What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-15 compared with 2021-08-16 · 169 added, 171 removed, 350 unchanged (49% of the section changed)

30 unchanged sentences

• We may be unable to successfully reposition our portfolio or list our shares on a national securities exchange in the timeframe we expect or at all.

• We may be unable to achieve the cost synergies anticipated to result from the Mergers.

• We may be unable to achieve the cost synergies anticipated to result from the CCIT III and CCPT V Mergers and the CIM Income NAV Merger.

We use certain defined terms throughout this Quarterly Report on Form 10-Q that have the following meanings:

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

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

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

As 93.1% of our rentable square feet was under lease, including any month-to-month agreements, as of June 30, 2021, with a weighted average remaining lease term of 8.3 years, we believe our exposure to changes in commercial rental rates on our portfolio is substantially mitigated, except for vacancies caused by tenant bankruptcies or other factors.

We intend to continue to pursue a diversified investment strategy across the capital structure by balancing our existing portfolio of core commercial real estate assets with investments in commercial mortgage loans and other real estate-related credit investments in which our sponsor and its affiliates have expertise.

We expect to adapt our investment strategy over time in order to respond to evolving market conditions and to capitalize on investment opportunities that may arise at different points in the economic and real estate investment cycle.

Assuming the successful repositioning of our portfolio, we then expect to pursue a listing of our common stock on a national securities exchange in 2022, though we can provide no assurances that a listing will happen on that timeframe or at all.

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

As 94.2% of our rentable square feet was under lease, including any month-to-month agreements, as of September 30, 2021, with a weighted average remaining lease term of 8.3 years, we believe our exposure to changes in commercial rental rates on our portfolio is substantially mitigated, except for vacancies caused by tenant bankruptcies or other factors.

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

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

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

As of June 30, 2021, we owned 469 properties, comprising 18.6 million rentable square feet of commercial space located in 41 states.

In addition, during the six months ended June 30, 2021, we completed foreclosure proceedings and took control of the assets which previously secured our mezzanine loans.

As of June 30, 2021, we owned $197.1 million of condominium developments.

We intend to continue to pursue a more diversified investment strategy across the capital structure by balancing our existing portfolio of core commercial real estate assets with our future investments in a portfolio of commercial mortgage loans

and other real estate-related credit investments in which our sponsor and its affiliates have expertise, that we would originate, acquire, finance and manage.

Assuming the successful repositioning of our portfolio, we then intend to pursue a listing of our common stock on a national securities exchange.

We cannot make assurances that we will successfully reposition our portfolio or list our common stock on a national securities exchange within a particular timeframe or at all.

As of June 30, 2021, our loan portfolio consisted of 247 loans with a net book value of $1.3 billion.

As of June 30, 2021, we had $43.2 million of unsettled broadly syndicated loan purchases included in cash and cash equivalents, and investments in real estate-related securities of $42.1 million.

During the six months ended June 30, 2021, we disposed of 47 properties for an aggregate sales price of $304.0 million.

The dispositions resulted in proceeds of $296.0 million after closing costs and we recorded a gain of $46.5 million which is included in gain on disposition of real estate and condominium developments, net in the condensed consolidated statements of operations.

As of June 30, 2021, our real estate portfolio consisted of 411 retail properties, 54 anchored shopping centers, three industrial properties and one office property representing 31 industry sectors.

In addition, we acquired 75 condominium units and 21 rental units via foreclosure during the six months ended June 30, 2021.

See Note 4 — Real Estate Assets to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q for a discussion of the disposition of individual properties during the six months ended June 30, 2021.

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic.

Since then, COVID-19 has spread worldwide, causing significant disruptions to the U.S.

and world economies.

and has triggered a period of significant global economic slowdown.

In the first half of 2021, the U.S.

and world economy have begun to show signs of recovery from the impact of COVID-19 as vaccination rates increased, virus caseloads declined and businesses, schools and public services have begun the reopening process.

However, the emergence of variant strains of COVID-19 has threatened to slow or reverse these trends in the third quarter of 2021 and beyond.

As a result, there continues to be uncertainty around impact of COVID-19 on the U.S.

economy and world economies.

In addition, our manager reviews our investment portfolios and in certain instances is in regular contact with our borrowers, monitoring performance of the collateral and enforcing our rights as necessary.

As of September 30, 2021, we owned 403 properties, which consisted of 346 retail properties, 53 anchored shopping centers, three industrial properties and one office property, representing 36 industry sectors and comprising 17.6 million rentable square feet of commercial space located in 40 states.

In addition, during the nine months ended September 30, 2021, we completed foreclosure proceedings and took control of the assets which previously secured our mezzanine loans.

As of September 30, 2021, we owned $189.3 million of condominium developments.

As of September 30, 2021, our loan portfolio consisted of 273 loans with a net book value of $1.5 billion.

As of September 30, 2021, we had $87.4 million of unsettled broadly syndicated loan purchases included in cash and cash equivalents, and investments in real estate-related securities of $185.2 million.

We are closely monitoring the negative impacts that the COVID-19 pandemic and the efforts to mitigate its spread are having on the economy, our tenants and our business.

T he extent to which the COVID-19 pandemic continues to impact our operations and those of our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, the distribution and acceptance of vaccines, the spread of new variants of COVID-19, the extent to which federal, state and local governments provide relief or assistance to those affected by COVID-19 and the impact that these developments will have on the timing and speed of the recovery of the U.S.

and world economy.

During the three and six months ended June 30, 2021, the majority of lease concessions provided were in the form of rent abatements to certain tenants in response to the impact of the COVID-19 pandemic on those tenants.

As of August 9, 2021, we have collected approximately 99% of rental payments billed to tenants during the three months ended June 30, 2021, and as of August 9, 2021, we collected $4.1 million of deferred rent, representing approximately 99% of amounts due through June 30, 2021 .

T he extent to which the COVID-19 pandemic continues to impact our operations and those of our tenants will depend on future developments, including, among other factors, the duration, spread and resurgences of the virus, including certain variants thereof, along with related travel advisories and restrictions, the recovery time of the disrupted supply chains and industries, the impact of labor market interruptions, the impact of government interventions, the pace, scope and efficacy of vaccination programs, and general uncertainty as to the impact of COVID-19, including related variants, on the global economy.

During the three and nine months ended September 30, 2021, the majority of lease concessions provided were in the form of rent abatements to certain tenants in response to the impact of the COVID-19 pandemic on those tenants.

As of November 8, 2021 , we have collected approximately 99.3% of rental payments billed to tenants during the three months ended September 30, 2021, and as of November 8, 2021, we collected $6.4 million of deferred rent, representing approximately 97% of amounts due through September 30, 2021 .

