease components are considered to be variable rental and other property income and are recognized in the period incurred.

As of September 30, 2020, the leases had a weighted-average remaining term of 8.5 years.

As of March 31, 2021, the Company’s leases had a weighted-average remaining term of 8.7 years.

Certain leases include provisions to extend the lease agreements, options for early termination after paying a specified penalty, rights of first refusal to purchase the property at competitive market rates, and other negotiated terms and conditions.

1 unchanged sentence

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As of September 30, 2020, the future minimum rental income from the Company’s real estate assets under non-cancelable operating leases, assuming no exercise of renewal options for the succeeding five fiscal years and thereafter, was as follows (in thousands):

As of March 31, 2021, the future minimum rental income from the Company’s real estate assets under non-cancelable operating leases, assuming no exercise of renewal options for the succeeding five fiscal years and thereafter, was as follows (in thousands):

Future Minimum Rental Income

4 unchanged sentences

These contingent rents are subject to the tenant achieving periodic revenues in excess of specified levels.

For the three and nine months ended September 30, 2020 and 2019, the amount of the contingent rent earned by the Company was not significant .

Rental and other property income during the three and nine months ended September 30, 2020 and 2019 consisted of the following (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

For the three months ended March 31, 2021 and 2020, the amount of the contingent rent earned by the Company was not significant .

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021 (Unaudited) – (Continued)

Rental and other property income during the three months ended March 31, 2021 and 2020 consisted of the following (in thousands):

Three Months Ended March 31,

Fixed rental and other property income (1)

4 unchanged sentences

__________________________________

(1) Consists primarily of fixed contractual payments from operating leases with tenants recognized on a straight-line basis over the lease term, including amortization of acquired above- and below-market leases, and is net of uncollectable lease-related receivables.

(2) Consists primarily of tenant reimbursements for recoverable real estate taxes and property operating expenses, and percentage rent.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

The Company has one property subject to a non-cancelable operating ground lease with a remaining term of 12.9 years.

Upon initial adoption of ASC 842 , the Company recognized a lease liability (in deferred rental income and other liabilities) and a related ROU asset (in prepaid expenses, derivative assets and other assets) of $ 2.7 million in the condensed consolidated balance sheets.

The Company has one property subject to a non-cancelable operating ground lease with a remaining term of 12.4 years, with a lease liability (in deferred rental income, derivative liabilities and other liabilities) and a related ROU asset (in prepaid expenses and other assets) of $ 2.4 million in the condensed consolidated balance sheets.

The lease liability and ROU asset were initially measured at the present value of the future minimum lease payments using a discount rate of 4.3 %.

This reflects the Company’s incremental borrowing rate, which was calculated based on the interest rate the Company would incur to borrow on a fully collateralized basis over a term similar to the lease.

The Company recognized $ 63,000 and $ 188,000 of ground lease expense during the three and nine months ended September 30, 2020, respectively, of which $ 61,000 and $ 182,000 were paid in cash during the period it was recognized.

As of September 30, 2020, the Company’s scheduled future minimum rental payments related to its operating ground lease is approximately $ 63,000 for the remainder of 2020, $ 250,000 annually for 2021 through 2025, and $ 1.9 million thereafter through the maturity date of the lease in August 2033.

The Company recognized $ 63,000 of ground lease expense during the three months ended March 31, 2021, of which $ 61,000 was paid in cash during the period it was recognized.

As of March 31, 2021, the Company’s scheduled future minimum rental payments related to its operating ground lease is approximately $ 188,000 for the remainder of 2021, $ 250,000 annually for 2022 through 2026, and $ 1.6 million thereafter through the maturity date of the lease in August 2033.

NOTE 16 — SEGMENT REPORTING

The Company has two reportable segments:

real estate and credit.

Corporate/other represents all corporate level and unallocated items and includes the Company’s other asset management activities and operating expenses.

There were no changes in the structure of the Company’s internal organization that prompted the change in reportable segments.

