CIM REAL ESTATE FINANCE TRUST, INC. [CMRF] Filings

10-Q 1 cmft-20240630.htm 10-Q cmft-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			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 000-54939

CIM REAL ESTATE FINANCE TRUST, INC.

(Exact name of registrant as specified in its charter)

Maryland

27-3148022

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)

2398 East Camelback Road, 4th Floor

Phoenix,

Arizona

85016

(Address of principal executive offices)

(Zip code)

(602)

778-8700

(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

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 ☒ 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 ☒ 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

☒

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 ☒

As of August 5, 2024, there were approximately 436.5 million shares of common stock, par value $0.01 per share, of CIM Real Estate Finance Trust, Inc. outstanding.

Table of Contents

CIM REAL ESTATE FINANCE TRUST, INC.

INDEX



PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023			3

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023			4

Condensed Consolidated Statements of Comprehensive (Loss) Income for the three and six months ended June 30, 2024 and 2023			5

Condensed Consolidated Statements of Equity for the three and six months ended June 30, 2024 and 2023			6

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023			8

Notes to Condensed Consolidated Financial Statements			10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			48

Item 3. Quantitative and Qualitative Disclosures About Market Risk			64

Item 4. Controls and Procedures			65

PART II — OTHER INFORMATION

Item 1. Legal Proceedings			66

Item 1A. Risk Factors			66

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			66

Item 3. Defaults Upon Senior Securities			66

Item 4. Mine Safety Disclosures			66

Item 5. Other Information			67

Item 6. Exhibits			68

Signature			69

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

CIM REAL ESTATE FINANCE TRUST, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts) (Unaudited)


	June 30, 2024		December 31, 2023
ASSETS
Real estate assets:
Land	$	295,606	$	317,844
Buildings, fixtures and improvements	734,888		818,151
Intangible lease assets	137,910		154,217
Condominium developments	69,959		87,581
Total real estate assets, at cost	1,238,363		1,377,793
Less: accumulated depreciation and amortization	(168,402)		(169,163)
Total real estate assets, net	1,069,961		1,208,630
Investment in unconsolidated entities	152,327		126,777
Real estate-related securities and other, at fair value, net of credit loss allowances of $40,091 and $35,808 as of June 30, 2024 and December 31, 2023, respectively	404,379		519,714
Loans held-for-investment and related receivables, net	4,203,409		4,397,063
Less: Current expected credit losses	(409,750)		(132,598)
Total loans held-for-investment and related receivables, net	3,793,659		4,264,465
Cash and cash equivalents	425,831		247,500
Restricted cash	3,395		13,082
Rents and tenant receivables, net	18,004		17,082


Prepaid expenses and other assets	8,992		9,423
Deferred costs, net	9,540		12,121
Accrued interest receivable	23,842		27,682

Total assets	$	5,909,930	$	6,446,476
LIABILITIES, REDEEMABLE COMMON STOCK AND EQUITY
Repurchase facilities, notes payable and credit facilities, net	$	3,777,227	$	3,923,723
Accrued expenses and accounts payable	39,566		40,240

Due to affiliates	14,258		13,897
Intangible lease liabilities, net	12,788		13,354
Distributions payable	16,570		16,047
Deferred rental income and other liabilities	3,568		4,435
Total liabilities	3,863,977		4,011,696
Commitments and contingencies (Note 11)
Redeemable common stock	167,682		168,703
EQUITY
Preferred stock, $0.01 par value per share; 10,000,000 shares authorized, none issued and outstanding	—		—
Common stock, $0.01 par value per share; 490,000,000 shares authorized, 437,117,869 and 437,254,715 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively	4,375		4,372
Capital in excess of par value	3,531,522		3,529,973
Accumulated distributions in excess of earnings	(1,570,017)		(1,187,125)
Accumulated other comprehensive loss	(87,659)		(81,143)
Total stockholders’ equity	1,878,221		2,266,077
Non-controlling interests	50		—
Total equity	1,878,271		2,266,077
Total liabilities, redeemable common stock and equity	$	5,909,930	$	6,446,476

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

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CIM REAL ESTATE FINANCE TRUST, 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,
	2024		2023		2024		2023
Revenues:
Rental and other property income	$	23,562	$	25,682	$	48,136	$	64,463
Interest income	98,309		115,038		208,164		223,121
Total revenues	121,871		140,720		256,300		287,584
Expenses:
General and administrative	6,111		4,921		12,261		8,219
Interest expense, net	63,937		59,548		129,513		125,782
Property operating	2,323		3,007		6,330		5,583
Real estate tax	1,173		1,231		2,451		2,048
Expense reimbursements to related parties	3,726		3,681		6,719		7,249
Management fees	12,613		12,859		25,304		25,438
Transaction-related	6		63		66		76
Depreciation and amortization	8,397		9,319		16,939		24,429
Real estate impairment	56,932		—		56,932		4,814
Increase in provision for credit losses	216,898		49,637		284,015		51,090
Total expenses	372,116		144,266		540,530		254,728




Other income (expense):
Gain on disposition of real estate and condominium developments, net	2,468		26,563		3,250		46,186
Gain on investment in unconsolidated entities	2,742		5,806		5,267		5,036
Unrealized (loss) gain on equity securities	(4,229)		3,096		(15,642)		5,354
Other income, net	3,463		850		7,012		1,174
Loss on extinguishment of debt	—		(894)		—		(4,539)
Total other income (expense)	4,444		35,421		(113)		53,211
Net (loss) income	$	(245,801)	$	31,875	$	(284,343)	$	86,067
Net income allocated to noncontrolling interest	—		—		—		8
Net (loss) income attributable to the Company	$	(245,801)	$	31,875	$	(284,343)	$	86,059
Weighted average number of common shares outstanding:
Basic and diluted	437,183,656		437,401,621		437,224,227		437,417,648
Net (loss) income per common share:
Basic and diluted	$	(0.56)	$	0.07	$	(0.65)	$	0.20

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

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CIM REAL ESTATE FINANCE TRUST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands) (Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net (loss) income	$	(245,801)	$	31,875	$	(284,343)	$	86,067
Other comprehensive (loss) income
Unrealized loss on CMBS	(11,471)		(5,606)		(6,516)		(31,916)

Amount of loss reclassified from other comprehensive loss into income as an increase in provision for credit losses	—		13,594		—		13,594


Total other comprehensive (loss) income	(11,471)		7,988		(6,516)		(18,322)

Comprehensive (loss) income	(257,272)		39,863		(290,859)		67,745
Comprehensive income attributable to noncontrolling interest	—		—		—		8
Comprehensive (loss) income attributable to the Company	$	(257,272)	$	39,863	$	(290,859)	$	67,737

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

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CIM REAL ESTATE FINANCE TRUST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(in thousands, except share amounts) (Unaudited)