Pending Merger

On September 21, 2021 , we entered into the Merger Agreement.

Subject to the terms and conditions of the Merger Agreements, CIM Income NAV will merge with and into Merger Sub with Merger Sub surviving the CIM Income NAV Merger, such that following the CIM Income NAV Merger, the surviving entity will continue as our wholly owned subsidiary.

In accordance with the applicable provisions of the Maryland General Corporation Law , the separate existence of CIM Income NAV shall cease.

At the effective time of the CIM Income NAV Merger and subject to the terms and conditions of the Merger Agreement, each issued and outstanding share of the Class D Common Stock will be converted into the right to receive 2.574 shares of CMFT Common Stock, each issued and outstanding share of the Class T Common Stock will be converted into the right to receive 2.510 shares of CMFT Common Stock, each issued and outstanding share of the Class S Common Stock will be converted into the right to receive 2.508 shares of CMFT Common Stock, and each issued and outstanding share of the Class I Common Stock will be converted into the right to receive 2.622 shares of CMFT Common Stock, in each case, subject to the treatment of fractional shares in accordance with the Merger Agreement.

The combined company after the Merger will retain the name CIM Real Estate Finance Trust, Inc.

The Merger is intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”).

For additional information on the Merger, see Note 1 — Organization and Business to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q and our Current Reports on Form 8-K filed with the SEC on September 22, 2021.

Operating Highlights and Key Performance Indicators

Activity through June 30, 2021

Activity through September 30, 2021

• Invested $720.1 million in senior loans and received principal repayments of $285.1 million.

• Invested $267.0 million in broadly syndicated loans and sold broadly syndicated loans for an aggregate gross sales price of $55.5 million.

• Invested $28.5 million in CMBS and sold CMBS for an aggregate gross sales price of $27.0 million.

• Disposed of 47 retail properties for an aggregate sales price of $304.0 million.

• Invested $171.9 million in CMBS and preferred units and sold CMBS for an aggregate gross sales price of $27.0 million.

• Disposed of 113 properties and one outparcel of land for an aggregate sales price of $484.4 million.

• Completed foreclosure to take control of the assets which previously secured our mezzanine loans, including 75 condominium units and 21 rental units across four buildings.

1 unchanged sentence

Portfolio Information

The following table shows the carrying value of our portfolio by investment type as of June 30, 2021 and 2020 (dollar amounts in thousands):

As of June 30,

The following table shows the carrying value of our portfolio by investment type as of September 30, 2021 and 2020 (dollar amounts in thousands):

As of September 30,

Asset Count Carrying Value Asset Count Carrying Value

7 unchanged sentences

CMBS 15 121,757 2.6 % 5 75,212 2.1 %

Preferred units 1 63,490 1.4 % — — — %

Total real estate assets and intangible lease liabilities, net 403 3,011,599 64.8 % 380 2,568,842 73.4 %

Total Investment Portfolio 691 $ 4,647,919 100.0 % 558 $ 3,501,910 100.0 %

The following table details overall statistics of our credit portfolio as of June 30, 2021 (dollar amounts in thousands):

The following table details overall statistics of our credit portfolio as of September 30, 2021 (dollar amounts in thousands):

Senior Loans (1) (2)

Broadly Syndicated Loans CMBS

Broadly Syndicated Loans CMBS Preferred Units

Number of loans 11 262 15 1

3 unchanged sentences

____________________________________

(1) As of June 30, 2021, 100% of our loans by principal balance earned a floating rate of interest, primarily indexed to U.S.

(1) As of September 30, 2021, 100% of our loans by principal balance earned a floating rate of interest, primarily indexed to U.S.

dollar LIBOR.

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Real Estate Portfolio Information

As of June 30, 2021, we owned 469 properties located in 41 states, the gross rentable square feet of which was 93.1% leased, including any month-to-month agreements, with a weighted average lease term remaining of 8.3 years.

As of June 30, 2021, no single tenant accounted for greater than 10% of our 2021 annualized rental income.

As of June 30, 2021, we had certain geographic and industry concentrations in our property holdings.

As of September 30, 2021, we owned 403 properties located in 40 states, the gross rentable square feet of which was 94.2% leased, including any month-to-month agreements, with a weighted average lease term remaining of 8.3 years.

September 30, 2021, no single tenant accounted for greater than 10% of our 2021 annualized rental income.

As of September 30, 2021, we had certain geographic and industry concentrations in our property holdings.

In particular, 46 of our properties were located in California, which accounted for 11% of our 2021 annualized rental income.

In addition, we had tenants in the sporting goods, hobby and musical instruments stores;

health and personal care stores;

and general merchandise stores industries, which accounted for 12%, 11% and 10%, respectively, of our 2021 annualized rental income.

The following table shows the property statistics of our real estate assets as of June 30, 2021 and 2020:

As of June 30,

In addition, we had tenants in the sporting goods, hobby and musical instruments stores and health and personal care stores industries, which accounted for 13% and 11%, respectively, of our 2021 annualized rental income.

The following table shows the property statistics of our real estate assets as of September 30, 2021 and 2020:

As of September 30,

Number of commercial properties 403 380

6 unchanged sentences

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

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

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

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

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

The following table summarizes our real estate acquisition activity during the six months ended June 30, 2021 and 2020:

Three Months Ended June 30, Six Months Ended June 30,

The following table summarizes our real estate acquisition activity during the nine months ended September 30, 2021 and 2020:

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

2021 2020 2021 2020

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____________________________________

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

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

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

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

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

In determining the same store property pool, we include all properties that were owned for the entirety of both the current and prior reporting periods, except for properties during the current or prior year that were under development or redevelopment.

Comparison of the Three Months Ended June 30, 2021 and 2020

Comparison of the Three Months Ended September 30, 2021 and 2020

The following table reconciles net loss, calculated in accordance with GAAP, to net operating income (dollar amounts in thousands):

For the Three Months Ended June 30,

For the Three Months Ended September 30,

2021 2020 Change

Net income (loss) $ 57,787 $ (3,746) $ 61,533

Net income $ 42,603 $ 4,179 $ 38,424

Loss on extinguishment of debt 3,251 89 3,162

1 unchanged sentence

Operating income 66,235 20,232 46,003

Merger-related expenses, net 398 1,207 (809)

Gain on disposition of real estate and condominium developments, net (34,033) (3,219) (30,814)

Provision for credit losses 123 7,905 (7,782)

(Decrease) increase in provision for credit losses (1,792) 7,355 (9,147)

Real estate impairment 891 476 415

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Our operating segments include credit and real estate.

