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Item 7. Management’s Discussion and Analysis

2025-03-28 compared with 2024-03-28 · 141 added, 107 removed, 441 unchanged (36% of the section changed)

9 unchanged sentences

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

We are externally managed by CMFT Management and, with respect to investments in securities and certain other investments of ours, 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 December 31, 2024, our loan portfolio consisted of 68 loans with a net book value of $3.4 billion, and investments in real estate-related securities of $345.8 million.

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

The Company conducts and expects to continue 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 February 29, 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 December 31, 2023, 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 December 31, 2024 , CLR holds a diversified portfolio of approximately $1.5 billion, which includes first mortgage loans with a net book value of $1.05 billion, CMBS with an estimated fair value of $241.3 million, and an investment in the Unconsolidated Joint Venture (as defined in Note 2 — Summary of Significant Accounting Policies — Investment in Unconsolidated Entities to the consolidated financial statements in this Annual Report on Form 10-K) with a carrying value of $171.8 million.

As of December 31, 2024, we owned 187 commercial real estate properties, which consisted of 176 retail properties, seven office properties, and four industrial properties, representing 16 industry sectors and comprising approximately 5.8 million rentable square feet of commercial space located in 36 states, with a net book value of $983.3 million.

As of December 31, 2024, we owned condominium developments with a net book value of $64.9 million.

During the year ended December 31, 2023, we disposed of 188 properties encompassing 4.8 million gross rentable square feet, including the sale of 178 properties that closed pursuant to the Realty Income Purchase and Sale Agreement (as defined in Note 4 — Real Estate Assets to the consolidated financial statements in this Annual Report on Form 10-K) for total consideration of $861.0 million, as further discussed in Note 4 — Real Estate Assets to the consolidated financial statements in this Annual Report on Form 10-K.

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.

During the year ended December 31, 2024, we disposed of seven properties encompassing 430,000 gross rentable square feet, and 11 condominium units for total consideration of $128.0 million, as further discussed in Note 4 — Real Estate Assets to the consolidated financial statements in this Annual Report on Form 10-K.

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.

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Macroeconomic Environment

The year 2023 was 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.

Events affecting financial institutions 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 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.

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.

The year 2024 was characterized by a mix of positive and challenging developments leading to continued volatility in global markets.

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

Heightened inflation caused the Federal Reserve to raise interest rates in 2022 and 2023.

Although the majority of our business model is such that elevated interest rates will, all else being equal, correlate to increases in our net income, increases in interest rates may adversely affect the ability of our existing borrowers to pay debt service, tenants and property values of our own portfolio and the assets that serve as collateral for our loans.

The Federal Reserve began to decrease interest rates in the second half of 2024 and has indicated that it may continue to decrease interest rates in 2025.

In a period of declining interest rates, our interest income on floating-rate investments may generally decrease, subject to the impact of interest rate floors in our investment portfolio.

In addition, the U.S.

office sector has been adversely affected by the increase in remote working arrangements and, over the past several years, the retail sector has been adversely affected by electronic commerce.

These negative factors have been considered in the determination of our CECL allowance.

We may be required to record further increases to our current expected credit loss reserves in the future, depending on the performance of our portfolio and broader market conditions, and there may be volatility in the level of our CECL reserves, particularly if market conditions relevant to the office sector do not improve.

Any such reserve increases are difficult to predict.

Operating Highlights and Key Performance Indicators

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Operating Results:

• Net income attributable to the Company of $28.1 million, or $0.06 per share.

• Net loss attributable to the Company of $292.3 million, or $0.67 per share.

• Redeemed 7.3 million shares under the share redemption program for $45.0 million at an average price of $6.15 per share.

• Declared aggregate distributions of $0.45 per share.

Credit Portfolio Activity:

• Invested $477.3 million in first mortgage loans.

• Invested $121.3 million in liquid corporate senior loans and sold liquid corporate senior loans for an aggregate gross sales price of $210.8 million.

Credit Portfolio Investment Activity:

• Originated $77.1 million of first mortgage loans.

• Funded $85.8 million in existing first mortgage loans.

