What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-11 compared with 2021-11-15 · 189 added, 300 removed, 219 unchanged (69% of the section changed)

16 unchanged sentences

• We may be unable to renew leases, lease vacant space or re-lease space as leases expire on favorable terms or at all.

• We are subject to risks associated with tenant, geographic and industry concentrations with respect to our properties.

• Our properties, intangible assets and other assets may be subject to impairment charges.

• We are subject to risks associated with tenant, geographic and industry concentrations with respect to our investments and properties.

• Our properties, intangible assets and other assets, as well as the property securing our loans or other investments, may be subject to impairment charges.

• We could be subject to unexpected costs or unexpected liabilities that may arise from dispositions.

• We are subject to competition in the acquisition and disposition of properties and in the leasing of our properties and we may suffer delays or be unable to acquire, dispose of, or lease properties on advantageous terms.

• We are subject to risks associated with bankruptcies or insolvencies of tenants or from tenant defaults generally.

• We are subject to risks associated with bankruptcies or insolvencies of our borrowers and tenants and from borrower or tenant defaults generally.

• Our credit and real estate investments subject us to the political, economic, capital markets and other conditions in the United States, including with respect to the effects of the COVID-19 pandemic and other events that impact the United States.

• We are subject to fluctuations in interest rates which could reduce our ability to generate income on our credit investments.

• We are subject to competition from entities engaged in lending which may impact the availability of origination and acquisition opportunities acceptable to us.

• We have substantial indebtedness, which may affect our ability to pay distributions and expose us to interest rate fluctuation risk and the risk of default under our debt obligations.

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• 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 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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Double-net leases typically hold the landlord responsible for the capital expenditures for the roof and structure, while the tenant is responsible for all lease payments and remaining operating expenses associated with the property (e.g., real estate taxes, insurance and maintenance).

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

federal income tax purposes commencing with our taxable year ended December 31, 2012.

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

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

CIM indirectly owns and/or controls CMFT Management;

our dealer manager, CCO Capital;

our property manager, CREI Advisors;

and CCO Group.

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

We suspended issuing shares of common stock under our Secondary DRIP Offering on August 30, 2020 in connection with our entry into the merger agreements with CCIT III and CCPT V.

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

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.

We are primarily focused on originating, acquiring, financing and managing shorter duration senior secured loans, other related credit investments and core commercial real estate.

Our investment strategy allows us to adapt 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.

We are continuing our strategy as a credit focused REIT, balancing our existing core of necessity commercial real estate assets leased to creditworthy tenants under long-term net leases with a portfolio of commercial mortgage loans and other credit investments.

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

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

federal income tax purposes.

We have no paid employees and are externally managed by CMFT Management and, with respect to investments in securities and certain other of our investments, our Investment Advisor, each of which is an affiliate of CIM, a community-focused real estate and infrastructure owner, operator, lender and developer.

As of March 31, 2022, we owned 445 properties, which consisted of 400 retail properties, 19 anchored shopping centers, 14 industrial properties and 12 office properties, representing 38 industry sectors and comprising 15.4 million rentable square feet of commercial space located in 45 states.

As of March 31, 2022, we owned condominium developments with a net book value of $158.1 million.

As of March 31, 2022, our loan portfolio consisted of 332 loans with a net book value of $3.3 billion.

As of March 31, 2022, we had $39.5 million of unfunded or unsettled liquid senior loan purchases included in cash and cash equivalents, and investments in real estate-related securities of $254.3 million.

In furtherance of our strategy, during the three months ended March 31, 2022, we disposed of 69 properties, encompassing 7.4 million gross rentable square feet.

On December 20, 2021, certain subsidiaries of the Company entered into the Purchase and Sale Agreement to sell 79 shopping centers and two single-tenant properties, for which we are to receive, in the aggregate, approximately $1.32 billion in total consideration at closing.

