CIM GROUP, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with the accompanying condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. We make statements in this section that are forward-looking statements within the meaning of the federal securities laws. Certain risks may cause our actual results, performance or achievements to differ materially from those expressed or implied by the following discussion. For a complete discussion of such risk factors, see Item 1A — Risk Factors of this Quarterly Report on Form 10-Q and the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Capitalized terms used herein, but not otherwise defined, shall have the meaning ascribed to those terms in “Part I — Financial Information” of this Quarterly Report on Form 10-Q, including the notes to the condensed consolidated financial statements contained therein, and the terms “we,” “us,” “our” and the “Company” refer to CIM Real Estate Finance Trust, Inc. Forward-Looking Statements This Quarterly Report on Form 10-Q includes “forward-looking statements” (within the meaning of the federal securities laws, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that reflect our expectations and projections about our future results, performance, prospects and opportunities. We have attempted to identify these forward-looking statements by the use of words such as “may,” “will,” “seek,” “expects,” “anticipates,” “believes,” “targets,” “intends,” “should,” “estimates,” “could,” “continue,” “assume,” “projects,” “plans” or similar expressions. These forward-looking statements are based on information currently available to us and are subject to a number of known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, among other things, those discussed below. In addition, these risks and uncertainties include those associated with general economic, market and other conditions. We intend for all such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, as applicable by law. We do not undertake to publicly update or revise any forward-looking statements, whether as a result of changes in underlying assumptions or new information, future events or otherwise, except as may be required to satisfy our obligations under federal securities law. The forward-looking statements should be read in light of the risk factors identified in Item 1A — Risk Factors of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2022. The following are some, but not all, of the assumptions, risks, uncertainties and other factors that could cause our actual results to differ materially from those presented in our forward-looking statements: • 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 domestic and international political, economic, capital markets and other conditions, including with respect to the long-term macroeconomic effects of the COVID-19 pandemic and other events. • We are subject to fluctuations in interest rates which could reduce our ability to generate income on our credit investments. • We are subject to an increase in inflation that could increase our credit and real estate portfolio related costs at a higher rate than our rental income and other revenue and adversely impact demand for rental space and future extensions of our tenants’ leases. • We are subject to competition from entities engaged in lending which may impact the availability of origination and acquisition opportunities acceptable to us. • 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 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 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. • We are subject to risks associated with the incurrence of additional secured or unsecured debt. 47 Table of Contents • We may not be able to maintain profitability. • We may not generate cash flows sufficient to pay our distributions to stockholders or meet our debt service obligations. • Our continued compliance with debt covenants depends on many factors and could be impacted by current or future economic conditions, including those associated with the long-term macroeconomic effects of the COVID-19 pandemic. • We may be affected by risks resulting from losses in excess of insured limits. • We may fail to remain qualified as a REIT for U.S. federal income tax purposes. • We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability or reduce our operating flexibility. • We may be unable to list our shares on a national securities exchange in a particular timeframe or at all. • If we, our operating partnership and any other subsidiaries do not maintain exemptions from registration under the Investment Company Act of 1940, as amended, we will be subject to significant regulation and restrictions on our business and investments, which could materially and adversely impact us. Definitions We use certain defined terms throughout this Quarterly Report on Form 10-Q that have the following meanings: The phrase “annualized rental income” refers to the straight-line rental revenue under our leases on operating properties owned as of the respective reporting date, which includes the effect of rent escalations and any tenant concessions, such as free rent, and excludes any contingent rent, such as percentage rent. Management uses annualized rental income as a basis for tenant, industry and geographic concentrations and other metrics within the portfolio. Annualized rental income is not indicative of future performance. Under a “net lease,” the tenant occupying the leased property (usually as a single tenant) does so in much the same manner as if the tenant were the owner of the property. The tenant generally agrees that it will either have no ability or only limited ability to terminate the lease or abate rent prior to the expiration of the term of the lease as a result of real estate driven events such as casualty, condemnation or failure by the landlord to fulfill its obligations under the lease. There are various forms of net leases, most typically classified as either triple-net or double-net. Triple-net leases typically require the tenant to pay all expenses associated with the property (e.g., real estate taxes, insurance, maintenance and repairs, including roof, structure and parking lot). 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). Overview We are a non-traded REIT that seeks to attain attractive risk-adjusted returns and create long term value for our investors by investing in a diversified portfolio of senior secured mortgage loans, creditworthy long-term net-leased property investments and other senior loan and liquid credit investments. 