• Invested $65.4 million in liquid corporate senior loans and sold liquid corporate senior loans for an aggregate gross sales price of $452.9 million, including $265.4 million as part of the Master Participation Agreement (as defined in Note 13 — Related-Party Transactions and Arrangements to the consolidated financial statements in this Annual Report on Form 10-K).

The liquid corporate senior loans served as the initial positions for the formation of a CLO, in which we invested $27.6 million in a CLO subordinated note.

• Invested $78.7 million in corporate senior loans.

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• Funded an additional $58.7 million in NP JV Holdings (as defined in Note 2 — Summary of Significant Accounting Policies to the consolidated financial statements in this Annual Report on Form 10-K).

Real Estate Portfolio Activity:

• Disposed of 188 properties for an aggregate sales price of $925.9 million.

Real Estate Portfolio Investment Activity:

• Acquired two properties for an aggregate purchase price of $44.1 million.

• Disposed of seven properties for an aggregate sales price of $90.6 million.

• Disposed of 11 condominium units for an aggregate sales price of $37.4 million.

Financing Activity:

• Decreased total debt by $504.8 million.

• Entered into a new financing facility with Ally Bank (as defined in Note 10 — Repurchase Facilities, Notes Payable and Credit Facilities to the consolidated financial statements in this Annual Report on Form 10-K) 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 revolving loan and security agreement entered into.

• Paid down the $240.0 million outstanding balance under the CMFT Credit Facility (as defined below) and terminated the CMFT Credit Facility.

• Paid down the $121.9 million outstanding balance on the first lien mortgage loan with JP Morgan Chase (as defined below).

• Paid down the $43.1 million outstanding balance on the refinanced Assumed Variable Rate Debt (as defined in Note 10 — Repurchase Facilities, Notes Payable and Credit Facilities to the consolidated financial statements in this Annual Report on Form 10-K) and terminated the respective amended borrowing agreement.

• Increased the aggregate maximum financing amount under the repurchase facilities with Citibank, N.A.

to $650.0 million.

• Decreased total debt by $756.5 million, reducing our ratio of debt to total gross assets net of gross intangible lease liabilities to 62.6%.

Portfolio Information

The following table shows the carrying value of our portfolio by investment type as of December 31, 2023 and 2022 (dollar amounts in thousands):

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

As of December 31,

Asset Count Carrying Value Asset Count Carrying Value

Asset Count Net Book Value

Loan Held-For-Investment

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Total loans held-for-investment and related receivable, net 68 3,370,877 70.7 % 291 4,264,465 71.3 %

Real Estate-Related Securities

CMBS and equity security 23 555,522 9.3 % 21 576,391 8.6 %

Real Estate-Related Securities and Other

16 396,819 8.3 % 22 512,523 8.6 %

CLO subordinated note

1 26,901 0.6 % — — — %

Equity securities

4 32,170 0.7 % 1 42,999 0.7 %

Current expected credit losses

(110,062) (2.3) % (35,808) (0.6) %

Total real estate-related securities, net

Total real estate-related securities and other, net

21 345,828 7.3 % 23 519,714 8.7 %

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Total Investment Portfolio (1)(2)

271 $ 4,764,899 100.0 % 506 $ 5,979,455 100.0 %

____________________________________

(1) Table does not include our investment in the Unconsolidated Joint Venture (as defined in Note 2 — Summary of Significant Accounting Policies to the consolidated financial statements in this Annual Report on Form 10-K), which had a carrying value of $181.4 million, $171.8 million of which is held through CLR as of December 31, 2024.

(2) As of December 31, 2024, first mortgage loans with a net book value of $1.05 billion and CMBS with an estimated fair value of $241.3 million were held through CLR.

Credit Portfolio Information

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CRE Loans (1)(2)

Liquid Corporate Senior Loans CMBS and Equity Security (2)

Liquid Corporate Senior Loans Real Estate Related Securities and Other (2)

Corporate Senior Loans

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(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 and therefore were in maturity default as of December 31, 2023.

As of December 31, 2024, our CRE loans had the following characteristics based on carrying values (dollar amounts in thousands):

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Real Estate Portfolio Information

As of December 31, 2023, 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 10.7 years.

