Company Quick10K Filing
Quick10K
Cole Real Estate Income Strategy
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-07-16 Shareholder Vote
8-K 2019-06-26 Other Events
8-K 2018-12-12 Officers
8-K 2018-11-27 Enter Agreement, Shareholder Rights, Amend Bylaw, Other Events, Exhibits
8-K 2018-11-14 Other Events, Exhibits
8-K 2018-10-09 Other Events
8-K 2018-08-13 Other Events, Exhibits
8-K 2018-06-21 Shareholder Vote
8-K 2018-05-15 Other Events, Exhibits
8-K 2018-02-01 Officers, Other Events
SGOL ETFS Gold Trust 1,008
CANB Canbiola 17
INND Innerscope Hearing Technologies 3
DMCI Diamond Cartel 0
FPNI Fraud Protection Network 0
IASO IASO BioMed 0
GEN Genesis Healthcare 0
SFRX Seafarer Exploration 0
NYCR American Realty Capital New York City REIT 0
JFKKU 8i Enterprises Acquisition Corp 0
CINAV 2019-06-30
Part I - Financial Information
Item 1. Financial Statements
Note 1 - Organization and Business
Note 2 - Summary of Significant Accounting Policies
Note 3 - Fair Value Measurements
Note 4 - Real Estate Assets
Note 5 - Intangible Lease Assets and Liabilities
Note 6 - Marketable Securities
Note 7 - Derivative Instruments and Hedging Activities
Note 8 - Credit Facility and Notes Payable
Note 9 - Supplemental Cash Flow Disclosures
Note 10 - Commitments and Contingencies
Note 11 - Related-Party Transactions and Arrangements
Note 12 - Economic Dependency
Note 13 - Stockholders' Equity
Note 14 - Leases
Note 15 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 cinav630201910qexhibit311.htm
EX-31.2 cinav630201910qexhibit312.htm
EX-32.1 cinav630201910qexhibit321.htm

Cole Real Estate Income Strategy Earnings 2019-06-30

CINAV 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 cinav630201910q.htm CINAV 6/30/2018 10Q Document
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________
Form 10-Q
_________________________________________ 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission file number 000-55187
__________________________________________ 
CIM INCOME NAV, INC.
(Exact name of registrant as specified in its charter)
__________________________________________ 
Maryland
 
27-3147801
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer Identification Number)
 
 
 
2398 East Camelback Road, 4th Floor
Phoenix, Arizona 85016
 
(602) 778-8700
(Address of principal executive offices; zip code)
 
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report) 
 ________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Trading Symbol
 
Name of each exchange on which registered
None
 
None
 
None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
 
Accelerated filer
¨
 
Non-accelerated filer
x
 
 
 
 
 
 
Smaller reporting company
¨
 
Emerging growth company
¨
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
As of August 5, 2019, there were approximately 18.8 million shares of Class D common stock, approximately 14.3 million shares of Class T common stock, no shares of Class S common stock, and approximately 1.2 million shares of Class I common stock, par value $0.01 each, of CIM Income NAV, Inc. outstanding.
 
 



CIM INCOME NAV, INC.
INDEX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2


PART I - FINANCIAL INFORMATION
Item 1.
Financial Statements
CIM INCOME NAV, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts) (Unaudited)
 
June 30, 2019
 
December 31, 2018
ASSETS
 
 
 
Real estate assets:
 
 
 
Land
$
146,984

 
$
146,675

Buildings and improvements
648,306

 
652,294

Intangible lease assets
126,055

 
127,209

Total real estate assets, at cost
921,345

 
926,178

Less: accumulated depreciation and amortization
(76,113
)
 
(64,755
)
Total real estate assets, net
845,232

 
861,423

Investment in marketable securities
6,047

 
5,466

Total real estate assets and marketable securities, net
851,279

 
866,889

Cash and cash equivalents
16,165

 
3,644

Restricted cash
670

 
806

Rents and tenant receivables
11,673

 
9,964

Prepaid expenses, derivative assets and other assets
666

 
3,404

Deferred costs, net
855

 
1,038

Due from affiliates
6

 
112

Assets held for sale
1,488

 

Total assets
$
882,802

 
$
885,857

LIABILITIES AND EQUITY
 
 
 
Credit facility and notes payable, net
$
348,603

 
$
354,254

Accrued expenses and accounts payable
4,237

 
3,812

Due to affiliates
15,636

 
15,585

Intangible lease liabilities, net
14,874

 
15,506

Distributions payable
2,724

 
2,719

Derivative liabilities, deferred rental income and other liabilities
6,993

 
4,989

Total liabilities
393,067

 
396,865

Commitments and contingencies


 


Redeemable common stock
59,892

 
58,902

STOCKHOLDERS’ EQUITY
 
 
 
Preferred stock, $0.01 par value per share; 10,000,000 shares authorized, none issued and outstanding

 

D Shares common stock, $0.01 par value per share; 122,500,000 shares authorized, 18,703,515 and 18,942,529 issued and outstanding as of June 30, 2019 and December 31, 2018, respectively
187

 
189

T Shares common stock, $0.01 par value per share; 122,500,000 shares authorized, 14,085,103 and 12,777,322 issued and outstanding as of June 30, 2019 and December 31, 2018, respectively
141

 
128

I Shares common stock, $0.01 par value per share; 122,500,000 shares authorized, 1,126,026 and 1,159,730 issued and outstanding as of June 30, 2019 and December 31, 2018, respectively
11

 
12

Capital in excess of par value
512,281

 
497,581

Accumulated distributions in excess of earnings
(78,406
)
 
(69,151
)
Accumulated other comprehensive (loss) income
(5,115
)
 
565

Total stockholders’ equity
429,099

 
429,324

Non-controlling interests
744

 
766

          Total equity
$
429,843

 
$
430,090

Total liabilities, redeemable common stock, and equity
$
882,802

 
$
885,857


The accompanying notes are an integral part of these condensed consolidated financial statements.

3


CIM INCOME NAV, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts) (Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 
 
 
 
 
 
Rental and other property income
$
19,250

 
$
17,736

 
$
38,753

 
$
32,939

Interest income on marketable securities
38

 
32

 
76

 
63

Total revenues
19,288

 
17,768

 
38,829

 
33,002

Operating expenses:
 
 
 
 
 
 
 
General and administrative
1,719

 
1,891

 
3,729

 
3,456

Property operating
1,150

 
694

 
2,219

 
1,248

Real estate tax
1,328

 
1,327

 
2,580

 
2,339

Advisory fees and expenses
1,988

 
1,425

 
3,880

 
2,660

Transaction-related
225

 
713

 
713

 
1,282

Depreciation and amortization
7,431

 
6,843

 
14,835

 
12,775

Total operating expenses
13,841

 
12,893

 
27,956

 
23,760

Gain (loss) on disposition of real estate, net
3,575

 
136

 
3,575

 
(73
)
Operating income
9,022

 
5,011

 
14,448

 
9,169

Other expense:
 
 
 
 
 
 
 
Interest expense and other, net
(3,569
)
 
(3,590
)
 
(7,359
)
 
(6,587
)
Net income
5,453

 
1,421

 
7,089

 
2,582

Net income allocated to noncontrolling interest
8

 
8

 
17

 
17

Net income attributable to the Company
$
5,445

 
$
1,413

 
$
7,072

 
$
2,565

 
 
 
 
 
 
 
 
Class D Common Stock:
 
 
 
 
 
 
 
Net income attributable to the Company
$
3,058

 
$
880

 
$
4,036

 
$
1,603

Basic and diluted weighted average number of common shares outstanding
18,828,972

 
17,252,804

 
18,935,853

 
16,739,049

Basic and diluted net income per common share
$
0.16

 
$
0.05

 
$
0.21

 
$
0.10

 
 
 
 
 
 
 
 
Class T Common Stock:
 
 
 
 
 
 
 
Net income attributable to the Company
$
2,202

 
$
484

 
$
2,788

 
$
866

Basic and diluted weighted average number of common shares outstanding
13,926,825

 
10,133,191

 
13,615,611

 
9,640,614

Basic and diluted net income per common share
$
0.16

 
$
0.05

 
$
0.20

 
$
0.09

 
 
 
 
 
 
 
 
Class I Common Stock:
 
 
 
 
 
 
 
Net income attributable to the Company
$
185

 
$
49

 
$
248

 
$
96

Basic and diluted weighted average number of common shares outstanding
1,120,341

 
908,512

 
1,126,328

 
959,215

Basic and diluted net income per common share
$
0.17

 
$
0.05

 
$
0.22

 
$
0.10

The accompanying notes are an integral part of these condensed consolidated financial statements.