During the three months ended March 31, 2022, the sale of 56 properties closed under the Purchase and Sale Agreement for total consideration of $811.8 million, as further discussed in Note

4 — Real Estate Assets to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

The remaining 25 properties are classified as held for sale in the condensed consolidated balance sheets as of March 31, 2022 with a carrying value of $481.4 million.

The sale of 23 such properties closed in phases for total consideration of $289.2 million subsequent to March 31, 2022, as further discussed in Note 17 — Subsequent Events to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q, with the remaining two properties expected to close during the second quarter of 2022.

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.

As 97.2% of our rentable square feet was under lease, including any month-to-month agreements, as of March 31, 2022, with a weighted average remaining lease term of 9.8 years, we believe our exposure to changes in commercial rental rates on our portfolio is substantially mitigated, except for vacancies caused by tenant bankruptcies or other factors, including due to circumstances related to COVID-19.

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

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

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.

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

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, 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 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 $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.

• Increased total debt by $656.6 million, from $2.1 billion to $2.8 billion.

Activity from January 1, 2022 through March 31, 2022

Operating Results:

• Net income of $39.1 million, or $0.09 per share.

• Declared distributions of $0.09 per share.

Credit Portfolio Activity:

• Invested $784.1 million in first mortgage loans and received principal repayments of $102.5 million.

• Invested $61.0 million in liquid senior loans and sold liquid senior loans for an aggregate gross sales price of $23.8 million.

• Invested $102.2 million in CMBS and preferred units and sold one marketable security for an aggregate gross sales price of $132,000.

• Invested $10.0 million in a corporate senior loan.

Real Estate Portfolio Activity:

• Disposed of 69 properties for an aggregate sales price of $925.3 million.

• Disposed of condominium units for an aggregate sales price of $21.1 million.

Financing Activity:

• Increased total debt by $29.8 million.

• Increased maximum financing amounts on two existing repurchase facilities to provide up to $1.25 billion and $750.0 million, respectively, to finance a portfolio of existing and future commercial real estate mortgage loans.

Portfolio Information

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,

The following table shows the carrying value of our portfolio by investment type as of March 31, 2022 and 2021 (dollar amounts in thousands):

As of March 31,

Asset Count Carrying Value Asset Count Carrying Value

Loan Held-For-Investment

Mezzanine loans — $ — — % 8 $ 146,516 4.2 %

Senior loans 11 890,804 19.2 % 4 327,244 9.3 %

Broadly syndicated loans 262 571,488 12.3 % 161 419,135 12.0 %

Allowance for credit losses (11,219) (0.2) % (35,039) (1.0) %

First mortgage loans 25 $ 2,664,702 40.8 % 6 $ 525,447 11.6 %

Liquid senior loans 306 671,569 10.3 % 221 496,832 11.0 %

Corporate senior loan 1 9,927 0.2 % — — — %

Current expected credit losses (19,150) (0.3) % (12,888) (0.3) %

Total loans held-for-investment and related receivable, net 332 3,327,048 51.0 % 227 1,009,391 22.3 %

Real Estate-Related Securities

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

CMBS and equity securities 8 186,070 2.9 % 5 67,222 1.5 %

Preferred units 1 68,243 1.0 % — — — %

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Total Investment Portfolio 786 $ 6,525,659 100.0 % 747 $ 4,526,689 100.0 %

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 Preferred Units

Number of loans 11 262 15 1

Credit Portfolio Information

The following table details overall statistics for our credit portfolio as of March 31, 2022 (dollar amounts in thousands):

First Mortgage Loans and Preferred Units (1)

Liquid Senior Loans CMBS and Equity Securities Corporate Senior Loan

Number of investments 26 306 8 1

Principal balance $ 2,757,184 $ 675,086 $ 157,830 $ 10,000

Net book value $ 2,721,703 $ 663,717 $ 186,070 $ 9,871

Unfunded or unsettled loan commitments $ 384,659 $ 39,489 $ — $ —

Weighted-average interest rate 3.5 % 4.0 % 4.8 % 7.0 %

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4.2 5.1 11.0 5.6

(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.