During the year ended December 31, 2023, we disposed of 188 properties for an aggregate gross sales price of $925.9 million.

As of December 31, 2024, we owned 187 commercial real estate properties located in 36 states, the gross rentable square feet of which was 100.0% leased, including any month-to-month agreements, with a weighted average lease term remaining of 10.5 years.

During the year ended December 31, 2024, we disposed of seven properties for an aggregate gross sales price of $90.6 million.

Additionally, during the year ended December 31, 2024, we sold 11 condominium units for an aggregate gross sales price of $37.4 million.

During the years ended December 31, 2023 and 2022, the Company did not acquire any properties.

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

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

The following table summarizes our real estate acquisition activity during the year ended December 31, 2024.

No properties were acquired during the year ended December 31, 2023.

As of December 31, 2024

Commercial properties acquired 2

Purchase price of acquired properties (in thousands) $ 44,148

Rentable square feet (in thousands) 105

The following table shows the tenant diversification of our real estate portfolio, based on annualized rental income, as of December 31, 2024:

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Walgreens 11 162 3,884 23.98 5 %

Vanguard Group 1 137 3,675 26.82 4 %

BJ's Wholesale Club, Inc.

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Bob Evans 2 76 2,826 37.18 3 %

AAA 1 120 2,811 23.43 3 %

Other 61 2,928 38,668 13.21 45 %

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Warehouse Clubs, Supercenters, and Other General Merchandise Retailers 9 695 6,815 9.81 8 %

Finance and Insurance 2 257 6,486 25.24 7 %

Building Material and Supplies Dealers 8 1,073 6,321 5.89 7 %

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Restaurants and Other Eating Places 11 110 4,492 40.84 5 %

Lawn and Garden Equipment and Supplies Stores 12 278 4,301 15.47 5 %

Other 16 487 11,041 22.67 13 %

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Ohio 18 1,120 $ 13,506 $ 12.06 16 %

Illinois 10 634 7,238 11.42 8 %

California 28 72 7,164 99.50 8 %

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Texas 24 189 4,873 25.78 6 %

Illinois 9 594 4,659 7.84 5 %

Arizona 2 140 3,973 28.38 5 %

Virginia 10 239 3,960 16.57 5 %

Kentucky 3 188 3,632 19.32 4 %

Nebraska 2 193 3,540 18.34 4 %

New Jersey 3 146 3,523 24.13 4 %

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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 Part I, Item 1A.

We are not aware of any material trends or uncertainties, other than national economic conditions affecting real estate in general, such as inflation and heightened interest rates and the imposition of tariffs and other changes to trade policy in the U.S.

and other jurisdictions, 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 Part I, Item 1A.

Risk Factors .

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Credit Segment $ 389,988 $ 453,480 $ (63,492)

$ 453,480 $ 238,757 $ 214,723

Real Estate Segment 93,525 115,056 (21,531)

115,056 213,001 (97,945)

Corporate 387 323 64

483,900 568,859 (84,959)

Credit Segment 603,837 412,341 191,496

412,341 171,624 240,717

Real Estate Segment 122,779 105,874 16,905

105,874 176,207 (70,333)

58,126 68,213 (10,087)

Corporate 51,802 58,126 (6,324)

778,418 576,341 202,077

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Credit Segment (10,034) (17,674) 7,640

(17,674) (4,964) (12,710)

Real Estate Segment 2,268 44,159 (41,891)

44,159 104,129 (59,970)

9,083 8,599 484

Corporate 9,994 9,083 911

2,228 35,568 (33,340)

Net (loss) income

(292,290) 28,086 (320,376)

Net income allocated to non-controlling interest 11 8 3

Net income attributable to the Company

Net (loss) income attributable to the Company

$ (292,301) $ 28,078 $ (320,379)

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Credit Segment

The increase in our Credit segment revenues of $214.7 million for the year ended December 31, 2023, as compared to the year ended December 31, 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 December 31, 2023, we held $4.8 billion in credit investments compared to $4.6 billion in credit investments as of December 31, 2022.

