What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-15 compared with 2023-11-14 · 154 added, 194 removed, 272 unchanged (56% of the section changed)

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• 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.

• Our credit and real estate investments subject us to domestic and international political, economic, capital markets and other conditions and 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 face risks associated with security breaches through cyber attacks, cyber intrusions or otherwise, as well as significant disruptions of CIM Group’s information technology (“IT”) networks and related systems.

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

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• 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.

• Our continued compliance with debt covenants depends on many factors and could be impacted by current or future economic conditions.

• We may be affected by risks resulting from losses in excess of insured limits.

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federal income tax purposes.

• We could be subject to a material tax liability if our sales of properties are treated as prohibited transactions.

• We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability or reduce our operating flexibility.

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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 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.

We are a non-traded REIT that seeks to attain attractive risk-adjusted returns and create long term value for our stockholders 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.

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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.

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.

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 vertically-integrated community-focused real estate and infrastructure owner, operator, lender and developer.

As of March 31, 2024, our loan portfolio consisted of 254 loans with a net book value of $4.1 billion, and 25 investments in CMBS and equity securities of $513.5 million.

The Company expects to conduct its commercial real estate lending business through CLR, a Maryland statutory trust and subsidiary of the Company which we expect to be taxed as a REIT for U.S.

federal income tax purposes.

As of March 31, 2024, CLR holds a diversified portfolio of approximately $1.6 billion of the Company’s senior secured mortgage loans and commercial mortgage-backed securities.

As of March 31, 2024, we owned 192 properties, which consisted of 179 retail properties, eight office properties, and five industrial properties, representing 17 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 March 31, 2024, we owned condominium developments with a net book value of $80.1 million.

During the three months ended March 31, 2024, we did not dispose of any properties, as further discussed in Note 4 — Real Estate Assets to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

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.

As of March 31, 2024, 99.3% of our CMBS and loans held-for-investment by net book 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.

In addition, as 99.9% of our rentable square feet was under lease, including any month-to-month agreements, as of March 31, 2024, with a weighted average remaining lease term of 10.5 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.

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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.

The three months ended March 31, 2024 have been characterized by a mix of positive and challenging developments leading to continued volatility in global markets.

Investor concerns over inflation, high interest rates, slowing economic growth, political and regulatory uncertainty and geopolitical conditions have persisted.

If inflation and other economic indicators do not meet central banks’ relevant expectations, interest rates could remain higher for longer than expected by market participants and observers, which could create further uncertainty for the economy and our borrowers.

Continued inflation caused the Federal Reserve to raise interest rates in 2022 and 2023, and while the Federal Reserve has left interest rates unchanged since its July 26, 2023 meeting, 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.

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Operating Highlights and Key Performance Indicators

Activity from January 1, 2023 through September 30, 2023

Activity from January 1, 2024 through March 31, 2024

Operating Results:

• Net income attributable to the Company of $75.0 million, or $0.17 per share.

• Declared aggregate distributions of $0.11 per share.

Credit Portfolio Activity:

• Invested $212.7 million in first mortgage loans.

• Originated a $13.6 million first mortgage loan.

• Funded $10.0 million in existing first mortgage loans.

• Invested $5.6 million in liquid corporate senior loans and sold liquid corporate senior loans for an aggregate gross sales price of $74.1 million.

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• Received principal repayments on loans held-for-investment of $46.3 million.

• Invested $143.2 million in CMBS and received repayments on CMBS of $57.5 million.

• Received repayments on CMBS of $3.2 million.

• Funded an additional $12.0 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.

• Disposed of four condominium units for an aggregate sales price of $13.2 million.

Financing Activity:

• Decreased total debt by $35.5 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.