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

____________________________________

(1) As of March 31, 2022, 100% of our loans by principal balance earned a floating rate of interest, primarily indexed to U.S.

dollar LIBOR and SOFR.

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

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

Real Estate Portfolio Information

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 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,

As of March 31, 2022, we owned 445 properties located in 45 states, the gross rentable square feet of which was 97.2% leased, including any month-to-month agreements, with a weighted average lease term remaining of 9.8 years.

As of March 31, 2022, no single tenant accounted for greater than 10% of our 2022 annualized rental income.

As of March 31, 2022, we had certain geographic and industry concentrations in our property holdings.

In particular, we had properties located in California and Ohio, which accounted for 12% and 11%, respectively, of our 2022 annualized rental income.

In addition, we had tenants in the health and personal care stores and sporting goods, hobby and musical instruments store industries, which accounted for 11% and 10%, respectively, of our 2022 annualized rental income.

During the three months ended March 31, 2022, we disposed of 69 properties, for an aggregate gross sales price of $925.3 million.

Additionally, during the three months ended March 31, 2022, we sold condominium units for an aggregate gross sales price of $21.1 million.

The following table shows the property statistics of our real estate assets as of March 31, 2022 and 2021:

As of March 31,

Number of commercial properties 445 515

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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 nine months ended September 30, 2021 and 2020:

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

2021 2020 2021 2020

Commercial properties acquired — 2 — 3

Purchase price of acquired properties (in thousands)

$ — $ 9,851 $ — $ 14,510

Rentable square feet (in thousands) (1)

____________________________________

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

During the three months ended March 31, 2022 and 2021, the Company did not acquire any properties.

Results of Operations

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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, (h) merger-related expenses, net and (i) interest income.

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).

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) increase in provision for credit losses, (g) gain on disposition of real estate and condominium developments, net, (h) merger-related expenses, net and (i) interest income.

Our calculation of 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).

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 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 September 30,

Comparison of the Three Months Ended March 31, 2022 and 2021

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

For the Three Months Ended March 31,

2022 2021 Change

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

Net income (loss) $ 39,101 $ (2,753) $ 41,854

Loss on extinguishment of debt 10,871 — 10,871

Interest expense and other, net 31,037 20,022 11,015

Gain on investment in unconsolidated entities (5,340) — (5,340)

Operating income 75,669 17,269 58,400

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

Gain on disposition of real estate and condominium developments, net (32,574) — (32,574)

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

Increase in provision for credit losses 4,709 568 4,141

Real estate impairment 3,291 4,300 (1,009)

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Refer to Note 16 — Segment Reporting to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q for further discussion of our operating segments.

Credit Segment

Interest Income

The increase in interest income of $19.5 million for the three months ended March 31, 2022, as compared to the same period in 2021, was due to an increase in the overall size of our investment portfolio.

As of March 31, 2022, we held investments in CRE loans held-for-investment of $2.7 billion, liquid senior loans of $671.6 million, an investment in a corporate senior loan of $9.9 million, CMBS and other securities of $186.1 million, and an investment in preferred units of $68.2 million.

As of March 31, 2021, we held investments in CRE loans held-for-investment of $525.4 million, liquid senior loans of $496.8 million, and CMBS of $67.2 million.

Provision for Credit Losses

The increase in provision for credit losses of $4.1 million during the three months ended March 31, 2022, as compared to the same period in 2021, was primarily due to the increased number of loan investments entered into during the three months ended March 31, 2022, as compared to the same period in 2021.

Real Estate Segment

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.

A total of 336 properties were acquired before January 1, 2021 and represent our “same store” properties during the three months ended March 31, 2022 and 2021.

“Non-same store” properties, for purposes of the table below, includes properties acquired or disposed of on or after January 1, 2021.

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 September 30,

For the Three Months Ended March 31,

2022 2021 Change 2022 2021 Change 2022 2021 Change

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Loss on Extinguishment of Debt

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.