Prior period amounts have been revised to conform to the current year presentation shown below.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021 (Unaudited) – (Continued)

The following tables present segment reporting for the three months ended March 31, 2021 and 2020 (in thousands):

Real Estate Credit Corporate/Other (1)

Company Total

Three Months Ended March 31, 2021

Rental and other property income

$ 76,794 $ — $ 136 $ 76,930

Interest income

— 11,953 — 11,953

Total revenues

76,794 11,953 136 88,883

General and administrative

64 376 5,031 5,471

Property operating

8,523 — 1,596 10,119

Real estate tax

7,869 — 4,350 12,219

Management and advisory fees and expenses

9,331 2,246 1,437 13,014

Transaction-related

Depreciation and amortization

25,738 — — 25,738

Real estate impairment 4,300 — — 4,300

Provision for credit losses — 568 — 568

Total operating expenses

55,829 3,190 12,595 71,614

Operating income (loss)

20,965 8,763 ( 12,459 ) 17,269

Other expense:

Interest expense and other, net

( 4,116 ) ( 3,547 ) ( 12,359 ) ( 20,022 )

Segment net income (loss)

$ 16,849 $ 5,216 $ ( 24,818 ) $ ( 2,753 )

Total assets as of March 31, 2021 $ 3,371,496 $ 1,155,640 $ 194,718 $ 4,721,854

__________________________________

(1) Includes 75 condominium units and 21 rental units acquired via foreclosure during the three months ended March 31, 2021.

During the year ended December 31, 2019, the borrower on the Company’s eight mezzanine loans became delinquent on certain required reserve payments.

Throughout 2020, the borrower remained delinquent on the required reserve payments and became delinquent on principal and interest.

As a result, the Company classified the loans as a troubled debt restructuring and commenced foreclosure proceedings.

Upon completing foreclosure in January 2021, The Company took control of the assets which previously secured its mezzanine loans.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021 (Unaudited) – (Continued)

Real Estate Credit Corporate/Other Company Total

Three Months Ended March 31, 2020

Rental and other property income

$ 68,436 $ — $ — $ 68,436

Interest income

— 5,571 — 5,571

Total revenues

68,436 5,571 — 74,007

General and administrative

62 12 3,608 3,682

Property operating

6,865 — — 6,865

Real estate tax

6,978 — — 6,978

Management and advisory fees and expenses

7,981 1,869 1,240 11,090

Transaction-related

125 — 127 252

Depreciation and amortization

20,823 — — 20,823

Real estate impairment 11,676 — — 11,676

Provision for credit losses — 17,777 — 17,777

Total operating expenses

54,510 19,658 4,975 79,143

Gain on disposition of real estate, net

13,110 — — 13,110

Operating income (loss)

27,036 ( 14,087 ) ( 4,975 ) 7,974

Other expense:

Interest expense and other, net

( 6,335 ) 200 ( 9,632 ) ( 15,767 )

Loss on extinguishment of debt ( 4,382 ) — — ( 4,382 )

Segment net income (loss)

$ 16,319 $ ( 13,887 ) $ ( 14,607 ) $ ( 12,175 )

Total assets as of March 31, 2020 $ 2,749,026 $ 627,479 $ 224,187 $ 3,600,692

NOTE 17 — SUBSEQUENT EVENTS

The following events occurred subsequent to September 30, 2020:

The following events occurred subsequent to March 31, 2021:

Broadly Syndicated Loans

Subsequent to September 30, 2020, the Company settled $ 42.2 million of net broadly syndicated loan transactions, $ 28.6 million of which were traded as of September 30, 2020.

Property Disposition

Subsequent to September 30, 2020, the Company disposed of one property for an aggregate gross sales price of $ 7.7 million.

The property disposition resulted in proceeds of $ 7.4 million after closing costs to CMFT Management or its affiliates and a gain of approximately $ 470,000 .

The Company has no continuing involvement with this property.

Repurchase Facilities

Subsequent to September 30, 2020, the Company received borrowings under the Repurchase Facilities in an aggregate amount of $ 56.2 million.

Termination of CCIT II Merger Agreement

Prior to the CCIT II Stockholder Approval, CCIT II received an acquisition proposal that CCIT II’s board of directors determined to be a Superior Proposal.

As a result, on October 28, 2020, CCIT II terminated the CCIT II Merger Agreement in order to enter into an Alternative Acquisition Agreement with respect to such Superior Proposal.

In accordance with the termination of the CCIT II Merger Agreement, CCIT II paid to the Company a termination fee of $ 7.38 million and agreed to pay the amount of the Company’s expenses incurred in connection with the CCIT II Merger Agreement up to $ 3.69 million.

Amendment to CCIT III Merger Agreement

On November 3, 2020, the parties to the CCIT III Merger Agreement entered into Amendment No.

