CIM Commercial Trust Corporation (NASDAQ: CMCT and TASE: CMCT-L) (“we”, “our”, “CMCT”, “CIM Commercial”, or the “Company”), a real estate investment trust (“REIT”), today reported operating results for the three and nine months ended September 30, 2021.

Third Quarter 2021 Highlights

Portfolio

• Same-store⁽¹⁾ office portfolio was 78.2% leased.
• Executed 32,646 square feet of leases with terms longer than 12 months.

Financial Results

• Net loss attributable to common stockholders of $3.2 million, or $0.14 per diluted share.
• Funds from operations (“FFO”) attributable to common stockholders⁽²⁾ was $1.8 million, or $0.08 per diluted share.
• Core FFO attributable to common stockholders⁽³⁾ was $2.0 million, or $0.08 per diluted share.

Management Commentary

“We are pleased that our core funds from operations improved to $0.08 per share during the third quarter of 2021, compared to $0.06 per share in the second quarter and a loss of $0.21 per share in the first quarter. The increase from last quarter was primarily driven by improving operating results at our hotel,” said David Thompson, Chief Executive Officer of CIM Commercial.

“As the quarter progressed, we continued to see improved office leasing activity, hotel occupancy and average daily rate. Our hotel occupancy improved to 67% for the quarter, from 48% in the prior quarter. For the full quarter, the property generated net operating income for the first time since the first quarter of 2020. The positive trends continued into October, with occupancy increasing to 77% in the month.

“We have improved our balance sheet and believe we have an opportunity to significantly increase our funds from operations as we evaluate ways to further reduce costs and increase our cash flows on invested capital. We intend to grow the company by leveraging the strength of CIM Group’s platform to acquire cash flowing true creative office, multifamily, retail, parking, in-fill industrial and limited-service hospitality assets in vibrant and improving metropolitan communities. It is our intention that no acquisition will exceed more than 10% of the Company’s gross asset value. We intend to finance these acquisitions with a balance of common equity, preferred equity and debt and we will continue to build the quality of our balance sheet while growing the portfolio.

“We have an attractive portfolio with significant same store growth opportunity, and we may have opportunities to dispose of some of those assets at attractive prices. To the extent that we do so, we will seek to redeploy proceeds in the same profile of assets that we are pursuing with the capital we have raised.”

Third Quarter 2021 Results

Portfolio

As of September 30, 2021, our real estate portfolio consisted of 13 assets, all of which were fee-simple properties. The portfolio included ten office properties and one development site, which is being used as a parking lot, totaling approximately 1.3 million rentable square feet, and one 503-room hotel with an ancillary parking garage.

Financial Results

Net loss attributable to common stockholders was $3.2 million, or $0.14 per diluted share of common stock, for the three months ended September 30, 2021, compared to $9.7 million, or $0.65 per diluted share of common stock, for the same period in 2020.

FFO attributable to common stockholders⁽²⁾ was $1.8 million, or $0.08 per diluted share of common stock, for the three months ended September 30, 2021, compared to a loss of $4.4 million, or $0.30 per diluted share of common stock, for the same period in 2020.

Core FFO attributable to common stockholders⁽³⁾ was $2.0 million, or $0.08 per diluted share of common stock, for the three months ended September 30, 2021, compared to a loss of $4.0 million, or $0.27 per diluted share of common stock, for the same period in 2020. The increase in FFO and Core FFO is primarily attributable to an increase in hotel and lending segment net operating income.

Segment Information

Our reportable segments during the three months ended September 30, 2021 and 2020 consisted of two types of commercial real estate properties, namely, office and hotel, as well as a segment for our lending business. Total Segment net operating income (“NOI”)⁽⁴⁾ was $13.3 million for the three months ended September 30, 2021, compared to $6.6 million for the same period in 2020.

Office

Same-Store

Same-store⁽¹⁾ office Segment NOI⁽⁴⁾ decreased 8.9%, while same-store⁽¹⁾ office Cash NOI⁽⁵⁾, excluding lease termination income, decreased 3.3% for the three months ended September 30, 2021 compared to the same period in 2020. The decrease is primarily due to lower revenues at an office property in Los Angeles, California and at an office property in Beverly Hills, California due to decreases in occupancy as compared to the same period in 2020.

At September 30, 2021, the Company’s same-store⁽¹⁾ office portfolio was 77.8% occupied, a decrease of 170 basis points year-over-year on a same-store⁽¹⁾ basis, and 78.2% leased, a decrease of 200 basis points year-over-year on a same-store⁽¹⁾ basis. The annualized rent per occupied square foot⁽⁶⁾ on a same-store⁽¹⁾ basis was $52.53 at September 30, 2021 compared to $50.39 at September 30, 2020. During the three months ended September 30, 2021, the Company executed 20,203 square feet of recurring leases at our same-store⁽¹⁾ office portfolio.

Total

Office Segment NOI⁽⁴⁾ increased to $7.5 million for the three months ended September 30, 2021, from $7.4 million for the same period in 2020. The increase is primarily due to tax refunds related to prior tax years and adjustments to payroll allocation reimbursements related to certain properties, both of which reduced office expenses for three months ended September 30, 2021, partially offset by the decreases in same-store⁽¹⁾ office Segment NOI⁽⁴⁾ as described above.

Hotel

Hotel Segment NOI⁽⁴⁾ increased to income of $877,000 for the three months ended September 30, 2021, from a loss of $1.1 million for the same period in 2020, due to an increase in occupancy, average daily rate, and food, beverage, and other sundry hotel services as a result of the easing of government restrictions associated with the COVID-19 pandemic. Monthly occupancy was 62%, 68% and 70% in July, August and September 2021, respectively. The following table sets forth the occupancy, average daily rate and revenue per available room for our hotel for the specified periods:

Lending

Our lending segment primarily consists of our SBA 7(a) lending platform, which is a national lender that primarily originates loans to small businesses in the hospitality industry. Lending Segment NOI⁽⁴⁾ was $4.9 million for the three months ended September 30, 2021, compared to $269,000 for the same period in 2020. The increase is primarily due to an increase in premium income from the sale of the guaranteed portion of our SBA 7(a) loans, which benefited from an increase in the SBA guaranty support from a maximum of 75% per loan to 90% per loan, a reduction in fees charged in the secondary market and higher market premiums. In addition, there was an increase in interest income resulting from an increase in our average outstanding lending portfolio during the three months ended September 30, 2021 compared to the three months ended September 30, 2020. As a result of the conclusion of the enhanced government support provided by the CARES Act, the SBA guaranty support has now reverted back to 75% from 90% and the reduction of fees charged in the secondary market ended as of October 1, 2020. This will likely cause future loan originations to decline and the premiums achieved on sales of the guaranteed portion of our SBA 7(a) loans to decrease, in each case possibly by a material amount.

Debt and Equity

During the three months ended September 30, 2021, we issued 209,965 shares of Series A Preferred Stock and 25,832 shares of Series D Preferred Stock for aggregate net proceeds of $5.3 million. Net proceeds represent gross proceeds offset by costs specifically identifiable to the offering of Series A Preferred Stock and Series D Preferred Stock, such as commissions, dealer manager fees, and other offering fees and expenses. Additionally, during the three months ended September 30, 2021, we paid down $32.0 million on our revolving credit facility.

Dividends

On September 7, 2021, we declared a quarterly cash dividend of $0.0750 per share of our common stock, which was paid on September 29, 2021 to stockholders of record at the close of business on September 17, 2021.

On September 7, 2021, we declared a quarterly cash dividend of $0.34375 per share of our Series A Preferred Stock or portion thereof for issuances during the second quarter of 2021. The dividend is payable as follows: $0.114583 per share on October 15, 2021, November 15, 2021 and December 15, 2021 to stockholders of record at the close of business on October 5, 2021, November 5, 2021 and December 5, 2021, respectively.

On September 7, 2021, we declared a quarterly cash dividend of $0.35313 per share of our Series D Preferred Stock, or portion thereof for issuances during the second quarter of 2021. The dividend is payable as follows: $0.117708 per share on October 15, 2021, November 15, 2021 and December 15, 2021 to stockholders of record at the close of business on October 5, 2021, November 5, 2021 and December 5, 2021, respectively.

About the Data

Descriptions of certain performance measures, including Segment NOI, Cash NOI, FFO attributable to common stockholders, and Core FFO are provided below. Refer to the subsequent tables for reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure.

FORWARD-LOOKING STATEMENTS

This press release contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), which are intended to be covered by the safe harbors created thereby. Such forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “will,” “project,” “target,” “expect,” “intend,” “might,” “believe,” “anticipate,” “estimate,” “could,” “would,” “continue,” “pursue,” “potential,” “forecast,” “seek,” “plan,” or “should” or the negative thereof or other variations or similar words or phrases. Such forward-looking statements include, among others, statements about CMCT’s plans and objectives relating to future growth and availability of funds. Such forward-looking statements are based on particular assumptions that management of CMCT has made in light of its experience, as well as its perception of expected future developments and other factors that it believes are appropriate under the circumstances. Forward-looking statements are necessarily estimates reflecting the judgment of CMCT’s management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These risks and uncertainties include those associated with (i) the scope, severity and duration of the current pandemic of COVID-19, and actions taken to contain the pandemic or mitigate its impact, and the winding-down of or termination of governmental assistance programs implemented to address the pandemic, (ii) the adverse effect of COVID-19 on the financial condition, results of operations, cash flows and performance of CMCT and its tenants and business partners, the real estate market and the global economy and financial markets, among others, (iii) the timing, form, and operational effects of CMCT’s development activities, (iv) the ability of CMCT to raise in place rents to existing market rents and to maintain or increase occupancy levels, (v) fluctuations in market rents, including as a result of COVID-19, and (vi) general economic, market and other conditions. Additional important factors that could cause CMCT’s actual results to differ materially from CMCT’s expectations are discussed under the section “Risk Factors” in CMCT’s Annual Report on Form 10-K for the year ended December 31, 2020. The forward-looking statements included herein are based on current expectations and there can be no assurance that these expectations will be attained. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond CMCT’s control. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included herein will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by CMCT or any other person that CMCT’s objectives and plans will be achieved. Readers are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date they are made. CMCT does not undertake to update them to reflect changes that occur after the date they are made, except as may be required by applicable law.

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