The increase in loss on extinguishment of debt of $10.9 million for the three months ended March 31, 2022, as compared to the same period in 2021, was primarily due to the termination of certain mortgage notes in connection with the disposition of the underlying properties during the three months ended March 31, 2022.

Gain on Investment in Unconsolidated Entities

The increase in gain on investment in unconsolidated entities of $5.3 million for the three months ended March 31, 2022, as compared to the same period in 2021, was due to the Company’s investment in CIM UII Onshore and NP JV Holdings, both of which were not invested in by the Company during the three months ended March 31, 2021.

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 $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.

The increase in interest expense and other, net, of $11.0 million for the three months ended March 31, 2022, as compared to the same period in 2021, was primarily due to an increase in the average aggregate amount of debt outstanding from $2.5 billion as of March 31, 2021 to $4.2 billion as of March 31, 2022 as a result of entering into and upsizing additional repurchase agreements, originating the Mortgage Loan and Class A Notes, and assuming the CIM Income NAV Credit Facility as part of the CIM Income NAV Merger subsequent to March 31, 2021.

Gain on Disposition of Real Estate and Condominium Developments, Net

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.

The increase in gain on disposition of real estate and condominium developments, net, of $32.6 million during the three months ended March 31, 2022, as compared to the same period in 2021, was due to the disposition of 69 properties for a gain of $29.2 million and the disposition of condominium units for a gain of $3.3 million during the three months ended March 31, 2022, compared to the disposition of one property with no gain or loss recognized during the three months ended March 31, 2021.

Real Estate Impairment

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.

The decrease in real estate impairments of $1.0 million during the three months ended March 31, 2022, as compared to the same period in 2021, was due to seven properties that were deemed to be impaired, resulting in impairment charges of $3.3 million during the three months ended March 31, 2022, compared to five properties that were deemed to be impaired, resulting in impairment charges of $4.3 million during the three months ended March 31, 2021.

Depreciation and Amortization

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.

The decrease in depreciation and amortization of $6.6 million during the three months ended March 31, 2022, as compared to the same period in 2021, was primarily due to the disposition of 185 properties subsequent to March 31, 2021, partially offset by the acquisition of 115 properties through the CIM Income NAV Merger that closed in December 2021.

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 September 30, 2021, as compared to the same period in 2020.

Transaction-related expenses remained generally consistent during the three months ended March 31, 2022, as compared to the same period in 2021.

Management Fees

3 unchanged sentences

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 $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.

The increase in management fees of $1.8 million during the three months ended March 31, 2022, as compared to the same period in 2021, was primarily due to increased equity from the issuance of common stock in connection with the CIM Income NAV Merger that closed in December 2021.

Expense Reimbursements to Related Parties

1 unchanged sentence

Additionally, we may be required to reimburse certain expenses incurred by CMFT Management in providing management services, subject to limitations as set forth in the Management Agreement (as discussed in Note 12 — Related-Party Transactions and Arrangements to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q).

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 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 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

(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.

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 September 30, 2021.

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 $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 Nine Months Ended September 30,

2021 2020 Change

Net income (loss) $ 97,637 $ (11,742) $ 109,379

Loss on extinguishment of debt 4,729 4,841 (112)

Interest expense and other, net 56,863 47,240 9,623

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)

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

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

Depreciation and amortization 73,186 60,486 12,700

Transaction-related expenses 37 308 (271)

Management fees 35,035 29,739 5,296

Expense reimbursements to related parties 8,387 6,674 1,713

General and administrative expenses 11,109 9,110 1,999

Interest income (48,168) (19,395) (28,773)

Net operating income $ 162,878 $ 157,368 $ 5,510

Real Estate Segment

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.

