Consolidated Statements of Operations—Three and Six Months Ended June 30, 2017 and 2016 Consolidated Statements of Comprehensive Income—Three and Six Months Ended June 30, 2017 and 2016 Consolidated Statements of Equity—Six Months Ended June 30, 2017 and 2016 Consolidated Statements of Cash Flows—Six Months Ended June 30, 2017 and 2016 Notes to Consolidated Financial Statements ASSETS Investments in real estate, net Cash and cash equivalents Restricted cash Accounts receivable, net Deferred rent receivable and charges, net Other intangible assets, net Other assets Assets held for sale, net TOTAL ASSETS LIABILITIES AND EQUITY LIABILITIES: Debt Accounts payable and accrued expenses Intangible liabilities, net Due to related parties Other liabilities Liabilities associated with assets held for sale Total liabilities COMMITMENTS AND CONTINGENCIES (Note 14) EQUITY: Common stock, $0.001 par value; 900,000,000 shares authorized; 87,676,197 and 97,589,598 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively Additional paid-in capital Accumulated other comprehensive income (loss) Distributions in excess of earnings Total stockholders' equity Noncontrolling interests Total equity TOTAL LIABILITIES AND EQUITY REVENUES: Rental and other property income Expense reimbursements Interest and other income EXPENSES: Rental and other property operating Asset management and other fees to related parties Interest General and administrative Transaction costs Depreciation and amortization Gain on sale of real estate INCOME (LOSS) FROM CONTINUING OPERATIONS DISCONTINUED OPERATIONS: Income from operations of assets held for sale NET INCOME FROM DISCONTINUED OPERATIONS NET INCOME Net income attributable to noncontrolling interests NET INCOME ATTRIBUTABLE TO STOCKHOLDERS BASIC AND DILUTED INCOME (LOSS) PER SHARE: Continuing operations Discontinued operations Net income WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING: Basic Diluted NET INCOME Other comprehensive income (loss): cash flow hedges COMPREHENSIVE INCOME (LOSS) Comprehensive income attributable to noncontrolling interests COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO STOCKHOLDERS Balances, January 1, 2016 Distributions to noncontrolling interests Stock-based compensation expense Issuance of shares pursuant to employment agreements Repurchase of common stock Common dividends ($0.4375 per share) Other comprehensive income (loss) Net income Balances, June 30, 2016 Balances, January 1, 2015 Contributions from noncontrolling interests Distributions to noncontrolling interests Stock-based compensation expense Common dividends ($0.4375 per share) Net income Balances, June 30, 2015 CASH FLOWS FROM OPERATING ACTIVITIES: Net income Adjustments to reconcile net income to net cash provided by operating activities: Deferred rent and amortization of intangible assets, liabilities and lease inducements Depreciation and amortization Gain on sale of real estate Straight line rent, below-market ground lease and amortization of intangible assets Amortization of deferred loan costs Amortization of premiums and discounts on debt Unrealized premium adjustment Amortization and accretion on loans receivable, net Bad debt expense Deferred income taxes Stock-based compensation Loans funded, held for sale to secondary market Proceeds from sale of guaranteed loans Principal collected on loans subject to secured borrowings Other operating activity Changes in operating assets and liabilities: Accounts receivable and interest receivable Other assets Accounts payable and accrued expenses Deferred leasing costs Other liabilities Due to related parties Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Additions to investments in real estate Proceeds from sale of real estate property, net Loans funded Principal collected on loans Restricted cash Other investing activity Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from (payment of) mortgage loans, net (Payment of) proceeds from unsecured revolving lines of credit, revolving credit facilities and term notes, net Payment of principal on secured borrowings Proceeds from secured borrowings Payment of deferred preferred stock offering costs Payment of deferred loan costs Payment of dividends Repurchase of common stock Contributions from noncontrolling interests Noncontrolling interests' distributions Net cash used in financing activities Change in cash balances included in assets held for sale NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS: Beginning of period End of period SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest Federal income taxes paid SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES: Additions to investments in real estate included in accounts payable and accrued expenses Additions to investments in real estate included in other assets Net decrease in fair value of derivatives applied to other comprehensive income (loss) Reduction of loans receivable and secured borrowings due to the SBA's repurchase of the guaranteed portion of loans Additions to deferred loan costs included in accounts payable and accrued expenses Expenses related to repurchase of common stock included in accounts payable and accrued expenses Proceeds receivable from closed mortgage loans included in other assets Additions to deferred preferred stock offering costs included in accounts payable and accrued expenses (Unaudited) CIM Commercial has qualified and intends to continue to qualify as a 16, 2017. Buildings and improvements Furniture, fixtures, and equipment Tenant improvements (Unaudited) respectively (Note 3). discount (the "Retained Loan Discount") is recorded as a reduction in basis of the retained portion of the loan. respectively. Deferred Other deferred costs are $1,414,000 and $135,000 at June 30, 2017 and December 31, 2016, respectively. Use of Estimates—The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (Unaudited) In February 2016, the FASB issued ASU No. 2016-02,Leases (Topic 842), which is intended to improve financial reporting about leasing transactions. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP, which requires a lessee to recognize only capital leases on the balance sheet, the new ASU will require a lessee to recognize both types of leases on the balance sheet. The lessor accounting will remain largely unchanged from current GAAP. However, the ASU contains some targeted improvements that are intended to align, where necessary, lessor accounting with the lessee accounting model and with the updated revenue recognition guidance issued in 2014. For public entities, the ASU is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2018. We are currently in the process of evaluating the impact of adoption of this new accounting guidance on our consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, tax withholding requirements, and classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax-withholding purposes. In addition, the ASU eliminates certain guidance in ASC 718, which was indefinitely deferred shortly after the issuance of FASB Statement No. 123 (revised 2004),Share-Based Payment. For public entities, the ASU is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2016. Early adoption is permitted and an entity that elects early adoption must adopt all of the amendments in the same period. In June 2016, the FASB issued ASU No. 2016-13,Financial There were no acquisitions during the six months ended June 30, 2017. Courtyard Oakland, Oakland, CA 2017. Assets Investments in real estate, net Cash and cash equivalents Restricted cash Accounts receivable, net Other assets Total assets Liabilities Accounts payable and accrued expenses Other liabilities Total liabilities (Unaudited) Land Land improvements Buildings and improvements Furniture, fixtures, and equipment Tenant improvements Work in progress Investments in real estate Accumulated depreciation Net investments in real estate Gross balance Accumulated amortization Average useful life (in years) (Unaudited) Gross balance Accumulated amortization Average useful life (in years) The amortization of the acquired above-market leases which decreased rental and other property income was respectively. 2016 (Six months ending December 31, 2016) 2017 2018 2019 2020 Thereafter Assets held for sale Loans receivable, net Cash and cash equivalents Restricted cash Accounts receivable and interest receivable, net Other intangible assets Other assets Total assets held for sale, net Liabilities associated with assets held for sale Debt Accounts payable and accrued expenses Other liabilities Total liabilities associated with assets held for sale Commercial mortgage loans SBA 7(a) loans, subject to secured borrowings SBA 7(a) loans Commercial real estate loans, subject to secured borrowings Loans receivable Deferred capitalized costs, net Loan loss reserves Loans receivable, net Secured Borrowings—Government Guaranteed Loans: Secured borrowing principal on SBA 7(a) loans sold for a premium and excess spread—variable rate, reset quarterly, based on prime rate with weighted average coupon rate of 4.14% and 3.90% at June 30, 2016 and December 31, 2015, respectively Secured borrowing principal on loans sold for excess spread—variable rate, reset quarterly, based on prime rate with weighted average coupon rate of 1.83% and 1.58% at June 30, 2016 and December 31, 2015, respectively Total Secured Borrowings—Government Guaranteed Loans Secured Borrowings—Commercial Real Estate Loans: Secured borrowings based on 49% of the principal on commercial real estate loans with variable interest rates, reset monthly, based on 30-day LIBOR with weighted average coupon rate of 12.50% and 9.77% at June 30, 2016 and December 31, 2015, respectively Total Secured Borrowings—Commercial Real Estate Loans Unamortized premiums and discounts, net Total Secured Borrowings 2016 (Six months ending December 31, 2016) 2017 2018 2019 2020 Thereafter Revenue—Interest and other income Expenses: Interest expense Fees to related party General and administrative Provision for income taxes Total expenses Income from operations of assets held for sale (Unaudited) Information on our debt is as follows: Mortgage loans with a fixed interest rate of 4.14% per annum, with monthly payments of interest only, and balances totaling $392,000,000 due on July 1, 2026. The loans are nonrecourse. Mortgage loan with a fixed interest rate of 4.50% per annum, with monthly payments of interest only for 10 years, and payments of interest and principal starting in February 2022. The loan has a $42,008,000 balance due on January 5, 2027. The loan is nonrecourse. Mortgage loan with a fixed interest rate of 6.65% per annum, with monthly payments of principal and interest. The loan has a 25-year amortization schedule with a $21,136,000 balance due on July 15, 2018. The loan is nonrecourse. Mortgage loans with a fixed interest rate of 5.39% per annum, with monthly payments of principal and interest, and a balance of $35,695,000 due on March 1, 2021. The loans are nonrecourse. Mortgage loan with a fixed interest rate of 5.18% per annum, with monthly payments of principal and interest, and balances totaling $26,232,000 due on June 5, 2021. The loan is nonrecourse. Deferred loan costs related to mortgage loans Premiums and discounts on assumed mortgages, net Total Mortgages Payable Junior subordinated notes with a variable interest rate which resets quarterly based on the 90-day LIBOR plus 3.25%, with quarterly interest only payments. Balance due at maturity on March 30, 2035. Unsecured term loan facility Unsecured credit facility Deferred loan costs related to unsecured term loan and credit facilities Discount on junior subordinated notes Total Other Total Debt life of the related loan, approximating the effective interest method. Deferred loan costs of 2016, respectively, and are a reduction to total debt. approximately $89,000,000 and $200,000,000, respectively. On August 3, 2017, we repaid $65,000,000 of outstanding borrowings on our unsecured term loan facility. In connection with such pay down, we terminated three interest rate swaps with an aggregate notional value of $65,000,000 (Note 13). Costs incurred to terminate such swaps totaled $38,000, which will be reflected in earnings. (Unaudited) 2016 (Six months ending December 31, 2016) 2017 2018 2019 2020 Thereafter These swaps hedge the future cash flows of interest payments on our $385,000,000 unsecured term loan facility by fixing the rate until May 8, 2020 at a weighted average rate of 1.563% plus the credit spread, which was 1.60% at June 30, Credit-Risk-Related Contingent Features Accumulated other comprehensive income (loss), at beginning of period Other comprehensive income (loss) before reclassifications Amounts reclassified from accumulated other comprehensive income (loss)(1) Net current period other comprehensive income (loss) Accumulated other comprehensive income (loss), at end of period Future Reclassifications from AOCI —Observable inputs other than quoted prices in active markets for identical assets and liabilities Liabilities: Interest rate swaps Assets held for sale: Loans receivable subject to credit risk SBA 7(a) loans receivable, subject to secured borrowings Commercial real estate loans, subject to secured borrowings Liabilities: Mortgages payable Junior subordinated notes Mortgages payable that are not active (i.e., markets in which there are few transactions for the financial instruments, the prices are not current, price quotations vary substantially, or in which little information is released publicly). There is limited reliable market information for our financial instruments other than our interest rate swaps and we utilize other methodologies based on unobservable inputs for valuation purposes since there are no Level 1 or Level 2 inputs available. Accordingly, Level 3 inputs are used to measure fair value. Mortgages Payable—The fair values of mortgages payable are estimated based on current interest rates available for debt instruments with similar terms. The fair value of our mortgages payable is sensitive to fluctuations in interest rates. Discounted cash flow analysis is generally used to estimate the fair value of our mortgages payable, using rates ranging from three months ended June 30, On January 1, 2015, we entered into a Staffing and Reimbursement Agreement with CIM SBA Staffing, LLC ("CIM SBA"), an affiliate of CIM Group and our subsidiary, PMC Commercial Lending, the Three and Six Months Ended June 30, 2017 and 2016 (Unaudited) January 2016 (as each executive was not entitled to any disability, death or severance payments on such date). These shares vested immediately. We accrued associated payroll taxes of $444,000 at December 31, 2015, which were paid in January 2016, and recorded no compensation Rent expense under this lease, which includes straight-line rent and amortization of acquired below-market ground lease, was $438,000 for each of the three months ended June 30, respectively. 2016 (Six months ending December 31, 2016) 2017 2018 2019 2020 Thereafter 2016 (Six months ending December 31, 2016) 2017 2018 2019 2020 Thereafter Tenant Revenue Concentrations—Rental and other property income for the three months ended June 30, California Washington, D.C. Texas North Carolina New York California(1) Washington, D.C. Texas North Carolina New York company expenses, legal, accounting, and tax preparation that are not considered separate operating segments. The reportable segments are accounted for on the same basis of accounting as described in the notes to our audited consolidated financial statements for the year ended December 31, 16, 2017. provision for income taxes. For the lending segment, we define net operating income as interest income net of interest expense and general overhead expenses. Office: Revenues Property expenses: Operating General and administrative Total property expenses Segment net operating income—office Hotel: Revenues Property expenses: Operating General and administrative Total property expenses Segment net operating income—hotel Multifamily: Revenues Property expenses: Operating General and administrative Total property expenses Segment net operating income—multifamily Total segment net operating income (Unaudited) Total segment net operating income Asset management and other fees to related parties Interest expense General and administrative Transaction costs Depreciation and amortization Gain on sale of real estate Income (loss) from continuing operations Discontinued operations Income from operations of assets held for sale Net income from discontinued operations Net income Net income attributable to noncontrolling interests Net income attributable to stockholders Condensed assets: Office Hotel(1) Multifamily Lending assets held for sale Non-segment assets Total assets Capital expenditures(2): Office Hotel Multifamily Total capital expenditures Loan originations included in assets held for sale Total capital expenditures and loan originations 2016. In that regard, in June 2016 we completed a tender offer for 10,000,000 shares of Common Stock at a price of $21.00 per share of Common Stock; in September 2016, we repurchased in a privately negotiated transaction, 3,628,116 shares of our Common Stock at $22.00 per share from Urban II; and in June 2017, we repurchased in a privately negotiated transaction, 26,181,818 shares of our Common Stock at $22.00 per share from Urban II. Additionally, in April 2017, we declared and paid a special cash dividend of $0.28 per share of Common Stock, or $601,000, to the common stockholders that did not participate in the September 2016 private repurchase and, in June 2017, we declared and paid a special cash dividend of $1.98 per share of Common Stock, or $4,271,000, to the common stockholders that did not participate in the June 2017 private repurchase. These special cash dividends allowed such common stockholders that did not participate in the September 2016 and June 2017 private repurchases to receive the economic benefits of such repurchases. In furtherance of our two primary goals, we anticipate additional share repurchases and/or special dividends in the future. development, finance, leasing, and management capabilities. CIM Group is lot) totaling approximately 4.1 million rentable square feet, two multifamily properties comprised of 418 units, and one hotel with 503 rooms. Our investment strategy is to continue to primarily invest in Class A and creative office investments in vibrant and improving urban communities throughout the United States in a manner that will allow us to increase our Furthermore, as part of our investment strategy, we may invest in or originate loans that are secured directly or indirectly by properties primarily located in Qualified Communities that meet our investment strategy. Such loans may include limited and/or non-recourse junior (mezzanine, B-note or 2nd lien) and senior construction loans that meet our investment strategy or limited and/or non-recourse junior (mezzanine, B-note or 2nd lien) and senior acquisition, bridge or repositioning loans. from the time of the original investment recommendation, through the implementation of the asset's business plan, and any disposition activities. fair value was determined with assistance from an independent third party valuation firm. $1,668,000 in income from discontinued operations. FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts ("NAREIT"). Net income attributable to stockholders Depreciation and amortization Gain on sale of depreciable assets Net income attributable to noncontrolling interests FFO Annualized rent per occupied square foot(1) Expiring Cash Rents: Expiring square feet(1) Expiring rent per square foot(2) Three Months Ended June 30, 2016(3) Six Months Ended June 30, 2016(3) Monthly rent per occupied unit(1) Office portfolio Multifamily portfolio(1) Rental Rate Trends—Hotel Statistics Occupancy ADR RevPAR Rental Rate Trends—Hotel Statistics, Excluding the Courtyard Oakland Occupancy ADR RevPAR Total revenues Total expenses Net income from discontinued operations Net income CIM Commercial operates in four segments: office, hotel, Revenues: Office Hotel Multifamily Expenses: Office Hotel Multifamily Office Revenue: Multifamily Expenses: Multifamily expenses Discontinued Operations Total revenues Total expenses Gain on sale of real estate Net income from discontinued operations Net income common stockholders, computed in accordance with GAAP, excluding gains (or losses) from sales of real estate, impairment of real estate, and real estate depreciation and amortization. We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts ("NAREIT"). Revenues: Office Hotel Multifamily Expenses: Office Hotel Multifamily Office Revenue: Liquidity and Capital Resources approximately $154,000,000, $89,000,000, and $200,000,000, respectively. On August 3, 2017, we repaid $65,000,000 of outstanding borrowings on our unsecured term loan facility. In connection with such pay down, we terminated three interest rate swaps with an aggregate notional value of $65,000,000 (Note 13). Costs incurred to terminate such swaps totaled $38,000, which will be reflected in earnings. covenants under the unsecured credit and term loan facilities. operations. We expect to employ leverage levels that are comparable to those of other commercial REITs engaged in business strategies similar to our own. distributions or to engage in further repurchases of Common Stock. Our cash flows from investing activities are primarily related to property investments and sales, expenditures for development and redevelopment projects, capital expenditures and cash flows associated with loans originated at our lending segment. Net cash 2016. 2016. 2016. from Urban II. April 1, 2016 to April 30, 2016 May 1, 2016 to May 31, 2016 June 1, 2016 to June 30, 2016 TotalUse these links to rapidly review the documentFORM 10-QFORM 10-Q (Mark One):
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20162017
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
(I.R.S. Employer
Identification No.)