The decrease in our Credit segment revenues of $63.5 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023, was primarily due to the suspension of interest income on three of our risk-rated 5 first mortgage loans with a carrying value of $373.8 million that were placed on nonaccrual status and were past due on their interest payments as of December 31, 2024, as well as a decrease in the overall size of our investment portfolio and a decline in interest rates during the year ended December 31, 2024.

As of December 31, 2024, we held credit investments with an outstanding principal balance of $4.4 billion compared to credit investments with an outstanding principal of $5.1 billion as of December 31, 2023.

Expenses for our Credit segment consist primarily of interest expense, increases (decreases) to our provision for credit losses, management fees, and general and administrative expenses.

The increase in our Credit segment expenses of $240.7 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily due to a $123.3 million increase in interest expense, net due to higher average index rates during 2023 and increased outstanding borrowings used to fund credit investments.

The increase was further driven by a $104.8 million increase in the provision for credit losses, primarily due to the asset-specific credit loss provision of $64.6 million recognized on two of the Company’s first mortgage loan investments and the $35.8 million credit loss allowance related to a CMBS position that was recognized due to a decline in the underlying collateral value during the year ended December 31, 2023.

The increase in our Credit segment expenses of $191.5 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023, was primarily due to a $208.5 million increase in the provision for credit losses, primarily due to the asset-specific credit loss provision on funded and unfunded commitments recognized on seven of the Company’s first mortgage loan investments and the increase in provision for credit loss related to two CMBS positions that was recognized due to a decline in the underlying collateral value during the year ended December 31, 2024.

Other Expense

Other 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 expense of $12.7 million during the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily due to a $35.4 million decrease in other (expense) income, net, $39.4 million of which was due to the realized loss on sale of CMBS.

The increase in other expense was partially offset by a $4.8 million unrealized gain on equity security recognized during the year ended December 31, 2023, compared to a $15.1 million unrealized loss on equity security recognized during the

year ended December 31, 2022, a $4.9 million increase in gain on investment in unconsolidated entities and a $3.6 million increase driven by increased dividend income on our equity security and increased interest income generated by short-term investments included in cash and cash equivalents on the consolidated balance sheet for the year ended December 31, 2023.

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

The decrease in our Credit segment other expense of $7.6 million during the year ended December 31, 2024, as compared to the same period in 2023, was primarily due to a $25.2 million decrease in other (expense) income, net, driven by a $36.4 million decrease in loss

on sale of CMBS during the year ended December 31, 2024, as compared to the same period in 2023, partially offset by a $13.7 million increase in loss on sale of liquid corporate senior loans during the year ended December 31, 2024, as compared to the same period in 2023.

The decrease in other expense was further driven by a $1.9 million increase in gain on investment in unconsolidated entities and a decrease of $1.2 million in loss on extinguishment of debt during the year ended December 31, 2024, as compared to the same period in 2023.

The decrease in other expense was partially offset by a $15.9 million unrealized loss on equity securities during the year ended December 31, 2024, compared to a $4.8 million unrealized gain on equity securities during the year ended December 31, 2023.

Real Estate Segment

The decrease in our Real Estate segment revenues of $97.9 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily due to the disposition of 188 properties subsequent to December 31, 2022 and the disposition of 134 properties during the year ended December 31, 2022.

The decrease in our Real Estate segment revenues of $21.5 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023, was primarily due to the disposition of seven properties subsequent to December 31, 2023 and the disposition of 188 properties during the year ended December 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 $70.3 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily due to the disposition of 188 properties subsequent to December 31, 2022.

The increase in our Real Estate segment expenses of $16.9 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023, was primarily due to an increase in impairment charges of $31.8 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023, as ten properties were deemed to be impaired during the year ended December 31, 2024, due to sales prices or revised cash flow estimates that were less than their respective carrying values, resulting in impairment charges of $52.2 million, as compared to six properties that were deemed to be impaired during the year ended December 31, 2023, resulting in impairment charges of $20.4 million.

The increase was partially offset by the disposition of seven properties subsequent to December 31, 2023.