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 Nine Months Ended September 30,

2021 2020 Change 2021 2020 Change 2021 2020 Change

Rental and other property income $ 223,026 $ 194,550 $ 28,476 $ 163,049 $ 161,609 $ 1,440 $ 59,977 $ 32,941 $ 27,036

Property operating expenses 32,632 16,890 15,742 17,237 14,547 2,690 15,395 2,343 13,052

Real estate tax expenses 27,516 20,292 7,224 18,183 17,926 257 9,333 2,366 6,967

Total property operating expenses 60,148 37,182 22,966 35,420 32,473 2,947 24,728 4,709 20,019

Net operating income $ 162,878 $ 157,368 $ 5,510 $ 127,629 $ 129,136 $ (1,507) $ 35,249 $ 28,232 $ 7,017

Loss on Extinguishment of Debt

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 $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 $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 $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 $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 $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 $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 $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.

The increase in expense reimbursements to related parties of $1.0 million during the three months ended March 31, 2022, as compared to the same period in 2021, was primarily due to increased operating expense reimbursements due to CMFT Management, primarily as a result of increased allocated payroll resulting from increased portfolio activity.

General and Administrative Expenses

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.

The primary general and administrative expense items are banking fees and escrow and trustee fees.

The decrease in general and administrative expenses of $1.0 million for the three months ended March 31, 2022, as compared to the same period in 2021, 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 Company’s credit facilities subsequent to March 31, 2021 as well as a decrease in legal costs and other professional fees.

This decrease was partially offset by increased expenses related to the assumption of the CIM Income NAV Credit Facility in connection with the CIM Income NAV Merger completed in December 2021.

Net Operating Income

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

(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 $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.

Same store property net operating income remained relatively consistent during the three months ended March 31, 2022, as compared to the same period in 2021.

Non-same store property net operating income increased $4.7 million during the three months ended March 31, 2022, as compared to the same period in 2021.

The increase was primarily due to the acquisition of 115 properties in connection with the CIM Income NAV Merger that closed in December 2021 and the acquisition of 146 properties that closed in December 2020, partially offset by a decrease in net operating income due to the disposition of 185 properties subsequent to March 31, 2021.

Distributions

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

On March 25, 2021, the Board resumed declaring distributions on a quarterly basis.

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

Record Date Distribution Amount

April 30, 2020 $0.0130

May 31, 2020 $0.0130

June 30, 2020 $0.0161

July 30, 2020 $0.0304

August 28, 2020 $0.0303

September 29, 2020 $0.0303

October 29, 2020 $0.0303

November 27, 2020 $0.0303

December 30, 2020 $0.0303

January 28, 2021 $0.0303

February 25, 2021 $0.0303

March 29, 2021 $0.0303

April 29, 2021 $0.0303

May 28, 2021 $0.0303

June 29, 2021 $0.0303

July 29, 2021 $0.0303

August 30, 2021 $0.0303

September 29, 2021 $0.0303

October 28, 2021 $0.0303

November 29, 2021 $0.0303

December 30, 2021 $0.0303

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):

Nine Months Ended September 30,

On March 25, 2021, the Board resumed declaring distributions on a quarterly basis, which are paid out on a monthly basis.

Since April 2020, our Board authorized the following monthly distribution amounts per share, payable to shareholders as of the record date for the applicable month, for the periods indicated below:

Period Commencing Period Ending Monthly Distribution Amount

April 2020 May 2020 $0.0130

June 2020 June 2020 $0.0161

July 2020 July 2020 $0.0304

August 2020 December 2021 $0.0303

January 2022 September 2022 $0.0305

As of March 31, 2022, we had distributions payable of $13.3 million.

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

Three Months Ended March 31,

Amount Percent Amount Percent

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— — % 4,159 13 %

Proceeds from the issuance of common stock — — % 8,308 (4) 9 %

Total sources $ 39,931 100 % $ 32,906 100 %

____________________________________

(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 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.

(1) Net cash provided by operating activities for the three months ended March 31, 2022 and 2021 was $30.1 million and $28.7 million, respectively.

(2) Our distributions covered by cash flows from operating activities for the three months ended March 31, 2022 include cash flows from operating activities in excess of distributions from prior periods of $9.9 million.