Refer to Note 16 — Segment Reporting for further discussion of our operating segments.

Refer to Note 15 — Segment Reporting to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q for further discussion of our operating segments.

Real Estate Segment

A total of 343 properties were acquired before April 1, 2020 and represent our “same store” properties during the three months ended June 30, 2021 and 2020.

“Non-same store” properties, for purposes of the table below, includes properties acquired or disposed of on or after April 1, 2020.

A total of 295 properties were acquired before July 1, 2020 and represent our “same store” properties during the three months ended September 30, 2021 and 2020.

“Non-same store” properties, for purposes of the table below, includes properties acquired or disposed of on or after July 1, 2020.

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

Total Same Store Non-Same Store

For the Three Months Ended June 30,

For the Three Months Ended September 30,

2021 2020 Change 2021 2020 Change 2021 2020 Change

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Loss on Extinguishment of Debt

The increase in loss on extinguishment of debt of $1.1 million for the three months ended June 30, 2021, as compared to the same period in 2020, was primarily due to the extinguishment of one mortgage loan with an aggregate carrying value of $22.0 million.

The increase in loss on extinguishment of debt of $3.2 million for the three months ended September 30, 2021, as compared to the same period in 2020, was primarily due to the extinguishment of five mortgage loans with an aggregate carrying value of $89.4 million and the repayment and termination of the Credit Facilities.

Interest Expense and Other, Net

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

The increase in interest expense and other, net, of $940,000 for the three months ended June 30, 2021, as compared to the same period in 2020, was primarily due to an increase in the average aggregate amount of debt outstanding from $1.6 billion as of June 30, 2020 to $2.4 billion as of June 30, 2021 as a result of entering into additional repurchase agreements and assuming the CCPT V Credit Facility as part of the Mergers subsequent to June 30, 2020.

This increase was partially offset by a decrease in the weighted average interest rate from 3.3% as of June 30, 2020 to 2.8% as of June 30, 2021.

The increase in interest expense and other, net, of $4.4 million for the three months ended September 30, 2021, as compared to the same period in 2020, was primarily due to an increase in the average aggregate amount of debt outstanding from $1.8 billion as of September 30, 2020 to $2.8 billion as of September 30, 2021 as a result of entering into and upsizing additional repurchase agreements, originating the Mortgage Loan and Class A Notes, and assuming the CCPT V Credit Facility as part of the CCIT III and CCPT V Mergers subsequent to September 30, 2020.

This increase was partially offset by a decrease in the weighted average interest rate from 3.3% as of September 30, 2020 to 2.8% as of September 30, 2021.

Merger-Related Expenses, Net

The decrease in merger-related expenses, net of $809,000 during the three months ended September 30, 2021, as compared to the same period in 2020, was primarily due to incurring expenses related to the CIM Income NAV Merger of $398,000 during the three months ended September 30, 2021, compared to incurring expenses related to the CCIT III and CCPT V Mergers of $1.2 million during the three months ended September 30, 2020.

Gain on Disposition of Real Estate and Condominium Developments, Net

The increase in gain on disposition of real estate and condominium developments, net, of $42.7 million during the three months ended June 30, 2021, as compared to the same period in 2020, was primarily due to the disposition of 46 properties for a gain of $45.0 million during the three months ended June 30, 2021 compared to the disposition of four properties for a gain of $3.8 million during the three months ended June 30, 2020.

The increase in gain on disposition of real estate and condominium developments, net, of $30.8 million during the three months ended September 30, 2021, as compared to the same period in 2020, was primarily due to the disposition of 66 properties and one outparcel of land for a gain of $30.7 million during the three months ended September 30, 2021 compared to the disposition of three properties for a gain of $3.2 million during the three months ended September 30, 2020.

Real Estate Impairment

The decrease in real estate impairments of $3.8 million during the three months ended June 30, 2021, as compared to the same period in 2020, was due to one property that was deemed to be impaired, resulting in impairment charges of $77,000 during the three months ended June 30, 2021, compared to three properties that were deemed to be impaired, resulting in impairment charges of $3.8 million during the three months ended June 30, 2020.

The increase in real estate impairments of $415,000 during the three months ended September 30, 2021, as compared to the same period in 2020, was due to six properties that was deemed to be impaired, resulting in impairment charges of $891,000 during the three months ended September 30, 2021, compared to one property that was deemed to be impaired, resulting in impairment charges of $476,000 during the three months ended September 30, 2020.

Depreciation and Amortization

The increase in depreciation and amortization of $5.0 million during the three months ended June 30, 2021, as compared to the same period in 2020, was primarily due to the acquisition of 146 properties in connection with the Mergers that closed in December 2020, partially offset by the disposition of 61 properties subsequent to June 30, 2020.

The increase in depreciation and amortization of $2.8 million during the three months ended September 30, 2021, as compared to the same period in 2020, was primarily due to the acquisition of 146 properties in connection with the CCIT III and CCPT V Mergers that closed in December 2020, partially offset by the disposition of 124 properties subsequent to September 30, 2020.

Transaction-Related Expenses

Transaction-related expenses include abandoned deal costs for acquisition and disposition activity.

Transaction-related expenses remained generally consistent during the three months ended June 30, 2021, as compared to the same period in 2020.

Transaction-related expenses remained generally consistent during the three months ended September 30, 2021, as compared to the same period in 2020.

Management Fees

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

The increase in management fees of $2.0 million during the three months ended June 30, 2021, as compared to the same period in 2020 was primarily due to the issuance of common stock in connection with the Mergers that closed in December 2020.

The increase in management fees of $1.6 million during the three months ended September 30, 2021, as compared to the same period in 2020, was primarily due to increased equity from the issuance of common stock in connection with the CCIT III and CCPT V Mergers that closed in December 2020.

Expense Reimbursements to Related Parties

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Additionally, we may be required to reimburse certain expenses incurred by CMFT Management in providing management services, subject to limitations as set forth in the Management Agreement (as discussed in Note 11 — Related-Party Transactions and Arrangements to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q).

The increase in expense reimbursements to related parties of $153,000 during the three months ended June 30, 2021, as compared to the same period in 2020, was primarily due to operating expense reimbursements due to CMFT Management as a result of acquiring 146 properties as part of the Mergers that closed in December 2020.

The increase in expense reimbursements to related parties of $1.1 million during the three months ended September 30, 2021, as compared to the same period in 2020, was primarily due to acquiring 146 properties as part of the CCIT III and CCPT V Mergers that closed in December 2020.