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,

Asset Count Carrying Value Asset Count Carrying Value

The following table shows the net book value of our portfolio by investment type as of March 31, 2024 and 2023 (dollar amounts in thousands):

As of March 31,

Asset Count Net Book Value

Loan Held-For-Investment

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Total loans held-for-investment and related receivables, net 254 4,110,887 70.8 % 349 3,932,537 67.2 %

Real Estate-Related Securities

CMBS and equity security 25 664,892 11.1 % 17 470,121 7.0 %

Real Estate-Related Securities and Other

CMBS and equity securities

25 549,036 9.5 % 19 520,639 8.9 %

Current expected credit losses (35,562) (0.6) % — — %

Total real estate-related securities, net 25 639,144 10.7 % 17 470,121 7.0 %

Total real estate-related securities and other, net

25 513,474 8.9 % 19 520,639 8.9 %

Total real estate assets and intangible lease liabilities, net 192 1,179,521 20.3 % 228 1,394,810 23.9 %

Total Investment Portfolio (1)

471 $ 5,803,882 100.0 % 596 $ 5,847,986 100.0 %

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(1) 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 $138.3 million as of March 31, 2024.

Credit Portfolio Information

The following table details overall statistics for our credit portfolio as of September 30, 2023 (dollar amounts in thousands):

The following table details overall statistics for our credit portfolio as of March 31, 2024 (dollar amounts in thousands):

CRE Loans (1)(2)

Liquid Corporate Senior Loans CMBS and Equity Security (2)

Liquid Corporate Senior Loans CMBS and Equity Securities (2)

Corporate Senior Loans

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Weighted-average interest rate (4)

8.7 % 9.3 % 9.3 % 11.8 %

Weighted-average maximum years to maturity 2.6 4.1 4.5 (5) 3.7

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(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.

(1) As of March 31, 2024, 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 and assumes all relevant conditions are met for such extensions;

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

(4) The weighted-average interest rate for variable rate investments is based on the relevant floating benchmark plus a spread.

(5) Includes two tranches of a CMBS position held by the Company that did not mature as anticipated in December 2023 and therefore were in maturity default as of March 31, 2024.

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.

As of March 31, 2024, we owned 192 properties located in 37 states, the gross rentable square feet of which was 99.9% leased, including any month-to-month agreements, with a weighted average lease term remaining of 10.5 years.

As of March 31, 2024, no single tenant accounted for greater than 10% of our 2024 annualized rental income.

As of March 31, 2024, 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 2024 annualized rental income.

In addition, we had tenants in the

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,

In addition, we had tenants in the health and personal care stores, manufacturing, and sporting goods, hobby, and musical instrument retailers industries, which accounted for 14%, 12%, and 11%, respectively, of our 2024 annualized rental income.

During the three months ended March 31, 2024, we sold four condominium units for a gross sales price of $13.2 million.

The following table shows the property statistics of our real estate assets as of March 31, 2024 and 2023:

As of March 31,

Number of commercial properties 192 228

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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.

During the nine months ended September 30, 2023 and 2022, the Company did not acquire any properties.

Results of Operations

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.

We are not aware of any material trends or uncertainties, other than national economic conditions affecting real estate in general, such as inflation and increasing 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, 2023 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):

For the Three Months Ended For the Nine Months Ended

September 30, 2023 September 30, 2022 Change September 30, 2023 September 30, 2022 Change

The following table compares our summarized results of operations for the three months ended March 31, 2024 and 2023 by operating segment (amounts in thousands):

For the Three Months Ended

March 31, 2024 March 31, 2023 Change

Credit Segment $ 109,855 $ 108,083 $ 1,772

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168,414 110,462 57,952

Other income (expense):

Other (expense) income:

Credit Segment (6,682) 3,331 (10,013)

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Net income allocated to non-controlling interest

— 129 (129) 8 66 (58)

Net income attributable to the Company $ (38,542) $ 54,184 $ (92,726)

Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022

Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023

Credit Segment

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.

The increase in our Credit segment revenues of $1.8 million for the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to increased average index rates during 2024, as well as an increase in the overall size of our investment portfolio.

As of March 31, 2024, we held $4.6 billion in credit investments compared to $4.5 billion in credit investments as of March 31, 2023.

The increase was partially offset by the suspension of interest income on our risk-rated 5 loans placed on nonaccrual status subsequent to March 31, 2023.

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.

Real Estate Segment

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”.

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

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 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.

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

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 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.