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. Subject to market conditions, we expect to pursue a listing of our common stock on a national securities exchange at such time as our Board determines that such a listing would be in the best interests of our stockholders, though we can provide no assurance that a listing will happen in a particular 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 Group, a community-focused real estate and infrastructure owner, operator, lender and developer. As of September 30, 2023, our loan portfolio consisted of 346 loans with a net book value of $4.1 billion, and investments in real estate-related securities of $639.1 million. As of September 30, 2023, we owned 194 properties, which consisted of 180 retail properties, nine office properties, and five industrial properties, representing 18 industry sectors and comprising approximately 6.2 million rentable square feet of commercial space located in 37 states, with a net book value of $1.1 billion. As of September 30, 2023, we owned condominium developments with a net book value of $106.5 million. 48 Table of Contents In furtherance of our strategy, during the nine months ended September 30, 2023, we disposed of 186 properties encompassing approximately 4.7 million gross rentable square feet, including the sale of 178 properties that closed under the Realty Income Purchase and Sale Agreement for total consideration of $861.0 million, as further discussed in Note 4 — Real Estate Assets to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q. Our operating results and cash flows are primarily influenced by interest income from our credit investments, rental and other property income from our commercial properties, interest expense on our indebtedness and credit investments and expenses. In general, our business model is such that rising interest rates will correlate to increases in our net income, while declining interest rates will correlate to decreases in our net income. As of September 30, 2023, 99.4% of our CMBS and loans held-for-investment by carrying value earned a floating rate of interest, indexed to SOFR, and were financed with liabilities that pay interest at floating rates, which resulted in an amount of net equity that is positively correlated to rising interest rates, subject to the impact of interest rate floors on certain of our floating rate loans. CMFT Management reviews our investment portfolio and is in regular contact with our borrowers, monitoring performance of the collateral and enforcing our rights as necessary. In addition, as 99.8% of our rentable square feet was under lease, including any month-to-month agreements, as of September 30, 2023, with a weighted average remaining lease term of 10.9 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 our manager 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. Macroeconomic Environment The nine months ended September 30, 2023 have been characterized by continued volatility in global markets, driven by investor concerns over inflation, rising interest rates, slowing economic growth, political and regulatory uncertainty and geopolitical conditions. Multiple bank failures have contributed to instability in the banking sector and have also contributed to diminished liquidity and credit availability in the market broadly. Continued inflation has caused the Federal Reserve to raise interest rates, and while the Federal Reserve declined to raise interest rates at its last two meetings, interest rates are expected to remain at an elevated level in the near-term, which has created further uncertainty for the economy and for our borrowers and tenants. Although the majority of our business model is such that rising interest rates will, all else being equal, correlate to increases in our net income, increases in interest rates may adversely affect our existing borrowers, tenants and owned property values. Additionally, rising rates and increasing costs may dampen consumer spending and slow corporate profit growth, which may negatively impact the collateral underlying certain of our loans and the ability of our tenants to pay rent. While there is debate among economists as to whether such factors indicate that the U.S. will enter a recession, it remains difficult to predict the full impact of recent changes and any future changes in interest rates or inflation. For a complete discussion of risk factors related to the economy that could impact our lending and our business, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. 49 Table of Contents Operating Highlights and Key Performance Indicators Activity from January 1, 2023 through September 30, 2023 Operating Results: • Net income attributable to the Company of $75.0 million, or $0.17 per share. • Declared aggregate distributions of $0.32 per share. Credit Portfolio Activity: • Invested $212.7 million in first mortgage loans. • Invested $105.1 million in liquid corporate senior loans and sold liquid corporate senior loans for an aggregate gross sales price of $76.0 million. • Invested $106.2 million in corporate senior loans. • Received principal repayments on loans held-for-investment of $184.0 million. • Invested $143.2 million in CMBS and received repayments on CMBS of $57.5 million. • Funded an additional $14.5 million in NP JV Holdings. Real Estate Portfolio Activity: • Disposed of 186 properties for an aggregate sales price of $913.5 million. • Disposed of 14 condominium units for an aggregate sales price of $43.1 million. Financing Activity: • Decreased total debt by $371.8 million. • Entered into a new financing facility that provides up to $300.0 million in financing, which may be increased to an aggregate principal amount up to $500.0 million, pursuant to the Loan and Security Agreement. • Paid down the $240.0 million outstanding balance under the CMFT Credit Facility and terminated the CMFT Credit Facility. • Paid down the $121.9 million outstanding balance on the Mortgage Loan. • Paid down the $43.1 million outstanding balance on the refinanced Assumed Variable Rate Debt and terminated the respective amended borrowing agreement. 50 Table of Contents Portfolio Information The following table shows the carrying value of our portfolio by investment type as of September 30, 2023 and 2022 (dollar amounts in thousands): As of September 30, 2023 2022 Asset Count Carrying Value Asset Count Carrying Value Loan Held-For-Investment First mortgage loans 31 $ 3,389,950 56.6 % 29 $ 3,259,744 48.7 % Liquid corporate senior loans 298 664,744 11.1 % 313 705,750 10.6 % Corporate senior loans 17 162,952 2.7 % 4 57,232 0.9 % Less: Current expected credit losses (110,710) (1.8) % (29,584) (0.4) % Total loans held-for-investment and related receivables, net 346 4,106,936 68.6 % 346 3,993,142 59.8 % Real Estate-Related Securities CMBS and equity security 25 664,892 11.1 % 17 470,121 7.0 % Less: Current expected credit losses (25,748) (0.4) % — — % Total real estate-related securities, net 25 639,144 10.7 % 17 470,121 7.0 % Real Estate Total real estate assets and intangible lease liabilities, net 194 1,242,354 20.7 % 384 2,220,272 33.2 % Total Investment Portfolio 565 $ 5,988,434 100.0 % 747 $ 6,683,535 