General and Administrative Expenses

The primary general and administrative expense items are banking fees and transfer agency costs.

The increase in general and administrative expenses of $585,000 for the three months ended June 30, 2021, as compared to the same period in 2020, was primarily due to increased expenses related to the Mergers completed in December 2020 and the foreclosure completed in January 2021 to take control of the assets which previously secured the Company’s mezzanine loans, as discussed in Note 7 — Loans Held-For-Investment to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

The primary general and administrative expense items are transfer agency costs and banking fees.

The decrease in general and administrative expenses of $132,000 for the three months ended September 30, 2021, as compared to the same period in 2020, was primarily due to a decrease in fees related to the unused portion of our line of credit due to the pay down and termination of the Credit Facilities during the three months ended September 30, 2021.

This decrease was partially offset by increased expenses related to the CCIT III and CCPT V Mergers completed in December 2020 and the foreclosure completed in January 2021 to take control of the assets which previously secured the Company’s mezzanine loans, as discussed in Note 7 — Loans Held-For-Investment to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

Net Operating Income

Same store property net operating income increased $2.3 million during the three months ended June 30, 2021, as compared to the same period in 2020.

The change was primarily due to an increase in rental income, as a result of the impact of COVID-19 leading to a temporary reduction in rental income during the three months ended June 30, 2020 for certain tenants, partially offset by increases in property operating expenses.

Non-same store property net operating income increased $5.4 million during the three months ended June 30, 2021, as compared to the same period in 2020.

The increase was primarily due to the acquisition of 146 properties in connection with the Mergers that closed December 2020, offset by the disposition of 61 properties subsequent to June 30, 2020.

Same store property net operating income decreased $1.4 million during the three months ended September 30, 2021, as compared to the same period in 2020.

The change was primarily due to a decrease in occupancy from 94.3% as of September 30, 2020 to 93.8% as of September 30, 2021.

Non-same store property net operating income decreased $748,000 during the three months ended September 30, 2021, as compared to the same period in 2020.

The increase was primarily due to the acquisition of 146 properties in connection with the CCIT III and CCPT V Mergers that closed December 2020, offset by the disposition of 124 properties subsequent to September 30, 2020.

Credit Segment

Provision for Credit Losses

The decrease in provision for credit losses of $7.8 million during the three months ended June 30, 2021, as compared to the same period in 2020, was primarily due to the Company’s foreclosure of the assets which previously secured the Company’s mezzanine loans.

During the three months ended June 30, 2020, the borrower on the Company’s eight mezzanine loans remained delinquent on the required reserve payments and became delinquent on principal and interest, resulting in the Company recording $6.7 million in credit losses related to the mezzanine loans.

Upon completing foreclosure in January 2021, the Company took control of the assets which previously secured the loans, and as such, a provision for credit losses related to the mezzanine loans was not recorded for the three months ended June 30, 2021.

(Decrease ) Increase in Provision for Credit Losses

The decrease in provision for credit losses of $9.1 million during the three months ended September 30, 2021, as compared to the same period in 2020, was primarily due to the Company’s foreclosure of the assets which previously secured the Company’s mezzanine loans.

During the three months ended September 30, 2020, the borrower on the Company’s eight mezzanine loans remained delinquent on the required reserve payments and became delinquent on principal and interest, resulting in the Company recording $3.6 million in credit losses related to the mezzanine loans.

During the three months ended September 30, 2021, a decrease in the provision for credit losses was recorded related to its senior loans and broadly syndicated loans due to the ongoing market recovery from COVID-19.

Interest Income

The increase in interest income of $9.3 million for the three months ended June 30, 2021, compared to the same period in 2020, was due to an increase in credit investments.

As of June 30, 2021, we held investments in broadly syndicated loans of $484.1 million, CRE loans held-for-investment of $872.2 million, and CMBS of $42.1 million.

As of June 30, 2020, we held investments in broadly syndicated loans of $372.3 million, CRE loans held-for-investment of $253.8 million, and CMBS of $16.1 million.

Comparison of the Six Months Ended June 30, 2021 and 2020

The increase in interest income of $13.1 million for the three months ended September 30, 2021, compared to the same period in 2020, was due to an increase in credit investments.

As of September 30, 2021, we held investments in CRE loans held-for-investment of $890.8 million, broadly syndicated loans of $571.5 million, and CMBS of $121.8 million.

As of September 30, 2020, we held investments in CRE loans held-for-investment of $473.8 million, broadly syndicated loans of $419.1 million, and CMBS of $75.2 million.

Comparison of the Nine Months Ended September 30, 2021 and 2020

The following table reconciles net income, calculated in accordance with GAAP, to net operating income (dollar amounts in thousands):

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

2021 2020 Change

3 unchanged sentences

Operating income 159,229 40,339 118,890

Merger-related expenses, net 398 1,207 (809)

Gain on disposition of real estate and condominium developments, net (80,502) (20,120) (60,382)

Provision for credit losses 691 25,682 (24,991)

(Decrease) increase in provision for credit losses (1,101) 33,037 (34,138)

Real estate impairment 5,268 15,983 (10,715)

7 unchanged sentences

Real Estate Segment

A total of 343 properties were acquired before January 1, 2020 and represent our “same store” properties during the six months ended June 30, 2021 and 2020.

A total of 294 properties were acquired before January 1, 2020 and represent our “same store” properties during the nine months ended September 30, 2021 and 2020.

“Non-same store” properties, for purposes of the table below, includes properties acquired or disposed of on or after January 1, 2020.

1 unchanged sentence

Total Same Store Non-Same Store

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

2021 2020 Change 2021 2020 Change 2021 2020 Change

5 unchanged sentences

Loss on Extinguishment of Debt

The decrease in loss on extinguishment of debt of $3.3 million for the six months ended June 30, 2021, as compared to the same period in 2020, was primarily due to the extinguishment of one mortgage note with an aggregate carrying value of $22.0 million, as compared the extinguishment of mortgage notes with an aggregate carrying value of $97.0 million during the six months ended June 30, 2020.

The decrease in loss on extinguishment of debt of $112,000 for the nine months ended September 30, 2021, as compared to the same period in 2020, was primarily due to the extinguishment of five mortgage note with an aggregate carrying value of $89.4.0 million and the pay down and termination of the Credit Facilities during the nine months ended September 30, 2021, as compared the extinguishment of two mortgage notes with an aggregate carrying value of $97.0 million during the nine months ended September 30, 2020.