The increase in our Credit segment expenses of $72.5 million for the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to a $65.7 million increase in the provision for credit losses during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, driven by a net increase in the asset-specific credit loss provision of $70.3 million on funded amounts during the three months ended March 31, 2024.

The increase was further driven by a $5.7 million increase in interest expense primarily due to higher average index rates during 2024.

Other (Expense) Income

Other (expense) income for our Credit segment consists of gain (loss) on investment in unconsolidated entities, unrealized (loss) gain on equity securities, along with dividend income from our equity securities.

The decrease in our Credit segment other (expense) income of $10.0 million during the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to recognizing an $11.4 million unrealized loss on equity securities during the three months ended March 31, 2024, as compared to a $2.3 million unrealized gain on equity securities for the same period in 2023.

The change was partially offset by the recognition of a $2.5 million gain on investment in unconsolidated entities during the three months ended March 31, 2024, as compared to a $770,000 loss on investment in unconsolidated entities for the same period in 2023.

Real Estate Segment

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.

The decrease in our Real Estate segment revenues of $14.3 million for the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to the disposition of 36 properties subsequent to March 31, 2023.

Refer to “Same Store Analysis” below for a further discussion of net operating income at our “same store properties”.

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.

The decrease in our Real Estate segment expenses of $14.8 million for the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to the disposition of 36 properties subsequent to March 31, 2023.

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,

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

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 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.

The decrease was also driven by a decrease in impairment charges of $4.8 million for the three months ended March 31, 2024, as compared to the same period in 2023, as there were no properties deemed to be impaired during the three months ended March 31, 2024, compared to one property that was deemed to be impaired during the three months ended March 31, 2023, resulting in impairment charges of $4.8 million.

Other income 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 of $16.5 million for the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to no properties being disposed of during the three months ended March 31, 2024, compared to the disposition of 152 properties resulting in a net gain of $19.6 million during the three months ended March 31, 2023.

The decrease was partially offset due to $1.9 million of unrealized loss on interest rate caps included in other income, net on the condensed consolidated statements of operations for the three months ended March 31, 2023.

The decrease was further offset by $1.2 million of loss on extinguishment of debt recognized during the three months ended March 31, 2023, driven by the termination of certain mortgage loans in connection with the disposition of the underlying properties.

Corporate and Other

Our corporate revenues, which consist primarily of rental income from our condominium and rental units acquired via foreclosure, increased $51,000 during the three months ended March 31, 2024 as compared to the same period in 2023, primarily due to rental credits issued to tenants during the three months ended March 31, 2023 in relation to ongoing onsite condominium and rental unit construction.

Our corporate expenses consist primarily of general and administrative expenses, expense reimbursements to related parties, interest expense, net related to our credit facilities, and property operating expenses related to our condominium and rental units acquired via foreclosure.

The increase in corporate expenses of $276,000 during the three months ended March 31, 2024 as compared to the same period in 2023, was partially due to an increase in property operating expenses of $2.1 million, primarily driven by increased condominium-related legal fees during the three months ended March 31, 2024 as compared to the same period in 2023.

The change was also driven by an increase of $2.1 million in general and administrative expenses during the three months ended March 31, 2024 as compared to the same period in 2023, primarily in connection with restricted stock unit related expense recorded during the three months ended March 31, 2024 as compared to the same period in 2023.

The increase was partially offset by a decrease in interest expense, net of $4.1 million during the three months ended March 31, 2024 as compared to the same period in 2023, driven by the pay down and termination of the credit agreement with JPMorgan Chase Bank, N.A.

and PNC Bank, N.A.

(the “CMFT Credit Facility”) during the three months ended March 31, 2023.

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.

The increase in corporate other income (expense) of $4.1 million during the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to $2.5 million in loss on extinguishment of debt recognized during the three months ended March 31, 2023, driven by the paydown and termination of the CMFT Credit Facility.

The increase was further driven by an increase in other income, net of $952,000 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 March 31, 2024, as compared to the same period in 2023.

The increase was also driven by the disposition of four condominium units resulting in a net gain of $782,000 during the three months ended March 31, 2024, compared to the disposition of one condominium unit for a gain of $60,000 for the three months ended March 31, 2023.