	Common Stock			Capital in Excess of Par Value		Accumulated Distributions in Excess of Earnings		Accumulated Other Comprehensive (Loss) Income		Total Stockholders’ Equity		Non-Controlling Interests		Total Equity
	Number of Shares	Par Value
Balance as of January 1, 2024	437,254,715	$	4,372	$	3,529,973	$	(1,187,125)	$	(81,143)	$	2,266,077	$	—	$	2,266,077
Issuance of common stock	1,742,240	19		10,846		—		—		10,865		—		10,865
Equity-based compensation	—	—		815		—		—		815		—		815
Distributions declared on common stock — $0.11 per common share	—	—		—		(49,278)		—		(49,278)		—		(49,278)
Redemptions of common stock	(1,754,973)	(17)		(11,062)		—		—		(11,079)		—		(11,079)
Changes in redeemable common stock	—	—		249		—		—		249		—		249
Comprehensive (loss) income	—	—		—		(38,542)		4,955		(33,587)		—		(33,587)
Balance as of March 31, 2024	437,241,982	$	4,374	$	3,530,821	$	(1,274,945)	$	(76,188)	$	2,184,062	$	—	$	2,184,062
Issuance of common stock	1,765,256	20		10,731		—		—		10,751		—		10,751
Equity-based compensation	—	—		701		—		—		701		—		701
Distributions declared on common stock — $0.11 per common share	—	—		—		(49,271)		—		(49,271)		—		(49,271)
Redemptions of common stock	(1,889,369)	(19)		(11,503)		—		—		(11,522)		—		(11,522)
Changes in redeemable common stock	—	—		772		—		—		772		—		772
Contributions from non-controlling interests	—	—		—		—		—		—		50		50
Comprehensive loss	—	—		—		(245,801)		(11,471)		(257,272)		—		(257,272)
Balance as of June 30, 2024	437,117,869	$	4,375	$	3,531,522	$	(1,570,017)	$	(87,659)	$	1,878,221	$	50	$	1,878,271

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CIM REAL ESTATE FINANCE TRUST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF 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 (Loss) Income		Total Stockholders’ Equity		Non-Controlling Interests		Total Equity
	Number of Shares	Par Value
Balance as of January 1, 2023	437,397,414	$	4,373	$	3,529,523	$	(1,029,287)	$	(48,526)	$	2,456,083	$	(8)	$	2,456,075
Issuance of common stock	1,637,923	17		10,746		—		—		10,763		—		10,763
Equity-based compensation	—	—		120		—		—		120		—		120
Distributions declared on common stock — $0.11 per common share	—	—		—		(45,929)		—		(45,929)		—		(45,929)
Redemptions of common stock	(1,605,529)	(16)		(10,532)		—		—		(10,548)		—		(10,548)
Changes in redeemable common stock	—	—		(213)		—		—		(213)		—		(213)
Comprehensive income (loss)	—	—		—		54,184		(26,310)		27,874		8		27,882
Balance as of March 31, 2023	437,429,808	$	4,374	$	3,529,644	$	(1,021,032)	$	(74,836)	$	2,438,150	$	—	$	2,438,150
Issuance of common stock	1,637,602	$	16	$	10,743	$	—	$	—	$	10,759	$	—	$	10,759
Equity-based compensation	—	—		120		—		—		120		—		120
Distributions declared on common stock — $0.11 per common share	—	—		—		(45,927)		—		(45,927)		—		(45,927)
Redemptions of common stock	(1,685,438)	(16)		(11,057)		—		—		(11,073)		—		(11,073)
Changes in redeemable common stock	—	—		315		—		—		315		—		315
Comprehensive income	—	—		—		31,875		7,988		39,863		—		39,863
Balance as of June 30, 2023	437,381,972	$	4,374	$	3,529,765	$	(1,035,084)	$	(66,848)	$	2,432,207	$	—	$	2,432,207

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

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CIM REAL ESTATE FINANCE TRUST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (Unaudited)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net (loss) income	$	(284,343)	$	86,067
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization, net	16,831		24,376
Amortization of deferred financing costs	4,975		5,235

Amortization and accretion on deferred loan fees	(2,373)		(5,977)
Amortization of premiums and discounts on credit investments	(3,772)		(18,717)
Capitalized interest income on real estate-related securities and loans held-for-investment	(663)		(571)
Equity-based compensation	1,516		240
Straight-line rental income	(1,283)		(1,435)
Write-offs for uncollectible lease-related receivables	(318)		578
Gain on disposition of real estate assets and condominium developments, net	(3,250)		(46,186)
Loss on sale of credit investments, net	1,578		690
Gain on investment in unconsolidated entities	(5,267)		(5,036)

Unrealized loss (gain) on equity securities	15,642		(5,354)

Loss on interest rate caps	—		4,399
Impairment of real estate assets	56,932		4,814
Increase in provision for credit losses	284,015		51,090
Write-off of deferred financing costs	—		3,564
Return on investment in unconsolidated entities	5,267		5,036
Changes in assets and liabilities:
Rents and tenant receivables, net	333		6,141
Prepaid expenses and other assets	431		12,522
Accrued interest receivable	3,840		(4,518)
Accrued expenses and accounts payable	(3,471)		(3,272)
Deferred rental income and other liabilities	(867)		(1,846)

Due to affiliates	361		(1,788)
Net cash provided by operating activities	86,114		110,052
Cash flows from investing activities:
Investment in unconsolidated entities	(26,806)		(5,420)
Return of investment in unconsolidated entities	1,256		4,801
Investment in real estate-related securities	—		(143,157)
Investment in liquid corporate senior loans	(7,244)		(80,553)
Investment in real estate assets and capital expenditures	(7,286)		(5,639)
Investment in corporate senior loans	(12,377)		(80,977)
Origination and funding of first mortgage loans	(47,897)		(135,398)
Origination and exit fees received on loans held-for-investment	329		—
Principal payments received on loans held-for-investment	136,636		156,601
Principal payments received on real estate-related securities	96,185		53,591

Net proceeds from disposition of real estate assets and condominium developments	77,702		925,848
Net proceeds from sale of liquid corporate senior loans	120,015		25,490




Net cash provided by investing activities	$	330,513	$	715,187

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CIM REAL ESTATE FINANCE TRUST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (Unaudited) — Continued


	Six Months Ended June 30,
	2024		2023
Cash flows from financing activities:
Redemptions of common stock	$	(22,601)	$	(21,621)
Distributions to stockholders	(76,410)		(69,854)
Proceeds from borrowings	48,343		241,610
Repayments of borrowings, and prepayment penalties	(196,550)		(679,322)