4



CIM INCOME NAV, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands) (Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Net income
$
5,453

 
$
1,421

 
$
7,089

 
$
2,582

Other comprehensive (loss) income
 
 
 
 
 
 
 
Unrealized holding gain (loss) on marketable securities
100

 
(20
)
 
223

 
(112
)
Reclassification adjustment for realized loss included in income as other expense
1

 

 
8

 
1

Unrealized (loss) gain on interest rate swaps
(3,575
)
 
948

 
(5,495
)
 
3,120

Amount of (gain) loss reclassified from other comprehensive (loss) income into income as interest expense and other, net
(198
)
 
(76
)
 
(416
)
 
1

Total other comprehensive (loss) income
(3,672
)
 
852

 
(5,680
)
 
3,010

 
 
 
 
 
 
 
 
Comprehensive income
1,781

 
2,273

 
1,409

 
5,592

Comprehensive income allocated to noncontrolling interest
8

 
8

 
17

 
17

Comprehensive income attributable to the Company
$
1,773

 
$
2,265

 
$
1,392

 
$
5,575


The accompanying notes are an integral part of these condensed consolidated financial statements.


5


CIM INCOME NAV, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands, except share amounts) (Unaudited)
 
Common Stock
 
Capital in
Excess of
Par Value
 
Accumulated
Distributions
in Excess of
Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Total
Stockholders’
Equity
 
Non-
Controlling
Interests
 
Total
Equity
 
Number 
of Shares
 
Par 
Value
 
 
 
 
 
 
Balance as of
     January 1, 2019
32,879,581

 
$
329

 
$
497,581

 
$
(69,151
)
 
$
565

 
$
429,324

 
$
766

 
$
430,090

Issuance of common stock
2,132,534

 
22

 
38,500

 

 

 
38,522

 

 
38,522

Distributions declared on common stock — $0.24 per common share

 

 

 
(8,070
)
 

 
(8,070
)
 

 
(8,070
)
Commissions, dealer manager and ongoing stockholder servicing fees

 

 
(1,788
)
 

 

 
(1,788
)
 

 
(1,788
)
Other offering costs

 

 
(285
)
 

 

 
(285
)
 

 
(285
)
Redemptions of common stock
(1,177,580
)
 
(13
)
 
(21,033
)
 

 

 
(21,046
)
 

 
(21,046
)
Equity-based compensation

 

 
33

 

 

 
33

 

 
33

Changes in redeemable common stock

 

 
(1,011
)
 

 

 
(1,011
)
 

 
(1,011
)
Distributions to non-controlling interests

 

 

 

 

 

 
(15
)
 
(15
)
Comprehensive loss

 

 

 
1,627

 
(2,008
)
 
(381
)
 
9

 
(372
)
Balance as of
     March 31, 2019
33,834,535

 
$
338

 
$
511,997

 
$
(75,594
)
 
$
(1,443
)
 
$
435,298

 
$
760

 
$
436,058

Issuance of common stock
1,530,101

 
15

 
27,370

 

 

 
27,385

 

 
27,385

Distributions declared on common stock — $0.24 per common share

 

 

 
(8,257
)
 

 
(8,257
)
 

 
(8,257
)
Commissions, dealer manager and ongoing stockholder servicing fees

 

 
(1,307
)
 

 

 
(1,307
)
 

 
(1,307
)
Other offering costs

 

 
(203
)
 

 

 
(203
)
 

 
(203
)
Redemptions of common stock
(1,449,992
)
 
(14
)
 
(25,629
)
 

 

 
(25,643
)
 

 
(25,643
)
Equity-based compensation

 

 
32

 

 

 
32

 

 
32

Changes in redeemable common stock

 

 
21

 

 

 
21

 

 
21

Distributions to non-controlling interests

 

 

 

 

 

 
(24
)
 
(24
)
Comprehensive income

 

 

 
5,445

 
(3,672
)
 
1,773

 
8

 
1,781

Balance as of
     June 30, 2019
33,914,644

 
$
339

 
$
512,281

 
$
(78,406
)
 
$
(5,115
)
 
$
429,099

 
$
744

 
$
429,843


6



CIM INCOME NAV, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands, except share amounts) (Unaudited) – (Continued)
 
Common Stock
 
Capital in
Excess of
Par Value
 
Accumulated
Distributions
in Excess of
Earnings
 
Accumulated Other Comprehensive Income
 
Total
Stockholders’
Equity
 
Non-
Controlling
Interests
 
Total
Equity
 
Number 
of Shares
 
Par 
Value
 
 
 
 
 
 
Balance as of
     January 1, 2018
25,695,557

 
$
257

 
$
378,266

 
$
(45,506
)
 
$
1,657

 
$
334,674

 
$
772

 
$
335,446

Cumulative effect of accounting changes

 

 

 
(37
)
 
37

 

 

 

Issuance of common stock
1,929,152

 
20

 
35,466

 

 

 
35,486

 

 
35,486

Distributions declared on common stock — $0.24 per common share

 

 

 
(6,359
)
 

 
(6,359
)
 

 
(6,359
)
Commissions, dealer manager and ongoing stockholder servicing fees

 

 
(2,436
)
 

 

 
(2,436
)
 

 
(2,436
)
Other offering costs

 

 
(264
)
 

 

 
(264
)
 

 
(264
)
Redemptions of common stock
(590,172
)
 
(6
)
 
(10,603
)
 

 

 
(10,609
)
 

 
(10,609
)
Changes in redeemable common stock

 

 
(2,506
)
 

 

 
(2,506
)
 

 
(2,506
)
Distributions to non-controlling interests

 

 

 

 

 

 
(12
)
 
(12
)
Comprehensive income

 

 

 
1,152

 
2,158

 
3,310

 
9

 
3,319

Balance as of
     March 31, 2018
27,034,537

 
$
271

 
$
397,923

 
$
(50,750
)
 
$
3,852

 
$
351,296

 
$
769

 
$
352,065

Issuance of common stock
3,064,712

 
30

 
57,008

 

 

 
57,038

 

 
57,038

Distributions declared on common stock — $0.24 per common share

 

 

 
(6,897
)
 

 
(6,897
)
 

 
(6,897
)
Commissions, dealer manager and ongoing stockholder servicing fees

 

 
(3,653
)
 

 

 
(3,653
)
 

 
(3,653
)
Other offering costs

 

 
(419
)
 

 

 
(419
)
 

 
(419
)
Redemptions of common stock
(600,764
)
 
(6
)
 
(11,174
)
 

 

 
(11,180
)
 

 
(11,180
)
Changes in redeemable common stock

 

 
(4,169
)
 

 

 
(4,169
)
 

 
(4,169
)
Distributions to non-controlling interests

 

 

 

 

 

 
(4
)
 
(4
)
Comprehensive income

 

 

 
1,413

 
852

 
2,265

 
8

 
2,273

Balance as of
     June 30, 2018
29,498,485

 
$
295

 
$
435,516

 
$
(56,234
)
 
$
4,704

 
$
384,281

 
$
773

 
$
385,054


The accompanying notes are an integral part of these condensed consolidated financial statements.

7


CIM INCOME NAV, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (Unaudited)
 
 
Six Months Ended June 30,
 
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 
Net income
 
$
7,089

 
$
2,582

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization, net
 
14,632

 
12,506

Straight-line rental income, net
 
(1,638
)
 
(1,467
)
Amortization of deferred financing costs
 
539

 
544

Amortization on marketable securities
 
3

 
4

Equity-based compensation
 
65

 

Loss on sale of marketable securities
 
8

 
1

(Gain) loss on disposition of real estate assets, net
 
(3,575
)
 
73

Write-off of deferred financing costs
 

 
35

Changes in assets and liabilities:
 
 
 
 
Rents and tenant receivables
 
(440
)
 
100

Prepaid expenses and other assets
 
(155
)
 
296

Accrued expenses and accounts payable
 
435

 
752

Deferred rental income and other liabilities
 
(1,132
)
 
56

Due from affiliates
 
106

 
100

Due to affiliates
 
(577
)
 
(861
)
Net cash provided by operating activities
 
15,360

 
14,721

Cash flows from investing activities:
 
 
 
 
Investment in real estate assets and capital expenditures
 
(32,428
)
 
(182,699
)
Investment in marketable securities
 
(712
)
 
(642
)
Proceeds from sale and maturities of marketable securities
 
351

 
667

Net proceeds from disposition of real estate assets
 
35,811

 
9,361

Payment of property escrow deposits
 
(200
)
 
(4,750
)
Refund of property escrow deposits
 
200

 
4,750

Proceeds from the settlement of insurance claims
 
118

 

Net cash provided by (used in) investing activities
 
3,140

 
(173,313
)
Cash flows from financing activities:
 
 
 
 
Proceeds from issuance of common stock
 
57,931

 
86,108

Offering costs on issuance of common stock
 
(2,955
)
 
(3,820
)
Redemptions of common stock
 
(46,689
)
 
(21,789
)
Distributions to stockholders
 
(8,346
)
 
(6,625
)
Proceeds from credit facility
 
25,500

 
160,500

Repayments of credit facility
 
(31,500
)
 
(56,500
)
Deferred financing costs paid
 
(17
)
 
(140
)
Distributions to noncontrolling interests
 
(39
)
 
(16
)
Net cash (used in) provided by financing activities
 
(6,115
)
 
157,718

Net increase (decrease) in cash and cash equivalents and restricted cash
 
12,385

 
(874
)
Cash and cash equivalents and restricted cash, beginning of period
 
4,450

 
2,924

Cash and cash equivalents and restricted cash, end of period
 
$
16,835

 
$
2,050

Reconciliation of cash and cash equivalents and restricted cash to the condensed consolidated balance sheets:
 
 
 
 
Cash and cash equivalents
 
$
16,165

 
$
1,957

Restricted cash
 
670

 
93

Total cash and cash equivalents and restricted cash
 
$
16,835

 
$
2,050


The accompanying notes are an integral part of these condensed consolidated financial statements.