(Registrant's telephone number)or a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer"filer," "smaller reporting company," and "smaller reporting"emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):(Do not check if a
smaller reporting company)Smaller reporting company ý3, 2016,4, 2017, the Registrant had outstanding 87,676,19757,875,848 shares of common stock, par value $0.001 per share.PAGE NO.PART I.Financial InformationItem 1.Financial Statements PAGE NO. PART I. Financial Information and 2015 (Unaudited) and 2015 (Unaudited) and 2015(Unaudited) and 2015(Unaudited) (Unaudited) 7 39 54 PART II. Other Information Item 4.Controls and Procedures54PART II.Other Information Legal Proceedings55 Risk Factors55 55 55 55 Other Information55Exhibits June 30,
2016 December 31,
2015 June 30, 2017 December 31, 2016 (Unaudited) (Unaudited) $ 1,625,070 $ 1,691,711 $ 1,141,460 $ 1,606,942 37,593 124,636 129,006 144,449 82,460 7,267 26,706 32,160 11,111 10,726 15,511 13,086 103,104 97,225 95,369 116,354 15,634 17,353 15,610 17,623 95,097 14,150 89,155 92,270 181,028 128,992 125,138 — $ 2,151,097 $ 2,092,060 $ 1,637,955 $ 2,022,884 LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY $ 939,767 $ 656,835 Debt, net $ 846,833 $ 967,886 39,639 40,049 42,287 39,155 4,824 6,086 1,138 3,576 9,773 9,472 10,005 10,196 40,129 29,531 31,275 34,056 52,994 52,740 Liabilities associated with assets held for sale, net 52,886 — 1,087,126 794,713 984,424 1,054,869 COMMITMENTS AND CONTINGENCIES (Note 16) REDEEMABLE PREFERRED STOCK: Series A, $0.001 par value; 36,000,000 shares authorized; 308,775 and 61,435 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively; liquidation preference of $25.00 per share 7,050 1,426 88 98 Common stock, $0.001 par value; 900,000,000 shares authorized; 57,875,848 and 84,048,081 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively 58 84 1,633,735 1,820,451 1,077,151 1,566,073 (12,889 ) (2,519 ) 603 (509 ) (557,876 ) (521,620 ) (432,220 ) (599,971 ) 1,063,058 1,296,410 645,592 965,677 913 937 889 912 1,063,971 1,297,347 646,481 966,589 $ 2,151,097 $ 2,092,060 TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY $ 1,637,955 $ 2,022,884 Three Months Ended
June 30, Six Months Ended
June 30, 2016 2015 2016 2015 (Unaudited) $ 61,624 $ 63,171 $ 124,472 $ 126,569 3,316 3,263 6,244 6,444 498 485 1,112 1,145 65,438 66,919 131,828 134,158 32,299 32,985 63,577 65,694 7,492 7,456 15,193 14,665 7,302 5,586 13,928 10,989 1,712 1,955 3,475 4,547 118 373 267 801 18,480 17,566 36,538 36,694 67,403 65,921 132,978 133,390 — — 24,739 — (1,965 ) 998 23,589 768 2,823 3,984 4,252 6,946 2,823 3,984 4,252 6,946 858 4,982 27,841 7,714 (9 ) (6 ) (12 ) (6 ) $ 849 $ 4,976 $ 27,829 $ 7,708 $ (0.02 ) $ 0.01 $ 0.24 $ 0.01 $ 0.03 $ 0.04 $ 0.04 $ 0.07 $ 0.01 $ 0.05 $ 0.29 $ 0.08 96,683 97,589 97,173 97,586 96,683 97,589 97,173 97,586 Three Months Ended June 30, Six Months Ended
June 30, 2017 2016 2017 2016 (Unaudited) REVENUES: Rental and other property income $ 55,956 $ 61,624 $ 116,765 $ 124,472 Expense reimbursements 2,526 3,316 5,556 6,244 Interest and other income 2,817 3,420 5,927 6,261 61,299 68,360 128,248 136,977 EXPENSES: Rental and other property operating 27,249 32,299 50,209 63,577 Asset management and other fees to related parties 7,863 8,376 16,563 17,007 Interest 9,513 7,295 19,286 14,110 General and administrative 1,647 2,131 3,326 4,073 Transaction costs (Note 16) 11,615 118 11,628 267 Depreciation and amortization 14,761 18,480 31,992 36,538 Impairment of real estate (Note 3) 13,100 — 13,100 — 85,748 68,699 146,104 135,572 Gain on sale of real estate (Note 3) 116,283 — 304,017 24,739 INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES 91,834 (339 ) 286,161 26,144 Provision for income taxes 462 471 854 661 NET INCOME (LOSS) FROM CONTINUING OPERATIONS 91,372 (810 ) 285,307 25,483 DISCONTINUED OPERATIONS: Income from operations of assets held for sale (Note 7) — 1,668 — 2,358 NET INCOME FROM DISCONTINUED OPERATIONS — 1,668 — 2,358 NET INCOME 91,372 858 285,307 27,841 Net income attributable to noncontrolling interests (9 ) (9 ) (14 ) (12 ) NET INCOME ATTRIBUTABLE TO THE COMPANY 91,363 849 285,293 27,829 Redeemable preferred stock dividends (Note 11) (72 ) — (103 ) — NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 91,291 $ 849 $ 285,190 $ 27,829 BASIC AND DILUTED NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS PER SHARE: Continuing operations $ 1.16 $ (0.01 ) $ 3.50 $ 0.26 Discontinued operations $ — $ 0.02 $ — $ 0.02 Net income $ 1.16 $ 0.01 $ 3.50 $ 0.29 WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING: Basic 78,871 96,683 81,445 97,173 Diluted 78,871 96,683 81,445 97,173 Three Months
Ended June 30, Six Months
Ended June 30, 2016 2015 2016 2015 (Unaudited) $ 858 $ 4,982 $ 27,841 $ 7,714 (2,445 ) — (10,370 ) — (1,587 ) 4,982 17,471 7,714 (9 ) (6 ) (12 ) (6 ) $ (1,596 ) $ 4,976 $ 17,459 $ 7,708 Three Months Ended June 30, Six Months Ended
June 30, 2017 2016 2017 2016 (Unaudited) NET INCOME $ 91,372 $ 858 $ 285,307 $ 27,841 Other comprehensive income (loss): cash flow hedges (440 ) (2,445 ) 1,112 (10,370 ) COMPREHENSIVE INCOME (LOSS) 90,932 (1,587 ) 286,419 17,471 Comprehensive income attributable to noncontrolling interests (9 ) (9 ) (14 ) (12 ) COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY $ 90,923 $ (1,596 ) $ 286,405 $ 17,459 Six Months Ended June 30, 2016 Common
Stock
Outstanding Common
Stock
Par Value Additional
Paid-in
Capital Accumulated
Other
Comprehensive
Income (Loss) Distributions
In Excess
Of Earnings Noncontrolling
Interests Total
Equity (Unaudited) 97,589,598 $ 98 $ 1,820,451 $ (2,519 ) $ (521,620 ) $ 937 $ 1,297,347 — — — — — (36 ) (36 ) 10,176 — 65 — — — 65 76,423 — — — — — — (10,000,000 ) (10 ) (186,781 ) — (23,541 ) — (210,332 ) — — — — (40,544 ) — (40,544 ) — — — (10,370 ) — — (10,370 ) — — — — 27,829 12 27,841 87,676,197 $ 88 $ 1,633,735 $ (12,889 ) $ (557,876 ) $ 913 $ 1,063,971 Six Months Ended June 30, 2017 Common
Stock
Outstanding Common
Stock
Par Value Additional
Paid-in
Capital Accumulated
Other
Comprehensive
Income (Loss) Distributions
in Excess of Earnings Noncontrolling
Interests Total
Equity (Unaudited) Balances, December 31, 2016 84,048,081 $ 84 $ 1,566,073 $ (509 ) $ (599,971 ) $ 912 $ 966,589 Distributions to noncontrolling interests — — — — — (37 ) (37 ) Stock-based compensation expense 9,585 — 78 — — — 78 Share repurchase (26,181,818 ) (26 ) (489,027 ) — (86,947 ) — (576,000 ) Special cash dividends paid to certain common stockholders ($2.26 per share) (Note 12) — — — — (4,872 ) — (4,872 ) Common dividends ($0.34375 per share) — — — — (25,620 ) — (25,620 ) Issuance of Warrants — — 27 — — — 27 Dividends to holders of Series A Preferred Stock ($0.6875 per share) — — — — (103 ) — (103 ) Other comprehensive income (loss) — — — 1,112 — — 1,112 Net income — — — — 285,293 14 285,307 Balances, June 30, 2017 57,875,848 $ 58 $ 1,077,151 $ 603 $ (432,220 ) $ 889 $ 646,481 Six Months Ended June 30, 2015 Common
Stock
Outstanding Common
Stock
Par Value Additional
Paid-in
Capital Distributions
In Excess Of
Earnings Treasury
Stock Noncontrolling
Interests Total
Equity (Unaudited) 97,581,598 $ 98 $ 1,824,381 $ (460,623 ) $ (4,901 ) $ 861 $ 1,359,816 — — — — — 110 110 — — — — — (38 ) (38 ) 8,000 — 717 — — — 717 — — — (42,693 ) — — (42,693 ) — — — 7,708 — 6 7,714 97,589,598 $ 98 $ 1,825,098 $ (495,608 ) $ (4,901 ) $ 939 $ 1,325,626 Six Months Ended June 30, 2016 Common
Stock
Outstanding Common
Stock
Par Value Additional
Paid-in
Capital Distributions
in Excess of
Earnings Noncontrolling
Interests Total
Equity (Unaudited) Balances, December 31, 2015 97,589,598 $ 98 $ 1,820,451 $ (2,519 ) $ (521,620 ) $ 937 $ 1,297,347 Distributions to noncontrolling interests — — — — — (36 ) (36 ) Stock-based compensation expense 10,176 — 65 — — — 65 Issuance of shares pursuant to employment agreements 76,423 — — — — — — Share repurchase (10,000,000 ) (10 ) (186,781 ) — (23,541 ) — (210,332 ) Common dividends ($0.4375 per share) — — — — (40,544 ) — (40,544 ) Other comprehensive income (loss) — — — (10,370 ) — — (10,370 ) Net income — — — — 27,829 12 27,841 Balances, June 30, 2016 87,676,197 $ 88 $ 1,633,735 $ (12,889 ) $ (557,876 ) $ 913 $ 1,063,971 Six Months Ended
June 30, 2016 2015 (Unaudited) $ 27,841 $ 7,714 (2,637 ) (2,893 ) 36,538 36,694 (24,739 ) — 885 1,000 1,967 1,538 (543 ) (634 ) 835 727 (419 ) (2,234 ) (60 ) 982 76 (26 ) 65 717 (22,105 ) (16,438 ) 21,579 17,365 1,883 2,365 1,020 (192 ) (1,574 ) (2,045 ) (1,107 ) (1,681 ) (1,779 ) (3,956 ) (6,532 ) (2,926 ) 2,063 352 301 621 33,558 37,050 (18,121 ) (14,074 ) 42,782 — (27,871 ) (24,683 ) 26,164 13,058 (76,956 ) 1,200 1,042 184 (52,960 ) (24,315 ) 309,170 (15,692 ) (107,000 ) 55,000 (11,965 ) (2,365 ) 9,956 — (362 ) — (1,076 ) (3,415 ) (40,544 ) (42,693 ) (210,060 ) — — 110 (36 ) (38 ) (51,917 ) (9,093 ) (15,724 ) 1,295 (87,043 ) 4,937 124,636 17,615 $ 37,593 $ 22,552 $ 13,717 $ 10,520 $ 50 $ 505 $ 9,392 $ 5,115 $ — $ 4,224 $ (10,370 ) $ — $ 2,663 $ — $ 626 $ 67 $ 272 $ — $ 80,687 $ — $ 984 $ — Six Months Ended
June 30, 2017 2016 (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 285,307 $ 27,841 Adjustments to reconcile net income to net cash provided by operating activities: Deferred rent and amortization of intangible assets, liabilities and lease inducements (2,662 ) (2,637 ) Depreciation and amortization 31,992 36,538 Transfer of right to collect supplemental real estate tax reimbursements (5,097 ) — Gain on sale of real estate (304,017 ) (24,739 ) Impairment of real estate 13,100 — Straight line rent, below-market ground lease and amortization of intangible assets 881 885 Amortization of deferred loan costs 808 1,967 Amortization of premiums and discounts on debt (458 ) (543 ) Unrealized premium adjustment 722 835 Amortization and accretion on loans receivable, net 140 (419 ) Bad debt expense (recovery) 187 (60 ) Deferred income taxes 459 76 Stock-based compensation 78 65 Loans funded, held for sale to secondary market (17,906 ) (22,105 ) Proceeds from sale of guaranteed loans 16,737 21,579 Principal collected on loans subject to secured borrowings 4,935 1,883 Other operating activity (441 ) 1,020 Changes in operating assets and liabilities: Accounts receivable and interest receivable (2,682 ) (1,574 ) Other assets (1,653 ) (1,107 ) Accounts payable and accrued expenses 5,631 (1,779 ) Deferred leasing costs (2,557 ) (6,532 ) Other liabilities (1,748 ) 2,063 Due to related parties 4 301 Net cash provided by operating activities 21,760 33,558 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to investments in real estate (9,915 ) (18,121 ) Proceeds from sale of real estate property, net 642,886 42,782 Loans funded (5,969 ) (27,871 ) Principal collected on loans 5,496 26,164 Restricted cash 5,403 (76,956 ) Other investing activity 67 1,042 Net cash provided by (used in) investing activities 637,968 (52,960 ) Six Months Ended
June 30, 2017 2016 (Unaudited) CASH FLOWS FROM FINANCING ACTIVITIES: (Payment of) proceeds from mortgages payable (65,569 ) 309,170 Payment of unsecured revolving lines of credit, revolving credit facilities and term notes — (107,000 ) Payment of principal on secured borrowings (4,935 ) (11,965 ) Proceeds from secured borrowings — 9,956 Payment of deferred preferred stock offering costs (862 ) (362 ) Payment of deferred loan costs (4 ) (1,076 ) Payment of common dividends (25,620 ) (40,544 ) Payment of special cash dividends (4,872 ) — Repurchase of Common Stock (576,000 ) (210,060 ) Net proceeds from issuance of Warrants 27 — Net proceeds from issuance of Series A Preferred Stock 5,645 — Payment of preferred stock dividends (40 ) — Noncontrolling interests' distributions (37 ) (36 ) Net cash used in financing activities (672,267 ) (51,917 ) Change in cash balances included in assets held for sale (2,904 ) (14,265 ) NET DECREASE IN CASH AND CASH EQUIVALENTS (15,443 ) (85,584 ) CASH AND CASH EQUIVALENTS: Beginning of period 144,449 139,101 End of period $ 129,006 $ 53,517 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest $ 19,303 $ 13,717 Federal income taxes paid $ 259 $ 50 SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES: Additions to investments in real estate included in accounts payable and accrued expenses $ 6,883 $ 9,392 Net increase (decrease) in fair value of derivatives applied to other comprehensive income (loss) $ 1,112 $ (10,370 ) Reduction of loans receivable and secured borrowings due to the SBA's repurchase of the guaranteed portion of a loan $ 534 $ 2,663 Additions to deferred loan costs included in accounts payable and accrued expenses $ — $ 626 Expenses related to repurchase of common stock included in accounts payable and accrued expenses $ — $ 272 Proceeds receivable from closed mortgage loans included in other assets $ — $ 80,687 Additions to preferred stock offering costs included in accounts payable and accrued expenses $ 1,387 $ 984 Accrual of dividends payable to preferred stockholders $ 72 $ — Preferred stock offering costs offset against redeemable preferred stock $ 21 $ — NOTES TO CONSOLIDATED FINANCIAL STATEMENTSAS OF JUNEAND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNEandAND 2015 (UNAUDITED)(which, together with CIM Commercial, may be referred to as "we,("we," "us" or "our") primarily invests in, owns, and operates Class A and creative office investments in vibrant and improving urban communities throughout the United States. These communities are located in areas that include traditional downtown areas and suburban main streets, which have high barriers-to-entry,barriers to entry, high population density, improving demographic trends and a propensity for growth. We also generate income from the yield and other related fee income earned on our investments from our lending activities. As discussed in Note 6, the lending segment is held for sale at June 30, 2016 and December 31, 2015. We were originally organized in 1993 as PMC Commercial Trust ("PMC Commercial"), a Texas real estate investment trust.The Merger was accounted for asAs a reverse acquisition under the acquisition method of accounting with CIM Urban considered to be the accounting acquirer based upon the termsresult of the Merger Agreement. Based on the determination thatand related transactions, CIM Urban was the accounting acquirer in the transaction, CIM Urban allocated the purchase price to the fair value of PMC Commercial's assets and liabilities as of the Acquisition Date. Pursuant to the Merger Agreement, an affiliate of CIM REIT and CIM Urban received 4,400,000 shares of newly-issued PMC Commercialbecame our wholly-owned subsidiary. and approximately 65,000,000 shares of newly-issued PMC Commercial preferred stock. Following the Merger and subsequent increase in our authorized number of shares, each share of preferred stock was converted into 1.4 shares of Common Stock, resulting in the issuance of 95,440,000 shares of Common Stock in the aggregate in connection with the Merger, representing approximately 97.8% of PMC Commercial's outstanding shares of Common Stock at the time. On April 28, 2014, PMC Commercial's charter was amended to increase the authorized shares of stock of PMC Commercial from 100,000,000 to 1,000,000,000 shares and PMC Commercial changed its state of incorporation from Texas to Maryland by means of a merger of PMC Commercial with and into a newly formed, wholly-owned Maryland corporation subsidiary. Also, on April 28, 2014, we changed our name from "PMC Commercial Trust" to "CIM Commercial Trust Corporation." Our Common Stock, is currently traded on the NASDAQ Global Market (symbol "CMCT"). On April 28, 2014, we filed Articles of Amendment (the "Reverse Split Amendment") to effectuate a one-for-five reverse stock split ofunder the Common Stock, effective April 29, 2014. Pursuant to the reverse stock split, each fiveticker symbol "CMCT." We have authorized for issuance 900,000,000 shares of Common Stock issued and outstanding immediately prior to the effective time of the reverse stock split were converted into one share of Common Stock. Fractional100,000,000 shares of Common Stock were not issued as a result of the reverse stock split; instead, holders of pre-split shares of Common Stock who otherwise would have been entitled to receive a fractional share of Common Stock received an amount in cash equal to the product of the fraction of a share multiplied by the closing price of the Common Stock (as adjusted for the one-for-five reverse stock split). In connection with and immediately following the filing of the Reverse Split Amendment, weCIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNE 30, 2016, AND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)1. ORGANIZATION AND OPERATIONS (Continued)filed Articles of Amendment to decrease the par value of the Common Stock issued and outstanding to $0.001 per share, effective April 29, 2014, subsequent to the effective time of the Reverse Split Amendment. All per share and outstanding share information has been presented to reflect the reverse stock split.real estate investment trust ("REIT"),REIT, as defined in the Internal Revenue Code of 1986, as amended.2015,2016, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 15, 2016.20162017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.2017. Our accompanying interim consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto, included in our Annual Report on Form 10-K filed with the SEC on March 15, 2016.16, 2017. 15 - 40 years 3 - 5 years Shorter of the useful lives or the
terms of the related leasesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNEAND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNEandAND 2015 (UNAUDITED)2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)NoWe recognized impairment of long-lived assets was recognizedof $13,100,000 and $0 during the three months ended June 30, 2017 and 2016, respectively, and $13,100,000 and $0 during the six months ended June 30, 2017 and 2016, and 2015.1113 for disclosures about our derivative financial instruments and hedging activities. held for sale are carried at their unamortized principal balance less unamortized acquisition discounts and premiums, retained loan discounts and loan loss reserves. For loans originated under the Small Business Administration's ("SBA") 7(a) Guaranteed Loan Program ("SBA 7(a) Program"), we sell the portion of the loan that is guaranteed by the SBA. Upon sale of the SBA guaranteed portion of the loans, which are accounted for as sales, the unguaranteed portion of the loan retained by us is valued on a fair value basis and aCIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNE 30, 2016, AND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)included in income from operations of assets held for sale, using the effective interest method. We sold substantially all of our commercial mortgage loans with unamortized acquisition discounts of $15,951,000 to an unrelated third party in December 2015 (see Note 6)(Note 7). Acquisition discounts of $2,602,000$1,563,000 remained as of June 30, 20162017 which have not yet been accreted to income. a net recovery $236,000 on our loans receivable, respectively. For the three and six months ended June 30, 2015, we recorded a net recovery of $36,0002017 and a net impairment of $65,000December 31, 2016, andcharges associated with the preferred stock offering (see Note 10).costs. Deferred rent receivable is $60,667,000$56,406,000 and $58,612,000$64,010,000 at June 30, 20162017 and December 31, 2015,2016, respectively. Deferred leasing costs, which represent lease commissions and other direct costs associated with the acquisition of tenants, are capitalized and amortized on a straight-line basis over the terms of the related leases. Deferred leasing costs of $64,678,000$60,116,000 and $59,225,000$76,063,000 are presented net of accumulated amortization of $23,587,000$25,338,000 and $20,612,000$25,914,000 at June 30, 20162017 and December 31, 2015,CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNE 30, 2016, AND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)chargesoffering costs represent direct costs incurred in connection with our offering of Units (as defined in Note 11), excluding costs specifically identifiable to a closing, such as commissions, dealer-manager fees, and other registration fees. For a specific issuance of Units, associated withoffering costs are reclassified as a reduction of proceeds raised on the preferred stockissuance date. Offering costs incurred but not directly related to a specifically identifiable closing are deferred. Deferred offering costs are $1,346,000first allocated to each issuance on a pro-rata basis equal to the ratio of Units issued in an issuance to the maximum number of Units that are expected to be issued. Then, the deferred offering costs allocated to such issuance are further allocated to the Series A Preferred Stock (as defined in Note 11) and $0Warrants (as defined in Note 11) issued in such issuance based on the relative fair value of the instruments on the date of issuance. The deferred offering costs allocated to the Series A Preferred Stock and Warrants are reductions to temporary equity and permanent equity, respectively. Deferred offering costs of $2,771,000 and $2,060,000 related to our offering of Units are included in deferred rent receivable and charges at June 30, 20162017 and December 31, 2015,2016, respectively.proceeds from dispositions that are temporarily held at qualified intermediaries for purposes of facilitating like-kind exchanges under Section 1031 of the Internal Revenue Code ("Section 1031 Exchange"), which allows the gain on sale of real estaterequired to be deferred for income tax purposes. As of June 30, 2016, net proceeds of $42,782,000 from the sale of a hotel property in February 2016 (see Note 3) held at a qualified intermediarysegregated in connection with a Section 1031 Exchange is included in restricted cash. The proceeds were released to us by the qualified intermediary in August 2016 as we decided not to pursue like-kind exchanges within the required period.certain of our loans receivable.CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNE 30, 2016, AND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)PronouncementsPronouncements——In April 2015,January 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-03,2016-01, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which is intended to simplify the presentation of debt issuance costs. These amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. For public entities, the ASU is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2015. We adopted ASU 2015-03 retrospectively in our fiscal quarter ended March 31, 2016. As a result of the retrospective adoption, we reclassified unamortized debt issuance costs of $6,113,000 as of December 31, 2015 from deferred rent receivable and charges to debt on the accompanying consolidated balance sheets. Adoption of this standard did not impact results of operations, retained earnings, or cash flows in the current or previous interim and annual reporting periods. In January 2016, the FASB issued ASU No. 2016-01,Financial Instruments—OverallInstruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which is designed to improve the recognition and measurement of financial instruments through targeted changes to existing GAAP. The ASU requires an entity to: (i) measure equity investments at fair value through net income, with certain exceptions; (ii) present in OCI the changes in instrument-specific credit risk for financial liabilities measured using the fair value option; (iii) present financial assets and financial liabilities by measurement category and form of financial asset; (iv) calculate the fair value of financial instruments for disclosure purposes based on an exit price; and (v) assess a valuation allowance on deferred tax assets related to unrealized losses of available-for-sale debt securities in combination with other deferred tax assets. In addition, the ASU provides an election to subsequently measure certain nonmarketable equity investments at cost less any impairment and adjusted for certain observable price changes. The ASU also requires a qualitative impairment assessment of such equity investments and amends certain fair value disclosure requirements. For public business entities, the ASU is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. Early adoption by public entities to financial statements that have not yet been issued is permitted only for the provision related to instrument-specific credit risk. We are currently in the process of evaluating the impact of adoption of this new accounting guidance on our consolidated financial statements.