8-K
CIM REAL ESTATE FINANCE TRUST, INC. (CMRF)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): December 20, 2020
CIM Real Estate Finance Trust, Inc.
(Exact Name of Registrant as Specified in its Charter)
| Maryland | 000-54939 | 27-3148022 |
|---|---|---|
| (State or Other Jurisdiction<br> <br>of Incorporation) | (Commission<br> <br>File Number) | (IRS Employer<br> <br>Identification No.) |
2398 East Camelback Road, 4th Floor, Phoenix, Arizona 85016
(Address of Principal Executive Offices)
(Zip Code)
(602) 778-8700
(Registrant’s telephone number, including area code)
None
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br> <br>Symbol(s) | Name of each exchange<br> <br>on which registered |
|---|---|---|
| None | None | None |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Introductory Note
On December 21, 2020, CIM Real Estate Finance Trust, Inc. (the “Company” or “CMFT”) completed the mergers previously disclosed in the Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on August 31, 2020, with Cole Office & Industrial REIT (CCIT III), Inc. (“CCIT III”) and Cole Credit Property Trust V, Inc. (“CCPT V”), pursuant to (i) the Agreement and Plan of Merger, dated August 30, 2020 (as amended on November 3, 2020, the “CCIT III Merger Agreement”), by and among the Company, Thor III Merger Sub, LLC, a wholly owned subsidiary of the Company (“CCIT III Merger Sub”), and CCIT III and (ii) the Agreement and Plan of Merger, dated August 30, 2020 (as amended on each of October 22, 2020, October 24, 2020 and October 29, 2020, the “CCPT V Merger Agreement” and together with the CCIT III Merger Agreement, the “Merger Agreements”), by and among the Company, Thor V Merger Sub, LLC, a wholly owned subsidiary of the Company (“CCPT V Merger Sub”), and CCPT V.
| Item 1.01 | Entry into a Material Definitive Agreement. |
|---|
The information set forth in Item 8.01 of this Current Report on Form 8-K is incorporated by reference into this Item 1.01 in its entirety.
On December 21, 2020, the Company, through CIM Real Estate Finance Operating Partnership, LP, the Company’s operating partnership (“CMFT OP”), entered into a Modification Agreement and Limited Consent (the “Modification Agreement”) by and among CMFT OP, JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), and the lender parties thereto (the “Lenders”). The Modification Agreement modifies the Company’s second amended and restated credit agreement, as described in the Company’s Current Report on Form 8-K filed with the SEC on March 17, 2017 (the “Second Amended and Restated Credit Agreement”), to, among other things:
| • | extend the maturity date under the Second Amended and Restated Credit Agreement to March 15, 2022; |
|---|---|
| • | set forth procedures by which the parties will select a replacement benchmark interest rate in the event that the London Interbank Offered Rate (“LIBOR”), the current benchmark interest rate on the Eurodollar Rate Loans (as defined in the Second Amended and Restated Credit Agreement) under the Second Amended and Restated Credit Agreement, is no longer available or appropriate as a reference rate upon which to determine the interest rate on the Eurodollar Rate Loans after December 31, 2021, the date on which contributing banks will no longer be required to submit rate information from which LIBOR is calculated; |
| --- | --- |
| • | specify that a default under the CCPT V Credit Facility (as defined below) beyond any applicable notice or grace period is an event of default; |
| --- | --- |
| • | provide that any Consolidated Group Investments (as defined in the Second Amended and Restated Credit Agreement) in excess of the limits in Section 7.02 of the Second Amended and Restated Credit Agreement shall no longer constitute an event of default but shall be excluded from the calculation of “Total Asset Value”; and |
| --- | --- |
| • | modify the minimum consolidated net worth covenant to $1.75 billion. |
| --- | --- |
Pursuant to the Modification Agreement and subject to the satisfaction of certain conditions set forth therein, the Administrative Agent and the Lenders consented to the consummation of (i) the merger of CCIT III with and into CCIT III Merger Sub (the “CCIT III Merger”) and (ii) the merger of CCPT V with and into CCPT V Merger Sub (the “CCPT V Merger” and together with the CCIT III Merger, the “Mergers”).