8


CIM INCOME NAV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019 (Unaudited)
NOTE 1 — ORGANIZATION AND BUSINESS
CIM Income NAV, Inc. (formerly known as Cole Real Estate Income Strategy (Daily NAV), Inc.) (the “Company”) is a daily priced perpetual life non-exchange traded real estate investment trust (“REIT”) formed as a Maryland corporation on July 27, 2010, that qualified as a REIT for U.S. federal income tax purposes beginning with its taxable year ended December 31, 2012.
Substantially all of the Company’s business is conducted through CIM Income NAV Operating Partnership, LP, a Delaware limited partnership (“CIM Income NAV OP”), of which the Company is the sole general partner, and owns, directly or indirectly, 100% of the partnership interests.
The Company is externally managed by CIM Income NAV Management, LLC, a Delaware limited liability company (“CIM Income NAV Management”), an affiliate of CIM Group, LLC (“CIM”), a vertically-integrated owner and operator of real assets with multidisciplinary expertise and in-house research, acquisition, credit analysis, development, finance, leasing, and asset management capabilities headquartered in Los Angeles, California with offices in Oakland, California; Bethesda, Maryland; Dallas, Texas; New York, New York; Chicago, Illinois; and Phoenix, Arizona. The Company has no paid employees and relies upon CIM Income NAV Management and its affiliates to provide substantially all of the Company’s day-to-day management. The Company’s advisory agreement with CIM Income NAV Management is for a one-year term and is considered for renewal on an annual basis by the Company’s board of directors (the “Board”). The current term of the advisory agreement expires on November 30, 2019.
CCO Group, LLC owns and controls CIM Income NAV Management, the Company’s advisor, and is the indirect owner of CCO Capital, LLC (“CCO Capital”), the Company’s dealer manager, and CREI Advisors, LLC (“CREI Advisors”), the Company’s property manager. CCO Group, LLC and its subsidiaries (collectively, “CCO Group”) serve as the Company’s sponsor and as a sponsor to Cole Credit Property Trust IV, Inc. (“CCPT IV”), Cole Credit Property Trust V, Inc. (“CCPT V”), Cole Office & Industrial REIT (CCIT II), Inc. (“CCIT II”) and Cole Office & Industrial REIT (CCIT III), Inc. (“CCIT III”).
On December 6, 2011, the Company commenced its initial public offering on a “best efforts” basis of $4.0 billion in shares of common stock. On August 26, 2013, the Company designated the existing shares of the Company’s common stock that were sold prior to such date to be Wrap Class shares (“W Shares”) of common stock and registered two new classes of the Company’s common stock, Advisor Class shares (“A Shares”) and Institutional Class shares (“I Shares”). On February 10, 2017, the Company filed a registration statement (the “Continuing Offering Registration Statement”), pursuant to which the Company is offering up to $4.0 billion in shares of common stock (the “Offering”), consisting of $3.5 billion in shares in the Company’s primary offering (the “Primary Offering”) and $500.0 million in shares pursuant to a distribution reinvestment plan (the “DRIP”).
On November 27, 2018, the Company amended its charter to, among other things, change the name and designation of its W Shares to Class D Common Stock (the “D Shares”), and its A Shares to Class T Common Stock (the “T Shares”), respectively, and reclassified a portion of its common stock as Class S Common Stock (the “S Shares”), to be offered alongside its D Shares, T Shares and I Shares in its continuous public offering (the “Share Modifications”). The Company is offering to sell any combination of D Shares, T Shares, S Shares and I Shares with a dollar value up to the maximum offering amount. In connection with the Share Modifications, when the Company refers to its share classes in this Quarterly Report on Form 10-Q with respect to dates prior to November 27, 2018 (the “Restructure Date”), the Company is referring to its shares under its prior share structure, and when the Company refers to its share classes with respect to dates on or after November 27, 2018, the Company is referring to its shares under its new share structure. See Note 11 — Related-Party Transactions and Agreements to the Company’s condensed consolidated financial statements for detailed information regarding the advisory and dealer manager amendments related to its Share Modifications. As of June 30, 2019, the Company had issued approximately 44.2 million shares of common stock in the Offering, including 2.5 million in shares issued in the DRIP, for gross offering proceeds of $797.9 million before $21.0 million in upfront selling commissions, dealer manager fees and the current portion of stockholder servicing fees, and $5.9 million in organization and offering costs.
The per share purchase price for each class of common stock varies from day-to-day and, on each business day, is equal to, for each class of common stock, the Company’s net asset value (“NAV”) for such class, divided by the number of shares of that class outstanding as of the close of business on such day, plus, for D Shares, T Shares and S Shares sold in the Primary Offering, applicable upfront selling commissions and dealer manager fees. The Company’s NAV per share is calculated daily as of the close of business by an independent fund accountant using a process that reflects (1) estimated values of each of the Company’s commercial real estate assets, related liabilities and notes receivable secured by real estate provided periodically by

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the Company’s independent valuation expert in individual appraisal reports, (2) daily updates in the price of liquid assets for which third party market quotes are available, (3) accruals of daily distributions, and (4) estimates of daily accruals, on a net basis, of operating revenues, expenses, debt service costs and fees. As of June 30, 2019, the NAV per share for D Shares, T Shares and I Shares was $17.79, $17.46 and $18.04, respectively. The Company’s NAV is not audited or reviewed by its independent registered public accounting firm.
The Company intends to use substantially all of the net proceeds from the Offering to acquire and operate a diversified portfolio primarily consisting of (1) necessity retail, office and industrial properties that are leased to creditworthy tenants under long-term net leases, and are strategically located throughout the United States, (2) notes receivable and other investments secured by commercial real estate, including the origination of loans, and (3) U.S. government securities, agency securities, corporate debt and other investments for which there is reasonable liquidity. As of June 30, 2019, the Company owned 147 commercial properties, including properties owned through a consolidated joint venture arrangement (the “Consolidated Joint Venture”), comprised of 5.4 million rentable square feet of commercial space located in 34 states, and which was 98.6% leased, including month-to-month agreements, if any.
As a perpetual-life, non-exchange traded REIT, the Company will be selling shares of common stock on a continuous basis and for an indefinite period of time, subject to ongoing regulatory approval of the Company’s filings for additional offerings. The Company will endeavor to take all reasonable actions to avoid interruptions in the continuous offering of shares of common stock. The Company reserves the right to terminate the Offering at any time.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The summary of significant accounting policies presented below is designed to assist in understanding the Company’s condensed consolidated financial statements. These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) in all material respects, and have been consistently applied in preparing the accompanying condensed consolidated financial statements.
Principles of Consolidation and Basis of Presentation
The condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission regarding interim financial reporting, including the instructions to Form 10-Q and Article 10 of Regulation S-X, and do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the statements for the interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results for such periods. Results for these interim periods are not necessarily indicative of full year results. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2018, and related notes thereto set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The condensed consolidated financial statements should also be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Quarterly Report on Form 10-Q.
The condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and the Consolidated Joint Venture in which the Company has a controlling financial interest. All intercompany balances and transactions have been eliminated in consolidation.
The Company evaluates its relationships and investments to determine if it has variable interests. A variable interest is an investment or other interest that will absorb portions of an entity’s expected losses or receive portions of the entity’s expected residual returns. If the Company determines that it has a variable interest in an entity, it evaluates whether such interest is in a variable interest entity (“VIE”). VIEs are entities where investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or where equity investors, as a group, lack one of the following characteristics: (a) the power to direct the activities that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses of the entity, or (c) the right to receive the expected returns of the entity. The Company consolidates any VIEs when it is determined to be the primary beneficiary of the VIE’s operations.
For legal entities being evaluated for consolidation, the Company must first determine whether the interests that it holds and fees it receives qualify as variable interests in the entity. A variable interest is an investment or other interest that will absorb portions of an entity’s expected losses or receive portions of the entity’s expected residual returns. The Company’s evaluation includes consideration of fees paid to the Company where the Company acts as a decision maker or service provider to the entity being evaluated. If the Company determines that it holds a variable interest in an entity, it evaluates whether that entity is a VIE.