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNEAND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNEandAND 2015 (UNAUDITED)2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In March 2016, the FASB issued ASU No. 2016-05,Derivatives and Hedging (Topic 815), which clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument under Topic 815 does not require de-designation of that hedging relationship provided that all other hedging criteria continue to be met. The new standard is effective for public entities for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2016 with early adoption permitted. We are currently evaluating the impact, if any, the new standard may have on our consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-08,Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations included in Topic 606 by clarifying the following: (i) an entity determines whether it is a principal or an agent for each specified good or service promised to the customer; (ii) an entity determines the nature of each specified good or service; (iii) when another party is involved in providing goods or services to a customer, an entity that is a principal obtains control of (a) a good or another asset from the other party, (b) a right to a service that will be performed by another party, or (c) a good or service from the other party that it combines with other goods or services; and (iv) the purpose of the indicators in the guidance is to support or assist in the assessment of control. For public entities, the ASU is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. Early adoption is permitted for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2016. We are currently in the process of evaluating the impact of adoption of this new accounting guidance on our consolidated financial statements.Compensation—StockCompensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which is intended to simplify several aspects of the accounting for share-based payment transactions, including accounting for income taxes, classification of excess tax benefits on the statement of cash flows, forfeitures, minimum statutoryCIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNE 30, 2016, AND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)We are currently in the process of evaluating the impact ofThe adoption of this new accounting guidance did not have a material impact on our consolidated financial statements. In April 2016, the FASB issued ASU No. 2016-10,Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which is intended to clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. The amendments in the ASU are expected to reduce the cost and complexity of applying the guidance on identifying promised goods or services and improve the operability and understandability of the licensing implementation guidance. For public entities, the ASU is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. Early adoption is permitted for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2016. We are currently in the process of evaluating the impact of adoption of this new accounting guidance on our consolidated financial statements.Instruments—CreditInstruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity. The amendments in the ASU replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For public entities, the ASU is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2019. Early adoption is permitted for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2018. We are currently in the process of evaluating the impact of adoption of this new accounting guidance on our consolidated financial statements. acquired ground leases, if any, based in each case on their respective fair values. Loan premiums, in the case of above-market rate loans, or loan discounts, in the case of below-market rate loans, are recorded based on the fair value of any loans assumed in connection with acquiring the real estate.CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNE 30, 2016, AND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)3. ACQUISITIONS AND DISPOSITIONS (Continued)Property Date of Sale Square Feet / Units (in thousands) 211 Main Street, San Francisco, CA Office March 28, 2017 417,266 $ 292,882 $ 187,734 3636 McKinney Avenue, Dallas, TX Multifamily May 30, 2017 103 $ 20,000 $ 5,488 3839 McKinney Avenue, Dallas, TX Multifamily May 30, 2017 75 $ 14,100 $ 4,224 200 S College Street, Charlotte, NC Office June 8, 2017 567,865 $ 148,500 $ 45,906 980 9th Street and 1010 8th Street, Sacramento, CA Office & Parking Garage June 20, 2017 485,926 $ 120,500 $ 34,829 4649 Cole Avenue, Dallas, TX Multifamily June 23, 2017 334 $ 64,000 $ 25,836 2015. (in thousands) Assets Investments in real estate, net $ 319,078 Deferred rent receivable and charges, net 22,089 Other intangible assets, net 129 Other assets 38 Total assets $ 341,334 Liabilities Debt, net (1) $ 64,777 Intangible liabilities, net 1,800 Total liabilities $ 66,577 (1) Net of $665,000 of premium on assumed mortgage. Asset
Type Date of Sale Rooms Sales
Price Gain on
Sale Asset
Type Date of Sale Rooms Sales
Price Gain on
Sale (in thousands) (in thousands) Hotel February 2, 2016 162 $ 43,800 $ 24,739 Hotel February 2, 2016 162 $ 43,800 $ 24,739 In addition, on July 19, 2016, we sold100% fee-simple interest in LAX Holiday Innseparate transaction with unrelated third parties, for the sale of an office property located at 7083 Hollywood Boulevard in Los Angeles, CaliforniaCalifornia; a multifamily property located at 4200 Scotland Street in Houston, Texas; and a multifamily property located at 47 E 34th Street in New York, New York. The aggregate contract sales price for these properties is $186,325,000. In connection with these dispositions, $50,568,000 of the outstanding mortgages payable at June 30, 2017 will be repaid or assumed by the buyer. We expect the closing of these sales transactions to an unrelated third party for $52,500,000occur during the second half of 2017. These purchase and recognized a gain of approximately $16,382,000. LAX Holiday Inn wassale agreements were entered into and became subject to non-refundable deposits on or prior to June 30, 2017. Therefore, these properties have been classified as held for sale as of June 30, 2016.a reconciliationthe detail of the carrying amounts of assets and liabilities of LAX Holiday Innthe properties that are classified as held for sale on theour consolidated balance sheetssheet as of June 30, 2016:2017: (in thousands) $ 36,839 3,986 709 799 286 $ 42,619 $ 1,152 40 $ 1,192 (in thousands) Assets Investments in real estate, net (1) $ 118,221 Cash and cash equivalents 2,904 Restricted cash 51 Accounts receivable, net 251 Deferred rent receivable and charges, net 1,865 Other intangible assets, net (2) 1,124 Other assets 722 Total assets held for sale, net $ 125,138 Liabilities Debt, net (3) $ 50,230 Accounts payable and accrued expenses 1,402 Due to related parties 195 Other liabilities 1,059 Total liabilities associated with assets held for sale, net $ 52,886 (1) (2) Other intangible assets, net, represents a tax abatement asset of $4,273,000 associated with 47 E 34th Street, which is presented net of accumulated amortization of $3,149,000. (3) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNEAND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNEandAND 2015 (UNAUDITED) June 30, 2016 December 31, 2015 June 30, 2017 December 31, 2016 (in thousands) (in thousands) $ 343,564 $ 363,612 $ 244,072 $ 343,564 26,177 26,747 17,746 26,177 1,473,060 1,506,962 1,064,191 1,475,415 4,458 9,720 3,525 4,955 159,793 146,205 130,481 159,677 7,891 8,126 9,528 11,706 2,014,943 2,061,372 1,469,543 2,021,494 (389,873 ) (369,661 ) (328,083 ) (414,552 ) $ 1,625,070 $ 1,691,711 $ 1,141,460 $ 1,606,942 $16,030,000$12,670,000 and $15,063,000$16,030,000 for the three months ended June 30, 20162017 and 2015,2016, respectively, and $31,703,000$27,354,000 and $31,343,000$31,703,000 for the six months ended June 30, 2017 and 2016, and 2015, respectively.20162017 and December 31, 20152016 is as follows: Assets Liabilities Acquired
Above-Market
Leases Acquired
In-Place
Leases Tax
Abatement Acquired
Below-Market
Ground
Lease Acquired
Below-Market
Leases (in thousands) $ 612 $ 21,137 $ 4,273 $ 11,685 $ (19,722 ) (553 ) (17,430 ) (2,598 ) (1,492 ) 14,898 $ 59 $ 3,707 $ 1,675 $ 10,193 $ (4,824 ) 7 8 8 84 8 Assets Liabilities June 30, 2017 Acquired
In-Place
Leases Acquired
Below-Market
Ground
Lease Trade Name and License Acquired
Below-Market
Leases (in thousands) Gross balance $ 10,181 $ 11,685 $ 2,957 $ (5,722 ) Accumulated amortization (7,581 ) (1,632 ) — 4,584 $ 2,600 $ 10,053 $ 2,957 $ (1,138 ) Average useful life (in years) 10 84 Indefinite 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNEAND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNEandAND 2015 (UNAUDITED)5. OTHER INTANGIBLE ASSETS (Continued) Assets Liabilities December 31, 2016 Acquired
Above-Market
Leases Acquired
In-Place
Leases Tax
Abatement (1) Acquired
Below-Market
Ground
Lease Trade Name and License Acquired
Below-Market
Leases (in thousands) Gross balance $ 215 $ 11,551 $ 4,273 $ 11,685 $ 2,957 $ (18,893 ) Accumulated amortization (180 ) (8,443 ) (2,873 ) (1,562 ) — 15,317 $ 35 $ 3,108 $ 1,400 $ 10,123 $ 2,957 $ (3,576 ) Average useful life (in years) 8 10 8 84 Indefinite 8 (1) Tax abatement is associated with 47 E 34th Street, which is classified as held for sale on our consolidated balance sheet at June 30, 2017 (Note 3). Assets Liabilities Acquired
Above-Market
Leases Acquired
In-Place
Leases Tax
Abatement Franchise
Affiliation
Fee(1) Acquired
Below-Market
Ground
Lease Acquired
Below-Market
Leases (in thousands) $ 966 $ 21,398 $ 4,273 $ 3,936 $ 11,685 $ (19,722 ) (843 ) (16,943 ) (2,322 ) (3,375 ) (1,422 ) 13,636 $ 123 $ 4,455 $ 1,951 $ 561 $ 10,263 $ (6,086 ) 7 8 8 10 84 8 (1)Franchise affiliation fee is associated with the Courtyard Oakland, which was sold in February 2016 (see Note 3).$26,000$0 and $79,000$26,000 for the three months ended June 30, 20162017 and 2015,2016, respectively, and $64,000$3,000 and $158,000$64,000 for the six months ended June 30, 20162017 and 2015,2016, respectively. The amortization of the below-market leases included in rental and other property income was $631,000 and $655,000 for the three months ended June 30, 2016 and 2015, respectively, and $1,262,000 and $1,310,000 for the six months ended June 30, 2016 and 2015, respectively. The amortization ofacquired in-place leases included in depreciation and amortization expense was $368,000$195,000 and $519,000$368,000 for the three months ended June 30, 20162017 and 2015,2016, respectively, and $748,000$411,000 and $1,048,000$748,000 for the six months ended June 30, 20162017 and 2015,2016, respectively. Included in depreciation and amortization expense was franchise affiliation fee amortization of $0 and $99,000$0 for the three months ended June 30, 20162017 and 2015,2016, respectively, and $33,000$0 and $198,000$33,000 for the six months ended June 30, 20162017 and 2015,2016, respectively. Tax abatement amortization of $138,000 for each of the three months ended June 30, 20162017 and 2015,2016, and $276,000 for each of the six months ended June 30, 20162017 and 20152016 was included in rental and other property operating expenses. The amortization of the acquired below-market ground lease obligation of $35,000 for each of the three months ended June 30, 20162017 and 2015,2016, and $70,000 for each of the six months ended June 30, 20162017 and 20152016 was included in rental and other property operating expenses.Table The amortization of ContentsCIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNEthe acquired below-market leases included in rental and other property income was $219,000 and $631,000 for the three months ended June 30, 2017 and 2016, AND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNErespectively, and $638,000 and $1,262,000 for the six months ended June 30, 2017 and 2016, AND 2015 (UNAUDITED)5. OTHER INTANGIBLE ASSETS (Continued)20162017, is as follows: Assets Liabilities Acquired
Above-Market
Leases Acquired
In-Place
Leases Tax
Abatement Acquired
Below-Market
Ground Lease Acquired
Below-Market
Leases (in thousands) $ 24 $ 599 $ 275 $ 70 $ (1,248 ) 26 871 551 140 (2,405 ) 9 733 551 140 (971 ) — 464 298 140 (200 ) — 207 — 140 — — 833 — 9,563 — $ 59 $ 3,707 $ 1,675 $ 10,193 $ (4,824 ) Assets Liabilities Years Ending December 31, Acquired
In-Place
Leases Acquired
Below-Market
Ground Lease Acquired
Below-Market
Leases (in thousands) 2017 (Six months ending December 31, 2017) $ 373 $ 70 $ (428 ) 2018 723 140 (510 ) 2019 464 140 (200 ) 2020 207 140 — 2021 207 140 — Thereafter 626 9,423 — $ 2,600 $ 10,053 $ (1,138 ) June 30, 2017 December 31, 2016 (in thousands) SBA 7(a) loans, subject to credit risk $ 46,276 $ 43,623 SBA 7(a) loans, subject to secured borrowings 24,162 29,524 Other assets 18,717 19,123 $ 89,155 $ 92,270 6.SBA 7(a) Loans, Subject to Credit Risk—Represents the non‑government guaranteed retained portion of loans originated under the SBA 7(a) Program and the government guaranteed portion of loans that have not yet been fully funded or sold.havehad reflected the lending segment, which was acquired on the Acquisition Date as disclosed in Note 1, as held for sale at June 30, 2016 and December 31, 2015,commencing in 2014, based on a plan approved by the Board of Directors to sell the lending segment that, when completed, will resultwould have resulted in the deconsolidation of the lending segment. Duringsegment, which at that time was focused on small business lending in the hospitality industry. In July 2015, to maximize value, we modified our strategy from a strategy of selling the lending segment as a whole to a strategy of soliciting buyers for components of the business.business, including our commercial mortgage loans and the SBA 7(a) lending platform. This change in the sale methodology resulted in the need to extend the period to complete the sale of the lending segment beyond one year. In connection with our plan, we have expensed transaction costs of $11,000 and $61,000$20,000 as incurred during the three months ended June 30, 2016 and 2015, respectively, and $20,000 and $224,000 during the six months ended June 30, 2016, and 2015, respectively. InWe are continuingIn September 2016, we discontinued our efforts to sell the SBA 7(a) lending platform, and are actively soliciting the activities related to the SBA 7(a) lending platform have been reclassified to continuing operations for all periods presented.remaindertransaction. Management's estimate of the lending segment.fair value was determined with assistance from an independent third party valuation firm.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNE 30, 2016, AND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)6. DISCONTINUED OPERATIONS (Continued) The following is a reconciliation of the carrying amounts of assets and liabilities of the lending segment that are classified as held for sale on the consolidated balance sheets20162017 and December 31, 2015: June 30,
2016 December 31,
2015 (in thousands) $ 100,664 $ 103,440 27,674 15,936 1,873 819 990 691 2,957 2,957 4,251 5,149 $ 138,409 $ 128,992 $ 42,021 $ 47,121 2,958 2,302 6,823 3,317 $ 51,802 $ 52,740 Loans receivable, net consist offor the following: June 30,
2016 December 31,
2015 (in thousands) $ 2,826 $ 3,511 31,601 36,574 45,791 43,096 20,340 20,408 100,558 103,589 385 406 (279 ) (555 ) $ 100,664 $ 103,440 Commercial Mortgage Loans—Represents loans to small businesses collateralized by first liens on the real estate of the related business. SBA 7(a) Loans, Subject to Secured Borrowings—Represents the government guaranteed portion of loans which were sold with the proceeds received from the sale reflected as "secured borrowings—government guaranteed loans." There is no credit risk associated with these loans since the SBA has guaranteed payment of the principal.CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNE 30, 2016, AND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)6. DISCONTINUED OPERATIONS (Continued) SBA 7(a) Loans—Represents the non-government guaranteed retained portion of loans originated under the SBA 7(a) ProgramThree and the government guaranteed portion of loans that have not yet been fully funded or sold. Commercial Real Estate Loans, Subject to Secured Borrowings—Represents mezzanine loans secured by an indirect ownership interest in entities that either directly or indirectly own parcels of commercial real estate. These loans have a variable interest rate. Debt consists of the following: June 30,
2016 December 31,
2015 (in thousands) $ 25,014 $ 29,481 4,868 4,947 29,882 34,428 9,967 10,000 9,967 10,000 2,172 2,693 $ 42,021 $ 47,121 Secured Borrowings—Represents sold loans which are treated as secured borrowings since the loan sales did not meet the derecognition criteria provided for in ASC 860-30,Secured Borrowing and Collateral. To the extent secured borrowings are for government guaranteed loans, they may include cash premiums which are included in secured borrowings and amortized as a reduction to interest expense over the life of the loan using the effective interest method and fully amortized when the underlying loan is repaid in full.CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNE 30, 2016, AND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)6. DISCONTINUED OPERATIONS (Continued) Future principal payments on our lending segment debt (face value) atSix Months Ended June 30, 2017 and 2016 are as follows: Secured
Borrowings
Principal(1) (in thousands) $ 1,155 1,026 11,028 1,100 1,141 24,399 $ 39,849 (1)Principal payments are generally dependent upon cash flows received from the underlying loans. Our estimate of their repayment is based on scheduled principal payments on the underlying loans. Our estimate will differ from actual amounts to the extent we experience prepayments and/or loan liquidations or charge-offs. No payment is due unless payments are received from the borrowers on the underlying loans.operations:operations for the three and six months ended June 30, 2016: Three Months
Ended June 30, Six Months Ended
June 30, 2016 2015 2016 2015 Three Months Ended June 30, 2016 Six Months Ended June 30, 2016 (in thousands) (in thousands) $ 5,338 $ 5,768 $ 8,680 $ 10,946 $ 2,416 $ 3,531 581 120 1,058 421 588 876 1,032 1,093 2,094 2,236 148 280 431 294 615 868 12 17 471 277 661 475 2,515 1,784 4,428 4,000 748 1,173 $ 2,823 $ 3,984 $ 4,252 $ 6,946 $ 1,668 $ 2,358 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNEAND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNEandAND 2015 (UNAUDITED)7. DEBT June 30,
2016 December 31,
2015 (in thousands) $ 392,000 $ — 46,000 46,000 27,694 29,201 39,495 39,846 29,459 29,744 534,648 144,791 (2,528 ) (897 ) 950 1,178 533,070 145,072 27,070 27,070 385,000 385,000 — 107,000 412,070 519,070 (3,320 ) (5,216 ) (2,053 ) (2,091 ) 406,697 511,763 $ 939,767 $ 656,835 June 30, 2017 December 31, 2016 (in thousands) Mortgage loans with a fixed interest rate of 4.14% per annum, with monthly payments of interest only, and balances totaling $370,300,000 due on July 1, 2026. The loans are nonrecourse. One loan with an outstanding principal balance of $21,700,000 was reclassified to liabilities associated with assets held for sale at June 30, 2017 (Note 3). $ 370,300 $ 392,000 Mortgage loan with a fixed interest rate of 4.50% per annum, with monthly payments of interest only for 10 years, and payments of interest and principal starting in February 2022. The loan has a $42,008,000 balance due on January 5, 2027. The loan is nonrecourse. 46,000 46,000 Mortgage loans with a fixed interest rate of 5.39% per annum, with monthly payments of principal and interest, and balances totaling $35,695,000 due on March 1, 2021. The loans were nonrecourse. The loans were repaid in May and June 2017 in connection with the sale of the properties that were collateral for the loans. — 39,134 Mortgage loan with a fixed interest rate of 5.18% per annum, with monthly payments of principal and interest, and a balance of $26,232,000 due on June 5, 2021. The loan is nonrecourse. The loan was reclassified to liabilities associated with assets held for sale at June 30, 2017 (Note 3). — 29,167 Mortgage loan with a fixed interest rate of 6.65% per annum, with monthly payments of principal and interest. The loan had a 25-year amortization schedule with a $21,136,000 balance due on July 15, 2018. The loan was nonrecourse. The loan was repaid in March 2017 in connection with the sale of the property that was collateral for the loan. — 26,136 416,300 532,437 Deferred loan costs related to mortgage loans (1,628 ) (2,366 ) Premiums and discounts on assumed mortgages, net — 722 Total Mortgages Payable 414,672 530,793 Secured borrowing principal on SBA 7(a) loans sold for a premium and excess spread—variable rate, reset quarterly, based on prime rate with weighted average coupon rate of 4.55% and 4.13% at June 30, 2017 and December 31, 2016, respectively. 18,504 23,122 Secured borrowing principal on SBA 7(a) loans sold for excess spread—variable rate, reset quarterly, based on prime rate with weighted average coupon rate of 2.33% and 1.83% at June 30, 2017 and December 31, 2016, respectively. 4,460 4,777 22,964 27,899 Unamortized premiums 1,638 2,077 Total Secured Borrowings—Government Guaranteed Loans 24,602 29,976 Unsecured term loan facility 385,000 385,000 Junior subordinated notes with a variable interest rate which resets quarterly based on the 90-day LIBOR plus 3.25%, with quarterly interest only payments. Balance due at maturity on March 30, 2035. 