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 $4.2 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022, as six properties were deemed to be impaired during the year ended December 31, 2023, resulting in impairment charges of $20.4 million, as compared to 23 properties that were deemed to be impaired during the year ended December 31, 2022, resulting in impairment charges of $16.2 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 $60.0 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily due to the disposition of 188 properties resulting in a net gain of $44.4 million during the year ended December 31, 2023, compared to the disposition of 134 properties and an outparcel of land for a gain of $117.8 million during the year ended December 31, 2022.

Other income was further reduced due to a $4.6 million decrease in the fair value of our interest rate caps during the year ended December 31, 2023, as compared to a $4.5 million increase in the fair value of our interest rate caps during the year ended December 31, 2022.

The decrease was partially offset by a $17.5 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 year ended December 31, 2022, as compared to the year ended December 31, 2023.

Other income for our Real Estate segment primarily consists of gain on disposition of real estate, loss on extinguishment of debt and other income.

The decrease in our Real Estate segment other income of $41.9 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023, was primarily due to the disposition of seven properties resulting in a net gain of $1.9 million during the year ended December 31, 2024, compared to the disposition of 188 properties resulting in a net gain of $44.4 million during the year ended December 31, 2023.

Corporate and Other

Our corporate revenues, which consist primarily of rental income from our condominium and rental units acquired via foreclosure, decreased $65,000 during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to the write-off of certain rent previously owed as a result of a settlement during the year ended December 31, 2023.

Our corporate expenses 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 decrease in corporate expenses of $10.1 million during the year ended December 31, 2023 as compared to the year ended December 31, 2022, was primarily due to a decrease in interest expense, net of $9.3 million, driven by the pay down and termination of the credit agreement with JPMorgan Chase Bank, N.A.

(“JP Morgan Chase”) and PNC Bank, N.A.

(the “CMFT Credit Facility”) during the year ended December 31, 2023, along with a decrease in expense reimbursements to related parties of $3.3 million during the year ended December 31, 2023 as compared to the year ended December 31, 2022.

The decrease was partially offset by a $3.4 million increase in transaction-related expenses driven by a tax settlement related to the Company’s condominium units during the year ended December 31, 2023.

The increase in corporate other income of $484,000 during the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily driven by an increase in other income, net of $9.6 million due to interest income generated by an increase in short-term liquid investments included in cash and cash equivalents on the consolidated balance

sheet for the year ended December 31, 2023, as compared to the year ended December 31, 2022.

The increase was partially offset by the $5.2 million net gain during the year ended December 31, 2022, related to our investment in CIM UII Onshore, L.P.

(“CIM UII Onshore”), which was subsequently redeemed during 2022.

The increase was further offset by a $3.4 million increase in loss on extinguishment of debt during the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily in connection with the paydown and termination of the CMFT Credit Facility and the refinanced Assumed Variable Rate Debt.

Net Income Allocated to Non-Controlling Interest

The change in net income allocated to non-controlling interest for the year ended December 31, 2023, as compared to the year ended December 31, 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 year ended December 31, 2023.

Our corporate revenues, which consist primarily of rental income from our condominium and rental units acquired via foreclosure, did not meaningfully change during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

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 and impairment on our condominium and rental units acquired via foreclosure.

The decrease in corporate expenses of $6.3 million during the year ended December 31, 2024 as compared to the year ended December 31, 2023, was partially due to a $5.6 million decrease in impairment charges related to condominium units during the year ended December 31, 2024, as compared to the year ended December 31, 2023, and a decrease in interest expense, net of $4.3 million, 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”) and the paydown and termination of the variable rate debt assumed by the Company upon completing the January 2021 foreclosure of assets which previously secured the Company's mezzanine loans (the “Assumed Variable Rate Debt”) during the year ended December 31, 2023.

The decrease was further driven by a $3.4 million decrease in transaction-related expenses driven by a tax settlement related to the Company’s condominium units during the year ended December 31, 2023.

In addition, we saw a decrease in property operating expenses of $1.9 million, primarily driven by decreased condominium-related legal expenses during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

The decrease was partially offset by an increase in general and administrative expenses of $8.9 million, primarily in connection with restricted stock unit related expenses recorded during the year ended December 31, 2024 as well as an increase in escrow and trustee fees and a non-recurring increase in taxes.