(3) Net proceeds on the repurchase facilities, credit facilities and notes payable for the three months ended March 31, 2022 and 2021 was $45.2 million and $197.0 million, respectively.

Share Redemptions

Our amended and restated share redemption program (the “Amended Share Redemption Program”) permits our stockholders to sell their shares of common stock back to us, subject to certain conditions and limitations.

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

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

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

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

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

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

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

In connection with the 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).

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

Any material modifications or suspension of the share redemption program will be disclosed to our stockholders as promptly as practicable in our reports filed with the SEC and via our website.

During the three months ended March 31, 2022, we received valid redemption requests under our share redemption program totaling approximately 25.2 million shares, of which we redeemed approximately 1.4 million shares subsequent to March 31, 2022 for $9.9 million (at a redemption price of $7.20 per share).

The remaining redemption requests relating to approximately 23.8 million shares went unfulfilled.

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

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

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

Liquidity and Capital Resources

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

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

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 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 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.

As a result of the CIM Income NAV Merger that closed in December 2021, our subsidiary assumed CIM Income NAV’s obligations pursuant to the CIM Income NAV Credit Agreement, including as guarantor under a guaranty provided by CIM Income NAV.

As of March 31, 2022, the CIM Income NAV Credit Agreement allows for borrowings of up to $425.0 million (the “CIM Income NAV Credit Facility”).

The CIM Income NAV Credit Facility includes $212.5 million in term loans and up to $212.5 million in revolving loans.

As of March 31, 2022, we had cash and cash equivalents of $165.1 million, which included $39.5 million of unfunded or unsettled liquid senior loan purchases.

As of March 31, 2022, CMFT Corporate Credit Securities, LLC, our indirect wholly-owned subsidiary, had a revolving credit and security agreement with Citibank, as administrative agent, that provided for borrowings secured by substantially all of the assets held by CMFT Corporate Credit Securities, LLC, which shall primarily consist of liquid senior secured loans subject to certain eligibility criteria under the Credit and Security Agreement.

As of March 31, 2022, the CMFT Lending Subs had Master Repurchase Agreements with Citibank, Barclays, Wells Fargo, and Deutsche Bank to provide financing primarily through each bank’s purchase of our CRE mortgage loans and future funding advances.

The following table details our outstanding financing arrangements as of March 31, 2022 (in thousands):

Portfolio Financing Outstanding Principal Balance Maximum Capacity

Notes payable – fixed rate debt $ 399,409 $ 399,409

Notes payable – variable rate debt 122,488 122,488

First lien mortgage loan 156,161 650,000

ABS mortgage notes 768,840 774,000

Credit facilities 774,000 975,000

Repurchase facilities 1,980,324 2,700,000

Total portfolio financing $ 4,201,222 $ 5,620,897

As of March 31, 2022, we believe that we were in compliance with the financial covenants of the Mortgage Loan, the ABS mortgage 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 10 — Repurchase Facilities, Credit Facilities and Notes Payable 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 $98.5 million within the next 12 months.

redemptions and interest and principal on current and any future debt financings, including principal repayments of $437.0 million within the next 12 months.

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

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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.

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 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):

As of March 31, 2022, we had debt outstanding with a carrying value of $4.2 billion and a weighted average interest rate of 2.7%.

See Note 10 — Repurchase Facilities, Credit Facilities and Notes Payable 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 March 31, 2022 were as follows (in thousands):

Payments due by period (1)

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Principal payments — fixed rate debt $ 399,409 $ 23,722 $ 375,687 $ — $ —

$ 387,262 $ 7,870 $ 356,411 $ 22,981 $ —

Interest payments — fixed rate debt (2)

7 unchanged sentences

10,227 7,511 2,716 — —

Principal payments — net-lease mortgage notes (6)

Principal payments — ABS mortgage notes (5)

768,840 7,740 2,580 — 758,520

Interest payments — net-lease mortgage notes (6)

Interest payments — ABS mortgage notes (5)

190,254 21,377 42,930 42,871 83,076

Principal payments — credit facilities (6)

774,000 252,500 521,500 — —

Interest payments — credit facilities (6)

40,251 17,257 22,994 — —

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

The table also does not include $384.7 million of unfunded commitments related to our existing CRE loans held-for-investment, $16.2 million of unfunded commitments related to NP JV Holdings, which are subject to the satisfaction of borrower milestones.