27,070 27,070 Unsecured credit facility — — 412,070 412,070 Deferred loan costs related to unsecured term loan and credit facilities (2,534 ) (2,938 ) Discount on junior subordinated notes (1,977 ) (2,015 ) Total Other 407,559 407,117 Total Debt $ 846,833 $ 967,886 CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNE 30, 2016, AND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)7. DEBT (Continued)$12,147,000$5,835,000 and $10,445,000$7,122,000 are presented net of accumulated amortization of $6,299,000$1,673,000 and $4,332,000$1,818,000 at June 30, 20162017 and December 31, 2015, respectively. The credit facility can be increased to $1,150,000,000 under certain conditions. CIM Commercial is subject to certain financial maintenance covenants and a minimum property ownership condition. Outstanding advances under the revolver bear interest at (i) the base rate plus 0.20% to 1.00% or (ii) London Interbank Offered Rate ("LIBOR")LIBOR plus 1.20% to 2.00%, depending on the maximum consolidated leverage ratio. Outstanding advances under the term loans bore interest at (i) the base rate plus 0.15% to 0.95% or (ii) LIBOR plus 1.15% to 1.95%, depending on the maximum consolidated leverage ratio. The revolver is also subject to an unused commitment fee of 0.15% or 0.25% depending on the amount of aggregate unused commitments. The delayed-draw term loan was also subject to an unused line fee of 0.25%. The credit facility matures in September 2016 and provides for, under certain conditions, two one-year extension options. We intend to exercise the first extension option in August 2016. At June 30, 2016, $0 was outstanding under the credit facility and $450,000,000 was available for future borrowings, while at December 31, 2015, $107,000,000 ($0 under the revolver and $107,000,000 under the term loans) was outstanding under the credit facility and $450,000,000 was available for future borrowings. Proceeds from the unsecured credit facility were used for acquisitions, funding of the tender offer (see Note 10), general corporate purposes, and to repay mortgage loans and outstanding balances under our prior unsecured credit facilities.facilities, for acquisitions, short-term funding of a Common Stock tender offer in June 2016, short-term funding of a private repurchase of Common Stock in June 2017, and general corporate purposes. In June 2016, we entered into six mortgage loan agreements with an aggregate principal amount of $392,000,000. A portion of the net proceeds from the loans was used to repay outstanding balances under our unsecured credit facility.facility and the remaining portion was used to repurchase shares of our Common Stock in a private repurchase in September 2016. The June 2017 borrowing used to fund the private share repurchase was repaid using proceeds from subsequent asset sales. The credit facility was set to mature in September 2016 and prior to maturity, we exercised the first of two one year extension options through September 2017 and we permanently reduced the revolving credit commitment under the credit facility to $200,000,000. In August 2017, we exercised the second of two one year extension options through September 2018 and, in connection with such exercise, we will pay an extension fee of $300,000. At June 30, 2017 and December 31, 2015,2016, $0 was outstanding under the interest ratecredit facility. The unused capacity on the outstanding balances under this unsecured credit facility, based on covenant restrictions at June 30, 2017 and December 31, 2016, was 1.57%.$850,000,000 unsecured credit facility described above; covenants under the term loan facility are substantially the same as those in the $850,000,000 unsecured credit facility. Outstanding advances under the term loan facility bear interest at (i) the base rate plus 0.60% to 1.25% or (ii) LIBOR plus 1.60% to 2.25%, depending on the maximum consolidated leverage ratio. The unused portion of the term loan facility was also subject to an unused fee of 0.20%. With some exceptions, any prepayment of the term loan facility prior to May 9, 2017 will bewas subject to a prepayment fee up to 2%2.00% of the outstanding principal amount. The term loan facility matures in May 2022. On November 2, 2015, $385,000,000 was drawn under the term loan facility. At June 30, 20162017 and December 31, 2015,2016, $385,000,000 was outstanding under the term loan facility. Proceeds from the term loan facility were used to repay balances outstanding under our unsecured credit facility. At June 30, 20162017 and December 31, 2015,2016, the variable interest rate on this unsecured term loan facility was 2.06%2.65% and 1.84%2.22%, respectively. The interest rate of the loan has been effectively converted to a fixed rate of 3.16% until May 8, 2020 through interest rate swaps (see Note 11)(Note 13).20162017 and December 31, 2015,2016, we were in compliance with all of our respective financial covenants.covenants under the unsecured credit and term loan facilities.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNEAND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNEandAND 2015 (UNAUDITED)7. DEBT (Continued)20162017 and December 31, 2015,2016, accrued interest and unused commitment fees payable of $1,525,000$2,765,000 and $1,688,000,$3,133,000, respectively, are included in accounts payable and accrued expenses.20162017 are as follows:Years Ending December 31, Secured Borrowings Principal (1) Mortgages
Payable (2) Other (3) Total (in thousands) 2017 (Six months ending December 31, 2017) $ 605 $ — $ — $ 605 2018 835 — — 835 2019 867 — — 867 2020 902 — — 902 2021 940 — — 940 Thereafter 18,815 416,300 412,070 847,185 $ 22,964 $ 416,300 $ 412,070 $ 851,334 (1) Principal payments are generally dependent upon cash flows received from the underlying loans. Our estimate of their repayment is based on scheduled principal payments on the underlying loans. Our estimate will differ from actual amounts to the extent we experience prepayments and/or loan liquidations or charge-offs. No payment is due unless payments are received from the borrowers on the underlying loans. (2) Excludes the future principal payments for 7083 Hollywood Boulevard and 4200 Scotland Street, which are classified as liabilities associated with assets held for sale on our consolidated balance sheet at June 30, 2017 (Note 3). (3) Represents the junior subordinated notes and unsecured term loan facility. Mortgages
Payable Other(1) Total (in thousands) $ 2,211 $ — $ 2,211 4,642 — 4,642 24,300 — 24,300 1,519 — 1,519 1,596 — 1,596 500,380 412,070 912,450 $ 534,648 $ 412,070 $ 946,718 (1)Represents the junior subordinated notes and unsecured term loan facility.8.9. STOCK-BASED COMPENSATION PLANS On March 11, 2014,which awards were effective upon the receipt of stockholder approval of the amendment of the 2005 Equity Incentive Plan on April 28, 2014. The shares of Common Stock vested in March 2015 based on a year of continuous service. In April 2015, an additional 2,000 restricted shares of Common Stock were granted to each of the independent members of the Board of Directors (6,000 in aggregate) under the 2015 Equity Incentive Plan, which fully vested in April 2016 based on aone year of continuous service. In addition, in May 2016, we granted awards of 3,392 restricted shares of Common Stock were granted to each of the independent members of the Board of Directors (10,176 in aggregate) under the 2015 Equity Incentive Plan, which fully vested in May 2017 based on one year of continuous service. In addition, in June 2017, we granted awards of 3,195 restricted shares of Common Stock to each of the independent members of the Board of Directors (9,585 in aggregate) under the 2015 Equity Incentive Plan, which will vest over aone year of continuous service. Compensation expense related to these restricted shares of Common Stock is recognized over the vesting period. We recorded compensation expense of $32,000$29,000 and $27,000$32,000 for the three months ended June 30, 20162017 and 2015,2016, respectively, and $77,000 and $59,000 for each of the six months ended June 30, 2017 and 2016, and 2015,respectively, related to these restricted shares of Common Stock.2015.2015, which were fully vested in March 2017. The restricted shares of Common Stock vestvested based on two years of continuous service with one-third of the shares of Common Stock vesting immediately upon issuance and one-third vesting at the end of each of the next two years from the date of issuance. Compensation expense related to these restricted shares of Common Stock iswas recognized over the vesting period. We recognized compensation expense of $1,000$0 and $8,000$1,000 for the three months ended June 30, 20162017 and 2015,2016, respectively, and $6,000$1,000 and $26,000$6,000 for the six months ended June 30, 20162017 and 2015,2016, respectively, related to these restricted shares of Common Stock.2016,2017, there was $164,000$137,000 of total unrecognized compensation expense related to shares of Common Stock which will be recognized over the next year.CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNE 30, 2016, AND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)9.96,683,00078,871,000 and 97,589,00096,683,000 for the three months ended June 30, 20162017 and 2015,2016, respectively, and 97,173,00081,445,000 and 97,586,00097,173,000 for the six months ended June 30, 20162017 and 2015,2016, respectively. We had no dilutive securities outstanding for each of the three and six months ended June 30, 20162017 and 2015. 2016. Outstanding shares of Series A Preferred Stock and Warrants were not included in the computation of diluted EPS for the three and six months ended June 30, 2017 because their impact was deemed to be anti-dilutive. No shares of Series A Preferred Stock or Warrants were outstanding during the three and six months ended June 30, 2016.offor computing EPS in the respective periods. In addition, EPS areis calculated independently for each component and may not be additive due to rounding.10. Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 (in thousands, except per share amounts) Numerator: Net income (loss) from continuing operations $ 91,372 $ (810 ) $ 285,307 $ 25,483 Net income attributable to noncontrolling interests (9 ) (9 ) (14 ) (12 ) Redeemable preferred stock dividends (72 ) — (103 ) — Numerator for basic and diluted net income (loss) from continuing operations available to common stockholders 91,291 (819 ) 285,190 25,471 Net income from discontinued operations — 1,668 — 2,358 Numerator for basic and diluted net income available to common stockholders $ 91,291 $ 849 $ 285,190 $ 27,829 Denominator: Basic weighted average shares outstanding 78,871 96,683 81,445 97,173 Effect of dilutive securities—contingently issuable shares and stock options — — — — Diluted weighted average shares and common stock equivalents outstanding 78,871 96,683 81,445 97,173 Basic and diluted net income (loss) available to common stockholders per share: Continuing operations $ 1.16 $ (0.01 ) $ 3.50 $ 0.26 Discontinued operations $ — $ 0.02 $ — $ 0.02 Net income $ 1.16 $ 0.01 $ 3.50 $ 0.29 Aggregate Declaration Date Payment Date Number of Shares Dividends Declared (in thousands) June 12, 2017 July 17, 2017 308,775 $ 72 March 8, 2017 April 17, 2017 144,698 $ 31 and 2015 consistedconsist of the following:Declaration Date Payment Date Dividend Per
Common Share Payment Date Type Dividend Per Common Share June 12, 2017 June 27, 2017 Special Cash $ 1.98000 June 12, 2017 June 27, 2017 Regular Quarterly $ 0.12500 April 5, 2017 April 24, 2017 Special Cash $ 0.28000 March 8, 2017 March 27, 2017 Regular Quarterly $ 0.21875 June 10, 2016 June 28, 2016 $ 0.21875 June 28, 2016 Regular Quarterly $ 0.21875 March 8, 2016 March 29, 2016 0.21875 March 29, 2016 Regular Quarterly $ 0.21875 June 12, 2015 June 29, 2015 0.21875 March 6, 2015 March 27, 2015 0.21875 Tender Offerannouncedcommenced a cash tender offer to purchase up to 10 million10,000,000 shares of our Common Stock at a price of $21.00 per share. The tender offer expired on June 13, 2016. The tender offer was oversubscribed and, pursuant to the terms of the tender offer, shares of Common Stock were accepted on a pro rata basis. In connection with the tender offer, we repurchased, canceled and retired 10 million10,000,000 shares of our Common Stock for an aggregate purchase price of $210 million,$210,000,000, excluding fees and expenses related to the tender offer, which were $332,000.$301,000. Based on the actual total number of shares tendered, CIM REITUrban II received approximately $208 million$208,140,000 of the aggregate purchase price paid. We funded the tender offer using available cash from asset sales and borrowings on our unsecured credit facility. The purchased shares represented approximately 10.24% of our then-outstanding shares of Common Stock. As a result of the repurchase, our stockholders' equity was reduced by the amount we paid for the repurchased shares and the related expenses. For further information regarding the terms and conditions of the tender offer, please refer to information in the Tender Offer Statement on Schedule TO filed with the SEC on May 16, 2016 and subsequent amendments thereto.Preferred Stock On April 22, 2016, we filed a registration statement with the SEC for up to $900 million of Series A Preferred Stock, par value $0.001 per share, of the Company (the "Series A Preferred Stock") and warrants ("Warrants") to purchase 0.25 of a share of Common Stock, which was declared effective on July 1, 2016 by the SEC. The registration statement allows us to offer up to a maximum ofNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNEAND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNEandAND 2015 (UNAUDITED)10. STOCKHOLDERS' EQUITY (Continued)36 million units (each a "Unit"), with each(Unaudited)consistingconsists of (i) one share of Series A Preferred Stock having a $25 stated value per share(Note 11) and (ii) one Warrant (Note 11) which allows the holder to purchase 0.25 of a share of Common Stock. Holders of Series A Preferred StockThe Warrants are entitled to receive, when, and as declared byexercisable beginning on the Board of Directors, cumulative cash dividends on each share of Series A Preferred Stock at an annual rate of 5.5%first anniversary of the stated value.date of their original issuance until and including the fifth anniversary of the date of such issuance. The exercise price of each Warrant will beis at a 15%15.0% premium to the per share estimated net asset value of our Common Stock (as most recently published by us at the time of each issuance).issuance). For further information regarding the terms and conditionssale of the offering ofUnits are allocated to the Series A Preferred Stock and warrants, please refer to information inWarrants using their relative fair values on the Registration Statement on Form S-11 filed with the SEC on April 22, 2016 and the subsequent amendment thereto. The offering is being conducted on a reasonable best efforts basis. Atdate of issuance. As of June 30, 2016, no shares2017, we had issued 308,775 Warrants in connection with our offering of Series A Preferred Stock are outstanding.11.Units and allocated net proceeds of $32,000, after specifically identifiable offering costs and allocated general offering costs, to the Warrants in permanent equity.(see Note 7)(Note 8), on August 13, 2015, we entered into interest rate swap agreements with multiple counterparties. These swap agreements became effective on November 2, 2015. Each of our interest rate swap agreements meets the criteria for cash flow hedge accounting treatment and we have designated the interest rate swap agreements as cash flow hedges of the risk of variability attributable to changes in the one-month LIBOR on the term loan facility. Accordingly, the interest rate swaps are recorded on the consolidated balance sheets at fair value and the changes in the fair value of the swaps are recorded in OCI and reclassified to earnings as an adjustment to interest expense as interest becomes receivable or payable (see Note(Note 2). We do not expect any significant losses from counterparty defaults related to our swap agreements.Number of Interest
Rate Swaps(1)(2) Total Notional
Amount Fixed Rates Floating Rate Index Effective
Date Expiration
Date (in thousands) 10 $ 385,000 1.559% - 1.569% One-Month LIBOR 11/2/2015 5/8/2020 (1) See Note 14 for our fair value disclosures. (2) Our interest rate swaps are not subject to master netting arrangements. (1)See Note 12 for our fair value disclosures.(2)Our interest rate swaps are not subject to master netting arrangements.20162017 and December 31, 2015,2016, or an all-in rate of 3.16%.CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNE 30, 2016, AND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)11. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)20162017 and December 31, 2015,2016, there have been no events of default under our interest rate swap agreements. Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 (in thousands) Accumulated other comprehensive income (loss), at beginning of period $ 1,043 $ (10,444 ) $ (509 ) $ (2,519 ) Other comprehensive income (loss) before reclassifications (983 ) (3,535 ) (189 ) (12,568 ) Amounts reclassified from accumulated other comprehensive income (loss) (1) 543 1,090 1,301 2,198 Net current period other comprehensive income (loss) (440 ) (2,445 ) 1,112 (10,370 ) Accumulated other comprehensive income (loss), at end of period $ 603 $ (12,889 ) $ 603 $ (12,889 ) (1) The amounts from AOCI are reclassified as an increase to interest expense in the statements of operations. Three Months
Ended June 30, Six Months
Ended June 30, 2016 2015 2016 2015 (in thousands) $ (10,444 ) $ — $ (2,519 ) $ — (3,535 ) — (12,568 ) — 1,090 — 2,198 — (2,445 ) — (10,370 ) — $ (12,889 ) $ — $ (12,889 ) $ — (1)The amounts from AOCI are reclassified as an increase to interest expense in the statements of operations.$4,227,000$1,108,000 related to our derivatives designated as cash flow hedges will be reclassified out of AOCI as an increase to interest expense during the next twelve months.12.Level 1 Inputs— Quoted prices in active markets for identical assets or liabilitiesLevel 2 Inputs—Observable inputs other than quoted prices in active markets for identical assets and liabilitiesLevel 3 Inputs—Unobservable inputsTable of ContentsLevel 2 InputsCIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)—Unobservable inputsAS OF JUNE 30, 2016, AND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)12. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)(see Note 11)(Note 13) are measured at fair value on a recurring basis and are presented on theour consolidated balance sheetsheets at fair value, on a gross basis, excluding accrued interest. The table below presents the fair value of our derivative financial instruments as well as their classification on our consolidated balance sheets: June 30,
2016 December 31,
2015 Level Balance Sheet
Location (in thousands) June 30, 2017 December 31, 2016 Level Balance Sheet
Location (in thousands) Assets (Liabilities): $ 12,889 $ 2,519 2 Other liabilities $ 603 $ (509 ) 2 Other assets (Other liabilities) wereare as follows: June 30, 2016 December 31, 2015 Carrying
Amount Estimated
Fair Value Carrying
Amount Estimated
Fair Value Level June 30, 2017 December 31, 2016 (in thousands) Carrying
Amount Estimated
Fair Value Carrying
Amount Estimated
Fair Value Level (in thousands) Assets: $ 48,815 $ 49,049 $ 46,456 $ 46,697 3 $ 46,276 $ 46,176 $ 43,623 $ 43,621 3 31,671 32,135 36,646 37,121 3 24,162 24,607 29,524 29,976 3 20,178 20,340 20,338 20,408 3 Other loans receivable 1,356 1,297 2,593 2,550 3 (1) 414,672 417,912 530,793 516,892 3 25,017 25,086 24,979 25,046 3 25,093 25,490 25,055 25,173 3 (1) 533,070 542,361 145,072 147,516 3 (1) The June 30, 2017 carrying amount and estimated fair value of mortgages payable excludes two mortgage loans that have been classified as liabilities associated with assets held for sale on our consolidated balance sheet at June 30, 2017 (Notes 3 and 8). CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNE 30, 2016, AND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)12. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued) included in liabilities associated with assets held for sale, and unsecured credit and term loan facilities approximate their fair values, as the interest rates on these securities are variable and approximate current market interest rates.13.00%13.25% and a prepayment rate of 15.00%. At December 31, 2015, our assumptions included discount rates ranging from 8.00%5.80% to 12.75% and a prepayment rate of 15.00%20.00%.loans (a liability associated with assets held for sale on our consolidated balance sheets (Note 6)).loans. There is no credit risk associated with these loans since the SBA has guaranteed payment of the principal. In order to determine the estimated fair value of these loans receivable, we use a present value technique for the anticipated future cash flows taking into consideration the lack of credit risk and using a range of prepayment rate of 15.00%rates from 6.70% to 20.00% at both June 30, 20162017 and December 31, 2015.2016. Commercial Real Estate Loans, Subject to Secured Borrowings—In order to determine the estimated fair value of our commercial real estate loans receivable which consist of mezzanine loans, we use a present value technique for the anticipated future cash flows using certain assumptions including a discount rate of 12.50% and 9.77% at June 30, 2016 and December 31, 2015, respectively. For the purpose of fair value determination, there is no prepayment anticipated and no potential credit deterioration anticipated on our loans at both June 30, 2016 and December 31, 2015. Junior Subordinated Notes—The fair value of the junior subordinated notes is estimated based on current interest rates available for debt instruments with similar terms. Discounted cash flow analysis isCIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNE 30, 2016, AND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)12. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)generally used to estimate the fair value of our junior subordinated notes. The rate used was 4.48% and 4.44% at June 30, 2016 and December 31, 2015, respectively.3.84%4.11% to 4.19%4.26% and 4.42%4.60% to 4.72% at June 30, 20162017 and December 31, 2015,2016, respectively.13.Junior Subordinated Notes—The fair value of the junior subordinated notes is estimated based on current interest rates available for debt instruments with similar terms. Discounted cash flow analysis is generally used to estimate the fair value of our junior subordinated notes. The rate used was 5.05% and 4.83% at June 30, 2017 and December 31, 2016, respectively. L.P. ("CIM Group" or "CIM"), entered into an Investment Management Agreement, pursuant to which CIM Urban engaged CIM Urban REIT Management, L.P. to provide investment advisory services to CIM Urban. CIM Investment Advisors, LLC, an affiliate of CIM REIT and CIM Group, registered with the SEC as an investment adviser and, in connection with such registration, CIM Urban entered into a new Investment Management Agreement with CIM Investment Advisors, LLC, in December 2015, on terms substantially similar to those in the previous Investment Management Agreement, pursuant to which CIM Urban engaged CIM Investment Advisors, LLC to provide investment advisory services, and the previous Investment Management Agreement was terminated. "Advisor" refers to CIM Urban REIT Management, L.P. prior to December 10, 2015 and to CIM Investment Advisors, LLC on and after December 10, 2015. Daily Average Adjusted Fair
Value of CIM Urban's Investments Quarterly Fee
Percentage From Greater of To and Including (in thousands) $ — $ 500,000 0.2500 % 500,000 1,000,000 0.2375 % 1,000,000 1,500,000 0.2250 % 1,500,000 4,000,000 0.2125 % 4,000,000 20,000,000 0.1000 % Daily Average Adjusted Fair
Value of CIM Urban's Investments Quarterly Fee