Interest Expense and Other, Net

The increase in interest expense and other, net, of $5.2 million for the six months ended June 30, 2021, as compared to the same period in 2020, was primarily due to an increase in the average aggregate amount of debt outstanding from $1.6 billion as of June 30, 2020 to $2.4 billion as of June 30, 2021 as a result of entering into additional repurchase agreements and assuming

the CCPT V Credit Facility as part of the Mergers subsequent to June 30, 2020.

This increase was partially offset by a decrease in the weighted average interest rate from 3.3% as of June 30, 2020 to 2.8% as of June 30, 2021.

The increase in interest expense and other, net, of $9.6 million for the nine months ended September 30, 2021, as compared to the same period in 2020, was primarily due to an increase in the average aggregate amount of debt outstanding from $1.7 billion as of September 30, 2020 to $2.5 billion as of September 30, 2021 as a result of entering into additional repurchase agreements, originating the Mortgage Loan and Class A Notes, and assuming the CCPT V Credit Facility as part of the CCIT III and CCPT V Mergers subsequent to September 30, 2020.

This increase was partially offset by a decrease in the weighted average interest rate from 3.3% as of September 30, 2020 to 2.8% as of September 30, 2021.

Merger-Related Expenses, Net

The decrease in merger-related expenses, net of $809,000 during the nine months ended September 30, 2021, as compared to the same period in 2020, was primarily due to incurring expenses related to the CIM Income NAV Merger of $398,000 during the nine months ended September 30, 2021, compared to incurring expenses related to the CCIT III and CCPT V Mergers of $1.2 million during the nine months ended September 30, 2020.

Gain on Disposition of Real Estate and Condominium Developments, Net

The increase in gain on disposition of real estate and condominium developments, net, of $29.6 million during the six months ended June 30, 2021, as compared to the same period in 2020, was primarily due to the disposition of 47 properties for a gain of $45.0 million during the six months ended June 30, 2021, compared to the disposition of 16 properties for a gain of $16.9 million during the six months ended June 30, 2021.

The increase in gain on disposition of real estate and condominium developments, net, of $60.4 million during the nine months ended September 30, 2021, as compared to the same period in 2020, was primarily due to the disposition of 113 properties and one outparcel of land for a gain of $75.6 million during the nine months ended September 30, 2021, compared to the disposition of 19 properties for a gain of $20.1 million during the nine months ended September 30, 2020.

Real Estate Impairment

The decrease in impairments of $11.1 million during the six months ended June 30, 2021, as compared to the same period in 2020, was due to five properties that were deemed to be impaired, resulting in impairment charges of $4.4 million during the six months ended June 30, 2021, compared to 10 properties that were deemed to be impaired, resulting in impairment charges of $15.5 million during the six months ended June 30, 2020.

The decrease in impairments of $10.7 million during the nine months ended September 30, 2021, as compared to the same period in 2020, was due to 11 properties that were deemed to be impaired, resulting in impairment charges of $5.3 million during the nine months ended September 30, 2021, compared to 11 properties that were deemed to be impaired, resulting in impairment charges of $16.0 million during the nine months ended September 30, 2020.

Depreciation and Amortization

The increase in depreciation and amortization of $9.9 million during the six months ended June 30, 2021, as compared to the same period in 2020, was primarily due to the acquisition of 146 properties in connection with the Mergers that closed in December 2020, partially offset by the disposition of 61 properties subsequent to June 30, 2020.

The increase in depreciation and amortization of $12.7 million during the nine months ended September 30, 2021, as compared to the same period in 2020, was primarily due to the acquisition of 146 properties in connection with the CCIT III and CCPT V Mergers that closed in December 2020, partially offset by the disposition of 124 properties subsequent to September 30, 2020.

Transaction-Related Expenses

The decrease in transaction-related expenses of $219,000 during the six months ended June 30, 2021, as compared to the same period in 2020, was due to a decrease in abandoned deal costs for the six months ended June 30, 2021.

The decrease in transaction-related expenses of $271,000 during the nine months ended September 30, 2021, as compared to the same period in 2020, was due to a decrease in abandoned deal costs for the nine months ended September 30, 2021.

Management Fees

The increase in management fees of $3.7 million during the six months ended June 30, 2021, as compared to the same period in 2020, was primarily due to the issuance of common stock in connection with the Mergers that closed in December 2020.

The increase in management fees of $5.3 million during the nine months ended September 30, 2021, as compared to the same period in 2020, was primarily due to increased equity from the issuance of common stock in connection with the CCIT III and CCPT V Mergers that closed in December 2020.

Expense Reimbursements to Related Parties

The increase in expense reimbursements to related parties of $636,000 during the six months ended June 30, 2021, as compared to the same period in 2020, was primarily due to increased operating expense reimbursements due to CMFT Management as a result of acquiring 146 properties as part of the Mergers that closed in December 2020.

The increase in expense reimbursements to related parties of $1.7 million during the nine months ended September 30, 2021, as compared to the same period in 2020, was primarily due to increased operating expense reimbursements due to CMFT Management as a result of acquiring 146 properties as part of the CCIT III and CCPT V Mergers that closed in December 2020.

General and Administrative Expenses

The increase in general and administrative expenses of $2.1 million for the six months ended June 30, 2021, compared to the same period in 2020, was primarily due to increased expenses resulting from board members added to our board and the acquisition of 146 properties in connection with the Mergers that closed in December 2020.

The increase was also due to increases in insurance costs, banking fees and appraisal fees related to the foreclosure completed in January 2021 to take control of the assets which previously secured the Company’s mezzanine loans, as discussed in Note 7 — Loans Held-For-Investment to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

The increase in general and administrative expenses of $2.0 million for the nine months ended September 30, 2021, compared to the same period in 2020, was primarily due to increased expenses resulting from board members added to our Board and the acquisition of 146 properties in connection with the CCIT III and CCPT V Mergers that closed in December 2020.

The increase was also due to increases in appraisal fees related to the foreclosure completed in January 2021 to take control of the assets which previously secured the Company’s mezzanine loans, as discussed in Note 7 — Loans Held-For-Investment to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

Net Operating Income

Same store property net operating income decreased $100,000 during the six months ended June 30, 2021, as compared to the same period in 2020.

The decrease was primarily due to increases in property operating expenses, partially offset by an increase in rental income as a result of the impact of COVID-19 leading to a temporary reduction in rental income during the three months ended June 30, 2020 for certain tenants.

Non-same store property net operating income increased $7.8 million during the six months ended June 30, 2021, as compared to the same period in 2020.

The increase is due to the acquisition of 146 properties in connection with the Mergers that closed in December 2020, partially offset by the disposition of 61 properties subsequent to June 30, 2020.