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A VIE must be consolidated by its primary beneficiary, which is generally defined as the party who has a controlling financial interest in the VIE. The Company qualitatively assesses whether it is (or is not) the primary beneficiary of a VIE. Consideration of various factors include, but are not limited to, the Company’s ability to direct the activities that most significantly impact the entity’s economic performance and its obligation to absorb losses from or right to receive benefits of the VIE that could potentially be significant to the VIE. The Company consolidates any VIEs when the Company is determined to be the primary beneficiary of the VIE, and the difference between consolidating the VIE and accounting for it using the equity method could be material to the Company’s condensed consolidated financial statements. The Company continually evaluates the need to consolidate any VIEs based on standards set forth in GAAP as described above.
As of June 30, 2019 and December 31, 2018, the Company determined that it had a controlling interest in the Consolidated Joint Venture and therefore met the GAAP requirements for consolidation.
Reclassifications
Certain amounts in the Company’s prior period condensed consolidated financial statements have been reclassified to conform to the current period presentation.
In November 2018, the SEC finalized the Disclosure Update Simplification Project, which eliminated Rule 3-15(a)(1) reporting of Gain or Loss on Sale of Properties by REITs. To conform with Accounting Standards Codification (“ASC”) 360, Property, Plant, and Equipment and the SEC rule change, the Company has classified the gain (loss) on disposition of real estate, net as operating income in the Company’s condensed consolidated statements of operations. This change resulted in an increase in operating income of $136,000 and a decrease in operating income of $73,000 during the three and six months ended June 30, 2018, respectively.
The Company combined rental income of $15.9 million and tenant reimbursement income of $1.8 million for the three months ended June 30, 2018, and rental income of $29.7 million and tenant reimbursement income of $3.2 million for the six months ended June 30, 2018, into a single financial statement line item, rental and other property income, in the condensed consolidated statements of operations for the three and six months ended June 30, 2018.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Real Estate Assets
Real estate assets are stated at cost, less accumulated depreciation and amortization. The Company considers the period of future benefit of each respective asset to determine the appropriate useful life. The estimated useful lives of the Company’s real estate assets by class are generally as follows:
Buildings
 
40 years
Site improvements
 
15 years
Tenant improvements
 
Lesser of useful life or lease term
Intangible lease assets
 
Lease term
Recoverability of Real Estate Assets
The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate assets may not be recoverable. Impairment indicators that the Company considers include, but are not limited to: bankruptcy or other credit concerns of a property’s major tenant, such as a history of late payments, rental concessions and other factors; a significant decrease in a property’s revenues due to lease terminations; vacancies; co-tenancy clauses; reduced lease rates; changes in anticipated holding periods; or other circumstances. When indicators of potential impairment are present, the Company assesses the recoverability of the assets by determining whether the carrying amount of the assets will be recovered through the undiscounted future cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying amount, the Company will adjust the real estate assets to their respective fair values and recognize an impairment loss. Generally, fair value will be determined using a

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discounted cash flow analysis and recent comparable sales transactions. No impairment indicators were identified and no impairment losses were recorded during the six months ended June 30, 2019 or 2018. The Company’s impairment assessment as of June 30, 2019 was based on the most current information available to the Company, including expected holding periods. If the Company’s expected holding periods for assets change, subsequent tests for impairment could result in impairment charges in the future. The Company cannot provide any assurance that material impairment charges with respect to the Company’s real estate assets will not occur during 2019 or in future periods.
Assets Held for Sale
When a real estate asset is identified by the Company as held for sale, the Company will cease recording depreciation and amortization of the assets related to the property and estimate its fair value, net of selling costs. If, in management’s opinion, the fair value, net of selling costs, of the asset is less than the carrying amount of the asset, an adjustment to the carrying amount is then recorded to reflect the estimated fair value of the property, net of selling costs. As of June 30, 2019, the Company identified one asset with a carrying value of $1.5 million as held for sale, which was sold subsequent to June 30, 2019, as discussed in Note 15 — Subsequent Events. There were no assets identified as held for sale as of December 31, 2018.
Disposition of Real Estate Assets
Gains and losses from dispositions are recognized once the various criteria relating to the terms of sale and any subsequent involvement by the Company with the asset sold are met. A discontinued operation includes only the disposal of a component of an entity and represents a strategic shift that has (or will have) a major effect on an entity’s financial results. The disposition of the Company’s individual properties did not qualify for discontinued operations presentation, and thus, the results of the properties that have been sold remain in operating income, and any associated gains or losses from the disposition are included in gain (loss) on disposition of real estate, net.
Allocation of Purchase Price of Real Estate Assets
Upon the acquisition of real properties, the Company allocates the purchase price to acquired tangible assets, consisting of land, buildings and improvements, and to identified intangible assets and liabilities, consisting of the value of above- and below-market leases and the value of in-place leases and other intangibles, based in each case on their respective fair values. The Company utilizes independent appraisals to assist in the determination of the fair values of the tangible assets of an acquired property (which includes land and buildings). The information in the appraisal, along with any additional information available to the Company’s management, is used in estimating the amount of the purchase price that is allocated to land. Other information in the appraisal, such as building value and market rents, may be used by the Company’s management in estimating the allocation of purchase price to the building and to intangible lease assets and liabilities. The appraisal firm has no involvement in management’s allocation decisions other than providing this market information.
The determination of the fair values of the real estate assets and liabilities acquired requires the use of significant assumptions with regard to the current market rental rates, rental growth rates, capitalization and discount rates, interest rates and other variables. The use of alternative estimates may result in a different allocation of the Company’s purchase price, which could materially impact the Company’s results of operations.
All real estate acquisitions in the periods presented qualified as asset acquisitions and, as such, acquisition-related fees and certain acquisition-related expenses related to these asset acquisitions were capitalized and allocated to tangible and intangible assets and liabilities, as described above.
Investment in Marketable Securities
Investment in marketable securities consists primarily of the Company’s investment in corporate and government debt securities. The Company determines the appropriate classification for debt securities at the time of purchase and reevaluates such designation as of each balance sheet date. As of June 30, 2019, the Company classified its investments as available-for-sale as the Company is not actively trading the securities; however, the Company may sell them prior to their maturity. These investments are carried at their estimated fair value with unrealized gains and losses reported in other comprehensive (loss) income.
The Company monitors its available-for-sale securities for impairments. A loss is recognized when the Company determines that a decline in the estimated fair value of a security below its amortized cost is other-than-temporary. The Company considers many factors in determining whether the impairment of a security is deemed to be other-than-temporary, including, but not limited to, the length of time the security has had a decline in estimated fair value below its amortized cost,

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the amount of the unrealized loss, the intent and ability of the Company to hold the security for a period of time sufficient for a recovery in value, recent events specific to the issuer or industry, external credit ratings and recent changes in such ratings. The analysis of determining whether the impairment of a security is deemed to be other-than-temporary requires significant judgments and assumptions. The use of alternative judgments and assumptions could result in a different conclusion.
The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity computed under the effective interest method and is recorded in the accompanying condensed consolidated statements of operations in interest and other expense, net. Upon the sale of a security, the realized net gain or loss is computed on the specific identification method.
Noncontrolling Interest in Consolidated Joint Venture
The Company has a controlling interest in a Consolidated Joint Venture and, therefore, met the GAAP requirements for consolidation. The Company recorded net income of $17,000 and paid distributions of $39,000 to the noncontrolling interest during the six months ended June 30, 2019. The Company recorded the noncontrolling interest of $744,000 and $766,000 as of June 30, 2019 and December 31, 2018, respectively, on the condensed consolidated balance sheets.
Restricted Cash
The Company had $670,000 and $806,000 in restricted cash as of June 30, 2019 and December 31, 2018, respectively. Included in restricted cash was $93,000 and $158,000 held by lenders in lockbox accounts as of June 30, 2019 and December 31, 2018, respectively. As part of certain debt agreements, rent from certain of the Company’s tenants is deposited directly into a lockbox account, from which funds in excess of the required minimum balance are disbursed on a weekly basis to the Company. Restricted cash also included $577,000 and $648,000 held in escrow for tenant improvements at a certain property in accordance with the associated lease agreement as of June 30, 2019 and December 31, 2018, respectively.
Stockholder Servicing Fees
The Company pays CCO Capital stockholder servicing fees, which are calculated on a daily basis in the amount of 1/365th of 0.25%, 0.85% and 0.85% of the per share NAV, respectively, for each class of common stock outstanding for D Shares, T Shares and S Shares. The Company does not pay a stockholder servicing fee with respect to I Shares.
The stockholder servicing fees are paid monthly in arrears. An estimated liability for future stockholder servicing fees payable to CCO Capital is recognized at the time each share is sold and included in due to affiliates in the condensed consolidated balance sheets with a corresponding decrease to capital in excess of par value. The Company recognized a liability for future fees payable to CCO Capital of $13.9 million and $13.2 million, as of June 30, 2019 and December 31, 2018, respectively.
Leases
The Company has lease agreements with lease and non-lease components. The Company has elected to not separate non-lease components from lease components for all classes of underlying assets (primarily real estate assets) and will account for the combined components as rental and other property income. Non-lease components included in rental and other property income include certain tenant reimbursements for maintenance services (including common-area maintenance services or “CAM”), real estate taxes, insurance and utilities paid for by the lessor but consumed by the lessee. As a lessor, the Company has further determined that this policy will be effective only on a lease that has been classified as an operating lease and the revenue recognition pattern and timing is the same for both types of components. Therefore, Accounting Standards Codification Topic 842, Leases (“ASC 842”), has been applied to these lease contracts for both types of components. The Company does not have material leases where it is the lessee.
Significant judgments and assumptions are inherent in not only determining if a contract contains a lease but also the lease classification, terms, payments, and, if needed, discount rates. Judgments include the nature of any options, including if they will be exercised, evaluation of implicit discount rates and the assessment and consideration of “fixed” payments for straight-line rent revenue calculations.
Lease costs represent the initial direct costs incurred in the origination, negotiation and processing of a lease agreement. Such costs include outside broker commissions and other independent third-party costs and are amortized over the life of the lease on a straight-line basis. Costs related to salaries and benefits, supervision, administration, unsuccessful origination efforts

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and other activities not directly related to completed lease agreements are expensed as incurred. Leasing commissions subsequent to successful lease execution are capitalized.
Revenue Recognition
Rental and other property income is primarily derived from fixed contractual payments from operating leases and, therefore, is generally recognized on a straight-line basis over the term of the lease, which typically begins the date the tenant takes control of the space. When the Company acquires a property, the terms of existing leases are considered to commence as of the acquisition date for the purpose of this calculation. Variable rental and other property income consists primarily of tenant reimbursements for recoverable real estate taxes and operating expenses which are included in rental and other property income in the period when such costs are incurred, with offsetting expenses in real estate taxes and property operating expenses, respectively, within the condensed consolidated statements of operations. The Company defers the recognition of variable rental and other property income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved.
The Company continually reviews whether collection of lease-related receivables, including any straight-line rent, and current and future operating expense reimbursements from tenants are probable. The determination of whether collectability is probable takes into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. Upon the determination that the collectability of a receivable is not probable, the Company will record a reduction to rental and other property income for amounts previously recorded and a decrease in the outstanding receivable. Revenue from leases where collection is deemed to be less than probable is recorded on a cash basis until collectability becomes probable. Management’s estimate of the collectability of lease-related receivables is based on the best information available to management at the time of evaluation. The Company does not use a general reserve approach and lease-related receivables are adjusted and taken against rental and other property income only when collectability becomes not probable.
Earnings and Distributions Per Share
The Company has four classes of common stock with nonforfeitable dividend rights that are determined based on a different NAV for each class. Accordingly, the Company utilizes the two-class method to determine its earnings per share, which can result in different earnings per share for each of the classes. Under the two-class method, earnings per share of each class of common stock are computed by dividing the sum of the distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of shares for each class of common stock for the respective period. Diluted income per share, when applicable, considers the effect of any potentially dilutive share equivalents, of which the Company had none for each of the three and six months ended June 30, 2019 or 2018. Distributions per share are calculated based on the authorized daily distribution rate.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by various standard setting bodies that may have an impact on the Company’s accounting and reporting. Except as otherwise stated below, the Company is currently evaluating the effect that certain new accounting requirements may have on the Company’s accounting and related reporting and disclosures in the Company’s condensed consolidated financial statements.
In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The Company used the optional alternative transition method upon adoption of the new standard on January 1, 2019 and used the effective date as the date of initial application. Consequently, financial information was not updated and the disclosures required under the new standard are not provided for dates and periods before January 1, 2019. The Company elected the “package of practical expedients,” which permits the Company to not reassess under the new standard prior conclusions about lease identification, lease classification and initial direct costs. The adoption of ASU 2016-02 has not had a material impact on the accounting treatment and disclosure of the Company’s net leases, which are the primary source of the Company’s revenues.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”), which was subsequently amended by ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses (“ASU 2018-19”), in November 2018. ASU 2016-13 and related updates are intended to improve financial reporting requiring more timely recognition of credit losses on loans and other financial instruments that are not accounted for at fair value through net income, including loans held for investment, held-to-maturity debt securities, net investment in leases and other such commitments. ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net

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amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU 2016-13 require the Company to measure all expected credit losses based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets and eliminates the “incurred loss” methodology under current GAAP. ASU 2018-19 clarified that receivables arising from operating leases are not within the scope of Topic 326. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. ASU 2016-13 and ASU 2018-19 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is currently evaluating the impact this amendment will have on its condensed consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). This ASU amends and removes several disclosure requirements including the valuation processes for Level 3 fair value measurements. ASU 2018-13 also modifies some disclosure requirements and requires additional disclosures for changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements and requires the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The provisions of ASU 2018-13 are effective January 1, 2020 using a prospective transition method for amendments effecting changes in unrealized gains and losses, significant unobservable inputs used to develop Level 3 fair value measurements and narrative description on uncertainty of measurements. The remaining provisions of the ASU are to be applied retrospectively, and early adoption is permitted. The Company is evaluating the impact of this ASU’s adoption, and does not believe this ASU will have a material impact on its condensed consolidated financial statements.
In October 2018, the FASB issued ASU No. 2018-16, Inclusion of the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap (“OIS”) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes (“ASU 2018-16”). The amendments in this ASU permit the use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes. The SOFR is a volume-weighted median interest rate that is calculated daily based on overnight transactions from the prior day’s activity in specified segments of the U.S. Treasury repo market. It has been selected as the preferred replacement for the U.S. dollar London Interbank Offered Rate (“LIBOR”), which will be phased out by the end of 2021. ASU 2018-16 is effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. ASU 2018-16 is required to be adopted on a prospective basis for qualifying new or redesignated hedging relationships entered into on or after the date of adoption. The Company currently uses LIBOR as its benchmark interest rate in the Company’s interest rate swaps associated with the Company’s LIBOR-based variable rate borrowings. The Company has not entered into any new or redesignated hedging relationships on or after the date of adoption of ASU 2018-16; as such, the Company is currently evaluating the potential effect this new benchmark interest rate option will have on its condensed consolidated financial statements.
In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. The guidance changes the guidance for determining whether a decision-making fee is a variable interest. Under the new ASU, indirect interests held through related parties under common control will now be considered on a proportional basis when determining whether fees paid to decision makers and service providers are variable interests. Such indirect interests were previously treated the same as direct interests. This ASU is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The Company is currently assessing the impact that adopting this new standard will have on its condensed consolidated financial statements and footnote disclosures.
NOTE 3 — FAIR VALUE MEASUREMENTS
GAAP defines fair value, establishes a framework for measuring fair value and requires disclosures about fair value measurements. GAAP emphasizes that fair value is intended to be a market-based measurement, as opposed to a transaction-specific measurement.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. Depending on the nature of the asset or liability, various techniques and assumptions can be used to estimate the fair value. Assets and liabilities are measured using inputs from three levels of the fair value hierarchy, as follows:
Level 1 — Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. An active market is defined as a market in which transactions for the assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

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Level 2 — Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active (markets with few transactions), inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data correlation or other means (market corroborated inputs).
Level 3 — Unobservable inputs, which are only used to the extent that observable inputs are not available, reflect the Company’s assumptions about the pricing of an asset or liability.
The following describes the methods the Company uses to estimate the fair value of the Company’s financial assets and liabilities:
Credit facility and notes payable — The fair value is estimated by discounting the expected cash flows based on estimated borrowing rates available to the Company as of the measurement date. Current and prior period liabilities’ carrying and fair values exclude net deferred financing costs. These financial instruments are valued using Level 2 inputs. As of June 30, 2019, the estimated fair value of the Company’s debt was $348.6 million, compared to a carrying value of $351.0 million. As of December 31, 2018, the estimated fair value of the Company’s debt was $350.2 million, compared to a carrying value of $356.9 million.
Marketable securities — The Company’s marketable securities are carried at fair value and are valued using Level 1 inputs. The estimated fair value of the Company’s marketable securities are based on quoted market prices that are readily and regularly available in an active market.
Derivative instruments — The Company’s derivative instruments are comprised of interest rate swaps. All derivative instruments are carried at fair value and are valued using Level 2 inputs. The fair value of these instruments is determined using interest rate market pricing models. In addition, credit valuation adjustments are incorporated into the fair values to account for the Company’s potential nonperformance risk and the performance risk of the respective counterparties.
Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties. However, as of June 30, 2019 and December 31, 2018, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
Other financial instruments  The Company considers the carrying values of its cash and cash equivalents, restricted cash, tenant receivables, accrued expenses and accounts payable, other liabilities, due to affiliates and distributions payable to approximate their fair values because of the short period of time between their origination and their expected realization as well as their highly-liquid nature. Due to the short-term maturities of these instruments, Level 1 inputs are utilized to estimate the fair value of these financial instruments.
Considerable judgment is necessary to develop estimated fair values of financial assets and liabilities. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize, or be liable for, upon disposition of the financial assets and liabilities. As of June 30, 2019 and December 31, 2018, there have been no transfers of financial assets or liabilities between fair value hierarchy levels.








16

CIM INCOME NAV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019 (Unaudited) – (Continued)

Items Measured at Fair Value on a Recurring Basis
In accordance with the fair value hierarchy described above, the following tables show the fair value of the Company’s financial assets and liabilities that are required to be measured at fair value on a recurring basis as of June 30, 2019 and December 31, 2018 (in thousands):
 
 
Balance as of
 
Quoted Prices in Active Markets for Identical Assets
 
Significant Other Observable Inputs
 
Significant
Unobservable Inputs
 
 
June 30, 2019
 
(Level 1)
 
(Level 2)
 
(Level 3)
Financial assets:
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
81

 
$

 
$
81

 
$

Marketable securities
 
6,047

 
6,047

 

 

Total financial assets
 
$
6,128

 
$
6,047

 
$
81

 
$

Financial liability:
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
(5,335
)
 
$

 
$
(5,335
)
 
$

 
 
Balance as of
 
Quoted Prices in Active Markets for Identical Assets
 
Significant Other Observable Inputs
 
Significant
Unobservable Inputs
 
 
December 31, 2018
 
(Level 1)
 
(Level 2)
 
(Level 3)
Financial assets:
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
2,856

 
$

 
$
2,856

 
$

Marketable securities
 
5,466

 
5,466

 

 

Total financial assets
 
$
8,322

 
$
5,466

 
$
2,856

 
$

Financial liability:
 
 
 
 
 
 
 
 
Interest rate swap
 
$
(2,199
)
 
$

 
$
(2,199
)
 
$

NOTE 4 — REAL ESTATE ASSETS
2019 Property Acquisitions
During the six months ended June 30, 2019, the Company acquired a 100% interest in three commercial properties for an aggregate purchase price of $31.5 million (the “2019 Asset Acquisitions”), which includes $190,000 of acquisition-related expenses that were capitalized. The Company funded the 2019 Asset Acquisitions with net proceeds from the Offering, real estate dispositions and available borrowings.
The following table summarizes the purchase price allocation for the 2019 Asset Acquisitions purchased during the six months ended June 30, 2019 (in thousands):
 
 
2019 Asset Acquisitions
Land
 
$
7,078

Building and improvements
 
22,432

Acquired in-place leases and other intangibles (1)
 
2,285

Intangible lease liabilities (2)
 
(313
)
Total purchase price
 
$
31,482

______________________
(1)
The weighted average amortization period for acquired in-place leases and other intangibles was 15.8 years.
(2)
The weighted average amortization period for acquired intangible lease liabilities was 15.0 years.
2019 Property Dispositions
During the six months ended June 30, 2019, the Company disposed of eight retail properties for an aggregate gross sales price of $36.9 million, resulting in net proceeds of $35.8 million after closing costs and a net gain of $3.6 million. No disposition fees were paid to affiliates in connection with the sales of these properties and the Company has no continuing involvement with these properties. The gain on sale of real estate is included in gain (loss) on disposition of real estate, net in the condensed consolidated statements of operations. The disposition of these properties did not qualify to be reported as

17

CIM INCOME NAV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019 (Unaudited) – (Continued)

discontinued operations since the disposition did not represent a strategic shift that had a major effect on the Company’s operations and financial results. Accordingly, the operating results of these disposed properties are reflected in the Company’s results from continuing operations for all periods presented through their respective date of disposition.
2018 Property Acquisitions
During the six months ended June 30, 2018, the Company acquired a 100% interest in 13 commercial properties for an aggregate purchase price of $182.5 million (the “2018 Asset Acquisitions”), which included $1.2 million of acquisition-related expenses that were capitalized.
The following table summarizes the purchase price allocation for the 2018 Asset Acquisitions purchased during the six months ended June 30, 2018 (in thousands):
 
2018 Asset Acquisitions
Land
$
19,288

Building and improvements
138,140

Acquired in-place leases and other intangibles (1)
22,745

Acquired above-market leases (2)
3,305

Intangible lease liabilities (3)
(989
)
Total purchase price
$
182,489

______________________
(1)
The weighted average amortization period for acquired in-place leases and other intangibles was 12.4 years.
(2)
The weighted average amortization period for acquired above-market leases was 10.5 years.
(3)
The weighted average amortization period for acquired intangible lease liabilities was 11.9 years.
2018 Property Disposition
During the six months ended June 30, 2018, the Company disposed of one multi-tenant property, excluding a related outparcel of land, for an aggregate gross sales price of $8.1 million, resulting in proceeds of $7.8 million after closing costs and a loss of $209,000. During the same period, the Company subsequently disposed of the related outparcel of land for an aggregate gross sales price of $1.6 million, resulting in proceeds of $1.6 million after closing costs and a gain of $136,000No disposition fees were paid to affiliates in connection with the sale of this property and the Company has no continuing involvement with this property. The loss on sale of real estate is included in gain (loss) on disposition of real estate, net in the condensed consolidated statements of operations.
Consolidated Joint Venture
As of June 30, 2019, the Company had an interest in a Consolidated Joint Venture that owns and manages two properties, with total assets of $7.4 million, which included $7.2 million of land, building and improvements and $641,000 of intangible assets, net of accumulated depreciation and amortization of $581,000, and total liabilities of $95,000. The Consolidated Joint Venture does not have any debt outstanding as of June 30, 2019. The Company has the ability to control operating and financial policies of the Consolidated Joint Venture. There are restrictions on the use of these assets as the Company would generally be required to obtain the approval of the partner (the “Consolidated Joint Venture Partner”) in accordance with the joint venture agreement for any major transactions. The Company and the Consolidated Joint Venture Partner are subject to the provisions of the joint venture agreement, which includes provisions for when additional contributions may be required to fund certain cash shortfalls.

18

CIM INCOME NAV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019 (Unaudited) – (Continued)

NOTE 5 — INTANGIBLE LEASE ASSETS AND LIABILITIES
Intangible lease assets and liabilities consisted of the following as of June 30, 2019 and December 31, 2018 (in thousands, except weighted average life remaining):
 
June 30, 2019
 
December 31, 2018
Intangible lease assets:
 
 
 
In-place leases and other intangibles, net of accumulated amortization of $24,219 and $20,688, respectively (with a weighted average life remaining of 13.6 years and 13.8 years, respectively)
 
 
 
$
87,030

 
$
91,549

Acquired above-market leases, net of accumulated amortization of $2,924 and $2,422, respectively (with a weighted average life remaining of 12.3 years and 12.6 years, respectively)
 
 
 
11,882

 
12,550

Total intangible assets, net
$
98,912

 
$
104,099

Intangible lease liabilities:


 


Acquired below-market liabilities, net of accumulated amortization of $3,903 and $3,280, respectively (with a weighted average life remaining of 20.9 years and 21.4 years, respectively)
 
 
 
$
14,874

 
$
15,506

Amortization of the above-market leases is recorded as a reduction to rental and other property income, and amortization expense for the in-place leases and other intangibles is included in depreciation and amortization in the accompanying condensed consolidated statements of operations. Amortization of below-market leases is recorded as an increase to rental and other property income in the accompanying condensed consolidated statements of operations. The following table summarizes the amortization related to the intangible lease assets and liabilities for the three and six months ended June 30, 2019 and 2018 (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
In-place lease and other intangible amortization
$
2,386

 
$
2,264

 
$
4,774

 
$
4,205

Above-market lease amortization
$
283

 
$
246

 
$
568

 
$
435

Below-market lease amortization
$
397

 
$
368

 
$
795

 
$
722

As of June 30, 2019, the estimated amortization relating to the intangible lease assets and liabilities is as follows (in thousands):
 
 
Amortization
 
 
In-Place Leases and Other Intangibles
 
Above-Market Leases
 
Below-Market Leases
Remainder of 2019
 
$
4,699

 
$
563

 
$
793

2020
 
9,199

 
1,119

 
1,562

2021
 
9,051

 
1,119

 
1,346

2022
 
9,008

 
1,119

 
1,308

2023
 
8,780

 
1,110

 
1,280

Thereafter
 
46,293

 
6,852

 
8,585

Total
 
$
87,030

 
$
11,882

 
$
14,874


19

CIM INCOME NAV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019 (Unaudited) – (Continued)

NOTE 6 — MARKETABLE SECURITIES
The Company owned marketable securities with an estimated fair value of $6.0 million and $5.5 million as of June 30, 2019 and December 31, 2018, respectively. The following is a summary of the Company’s available-for-sale securities as of June 30, 2019 (in thousands):
 
 
Available-for-sale securities
 
 
Amortized Cost Basis
 
Unrealized (Loss) Gain
 
Fair Value
U.S. Treasury Bonds
 
$
2,070

 
$
52

 
$
2,122

U.S. Agency Bonds
 
907

 
6

 
913

Corporate Bonds
 
2,931

 
81

 
3,012

Total available-for-sale securities
 
$
5,908

 
$
139

 
$
6,047

The following table provides the activity for the marketable securities during the six months ended June 30, 2019 (in thousands):
 
 
Amortized Cost Basis
 
Unrealized (Loss) Gain
 
Fair Value
Marketable securities as of January 1, 2019
 
$
5,558

 
$
(92
)
 
$
5,466

Face value of marketable securities acquired
 
696

 

 
696

Premiums and discounts on purchase of marketable securities, net of acquisition costs
 
16

 

 
16

Amortization on marketable securities
 
(3
)
 

 
(3
)
Sales and maturities of securities
 
(359
)
 
8

 
(351
)
Unrealized gain on marketable securities
 

 
223

 
223

Marketable securities as of June 30, 2019
 
$
5,908

 
$
139

 
$
6,047

During the six months ended June 30, 2019, the Company sold eight marketable securities for aggregate proceeds of $351,000. Unrealized (losses) gains on marketable securities are recorded in other comprehensive (loss) income, with a portion of the amount subsequently reclassified into other expense, net in the accompanying condensed consolidated statements of operations as securities are sold and gains (losses) are recognized. In addition, the Company recorded an unrealized gain of $223,000 on its investments, which is included in accumulated other comprehensive (loss) income in the accompanying condensed consolidated statement of changes in equity for the six months ended June 30, 2019 and the condensed consolidated balance sheet as of June 30, 2019.
The scheduled maturities of the Company’s marketable securities as of June 30, 2019 are as follows (in thousands):
 
 
Available-for-sale securities
 
 
Amortized Cost
 
 Estimated Fair Value
Due within one year
 
$
190

 
$
189

Due after one year through five years
 
3,003

 
3,041

Due after five years through ten years
 
2,134

 
2,229

Due after ten years
 
581

 
588

Total
 
$
5,908

 
$
6,047

Actual maturities of marketable securities can differ from contractual maturities because borrowers on certain debt securities may have the right to prepay their respective debt obligations at any time. In addition, factors such as prepayments and interest rates may affect the yields on such securities.
In estimating other-than-temporary impairment losses, management considers a variety of factors, including (1) whether the Company has the intent to sell the impaired security, (2) whether the Company expects to hold the investment for a period of time sufficient to allow for anticipated recovery in fair value, and (3) whether the Company expects to recover the entire amortized cost basis of the security. The Company believes that none of the unrealized losses on investment securities are other-than-temporary as management expects the Company will fully recover the entire amortized cost basis of all securities. As of June 30, 2019, the Company had no other-than-temporary impairment losses.

20

CIM INCOME NAV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019 (Unaudited) – (Continued)

NOTE 7 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In the normal course of business, the Company uses certain types of derivative instruments for the purpose of managing or hedging its interest rate risk. The Company did not enter into any interest rate swap agreements during the three and six months ended June 30, 2019. As of June 30, 2019, the Company had nine interest rate swap agreements. The following table summarizes the terms of the Company’s executed interest rate swap agreements designated as hedging instruments as of June 30, 2019 and December 31, 2018 (dollar amounts in thousands):
 
 
 
Outstanding Notional Amount as of
 
Interest
 
Effective
 
Maturity
 
Fair Value of
Assets and (Liabilities) as of
 
Balance Sheet Location
 
June 30, 2019
 
Rate (1)
 
Date
 
Date
 
June 30, 2019
 
December 31, 2018
Interest Rate Swaps
Prepaid expenses, derivative assets and other assets
 
$
49,240

 
3.13% to 3.57%
 
6/30/2015 to 12/1/2015
 
9/12/2019 to 12/1/2020
 
$
81

 
$
2,856

Interest Rate Swaps
Derivative liabilities, deferred rental income and other liabilities
 
$
241,465

 
3.32% to 5.16%
 
12/16/2016 to 10/31/2018
 
9/30/2021 to 9/6/2022
 
$
(5,335
)
 
$
(2,199
)
______________________
(1)
The interest rates consist of the underlying index swapped to a fixed rate and the applicable interest rate spread as of June 30, 2019.
Additional disclosures related to the fair value of the Company’s derivative instruments are included in Note 3 — Fair Value Measurements. The notional amount under the interest rate swap agreements is an indication of the extent of the Company’s involvement in each instrument, but does not represent exposure to credit, interest rate or market risks.
Accounting for changes in the fair value of a derivative instrument depends on the intended use and designation of the derivative instrument. The Company designated the interest rate swaps as cash flow hedges in order to hedge the variability of the anticipated cash flows on its variable rate debt. The change in fair value of the derivative instruments that are designated as hedges is recorded in other comprehensive (loss) income, with a portion of the amount subsequently reclassified to interest expense as interest payments are made on the Company’s variable rate debt. For the three and six months ended June 30, 2019, the amount of gains reclassified from other comprehensive (loss) income as a decrease to interest expense was $198,000 and $416,000, respectively. For the three and six months ended June 30, 2018, the amount of gains (losses) reclassified from other comprehensive (loss) income was a decrease of $76,000 and an increase of $1,000, respectively, to interest expense. During the next 12 months, the Company estimates that an additional $1.1 million will be reclassified from other comprehensive (loss) income as an increase to interest expense. The Company includes cash flows from interest rate swap agreements in cash flows provided by operating activities on the condensed consolidated statements of cash flows, as the Company’s accounting policy is to present cash flows from hedging instruments in the same category in the condensed consolidated statements of cash flows as the category for cash flows from the hedged items.
The Company has agreements with each of its derivative counterparties that contain provisions whereby, if the Company defaults on certain of its unsecured indebtedness, the Company could also be declared in default on its derivative obligations, resulting in an acceleration of payment. If the Company had breached any of these provisions, it could have been required to settle its obligations, under the agreements at an aggregate termination value, inclusive of interest payments of $5.3 million, which includes accrued interest, at June 30, 2019. In addition, the Company is exposed to credit risk in the event of non-performance by its derivative counterparties. The Company believes it mitigates its credit risk by entering into agreements with creditworthy counterparties. The Company records credit risk valuation adjustments on its interest rate swaps based on the credit quality of the Company and the respective counterparty. There were no termination events or events of default related to the interest rate swaps as of June 30, 2019.

21

CIM INCOME NAV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019 (Unaudited) – (Continued)

NOTE 8 — CREDIT FACILITY AND NOTES PAYABLE
As of June 30, 2019, the Company had $348.6 million of debt outstanding, including net deferred financing costs, with a weighted average years to maturity of 3.1 years and a weighted average interest rate of 3.91%. The weighted average years to maturity is computed using the scheduled repayment date as specified in each loan agreement where applicable. The weighted average interest rate is computed using the interest rate in effect until the scheduled repayment date. Should a loan not be repaid by its scheduled repayment date, the applicable interest rate will increase as specified in the respective loan agreement until the extended maturity date. The following table summarizes the debt balances as of June 30, 2019 and December 31, 2018, and the debt activity for the six months ended June 30, 2019 (in thousands):
 
 
 
During the Six Months Ended June 30, 2019
 
 
 
 
Balance as of
December 31, 2018
 
Debt Issuance, Net (1)
 
Repayments
 
Amortization
 
Balance as of
June 30, 2019
Credit facility
 
$
218,500

 
$
25,500

 
$
(31,500
)
 
$

 
$
212,500

Fixed rate debt
 
138,459

 

 

 

 
138,459

Total debt
 
356,959

 
25,500

 
(31,500
)
 

 
350,959

Deferred costs  credit facility (2)
 
(1,387
)
 

 

 
188

 
(1,199
)
Deferred costs  fixed rate debt
 
(1,318
)
 

 

 
161

 
(1,157
)
Total debt, net
 
$
354,254

 
$
25,500

 
$
(31,500
)
 
$
349

 
$
348,603

______________________
(1)
Includes deferred financing costs incurred during the period.
(2)
Deferred costs related to the term portion of the credit facility.
As of June 30, 2019, the Company had fixed rate debt outstanding of $138.5 million, including $78.2 million of variable rate debt that is fixed through interest rate swap agreements, which has the effect of fixing the variable interest rate per annum through the maturity date of the variable rate debt. The fixed rate debt has interest rates ranging from 3.56% to 4.17% per annum and as of June 30, 2019, the fixed rate debt had a weighted average interest rate of 3.91%. The fixed rate debt outstanding matures on various dates from December 2020 to February 2025. The aggregate balance of gross real estate assets, net of gross intangible lease liabilities, securing the fixed rate debt outstanding was $247.0 million as of June 30, 2019. Each of the mortgage notes payable comprising the fixed rate debt is secured by the respective properties on which the debt was placed.
The Company is party to a second amended and restated credit agreement (the “Second Amended Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent (“JPMorgan Chase”), that provides for borrowings up to $425.0 million, which is comprised of up to $212.5 million in unsecured revolving loans (the “Revolving Loans”) and up to $212.5 million in unsecured term loans (the “Term Loans”) (collectively, with the Revolving Loans the “Credit Facility”). The Term Loans mature on September 6, 2022 and the Revolving Loans mature on September 6, 2021; however, the Company may elect to extend the maturity date for the Revolving Loans for up to two six-month periods, but no later than September 6, 2022, subject to satisfying certain conditions contained in the Second Amended Credit Agreement.
Depending upon the type of loan specified and overall leverage ratio, the Credit Facility bears interest at (i) the one-month, two-month, three-month or six-month LIBOR multiplied by the statutory reserve rate (the “Eurodollar Rate”) plus an interest rate spread ranging from 1.70% to 2.20% for Revolving Loans and 1.60% to 2.10% for Term Loans; or (ii) a base rate ranging from 0.70% to 1.20% for Revolving Loans and 0.60% to 1.10% for Term Loans, plus the greater of: (a) JPMorgan Chase’s Prime Rate (as defined in the Second Amended Credit Agreement); (b) the Federal Funds Effective Rate (as defined in the Second Amended Credit Agreement) plus 0.50%; or (c) the one-month LIBOR multiplied by the statutory reserve rate plus 1.0%. As of June 30, 2019, there were no amounts outstanding under the Revolving Loans, and the Term Loans outstanding totaled $212.5 million, all of which are subject to interest rate swap agreements (the “Swapped Term Loans”). The interest rate swap agreements have the effect of fixing the Eurodollar Rate per annum of the Swapped Term Loan at an all-in rate of 3.91%. As of June 30, 2019, the Company had $212.5 million outstanding under the Credit Facility at a weighted average interest rate of 3.91% and $212.5 million in unused capacity, subject to borrowing availability.