Contributions from non-controlling interests	50		—
Deferred financing costs paid	(815)		(3,983)
Net cash used in financing activities	(247,983)		(533,170)
Net increase in cash and cash equivalents and restricted cash	168,644		292,069
Cash and cash equivalents and restricted cash, beginning of period	260,582		176,594
Cash and cash equivalents and restricted cash, end of period	$	429,226	$	468,663
Reconciliation of cash and cash equivalents and restricted cash to the condensed consolidated balance sheets:
Cash and cash equivalents	$	425,831	$	416,891
Restricted cash	3,395		51,772
Total cash and cash equivalents and restricted cash	$	429,226	$	468,663
Supplemental Disclosures of Non-Cash Investing and Financing Activities:
Distributions declared and unpaid	$	16,570	$	15,308
Accrued capital expenditures	$	3,024	$	54
Construction reserve allocation	$	—	$	(190)
Accrued deferred financing costs	$	—	$	167






Common stock issued through distribution reinvestment plan	$	21,616	$	21,522

Change in fair value of real estate-related securities	$	(6,516)	$	(18,322)
Conversion of loan held-for-investment to equity securities	$	(5,060)	$	—

Supplemental Cash Flow Disclosures:
Interest paid	$	126,542	$	122,068
Cash paid for taxes	$	1,363	$	911

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

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CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024 (Unaudited)

NOTE 1 — ORGANIZATION AND BUSINESS

CIM Real Estate Finance Trust, Inc. (the “Company”) is a non-exchange traded real estate investment trust (“REIT”) formed as a Maryland corporation on July 27, 2010, that elected to be taxed, and operates its business to qualify, as a REIT for U.S. federal income tax purposes beginning with its taxable year ended December 31, 2012. The Company seeks to attain attractive risk-adjusted returns and create long term value for its investors by investing in a diversified portfolio of senior secured mortgage loans, creditworthy long-term net-leased property investments and other senior loan and liquid credit investments. As of June 30, 2024, the Company’s loan portfolio consisted of 210 loans with a net book value of $3.8 billion, and investments in real estate-related securities and other of $404.4 million. The Company conducts and expects to continue to conduct its commercial real estate lending business through CIM Commercial Lending REIT (“CLR”), a Maryland statutory trust and subsidiary of the Company which the Company expects to be taxed as a REIT for U.S. federal income tax purposes. As of June 30, 2024, CLR holds a diversified portfolio of approximately $1.5 billion of the Company’s senior secured mortgage loans and commercial mortgage-backed securities. As of June 30, 2024, the Company owned 190 properties, comprising approximately 6.0 million rentable square feet of commercial space located in 36 states. As of June 30, 2024, the rentable square feet at these properties was 100.0% leased, including month-to-month agreements, if any. As of June 30, 2024, the Company owned condominium developments with a net book value of $70.0 million.

A majority of the Company’s business is conducted through CIM Real Estate Finance Operating Partnership, LP, a Delaware limited partnership, 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 Real Estate Finance Management, LLC, a Delaware limited liability company (“CMFT Management”), which is an affiliate of CIM Group, LLC (“CIM Group”). CIM Group is a vertically-integrated community-focused real estate and infrastructure owner, operator, lender and developer. CIM Group is headquartered in Los Angeles, CA, with offices in Atlanta, GA, Chicago, IL, Dallas, TX, London, UK, New York, NY, Orlando, FL, Phoenix, AZ, and Tokyo, Japan. CIM Group also maintains additional offices across the United States and in South Korea to support its platform.

The Company relies upon CIM Capital IC Management, LLC, the Company’s investment advisor (the “Investment Advisor”), to provide substantially all of the day-to-day management of its subsidiary, CMFT Securities Investments, LLC, with respect to investments in securities and certain other investments held by CMFT Securities Investments, LLC and its subsidiaries. Collectively, CMFT Management, the Company’s manager, and the Investment Advisor, together with certain other affiliates of CIM Group, serve as the Company’s sponsor, which is referred to as the Company’s “sponsor” or “CIM”.

On January 26, 2012, the Company commenced its initial public offering on a “best efforts” basis of up to a maximum of $2.975 billion in shares of common stock (the “Initial Offering”). The Company ceased issuing shares in the Initial Offering on April 4, 2014. At the completion of the Initial Offering, a total of approximately 297.4 million shares of common stock had been issued, including approximately 292.3 million shares of common stock sold to the public pursuant to the primary portion of the Initial Offering and approximately 5.1 million shares of common stock issued pursuant to the distribution reinvestment plan (“DRIP”) portion of the Initial Offering. The remaining approximately 404,000 unsold shares from the Initial Offering were deregistered.

The Company registered $247.0 million of shares of common stock under the DRIP (the “Initial DRIP Offering”) pursuant to a Registration Statement on Form S-3 (Registration No. 333-192958), which was filed with the U.S. Securities and Exchange Commission (the “SEC”) on December 19, 2013 and automatically became effective with the SEC upon filing. The Company ceased issuing shares under the Initial DRIP Offering effective as of June 30, 2016. At the completion of the Initial DRIP Offering, a total of approximately $241.7 million of shares of common stock had been issued. The remaining $5.3 million of unsold shares from the Initial DRIP Offering were deregistered.

The Company registered an additional $600.0 million of shares of common stock under the DRIP (the “Secondary DRIP Offering,” and together with the Initial DRIP Offering, the “DRIP Offerings,” and the DRIP Offerings collectively with the Initial Offering, the “Offerings”) pursuant to a Registration Statement on Form S-3 (Registration No. 333-212832), which was filed with the SEC on August 2, 2016 and automatically became effective with the SEC upon filing. The Company began to

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CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024 (Unaudited) – (Continued)

issue shares under the Secondary DRIP Offering on August 2, 2016 and continues to issue shares under the Secondary DRIP Offering.

The Company’s board of directors (the “Board”) establishes an updated estimated per share net asset value (“NAV”) of the Company’s common stock on at least an annual basis for purposes of assisting broker-dealers that participated in the Initial Offering in meeting their customer account reporting obligations under Financial Industry Regulatory Authority Rule 2231. Distributions are reinvested in shares of the Company’s common stock for participants in the DRIP at the estimated per share NAV as determined by the Board. Additionally, the estimated per share NAV as determined by the Board serves as the per share NAV for purposes of the share redemption program. As of June 30, 2024, the estimated per share NAV of the Company’s common stock was $6.09, which was established by the Board on February 29, 2024 using a valuation date of January 31, 2024. Commencing on March 1, 2024, distributions are reinvested in shares of the Company’s common stock under the DRIP at a price of $6.09 per share and $6.09 per share serves as the most recent estimated per share NAV for purposes of the share redemption program. The Company’s estimated per share NAVs are not audited or reviewed by its independent registered public accounting firm.

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 SEC 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, 2023, and related notes thereto, set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. 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 and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

In determining whether the Company has controlling interests in an entity and is required to consolidate the accounts in that entity, the Company analyzes its credit and real estate investments in accordance with standards set forth in GAAP to determine whether the entities are variable interest entities (“VIEs”), and if so, whether the Company is the primary beneficiary. The Company’s judgment with respect to its level of influence or control over an entity and whether the Company is the primary beneficiary of a VIE involves consideration of various factors, including the form of the Company’s ownership interest, the Company’s voting interest, the size of the Company’s investment (including loans), and the Company’s ability to participate in major policy-making decisions. The Company will reassess its initial evaluation of whether an entity is a VIE when certain reconsideration events occur. The Company’s ability to correctly assess its influence or control over an entity affects the presentation of these credit and real estate investments on the Company’s condensed consolidated financial statements.