Same Store Analysis

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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.

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.

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 (loss) 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

Comparison of the Three Months Ended March 31, 2024 and 2023

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,

For the Three Months Ended March 31,

2024 2023 Change

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Loss on extinguishment of debt — 1,172 (1,172)

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,

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)

Other (expense) income, net

(68) 1,842 (1,910)

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.

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 — (19,563) 19,563

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Net operating income $ 22,355 $ 36,606 $ (14,251)

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.

A total of 192 properties were acquired before January 1, 2023 and represent our “same store” properties during the three months ended March 31, 2024 and 2023.

“Non-same store” properties, for purposes of the table below, includes properties acquired or disposed of on or after January 1, 2023.

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):

The following table details the components of our Real Estate segment 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,

For the Three Months Ended March 31,

2024 2023 Change 2024 2023 Change 2024 2023 Change

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Total property operating expenses 2,102 2,109 (7) 1,991 1,943 48 111 166 (55)

Net operating income $ 82,351 $ 147,855 $ (65,504) $ 67,640 $ 67,306 $ 334 $ 14,711 $ 80,549 $ (65,838)

Net operating income (loss)

$ 22,355 $ 36,606 $ (14,251) $ 22,552 $ 22,465 $ 87 $ (197) $ 14,141 $ (14,338)

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.

Same store property net operating income remained relatively consistent during the three months ended March 31, 2024, as compared to the same period in 2023.

Non-same store property net operating income decreased $14.3 million during the three months ended March 31, 2024, as compared to the same period in 2023.

The decrease was primarily due to the disposition of 36 properties subsequent to March 31, 2023.

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:

Our Board authorizes 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, 2023 and the three months ended March 31, 2024 for the periods indicated below:

Period Commencing Period Ending Monthly Distribution Amount

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January 2024 September 2024 $0.0375

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.

As of March 31, 2024, we had distributions payable of $16.5 million.

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

Nine Months Ended September 30,

Three Months Ended March 31,

Amount Percent Amount Percent

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____________________________________

(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.

(1) Net cash provided by operating activities for the three months ended March 31, 2024 and 2023 was $50.7 million and $65.1 million, respectively.

Share Redemptions

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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

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.

If sufficient 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.

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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).

During the three months ended March 31, 2024, we received valid redemption requests under our share redemption program totaling approximately 32.1 million shares, of which we redeemed approximately 1.8 million shares subsequent to March 31, 2024 for $11.2 million (at a redemption price of $6.09 per share).

The remaining redemption requests relating to 30.2 million shares went unfulfilled.

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Liquidity and Capital Resources

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

We expect to utilize proceeds from net cash provided by operations, cash proceeds from the sale of credit investments, principal payments received on credit investments, cash proceeds from real estate asset dispositions, proceeds from the Secondary DRIP Offering, proceeds from the sale of subsidiary equity, distributions, as well as secured or unsecured borrowings from banks and other lenders to finance our 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.

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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

March 31, 2024 December 31, 2023

Cash and cash equivalents $ 301,296 $ 247,500

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____________________________________

(1) Subject to borrowing availability.

(1) Reflects the total borrowing capacity approved by the lenders related to the assets pledged as collateral, less the drawn amount.

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):

The following table details our outstanding financing arrangements and borrowing capacity as of March 31, 2024 (in thousands):

Portfolio Financing Outstanding Principal Balance Maximum Capacity (1)

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Morgan Repurchase Facility carry no maximum facility size.

Variance between Average and Quarter-End Repurchase Facility Borrowings Outstanding

The following table compares the average amount outstanding under our Repurchase Facilities during each quarter and the amount outstanding as of the end of each quarter, together with an explanation of significant variances (amounts in thousands):

Quarter Ended

Quarter-End Balance

Weighted-Average Balance During Quarter

December 31, 2023 2,067,264 2,212,706 (145,442) (1)

March 31, 2024 2,028,944 2,065,339 (36,395)

____________________________________

(1) Variance driven by late quarter timing of CMBS sales and debt pay downs primarily in connection with the amended and restated Master Repurchase Agreement with Barclays (as described in further detail in Note 10 — Repurchase Facilities, Notes Payable and Credit Facilities).