PercentageFrom Greater of To and Including (in thousands) $ — $ 500,000 0.2500% 500,000 1,000,000 0.2375% 1,000,000 1,500,000 0.2250% 1,500,000 4,000,000 0.2125% 4,000,000 20,000,000 0.1000% $6,238,000$6,130,000 and $6,176,000$6,238,000 for the three months ended June 30, 20162017 and 2015,2016, respectively, and $12,716,000$12,544,000 and $12,318,000$12,716,000 for the six months ended June 30, 20162017 and 2015,2016, respectively. At20162017 and December 31, 2015,2016, and$6,305,000$6,107,000 and $6,260,000,$6,448,000, respectively, were due to the Advisor.$1,405,000$1,306,000 and $1,463,000$1,405,000 for theCIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNE 30, 2016, AND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)13. RELATED-PARTY TRANSACTIONS (Continued)20162017 and 2015,2016, respectively, and $2,815,000$2,738,000 and $2,926,000$2,815,000 for the six months ended June 30, 20162017 and 2015,2016, respectively. CIM Urban also reimbursed the CIM Management Entities $2,245,000$2,556,000 and $2,229,000$2,245,000 during the three months ended June 30, 20162017 and 2015,2016, respectively, and $4,686,000 and $4,007,000 and $4,286,000 forduring the six months ended June 30, 20162017 and 2015,2016, respectively, for the cost of on-site personnel incurred on behalf of CIM Urban, which is included in rental and other property operating expenses. The CIM Management Entities earned leasing commissions of $688,000$210,000 and $40,000$688,000 for the three months ended June 30, 20162017 and 2015,2016, respectively, and $754,000$371,000 and $93,000$754,000 for the six months ended June 30, 20162017 and 2015,2016, respectively, which were capitalized to deferred charges. In addition, the CIM Management Entities earned construction management fees of $410,000$91,000 and $222,000$410,000 for the three months ended June 30, 20162017 and 2015,2016, respectively, and $668,000$275,000 and $447,000$668,000 for the six months ended June 30, 20162017 and 2015,2016, respectively, which were capitalized to investments in real estate.20162017 and December 31, 2015,2016, fees payable and expense reimbursements due to the CIM Management Entities of $2,247,000$2,450,000 and $2,230,000,$2,027,000, respectively, are included in due to related parties. Also included in due (from) tofrom related parties as of June 30, 20162017 and December 31, 2015,2016, was ($474,000)$591,000 and ($274,000),$214,000, respectively, due (from)from the CIM Management Entities and related parties.$1,000,000$1,000,000 per year (subject to an annual escalation by a specified inflation factor beginning on January 1, 2015), payable quarterly in arrears. The Manager earned a Base Service Fee of $271,000$265,000 and $253,000$271,000 for the three months ended June 30, 20162017 and 2015,2016, respectively, and $525,000$530,000 and $506,000$525,000 for the six months ended June 30, 20162017 and 2015,2016, respectively. In addition, pursuant to the terms of the Master Services Agreement, the Manager may receive compensation and/or reimbursement for performing certain services for CIM Commercial and its subsidiaries that are not covered under the Base Service Fee. During the six months ended June 30, 20162017 and 2015,2016, such services performed by the Manager included accounting, tax, reporting, internal audit, legal, compliance, risk management, IT, human resources and corporate communications. The Manager's compensation is based on the salaries and benefits of the employees of the Manager and/or its affiliates who performed these services (allocated based on the percentage of time spent on the affairs of CIM Commercial and its subsidiaries). We expensed $860,000$560,000 and $899,000$860,000 for the three months ended June 30, 20162017 and 2015,2016, respectively, and $1,726,000$1,622,000 and $1,590,000$1,726,000 for the six months ended June 30, 20162017 and 2015,2016, respectively, for such services.services which are included in asset management and other fees to related parties. At June 30, 20162017 and December 31, 2015, $1,695,0002016, $2,234,000 and $1,256,000$1,935,000 was due to the Manager, respectively, for such services.CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNE 30, 2016, AND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)13. RELATED-PARTY TRANSACTIONS (Continued)LLC, whichLLC. The Agreement provides that CIM SBA will provide personnel and resources to us and that we will reimburse CIM SBA for the costs and expenses of providing such personnel and resources. For the three months ended June 30, 20162017 and 2015,2016, we incurred expenses related to services subject to reimbursement by us under this agreement of $1,032,000$784,000 and $1,093,000, respectively, which are included in discontinued operations, and $123,000 and $128,000,$884,000, respectively, which are included in asset management and other fees to related parties;parties for lending segment costs included in continuing operations, $124,000 and $123,000, respectively, for corporate services, which are included in asset management and other fees to related parties, and $0 and $148,000, respectively, which are included in discontinued operations; for the six months ended June 30, 20162017 and 2015,2016, we incurred expenses related to such services of $2,094,000$1,628,000 and $2,236,000, respectively, which are included in discontinued operations, and $226,000 and $251,000,$1,814,000, respectively, which are included in asset management and other fees to related parties.parties for lending segment costs included in continuing operations, $239,000 and $226,000, respectively, for corporate services, which are included in asset management and other fees to related parties, and $0 and $280,000, respectively, which are included in discontinued operations. In addition, we deferred $70,000personnel costs of $110,000 and $106,000$70,000 for the three months ended June 30, 20162017 and 2015,2016, respectively, and $149,000$154,000 and $141,000$149,000 for the six months ended June 30, 20162017 and 2015,2016, respectively, associated with services renderedprovided for originating loans, which are included in loans receivable in our assets held loans.sale.and $26,000 for each of the three months ended June 30, 2017 and 2016 and 2015, respectively, and $54,000 and $52,000 for each of the six months ended June 30, 2017 and 2016.2015, respectively.14.retired 10,000,000 shares of our Common Stock for an aggregate purchase price of $210,000,000, excluding fees and expenses related to the tender offer, which were $301,000. Based on the actual total number of shares tendered, Urban II received $208,140,000 of the aggregate purchase price paid (Note 12).(including the unfunded balance of loans which have closed) to fund loans were $162,778,000$25,877,000 at June 30, 2016. Of the total commitments, $144,585,000 was for the unfunded balance of closed commercial real estate loans, approximately $70,900,000 of which is expected to be funded by a participant in those loans through loan participation agreements; the remaining commitments were2017 and are for prime-based loans to be originated by our subsidiary engaged in SBA 7(a) Program lending, the government guaranteed portion of which is intended to be sold. Commitments generally have fixed expiration dates. Since some commitments are expected to expire without being drawn upon, total commitment amounts do not necessarily represent future cash requirements.$35,388,000$29,971,000 in future obligations under leases to fund tenant improvements and other future construction obligations at June 30, 2016.2017. At June 30, 2016, $22,346,0002017, $12,648,000 was funded to reserve accounts included in restricted cash on our consolidated balance sheetssheet for these tenant improvement obligations in connection with the mortgage loan agreements entered into in June 2016. effective on the Acquisition Date, with two of our officers. Pursuant to these employment agreements, we issued an aggregate of 76,423 shares of Common Stock under the 2015 Equity Incentive Plan as retention bonuses to these officers inCIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNE 30, 2016, AND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)14. COMMITMENTS AND CONTINGENCIES (Continued)expenses of $0 and $316,000expense during the three months ended June 30, 2016 and 2015, respectively, and $0 and $632,000 during the six months ended June 30, 20162017 and 2015, respectively,2016 related to these retention bonuses. In addition, under certain circumstances, each of these employment agreements currently provides for (1) severance payment equal to the annual base salary paid to the officer and (2) death and disability payments in an amount equal to two times and one time, respectively, the annual base salary paid to the officers. At June 30, 2016,2017, there was no unrecognized compensation expense related to these awards.isare any material legal proceedings currently threatened against us, other than routine litigation arising in the ordinary course of business. In the normal course of business, we are periodically party to certain legal actions and proceedings involving matters that are generally incidental to our business. While the outcome of these legal actions and proceedings cannot be predicted with certainty, in management's opinion, the resolution of these legal proceedings and actions will not have a material adverse effect on our consolidatedbusiness, financial position,condition, results of operations, cash flow or cash flows.our ability to satisfy our debt service obligations, to maintain our level of Common Stock or Series A Preferred Stock dividend distributions or to engage in further repurchases of Common Stock.consolidatedbusiness, financial position,condition, results of operations, cash flow or cash flows.our ability to satisfy our debt service obligations, to maintain our level of Common Stock or Series A Preferred Stock dividend distributions or to engage in further repurchases of Common Stock.consolidatedbusiness, financial position,condition, results of operations, cash flow or cash flows.our ability to satisfy our debt service obligations, to maintain our level of Common Stock or Series A Preferred Stock dividend distributions or to engage in further repurchases of Common Stock.CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNE 30, 2016, AND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)14. COMMITMENTS AND CONTINGENCIES (Continued)20162017 and 20152016 and $876,000 for each of the six months ended June 30, 20162017 and 2015.2016. We record rent expense on a straight-line basis. Straight-line rent liability of $12,735,000$13,843,000 and $12,180,000$13,289,000 is included in other liabilities in the accompanying consolidated balance sheets as of June 30, 20162017 and December 31, 2015,2016, respectively.$72,000$56,000 for the three months ended June 30, 20162017 and 2015,2016, respectively, and $114,000$112,000 and $130,000$114,000 for the six months ended June 30, 2017 and 2016, and 2015, respectively, which is included in discontinued operations.20162017 are as follows: (in thousands) $ 372 749 607 503 541 127,679 $ 130,451 Years Ending December 31, (in thousands) 2017 (Six months ending December 31, 2017) $ 375 2018 607 2019 503 2020 541 2021 578 Thereafter 127,101 $ 129,705 15.revenuesrevenue under long-term operating leases at June 30, 2016,2017, excluding tenant reimbursements of certain costs, are as follows: Governmental
Tenants Other
Tenants Total (in thousands) $ 24,890 $ 55,109 $ 79,999 45,975 108,090 154,065 44,571 92,511 137,082 45,145 78,235 123,380 41,017 66,842 107,859 142,832 213,214 356,046 $ 344,430 $ 614,001 $ 958,431 Years Ending December 31, Governmental
Tenants (1) Other
Tenants (1) Total (in thousands) 2017 (Six months ending December 31, 2017) $ 23,641 $ 42,985 $ 66,626 2018 47,795 84,583 132,378 2019 50,079 76,353 126,432 2020 48,002 67,531 115,533 2021 36,307 56,511 92,818 Thereafter 122,999 168,790 291,789 $ 328,823 $ 496,753 $ 825,576 (1) Excludes future minimum rental revenue of 7083 Hollywood Boulevard, which is classified as held for sale on our consolidated balance sheet at June 30, 2017 (Note 3). 16. CONCENTRATIONSrevenuesrevenue, excluding tenant reimbursements of certain costs, from the U.S. General Services Administration and other government agencies (collectively, "Governmental Tenants"), which primarily occupy properties located in Washington, D.C., accounted for approximately 19.0%21.4% and 22.9%19.0% of our rentalCIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNE 30, 2016, AND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)16. CONCENTRATIONS (Continued)20162017 and 2015,2016, respectively, and 19.5%20.4% and 22.8%19.5% for the six months ended June 30, 20162017 and 2015,2016, respectively. At June 30, 20162017 and December 31, 2015, $7,734,0002016, $11,946,000 and $7,968,000,$8,339,000, respectively, was due from Governmental Tenants (see Note 15)(Note 17).20162017 and December 31, 2015,2016, we owned 17 and 20 office properties, respectively, two and five multifamily properties, respectively, one hotel property, two and three hotel properties, respectively, three parking garages, respectively, and two development sites, one of which is being used as a parking lot. These properties are located in three and four states, respectively, and Washington, D.C. Three Months
Ended June 30, Six Months
Ended June 30, Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 2017 2016 2017 2016 65.1 % 63.0 % 64.9 % 62.8 % 61.1 % 65.1 % 62.2 % 64.9 % 20.6 24.5 20.9 24.2 23.7 20.6 22.2 20.9 8.1 7.8 8.0 7.6 8.0 8.1 7.9 8.0 4.2 4.5 4.2 4.5 4.9 4.2 5.6 4.2 2.0 0.2 2.0 0.9 2.3 2.0 2.1 2.0 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % June 30, 2017 December 31, 2016 California (1) 50.2 % 50.8 % Washington, D.C. 39.9 32.3 Texas (1) 5.2 7.7 New York (1) 4.7 3.7 North Carolina — 5.5 100.0 % 100.0 % (1) Includes the assets of 7083 Hollywood Boulevard, 4200 Scotland Street, and 47 E 34th Street, all of which are classified as held for sale on our consolidated balance sheet at June 30, 2017 (Note 3). June 30,
2016 December 31,
2015 52.0 % 52.6 % 31.6 31.1 7.5 7.4 5.3 5.3 3.6 3.6 100.0 % 100.0 % (1)Includes the assets of LAX Holiday Inn that were held for sale at June 30, 2016 (see Note 3).17.19. SEGMENT DISCLOSUREproperties, as well as a segment for our lending operations, whichbusiness that is included in our continuing operations. The lending business that is held for sale as offor the three and six months ended June 30, 2016 and 2015.is not included in our reportable segments. Management internally evaluates the operating performance and financial results of the segments based on net operating income. We also have certain general and administrative level activities, including publicCIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNE 30, 2016, AND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)17. SEGMENT DISCLOSURE (Continued)20152016 included in our Annual Report on Form 10-K filed with the SEC on March 15, 2016.transaction costs. reportable segments included in continuing operations for the three and six months ended June 30, 20162017 and 20152016 is as follows: Three Months Ended
June 30, Six Months Ended
June 30, Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 2017 2016 2017 2016 (in thousands) (in thousands) $ 45,770 $ 47,084 $ 91,819 $ 93,699 $ 43,914 $ 45,770 $ 93,007 $ 91,819 19,930 20,060 38,417 39,451 17,804 19,930 31,557 38,417 91 113 445 426 394 91 682 445 20,021 20,173 38,862 39,877 18,198 20,021 32,239 38,862 25,749 26,911 52,957 53,822 25,716 25,749 60,768 52,957 14,496 15,822 29,779 31,541 10,604 14,496 21,122 29,779 9,431 9,987 19,386 20,664 6,586 9,431 13,025 19,386 306 38 393 79 35 306 39 393 9,737 10,025 19,779 20,743 6,621 9,737 13,064 19,779 4,759 5,797 10,000 10,798 3,983 4,759 8,058 10,000 5,172 4,013 10,230 8,918 4,714 5,172 9,717 10,230 2,938 2,938 5,774 5,579 2,859 2,938 5,627 5,774 97 90 355 173 113 97 342 355 3,035 3,028 6,129 5,752 2,972 3,035 5,969 6,129 2,137 985 4,101 3,166 1,742 2,137 3,748 4,101 Lending: Revenues 2,067 2,922 4,402 5,149 Lending expenses: Interest expense (55 ) (7 ) 87 182 Fees to related party 784 884 1,628 1,814 General and administrative 310 419 677 598 Total lending expenses 1,039 1,296 2,392 2,594 Segment net operating income—lending 1,028 1,626 2,010 2,555 $ 32,645 $ 33,693 $ 67,058 $ 67,786 $ 32,469 $ 34,271 $ 74,584 $ 69,613 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNEAND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNEandAND 2015 (UNAUDITED)17. SEGMENT DISCLOSURE (Continued)20162017 and 20152016 is as follows: Three Months Ended
June 30, Six Months Ended
June 30, Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 2017 2016 2017 2016 (in thousands) (in thousands) $ 32,645 $ 33,693 $ 67,058 $ 67,786 $ 32,469 $ 34,271 $ 74,584 $ 69,613 (7,492 ) (7,456 ) (15,193 ) (14,665 ) (7,079 ) (7,492 ) (14,935 ) (15,193 ) (7,302 ) (5,586 ) (13,928 ) (10,989 ) (9,568 ) (7,302 ) (19,199 ) (13,928 ) (1,218 ) (1,714 ) (2,282 ) (3,869 ) (795 ) (1,218 ) (1,586 ) (2,282 ) (118 ) (373 ) (267 ) (801 ) (11,615 ) (118 ) (11,628 ) (267 ) (18,480 ) (17,566 ) (36,538 ) (36,694 ) (14,761 ) (18,480 ) (31,992 ) (36,538 ) Impairment of real estate (13,100 ) — (13,100 ) — — — 24,739 — 116,283 — 304,017 24,739 (1,965 ) 998 23,589 768 Income (loss) from continuing operations before provision for income taxes 91,834 (339 ) 286,161 26,144 Provision for income taxes (462 ) (471 ) (854 ) (661 ) Net income (loss) from continuing operations 91,372 (810 ) 285,307 25,483 Discontinued operations: 2,823 3,984 4,252 6,946 — 1,668 — 2,358 2,823 3,984 4,252 6,946 — 1,668 — 2,358 858 4,982 27,841 7,714 91,372 858 285,307 27,841 (9 ) (6 ) (12 ) (6 ) (9 ) (9 ) (14 ) (12 ) $ 849 $ 4,976 $ 27,829 $ 7,708 Net income attributable to the Company $ 91,363 $ 849 $ 285,293 $ 27,829 20162017 and December 31, 2015,2016, along with capital expenditures and loan originations for the six months ended June 30, 20162017 and 2015,2016, are as follows: June 30,
2016 December 31,
2015 (in thousands) $ 1,553,454 $ 1,520,339 154,162 176,735 168,426 171,429 138,409 128,992 136,646 94,565 $ 2,151,097 $ 2,092,060 June 30, 2017 December 31, 2016 (in thousands) Condensed assets: Office (1) $ 1,235,540 $ 1,568,702 Hotel 110,655 115,955 Multifamily (2) 107,412 170,159 Lending assets 86,307 91,191 Non-segment assets 98,041 76,877 Total assets $ 1,637,955 $ 2,022,884 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)AS OF JUNE 30, 2016, AND DECEMBER 31, 2015, ANDFOR THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)17. SEGMENT DISCLOSURE (Continued) Six Months Ended
June 30, 2016 2015 (in thousands) $ 18,839 $ 14,200 336 738 241 882 19,416 15,820 49,976 41,121 $ 69,392 $ 56,941 (1)Includes the assetsNotes to Consolidated Financial Statements as of LAX Holiday Inn that were held for sale at June 30, 2017 and December 31, 2016, (see Note 3).(2)Represents additionsandimprovements to real estate investments, excluding acquisitions.Six Months Ended June 30, 2017 and 2016 (Unaudited) Six Months Ended June 30, 2017 2016 (in thousands) Capital expenditures (3): Office $ 11,973 $ 18,839 Hotel 74 336 Multifamily 224 241 Total capital expenditures 12,271 19,416 Loan originations 23,875 49,976 Total capital expenditures and loan originations (4) $ 36,146 $ 69,392 (1) Includes the assets of 7083 Hollywood Boulevard, which are classified as held for sale on our consolidated balance sheet at June 30, 2017 (Note 3). (2) Includes the assets of 4200 Scotland Street and 47 E 34th Street, both of which are classified as held for sale on our consolidated balance sheet at June 30, 2017 (Note 3). (3) Represents additions and improvements to real estate investments, excluding acquisitions. (4) Includes the activity for dispositions through their respective disposition dates. "continue,""should" or the negative thereof or other variations or similar words or phrases. These statements include the plans and objectives of management for future operations, including, but not limited to, plans and objectives relating to future growth and availability of funds. 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 our 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 in this Form 10-Q 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 us or any other person that our 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. We do not undertake to update them to reflect changes that occur after the date they are made.20162017 and results of operations for the three and six months ended June 30, 20162017 and 20152016 should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2015.2016. For a more detailed description of the risks affecting our financial condition and results of operations, see "Risk Factors" in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2015.EXECUTIVE SUMMARYbarriers-to-entry,barriers to entry, high population density, improving demographic trends and a propensity for growth. We believe that the critical mass of redevelopment in such areas creates positive externalities, which enhance the value of substantially stabilized assets in the area. We believe that these assets will provide greater returns than similar assets in other markets as a result of the improving demographics, public commitment, and significant private investment that characterize these areas.which we refer to as NAV,("NAV") and cash flows per common share of Common Stock through our principal business described above and (b) providing liquidity to our common stockholders at prices reflecting our NAV and cash flow prospects.providesagrees to provide or arrangesarrange for other service providers to provide management and administration services ("Base Service") to us.us and all of our direct and indirect subsidiaries. CIM Group is a vertically-integrated, full-service investment manager with multidisciplinary expertise and in-house research, acquisition, investment,2016,2017, our real estate portfolio consisted of (i) 20 office properties comprised of approximately 5.5 million rentable square feet, (ii) five multifamily properties comprised of 930 units, (iii) two hotels comprised of 908 rooms, (iv) three(including one parking garages, two of which have street level retail space,garage and (v) two development sites, one of which is being used as a parking lot.Strategynet asset valueNAV and cash flowflows per share of Common Stock. Our investment strategy is centered around CIM's community qualification process. We believe this strategy provides us with a significant competitive advantage when making urban real estate investments. The qualification process generally takes between six months and five years and is a critical component of CIM's investment evaluation. CIM examines the characteristics of a market to determine whether the district justifies the extensive efforts CIM undertakes in reviewing and making potential investments in its qualified communities ("Qualified Communities"). Qualified Communities generally fall into one of two categories: (i) transitional urban districts that have dedicated resources to become vibrant urban communities and (ii) well-established, thriving urban areas (typically major central business districts). Qualified Communities are distinct districts which have dedicated resources to become or are currently vibrant communities where people can live, work, shop and be entertained—all within walking distance or close proximity to public transportation. These areas also generally have high barriers-to-entry,barriers to entry, high population density, improving demographic trends and a propensity for growth. CIM believes that a vast majority of the risks associated with making real asset investments are mitigated by accumulating local market knowledge of the community where the investment lies. CIM typically spends significant time and resources qualifying targeted investment communities prior to making any acquisitions. Since 1994, CIM Group has qualified 103105 communities and has deployed capital in 5863 of these Qualified Communities. Although we may not invest exclusively in Qualified Communities, it is expected that most of our investments will be identified through this systematic process. Our investments may also include side-by-side investments in one or more CIM Group-managed funds as well as a side-by-side or direct investment in a CIM Group-managed debt fund that principally originates loans secured directly or indirectly by commercial real estate properties.strategic and disposition plans. In addition, the asset management committee reviews and approves the annual business plan for each property, including its capital and operating budget. CIM's organizational structure provides for investment and asset management continuity through multi-disciplinary teams responsible for an asset We have been reviewingwith respector when our view of the market value of such investment is equal to certain of our non-office and non-strategic real estate portfolio.or exceeds its intrinsic value. As a result of such review, we sold a hotel in Los Angeles, California in July 2016, a hotel in Oakland, California in February 2016 and an office building in Santa Ana, California in November 2015. As2015; a general matter,hotel in Oakland, California in February 2016; a hotel in Los Angeles, California in July 2016; an office building in San Francisco, California in March 2017; two multifamily properties in Dallas, Texas in May 2017; an office building in Charlotte, North Carolina in June 2017; an office building and a parking garage in Sacramento, California in June 2017; and a multifamily property in Dallas, Texas in June 2017. In addition, we continuously evaluatehave entered into three purchase and sale agreements, each asset withinas a separate transaction with unrelated third parties, for the saleportfolioconsolidated balance sheet as well as our strategies and suchof June 30, 2017. We expect the closings of these sales transactions to occur during the second half of 2017. Such review mayis likely to result in additional dispositions in 2017 and 2018. We are considering using a substantial portion of the net proceeds of such dispositions to provide liquidity to our common stockholders from time to time in 2017 and 2018 at prices reflecting our NAV and cash flow prospects. As of June 30, 2017 2016 Occupancy (1) 86.6 % 83.5 % Annualized rent per occupied square foot (1) (2) $ 41.04 $ 36.77 (1) Three office properties and a parking garage were sold during the first half of 2017 and one property was classified as held for sale as of June 30, 2017 (Note 3). Excluding these properties, the occupancy and annualized rent per occupied square foot were 86.4% and $41.12 as of June 30, 2017 and 86.1% and $39.72 as of June 30, 2016. No office properties were sold in the second half of 2016. (2) Represents gross monthly base rent under leases commenced as of the specified periods, multiplied by twelve. This amount reflects total cash rent before abatements. Total abatements for the twelve months ended June 30, 2017 and 2016 were approximately $4,899,000 and $3,650,000, respectively. Where applicable, annualized rent has been grossed up by adding annualized expense reimbursements to base rent. Annualized rent for certain office properties includes rent attributable to retail. For the Three Months Ended September 30,