Same store property net operating income decreased $1.5 million during the nine months ended September 30, 2021, as compared to the same period in 2020.

The decrease was primarily due to increases in property operating expenses relating to parking lot repairs, partially offset by an increase in rental income as a result of the impact of COVID-19 leading to a temporary reduction in rental income during the nine months ended September 30, 2020 for certain tenants.

Non-same store property net operating income increased $7.0 million during the nine months ended September 30, 2021, as compared to the same period in 2020.

The increase is due to the acquisition of 146 properties in connection with the CCIT III and CCPT V Mergers that closed in December 2020, partially offset by the disposition of 124 properties subsequent to September 30, 2020.

Credit Segment

Provision for Credit Losses

The decrease in provision for credit losses of $25.0 million during the six months ended June 30, 2021, as compared to the same period in 2020, was primarily due to the Company recording $19.8 million in credit losses related to the mezzanine loans.

The mezzanine loans and underlying assets were foreclosed on in January 2021 ,and as such a provision for credit losses was not recorded during the six months ended June 30, 2021 related to these loans.

(Decrease ) Increase in Provision for Credit Losses

The decrease in provision for credit losses of $34.1 million during the nine months ended September 30, 2021, as compared to the same period in 2020, was primarily due to the Company recording $23.4 million in credit losses related to the mezzanine loans.

The mezzanine loans and underlying assets were foreclosed on in January 2021, and as such a provision for credit losses was not recorded during the nine months ended September 30, 2021 related to these loans.

Interest Income

The increase in interest income of $15.6 million for the six months ended June 30, 2021, as compared to the same period in 2020, was due to an increase in credit investments.

As of June 30, 2021, we held investments in broadly syndicated loans of $484.1 million, CRE loans held-for-investment of $872.2 million, and CMBS of $42.1 million.

As of June 30, 2020, we held investments in broadly syndicated loans of $372.3 million, CRE loans held-for-investment of $253.8 million, and CMBS of $16.1 million.

The increase in interest income of $28.8 million for the nine months ended September 30, 2021, as compared to the same period in 2020, was due to an increase in credit investments.

As of September 30, 2021, we held investments in CRE loans held-for-investment of $890.8 million, broadly syndicated loans of $571.5 million, and CMBS of $121.8 million.

As of September 30, 2020, we held investments in CRE loans held-for-investment of $473.8 million, broadly syndicated loans of $419.1 million, and CMBS of $75.2 million.

Distributions

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December 30, 2021 $0.0303

As of June 30, 2021, we had distributions payable of $11.0 million.

As of September 30, 2021, we had distributions payable of $11.0 million.

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

Six Months Ended June 30,

Nine Months Ended September 30,

Amount Percent Amount Percent

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____________________________________

(1) Net cash provided by operating activities for the six months ended June 30, 2021 and 2020 was $65.3 million and $37.2 million, respectively.

(2) Our distributions covered by cash flows from operating activities for the six months ended June 30, 2020 include cash flows from operating activities in excess of distributions from prior periods of $9.6 million.

(3) Net proceeds on the credit facilities and notes payable for the six months ended June 30, 2021 and 2020 were $292.2 million and $102.2 million, respectively.

(1) Net cash provided by operating activities for the nine months ended September 30, 2021 and 2020 was $97.5 million and $71.8 million, respectively.

(2) Our distributions covered by cash flows from operating activities for the nine months ended September 30, 2020 include cash flows from operating activities in excess of distributions from prior periods of $9.6 million.

(3) Net proceeds on the credit facilities and notes payable for the nine months ended September 30, 2021 and 2020 were $584.1 million and $237.8 million, respectively.

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

Therefore, for consistency, proceeds from the issuance of common stock used as a source of distributions for the six months ended June 30, 2020 include the amount by which real estate acquisition-related fees and expenses have reduced net cash flows from operating activities in those prior periods.

Therefore, for consistency, proceeds from the issuance of common stock used as a source of distributions for the nine months ended September 30, 2020 include the amount by which real estate acquisition-related fees and expenses have reduced net cash flows from operating activities in those prior periods.

Share Redemptions

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

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

During the six months ended June 30, 2021, we received valid redemption requests under our share redemption program totaling approximately 32.8 million shares, of which we redeemed approximately 1.7 million shares subsequent to June 30, 2021 for $12.0 million (at a redemption price of $7.20 per share).

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

During the nine months ended September 30, 2021, we received valid redemption requests under our share redemption program totaling approximately 61.8 million shares, of which we redeemed approximately 1.7 million shares as of September 30, 2021 for $12.0 million at an average redemption price of $7.20 per share, and 1.3 million shares subsequent to September 30, 2021 for $9.4 million (at a redemption price of $7.20 per share).

The remaining redemption requests relating to approximately 58.8 million shares went unfulfilled.

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Liquidity and Capital Resources

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

acquisitions and loan originations, repayment of certain indebtedness and for general corporate uses.

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

As of June 30, 2021, the CMFT Credit Facility provided for borrowings of up to $1.24 billion, which includes the $885.0 million CMFT Term Loan and up to $350.0 million on the CMFT Revolving Loans.

The CCPT V Credit Facility provides for borrowings of $220.0 million under the CCPT V Term Loans and up to $130.0 million under the CCPT V Revolving Loans.

As of June 30, 2021, we had $480.0 million in unused capacity under the Credit Facilities, subject to borrowing availability.

We had available borrowings of $12.2 million as of June 30, 2021.

As of June 30, 2021, we also had cash and cash equivalents of $141.3 million, which included $43.2 million of unsettled broadly syndicated loan purchases.

Subsequent to June 30, 2021, and with the proceeds from the Mortgage Loan and the sale of the Class A Notes, the Company repaid fixed rate debt of $104.1 million, paid down the $1.11 billion outstanding balance under the Credit Facilities and terminated the CCPT V Credit Facility and the CMFT Credit Facility, as further discussed in Note 17 — Subsequent Events.

As of June 30, 2021, the Credit and Security Agreement provided for borrowings in an aggregate principal amount up to $500.0 million under the Credit Securities Revolver, which may be increased from time to time pursuant to the Credit and Security Agreement.

During the nine months ended September 30, 2021, and with the proceeds from the Mortgage Loan and the sale of the Class A Notes, the Company paid down the $1.11 billion outstanding balance under the Credit Facilities and terminated the Credit Facilities.

As of September 30, 2021, we had cash and cash equivalents of $289.8 million, which included $87.4 million of unsettled broadly syndicated loan purchases.

As of September 30, 2021, the Credit and Security Agreement provided for borrowings in an aggregate principal amount up to $500.0 million under the Credit Securities Revolver, which may be increased from time to time pursuant to the Credit and Security Agreement.