1 to Agreement and Plan of Merger (the “Amendment”), pursuant to which (i) the CCIT III Merger Agreement was amended to increase the exchange ratio set forth therein from 1.093 to 1.098 shares of the Company’s common stock for each share of CCIT III Common Stock (as each term is defined in the CCIT III Merger Agreement) (with such ratio subject to adjustments in accordance with the terms and conditions of the CCIT III Merger Agreement) and (ii) CCIT III irrevocably waived its right to terminate the Merger Agreement set forth in Section 9.1(c)(iii) in relation to the amendment on October 29, 2020 of the CCPT V Merger Agreement to increase the exchange ratio set forth therein.

Amendments to CCPT V Merger Agreement

On October 22, 2020, the parties to the CCPT V Merger Agreement entered into the First Amendment to Agreement and Plan of Merger, pursuant to which CCPT V was granted an extension under limited circumstances to timely deliver a CCPT V Change Notice (as defined in the CCPT V Merger Agreement) in order for the Go Shop Termination Payment (as defined in the CCPT V Merger Agreement) to be applicable in those circumstances.

Subsequent to March 31, 2021, the Company settled $ 8.7 million of broadly syndicated loan acquisitions, $ 711,000 of which were traded as of March 31, 2021.

Additionally, subsequent to March 31, 2021, the Company settled $ 8.6 million of broadly syndicated loan sales, $ 1.2 million of which were traded as of March 31, 2021.

Subsequent to March 31, 2021, the Company sold $ 24.4 million of CMBS, resulting in proceeds of $ 27.6 million and a gain of $ 660,000 .

Subsequent to March 31, 2021, the Company acquired two senior loans with an aggregate principal balance of $ 92.6 million and unfunded commitments of $ 12.4 million, the funding of which is subject to the satisfaction of borrower milestones.

The senior loans have a weighted average interest rate of 2.1 % and an initial maturity date of November 2021, with three one-year extension options for a final maturity date of November 2024.

Property Dispositions

Subsequent to March 31, 2021, the Company disposed of five properties for an aggregate gross sales price of $ 41.5 million.

The property dispositions resulted in proceeds of $ 38.8 million after closing costs and a gain of approximately $ 2.0 million.

In connection with one of the property dispositions, the Company legally defeased a mortgage loan with an outstanding balance of $ 21.9 million.

The Company has no continuing involvement with these properties.

CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020 (Unaudited) – (Continued)

On October 24, 2020, the parties to the CCPT V Merger Agreement entered into the Second Amendment to Agreement and Plan of Merger, pursuant to which the CCPT V was granted another extension under limited circumstances to timely deliver a CCPT V Change Notice in order for the Go Shop Termination Payment to be applicable in those circumstances.

On October 29, 2020, the parties to the CCPT V Merger Agreement entered into Amendment No.

3 to Agreement and Plan of Merger, pursuant to which the CCPT V Merger Agreement was amended to (i) increase the exchange ratio set forth therein from 2.691 to 2.892 shares of the Company’s common stock for each share of CCPT V Common Stock (as each term is defined in the CCPT V Merger Agreement) (with such ratio subject to adjustments in accordance with the terms and conditions of the CCPT V Merger Agreement), (ii) increase the amount of the Full Termination Payment (as defined in the CCPT V Merger Agreement) from $ 9.17 million to $ 9.85 million and (iii) increase the maximum amount of Expenses (as defined in the CCPT V Merger Agreement) payable by either by the Company or CCPT V to the other in connection with certain terminations of the CCPT V Merger Agreement from $ 1.67 million to $ 1.79 million.

Registration Statements on Form S-4

In connection with the Mergers, the Company filed two registration statements on Form S-4 (File Nos.

333-249292 and 333-249294), each of which was declared effective by the SEC on November 10, 2020, that contain a prospectus of the Company.

The Mergers are currently anticipated to close by year end 2020.

March 31, 2021 (Unaudited) – (Continued)

Derivative Instruments and Notes Payable

Subsequent to March 31, 2021, one of the Company’s interest rate swap agreements matured and the Company repaid in full $ 32.1 million of the underlying mortgage notes payable.

Credit Facilities

Subsequent to March 31, 2021, the Company borrowed $ 60.0 million under the Credit Securities Revolver.

The Credit Securities Revolver bears interest equal to the three-month LIBOR for the relevant interest period, plus an applicable rate of 1.70 % per annum during the reinvestment period and 2.00 % per annum during the amortization period, as discussed in Note 9 — Credit Facilities, Notes Payable and Repurchase Facilities.

Subsequent to March 31, 2021, the Company repaid $ 60.0 million on the CMFT Credit Facility.

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-Q

Item 1. Financial Statements