In addition, the table does not include $39.5

million of unfunded or unsettled liquid senior loan acquisitions, which are included in cash and cash equivalents in the accompanying condensed consolidated balance sheet.

(2) As of March 31, 2022, we had $15.8 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.

(3) As of March 31, 2022, we had variable rate debt outstanding of $122.5 million with a weighted average interest rate of 3.9%.

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

(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%.

(4) As of March 31, 2022, the amounts outstanding under the Mortgage Loan totaled $156.2 million and had a weighted average interest rate of 4.8%.

(5) As of March 31, 2022, the amounts outstanding under the ABS mortgage notes totaled $768.8 million and had a weighted average interest rate of 2.8%.

(6) As of March 31, 2022, the amounts outstanding under the Credit Securities Revolver (as defined in Note 10 — Repurchase Facilities, Credit Facilities and Notes Payable to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q) totaled $521.5 million and had a weighted average interest rate of 2.5% and the amounts outstanding under the CIM Income NAV Revolving Loans totaled $40.0 million and had a weighted average interest rate of 4.4%.

As of March 31, 2022, the CIM Income NAV Term Loans outstanding totaled $212.5 million, $140.0 million of which is subject to interest rate swap agreements.

As of March 31, 2022, the weighted average all-in interest rate for the Swapped Term Loans was 4.4%.

The remaining $72.5 million outstanding under our credit facilities had a weighted average interest rate of 2.3% as of March 31, 2022.

(7) As of March 31, 2022, the amount outstanding under the Citibank Repurchase Facility was $322.4 million at a weighted average interest rate of 2.1%, the amount outstanding under the Barclays Repurchase Facility was $906.9 million at a weighted average interest rate of 2.1%, the amount outstanding under the Wells Fargo Repurchase Facility was $657.6 million at a weighted average interest rate of 1.8%, and the amount outstanding under the Deutsche Bank Repurchase Facility was $93.4 million at a weighted average interest rate of 2.3%.

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 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 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

September 30, 2021

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

Deferred costs and net premiums (1)

Cash and cash equivalents (289,840)

Net debt $ 2,516,729

Gross real estate and related assets, net (2)

Net debt leverage ratio 49.3 %

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

(2) Net of gross intangible lease liabilities.

Includes gross assets held for sale, as well as real estate-related securities and loans held-for-investment principal balance, net of allowance for credit losses, of $1.7 billion.

As of March 31, 2022, our ratio of debt to total gross assets net of gross intangible lease liabilities was 60.1% and our ratio of debt to the fair market value of our gross assets net of gross intangible lease liabilities was 60.8%.

Fair market value of our first mortgage loans is based on the estimated market value as of March 31, 2022.

Fair market value of the remaining credit investments is based on the market value as of March 31, 2022.

Fair market value of our real estate assets is based on the estimated market value as of March 31, 2021 that was used to determine our estimated per share NAV, and for those assets acquired from April 1, 2021 through March 31, 2022 is based on the purchase price.

Cash Flow Analysis

Operating Activities.

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.

Net cash provided by operating activities increased by $1.3 million for the three months ended March 31, 2022, as compared to the same period in 2021.

The increase was primarily due to the acquisition of 115 properties through the CIM Income NAV Merger and the growth in our loan portfolio, offset by the disposition of 185 properties subsequent to March 31, 2021.

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

Investing Activities.

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.

Net cash provided by investing activities increased $305.3 million for the three months ended March 31, 2022, as compared to the same period in 2021.

The change was primarily due to an increase in proceeds from disposition of real estate assets of $919.9 million, partially offset by an increase in the net investment in loans held-for-investment of $540.2 million and an increase in the net investment of real estate-related securities of $127.0 million.