The Modification Agreement contains customary representations, warranties and borrowing conditions. CMFT OP paid certain fees under the Modification Agreement. The Company had $960.0 million of debt outstanding under the Second Amended and Restated Credit Agreement as of December 21, 2020 at a weighted average interest rate of 3.48% and $280.0 million in unused capacity, subject to borrowing availability. The Company had available borrowings of $64.9 million as of December 21, 2020.
The foregoing description of the Modification Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Modification Agreement, which will be filed as an exhibit to CMFT’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
|---|
Modification of Second Amended and Restated Credit Agreement
The information set forth under Item 1.01 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 2.03 in its entirety.
Assumption of CCPT V Credit Agreement Resulting from the CCPT V Merger
On December 21, 2020, upon the consummation of the CCPT V Merger, a subsidiary of the Company assumed CCPT V’s obligations as guarantor under a guaranty provided by CCPT V pursuant to the credit agreement by and among Cole Operating Partnership V, LP, the operating partnership of CCPT V (“CCPT V OP”), JPMorgan Chase Bank, N.A., as administrative agent, and the lender parties thereto, as described in CCPT V’s Current Report on Form 8-K filed with the SEC on March 30, 2018 (the “CCPT V Credit Agreement”), and as modified by a modification agreement dated as of May 31, 2018 and the CCPT V Second Modification Agreement (as defined below). The CCPT V Credit Agreement allows for borrowings of up to $350.0 million (the “CCPT V Credit Facility”). The CCPT V Credit Facility includes up to $220.0 million in term loans and up to $130.0 million in revolving loans.
Depending upon the type of loan specified and overall leverage ratio, the CCPT V Credit Facility bears interest at (i) the one-month, two-month, three-month or six-month LIBOR multiplied by the statutory reserve rate (the “Adjusted LIBO Rate”) for the interest period plus an applicable rate ranging from 1.30% to 1.70%; or (ii) a base rate ranging from 0.30% to 0.70%, plus the greater of: (a) JPMorgan Chase Bank, N.A.’s Prime Rate (as defined in the CCPT V Credit Agreement); (b) the NYFRB Rate (as defined in the CCPT V Credit Agreement) plus 0.50%; or (c) the Adjusted LIBO Rate for a period of one month plus 1.0%. CCPT V had $262.0 million of debt outstanding under the CCPT V Credit Facility as of December 21, 2020 at a weighted average interest rate of 3.82% and $88.0 million in unused capacity, subject to borrowing availability. CCPT V had available borrowings of $12.4 million as of December 21, 2020.
The CCPT V Credit Agreement contains provisions with respect to covenants, events of default and remedies customary for facilities of this nature. In particular, the CCPT V Credit Agreement requires CCPT V Merger Sub (as successor by merger to CCPT V) to maintain a minimum consolidated net worth of not less than $225.0 million plus 75% of the equity interests issued by CCPT V Merger Sub, a net leverage ratio less than or equal to 60%, a fixed charge coverage ratio greater than 1.50, an unsecured debt to unencumbered asset value ratio equal to or less than 60% (or 65% for up to two consecutive fiscal quarters immediately following a material acquisition), an unsecured debt service coverage ratio greater than 1.75, a secured debt ratio equal to or less than 40%, recourse debt not greater than 15% of total asset value, a portfolio debt yield of not less than 10.24% and a minimum unencumbered asset value of not less than $250 million.
Following the consummation of the CCPT V Merger, on December 21, 2020, the Company, through CCPT V OP, entered into a Second Modification Agreement and Limited Consent (the “CCPT V Second Modification Agreement”) by and among CCPT V OP, JPMorgan Chase Bank, N.A., as administrative agent (the “CCPT V Administrative Agent”), and the lender parties thereto (the “CCPT V Lenders”). The CCPT V Second Modification Agreement modifies the CCPT V Credit Agreement to, among other things:
| • | subject to the satisfaction of certain conditions set forth in the CCPT V Second Modification Agreement, obtain the consent of the CCPT V Administrative Agent and the CCPT V Lenders to the CCPT V Merger; |
|---|---|
| • | account for the consummation and effectiveness of the CCPT V Merger; |
| --- | --- |
| • | modify the maturity date under the CCPT V Credit Agreement to March 15, 2022; |
| --- | --- |
| • | specify that a default under the Second Amended and Restated Credit Agreement beyond any applicable notice or grace period is an event of default; and |
| --- | --- |
| • | set forth procedures by which the parties will select a replacement benchmark interest rate in the event that LIBOR, the current benchmark interest rate on the LIBOR Loans (as defined in the CCPT V Credit Agreement) under the CCPT V Credit Agreement, is no longer available or appropriate as a reference rate upon which to determine the interest rate on the LIBOR Loans after December 31, 2021, the date on which contributing banks will no longer be required to submit rate information from which LIBOR is calculated. |
| --- | --- |
The CCPT V Second Modification Agreement contains customary representations, warranties and borrowing conditions. CCPT V OP paid certain fees under the CCPT V Second Modification Agreement.