As of June 30, 2024, CLR is a VIE that is consolidated by the Company as the primary beneficiary, as the Company has the ability to direct the activities of CLR and the obligation to absorb CLR’s losses through its guarantee of their indebtedness, which is significant to CLR. The non-controlling interest on the condensed consolidated balance sheets represents the equity interests in CLR owned by outside investors. As of June 30, 2024, CLR’s loan portfolio consisted of senior secured mortgage loans with a net book value of $1.1 billion and investments in real estate-related securities of $257.3 million. In addition, as of June 30, 2024, the carrying value of CLR’s investment in NP JV Holdings was $144.0 million. CLR had $945.1 million of debt outstanding, including net deferred financing costs, as of June 30, 2024.

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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, lease 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; significant increases to budgeted costs for units under development; and a reduction in prevailing market values for assets being considered for disposition. 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 is determined using a discounted cash flow analysis and recent comparable sales transactions. The Company’s impairment assessment as of June 30, 2024 was based on the most current information available to the Company, including expected holdings periods. If the Company’s expected holding periods for assets change, subsequent tests for impairment could result in additional impairment charges in the future. The assumptions and uncertainties utilized in the evaluation of the impairment of real estate assets are discussed in detail in Note 3 — Fair Value Measurements. See also Note 4 — Real Estate Assets for further discussion regarding real estate investment activity.

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.

Dispositions 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. Given the Company’s current asset portfolio and strategy, the Company’s dispositions during the six months ended June 30, 2024 and 2023 did not qualify for discontinued operations presentation and thus, the results of the properties and condominiums that were sold will not be reported as discontinued operations, and any associated gains or losses from the dispositions are included in gain on disposition of real estate and condominium developments, net. See Note 4 — Real Estate Assets for a discussion of the disposition of individual properties and condominiums during the six months ended June 30, 2024 and 2023.

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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 relative 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.

Certain acquisition-related expenses related to asset acquisitions are capitalized and allocated to tangible and intangible assets and liabilities, as described above. Acquisition-related manager expense reimbursements are expensed as incurred and are included in expense reimbursements to related parties in the accompanying condensed consolidated statements of operations. Other acquisition-related expenses continue to be expensed as incurred and are included in transaction-related expenses in the accompanying condensed consolidated statements of operations.

Investment in Unconsolidated Entities

The Company is engaged in an unconsolidated joint venture arrangement through CIM NP JV Holdings, LLC (“NP JV Holdings”) (the “Unconsolidated Joint Venture”), of which it owns, indirectly through CMFT MT JV Holdings, LLC and CLR NP Holdings, LLC, a subsidiary of CLR, approximately 50% of the outstanding equity. Through the Unconsolidated Joint Venture, which holds approximately 92% of the membership interest in NewPoint JV, LLC (the “NewPoint JV”) pursuant to the terms of the Operating Agreement entered into between the Unconsolidated Joint Venture and NewPoint Bridge Lending, LLC, the Company indirectly owns approximately 46% of the outstanding equity of the NewPoint JV on a fully diluted basis. The Company accounts for its investment under the equity method. The equity method of accounting requires the investment to be initially recorded at cost, including transaction costs incurred to finalize the investment, and is subsequently adjusted for the Company’s share of equity in NP JV Holdings’ earnings and distributions, including unrealized gains and losses as a result of changes in fair value of the NewPoint JV. The Company records its share of NP JV Holdings’ profits or losses on a quarterly basis as an adjustment to the carrying value of the investment on the Company’s condensed consolidated balance sheet and such share is recognized as a profit or loss on the condensed consolidated statements of operations.

For more information, refer to Note 6 — Investment in Unconsolidated Entities.

Restricted Cash

The Company had $3.4 million and $13.1 million in restricted cash as of June 30, 2024 and December 31, 2023, respectively. Included in restricted cash was $1.4 million and $1.9 million held by lenders in lockbox accounts, as of June 30, 2024 and December 31, 2023, respectively. As part of certain of the Company’s debt agreements, rents from certain encumbered properties and interest income from certain first mortgage loans are deposited directly into a lockbox account, from which the monthly debt service payment is disbursed to the lender and the excess is disbursed to the Company. Also included in restricted cash was $2.0 million of construction reserves, amounts held by lenders in escrow accounts for real estate taxes and other lender reserves for certain properties, in accordance with the associated lender’s loan agreement as of June 30, 2024 and December 31, 2023. In addition, the Company had a $9.2 million deposit held as cash collateral included in restricted cash as December 31, 2023, that was applied by Barclays Bank PLC (“Barclays”) as repayment of certain eligible assets transferred under the Master Repurchase Agreement with Barclays (as described in more detail in Note 10 — Repurchase Facilities, Notes Payable and Credit Facilities) during the six months ended June 30, 2024.

Real Estate-Related Securities and Other

Real estate-related securities and other consists primarily of the Company’s investments in commercial mortgage-backed securities (“CMBS”) and equity securities. The Company determines the appropriate classification for real estate-related securities at the time of purchase and reevaluates such designation as of each balance sheet date.

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As of June 30, 2024, the Company classified its investments in CMBS 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 amortized cost of the Company’s CMBS is adjusted for amortization of premiums and accretion of discounts to maturity computed under the effective interest method.

The Company’s investments in equity securities of public and private companies are carried at their estimated fair values with unrealized gains and losses reported on the condensed consolidated statements of operations. Dividend income is included in other income, net on the condensed consolidated statements of operations, of which the Company recorded $1.2 million and $2.7 million, respectively, during the three and six months ended June 30, 2024. During the three and six months ended June 30, 2023, the Company recorded $1.4 million and $2.7 million of dividend income, respectively.

The Company monitors its CMBS for changes in fair value. A loss is recognized when the Company determines that a decline in the estimated fair value of a security below its amortized cost has resulted from a credit loss or other factors, such as market conditions. Such losses that are credit related are recorded as a current expected credit loss in increase in provision for credit losses on the Company’s condensed consolidated statements of operations. Subsequent cumulative adverse changes in expected cash flows on the Company’s CMBS are recognized as an increase to current expected credit losses. However, the allowance is limited to the amount by which the CMBS’s amortized cost exceeds its fair value. Favorable changes in expected cash flows are recognized as a decrease to current expected credit losses. For additional information regarding the Company’s process for estimating current expected credit losses for its real estate-related securities, see the Current Expected Credit Losses section below.

Interest earned is either received in cash or capitalized to CMBS in the Company’s condensed consolidated balance sheets. Interest is capitalized when certain conditions are met as specified in each security agreement.

Loans Held-for-Investment

The Company’s loans held-for-investment include loans related to real estate assets, as well as credit investments, including commercial mortgage loans and other loans and securities related to commercial real estate assets, as well as corporate loan opportunities that are consistent with the Company’s investment strategy and objectives. The Company intends to hold the loans held-for-investment for the foreseeable future or until maturity. Loans held-for-investment are carried on the Company’s condensed consolidated balance sheets at amortized cost, net of any current expected credit losses and are adjusted for amortization of premiums and accretion of discounts to maturity.

Interest earned is either received in cash or capitalized to loans held-for-investment and related receivables, net in the Company’s condensed consolidated balance sheets. Interest is capitalized when certain conditions are met as specified in each loan agreement.

Loans that are past due 90 days or more as to principal or interest, or where reasonable doubt exists as to timely collection, are generally considered nonperforming and placed on nonaccrual status. See the Revenue Recognition section below for additional information regarding the Company’s revenue from lending activities.

Current Expected Credit Losses

Current expected credit losses (“CECL”) required under the Financial Accounting Standards Board (“FASB”), Accounting Standards Codification Topic 326, Financial Instruments - Credit Losses (“ASC 326”), reflects the Company’s current estimate of potential credit losses related to the Company’s loans held-for-investment and CMBS included in the condensed consolidated balance sheets. Changes to current expected credit losses are recognized through net income on the Company’s condensed consolidated statements of operations. While ASC 326 does not require any particular method for determining current expected credit losses, it does specify current expected credit losses should be based on relevant information about past events, including historical loss experience, current portfolio and market conditions, and reasonable and supportable forecasts for the duration of each respective loan. In addition, other than a few narrow exceptions, ASC 326 requires that all financial instruments subject to the credit loss model should have some amount of loss reserve to reflect the GAAP principal underlying the credit loss model that all loans, debt securities, and similar assets have some inherent risk of loss, regardless of credit quality, subordinate capital, or other mitigating factors.

The Company estimates the current expected credit loss for its first mortgage loans primarily using the Weighted Average Remaining Maturity method, which has been identified as an acceptable method for estimating CECL reserves in the FASB Staff Q&A Topic 326, No. 1. This method requires the Company to reference historic loan loss data across a comparable data

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set and apply such loss rate to each loan investment over its expected remaining term, taking into consideration expected economic conditions over the relevant timeframe. The Company considers loan investments that are both (i) expected to be substantially repaid through the operation or sale of the underlying collateral, and (ii) for which the borrower is experiencing financial difficulty, to be “collateral-dependent” loans. For such loans that the Company determines that foreclosure of the collateral is probable, the Company measures the expected losses based on the difference between the fair value of the collateral less costs to sell and the amortized cost basis of the loan as of the measurement date. For collateral-dependent loans that the Company determines foreclosure is not probable, the Company applies a practical expedient to estimate expected losses using the difference between the collateral’s fair value and the amortized cost basis of the loan. For the Company’s liquid corporate senior loans and corporate senior loans, the Company uses a probability of default and loss given default method using a comparable data set. The Company may use other acceptable alternative approaches in the future depending on, among other factors, the type of loan, underlying collateral, and availability of relevant historical market loan loss data. The Company only expects to charge-off impairment losses as a reduction to current expected credit losses and as a reduction to the respective loan balance if and when such amounts are deemed non-recoverable. This is generally at the time a loan is repaid or foreclosed. However, non-recoverability may also be concluded if, in the Company’s determination, it is nearly certain that all amounts due will not be collected.

Quarterly, the Company evaluates the risk of all loans held-for-investment and assigns a risk rating based on a variety of factors, grouped as follows: (i) loan and credit structure, including the as-is loan-to-value (“LTV”) ratio and structural features; (ii) quality and stability of real estate value and operating cash flow, including debt yield, dynamics of the geography, property type and local market, physical condition, stability of cash flow, leasing velocity and quality and diversity of tenancy; (iii) performance against underwritten business plan; and (iv) quality, experience and financial condition of sponsor, borrower and guarantor(s).

Based on a 5-point scale, the Company’s loans are rated “1” through “5,” from least risk to greatest risk, respectively, which ratings are defined as follows:

1-Outperform — Most satisfactory asset quality and liquidity, good leverage capacity. A “1” rating maintains predictable and strong cash flows from operations. The trends and outlook for the credit’s operations, balance sheet, and industry are neutral to favorable. Collateral, if appropriate, exceeds performance metrics;

2-Meets or Exceeds Expectations — Acceptable asset quality, moderate excess liquidity, modest leverage capacity. A “2” rating could have some financial/non-financial weaknesses which are offset by strengths; however, the credit demonstrates an ample current cash flow from operations. The trends and outlook for the credit’s operations, balance sheet, and industry are generally positive or neutral. Collateral performance, if appropriate, meets or exceeds substantially all performance metrics included in original or current underwriting / business plan;

3-Satisfactory — Acceptable asset quality, somewhat strained liquidity, minimal leverage capacity. A “3” rating is at times characterized by acceptable cash flows from operations. The trends and conditions of the credit’s operations and balance sheet are neutral. Collateral performance, if appropriate, meets or is on track to meet underwriting; business plan can reasonably be achieved;

4-Underperformance — The debt investment possesses credit deficiencies or potential weaknesses which deserve management’s close and continued attention. The obligor’s operations and/or balance sheet have demonstrated an adverse trend or deterioration which, while serious, has not reached the point where the liquidation of debt is jeopardized. These weaknesses are generally considered correctable by the borrower in the normal course of business but may weaken the asset or inadequately protect the Company’s credit position if not checked or corrected. Collateral performance, if appropriate, falls short of original underwriting, material differences exist from business plan, or both; technical milestones have been missed; defaults may exist, or may soon occur absent material improvement; and

5-Default/Possibility of Loss — The debt investment is protected inadequately by the current enterprise value or paying capacity of the obligor or of the collateral, if any. The underlying company’s operations have well-defined weaknesses based upon objective evidence, such as recurring or significant decreases in revenues and cash flows. Major variance from business plan; loan covenants or technical milestones have been breached; timely exit from loan via sale or refinancing is questionable; risk of principal loss. Collateral performance, if appropriate, is significantly worse than underwriting.

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The Company generally assigns a risk rating of “3” to all newly originated or acquired loans held-for-investment during a most recent quarter, except in the case of specific circumstances warranting an exception.

In estimating credit losses related to real estate-related securities, management considers a variety of factors, including, but not limited to, the extent to which the fair value is less than the amortized cost basis, recent events specific to the security, industry or geographic area, the payment structure of the security, the failure of the issuer of the security to make scheduled interest or principal payments, and external credit ratings and recent changes in such ratings. Credit losses, if any, are estimated by calculating the difference between (i) the present value of estimated cash flows expected to be collected from the security discounted at the yield determined as of the initial acquisition date or, if since revised, as of the last date previously revised, and (ii) the net amortized cost basis of the security. Significant judgment is used in estimating future cash flows for the Company’s real estate-related securities.