Financing Activities.

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.

Net cash provided by financing activities decreased $162.7 million for the three months ended March 31, 2022, as compared to the same period in 2021.

The change was primarily due to a decrease in net proceeds on the credit facilities, notes payable and repurchase facilities of $151.8 million in addition to an increase in redemptions of common stock due to the reinstatement of the share redemption program subsequent to March 31, 2021.

Election as a REIT

We elected to be taxed, and currently qualify, as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 2012.

We elected to be taxed, and operate our business to qualify, as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 2012.

To maintain our qualification as a REIT, we must continue to meet certain requirements relating to our organization, sources of income, nature of assets, distributions of income to our stockholders and recordkeeping.

As a REIT, we generally are not subject to federal income tax on taxable income that we distribute to our stockholders so long as we distribute at least 90% of our annual taxable income (computed without regard to the dividends paid deduction and excluding net capital gains).

As a REIT, we generally are not subject to federal income tax on taxable income that we distribute to our

stockholders so long as we distribute at least 90% of our annual taxable income (computed without regard to the dividends paid deduction and excluding net capital gains).

If we fail to maintain our qualification as a REIT for any reason in a taxable year and applicable relief provisions do not apply, we will be subject to tax on our taxable income at regular corporate rates.

18 unchanged sentences

• Allocation of Purchase Price of Real Estate Assets;

• Allowance for Credit Losses.

• Current Expected Credit Losses.

A complete description of such policies and our considerations is contained in our Annual Report on Form 10-K for the year ended December 31, 2021.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2021 and related notes thereto.

We continually monitor events and changes in circumstances that could indicate that the carrying amounts of our real estate assets may not be recoverable.

Impairment indicators that we consider include, but are not limited to:

bankruptcy or other credit concerns of a property’s major tenant, such as a history of late payments, lease concessions and other factors;

a significant decrease in a property’s revenues due to lease terminations;

co-tenancy clauses;

reduced lease rates;

or changes in anticipated holding periods.

We continue to evaluate our portfolio to determine if anticipated holding periods for certain properties may materially differ from the initial intended holding periods for such properties, which could result in an impairment charge in the future.

Related-Party Transactions and Agreements

We have entered into agreements with CMFT Management or its affiliates whereby we agree to pay certain fees to, or reimburse certain expenses of, CMFT Management or its affiliates such as management and advisory fees and expenses, organization and offering costs, leasing fees and reimbursement of certain operating costs.

We have entered into agreements with CMFT Management and our Investment Advisor whereby we agree to pay certain fees to, or reimburse certain expenses of, CMFT Management, the Investment Advisor or their affiliates.

In addition, we have invested in, and may continue to invest in, certain co-investments with funds that are advised by an affiliate of CMFT Management.

We may also originate loans to third parties that use the proceeds to finance the acquisition of real estate from funds that are advised by an affiliate of CMFT Management.

See Note 12 — Related-Party Transactions and Arrangements to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q for a discussion of the various related-party transactions, agreements and fees.

Conflicts of Interest

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

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

One of our directors, Elaine Y.

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

One of our independent directors, W.

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

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 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.

Ressler, the chairman of our Board, chief executive officer and president, who is also a founder and principal of CIM and is an officer/director of certain of its affiliates, is the vice president of our manager.

One of our directors, Avraham Shemesh, who is also a founder and principal of CIM and is an officer/director of certain of its affiliates, is the president and treasurer of our manager.

Additionally, two of our directors, Jason Schreiber and Emily Vande Krol, are employees of CIM.

DeBacker, our chief financial officer and treasurer, is a vice president of our manager and is an officer of certain of its affiliates.

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 program sponsored or operated by affiliates of our manager, 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 affiliates of our manager could influence the advice provided to us.

See Part I, Item 1.

Business — Conflicts of Interest in our Annual Report on Form 10-K for the year ended December 31, 2021.

Off-Balance Sheet Arrangements

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