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

As of June 30, 2021, the amounts borrowed and outstanding under the Credit Securities Revolver totaled $316.5 million.

Subsequent to June 30, 2021, the Company received borrowings in an aggregate principal amount of $50.0 million under the Credit and Security Agreement, as further discussed in Note 17 — Subsequent Events.

As of June 30, 2021, the Repurchase Agreements provided up to an aggregate of $1.1 billion of financing under the Repurchase Facilities.

As of September 30, 2021, the amounts borrowed and outstanding under the Credit Securities Revolver totaled $406.5 million.

Subsequent to September 30, 2021, the Company amended the Credit and Security Agreement by increasing available borrowings under the Credit Securities Revolver up to $550.0 million, as discussed in Note 16 — Subsequent Events to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

As of September 30, 2021, the Repurchase Agreements provided up to an aggregate of $1.2 billion of financing under the Repurchase Facilities.

The Repurchase Agreements provide for simultaneous agreements by the banks to re-sell purchased CRE mortgage loans back to the CMFT Lending Subs at a certain future date or upon demand.

As of June 30, 2021, we had nine senior loans with an aggregate carrying value of $727.4 million financed with $505.4 million under the Repurchase Facilities,

$250.0 million of which was financed under the Barclays Repurchase Facility, $188.0 million of which was financed under the Citibank Repurchase Facility and $67.4 million of which was financed under the Wells Fargo Repurchase Facility.

Additionally, subsequent to June 30, 2021, the Company amended the Barclays Repurchase Agreement to extend the maturity date to September 21, 2024.

See further discussion of these repayments in Note 17 — Subsequent Events.

As of June 30, 2021, we believe that we were in compliance with the financial covenants of the CMFT Second Amended and Restated Credit Agreement, the CCPT V Credit Agreement, the Citibank Repurchase Agreement, the Barclays Repurchase Agreement and the Wells Fargo Repurchase Agreement, as well as the financial covenants under our various fixed and variable rate debt agreements, as further discussed in Note 9 — Credit Facilities, Notes Payable and Repurchase Facilities to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

As of September 30, 2021, we had nine senior loans with an aggregate carrying value of $712.8 million financed with $507.3 million under the Repurchase Facilities, $184.4 million of which was financed under the Barclays Repurchase Facility, $199.2 million of which was financed under the Citibank Repurchase Facility and $123.6 million of which was financed under the Wells Fargo Repurchase Facility.

As of September 30, 2021, we believe that we were in compliance with the financial covenants of the Mortgage Loan, the Class A Notes, and the Repurchase Agreements, as well as the financial covenants under our various fixed and variable rate debt agreements, as further discussed in Note 9 — Notes Payable, Repurchase Facilities and Credit Facilities to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

Short-term Liquidity and Capital Resources

On a short-term basis, our principal demands for funds will be for the acquisition of real estate-related securities, real estate and real estate-related assets and the payment of acquisition-related fees and expenses, operating expenses, distributions, redemptions and interest and principal on current and any future debt financings, including principal repayments of $1.3 billion within the next 12 months, $1.2 billion of which was paid down subsequent to June 30, 2021 with proceeds from the Mortgage Loan and the sale of the Class A Notes, as further discussed in Note 17 — Subsequent Events.

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

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however, we have used, and may continue to use, other sources to fund distributions, as necessary, including borrowings on our unencumbered assets.

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

We expect that substantially all net cash flows from the Offerings or debt financings will be used to fund acquisitions, loan originations, certain capital expenditures, repayments of outstanding debt or distributions and redemptions to our stockholders.

To the extent that cash flows from operations are lower, distributions paid to our stockholders may be lower.

We expect that

substantially all net cash flows from the Offerings or debt financings will be used to fund acquisitions, loan originations, certain capital expenditures, repayments of outstanding debt or distributions and redemptions to our stockholders.

Contractual Obligations

As of June 30, 2021, we had debt outstanding with a carrying value of $2.5 billion and a weighted average interest rate of 2.8%.

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

Our contractual obligations as of June 30, 2021 were as follows (in thousands):

As of September 30, 2021, we had debt outstanding with a carrying value of $2.8 billion and a weighted average interest rate of 2.8%.

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

Our contractual obligations as of September 30, 2021 were as follows (in thousands):

Payments due by period (1)

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2,759 2,759 — — —

Principal payments — credit facilities (5)

Principal payments — first lien mortgage loan (5)

650,000 — 650,000 — —

Interest payments — credit facilities (5)

Interest payments — first lien mortgage loan (5)

33,857 18,200 15,657 — —

Principal payments — net-lease mortgage notes (6)

772,710 7,740 6,450 — 758,520

Interest payments — net-lease mortgage notes (6)

186,543 21,636 43,450 43,390 78,067

Principal payments — credit facilities 406,500 — — 406,500 —

Interest payments — credit facilities 23,815 7,317 14,654 1,844 —

Principal payments — repurchase facilities (7)

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

The table also does not include $123.7 million of unfunded commitments related to our existing CRE loans held-for-investment which are subject to the satisfaction of borrower milestones.

(2) Principal payment amounts reflect actual payments based on the face amount of notes payable secured by our wholly-owned properties, which excludes the fair value adjustment, net of amortization, of mortgage notes assumed.

(3) As of June 30, 2021, we had $21.5 million of variable rate debt effectively fixed through the use of interest rate swap agreements.

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

(4) As of June 30, 2021, we had variable rate debt outstanding of $94.2 million with a weighted average interest rate of 5.5%.

(3) As of September 30, 2021, we had variable rate debt outstanding of $82.8 million with a weighted average interest rate of 5.5%.

We used the weighted average interest rate to calculate the debt payment obligations in future periods.

(5) As of June 30, 2021, the Term Loans outstanding totaled $1.1 billion, $220.0 million of which is subject to interest rate swap agreements.

As of June 30, 2021, the weighted average all-in interest rate for the Swapped Term Loans was 4.2%.

The remaining $885.0 million outstanding under the Credit Facilities had a weighted average interest rate of 2.1% as of June 30, 2021.

As of June 30, 2021, the amounts outstanding under the Credit Securities Revolver totaled $316.5 million and had a weighted average interest rate of 1.8%.

(6) As of June 30, 2021, the amount outstanding under the Citibank Repurchase Facility was $188.0 million at a weighted average interest rate of 2.2%, the amount outstanding under the Barclays Repurchase Facility was $250.0 million at a weighted average interest rate of 2.5%, and the amount outstanding under the Wells Fargo Repurchase Facility was $67.4 million at a weighted average interest rate of 1.8%.

(4) As of September 30, 2021, the amounts outstanding under the Credit Securities Revolver totaled $406.5 million and had a weighted average interest rate of 1.8%.

(5) As of September 30, 2021, the amounts outstanding under the Mortgage Loan totaled $650.0 million and had a weighted average interest rate of 2.8%.

(6) As of September 30, 2021, the amounts outstanding under the Class A Notes totaled $772.7 million and had a weighted average interest rate of 2.8%.

(7) As of September 30, 2021, the amount outstanding under the Citibank Repurchase Facility was $199.2 million at a weighted average interest rate of 2.1%, the amount outstanding under the Barclays Repurchase Facility was $184.4 million at a weighted average interest rate of 2.3%, and the amount outstanding under the Wells Fargo Repurchase Facility was $123.6 million at a weighted average interest rate of 1.8%.

We expect to incur additional borrowings in the future to acquire additional properties and credit investments.

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

As of June 30, 2021, our ratio of debt to total gross assets net of gross intangible lease liabilities was 50.5% and our ratio of debt to the fair market value of our gross assets net of gross intangible lease liabilities was 50.9%.

Fair market value is based on the estimated market value of our real estate assets as of June 30, 2020 that were used to determine our estimated per share NAV, and for those assets acquired from July 1, 2020 through June 30, 2021 is based on the purchase price.

As of September 30, 2021, our ratio of debt to total gross assets net of gross intangible lease liabilities was 55.0% and our ratio of debt to the fair market value of our gross assets net of gross intangible lease liabilities was 57.1%.

Fair market value is based on the estimated market value of our real estate assets as of September 30, 2020 that were used to determine our estimated per share NAV, and for those assets acquired from July 1, 2020 through September 30, 2021 is based on the purchase price.

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

Net debt is a non-GAAP measure used to show our outstanding principal debt balance, excluding certain GAAP adjustments, such as premiums or discounts, financing and issuance costs, and related accumulated amortization, less all cash and cash equivalents.

As of June 30, 2021, our net debt leverage ratio, which is the ratio of net debt to total gross real estate and related assets net of gross intangible lease liabilities, was 47.7%.

The following table provides a reconciliation of the notes payable and credit facility, net balance, as reported on our condensed consolidated balance sheet, to net debt as of June 30, 2021 (dollar amounts in thousands):

As of September 30, 2021, our net debt leverage ratio, which is the ratio of net debt to total gross real estate and related assets net of gross intangible lease liabilities, was 49.3%.

The following table provides a reconciliation of the notes payable and credit facility, net balance, as reported on our condensed consolidated balance sheet, to net debt as of September 30, 2021 (dollar amounts in thousands):

Balance as of

June 30, 2021

Credit facilities, notes payable and repurchase facilities, net $ 2,540,809

September 30, 2021

Notes payable, repurchase facilities and credit facilities, net $ 2,776,215

Deferred costs and net premiums (1)

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Operating Activities.

Net cash provided by operating activities increased by $28.1 million for the six months ended June 30, 2021, as compared to the same period in 2020.

The increase was primarily due to the acquisition of 146 properties in connection with the Mergers that closed in December 2020, partially offset by the disposition of 61 properties subsequent to June 30, 2020 and lower net income after non-cash adjustments primarily resulting from the Company’s foreclosure of the assets which previously secured the Company’s mezzanine loans during the six months ended June 30, 2021.

Net cash provided by operating activities increased by $25.8 million for the nine months ended September 30, 2021, as compared to the same period in 2020.

The increase was primarily due to the acquisition of 146 properties in connection with the CCIT III and CCPT V Mergers that closed in December 2020 along with increases in credit investments driving higher interest income, partially offset by the disposition of 124 properties and one outparcel of land subsequent to September 30, 2020.

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

Investing Activities.

Net cash used in investing activities increased $59.7 million for the six months ended June 30, 2021, as compared to the same period in 2020.

The change was primarily due to an increase in the net investment in loans held-for-investment of $494.1 million, The change was partially offset by a decrease in the net investment in broadly syndicated loans of $279.2 million, an increase in proceeds from disposition of real estate assets of $147.2 million, and an increase in net proceeds from the sale of real estate-related securities of $27.6 million.

Net cash used in investing activities decreased $141.6 million for the nine months ended September 30, 2021, as compared to the same period in 2020.

The change was primarily due to a decrease in the net investment in broadly syndicated loans of $237.4 million, and an increase in proceeds from disposition of real estate assets of $265.0 million.

The change was partially offset by an increase in the net investment in loans held-for-investment of $287.6 million and an increase in the net investment of real estate-related securities of $67.6 million.

Financing Activities.

Net cash provided by financing activities increased $209.8 million for the six months ended June 30, 2021, as compared to the same period in 2020.

The change was primarily due to an increase in net proceeds on the credit facilities, notes payable and repurchase facilities of $190.0 million as a result of entering into the Repurchase Facilities, coupled with a decrease in redemptions of common stock of $38.7 million as a result of the Board’s suspension of the Amended Share Redemption Program from August 30, 2020 through March 31, 2021.

Net cash provided by financing activities increased $323.1 million for the nine months ended September 30, 2021, as compared to the same period in 2020.

The change was primarily due to an increase in net proceeds on the credit facilities, notes payable and repurchase facilities of $346.2 million as a result of entering into and upsizing the Repurchase Facilities, the Mortgage Loan and the Class A Notes, coupled with a decrease in redemptions of common stock of $35.7 million as a result of the Board’s suspension of the Amended Share Redemption Program from August 30, 2020 through March 31, 2021.

The change was offset by increased deferred financing costs paid as a result of entering into new debt agreements as described above.

Election as a REIT

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

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

DeBacker, our chief financial officer and treasurer, who is also the chief financial officer and treasurer of CIM Income NAV, is a vice president of CMFT Management and is an officer of certain of its affiliates.

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

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

The compensation arrangements between affiliates of CMFT Management and these other real estate programs sponsored or operated by CCO Group could influence the advice provided to us.

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

The compensation arrangements between affiliates of CMFT Management and these other real estate programs sponsored or operated by CIM and CCO Group could influence the advice provided to us.

See Part I, Item 1.

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Off-Balance Sheet Arrangements

As of June 30, 2021 and December 31, 2020, we had no material off-balance sheet arrangements that had or are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity or capital resources.

As of September 30, 2021 and December 31, 2020, we had no material off-balance sheet arrangements that had or are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity or capital resources.

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 2. Management’s Discussion and Analysis