2017 December 31, 2017 March 31, 2018 June 30, 2018 Expiring Cash Rents (1): Expiring square feet (2) 66,969 56,332 91,893 15,789 Expiring rent per square foot (3) $ 33.59 $ 43.99 $ 34.57 $ 38.94 (1) Excludes the expiring square feet and rent related to 7083 Hollywood Boulevard, which is classified as held for sale on our consolidated balance sheet at June 30, 2017. (2) All month-to-month tenants occupying a total of 44,293 square feet are included in the expiring leases in the first quarter listed. (3) Represents gross monthly base rent, as of June 30, 2017, under leases expiring during the periods above, multiplied by twelve. This amount reflects total cash rent before abatements. Where applicable, annualized rent has been grossed up by adding annualized expense reimbursements to base rent. no longer fit our overall objectives and/orwas vacant for more than one year: Number of
Leases (1) (2) Rentable
Square
Feet (2) New Cash
Rents per
Square
Foot (2) (3) Expiring
Cash
Rents per
Square
Foot (2) (3)Three months ended June 30, 2017 (3) 9 27,649 $ 50.92 $ 44.36 Six months ended June 30, 2017 (3) 26 101,182 $ 48.79 $ 40.72 (1) Based on the number of tenants. (2) Excludes leases for which the space was vacant for longer than one year, month-to-month leases, leases with an original term of less than 12 months, related party leases, and space where the previous tenant was a related party. (3) Cash rents represent gross monthly base rent, multiplied by twelve. This amount reflects total cash rent before abatements. Where applicable, annualized rent has been grossed up by adding annualized expense reimbursements to base rent. strategies.ability to timely renew or re-lease space could have further negative effects on our future financial condition, results of operations and cash flows. As of June 30, 2017 2016 Occupancy (1) 95.0 % 94.8 % Monthly rent per occupied unit (1) (2) $ 2,488 $ 1,914 (1) Three multifamily properties were sold during the first half of 2017 and the remaining two properties were classified as held for sale on our consolidated balance sheet as of June 30, 2017 (Note 3). Excluding the sold properties, the occupancy and monthly rent per occupied unit as of June 30, 2016 were 93.5% and $2,423, respectively. No multifamily properties were sold in the second half of 2016. (2) Represents gross monthly base rent under leases commenced as of the specified period, divided by occupied units. This amount reflects total cash rent before concessions. For the Six Months
Ended June 30, 2017 2016 Occupancy (1) 84.0 % 80.9 % ADR (1) $ 165.44 $ 141.70 RevPAR (1) $ 138.97 $ 114.68 (1) Occupancy, ADR, and RevPAR includes activity for hotels that were sold in 2016 for our period of ownership only. Excluding the hotel properties that were sold in 2016, occupancy, ADR, and RevPAR for the six months ended June 30, 2016 were 81.5%, $155.46, and $126.65, respectively. will resultwould have resulted in the deconsolidation of the lending segment. The assets and liabilities ofsegment, which at that time was focused on small business lending in the lending segment are reflected as held for sale in our June 30, 2016 and December 31, 2015 consolidated balance sheets and its operations have been reflected as discontinued operations in our consolidated income statements for the three and six months ended June 30, 2016 and 2015 (see Note 6). Duringhospitality industry. In July 2015, to maximize value, we modified our strategy from a strategy of selling the lending segment as a whole to a strategy of soliciting buyers for components of the business. In December 2015, pursuant to the modified plan, we sold substantially all ofbusiness, including our commercial mortgage loans that were associated withand the SBA 7(a) lending segment to an unrelated third party.platform. This change in the sale methodology resulted in the need to extend the period to complete the sale of the remainder of the lending segment beyond one year. The Company isOn December 17, 2015, pursuant to the modified plan, we sold substantially all of our commercial mortgage loans with a carrying value of $77,121,000 to an unrelated third party and recognized a gain of $5,151,000. In September 2016, we discontinued our efforts to sell the SBA 7(a) lending platform, and the activities related to the SBA 7(a) lending platform have been reclassified to continuing its effortsoperations for all periods presented. On December 29, 2016, we sold our commercial real estate lending subsidiary, which was classified as held for sale and is actively solicitinghad a carrying value of $27,587,000, which was equal to management's estimate of fair value, to a fund managed by an affiliate of CIM Group. We did not recognize any gain or loss in connection with the saletransaction. Management's estimate of the remainder of the lending segment.business,platform, we are a national lender that primarily originates loans to small businesses. We identify loan origination opportunities through personal contacts, internet referrals, attendance at trade shows and meetings, direct mailings, advertisements in trade publications and other marketing methods. We also generate loans through referrals from real estate and loan brokers, franchise representatives, existing borrowers, lawyers and accountants. As partour lending business, we also originate commercialOperations Three Months Ended
June 30, Change 2017 2016 $ % (dollars in thousands) Total revenues $ 61,299 $ 68,360 $ (7,061 ) (10.3 )% Total expenses 85,748 68,699 17,049 24.8 % Gain on sale of real estate 116,283 — 116,283 — Net income from discontinued operations — 1,668 (1,668 ) — Net income 91,372 858 90,514 — loans for properties that are primarily locatedof $116,283,000, as well as a decrease of $3,719,000 in CIM Group's Qualified Communities. We target investments between $15 milliondepreciation and $150 million withamortization expense, partially offset by $13,100,000 of impairment of real estate, an increase of $11,497,000 in transaction costs, a focus on developingdecrease of $1,802,000 in net operating income ofdiversified pooldecrease of loans. These loans are typically short duration (five years or less, inclusive of extension options), floating rate and are expected to be:•limited and/or non-recourse junior (mezzanine, b-note or 2nd lien) and senior construction loans; or•limited and/or non-recourse junior (mezzanine, b-note or 2nd lien) and senior acquisition, bridge or repositioning loans. We have participated and expect to continue to participate with one or more institutional investors with respect to a substantial portion of these loans, and/or syndicate a substantial portion of these loans to, one or more institutional investors., available to common stockholders, computed in accordance with GAAP, excluding gains (or losses) from sales of real estate, impairment of real estate, and real estate depreciation and amortization, and adjustments for non-controlling interests.amortization. We calculateFFO:common stockholders to FFO available to common stockholders: Three Months Ended
June 30, Six Months Ended
June 30, 2016 2015 2016 2015 (in thousands) $ 849 $ 4,976 $ 27,829 $ 7,708 18,480 17,566 36,538 36,694 — — (24,739 ) — 9 6 12 6 $ 19,338 $ 22,548 $ 39,640 $ 44,408 Three Months Ended
June 30, 2017 2016 (in thousands) Net income available to common stockholders $ 91,291 $ 849 Depreciation and amortization 14,761 18,480 Impairment of real estate 13,100 — Gain on sale of depreciable assets (116,283 ) — FFO available to common stockholders $ 2,869 $ 19,329 $19,338,000$2,869,000 for the three months ended June 30, 2016,2017, a decrease of $3,210,000$16,460,000 compared to $22,548,000$19,329,000 for the three months ended June 30, 2015.2016. The decrease in FFO was primarily attributable to an increase of $11,497,000 in transaction costs, a decrease of $1,161,000$1,802,000 in net operating income from discontinuedof our operating segments in continuing operations, an increase of $1,716,000$2,266,000 in interest expense and a decrease of $1,048,000 in net operating income of our three operating segments in continuing operations, partially offset by a decrease in corporate general and administration expenses of $496,000 and a decrease of $255,000 in transaction costs. FFO was $39,640,000 for the six months ended June 30, 2016, a decrease of $4,768,000 compared to $44,408,000 for the six months ended June 30, 2015. The decrease in FFO was primarily attributable to a decrease of $2,694,000$1,668,000 in income from discontinued operations, an increase of $2,939,000 in interest expense, a decrease of $728,000 in net operating income of our three operating segments in continuing operations and an increase of $528,000 in asset management and other fees to related parties, partially offset by a decrease in corporate general and administration expenses of $1,587,000 and a decrease of $534,000 in transaction costs.Rental Rate Trends Office Rental Rates: The following table sets forth the annualized rent per occupied square foot across our office portfolio as of the specified periods: As of June 30, 2016 2015 $ 36.77 $ 36.37
operations.(1)Represents gross monthly base rent under leases commenced as of the specified periods, multiplied by twelve. This amount reflects total cash rent before abatements. Totalabatements for the twelve months ended June 30, 2016 and 2015 were approximately $3,650,000 and $7,200,000, respectively. Where applicable, annualized rent has been grossed up by adding annualized expense reimbursements to base rent. Annualized rent for certain office properties includes rent attributable to retail. Over the next four quarters, we expect to see expiring cash rents as set forth in the table below: For the Three Months Ended September 30,
2016 December 31,
2016 March 31,
2017 June 30,
2017 175,027 87,421 111,269 51,776 $ 35.05 $ 41.54 $ 28.89 $ 36.54
Summary Segment Results(1)All month-to-month tenants occupying a total of 72,561 square feet are included in the expiring leases in the first quarter listed.(2)Represents gross monthly base rent, as of June 30, 2016, under leases expiring during the periods above, multiplied by twelve. This amount reflects total cash rent before abatements. Where applicable, annualized rent has been grossed up by adding annualized expense reimbursements to base rent. During the three and six months ended June 30, 2016, we executed leases with terms longer than 12 months totaling 190,078 and 426,954 square feet, respectively. The table below sets forth information on certain of our executed leases during the three and six months ended June 30, 2016, excluding space that was vacant for more than one year: Number of
Leases(1)(2) Rentable
Square
Feet(2) New Cash
Rents per
Square
Foot(2)(3) Expiring
Cash
Rents per
Square
Foot(2)(3) 17 172,369 $ 44.89 $ 36.67 25 203,993 $ 42.24 $ 35.48 (1)Based on the number of tenants.(2)Excludes leases for which the space was vacant for longer than one year, month-to-month leases, leases with an original term of less than 12 months, related party leases, and space where the previous tenant was a related party.(3)Cash rents represent gross monthly base rent, multiplied by twelve. This amount reflects total cash rent before abatements. Where applicable, annualized rent has been grossed up by adding annualized expense reimbursements to base rent. Fluctuations in submarkets, buildings and terms of the leases cause large variations in these numbers and make predicting the changes in rent in any specific period difficult. Our rental and occupancy rates are impacted by general economic conditions, including the pace of regional and economic growth, and access to capital. Therefore, we cannot give any assurance that leases will be renewed or that available space will be re-leased at rental rates equal to or above the current market rates. Additionally, decreased demand and other negative trends or unforeseeable events that impair our ability to timely renew or re-lease space could have further negative effects on our future financial condition, results of operations and cash flows. Multifamily Rates: The following table sets forth the monthly rent per occupied unit across our multifamily portfolio for the specified periods: As of June 30, 2016 2015 $ 1,914 $ 1,712 (1)Represents gross monthly base rent under leases commenced as of the specified period, divided by occupied units. This amount reflects total cash rent before concessions. Our property in New York was in the process of being re-leased as individual units as of June 30, 2015 as our corporate housing tenant terminated its lease in March 2015. Monthly rent per occupied unit excluding the New York property is $1,584 and $1,570 as of June 30, 2016 and 2015, respectively. Occupancy Rates: The following table sets forth the occupancy rates across our office and multifamily real estate portfolios, as of the specified periods: As of June 30, 2016 2015 83.5 % 85.2 % 94.8 % 89.0 % (1)The multifamily occupancy as of June 30, 2015 reflects 36.4% occupancy for our New York property, as our corporate housing tenant terminated its lease in March 2015 and we were in the process of re-leasing the property as individual units. The occupancy rate for the multifamily portfolio excluding the New York property is 95.7% and 96.1% as of June 30, 2016 and 2015, respectively. Hotel Statistics: The following table sets forth the occupancy, average daily rate ("ADR") and revenue per available room ("RevPAR") for the hotel portfolio for the specified periods: For the Six Months
Ended June 30, 2016 2015 80.9 % 84.5 % $ 141.70 $ 130.77 $ 114.68 $ 110.56 One of our hotel properties, the Courtyard Oakland, was sold in February 2016 (see Note 3). The following table sets forth the occupancy, ADR and RevPAR for the hotel portfolio excluding the Courtyard Oakland for the specified periods: For the Six Months
Ended June 30, 2016 2015 81.1 % 85.2 % $ 140.90 $ 124.88 $ 114.32 $ 106.41 Secondary Market Loan Sales Our lending segment, which is reflected as held for sale at June 30, 2016 and December 31, 2015, sells loans pursuant to the SBA 7(a) Program. The SBA guaranteed portion of these loans are sold in legal sale transactions to either dealers in government guaranteed loans or institutional investors as the loans are fully funded. These government guaranteed portions of loans may be sold for (1) a cash premium and the minimum 1% SBA required servicing spread, (2) significant future servicing spread and no cash premium or (3) future servicing spread and a cash premium of 10%. We are required to permanently treat certain of the proceeds received from these legally sold portions of loans (those loans sold solely for future servicing spread and those loans sold for future servicing spread and a cash premium of 10%) as secured borrowings (debt), which are included in the accompanying consolidated balance sheets as liabilities associated with assets held for sale, and 100% of the loans are included in assets held for sale.RESULTS OF OPERATIONSComparison of the Three Months Ended June 30, 2016 to the Three Months Ended June 30, 2015Overview Three Months Ended
June 30, Change 2016 2015 $ % (dollars in thousands) $ 65,438 $ 66,919 $ (1,481 ) (2.2 )% 67,403 65,921 1,482 2.2 % 2,823 3,984 (1,161 ) (29.1 )% 858 4,982 (4,124 ) (82.8 )% Net income decreased to $858,000, or by $4,124,000, for the three months ended June 30, 2016, compared to $4,982,000 for the three months ended June 30, 2015. The decrease is primarily attributable to a decrease of $1,161,000 in income from discontinued operations, an increase of $1,716,000 in interest expense, an increase of $914,000 in depreciation and amortization and a decrease of $1,048,000 in net operating income of our three operating segments in continuing operations, partially offset by a decrease in corporate general and administration expenses of $496,000 and a decrease of $255,000 in transaction costs.and multifamily properties and lending. The lending segment is classified as held for sale at June 30, 2016 and 2015 and is included in discontinued operations. Set forth and described below are summary segment results for our threefour segments included in continuing operations.Summary Segment Results Three Months Ended
June 30, Change Three Months Ended
June 30, Change 2016 2015 $ % 2017 2016 $ % (dollars in thousands) (dollars in thousands) $ 45,770 $ 47,084 $ (1,314 ) (2.8 )% $ 43,914 $ 45,770 $ (1,856 ) (4.1 )% 14,496 15,822 (1,326 ) (8.4 )% 10,604 14,496 (3,892 ) (26.8 )% 5,172 4,013 1,159 28.9 % 4,714 5,172 (458 ) (8.9 )% Lending 2,067 2,922 (855 ) (29.3 )% 20,021 20,173 (152 ) (0.8 )% 18,198 20,021 (1,823 ) (9.1 )% 9,737 10,025 (288 ) (2.9 )% 6,621 9,737 (3,116 ) (32.0 )% 3,035 3,028 7 0.2 % 2,972 3,035 (63 ) (2.1 )% Lending 1,039 1,296 (257 ) (19.8 )% RevenuesRevenues includeOffice revenue includes rental revenue from office properties, expense reimbursements and lease termination income. Office revenue decreased to $45,770,000,$43,914,000, or 2.8%by (4.1)%, for the three months ended June 30, 20162017 compared to $47,084,000$45,770,000 for the three months ended June 30, 2015.2016. The decrease is primarily due to a decreasethe sale of an office building in revenueSan Francisco, California in March 2017, partially offset by increases at one of ourcertain California and Washington D.C. properties due to expirationincreases in both occupancy and rental rates. The sale of a lease with a large tenantan office building in January 2016, a decreaseSan Francisco, California in revenue at ourMarch 2017, an office building in Charlotte, North Carolina in June 2017, and an office building and parking garage in Sacramento, California property due to expiration of a lease with a large tenant in June 2015,2017 will, and a decreasethe sale of an office property in expense reimbursements revenueLos Angeles, California, which is held for sale at oneJune 30, 2017, and the sale of our Washington D.C. properties. These decreases in revenueany additional office properties during 2017, are partially offset by revenue increases at certain properties in Washington D.C. and California due to increases in occupancy. Although we signed an approximately 113,000 square foot lease at a Washington D.C. property which experienced the loss of the large tenant in January 2016, the new tenant is not expected to, take occupancy until mid-2017. Therefore, we expect the decrease incause office revenue to be sustaineddecline materially for the remainder of 2017. However, the year at this property.magnitude of any such decrease cannot be predicted as it will depend on a number of factors such as the timing and number of dispositions that occur in 2017.