The increase in corporate other income of $911,000 during the year ended December 31, 2024, as compared to the year ended December 31, 2023, was primarily driven by a decrease of $4.4 million in loss on extinguishment of debt during the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily in connection with the paydown and termination of the CMFT Credit Facility and the refinanced Assumed Variable Rate Debt.

The increase was further driven by the disposition of 11 condominium units resulting in a net gain of $4.8 million during year ended December 31, 2024, compared to the disposition of 18 condominium units resulting in a net gain of $3.6 million during the year ended December 31, 2023.

The increase was partially offset by a decrease in other (expense) income, net of $4.7 million primarily due to a decrease in interest income generated by decreased short-term liquid investments included in cash and cash equivalents on the consolidated balance sheets during the year ended December 31, 2024, as compared to the year ended December 31, 2023.

Same Store Analysis

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Comparison of the Years Ended December 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):

The following table reconciles our Real Estate segment net (loss) income, calculated in accordance with GAAP, to net operating income (in thousands):

For the Year Ended December 31,

2024 2023 Change

Net (loss) income

$ (26,986) $ 53,341 $ (80,327)

Loss on extinguishment of debt — 1,192 (1,192)

Other income (expense), net

Other (expense) income, net

(413) 4,380 (4,793)

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General and administrative expenses

399 709 (310)

Interest expense, net

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Rental and other property income $ 93,525 $ 115,056 $ (21,531) $ 87,370 $ 87,462 $ (92) $ 6,155 $ 27,594 $ (21,439)

$ 115,057 $ 213,001 $ (97,944) $ 96,844 $ 95,876 $ 968 $ 18,213 $ 117,125 $ (98,912)

Property operating expenses

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Total property operating expenses 6,690 8,633 (1,943) 5,601 5,903 (302) 1,089 2,730 (1,641)

8,634 25,532 (16,898) 7,704 7,373 331 930 18,159 (17,229)

Net operating income

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Non-same store property net operating income decreased $19.8 million during the year ended December 31, 2024, as compared to the year ended December 31, 2023.

The decrease was primarily due to the disposition of 188 properties subsequent to December 31, 2022 in addition to the disposition of 134 properties during the year ended December 31, 2022.

The decrease was primarily due to the disposition of seven properties subsequent to December 31, 2023 in addition to the disposition of 188 properties during the year ended December 31, 2023.

Distributions

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Period Commencing Period Ending Monthly Distribution Amount

December 2021

January 2022 September 2022 $0.0305

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January 2023 September 2023 $0.0350

December 2023

June 2024 $0.0375

October 2023 December 2023 $0.0367

January 2024 December 2024 $0.0375

January 2025 June 2025 $0.0283

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

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(1) Net cash provided by operating activities for the years ended December 31, 2024 and 2023 was $161.2 million and $223.8 million, respectively.

(2) Our distributions covered by cash flows for the year ended December 31, 2024 include cash flows from operating activities in excess of distributions from prior periods of $35.4 million.

We have paid, and may continue to pay, some of our distributions from sources other than cash flows from operations, including proceeds from asset sales, proceeds from loan repayments, and borrowings.

Distributions at any point in time may not reflect the current performance of our assets or our current operating cash flows.

Share Redemptions

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Liquidity and Capital Resources

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.

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 from certain investments, as well as secured or unsecured borrowings from banks and other lenders to finance our future acquisitions and loan originations, repayment of certain indebtedness, distributions, redemptions 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

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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 consolidated financial statements in this Annual Report on Form 10-K for additional details regarding our repurchase facilities, notes payable and credit facilities.

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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 (as defined in Note 10 — Repurchase Facilities, Notes Payable and Credit Facilities to our consolidated financial statements in this Annual Report on Form 10-K) 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 Variance

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

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

June 30, 2024 $ 1,929,204 $ 1,975,822 $ (46,618)

September 30, 2024 $ 1,810,749 $ 1,888,858 $ (78,109)

December 31, 2024 $ 1,693,142 $ 1,779,490 $ (86,348) (2)

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(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 Bank PLC (as described in further detail in Note 10 — Repurchase Facilities, Notes Payable and Credit Facilities to our consolidated financial statements in this Annual Report on Form 10-K).