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 $639.3 million within the next 12 months, $188.1 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.

As of March 31, 2024, we had unfunded commitments of $218.9 million related to 34 loans and unfunded commitments of $76.7 million related to the NewPoint JV.

Loan funding commitments are generally subject to certain conditions and the satisfaction of borrower milestones.

Therefore, the exact timing and amounts of such future loan fundings are uncertain and will depend on the current and future performance of the underlying collateral assets.

We expect to fund our loan commitments over the remaining term of the related loans, which have a weighted-average future funding period of 3.0 years.

Generally, we expect to meet our liquidity requirements through net cash provided by operations, cash proceeds from the sale of credit investments, principal payments received on credit investments, cash proceeds from real estate asset dispositions, proceeds from the Secondary DRIP Offering, proceeds from the sale of subsidiary equity, distributions, as well as secured or

unsecured borrowings from banks and other lenders to finance our future acquisitions and loan originations, repayment of certain indebtedness and for general corporate uses.

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;

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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%.

As of March 31, 2024, we had debt outstanding with a carrying value of $3.9 billion and a weighted average interest rate of 6.3%.

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):

Our contractual obligations as of March 31, 2024 were as follows (in thousands):

Payments due by period (1)

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Year 1-3 Years 3-5 Years More Than

Unfunded loan commitments (2)

$ 218,902 $ 10,052 $ 110,644 $ 78,517 $ 19,689

Principal payments — variable rate debt 624,623 203,854 — 420,769 —

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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 $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.

(2) Comprised of our off-balance sheet unfunded loan commitments to provide additional CRE loan, corporate senior loan and liquid corporate senior loan financing as of March 31, 2024.

The allocation of our unfunded loan commitments is based on the earlier of the commitment expiration date or the final maturity date;

however, we may be obligated to fund these commitments earlier than such date.

This table does not include $76.7 million of unfunded commitments related to the NewPoint JV.

(3) Interest payments on the variable rate debt, credit facilities and repurchase facilities have been calculated based on outstanding balances as of March 31, 2024 through their respective maturity dates.

This is only an estimate as actual amounts borrowed and interest rates could vary over time.

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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%.

As of March 31, 2024, our ratio of debt to total gross assets net of gross intangible lease liabilities was 64.2%.

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.

Net cash provided by operating activities decreased by $14.4 million for the three months ended March 31, 2024, as compared to the same period in 2023.

The decrease was primarily due to the disposition of 36 properties subsequent to March 31, 2023.

The decrease was partially offset by net increases in credit investments of $171.2 million coupled with an increase in interest rates driving higher interest income for the three months ended March 31, 2024, as compared to the same period in 2023.

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.

For the three months ended March 31, 2024, net cash provided by investing activities decreased by $806.9 million, as compared to the same period in 2023.

The change was primarily due to a decrease in net proceeds from the disposition of real estate assets and condominium units of $764.6 million as the Company disposed of four condominium units

during the three months ended March 31, 2024, as compared to 152 properties and one condominium unit during the same period in 2023.

The change was further driven by a decrease in net proceeds from real estate-related securities of $36.3 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.

For the three months ended March 31, 2024, net cash used in financing activities decreased by $429.1 million, as compared to the same period in 2023.

The change was primarily due to a decrease in net repayments on the repurchase facilities, notes payable and credit facilities of $430.3 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.

We elected to be taxed, and operate our business to qualify, as a REIT for U.S.

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.

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We consider our critical accounting policies to be the following:

• Current Expected Credit Losses;

• Recoverability of Real Estate Assets;

• Allocation of Purchase Price of Real Estate Assets.

• 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, 2023.

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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.

In addition, we have invested in, and may continue to invest in, certain assets 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.

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 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.

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.

Additionally, one of our directors, Jason Schreiber, is an employee of CIM Group.

DeBacker, our chief financial officer, principal accounting officer and treasurer, is an employee of CIM and 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.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis