CIM REAL ESTATE FINANCE TRUST, INC. Item 1.01 Entry into a Material Definitive Agreement.
OnJune 1, 2022 , (the "Closing Date"),CMFT Real Estate Securities I, LLC (the "Seller"), an indirect wholly-owned subsidiary ofCIM Real Estate Finance Trust (the "Company"), entered into a Master Repurchase Agreement withJ.P. Morgan Securities LLC (the "Buyer"), in which the Buyer and Seller may agree to transfer securities or other assets ("Securities") against the transfer of funds by the Buyer, with a simultaneous agreement by the Buyer to transfer to Seller such Securities at a date certain or on demand, against the transfer of funds by the Seller. Pursuant to the Repurchase Agreement, the initial purchase price for an asset is the price at which Securities are transferred by Seller to Buyer (the "Purchase Price") and thereafter, except where Buyer and Seller agree otherwise, such price increased by the amount of any cash transferred as a margin deficit or margin excess. The repurchase price of a purchased asset is equal to the sum of the Purchase Price and a pricing rate designated by the Buyer in its sole discretion ("Price Differential") as of the date of such determination.
The foregoing summary of the Repurchase Agreement does not purport to be a complete description and is qualified in its entirety by the full text of the Repurchase Agreement, which is attached hereto as Exhibit 10.1, and is incorporated herein by reference.
Item 2.01 Completion of Acquisition or Disposition of Assets.
As previously reported, onDecember 20, 2021 , certain subsidiaries (collectively, the "Seller") ofCIM Real Estate Finance Trust, Inc. (the "Company" or "CMFT") entered into an Agreement of Purchase and Sale, as amended (the "Purchase and Sale Agreement"), withAmerican Finance Trust, Inc. (now known asThe Necessity Retail REIT, Inc. ) (NASDAQ: RTL) ("RTL"),American Finance Operating Partnership, L.P. (now known asThe Necessity Retail REIT Operating Partnership, L.P. ) ("RTL OP"), and certain of their subsidiaries (collectively, the "Purchaser"). The Purchaser is not affiliated with the Seller. Under the terms of the Purchase and Sale Agreement, the Seller agreed to sell to the Purchaser 79 shopping centers and two single-tenant properties encompassing approximately 9.5 million gross rentable square feet of commercial space across 27 states for total consideration of$1.32 billion (the "Purchase Price"). The Purchase Price includes the Purchaser's option to seek the assumption of certain existing debt, and Purchaser's issuance of up to$53.4 million in value of RTL's Class A common stock, par value$0.01 per share ("RTL Common Stock"), or Class A units in RTL OP, subject to certain limits described more fully in the Purchase and Sale Agreement. The sale of 80 properties under contract for sale pursuant to the Purchase and Sale Agreement closed in tranches during the first and second quarters of 2022 for total consideration of$1.28 billion , which consisted of$1.22 billion in cash proceeds (inclusive of$23.5 million in earnout proceeds) and$53.4 million of RTL Common Stock, which shares are restricted and subject to certain registration rights as described in the Purchase and Sale Agreement. The remaining property pursuant to the Purchase and Sale Agreement is expected to close during the second quarter of 2022. The Company previously reported in its Current Report on Form 8-K filed with theSecurities and Exchange Commission (the "SEC") onFebruary 15, 2022 , that it completed the disposition of 44 properties onFebruary 11, 2022 (the "First Closing Properties "). After the total repayment and assumptions of approximately$843.2 million of debt and$10.9 million of transaction costs, the Company will redeploy approximately$437.1 million of net sale proceeds into investments in senior secured loans and credit leases, consistent with its core business strategy as a credit-focused real estate investment trust.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information set forth under Item 1.01 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 2.03 in its entirety.
Item 9.01 Financial Statements and Exhibits.
Explanatory Note
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Company is providing the pro forma financial information required by Item
9.01 related to the sale of 36 properties subsequent to February 11, 2022 , along
with the First Closing Properties and the expected sale of one remaining
property.
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The accompanying unaudited pro forma condensed consolidated balance sheet of the
Company as of March 31, 2022 is presented as if the closing of all 81 properties
(the "Closing") had occurred on March 31, 2022 . The accompanying unaudited pro
forma condensed consolidated statements of operations of the Company for the
three months ended March 31, 2022 and for the year ended December 31, 2021 are
presented as if the Closing had occurred on January 1, 2021 .
The accompanying unaudited pro forma condensed consolidated financial statements
reflect all adjustments that, in the opinion of management, are necessary to
present fairly the pro forma financial position and results of operations of the
Company as of and for the periods indicated; however, the accompanying unaudited
pro forma condensed consolidated financial statements are not intended to be
indicative of the financial position or results of operations that would have
actually occurred nor do they purport to represent the financial position or
results of operations for future periods. The retrospectively adjusted financial
position and results of operations for the indicated periods when reported in
the post-sale periodic reports may differ from the pro forma financial
statements presented herein. The unaudited pro forma condensed consolidated
financial statements should be read in conjunction with the historical
consolidated financial statements and notes accompanying the Company's Quarterly
Report on Form 10-Q for the three months ended March 31, 2022 and the Company's
Annual Report on Form 10-K for the year ended December 31, 2021 . The unaudited
pro forma condensed consolidated statements of operations do not include the
impact of any strategies that management may have considered in order to
efficiently manage the Company's operations had the sale occurred on January 1,
2021 . Pro forma adjustments have not been made in the accompanying pro forma
condensed consolidated statements of operations of the Company for the estimated
gain on disposition resulting from the sale, for any reimbursements or payments
resulting from the sale, or for the use of proceeds resulting from the sale.
Financial Statements and Exhibits
(b) Pro Forma Financial Information
Pro Forma Condensed Consolidated Balance Sheet as of
Pro Forma Condensed Consolidated Statement of Operations for the Three Months Ended
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Pro Forma Condensed Consolidated Statement of Operations for the Year Ended
6
Notes to Pro Forma Condensed Consolidated Financial Statements (Unaudited)
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(c) Shell Company Transactions
None
(d) Exhibits
Exhibit No. Description
10.1 Master Repurchase Agreement, dated June 1, 2022 ,by and between CMFT Real
Estate Securities I, LLC and J.P. Morgan
104 Cover Page Interactive Data File (embedded withinthe Inline XBRL document).
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CIM REAL ESTATE FINANCE TRUST, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of March 31, 2022
(in thousands, except share and per share amounts) (Unaudited)
Disposition
Transaction
Accounting
As Reported Adjustments Pro - Forma
(a) (b)
ASSETS
Real estate assets:
Land $ 628,630 $ - $ 628,630
Buildings, fixtures and improvements 1,621,687 (457) 1,621,230
Intangible lease assets 300,996 (4) 300,992
Condominium developments 158,145 - 158,145
Total real estate assets, at cost 2,709,458 (461) 2,708,997
Less: accumulated depreciation and
amortization (231,543) - (231,543)
Total real estate assets, net 2,477,915 (461) 2,477,454
Investments in unconsolidated entities 78,443 - 78,443
Real estate-related securities ($186,070 held
at fair value) 254,313 - 254,313
Loans held-for-investment and related
receivables, net 3,346,198 - 3,346,198
Less: Current expected credit losses (19,150) - (19,150)
Total loans held-for-investment and related
receivables, net 3,327,048 - 3,327,048
Cash and cash equivalents 165,111 187,070 (c) 352,181
Restricted cash 72,486 (2,703) 69,783
Rents and tenant receivables, net 42,925 (14,446) 28,479
Prepaid expenses and other assets 52,940 (23,130) 29,810
Deferred costs, net 9,770 - 9,770
Assets held for sale 487,469 (481,414) (d) 6,055
Total assets $ 6,968,420 $ (335,084) $ 6,633,336
LIABILITIES AND STOCKHOLDERS' EQUITY
Repurchase facilities, notes payable and
credit facilities, net $ 4,181,313 $ (346,830) (e) $ 3,834,483
Accrued expenses and accounts payable 29,979 (6,782) 23,197
Due to affiliates 16,051 - 16,051
Intangible lease liabilities, net 21,086 - 21,086
Distributions payable 13,339 - 13,339
Deferred rental income, derivative liabilities
and other liabilities 11,383 (2,860) 8,523
Total liabilities 4,273,151 (356,472) 3,916,679
Commitments and contingencies
Redeemable common stock 170,599 - 170,599
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value per share - - -
Common stock, $0.01 par value per share 4,374 - 4,374
Capital in excess of par value 3,529,163 - 3,529,163
Accumulated distributions in excess of
earnings (1,009,487) 21,388 (f) (988,099)
Accumulated other comprehensive loss (448) - (448)
Total stockholders' equity 2,523,602 21,388 2,544,990
Non-controlling interests 1,068 - 1,068
Total equity $ 2,524,670 $ 21,388 $ 2,546,058
Total liabilities, redeemable common stock,
non-controlling interests and stockholders'
equity $ 6,968,420 $ (335,084) $ 6,633,336 The accompanying notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
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CIM REAL ESTATE FINANCE TRUST, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2022
(in thousands, except share and per share amounts) (Unaudited)
Disposition
Three Months Ended Transaction Three Months Ended
March 31, 2022 Accounting March 31, 2022
As Reported Adjustments Pro - Forma
(a) (b)Revenues:
Rental and other property income $ 73,736 $ (25,514) $ 48,222 Interest income 31,463 - 31,463 Total revenues 105,199 (25,514) 79,685 Operating expenses: General and administrative 3,475 (23) 3,452 Property operating 7,727 (5,341) 2,386 Real estate tax 6,713 (4,299) 2,414 Expense reimbursements to related parties 3,694 - 3,694 Management fees 13,347 (94) (c) 13,253 Transaction-related 7 - 7 Depreciation and amortization 19,141 - 19,141 Real estate impairment 3,291 - 3,291 Increase in provision for credit losses 4,709 - 4,709 Total operating expenses 62,104 (9,757) 52,347 Gain on disposition of real estate and condominium developments, net 32,574 1,168 33,742 Operating income 75,669 (14,589) 61,080 Other expense: Gain on investment in unconsolidated entities 5,340 - 5,340 Interest expense and other, net (31,037) 5,926 (d) (25,111) Loss on extinguishment of debt (10,871) 9,130 (e) (1,741) Total other expense (36,568) 15,056 (21,512) Net income 39,101 467 39,568 Net income allocated to noncontrolling interest 9 - 9 Net income attributable to the Company $ 39,092 $ 467 $ 39,559 Weighted average number of common shares outstanding: Basic and diluted 437,374,008 - 437,374,008 Net income per common share: Basic and diluted $ 0.09 $ - $ 0.09
The accompanying notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
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CIM REAL ESTATE FINANCE TRUST, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2021
(in thousands, except share and per share amounts) (Unaudited)
Disposition
Year Ended Transaction Year Ended
December 31, 2021 Accounting December 31, 2021
As Reported Adjustments Pro - Forma
(a) (b)Revenues:
Rental and other property income $ 295,164 $ (146,960) $ 148,204 Interest income 70,561 - 70,561 Total revenues 365,725 (146,960) 218,765 Operating expenses: General and administrative 15,078 (83) 14,995 Property operating 47,559 (26,269) 21,290 Real estate tax 34,943 (23,690) 11,253 Expense reimbursements to related parties 11,624 - 11,624 Management fees 47,020 (1,057) (c) 45,963 Transaction-related 315 - 315 Depreciation and amortization 95,190 (41,976) 53,214 Real estate impairment 18,078 (982) 17,096 Increase in provision for credit losses 2,881 - 2,881 Total operating expenses 272,688 (94,057) 178,631 Gain on disposition of real estate and condominium developments, net 83,045 - 83,045 Merger-related expenses, net (1,404) - (1,404) Operating income 174,678 (52,903) 121,775 Other expense: Gain on investment in unconsolidated entities 606 - 606 Interest expense and other, net (83,899) 24,276 (d) (59,623) Loss on extinguishment of debt (4,895) 31 (4,864) Total other expenses (88,188) 24,307 (63,881) Net income 86,490 (28,596) 57,894 Net income allocated to noncontrolling interest - - - Net income attributable to the Company $ 86,490 $ (28,596) $ 57,894 Weighted average number of common shares outstanding: Basic and diluted 365,726,453 - 365,726,453 Net income per common share: Basic and diluted $ 0.24 $ (0.08) $ 0.16
The accompanying notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
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CIM REAL ESTATE FINANCE TRUST, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)TRANSACTION ACCOUNTING ADJUSTMENTS
The transaction accounting adjustments are based on our preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma condensed consolidated financial information:
Adjustments to the Unaudited Pro Forma Condensed Consolidated Balance Sheet as
of
(a)Reflects the Company's historical unaudited condensed consolidated balance sheet as ofMarch 31, 2022 , which was included in the Company's Quarterly Report on Form 10-Q, as filed with theSEC onMay 11, 2022 . (b)Reflects the Company's property-level historical financial position related to the properties involved in the Closing as ofMarch 31, 2022 , except for certain of the pro forma adjustments described below that are a direct result of the transaction. Cash and cash equivalents (c)Reflects the remaining$538.0 million cash consideration received subsequent toMarch 31, 2022 under the Closing, less certain other amounts including, but not limited to, the following: the assumption by the Purchaser and paydown of$337.2 million of certain mortgage notes, the repayment of$9.6 million on the secured first lien mortgage loan, and$2.1 million in certain transaction costs.
Assets held for sale
(d)Reflects the carrying value of the remaining 25 properties subject to the Purchase and Sale Agreement as ofMarch 31, 2022 . As ofMarch 31, 2022 , the sale of 56 properties closed under the Purchase and Sale Agreement.
Repurchase facilities, notes payable and credit facilities, net
(e)Reflects certain amounts repaid or assumed under the Closing as discussed in (c) above, including, but not limited to, the following: the assumption by the Purchaser and paydown of certain mortgage notes and the repayment of the secured first lien mortgage loan. Also reflects the adjustment of the deferred financing costs related to such debt.
Accumulated distributions in excess of earnings
(f)Reflects the estimated net increase in equity resulting from the Closing, net of the assumption by the Purchaser of certain mortgage notes.
Adjustments to the Unaudited Pro Forma Condensed Consolidated Statements of
Operations for the Three Months Ended
(a)Reflects the historical unaudited condensed consolidated statements of operations for the three months endedMarch 31, 2022 and the year endedDecember 31, 2021 , which were included in the Quarterly Report on Form 10-Q, as filed with theSEC onMay 11, 2022 , and the Annual Report on Form 10-K, as filed with theSEC onMarch 31, 2022 , respectively. (b)Reflects the Company's property-level historical results of operations related to the properties involved in the Closing for the three months endedMarch 31, 2022 , and the Company's property-level historical results of operations related to the properties involved in the Closing for the year endedDecember 31, 2021 , except the pro forma adjustments described below that are a direct result of the transaction.
Management fees
(c)Reflects adjustments to CMFT's management fee during the periods presented, which has been pro-rated based on average equity under management pursuant to the Management Agreement as if the Closing had occurredJanuary 1, 2021 .
Interest expense and other, net
(d)Reflects reduced interest expense as a result of certain debt repayments and assumptions related to the properties involved in the Closing, including, but not limited to, the following: the assumption by the Purchaser and paydown of certain mortgage notes and the repayment of the secured first lien mortgage loan. For certain terms of CMFT's debt outstanding, see Note 9 - Repurchase Facilities, Credit Facilities, and Notes Payable to the condensed consolidated financial statements in the Company's Quarterly Report on Form 10-Q for the three months endedMarch 31, 2022 and the Company's Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 . 7 -------------------------------------------------------------------------------- CIM REAL ESTATE FINANCE TRUST, INC. NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Loss on extinguishment of debt
(e)Reflects a reduced loss on extinguishment of debt during the three months endedMarch 31, 2022 that was recognized in relation to certain debt repayments and assumptions related to the properties involved in the Closing. 8
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