(2) Variance driven by late quarter timing of CMBS sales and debt pay downs, primarily in connection with the Master Repurchase agreement with Wells Fargo Bank, N.A and the amended and restated Master Repurchase Agreement with Barclays Bank PLC (as described in further detail in Note 10 — Repurchase Facilities, Notes Payable and Credit Facilities to our consolidated financial statements in this Annual Report on Form 10-K).

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 $633.1 million within the next 12 months, $199.6 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 consolidated financial statements in this Annual Report on Form 10-K.

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 $1.7 billion within the next 12 months, $104.0 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 consolidated financial statements in this Annual Report on Form 10-K.

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.

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As of December 31, 2024, we had debt outstanding with a carrying value of $3.2 billion and a weighted average interest rate of 5.5%.

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

See Note 10 — Repurchase Facilities, Notes Payable and Credit Facilities to our consolidated financial statements in this Annual Report on Form 10-K for certain terms of our debt outstanding, including extension options.

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

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Year 1-3 Years 3-5 Years More Than

Unfunded loan commitments (2)

$ 261,657 $ 3,735 $ 154,785 $ 92,361 $ 10,776

Principal payments — variable rate debt 606,452 190,926 369,686 45,840 —

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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 $272.5 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 $88.4 million of unfunded commitments related to the NewPoint JV (as defined in Note 2 — Summary of Significant Accounting Policies — Investment in Unconsolidated Entities to the consolidated financial statements in this Annual Report on Form 10-K), which are subject to the satisfaction of borrower milestones.

(2) Comprised of our unfunded loan commitments to provide additional CRE loan, corporate senior loan and liquid corporate senior loan financing as of December 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 $33.9 million of unfunded commitments related to the NewPoint JV (as defined in Note 2 — Summary of Significant Accounting Policies — Investment in Unconsolidated Entities to the consolidated financial statements in this Annual Report on Form 10-K).

In addition, the table does not include $1.2 million of unsettled liquid corporate senior loan acquisitions, which is included in cash and cash equivalents on the accompanying consolidated balance sheet.

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Operating Activities.

Net cash provided by operating activities increased by $45.1 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022.

The increase was primarily due to net increases in credit investments of $206.2 million coupled with an increase in interest rates driving higher interest income.

The increase was partially offset by the disposition of 188 properties during the year ended December 31, 2023.

Net cash provided by operating activities decreased by $62.5 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023.

The decrease was primarily due to a net decrease in credit investments of $717.8 million, and decreased interest income as a result of our three first mortgage loans that were placed on nonaccrual status and were past due on their interest payments as of December 31, 2024, along with a decline in interest rates during the year ended December 31, 2024.

The decease was further driven by the dispositions of seven properties subsequent to December 31, 2023.

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

Investing Activities.

For the year ended December 31, 2023, net cash provided by investing activities was $559.5 million, as compared to net cash used in investing activities of $576.5 million during the year ended December 31, 2022.

The change was primarily due to a decrease in the net investment in loans held-for-investment of $998.8 million and a decrease in the net investment in real estate-related securities of $514.6 million, partially offset by a decrease in net proceeds from real estate assets and condominium units of $337.0 million.

The change was further offset by the $26.2 million net investment in unconsolidated entities during the year ended December 31, 2023, as compared to the $13.6 million net proceeds from the investment in unconsolidated entities during the year ended December 31, 2022, resulting in a $39.8 million net decrease in cash flow provided by investing activities year over year.

For the year ended December 31, 2024, net cash provided by investing activities increased by $161.1 million, as compared to the year ended December 31, 2023.

The change was primarily due to $627.3 million of net proceeds from loans held-for-investment during the year ended December 31, 2024, as compared to the $342.4 million net investment in loans held-for-sale during the year ended December 31, 2023.

The change was further driven by $85.9 million of net proceeds from real estate-related securities and other during the year ended December 31, 2024, as compared to the $26.3 million net investment in real estate-related securities and other during the year ended December 31, 2023.

The change was offset by a decrease in net proceeds from real estate assets and condominium units of $892.3 million, as the Company disposed of seven properties and 11 condominium units during the year ended December 31, 2024, as compared to 188 properties and 18 condominium units disposed of during the same period in 2023.