100.0 % Credit Portfolio Information The following table details overall statistics for our credit portfolio as of September 30, 2023 (dollar amounts in thousands): CRE Loans (1)(2) Liquid Corporate Senior Loans CMBS and Equity Security (2) Corporate Senior Loans Number of investments (3) 31 298 25 17 Principal balance $ 3,406,765 $ 671,321 $ 772,198 $ 165,701 Net book value $ 3,299,530 $ 646,753 $ 639,144 $ 160,653 Unfunded loan commitments $ 255,385 $ 201 $ — $ 25,000 Weighted-average interest rate 8.6 % 9.1 % 9.1 % 11.9 % Weighted-average maximum years to maturity 2.9 4.4 4.6 3.5 ____________________________________ (1) As of September 30, 2023, 100% of our loans by principal balance earned a floating rate of interest, primarily indexed to SOFR. (2) Maximum maturity date assumes all extension options are exercised by the borrower; however, our CRE loans and CMBS investments may be repaid prior to such date. (3) Table does not include our investment in the Unconsolidated Joint Venture (as defined in Note 2 — Summary of Significant Accounting Policies — Investment in Unconsolidated Entities to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q), which had a carrying value of $110.8 million as of September 30, 2023. Real Estate Portfolio Information As of September 30, 2023, we owned 194 properties located in 37 states, the gross rentable square feet of which was 99.8% leased, including any month-to-month agreements, with a weighted average lease term remaining of 10.9 years. As of September 30, 2023, no single tenant accounted for greater than 10% of our 2023 annualized rental income. As of September 30, 2023, we had certain geographic and industry concentrations in our property holdings. In particular, we had properties located in Ohio, which accounted for 16% of our 2023 annualized rental income. In addition, we had tenants in the 51 Table of Contents health and personal care stores, manufacturing, and sporting goods, hobby, and musical instrument retailers industries, which accounted for 14%, 11%, and 11%, respectively, of our 2023 annualized rental income. During the nine months ended September 30, 2023, we disposed of 186 properties for an aggregate gross sales price of $913.5 million. Additionally, during the nine months ended September 30, 2023, we sold 14 condominium units for a gross sales price of $43.1 million. The following table shows the property statistics of our real estate assets as of September 30, 2023 and 2022: As of September 30, 2023 2022 Number of commercial properties 194 384 Rentable square feet (in thousands) (1) 6,239 11,043 Percentage of rentable square feet leased 99.8 % 99.3 % Percentage of investment-grade tenants (2) 33.4 % 39.3 % ____________________________________ (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 or a credit rating of Baa3 or higher by Moody’s Investor Service, Inc. (“Moody’s”). 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. During the nine months ended September 30, 2023 and 2022, the Company did not acquire any properties. Results of Operations Overview We are not aware of any material trends or uncertainties, other than national economic conditions affecting real estate in general, such as inflation and rising interest rates, that may reasonably be expected to have a material impact on our results from the acquisition, management and operation of properties and credit investments other than those listed in the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2022 and this Quarterly Report on Form 10-Q. Our operating segments include Credit and Real Estate. 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. The following table compares our summarized results of operations for the three and nine months ended September 30, 2023 and 2022 by operating segment (amounts in thousands): 52 Table of Contents For the Three Months Ended For the Nine Months Ended September 30, 2023 September 30, 2022 Change September 30, 2023 September 30, 2022 Change Revenues: Credit Segment $ 113,766 $ 66,222 $ 47,544 $ 336,887 $ 142,669 $ 194,218 Real Estate Segment 25,008 43,465 (18,457) 89,311 170,509 (81,198) Corporate 65 94 (29) 225 294 (69) 138,839 109,781 29,058 426,423 313,472 112,951 Expenses: Credit Segment 121,762 47,109 74,653 304,023 101,692 202,331 Real Estate Segment 26,845 32,975 (6,130) 77,942 139,017 (61,075) Corporate 12,392 12,063 329 33,762 43,686 (9,924) 160,999 92,147 68,852 415,727 284,395 131,332 Other income (expense): Credit Segment 3,475 (5,685) 9,160 16,873 (9,414) 26,287 Real Estate Segment 4,947 1,412 3,535 43,408 101,195 (57,787) Corporate 2,696 2,178 518 4,048 7,395 (3,347) 11,118 (2,095) 13,213 64,329 99,176 (34,847) Net income (11,042) 15,539 (26,581) 75,025 128,253 (53,228) Net income allocated to non-controlling interest — 129 (129) 8 66 (58) Net income attributable to the Company $ (11,042) $ 15,410 $ (26,452) $ 75,017 $ 128,187 $ (53,170) Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022 Credit Segment Revenues The increase in our Credit segment revenues of $47.5 million for the three months ended September 30, 2023, as compared to the same period in 2022, was primarily due to increased average index rates during 2023, as well as an increase in the overall size of our investment portfolio. As of September 30, 2023, we held $4.7 billion in credit investments compared to $4.5 billion in credit investments as of September 30, 2022. Expenses Expenses for our Credit segment consist primarily of interest expense, management fees, increases (decreases) to our provision for credit losses, and general and administrative expenses. The increase in our Credit segment expenses of $74.7 million for the three months ended September 30, 2023, as compared to the same period in 2022, was primarily due to a $44.6 million increase in the provision for credit losses driven by the asset-specific credit loss provision of $63.9 million recognized on two of the Company’s first mortgage loan investments, partially offset by reversals to the increase in provision for credit losses, during the three months ended September 30, 2023, as compared to the same period in 2022. The increase was further driven by increased interest expenses due to higher average index rates during 2023 and increased outstanding borrowings used to fund credit investments. As of September 30, 2023, we held $4.7 billion in credit investments compared to $4.5 billion in credit investments as of September 30, 2022. Other Income (Expense) Other income (expense) for our Credit segment consists of gain on investment in unconsolidated entities, unrealized (loss) gain on equity security, along with dividend income from our equity security. The increase in our Credit segment other income (expense) of $9.2 million during the three months ended September 30, 2023, as compared to the same period in 2022, was primarily due to recognizing a $2.1 million unrealized loss on equity security during the three months ended September 30, 2023, as compared to a $9.0 million unrealized loss on equity security for the same period in 2022. 53 Table of Contents Real Estate Segment Revenues The decrease in our Real Estate segment revenues of $18.5 million for the three months ended September 30, 2023, as compared to the same period in 2022, was primarily due to the disposition of 190 properties subsequent to September 30, 2022. Refer to “Same Store Analysis” below for a further discussion of net operating income at our “same store properties”. Expenses The decrease in our Real Estate segment expenses of $6.1 million for the three months ended September 30, 2023, as compared to the same period in 2022, was primarily due to the disposition of 190 properties subsequent to September 30, 2022. Refer to “Same Store Analysis” below for a further discussion of net operating income at our “same store properties”. The decrease was partially offset by an increase in impairment charges of $6.2 million for the three months ended September 30, 2023, as compared to the same period in 2022, as four properties were deemed to be impaired during the three months ended September 30, 2023, resulting in impairment charges of $6.8 million, as compared to one property that was deemed to be impaired during the three months ended September 30, 2022, resulting in impairment charges of $527,000. Other Income (Expense) Other income (expense) for our Real Estate segment primarily consists of gain on disposition of real estate and condominium developments, net, loss on extinguishment of debt and other income, net. The increase in our Real Estate segment other income (expense) of $3.5 million for the three months ended September 30, 2023, as compared to the same period in 2022, was primarily due to no loss on extinguishment of debt recognized during the three months ended September 30, 2023, as compared to $5.6 million loss on extinguishment of debt recognized in connection with the repayment of certain mortgage notes for the same period in 2022. The increase was partially offset by a $2.8 million decrease in unrealized gain on interest rate caps included in other income, net on the condensed consolidated statements of operations for the three months ended September 30, 2023, as compared to the same period in 2022. Corporate Segment and Other Revenues Our Corporate segment revenues, which consist primarily of rental income from our condominium and rental units acquired via foreclosure, decreased $29,000 during the three months ended September 30, 2023 as compared to the same period in 2022, primarily due to the write-off of certain rent previously owed as a result of a settlement during the three months ended September 30, 2023. Expenses Expenses for our Corporate segment consist primarily of general and administrative expenses, expense reimbursements to related parties, interest expense, net related to our credit facilities, and impairment on our condominium and rental units acquired via foreclosure. The increase in Corporate segment expenses of $329,000 during the three months ended September 30, 2023 as compared to the same period in 2022, was primarily due to an increase in property operating expenses of $2.3 million, which was driven by increased litigation expenses. The change was partially offset by a decrease in interest expense, net of $2.0 million during the three months ended September 30, 2023 as compared to the same period in 2022, primarily due to the pay down and termination of the CMFT Credit Facility during the nine months ended September 30, 2023. Other Income (Expense) The increase in Corporate segment other income (expense) of $518,000 during the three months ended September 30, 2023, as compared to the same period in 2022, was primarily driven by an increase in other income, net of $3.1 million due to interest income generated by an increase in short-term liquid investments included in cash and cash equivalents on the condensed consolidated balance sheets during the three months ended September 30, 2023, as compared to the same period in 2022. The increase was further driven by a $728,000 increase in gain on real estate and condominium developments, net during the three months ended September 30, 2023, as compared to the same period in 2022. The increase was partially offset by an increase in loss on extinguishment of debt during the three months ended September 30, 2023, as compared to the same period in 2022, driven by the paydown and termination of the refinanced Assumed Variable Rate Debt. 54 Table of Contents Net Income Allocated to Non-Controlling Interest The change in net income allocated to non-controlling interest of $129,000 for the three months ended September 30, 2023, as compared to the same period in 2022, was due to the disposition of the two properties previously owned through a consolidated joint venture arrangement during the year ended December 31, 2022, and therefore no income allocated to non-controlling interest was recorded during the three months ended September 30, 2023. Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022 Credit Segment Revenues The increase in our Credit segment revenues of $194.2 million for the nine months ended September 30, 2023, as compared to the same period in 2022, was primarily due to increased average index rates during 2023, as well as an increase in the overall size of our investment portfolio. As of September 30, 2023, we held $4.7 billion in credit investments compared to $4.5 billion in credit investments as of September 30, 2022. Expenses Expenses for our Credit segment consists primarily of interest expense, management fees, increases (decreases) to our provision for credit losses, and general and administrative expenses. The increase in our Credit segment expenses of $202.3 million for the nine months ended September 30, 2023, as compared to the same period in 2022, was primarily driven by increased interest expenses due to higher average index rates during 2023 and increased outstanding borrowings used to fund credit investments. As of September 30, 2023, we held $4.7 billion in credit investments compared to $4.5 billion in credit investments as of September 30, 2022. The increase was further driven by an increase in the provision for credit losses of $86.0 million, primarily due to the asset-specific credit loss provision of $63.9 million recognized on two of the Company’s first mortgage loan investments, partially offset by reversals to the increase in provision for credit losses, and the $25.7 million credit loss allowance related to a CMBS position that was recognized due to a decline in the underlying collateral value during the nine months ended September 30, 2023. Other Income (Expense) Other income (expense) for our Credit segment consists of gain on investment in unconsolidated entities, unrealized gain (loss) on equity security, along with dividend income from our equity security. The increase in our Credit segment other income (expense) of $26.3 million during the nine months ended September 30, 2023, as compared to the same period in 2022, was primarily due to recognizing a $3.3 million unrealized gain on equity security during the nine months ended September 30, 2023, compared to a $15.5 million unrealized loss on equity security during the nine months ended September 30, 2022. The increase was further driven by a $4.5 million increase in gain on investment in unconsolidated entities during the nine months ended September 30, 2023, compared to the same period in 2022, along with a $1.4 million increase in dividend income from our equity security during the nine months ended September 30, 2023, compared to the same period in 2022. Real Estate Segment Revenues The decrease in our Real Estate segment revenues of $81.2 million for the nine months ended September 30, 2023, as compared to the same period in 2022, was primarily due to the disposition of 190 properties subsequent to September 30, 2022. Refer to “Same Store Analysis” below for a further discussion of net operating income at our “same store properties”. Expenses The decrease in our Real Estate segment expenses of $61.1 million for the nine months ended September 30, 2023, as compared to the same period in 2022, was primarily due to the disposition of 190 properties subsequent to September 30, 2022. Refer to “Same Store Analysis” below for a further discussion of net operating income at our “same store properties”. Other Income (Expense) Other income (expense) for our Real Estate segment primarily consists of gain on disposition of real estate and condominium developments, net, loss on extinguishment of debt and other income, net. The decrease in our Real Estate segment other income (expense) of $57.8 million for the nine months ended September 30, 2023, as compared to the same period in 2022, was primarily due to the disposition of 186 properties and the receipt of additional earnout proceeds upon the settlement of earnout claims related to the disposition of the properties pursuant to the RTL Purchase and Sale Agreement, 55 Table of Contents resulting in a gain of $49.2 million during the nine months ended September 30, 2023, compared to the disposition of 130 properties and an outparcel of land for a gain of $115.0 million during the nine months ended September 30, 2022. Other income (expense) was further reduced due to a $4.6 million decrease in the fair value of our interest rate caps during the nine months ended September 30, 2023, as compared to a $4.2 million increase in the fair value of our interest rate caps during the nine months ended September 30, 2022. The decrease was partially offset by a $17.4 million decrease in loss on extinguishment of debt, driven by increased termination of certain mortgage notes in connection with the disposition of the underlying properties during the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2023. Corporate Segment and Other Revenues Our Corporate segment revenues, which consist primarily of rental income from our condominium and rental units acquired via foreclosure, decreased $69,000 during the nine months ended September 30, 2023, as compared to the same period in 2022, primarily due to the write-off of certain rent previously owed as a result of a settlement during the nine months ended September 30, 2023. Expenses Expenses for our Corporate segment consists primarily of general and administrative expenses, expense reimbursements to related parties, interest expense related to our credit facilities, and impairment on our condominium and rental units acquired via foreclosure. The decrease in Corporate segment expenses of $9.9 million during the nine months ended September 30, 2023, as compared to the same period in 2022, was primarily driven by a decrease in impairment charges related to condominium units of $7.8 million. The change was further driven by a decrease in interest expense, net primarily due to the pay down and termination of the CMFT Credit Facility during the nine months ended September 30, 2023 as compared to the same period in 2022. The change was partially offset by an increase in property operating expenses of $3.3 million, primarily driven by increased litigation expenses during the nine months ended September 30, 2023 as compared to the same period in 2022. Other Income (Expense) The decrease in Corporate segment other income (expense) of $3.3 million during the nine months ended September 30, 2023, as compared to the same period in 2022, was primarily driven by the $5.2 million net gain during the nine months ended September 30, 2022 related to our investment in CIM UII Onshore, which was subsequently redeemed during 2022. The change was further driven by a $3.5 million increase in loss on extinguishment of debt during the nine months ended September 30, 2023, as compared to the same period in 2022, primarily in connection with the pay down and termination of the CMFT Credit Facility and the refinanced Assumed Variable Rate Debt. The decrease was partially offset by a $5.4 million increase in other income, net primarily due to interest income generated by an increase in short-term liquid investments included in cash and cash equivalents on the condensed consolidated balance sheets during the nine months ended September 30, 2023, as compared to the same period in 2022. Net Income Allocated to Non-Controlling Interest The change in net income allocated to non-controlling interest for the nine months ended September 30, 2023, as compared to the same period in 2022, was due to the Company having sold the two properties previously owned through a consolidated joint venture arrangement during the year ended December 31, 2022, and therefore no longer having a controlling financial interest in the consolidated joint venture arrangement during the nine months ended September 30, 2023. Same Store Analysis Our results of operations are influenced by the timing of acquisitions and the operating performance of our real estate assets. We review our stabilized operating results, measured by net operating income, from properties that we owned for the entirety of both the current and prior year reporting periods, referred to as “same store” properties, and we believe that the presentation of operating results for same store properties provides useful information to stockholders. Net operating income is a supplemental non-GAAP financial measure of a real estate company’s operating performance. 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) 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 56 Table of Contents 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. 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, 2023 and 2022 The following table reconciles our Real Estate segment net income, calculated in accordance with GAAP, to net operating income (in thousands): For the Three Months Ended September 30, 2023 2022 Change Net income $ 3,110 $ 11,902 $ (8,792) Loss on extinguishment of debt — 5,615 (5,615) Other income (expense), net 385 (2,423) 2,808 Gain on disposition of real estate and condominium developments, net (5,332) (4,604) (728) Real estate impairment 6,754 527 6,227 Depreciation and amortization 9,193 16,948 (7,755) Transaction-related expenses 82 2 80 Management fees 2,580 4,849 (2,269) General and administrative expenses 118 215 (97) Interest expense, net 5,358 6,940 (1,582) Net operating income $ 22,248 $ 39,971 $ (17,723) A total of 194 properties were acquired before July 1, 2022 and represent our “same store” properties during the three months ended September 30, 2023 and 2022. “Non-same store” properties, for purposes of the table below, includes properties acquired or disposed of on or after July 1, 2022. The following table details the components of our Real Estate segment net operating income broken out between same store and non-same store properties (in thousands): Total Same Store Non-Same Store For the Three Months Ended September 30, For the Three Months Ended September 30, For the Three Months Ended September 30, 2023 2022 Change 2023 2022 Change 2023 2022 Change Rental and other property income $ 25,008 $ 43,465 $ (18,457) $ 24,529 $ 24,293 $ 236 $ 479 $ 19,172 $ (18,693) Property operating expenses 1,515 2,109 (594) 1,027 942 85 488 1,167 (679) Real estate tax expenses 1,245 1,385 (140) 929 948 (19) 316 437 (121) Total property operating expenses 2,760 3,494 (734) 1,956 1,890 66 804 1,604 (800) Net operating income (loss) $ 22,248 $ 39,971 $ (17,723) $ 22,573 $ 22,403 $ 170 $ (325) $ 17,568 $ (17,893) Net Operating Income Same store property net operating income remained relatively consistent during the three months ended September 30, 2023, as compared to the same period in 2022. Non-same store property net operating income decreased $17.9 million during the three months ended September 30, 2023, as compared to the same period in 2022. The decrease was primarily due to the disposition of 190 properties subsequent to September 30, 2022. 57 Table of Contents Comparison of the Nine Months Ended September 30, 2023 and 2022 The following table reconciles our Real Estate segment net income, calculated in accordance with GAAP, to net operating income (in thousands): For the Nine Months Ended September 30, 2023 2022 Change Net income $ 54,777 $ 132,687 $ (77,910) Loss on extinguishment of debt 1,192 18,609 (17,417) Other income (expense), net 4,577 (4,754) 9,331 Gain on disposition of real estate and condominium developments, net (49,177) (115,050) 65,873 Real estate impairment 11,568 11,869 (301) Depreciation and amortization 33,622 54,104 (20,482) Transaction-related expenses 107 439 (332) Management fees 8,471 17,176 (8,705) General and administrative expenses 540 494 46 Interest expense, net 16,674 32,281 (15,607) Net operating income $ 82,351 $ 147,855 $ (65,504) A total of 194 properties were acquired before January 1, 2022 and represent our “same store” properties during the nine months ended September 30, 2023 and 2022. “Non-same store” properties, for purposes of the table below, includes properties acquired or disposed of on or after January 1, 2022. The following table details the components of our Real Estate segment net operating income broken out between same store and non-same store properties (in thousands): Total Same Store Non-Same Store For the Nine Months Ended September 30, For the Nine Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 Change 2023 2022 Change 2023 2022 Change Rental and other property income $ 89,311 $ 170,509 $ (81,198) $ 73,447 $ 72,789 $ 658 $ 15,864 $ 97,720 $ (81,856) Property operating expenses 4,400 13,403 (9,003) 2,978 2,674 304 1,422 10,729 (9,307) Real estate tax expenses 2,560 9,251 (6,691) 2,829 2,809 20 (269) 6,442 (6,711) Total property operating expenses 6,960 22,654 (15,694) 5,807 5,483 324 1,153 17,171 (16,018) Net operating income $ 82,351 $ 147,855 $ (65,504) $ 67,640 $ 67,306 $ 334 $ 14,711 $ 80,549 $ (65,838) Net Operating Income Same store property net operating income remained relatively consistent during the nine months ended September 30, 2023, as compared to the same period in 2022. Non-same store property net operating income decreased $65.8 million during the nine months ended September 30, 2023, as compared to the same period in 2022. The decrease was primarily due to the disposition of 190 properties subsequent to September 30, 2022. 58 Table of Contents Distributions Our Board declares distributions on a quarterly basis, which are paid out on a monthly basis. Our Board authorized the following monthly distribution amounts per share, payable to stockholders as of the record date for the applicable month, during the year ended December 31, 2022 and the nine months ended September 30, 2023 for the periods indicated below: Period Commencing Period Ending Monthly Distribution Amount January 2022 September 2022 $0.0305 October 2022 December 2022 $0.0339 January 2023 September 2023 $0.0350 October 2023 December 2023 $0.0367 January 2024 March 2024 $0.0375 As of September 30, 2023, we had distributions payable of $15.3 million. The following table presents distributions and source of distributions for the periods indicated below (dollar amounts in thousands): Nine Months Ended September 30, 2023 2022 Amount Percent Amount Percent Distributions paid in cash $ 105,179 77 % $ 91,297 76 % Distributions reinvested 32,117 23 % 28,664 24 % Total distributions $ 137,296 100 % $ 119,961 100 % Source of distributions: Net cash provided by operating activities (1) $ 137,296 100 % $ 119,961 100 % Total sources $ 137,296 100 % $ 119,961 100 % ____________________________________ (1) Net cash provided by operating activities for the nine months ended September 30, 2023 and 2022 was $170.5 million and $125.4 million, respectively. Share Redemptions Our share redemption program permits our stockholders to sell their shares of common stock back to us, subject to certain conditions and limitations. We will limit the number of shares redeemed pursuant to our share redemption program as follows: (1) we will not redeem in excess of 5% of the weighted average number of shares outstanding during the trailing 12 months prior to the end of the fiscal quarter for which the redemptions are being paid; and (2) funding for the redemption of shares will be limited, among other things, to the net proceeds we receive from the sale of shares under our DRIP, net of shares redeemed to date. In an effort to accommodate redemption requests throughout the calendar year, we will generally limit quarterly redemptions to approximately 1.25% of the weighted average number of shares outstanding during the trailing 12-month period ending on the last day of the fiscal quarter for which the redemptions are being paid, and to the net proceeds we receive from the sale of shares in the respective quarter under the Secondary DRIP Offering. Any of the foregoing limits might prevent us from accommodating all redemption requests made in any fiscal quarter or in any 12-month period. We will determine whether we have sufficient funds and/or shares available as soon as practicable after the end of each fiscal quarter, but in any event prior to the applicable payment date. If we cannot purchase all shares presented for redemption in any fiscal quarter, based upon insufficient cash available from the sale of shares under our DRIP and/or the limit on the number of shares we may redeem during any quarter or year, we will give priority to the redemption of deceased stockholders’ shares and stockholders with exigent circumstances, as determined in our sole discretion and accompanied by such evidentiary documentation as we may request. While the shares of deceased stockholders and stockholders determined to have exigent circumstances will be included in calculating the maximum number of shares that may be redeemed in any annual or quarterly period, they will not be subject to the annual or quarterly percentage caps; therefore, if the volume of requests to redeem deceased stockholders’ shares and stockholders determined to have exigent circumstances in a particular quarter were large enough to cause the annual or quarterly percentage caps to be exceeded, even if no other redemption requests were processed, the redemptions of deceased stockholders’ shares and stockholders determined to have exigent circumstances would be completed in full, assuming sufficient proceeds from the sale of shares under our DRIP, net of shares redeemed to date, were available. If sufficient 59 Table of Contents proceeds from the sale of shares under our DRIP, net of shares redeemed to date, were not available to pay all such redemptions in full, the requests to redeem deceased stockholders’ shares and shareholders determined to have exigent circumstances would be honored on a pro rata basis. We next will give priority to requests for full redemption of accounts with a balance of 250 shares or less at the time we receive the request, in order to reduce the expense of maintaining small accounts. Thereafter, we will honor the remaining redemption requests on a pro rata basis. Following such quarterly redemption period, if a stockholder would like to resubmit the unsatisfied portion of the prior request for redemption, such stockholder must submit a new request for redemption of such shares prior to the last day of the new quarter. Unfulfilled requests for redemption will not be carried over automatically to subsequent redemption periods. In addition, our management reserves the right, in its sole discretion at any time, and from time to time, to reject any request for redemption for any reason. 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 nine months ended September 30, 2023, we received valid redemption requests under our share redemption program totaling approximately 80.8 million shares, of which we redeemed approximately 3.4 million shares as of September 30, 2023 for $22.4 million (at an average redemption price of $6.57 per share) and approximately 1.6 million shares subsequent to September 30, 2023 for $10.7 million (at a redemption price of $6.57 per share). The remaining redemption requests relating to 75.8 million shares went unfulfilled. 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. Liquidity and Capital Resources General 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 interest income from our portfolio of credit investments and the rental and other property income received from current and future leased properties. Sources of Liquidity Our primary sources of liquidity include cash and cash equivalents and available borrowings under our debt facilities, which are set forth in the following table (in thousands): September 30, 2023 December 31, 2022 Cash and cash equivalents $ 486,383 $ 118,978 Unused borrowing capacity (1) 1,035,592 513,121 $ 1,521,975 $ 632,099 ____________________________________ (1) Subject to borrowing availability. See Note 10 — Repurchase Facilities, Notes Payable and Credit Facilities to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q for additional details regarding our repurchase facilities, notes payable and credit facilities. The following table details our outstanding financing arrangements and borrowing capacity as of September 30, 2023 (in thousands): Portfolio Financing Outstanding Principal Balance Maximum Capacity (1) Notes payable – variable rate debt $ 494,381 $ 494,381 ABS mortgage notes 758,520 758,520 Credit facilities 490,500 850,000 Repurchase facilities 2,328,715 3,004,807 (2) Total portfolio financing $ 4,072,116 $ 5,107,708 ____________________________________ (1) Subject to borrowing availability. (2) Facilities under the J.P. Morgan Repurchase Facility carry no maximum facility size. 60 Table of Contents Capital Resources Our principal demands for funds will be for the acquisition or origination of credit investments and real estate, and the payment of tenant improvements, acquisition-related expenses, operating expenses, distributions, redemptions and interest and principal on current and any future debt financings, including principal repayments of $715.0 million within the next 12 months, $304.8 million of which has a rolling term that resets monthly, as further discussed in Note 10 — Repurchase Facilities, Notes Payable and Credit Facilities to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q. Generally, we expect to meet our liquidity requirements through net cash provided by operations, cash proceeds from real estate asset dispositions, cash proceeds from the sale of credit investments, principal payments received on credit investments, 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. We expect that substantially all net cash flows from operations will be used to pay distributions to our stockholders after certain capital expenditures, including tenant improvements and leasing commissions, are paid; however, we have used, and may continue to use, other sources to fund distributions, as necessary, including borrowings on our unencumbered assets. To the extent that cash flows from operations are lower, distributions paid to our stockholders may be lower. Operating cash flows are expected to increase as we complete future acquisitions. We expect that substantially all net cash flows from the Secondary DRIP Offering 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 believe that the resources stated above will be sufficient to satisfy our operating requirements for the foreseeable future, and we do not anticipate a need to raise funds from sources other than those described above within the next 12 months. Management intends to use the proceeds from the disposition of properties to, among other things, acquire additional high-quality net-lease properties and credit investments in furtherance of our investment objectives and for other general corporate purposes. Contractual Obligations As of September 30, 2023, we had debt outstanding with a carrying value of $4.1 billion and a weighted average interest rate of 6.4%. See Note 10 — Repurchase Facilities, Notes Payable 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, 2023 were as follows (in thousands): Payments due by period (1) Total Less Than 1 Year 1-3 Years 3-5 Years More Than 5 Years Principal payments — variable rate debt $ 494,381 $ 73,612 $ — $ 420,769 $ — Principal payments — ABS mortgage notes 758,520 — — 303,408 455,112 Principal payments — credit facilities 490,500 — — 490,500 — Principal payments — repurchase facilities 2,328,715 641,354 1,687,361 — — Interest payments (2) 660,718 237,787 281,439 103,400 38,092 Total $ 4,732,834 $ 952,753 $ 1,968,800 $ 1,318,077 $ 493,204 ____________________________________ (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 $280.6 million of unfunded commitments related to our existing CRE loans held-for-investment, corporate senior loans held-for-investment and liquid corporate senior loans and $104.0 million of unfunded commitments related to the NewPoint JV, which are subject to the satisfaction of borrower milestones. In addition, the table does not include $9.3 million of unsettled liquid corporate senior loan acquisitions, which is included in cash and cash equivalents on the accompanying condensed consolidated balance sheet. (2) Interest payments on the variable rate debt, credit facilities and repurchase facilities have been calculated based on outstanding balances as of September 30, 2023 through their respective maturity dates. This is only an estimate as actual amounts borrowed and interest rates could vary over time. 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, 2023, our ratio of debt to total gross assets net of gross intangible lease liabilities was 65.5%. 61 Table of Contents Cash Flow Analysis Operating Activities. Net cash provided by operating activities increased by $45.1 million for the nine months ended September 30, 2023, as compared to the same period in 2022. The increase was primarily due to net increases in credit investments of $282.8 million coupled with an increase in interest rates driving higher interest income, partially offset by the disposition of 190 properties subsequent to September 30, 2022. See “— Results of Operations” for a more complete discussion of the factors impacting our operating performance. Investing Activities. For the nine months ended September 30, 2023, net cash provided by investing activities was $678.8 million, as compared to net cash used in investing activities of $494.8 million in the same period in 2022. The change was primarily due to a decrease in the net investment in loans held-for-investment of $1.2 billion, a decrease in the net investment in real estate-related securities of $331.2 million, and a decrease in the net investment in unconsolidated entities of $8.5 million, partially offset by a decrease in proceeds from the disposition of real estate assets of $330.5 million. Financing Activities. For the nine months ended September 30, 2023, net cash used in financing activities was $516.1 million, as compared to net cash provided by financing activities of $413.0 million in the same period in 2022. The change was primarily due to a decrease in net proceeds from borrowings on the repurchase facilities, notes payable and credit facilities of $927.0 million. Election as a REIT 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). 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. We will not be able to deduct distributions paid to our stockholders in any year in which we fail to maintain our qualification as a REIT. We also will be disqualified for the four taxable years following the year during which qualification was lost, unless we are entitled to relief under specific statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to stockholders. However, we believe that we are organized and operate in such a manner as to maintain our qualification as a REIT for federal income tax purposes. No provision for federal income taxes has been made in our accompanying condensed consolidated financial statements. We are subject to certain state and local taxes related to the operations of properties in certain locations, which have been provided for in our accompanying condensed consolidated financial statements. Critical Accounting Policies and Significant Accounting Estimates Our accounting policies have been established to conform with GAAP. The preparation of financial statements in conformity with GAAP requires us to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Management believes that we have made these estimates and assumptions in an appropriate manner and in a way that accurately reflects our financial condition. We continually test and evaluate these estimates and assumptions using our historical knowledge of the business, as well as other factors, to ensure that they are reasonable for reporting purposes. However, actual results may differ from these estimates and assumptions. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other companies may utilize different estimates that may impact comparability of our results of operations to those of companies in similar businesses. We believe the following critical accounting policies govern the significant judgments and estimates used in the preparation of our financial statements, which should be read in conjunction with the more complete discussion of our accounting policies and procedures included in Note 2 — Summary of Significant Accounting Policies to our audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022. We consider our critical accounting policies to be the following: • Recoverability of Real Estate Assets; • Allocation of Purchase Price of Real Estate Assets; and • Current Expected Credit Losses. 62 Table of Contents 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, 2022. 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, 2022 and related notes thereto. Related-Party Transactions and Agreements 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 Richard S. Ressler, the chairman of our Board, chief executive officer and president, who is also a founder and principal of CIM Group 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 Group 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 Group. Nathan D. DeBacker, our chief financial officer, principal accounting 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 Group 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, 2022.