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. The Company is not a party to any 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 and other activities not directly related to completed lease agreements are expensed as incurred. Upon successful lease execution, leasing commissions are capitalized.

Development Activities

Project costs and expenses, including interest incurred, associated with the development, construction and lease-up of a real estate project are capitalized as construction in progress. For additional information, refer to Note 4 — Real Estate Assets.

Revenue Recognition

Revenue from leasing activities

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 future lease payments 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 future lease payments 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 not

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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 at the time of estimate. 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.

Revenue from lending activities

Interest income from the Company’s loans held-for-investment and CMBS is recognized using the effective interest method (or the modified straight-line method when it is materially consistent with the effective interest method). Interest income is comprised of interest earned on credit investments and the accretion and amortization of net loan origination fees, other fees and discounts recognized through the life of each investment. Interest income on loans is accrued as earned, with the accrual of interest suspended when the related loan becomes a nonaccrual loan. Interest income on the Company’s liquid corporate senior loans and corporate senior loans is accrued as earned beginning on the settlement date. Upon the sale of a security, the realized net gain or loss is computed on the specific identification method.

Accrual of interest income is suspended on nonaccrual loans. Loans that are past due 90 days or more as to principal or interest, or where reasonable doubt exists as to timely collection, are generally considered nonperforming and placed on nonaccrual status. Interest collected is recognized on a cash basis when received or as a reduction in the amortized cost basis, based on specific facts and circumstances, until accrual is resumed when the loan becomes contractually current and the Company believes all future principal and interest will be received according to the contractual loan terms.

Reportable Segments

The Company’s segment information reflects how the chief operating decision makers review information for operational decision-making purposes. The Company has two reportable segments:

Credit — engages primarily in acquiring and originating primarily floating rate first and second lien mortgage loans, either directly or through co-investments in joint ventures, related to real estate assets. This segment also includes investments in real estate-related securities, equity securities, liquid corporate senior loans and corporate senior loans.

Real estate — engages primarily in acquiring and managing geographically diversified income-producing retail, industrial and office properties that are primarily single-tenant properties, which are leased to creditworthy tenants under long-term net leases.

See Note 16 — Segment Reporting for a further discussion regarding these segments.

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 June 2022, the FASB issued Accounting Standards Update (“ASU”) No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”). The amendments in this update clarify the guidance in Topic 820 when measuring the fair value of an equity security subject to contractual sale restrictions and introduce new disclosure requirements related to such equity securities. The amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those annual periods, with early adoption permitted. The ASU became effective for the Company beginning January 1, 2024. ASU 2022-03 did not have a material impact on the Company’s condensed consolidated financial statements and disclosures during the six months ended June 30, 2024.

In August 2023, the FASB issued ASU No. 2023-05, Business Combinations-Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement (“ASU 2023-05”). ASU 2023-05 applies to the formation of a joint venture and requires a joint venture to initially measure all contributions received upon its formation at fair value. The guidance is intended to reduce diversity in practice and provide users of joint venture financial statements with more decision-useful information. The amendments are effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. The Company does not believe the adoption of ASU 2023-05 will have a material impact on its condensed consolidated financial statements and disclosures.

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In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 enhances the disclosures required for reportable segments on an annual and interim basis. ASU 2023-07 is effective on a retrospective basis for annual periods beginning after December 15, 2023, for interim periods within fiscal years beginning after December 15, 2024, and early adoption is permitted. The Company does not expect the adoption of ASU 2023-07 to have a material impact on its condensed consolidated financial statements and 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.

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:

Real estate-related securities and other — The Company generally determines the fair value of its CMBS by utilizing broker-dealer quotations, reported trades or valuation estimates from pricing models to determine the reported price. Pricing models for CMBS are generally discounted cash flow models that usually consider the attributes applicable to a particular class of security (e.g., credit rating, seniority), current market data, and estimated cash flows for each class and incorporate deal collateral performance such as prepayment speeds and default rates, as available. Depending upon the significance of the fair value inputs used in determining these fair values, these securities are valued using Level 1, Level 2 or Level 3 inputs. A breakout of the Company’s CMBS Level 2 and Level 3 positions as of June 30, 2024 and December 31, 2023 can be found in the tables under Items Measured at Fair Value on a Recurring Basis below.

The Company’s equity securities are valued using Level 1, Level 2 or Level 3 inputs depending upon the significance of the fair value inputs used in determining the respective fair values. The estimated fair value of the Company’s equity securities are based on quoted market prices when readily and regularly available in an active market.

Credit facilities 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, 2024, the estimated fair value of the Company’s debt was $3.70 billion, compared to a carrying value of $3.79 billion. The estimated fair value of the Company’s debt as of December 31, 2023 was $3.83 billion, compared to a carrying value of $3.94 billion.

Derivative instruments — In the normal course of business, the Company uses certain types of derivative instruments, such as interest rate swaps and interest rate caps, for the purpose of managing or hedging its interest rate risk. All derivative instruments are carried at fair value and are generally 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.

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Although the Company has determined that the majority of the inputs used to value its derivatives has generally fallen within Level 2 of the fair value hierarchy, certain credit valuation adjustments associated with such derivatives may utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties.

Loans held-for-investment — The Company’s loans held-for-investment are recorded at cost upon origination, net of loan origination fees and discounts. The Company estimates the fair value of its loans held-for-investment by performing a present value analysis for the anticipated future cash flows using an appropriate market discount rate taking into consideration the credit risk. The Company has determined that its commercial real estate (“CRE”) loans held-for-investment and corporate senior loans are classified in Level 3 of the fair value hierarchy. The Company’s liquid corporate senior loans are classified as Level 2 or Level 3 depending on the number of market quotations or indicative prices from pricing services that are available, and whether the depth of the market is sufficient to transact at those prices in amounts approximating the Company’s investment position at the measurement date. As of June 30, 2024, $282.0 million and $41.0 million of the Company’s liquid corporate senior loans were classified in Level 2 and Level 3 of the fair value hierarchy, respectively. As of December 31, 2023, $445.7 million and $70.2 million of the Company’s liquid corporate senior loans were classified in Level 2 and Level 3 of the fair value hierarchy, respectively. As of June 30, 2024, the estimated fair value of the Company’s loans held-for-investment and related receivables, net was $3.96 billion, compared to its net book value of $3.79 billion. As of December 31, 2023, the estimated fair value of the Company’s loans held-for-investment and related receivables, net was $4.32 billion, compared to its net book value of $4.26 billion.

Other financial instruments — The Company considers the carrying values of its cash and cash equivalents, restricted cash, tenant receivables, accounts payable and accrued expenses, 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. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. The Company does not expect that changes in classifications between levels will be frequent.

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 that are required to be measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023 (in thousands):


	Balance as of June 30, 2024		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets:
CMBS	$	371,961	$	—	$	257,279	$	114,682
Equity securities	32,418		31,764		—		654



Total financial assets	$	404,379	$	31,764	$	257,279	$	115,336


	Balance as of December 31, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets:
CMBS	$	476,715	$	—	$	347,634	$	129,081

Equity security	42,999		42,999		—		—

Total financial assets	$	519,714	$	42,999	$	347,634	$	129,081

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CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024 (Unaudited) – (Continued)

The following are reconciliations of the changes in financial assets with Level 3 inputs in the fair value hierarchy for the six months ended June 30, 2024 (in thousands):


	Level 3
Beginning Balance, January 1, 2024	$	129,081
Total gains and losses:
Unrealized loss included in other comprehensive (loss) income, net	(11,902)
Current expected credit losses	(4,284)
Purchases and payments received:
Conversion to equity security (1)	654

Discounts, net	1,189
Capitalized interest income	598


Ending Balance, June 30, 2024	$	115,336

____________________________________

(1)During the six months ended June 30, 2024, one of the Company’s defaulted liquid corporate senior loans was equitized into a Level 3 equity security, as further discussed in Note 7 — Real Estate-Related Securities and Other.

Items Measured at Fair Value on a Non-Recurring Basis (Including Impairment Charges)

Certain financial and nonfinancial assets and liabilities are measured at fair value on a nonrecurring basis and are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment. The Company’s process for identifying and recording impairment related to credit investments, real estate assets and intangible assets is discussed in Note 2 — Summary of Significant Accounting Policies.

As of June 30, 2024, the Company had an aggregate $339.0 million asset-specific credit loss reserve on funded and unfunded commitments related to eight of the Company’s first mortgage loans with an aggregate carrying value of $1.1 billion. The asset-specific credit loss reserve was recorded based on the Company’s estimation of the fair value of the first mortgage loans’ aggregate underlying collateral, less costs to sell the underlying collateral, as of June 30, 2024. These loans are therefore measured at fair value on a nonrecurring basis using significant unobservable inputs, and are classified as Level 3 assets in the fair value hierarchy. The Company considered a variety of inputs including property performance, market data and comparable sales, as applicable. The significant unobservable inputs used include the terminal capitalization rate, which ranged from 5.5% to 11.9%, and the discount rate, which ranged from 10.8% to 13.0%. For additional information regarding the first mortgage loans, refer to Note 8 — Loans Held-For-Investment.

As discussed in Note 4 — Real Estate Assets, during the six months ended June 30, 2024, seven properties were deemed to be impaired due to sales prices or revised cash flow estimates that were less than their respective carrying values, and their carrying values were reduced to an estimated fair value of $115.3 million, resulting in impairment charges of $51.5 million. The revised cash flow estimates were a result of continued deterioration of fundamentals at certain office properties, including weakened leasing activity and increased capitalization rates, and a revision in assumed holding periods at certain properties. Additionally, during the six months ended June 30, 2024, certain condominium units were deemed to be impaired, primarily due to a decrease in expected sales prices for certain units, and their carrying values were reduced to their estimated fair value, resulting in impairment charges of $5.5 million. During the six months ended June 30, 2023, real estate assets related to one property were deemed to be impaired and their carrying value was reduced to an estimated fair value of $4.8 million, resulting in impairment charges of $4.8 million. The Company estimates fair values using Level 3 inputs and a combined income and market approach, specifically using discounted cash flow analysis and recent comparable sales transactions. The evaluation of real estate assets for potential impairment requires the Company’s management to exercise significant judgment and to make certain key assumptions, including, but not limited to, the following: (1) terminal capitalization rates; (2) discount rates; (3) the number of years the property will be held; (4) property operating expenses; and (5) re-leasing assumptions, including the number of months to re-lease, market rental income and required tenant improvements. There are inherent uncertainties in making these estimates such as market conditions and the future performance and sustainability of the Company’s tenants. The Company determined that the selling prices used to determine the fair values were Level 2 inputs.

The following summarizes the ranges of discount rates and terminal capitalization rates used for the Company’s impairment test for the real estate assets during the six months ended June 30, 2024 and 2023:

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024 (Unaudited) – (Continued)

Six Months Ended June 30,

2024

2023

Discount Rate

Terminal Capitalization Rate

Discount Rate

Terminal Capitalization Rate

8.6% - 11.0%

8.1% – 9.5%

9.7%

7.0% – 9.2%

The following table presents the impairment charges by asset class recorded during the six months ended June 30, 2024 and 2023 (in thousands):


	Six Months Ended June 30,
	2024		2023
Asset class impaired:
Land	$	8,182	$	1,144
Buildings, fixtures and improvements	39,364		3,652
Intangible lease assets	3,918		18
Intangible lease liabilities	5		—

Condominium developments	5,463		—
Total impairment loss	$	56,932	$	4,814

NOTE 4 — REAL ESTATE ASSETS

Property Acquisitions

During the six months ended June 30, 2024 and 2023, the Company did not acquire any properties.

Condominium Development Project

During the six months ended June 30, 2024 and 2023, the Company capitalized $10.8 million and $5.3 million, respectively, of expenditures associated with the development of condominiums acquired via foreclosure, which is included in condominium developments in the accompanying condensed consolidated balance sheets. Such capitalized expenditures included $848,000 of capitalized interest expense during the six months ended June 30, 2023. No capitalized interest was included in the capitalized expenditures during the six months ended June 30, 2024.

Condominium Dispositions

During the six months ended June 30, 2024, the Company disposed of condominium units for an aggregate sales price of $27.1 million, resulting in proceeds of $25.1 million after closing costs and a gain of $3.3 million. During the six months ended June 30, 2023, the Company disposed of condominium units for an aggregate sales price of $29.0 million, resulting in proceeds of $26.1 million after closing costs and a gain of $2.4 million. The Company has no continuing involvement that would preclude sale treatment with these condominium units. The gain on sale of condominium units is included in gain on disposition of real estate and condominium developments, net in the condensed consolidated statements of operations.

Property Dispositions and Real Estate Assets Held for Sale

During the six months ended June 30, 2024, the Company disposed of two properties, including one retail property and one office property, for an aggregate gross sales price of $53.9 million, resulting in proceeds of $52.6 million after closing costs. No gain or loss was recorded. The Company has no continuing involvement that would preclude sale treatment with these properties.

On December 29, 2022, certain subsidiaries of the Company entered into an Agreement of Purchase and Sale (the “Realty Income Purchase and Sale Agreement”) with certain subsidiaries of Realty Income Corporation (NYSE: O) (“Realty Income”), to sell to Realty Income 185 single-tenant net lease properties encompassing approximately 4.6 million gross rentable square feet of commercial space across 34 states for total consideration of $894.0 million. The consideration was paid in cash.

During the six months ended June 30, 2023, the Company disposed of 185 properties, including 183 retail properties and two industrial properties, for an aggregate gross sales price of $909.3 million, resulting in proceeds of $899.7 million after closing costs and a gain of $43.8 million. The sale of 178 of these properties closed pursuant to the Realty Income Purchase and

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024 (Unaudited) – (Continued)

Sale Agreement for total consideration of $861.0 million, resulting in proceeds of $852.6 million after closing costs and a gain of $32.3 million. The Company has no continuing involvement that would preclude sale treatment with these properties. The gain on sale of real estate is included in gain on disposition of real estate and condominium developments, net in the condensed consolidated statements of operations.

As of June 30, 2024 and 2023, the Company did not identify any real estate assets as held for sale.

Impairment

The Company performs quarterly impairment review procedures, primarily through continuous monitoring of events and changes in circumstances that could indicate that the carrying value of certain of its real estate assets may not be recoverable. See Note 2 — Summary of Significant Accounting Policies for a discussion of the Company’s accounting policies regarding impairment of real estate assets.

During the six months ended June 30, 2024, seven properties totaling approximately 824,000 square feet with a carrying value of $166.8 million were deemed to be impaired and their carrying values were reduced to an estimated fair value of $115.3 million, resulting in impairment charges of $51.5 million, which were recorded in the condensed consolidated statements of operations. Additionally, during the six months ended June 30, 2024, certain condominium units were deemed to be impaired and their carrying values were reduced to their estimated fair value, resulting in impairment charges of $5.5 million, which were recorded in the condensed consolidated statements of operations. During the six months ended June 30, 2023, one property totaling approximately 45,000 square feet with a carrying value of $9.6 million was deemed to be impaired and its carrying value was reduced to an estimated fair value of $4.8 million, resulting in impairment charges of $4.8 million, which were recorded in the condensed consolidated statements of operations.

See Note 3 — Fair Value Measurements for a further discussion regarding these impairment charges during the six months ended June 30, 2024 and 2023.

Property Concentrations

As of June 30, 2024, one of the Company’s tenants, CVS, accounted for 10% of the Company’s 2024 annualized rental income across 33 properties. As of June 30, 2024, the Company had properties located in Ohio, which accounted for 17% of the Company’s 2024 annualized rental income. In addition, the Company had tenants in the health and personal care stores, manufacturing, and sporting goods, hobby, and musical instrument retailers industries, which accounted for 15%, 12%, and 12%, respectively, of the Company’s 2024 annualized rental income.

NOTE 5 — INTANGIBLE LEASE ASSETS AND LIABILITIES

Intangible lease assets and liabilities consisted of the following as of June 30, 2024 and December 31, 2023 (in thousands, except weighted average life remaining):


	June 30, 2024		December 31, 2023
Intangible lease assets:
In-place leases and other intangibles, net of accumulated amortization of $47,880 and $49,737, respectively (with a weighted average life remaining of 11.5 years and 11.2 years, respectively)
	$	83,370	$	97,537
Acquired above-market leases, net of accumulated amortization of $3,019 and $3,029, respectively (with a weighted average life remaining of 11.0 years and 11.1 years, respectively)
	3,641		3,914
Total intangible lease assets, net	$	87,011	$	101,451
Intangible lease liabilities:
Acquired below-market leases, net of accumulated amortization of $5,702 and $5,136, respectively (with a weighted average life remaining of 11.6 years and 12.1 years, respectively)
	$	12,788	$	13,354

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.

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CIM REAL ESTATE FINANCE TRUST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024 (Unaudited) – (Continued)

The following table summarizes the amortization related to the intangible lease assets and liabilities for the three and six months ended June 30, 2024 and 2023 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
In-place lease and other intangible amortization	$	2,635	$	3,014	$	5,330	$	8,096
Above-market lease amortization	$	106	$	118	$	212	$	352
Below-market lease amortization	$	281	$	313	$	566	$	746

As of June 30, 2024, 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 2024	$	4,479	$	194	$	560
2025	8,868		390		1,120
2026	8,145		372		1,120
2027	7,901		356		1,120
2028	7,194		343		1,120
Thereafter	46,783		1,986		7,748
Total	$	83,370	$	3,641	$	12,788

NOTE 6 — INVESTMENT IN UNCONSOLIDATED ENTITIES

During the year ended December 31, 2021, the Company entered into the Unconsolidated Joint Venture, of which the Company currently owns as of June 30, 2024, indirectly through CMFT MT JV Holdings, LLC and CLR NP Holdings, LLC, a subsidiary of CLR, approximately 50% of the outstanding equity. The Unconsolidated Joint Venture holds approximately 92% of the membership interest in the NewPoint JV. Through the Unconsolidated Joint Venture, the Company holds an approximate 46% interest in the NewPoint JV and accounts for its investment under the equity method. The primary purpose of the NewPoint JV is to source, underwrite, close and service on an ongoing basis multifamily bridge loans, participation interests, and other debt instruments such as loans. As of June 30, 2024 and December 31, 2023, the carrying value of the Company’s investment in NP JV Holdings was $152.3 million and $126.8 million, respectively, which approximates fair value and is included in investment in unconsolidated entities on the condensed consolidated balance sheets. The Company recorded a gain totaling $2.7 million and $5.3 million, which represented its share of NP JV Holdings’ gain, during the three and six months ended June 30, 2024, respectively, in the condensed consolidated statements of operations. The Company recorded a gain totaling $5.8 million and $5.0 million, which represented its share of NP JV Holdings’ gain, during the three and six months ended June 30, 2023, respectively, in the condensed consolidated statements of operations. During the six months ended June 30, 2024, the Company contributed an additional $26.8 million in NP JV Holdings. The Company also received $6.5 million in distributions during the six months ended June 30, 2024, $5.3 million of which was recognized as a return on investment and $1.3 million of which was recognized as a return of investment and reduced the invested capital and the carrying amount. As of June 30, 2024, the Company had $61.9 million of unfunded commitments related to NewPoint JV. These commitments are not reflected in the accompanying condensed consolidated balance sheets.

The Company provided a limited guaranty to NewPoint JV, under which the Company agreed to guarantee the Unconsolidated Joint Venture’s cross indemnity and its share of capital contribution obligations under the agreement with NewPoint JV.

NOTE 7 — REAL ESTATE-RELATED SECURITIES AND OTHER

As of June 30, 2024, the Company had real estate-related securities and equity securities with an aggregate estimated fair value of $404.4 million, which included 17 CMBS investments and four equity securities. The CMBS investments have initial maturity dates ranging from July 2024 through June 2058 and have interest rates ranging from 0.2% to 12.7% as of June 30, 2024, with one CMBS earning a zero coupon rate. The following is a summary of the Company’s real estate-related securities and equity securities as of June 30, 2024 (in thousands):

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024 (Unaudited) – (Continued)


	Real Estate-Related Securities and Other
			Gross Unrealized
	Amortized Cost Basis		Gains		Losses		CECL		Fair Value
CMBS	$	499,693	$	542	$	(88,183)	$	(40,091)	$	371,961
Equity securities