22

CIM INCOME NAV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019 (Unaudited) – (Continued)

The Second Amended Credit Agreement contains provisions with respect to covenants, events of default and remedies customary for facilities of this nature. In particular, the Second Amended Credit Agreement requires the Company to maintain a minimum consolidated net worth greater than or equal to the sum of (i) $367.1 million plus (ii) 75% of the equity issued (iii) minus the aggregate amount of any redemptions or similar transaction from the date of the Second Amended Credit Agreement, a leverage ratio less than or equal to 60%, a fixed charge coverage ratio equal to or greater than 1.50, an unsecured debt to unencumbered asset value ratio equal to or less than 60%, an unsecured debt service coverage ratio greater than 1.75, a secured debt ratio equal to or less than 40%, and the amount of secured debt that is recourse debt at no greater than 15% of total asset value. As of June 30, 2019, the Company believes it was in compliance with the financial covenants of the Second Amended Credit Agreement, as well as the financial covenants under the Company’s various fixed and variable rate debt agreements.
Maturities
The following table summarizes the scheduled aggregate principal repayments for the Company’s outstanding debt subsequent to June 30, 2019 (in thousands):
 
 
Principal Repayments
Remainder of 2019
$

2020
9,240

2021
20,442

2022
304,327

2023

Thereafter
16,950

Total
$
350,959

NOTE 9 — SUPPLEMENTAL CASH FLOW DISCLOSURES
Supplemental cash flow disclosures for the six months ended June 30, 2019 and 2018 are as follows (in thousands):
 
Six Months Ended June 30,
 
2019
 
2018
Supplemental Disclosures of Non-Cash Investing and Financing Activities:
 
 
 
Change in accrued dealer manager fee, ongoing stockholder servicing fees, and other offering costs
$
2,216

 
$
4,686

Distributions to stockholders declared and unpaid
$
2,724

 
$
2,341

Common stock issued through distribution reinvestment plan
$
7,976

 
$
6,416

Change in fair value of marketable securities
$
231

 
$
(111
)
Change in fair value of interest rate swaps
$
(5,911
)
 
$
3,121

Accrued capital expenditures
$

 
$
18

Accrued deferred financing costs
$
1

 
$

Supplemental Cash Flow Disclosures:
 
 
 
Interest paid
$
7,036

 
$
5,846

Cash paid for taxes
$
60

 
$
38


23

CIM INCOME NAV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019 (Unaudited) – (Continued)

NOTE 10 — COMMITMENTS AND CONTINGENCIES
Litigation
In the ordinary course of business, the Company may become subject to litigation and claims. The Company is not aware of any material pending legal proceedings, other than ordinary routine litigation incidental to the Company’s business, to which the Company is a party or of which the Company’s properties are the subject.
Environmental Matters
In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. In addition, the Company may own or acquire certain properties that are subject to environmental remediation. Generally, the seller of the property, the tenant of the property and/or another third party is responsible for environmental remediation costs related to a property. Additionally, in connection with the purchase of certain properties, the respective sellers and/or tenants may agree to indemnify the Company against future remediation costs. The Company also carries environmental liability insurance on its properties that provides limited coverage for any remediation liability and/or pollution liability for third-party bodily injury and/or property damage claims for which the Company may be liable. The Company is not aware of any environmental matters which it believes are reasonably likely to have a material effect on its results of operations, financial condition or liquidity.
NOTE 11 — RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS
The Company has incurred, and will continue to incur, commissions, fees and expenses payable to CIM Income NAV Management and certain of its affiliates in connection with the Offering, and the acquisition, management and performance of the Company’s assets. In connection with the Share Modifications, the Company amended and restated its dealer manager agreement and advisory agreement to reflect the changes to the names and classifications of its common stock, and to establish the fees associated with its D Shares, T Shares, S Shares and I Shares, effective November 27, 2018.
Upfront selling commissions, dealer manager and ongoing stockholder servicing fees
In connection with the Offering, CCO Capital, the Company’s dealer manager, will receive upfront selling commissions and dealer manager fees, and/or an asset-based stockholder servicing fees, as summarized in the table below for each class of common stock:
 
Upfront Selling Commissions
 
Dealer Manager Fees
 
Ongoing Stockholder Servicing Fees (2)
D Shares (1)
1.50
%
 
%
 
0.25
%
T Shares (1)
3.00
%
 
0.50
%
 
0.85
%
S Shares (1)
3.50
%
 
%
 
0.85
%
I Shares
%
 
%
 
%
______________________
(1)
The upfront selling commissions are based on a percentage of the transaction price, which is exclusive of the upfront selling commission for D Shares, T Shares and S Shares. The dealer manager fee is based on a percentage of the transaction price for T Shares. Upfront selling commissions and dealer manager fees are deducted directly from the offering price for D Shares, T Shares and S Shares and paid to CCO Capital. The Company has been advised that CCO Capital intends to reallow 100% of the upfront selling commissions on D Shares, T Shares and S Shares, to participating broker-dealers and may reallow a portion of the dealer manager fee.
(2)
The stockholder servicing fees will be calculated on a daily basis in an amount equal to 1/365th of the percentage of NAV per D Share, T Share or S Share, as applicable, for such day on a continuous basis. CCO Capital, in its sole discretion, may reallow a portion of the stockholder servicing fees to participating broker-dealers. The Company will cease paying the stockholder servicing fees with respect to any D Shares, T Shares or S Shares held in a stockholder’s account when the total upfront selling commissions, dealer manager fees and stockholder servicing fees would exceed, in the aggregate, 8.75% (or, in the case of shares sold through certain participating broker-dealers, a lower limit as set forth in any applicable agreement between our dealer manager and a participating broker-dealer) of the gross proceeds from the sale of such shares.

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CIM INCOME NAV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019 (Unaudited) – (Continued)

Other organization and offering expenses
All other organization and offering expenses associated with the sale of the Company’s common stock (excluding upfront selling commissions, dealer manager fee and the ongoing stockholder servicing fees) are paid for by CIM Income NAV Management or its affiliates and can be reimbursed by the Company up to 0.75% of the aggregate gross offering proceeds, excluding upfront selling commissions and dealer manager fees charged on D Shares, T Shares and S Shares sold in the Primary Offering. As of June 30, 2019, CIM Income NAV Management or its affiliates had paid organization and offering expenses in excess of the 0.75% in connection with the Offering. These excess amounts were not included in the financial statements of the Company because such amounts were not a liability of the Company as they exceeded 0.75% of gross proceeds from the Offering. As the Company raises additional proceeds from the Offering, these excess amounts may become payable to CIM Income NAV Management.
Advisory fees and expenses
Effective on the Restructure Date, the Company modified the asset-based advisory fee that is payable to CIM Income NAV Management in arrears on a monthly basis and accrues daily in an amount equal to 1/365th of 0.90% to 1/365th of 1.10% of the Company’s NAV for each class of common stock, for each day.
Operating expenses
The Company reimburses CIM Income NAV Management for the operating expenses it paid or incurred in connection with the services provided to the Company, subject to the limitation that the Company will not reimburse for any amount by which its operating expenses (including the advisory fee) at the end of the four preceding fiscal quarters exceeds the greater of (1) 2% of average invested assets, or (2) 25% of net income other than any additions to reserves for depreciation, bad debts or other similar non-cash reserves and excluding any gain from the sale of assets for that period.
Acquisition expenses
In addition, the Company reimburses CIM Income NAV Management for all out-of-pocket expenses incurred in connection with the acquisition of the Company’s investments. While most of the acquisition expenses are expected to be paid to third parties, a portion of the out-of-pocket acquisition expenses may be reimbursed to CIM Income NAV Management or its affiliates. Acquisition expenses, together with any acquisition fees paid to third parties for a particular real estate-related asset, will in no event exceed 6% of the gross purchase price of such asset. Other acquisition-related expenses, such as advisor reimbursements, continue to be expensed as incurred and are included in transaction-related expenses in the accompanying condensed consolidated statements of operations.
Performance Fee
As compensation for services provided pursuant to the advisory agreement, the Company will also pay CIM Income NAV Management a performance-based fee calculated based on the Company’s annual total return to stockholders for each class of common stock (defined below), payable annually in arrears. The total return to stockholders is defined, for each class of the Company’s common stock, as the change in NAV per share plus distributions per share for such class. For each respective class, the NAV per share is calculated on the last trading day of a calendar year shall be the amount against which changes in NAV per share for such class are measured during the subsequent calendar year. Under the terms of the advisory agreement, in the event that performance fees are earned for any particular period, CIM Income NAV Management will not be obligated to return any portion of such fees previously paid based on the Company’s subsequent performance.
Through December 31, 2018, the performance fee was calculated such that, for any calendar year in which the total return per share for a particular class exceeded 6% (the “6% Return”), CIM Income NAV Management would receive 25% of the excess total return on such class above the 6% Return allocable to that class, but in no event would the Company pay CIM Income NAV Management more than 10% of the aggregate total return, for that class, for such year. However, in the event the NAV per share of the Company’s D Shares, T Shares and I Shares decreased below the base NAV