$14,496,000,$10,604,000, or 8.4%by 26.8%, for the three months ended June 30, 20162017 compared to $15,822,000$14,496,000 for the three months ended June 30, 2015.2016. The decrease is primarily due to the sale of a hotel property in FebruaryLos Angeles, California in July 2016, (see Note 3), partially offset by revenue increases at the remaining hotel propertiesproperty due to RevPAR growth as a result ofresulting from increases in rates orand occupancy.increaseddecreased to $5,172,000,$4,714,000, or 28.9%by 8.9%, for the three months ended June 30, 20162017 compared to $4,013,000$5,172,000 for the three months ended June 30, 2015.2016. The increasedecrease is primarily due to higher revenue as a resultthe sale of increased occupancy at our three properties located in Dallas, Texas in May and June 2017. The sale of our three multifamily properties in Dallas, Texas, will, and the sale of our remaining two multifamily properties in New York, property,New York and Houston, Texas, which we began re-leasingare held for sale at June 30, 2017, are expected to, cause multifamily revenue to decline materially for the remainder of 2017. However, the magnitude of any such decrease cannot be predicted as individual units startingit will depend on a number of factors such as the timing and number of dispositions that occur in March 2015 following the termination of the lease by2017.corporate housing tenant.Expenses Office Expenses: Office expenseslending subsidiaries included in continuing operations, including interest income on loans and other loan related fee income. Lending revenue decreased to $20,021,000,$2,067,000, or 0.8%by 29.3%, for the three months ended June 30, 20162017 compared to $20,173,000$2,922,000 for the three months ended June 30, 2015.2016. The decrease is primarily due to a decrease in tenant reimbursable expenses at onepremium income from the sale of the guaranteed portion of our Washington D.C. properties and a decrease in expenses associated with our Santa Ana, California property sold in November 2015, partially offset by an overall increase in real estate taxes at our Washington D.C. properties and an increase in earthquake insurance premiums at our California properties.SBA 7(a) loans during the three months ended June 30, 2017. HotelOffice Expenses: HotelOffice expenses decreased to $9,737,000,$18,198,000, or 2.9%by 9.1%, for the three months ended June 30, 20162017 compared to $10,025,000$20,021,000 for the three months ended June 30, 2015.2016. The decrease is primarily due to the sale of an office building in San Francisco, California in March 2017 and a decrease in real estate taxes for the three months ended June 30,February 2016 (see Note 3), partially offset by an increaseLos Angeles, California in operating costs at the remaining hotel properties and an increase in real estate taxes at our hotel property in Sacramento, California due to a reduction in tax accruals during the second quarter of 2015 following the receipt of the actual tax assessment.July 2016.increaseddecreased to $3,035,000,$2,972,000, or 0.2%by 2.1%, for the three months ended June 30, 20162017 compared to $3,028,000$3,035,000 for the three months ended June 30, 2015. The increase is primarily due to an increase in real estate taxes resulting from a tax appeal refund recorded during the second quarter of 2015 at one of our Texas properties, partially offset by lower expenses associated with operating our New York property, which was in the process of being re-leased as individual units during the second quarter of 2015 following the termination of the lease by our corporate housing tenant. Interest Expense: Interest expense, which is not allocated to our operating segments, was $7,302,000 for the three months ended June 30, 2016, an increase of $1,716,000 compared to $5,586,000 in the corresponding period in 2015. The increase is mainly due to higher average outstanding loan balances under the unsecured credit and term loan facilities during the second quarter of 2016 compared to the corresponding period in 2015 combined with a higher overall interest rate including the impact of the interest rate swaps, and higher amortization of deferred loan costs during the second quarter of 2016 resulting from a write-off of the outstanding deferred loan costs associated with the term loan balance under the unsecured credit facility that was paid off in June 2016, partially offset by lower interest expense as a result of the repayment of approximately $71,237,000 in fixed rate mortgages in April and September 2015. General and Administrative Expenses: General and administrative expenses, which have not been allocated to our operating segments, were $1,218,000 for the three months ended June 30, 2016, a decrease of $496,000 compared to $1,714,000 in the corresponding period in 2015.2016. The decrease is primarily due to a decrease in legal, other consulting, professional servicesin operating expenses at our Houston,Texas property. The sale of our three multifamily properties in Dallas, Texas, will, and stock-based compensation expenses.the sale of our remaining two multifamily properties in New York, New York and Houston, Texas, which are held for sale at June 30, 2017, are expected to, cause multifamily expenses to decline materially for the remainder of 2017. However, the magnitude of any such decrease cannot be predicted as it will depend on a number of factors such as the timing and number of dispositions that occur in 2017. Transaction Costs:Lending Expenses: Transaction costs totaling $118,000Lending expenses represent expenses from our lending subsidiaries included in continuing operations, including general and administrative expenses and fees to related party, related to the operation of the lending business. Lending expenses decreased to $1,039,000, or by 19.8%, for the three months ended June 30, 2017 compared to $1,296,000 for the three months ended June 30, 2016, representprimarily due to a $255,000 decrease from $373,000in fees to related party and reductions in general and administrative costs associated with assets acquired in liquidation and professional fees.2015. The costs incurred for the three months ended June 30, 2016 mostly represent abandoned project costs, while the costs incurred for the three months ended June 30, 2015 represent abandoned project costs, costs related2017 compared to the planned disposition of the lending segment, and costs associated with evaluating strategies for exiting certain of our non-office real estate portfolio. Asset Management and Other Fees to Related Parties: Asset management fees totaled $6,238,000 for the three months ended June 30, 2016 compared to $6,176,000 for the three months ended June 30, 2015.2016. Asset management fees are calculated based on a percentage of the daily average adjusted fair value of CIM Urban's investments, which are appraised in the fourth quarter of each year. The higherlower fees reflect a decrease in the adjusted fair value of CIM Urban's investments due to the sale of a hotel property in February 2016, the sale of a hotel property in July 2016, the sale of an office property in March 2017, the sale of two multifamily properties in May 2017, and the sale of two office properties, a parking garage, and one multifamily property in June 2017, offset by net increaseincreases in the fair value of CIM Urban's real estate investments based on the December 31, 20152016 appraised values as well as incremental capital expenditures incurred in the first six months of 2016, offset by decreases as a result of dispositions.2017. CIM Commercial also pays a Base Service Fee to the Manager, a related party, which totaled $265,000 for the three months ended June 30, 2017 compared to $271,000 for the three months ended June 30, 2016 compared to $253,000 for the three months ended June 30, 2015.2016. In addition, the Manager may receive compensation and/or reimbursement for performing certain services for CIM Commercial and its subsidiaries that are not covered under the Base Service Fee. For the three months ended June 30, 20162017 and 2015,2016, we expensed $860,000$560,000 and $899,000$860,000 for such services, respectively. For the three months ended June 30, 20162017 and 2015,2016, we also expensed $123,000$124,000 and $128,000,$123,000, respectively, related to corporate services subject to reimbursement by us under the CIM SBA Staffing and Reimbursement Agreement. Asset management fees are expected to decline materially for the remainder of 2017 as a result of our completed sales, the disposition of assets held for sale at June 30, 2017, and any additional property sales that may occur during the remainder of 2017.2016, an increase of $914,000 compared to $17,566,000 for the three months ended June 30, 2015.2016. The increasedecrease is primarily due to the sale of an office property in San Francisco, California held for sale starting in mid-February 2017, that was sold in March 2017, the sale of a hotel property in July 2016, the sale of three multifamily properties in Dallas, Texas, which were held for sale in May 2017 and sold in May and June 2017, the sale of two office properties and a parking garage in Sacramento, California and Charlotte, North Carolina, which were held for sale in April 2017 and sold in June 2017, and an office property in Los Angeles, California, which was held for sale in May 2017, partially offset by an increase in the depreciation expense associated with additional capital expenditures, partially offset by a decrease inexpenditures. Depreciation expense is expected to decline materially for the depreciation expenseremainder of 2017 as a result of our completed sales, the disposition of assets held for sale at June 30, 2017, and any additional property sales that may occur during 2017.in November 2015exceeded its estimated fair value less costs to sell, and as such, an impairment charge of $13,100,000 was recognized as of June 30, 2017. Our determination of fair value was based on negotiations with the third party buyer.hotel property in Februarydecrease of $9,000 compared to $471,000 for the three months ended June 30, 2016.incomeIncome from discontinued operations:Discontinued Operations: Net income from discontinued operations represents revenues and expenses from the part of our lending segment that is included in discontinued operations, including interest income on loans and other loan related fee income, offset by expenses, which include general and administrative expenses, fees to related party, and direct interest expense, and provision for income taxes.expense. Net income from discontinued operations was $2,823,000, a decrease of $1,161,000 compared to $3,984,000$0 for the three months ended June 30, 2015.2017, a decrease of $1,668,000 compared to $1,668,000 for the three months ended June 30, 2016. The decrease is mainly due to decreased interest income resulting from the sale of substantially all of our commercial mortgage loansreal estate lending subsidiary in December 2015, partially offset by an increase in loan prepayment fee income.2016.20162017 to the Six Months Ended June 30, 20152016Overview Six Months
Ended June 30, Change Six Months Ended
June 30, Change 2016 2015 $ % 2017 2016 $ % (dollars in thousands) (dollars in thousands) $ 131,828 $ 134,158 $ (2,330 ) (1.7 )% $ 128,248 $ 136,977 $ (8,729 ) (6.4 )% 132,978 133,390 (412 ) (0.3 )% 146,104 135,572 10,532 7.8 % 24,739 — 24,739 — 304,017 24,739 279,278 — 4,252 6,946 (2,694 ) (38.8 )% — 2,358 (2,358 ) — 27,841 7,714 20,127 — 285,307 27,841 257,466 — $27,841,000,$285,307,000, or by $20,127,000,$257,466,000, for the six months ended June 30, 2016,2017, compared to $7,714,000$27,841,000 for the six months ended June 30, 2015.2016. The increase is primarily attributable to aan increase in the gain on sale of real estate of $24,739,000 (see Note 3), a decrease in corporate general and administration expenses of $1,587,000 and a decrease of $534,000 in transaction costs, partially offset by a decrease of $2,694,000 in income from discontinued operations,$279,278,000, as well as an increase of $2,939,000 in interest expense, a decrease of $728,000$4,971,000 in net operating income of our three operating segments in continuing operations and a decrease of $4,546,000 in depreciation and amortization expense, partially offset by $13,100,000 of impairment of real estate, an increase of $528,000$11,361,000 in asset managementtransaction costs, an increase of $5,271,000 in interest expense and a decrease of $2,358,000 in income from discontinued operations.feesinterested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO represents net income (loss) available to related parties. Six Months Ended
June 30, 2017 2016 (in thousands) Net income available to common stockholders $ 285,190 $ 27,829 Depreciation and amortization 31,992 36,538 Impairment of real estate 13,100 — Gain on sale of depreciable assets (304,017 ) (24,739 ) FFO available to common stockholders $ 26,265 $ 39,628 threefour segments included in continuing operations.Summary Segment Results Six Months
Ended June 30, Change Six Months Ended
June 30, Change 2016 2015 $ % 2017 2016 $ % (dollars in thousands) (dollars in thousands) $ 91,819 $ 93,699 $ (1,880 ) (2.0 )% $ 93,007 $ 91,819 $ 1,188 1.3 % 29,779 31,541 (1,762 ) (5.6 )% 21,122 29,779 (8,657 ) (29.1 )% 10,230 8,918 1,312 14.7 % 9,717 10,230 (513 ) (5.0 )% Lending 4,402 5,149 (747 ) (14.5 )% 38,862 39,877 (1,015 ) (2.5 )% 32,239 38,862 (6,623 ) (17.0 )% 19,779 20,743 (964 ) (4.6 )% 13,064 19,779 (6,715 ) (34.0 )% 6,129 5,752 377 6.6 % 5,969 6,129 (160 ) (2.6 )% Lending 2,392 2,594 (202 ) (7.8 )%
RevenuesTable of ContentsRevenuesRevenues includeOffice revenue includes rental revenue from office properties, expense reimbursements and lease termination income. Office revenue decreasedincreased to $91,819,000,$93,007,000, or 2.0%by 1.3%, for the six months ended June 30, 20162017 compared to $93,699,000$91,819,000 for the six months ended June 30, 2015.2016. The decreaseincrease is primarily due to a decreaseincreases at our North Carolina property sold in revenueJune 2017, and at certain of our California and Washington D.C. properties mainlydue to increases in both occupancy and rental rates, partially offset by a decrease due to the sale of an office building in San Francisco, California in March 2017, and a decrease at one of our Washington D.C. properties due to expiration of a lease with a large tenant in January 2016, a decrease2016. Additionally, the sale of an office building in revenue at ourSan Francisco, California in March 2017, an office building in Charlotte, North Carolina in June 2017, and an office building and parking garage in Sacramento, California property due to expiration of a lease with a large tenant in June 2015,2017 will, and a decreasethe sale of an office property in expense reimbursements revenueLos Angeles, California, which is held for sale at oneJune 30, 2017, and the sale of our Washington D.C. properties. These decreases in revenueany additional office properties during 2017, are partially offset by revenue increases at certain properties in Washington D.C. and California mainly due to increases in occupancy. Although we signed an approximately 113,000 square foot lease at a Washington D.C. property which experienced the loss of the large tenant in January 2016, the new tenant is not expected to, take occupancy until mid-2017. Therefore, we expect the decrease incause office revenue to be sustaineddecline materially for the remainder of 2017. However, the year at this property.magnitude of any such decrease cannot be predicted as it will depend on a number of factors such as the timing and number of dispositions that occur in 2017.$29,779,000,$21,122,000, or 5.6%by 29.1%, for the six months ended June 30, 20162017 compared to $31,541,000$29,779,000 for the six months ended June 30, 2015.2016. The decrease is primarily due to the sale of atwo hotel propertyproperties in February and July 2016, (see Note 3), partially offset by revenue increases at the remaining hotel propertiesproperty due to RevPAR growth as a result ofresulting from increases in rates orand occupancy.increaseddecreased to $10,230,000,$9,717,000, or 14.7%by 5.0%, for the six months ended June 30, 20162017 compared to $8,918,000$10,230,000 for the six months ended June 30, 2015.2016. The increasedecrease is primarily due to higher revenuethe sale of our three properties located in Dallas, Texas in May and June 2017, and a decrease at our Houston, Texas property as a result of increased occupancy atdecreased annualized rents. The sale of our three multifamily properties in Dallas, Texas, will, and the sale of our remaining two multifamily properties in New York, property,New York and Houston, Texas, which we began re-leasingare held for sale at June 30, 2017, are expected to, cause multifamily revenue to decline materially for the remainder of 2017. However, the magnitude of any such decrease cannot be predicted as individual units startingit will depend on a number of factors such as the timing and number of dispositions that occur in March 2015 following the termination of the lease by2017.corporate housing tenant.Expenses Office Expenses: Office expenseslending subsidiaries included in continuing operations, including interest income on loans and other loan related fee income. Lending revenue decreased to $38,862,000,$4,402,000, or 2.5%by 14.5%, for the six months ended June 30, 20162017 compared to $39,877,000$5,149,000 for the six months ended June 30, 2015.2016. The decrease is primarily due to a decrease in electricity expense at our Washington D.C. properties, a decrease in certain other tenant reimbursable expenses at onepremium income from the sale of the guaranteed portion of our Washington D.C. properties,SBA 7(a) loans, and lower revenue as a decrease in expenses associated withresult of recognition of accretion for discounts related to decreased prepayments on our Santa Ana, California property sold in November 2015,loans, partially offset by an increase in earthquake insurance premiums at our California properties.a break-up fee related to a potential loan that was received during the six months ended June 30, 2017. HotelOffice Expenses: HotelOffice expenses decreased to $19,779,000,$32,239,000, or 4.6%by 17.0%, for the six months ended June 30, 20162017 compared to $20,743,000$38,862,000 for the six months ended June 30, 2015.2016. The decrease is primarily due to reduced real estate taxes for the six months ended June 30, 2017 due to the transfer of the right to collect supplemental real estate tax reimbursements related to an office building in San Francisco, California in March 2017, the sale of the same office building in San Francisco, California in March 2017, a decrease in real estate taxes for the six months ended June 30, 2017 at our office building in Charlotte, North Carolina, and at certain Washington D.C. properties, partially offset by an increase in real estate taxes at one of our Washington D.C. properties, as the prior comparable period included a tax refund that reduced expenses. The sale of an office building in San Francisco, California in March 2017, an office building in Charlotte, North Carolina in June 2017, and an office building and parking garage in Sacramento, California in June 2017 will, and the sale of an office property in Los Angeles, California, which is held for sale at June 30, 2017, and the sale of any additional office properties during 2017, are expected to, cause office expenses to decline materially for the remainder of 2017. However, the magnitude of any such decrease cannot be predicted as it will depend on a number of factors such as the timing and number of dispositions that occur in 2017.atwo hotel propertyproperties in February 2016 (see Note 3), partially offset by an increase in operating costs at the remaining hotel properties and an increase in real estate taxes at our hotel property in Sacramento, California due to a reduction in tax accruals during the first six months of 2015 following the receipt of the actual tax assessment.July 2016.increaseddecreased to $6,129,000,$5,969,000, or 6.6%by 2.6%, for the six months ended June 30, 20162017 compared to $5,752,000$6,129,000 for the six months ended June 30, 2015. The increase is primarily due to an increase in legal fees during the first six months of 2016 at our New York property. Interest Expense: Interest expense, which is not allocated to our operating segments, was $13,928,000 for the six months ended June 30, 2016, an increase of $2,939,000 compared to $10,989,000 in the corresponding period in 2015. The increase is mainly due to higher average outstanding loan balances under the unsecured credit and term loan facilities during the first six months of 2016 compared to the corresponding period in 2015 combined with a higher overall interest rate including the impact of the interest rate swaps, and higher amortization of deferred loan costs during the first six months of 2016 resulting from a write-off of the outstanding deferred loan costs associated with theterm loan balance under the unsecured credit facility that was paid off in June 2016, partially offset by lower interest expense as a result of the repayment of approximately $71,237,000 in fixed rate mortgages in April and September 2015. General and Administrative Expenses: General and administrative expenses, which have not been allocated to our operating segments, were $2,282,000 for the six months ended June 30, 2016, a decrease of $1,587,000 compared to $3,869,000 in the corresponding period in 2015.2016. The decrease is primarily due to a decrease in legal, other consulting, professional servicesreal estate taxes at our properties in Houston, Texas and stock-based compensation expenses.New York, New York. The sale of our three multifamily properties in Dallas, Texas, will, and the sale of our remaining two multifamily properties in New York, New York and Houston, Texas, which are held for sale at June 30, 2017, are expected to, cause multifamily expenses to decline materially for the remainder of 2017. However, the magnitude of any such decrease cannot be predicted as it will depend on a number of factors such as the timing and number of dispositions that occur in 2017. Transaction Costs:Lending Expenses: Transaction costs totaling $267,000Lending expenses represent expenses from our lending subsidiaries included in continuing operations, including general and administrative expenses and fees to related party, related to the operation of the lending business. Lending expenses decreased to $2,392,000, or by 7.8%, for the six months ended June 30, 2017 compared to $2,594,000 for the six months ended June 30, 2016, representprimarily due to a $534,000 decrease from $801,000in interest expense as a result of secured borrowing prepayments and amortization of related deferred premiums, a decrease in fees to related party and reductions in general and administrative costs associated with assets acquired in liquidation and professional fees, partially offset by the recognition of a provision for loan losses during the six months ended June 30, 2017 compared to a recovery of loan losses during the six months ended June 30, 2016.2015. The costs incurred for the six months ended June 30, 2016 mostly represent abandoned project costs, while the costs incurred for the six months ended June 30, 2015 represent abandoned project costs, costs related2017 compared to the planned disposition of the lending segment, and costs associated with evaluating strategies for exiting certain of our non-office real estate portfolio. Asset Management and Other Fees to Related Parties: Asset management fees totaled $12,716,000 for the six months ended June 30, 2016 compared to $12,318,000 for the six months ended June 30, 2015.2016. Asset management fees are calculated based on a percentage of the daily average adjusted fair value of CIM Urban's investments, which are appraised in the fourth quarter of each year. The higherlower fees reflect a decrease in the adjusted fair value of CIM Urban's investments due to the sale of a hotel property in February 2016, the sale of a hotel property in July 2016, the sale of an office property in March 2017, the sale of two multifamily properties in May 2017, and the sale of two office properties, a parking garage, and one multifamily property in June 2017, offset by net increaseincreases in the fair value of CIM Urban's real estate investments based on the December 31, 20152016 appraised values as well as incremental capital expenditures incurred in the first six months of 2016, offset by decreases as a result of dispositions.2017. CIM Commercial also pays a Base Service Fee to the Manager, a related party, which totaled $530,000 for the six months ended June 30, 2017 compared to $525,000 for the six months ended June 30, 2016 compared to $506,000 for the six months ended June 30, 2015.2016. In addition, the Manager may receive compensation and/or reimbursement for performing certain services for CIM Commercial and its subsidiaries that are not covered under the Base Service Fee. For the six months ended June 30, 20162017 and 2015,2016, we expensed $1,726,000$1,622,000 and $1,590,000$1,726,000 for such services, respectively. For the six months ended June 30, 20162017 and 2015,2016, we also expensed $226,000$239,000 and $251,000,$226,000, respectively, related to corporate services subject to reimbursement by us under the CIM SBA Staffing and Reimbursement Agreement. Asset management fees are expected to decline materially for the remainder of 2017 as a result of our completed sales, the disposition of assets held for sale at June 30, 2017, and any additional property sales, that may occur during the remainder of 2017.2016, a decrease of $156,000 compared to $36,694,000 for the six months ended June 30, 2015.2016. The decrease in the depreciation expense is primarily due to the sale of an office property in November 2015 andSan Francisco, California held for sale starting in mid-February 2017, that was sold in March 2017, the sale of a hotel property in FebruaryJuly 2016, the sale of three multifamily properties in Dallas, Texas, which were held for sale in May 2017 and sold in May and June 2017, the sale of two office properties and a parking garage in Sacramento, California and Charlotte, North Carolina, which were held for sale in April 2017 and sold in June 2017, and an office property in Los Angeles, California, which was held for sale in May 2017, partially offset by an increase in the depreciation expense associated with additional capital expenditures. Depreciation expense is expected to decline materially for the remainder of 2017 as a result of our completed