Financing Activities.

For the year ended December 31, 2023, net cash used in financing activities was $699.3 million, as compared to net cash provided by financing activities of $430.3 million during the year ended December 31, 2022.

The change was primarily due to net repayments on the repurchase facilities, notes payable and credit facilities of $505.8 million during the year ended December 31, 2023, as compared to net proceeds provided by the repurchase facilities, notes payable and credit facilities of $617.4 million during the year ended December 31, 2022.

For the year ended December 31, 2024, net cash used in financing activities increased by $257.9 million.

The change was primarily due to net repayments on the repurchase facilities, notes payable and credit facilities of $756.5 million during the year ended December 31, 2024, as compared to net repayments on the repurchase facilities, notes payable and credit facilities of $505.8 million during the year ended December 31, 2023.

Election as a REIT

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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.

Through his affiliation with Orchard Capital Corporation, Mr.

Ressler chairs the executive committee of Orchard First Source Asset Management Holdings,

LLC, the holding Company of our Investment Advisor.

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.

DeBacker, our chief financial officer, principal accounting officer and treasurer, is an employee of CIM Group, the 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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See Part I, Item 1.

Business — Conflicts of Interest of this Annual Report on Form 10-K.

Business — Conflicts of Interest and Part I, Item 1A.

Risk Factors — Risks Related to Conflicts of Interest of this Annual Report on Form 10-K.

Critical Accounting Policies and Significant Accounting Estimates

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Current Expected Credit Losses

The current expected credit loss is our current estimate of potential credit losses related to our loans held-for-investment and CMBS.

The current expected credit loss is our current estimate of potential credit losses related to our loans held-for-investment, CMBS and CLO subordinated note.

We estimate our CECL reserve for our senior loans and mezzanine loans primarily using the Weighted Average Remaining Maturity method, which has been identified as an acceptable method for estimating CECL reserves in the Financial Accounting Standards Board Staff Q&A Topic 326, No.

For our liquid corporate senior loans and corporate senior loans, we use a probability of default and loss given default method.

CMBS credit losses, if any, are estimated by calculating the difference between (i) the present value of estimated cash flows expected to be collected from the security discounted at the yield determined as of the initial acquisition date or, if since revised, as of the last date previously revised, to (ii) the net amortized cost basis of the security.

CMBS and CLO subordinated note credit losses, if any, are estimated by calculating the difference between (i) the present value of estimated cash flows expected to be collected from the security discounted at the yield determined as of the initial acquisition date or, if since revised, as of the last date previously revised, to (ii) the net amortized cost basis of the security.

The risks and uncertainties involved in applying the principles related to CECL reserves include, but are not limited to, the following:

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Within this database, we focused on the applicable subset of available loan data, which we determined based on loan metrics that are most comparable to our loan portfolio including asset type, loan structure, credit rating and years to maturity;

• The expected repayments over the contractual term of each loan and CMBS.

• The expected repayments over the contractual term of each loan, CMBS and CLO subordinated note.

As part of our quarterly review of our loan and CMBS portfolios, we assess the expected repayment date of each position, which is used to determine the contractual term for purposes of computing our CECL reserve;

• The current credit quality and performance expectations of our loan and CMBS portfolios, as well as market conditions over the relevant time period and its impact on our portfolios are estimated by management;

• The current credit quality and performance expectations of our loan, CMBS and CLO subordinated note portfolios, as well as market conditions over the relevant time period and its impact on our portfolios are estimated by management;

• The expectations of performance and market conditions.

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These estimations include unemployment rates, interest rates, inflation, and other macroeconomic factors impacting the likelihood and magnitude of potential credit losses for our loans during their anticipated term.

In addition to the CRE data we have licensed from Trepp LLC, we have also licensed certain macroeconomic financial forecasts to inform our view of the potential future impact that broader economic conditions may have on our loan portfolio’s performance.

portfolio’s performance.

We may also incorporate information from other sources, including information and opinions available to our Investment Advisor, to further inform these estimations.

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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-K

Item 7. Management’s Discussion and Analysis