sales, the disposition of assets held for sale at June 30, 2017, and any additional property sales that may occur during 2017.incomeIncome from discontinued operations:Discontinued Operations: Net income from discontinued operations represents revenues and expenses from the part of our lending segment that is included in discontinued operations, including interest income on loans and other loan related fee income, offset by expenses, which include general and administrative expenses, fees to related party, and direct interest expense, and provision for income taxes.expense. Net income from discontinued operations was $4,252,000, a decrease of $2,694,000 compared to $6,946,000$0 for the six months ended June 30, 2015.2017, a decrease of $2,358,000 compared to $2,358,000 for the six months ended June 30, 2016. The decrease is mainly due to decreased interest income resulting from the sale of substantially all of our commercial mortgage loansreal estate lending subsidiary in December 2015 and increased interest expense resulting from additional secured borrowings, partially offset by an increase in loan prepayment fee income and a decrease in provision for loan losses.2016.Credit Facilities The credit facility can be increased to $1,150,000,000 under certain conditions. CIM Commercial is subject to certain financial maintenance covenants and a minimum property ownership condition. Outstanding advances under the revolver bear interest at (i) the base rate plus 0.20% to 1.00% or (ii) LIBOR plus 1.20% to 2.00%, depending on the maximum consolidated leverage ratio. Outstanding advances under the term loans bore interest at (i) the base rate plus 0.15% to 0.95% or (ii) LIBOR plus 1.15% to 1.95%, depending on the maximum consolidated leverage ratio. The revolver is also subject to an unused commitment fee of 0.15% or 0.25% depending on the amount of aggregate unused commitments. The delayed-draw term loan was also subject to an unused line fee of 0.25%. The credit facility matures in September 2016 and provides for, under certain conditions, two one-year extension options. We intend to exercise the first extension option in August 2016. At July 31, 2016 and June 30, 2016, $0 was outstanding under the credit facility and $450,000,000 was available for future borrowings, while at December 31, 2015, $107,000,000 ($0 under the revolver and $107,000,000 under the term loans) was outstanding under the credit facility and $450,000,000 was available for future borrowings. Proceeds from the unsecured credit facility were used for acquisitions, funding of the tender offer (see Note 10), general corporate purposes, and to repay mortgage loans and outstanding balances under our prior unsecured credit facilities.facilities, for acquisitions, short-termfacility.facility and the remaining portion was used to repurchase shares of our Common Stock in a private repurchase in September 2016. The June 2017 borrowing used to fund the private share repurchase was repaid using proceeds from subsequent asset sales. The credit facility was set to mature in September 2016 and prior to maturity, we exercised the first of two one-year extension options through September 2017 and we permanently reduced the revolving credit commitment under the credit facility to $200,000,000. In August 2017, we exercised the second of two one year extension options through September 2018 and, in connection with such exercise, we will pay an extension fee of $300,000. At August 4, 2017, June 30, 2017 and December 31, 2015,2016, $0 was outstanding under the interest ratecredit facility. The unused capacity on the outstanding balances under this unsecured credit facility based on covenant restrictions at August 4, 2017, June 30, 2017 and December 31, 2016, was 1.57%.$850,000,000 unsecured credit facility described above; covenants under the term loan facility are substantially the same as those in the $850,000,000 unsecured credit facility. Outstanding advances under the term loan facility bear interest at (i) the base rate plus 0.60% to 1.25% or (ii) LIBOR plus 1.60% to 2.25%, depending on the maximum consolidated leverage ratio. The unused portion of the term loan facility was also subject to an unused fee of 0.20%. With some exceptions, any prepayment of the term loan facility prior to May 9, 2017 will bewas subject to a prepayment fee up to 2%2.00% of the outstanding principal amount. The term loan facility matures in May 2022. On November 2, 2015, $385,000,000 was drawn under the term loan facility. At July 31, 2016,August 4, 2017, $320,000,000 was outstanding under the unsecured term loan facility and, at June 30, 20162017 and December 31, 2015,2016, $385,000,000 was outstanding under the term loan facility. Proceeds from the term loan facility were used to repay balances outstanding under our unsecured credit facility. At June 30, 20162017 and December 31, 2015,2016, the variable interest rate on this unsecured term loan facility was 2.06%2.65% and 1.84%2.22%, respectively. The interest rate of the loan has been effectively converted to a fixed rate of 3.16% until May 8, 2020 through interest rate swaps (see Note 11)(Note 13).20162017 and December 31, 2015,2016, we were in compliance with all of our respective financial covenants.currently have substantial borrowing capacity,an effective registration statement with the SEC with respect to the offer and sale of up to $900,000,000 of Units, with each Unit consisting of (i) one share of Series A Preferred Stock, par value $0.001 per share, with an initial Stated Value of $25.00 per share and (ii) one Warrant to purchase 0.25 of a share of Common Stock. The registration statement allows us to sell up to a maximum of 36,000,000 Units. Holders of our Series A Preferred Stock are entitled to receive, if, as and when declared by the Board of Directors, cumulative cash dividends on each share of Series A Preferred Stock at an annual rate of 5.5% of the Stated Value. The exercise price of each Warrant will be at a 15.0% premium to the per share estimated NAV of our Common Stock (as most recently published by us at the time of each issuance). As of June 30, 2017, we had issued 308,775 Units and collected net proceeds of $7,082,000 after commissions, fees and allocated costs. As of June 30, 2017, no shares of Series A Preferred Stock have been redeemed.shares,stock, senior unsecured securities, and/or other equity and debt securities; (ii) credit facilities and term loans; (iii) the addition of senior recourse or non-recourse debt using target acquisitions as well as existing investments as collateral; (iv) the sale of existing investments; and/or (v) cash flows fromacquisitionacquisitions of investments, and payment for development or repositioning of properties, capital expenditures, refinancing of indebtedness, and acquisitionsrepurchases of shares of our Common Stock at or below net asset value, whether(whether through one or more tender offers, share repurchases or otherwise. In addition, as we issue shares ofotherwise), dividends on the Series A Preferred Stock or any other preferred stock under the registration statement that was declared effective by the SEC in July 2016, our future liquidity needs will include funds for dividends on such preferred stockwe may issue and may include funds for the redemption of such preferred stockSeries A Preferred Stock (if we choose to pay the redemption price in cash instead of in shares of our Common Stock). Although we do not currently have any significant property development or repositioning projects planned, we and dividend distributions on our Common Stock. We may not have sufficient funds on hand or may not be able to obtain additional financing to cover all of these long-term cash requirements.requirements although, it should be noted that we do not currently have any significant property development or repositioning projects planned. The nature of our business, and the requirements imposed by REIT rules that we distribute a substantial majority of our REIT taxable income on an annual basis in the form of dividends, may cause us to have substantial liquidity needs over the long-term. We will seek to satisfy our long-termlong term liquidity needs through one or more of the methods described in the immediately preceding paragraph. These sources of funding may not be available on attractive terms or at all. If we cannot obtain additional funding for our long-term liquidity needs, our investments may generate lower cash flows or decline in value, or both, which may cause us to sell assets at a time when we would not otherwise do so and could have a material adverse effect on our business, financial condition, results of operations, cash flow or our ability to satisfy our debt service obligations, or to maintain our level of Common Stock or Series A Preferred Stock dividend distributions.facilities and term loans.facilities. As of June 30, 20162017 and December 31, 2015,2016, we had total indebtedness, exclusive of debt included in liabilities associated with assets held for sale, of $939,767,000$846,833,000 and $656,835,000,$967,886,000, respectively. Included in total indebtedness isAs of June 30, 2017 and December 31, 2016, $385,000,000 and $492,000,000 of borrowings under credit and term loan facilities withwere included in total capacityindebtedness. Based on covenant restrictions as of $835,000,000 and $942,000,000 at June 30, 20162017 and December 31, 2015,2016, these facilities had total unused capacity of approximately $89,000,000 and $200,000,000, respectively. As of August 5, 2016, $385,000,0004, 2017, $320,000,000 ($0 under the revolver and $385,000,000$320,000,000 under the term loans)loan) was outstanding under the credit and term loan facilities, and, $450,000,000based on covenant restrictions, approximately $154,000,000 was available for future borrowings. As a REIT, our cash flows from operations are typically used to fund our dividends.$69,253,000$131,910,000 and $140,572,000$144,449,000 at June 30, 20162017 and December 31, 2015,2016, respectively. Our cash flows from operating activities are primarily dependent upon the real estate assets owned, occupancy level of our real estate assets, the rental rates achieved through our leases, and the collectability of rent and recoveries from our tenants. Our cash flows from operating activities are also impacted by fluctuations in operating expenses and other general and administrative costs. Net cash provided by operating activities totaled $21,760,000 for the six months ended June 30, 2017 compared to $33,558,000 for the six months ended June 30, 2016 compared to $37,050,000 for the six months ended June 30, 2015.2016. The decrease was mainly due to a decrease of $5,667,000 resulting from increased funding for loans held for sale and a decrease of $4,612,000$18,355,000 in net income adjusted for the gain on sale of real estate, depreciation and amortization expense, impairment of real estate, and transfer of the right to collect supplemental real estate tax reimbursements at an office property in San Francisco, California that we sold in March 2017, a decrease of $4,842,000 in proceeds from the sale of guaranteed loans, and a decrease of $1,461,000 in other operating activity, partially offset by an increase of $4,214,000 in proceeds from sale of guaranteed loans, an increase of $1,007,000$5,623,000 resulting from a lower level of working capital used compared to the prior period, a $4,199,000 decrease in loans funded, and ana $3,052,000 increase of $1,212,000 from other operating activity.in principal collected on loans subject to secured borrowings.used inprovided by investing activities for the six months ended June 30, 20162017 was $52,960,000$637,968,000 compared to $24,315,000 in the corresponding period in 2015. The increase in net cash used in investing activities of $52,960,000 in the corresponding period in 2016. The increase was primarily due to an increase of $600,104,000 in cash generated from the sale of real estate during the six months ended June 30, 2017 compared to the six months ended June 30, 2016, an increase in the change in restricted cash of $78,156,000$82,359,000 primarily related to athe anticipated Section 1031 Exchange in connection with the sale of a hotel property in February 2016, (see Note 2) and reserves funded during the six months ended June 30, 2017 in connection with our six mortgage loan agreementsloans entered into in June 2016, (see Note 7),a decrease in loans funded of $21,902,000, and an increasea decrease in funding for loansadditions to investments in real estate of $3,188,000,$8,206,000, partially offset by the net proceedsa decrease of $42,782,000 from the sale of a hotel property and an increase of $13,106,000$20,668,000 in principal collected on loans.20162017 was $51,917,000$672,267,000 compared to $9,093,000$51,917,000 in the corresponding period in 2015. We used funds2016. The primary reason for the increase in usage of proceeds from financing activities primarily to pay dividendswas our repurchase of $40,544,000$576,000,000 of Common Stock during the six months ended June 30, 20162017 compared to $42,693,000$210,060,000 during the corresponding period in 2015.six months ended June 30, 2016. We had net borrowings,debt payments, inclusive of secured borrowings of the lending segment heldbusiness, of $70,504,000 for the six months ended June 30, 2017, mainly due to the prepayment of mortgages in connection with the sale of real estate, compared to net borrowings of $200,161,000 for the six months ended June 30, 2016 compared to $36,943,0002016. Dividends of $30,532,000 for the six months ended June 30, 2015.2017 were sourced from net cash provided by operating activities of $21,760,000 and the remainder(see Note 7) compared to $3,415,000 paid during the corresponding period in 2015 primarily related to the $385,000,000 unsecured term loan facility. In addition, the total cash outlay related to repurchase of our Common Stock pursuant to the tender offer completedwe entered into in June 2016 (see Note 10) was $210,060,000.CONTRACTUAL OBLIGATIONS, COMMITMENTS AND CONTINGENCIES2016,2017, there were no material changes outside the ordinary course of business in the information regarding specified contractual obligations contained in our Annual Report on Form 10-K for the year ended December 31, 2015.OFF-BALANCE SHEET ARRANGEMENTS2016,2017, we did not have any off-balance sheet arrangements.RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTSDIVIDENDS Our stockholders Aggregate Declaration Date Payment Date Number of Shares Dividends Declared (in thousands) June 12, 2017 July 17, 2017 308,775 $ 72 March 8, 2017 April 17, 2017 144,698 $ 31 and as declaredauthorized by the Board of Directors.Directors and declared by us. In determining our dividend policy, the Board of Directors considers many factors including but not limited to, expectationsthe amount of cash resources available for dividend distributions, capital spending plans, cash flow, financial position, applicable requirements of the MGCL, any applicable contractual restrictions, and future earnings, REIT taxable income (loss)growth in net asset value and maintenance of REIT status, the economic environment and portfolio performance.cash flow per share prospects. Consequently, the dividend rate on a quarterly basis does not necessarily correlate directly to any individual factor. There can be no assurance that the future dividends declared by our Board of Directors will not differ materially from historical dividend levels. On March 8, 2016 and June 10, 2016, we declared common share dividends of $0.21875Dividends per share of Common Stock which were paid on March 29, 2016 anddeclared during the six months ended June 28, 2016, respectively.30, 2017 consist of the following:Declaration Date Payment Date Type (1) Dividend Per Common Share June 12, 2017 June 27, 2017 Special Cash $ 1.98000 June 12, 2017 June 27, 2017 Regular Quarterly $ 0.12500 April 5, 2017 April 24, 2017 Special Cash $ 0.28000 March 8, 2017 March 27, 2017 Regular Quarterly $ 0.21875 (1) Urban II, an affiliate of CIM REIT and CIM Urban, waived its right to receive the April 24, 2017 and June 27, 2017 special cash dividends. 3.84%4.11% to 4.19%4.26% at June 30, 20162017 and 4.42%4.60% to 4.72% at December 31, 2015.2016. Mortgages payable, exclusive of debt included in liabilities associated with assets held for sale, with book values of $533,070,000$414,672,000 and $145,072,000$530,793,000 as of June 30, 20162017 and December 31, 2015,2016, respectively, have fair values of approximately $542,361,000$417,912,000 and $147,516,000,$516,892,000, respectively.Market risk refers to the risk of loss from adverse changes in market prices and interest rates. At June 30, 20162017 and December 31, 20152016 (excluding premiums, and discounts, and debt issuance costs, including the debt included in liabilities associated with assets held for sale, and before the impact ofrelated to the interest rate swaps), $534,648,000$466,868,000 (or 54.2%51.8%) and $144,791,000$532,437,000 (or 20.4%54.8%) of our debt, respectively, was fixed rate mortgage loans, and $451,919,000$435,034,000 (or 45.8%48.2%) and $563,498,000$439,969,000 (or 79.6%45.2%), respectively, was floating rate borrowings. Based on the level of floating rate debt outstanding at June 30, 20162017 and December 31, 2015,2016, and before the impact of the interest rate swaps, a 12.5 basis point change in LIBOR would result in an annual impact to our earnings of approximately $565,000$544,000 and $704,000,$550,000, respectively. We calculate interest rate sensitivity by multiplying the amount of floating rate debt by the respective change in rate. The sensitivity analysis does not take into consideration possible changes in the balances or fair value of our floating rate debt or the impact of interest rate swaps.1.56%1.563% plus the credit spread, which was 1.60% at June 30, 20162017 and December 31, 2015,2016, or an all-in rate of 3.16% until May 8, 2020. However,On August 3, 2017, we repaid $65,000,000 of outstanding borrowings on our unsecured term loan facility. In connection with such pay down, we terminated three interest rate swaps with an aggregate notional value of $65,000,000. Our use of these derivative instruments to hedge exposure to changes in interest rates exposes us to credit risk from the potential inability of our counterparties to perform under the terms of the agreements. We attempt to minimize this credit risk by contracting with what we believe to be high-quality financial counterparties. For a description of our derivative contracts, see Note 1113 to our consolidated financial statements included in this Report.EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURESofregarding the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon thison that evaluation, as of June 30, 2016,2017, our Principal Executive Officer and Principal Financial Officer concluded, as of that time, that our disclosure controls and procedures were effective to ensurein ensuring that information required to be disclosed by us in the reports that we file or submit to the SEC under the Exchange Act areis recorded, processed, summarized and reported within the time periods specified inby the SEC's rules and forms and thatincludes controls and procedures designed to ensure the information required to be disclosed by the Company in such informationreports is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING20162017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.proceedingsproceeding currently threatened against us, other than routine litigation arising in the ordinary course of business. In the normal course of business we are periodically party to certain legal actions and proceedings involving matters that are generally incidental to our business. While the outcome of these legal actions and proceedings cannot be predicted with certainty, in management's opinion, the resolution of these legal proceedings and actions will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.2015.May 16, 2016,June 12, 2017, we announced that our Board of Directors approvedrepurchased, in a cash tender offer to purchase up to 10 million shares of our Common Stock at a price of $21.00 per share. The tender offer expired at 11:59 p.m. Eastern time, on June 13, 2016. The tender offer was oversubscribedprivately negotiated transaction, canceled and pursuant to the terms of the tender offer,retired 26,181,818 shares of Common Stock were accepted on a pro rata basis. In connection with the tender offer, we repurchased and retired 10 million shares of our Common Stock at $21.00 per share. The total cost of the tendered shares, including professional fees to complete the tender offer, was $210,332,000 (average cost of $21.03 per share). For further information regarding the terms and conditions of the tender offer, please refer to information in the Tender Offer Statement on Schedule TO filed with the SEC on May 16, 2016 and subsequent amendments thereto.2016 pursuant to the recently completed tender offer:2017. Total Number
of Shares
Purchased Average
Price Paid
Per Share Total Number of
Shares Purchased
as Part of Publicly
Announced
Plans or Programs Maximum Dollar
Value of Shares
That May Yet Be
Purchased Under the
Plans or Programs — $ — — $ — — — — — 10,000,000 21.03 — — 10,000,000 $ 21.03 — Period Total Number
of Shares
Purchased Average
Price Paid
Per Share Total Number of
Shares Purchased
as Part of Publicly
Announced
Plans or Programs Maximum Dollar
Value of Shares
That May Yet Be
Purchased Under the
Plans or ProgramsApril 1, 2017 to April 30, 2017 — $ — — $ — May 1, 2017 to May 31, 2017 — — — — June 1, 2017 to June 30, 2017 26,181,818 22.00 — — Total 26,181,818 $ 22.00 — None.4.1Exhibit Number Articles Supplementary for the Series A Preferred Stock (incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-11/A filed with the SEC on June 28, 2016)Description
*31.14.2Warrant Agreement, dated June 28, 2016, between CIM Commercial Trust Corporation and American Stock Transfer & Trust Company, LLC (incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-11/A filed with the SEC on June 28, 2016)10.1Escrow Agreement, dated June 28, 2016, between CIM Commercial Trust Corporation, International Assets Advisory, LLC and UMB Bank, N.A. (incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-11/A filed with the SEC on June 28, 2016)*31.1
Section 302 Officer Certification—Chief Executive Officer
*31.2*31.2
Section 302 Officer Certification—Chief Financial Officer
*32.1*32.1
Section 906 Officer Certification—Chief Executive Officer
*32.2*32.2
Section 906 Officer Certification—Chief Financial Officer
*101*101
Interactive data files pursuant to Rule 405 of Regulation S-TSIGNATURES CIM COMMERCIAL TRUST CORPORATION
Dated: August 9, 20162017
By:
Dated: August 9, 20162017
By:
Exhibit Number Exhibit Description4.1 Articles Supplementary for the Series A Preferred Stock (incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-11/A filed with the SEC on June 28, 2016)Description
*31.14.2Warrant Agreement, dated June 28, 2016, between CIM Commercial Trust Corporation and American Stock Transfer & Trust Company, LLC (incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-11/A filed with the SEC on June 28, 2016)10.1Escrow Agreement, dated June 28, 2016, between CIM Commercial Trust Corporation, International Assets Advisory, LLC and UMB Bank, N.A. (incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-11/A filed with the SEC on June 28, 2016)*31.1
Section 302 Officer Certification—Chief Executive Officer
*31.2*31.2
Section 302 Officer Certification—Chief Financial Officer
*32.1*32.1
Section 906 Officer Certification—Chief Executive Officer
*32.2*32.2
Section 906 Officer Certification—Chief Financial Officer
*101*101
Interactive data files pursuant to Rule 405 of Regulation S-T