The foregoing description of the CCPT V Second Modification Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the CCPT V Second Modification Agreement, which will be filed as an exhibit to CMFT’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
|---|
The information set forth in Item 8.01 of this Current Report on Form 8-K is incorporated by reference into this Item 5.02 in its entirety.
In connection with the CCIT III Merger, effective at the effective time of the CCIT III Merger, the size of the board of directors (the “Board”) of the Company was increased by one director and Stephen O. Evans was elected to serve as a director of the Company until the 2021 annual meeting of stockholders of the Company and until his successor is duly elected and qualifies.
In connection with the CCPT V Merger, effective at the effective time of the CCPT V Merger, the size of the Board was increased by three directors and each of Calvin E. Hollis, Marcus E. Bromley and Robert A. Gary, IV was elected to serve as a director of the Company until the 2021 annual meeting of stockholders of the Company and until his successor is duly elected and qualifies.
Other than as provided in the Merger Agreements, there are no arrangements or understandings between Messrs. Evans, Hollis, Bromley and Gary and any person pursuant to which he was elected to serve as a director of the Company. There are no family relationships between any of Messrs. Evans, Hollis, Bromley or Gary and any director or executive officer of the Company, and none of them has any direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.
Compensatory arrangements for Messrs. Evans, Hollis, Bromley and Gary will be consistent with the Company’s previously disclosed standard arrangements for non-employee directors. Such arrangements are described in the proxy statements/prospectuses that the Company filed with the SEC pertaining to each of the CCIT III Merger and the CCPT V Merger. Each of Messrs. Evans, Hollis, Bromley and Gary will also enter into the Company’s standard indemnification agreement for directors.
| Item 8.01 | Other Events. |
|---|
Completion of CCIT III Merger
On December 21, 2020, subject to the terms and conditions of the CCIT III Merger Agreement, CCIT III merged with and into CCIT III Merger Sub, with CCIT III Merger Sub surviving the CCIT III Merger as a wholly owned subsidiary of the Company. In accordance with the applicable provisions of the Maryland General Corporation Law (the “MGCL”), the separate existence of CCIT III ceased.
At the effective time of the CCIT III Merger, each issued and outstanding share of CCIT III’s Class A common stock, $0.01 par value per share (the “CCIT III Class A Common Stock”), and Class T common stock, $0.01 par value per share (the “CCIT III Class T Common Stock” and, together with the CCIT III Class A Common Stock, the “CCIT III Common Stock”), was converted into the right to receive 1.098 shares of CMFT’s common stock, $0.01 par value per share (the “CMFT Common Stock”), subject to the treatment of fractional shares in accordance with the CCIT III Merger Agreement (the “CCIT III Merger Consideration”). At the effective time of the CCIT III Merger, each issued and outstanding share of CCIT III Class A Common Stock granted under CCIT III’s 2018 Equity Incentive Plan, whether vested or unvested, was cancelled in exchange for an amount equal to the CCIT III Merger Consideration.
The foregoing description of the CCIT III Merger Agreement is only a summary, does not purport to be complete and is qualified in its entirety by reference to the full text of the CCIT III Merger Agreement. A copy of the CCIT III Merger Agreement and the amendment thereto are filed as Exhibit 2.1 and Exhibit 2.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.
Completion of CCPT V Merger
On December 21, 2020, subject to the terms and conditions of the CCPT V Merger Agreement, CCPT V merged with and into CCPT V Merger Sub, with CCPT V Merger Sub surviving the CCPT V Merger as a wholly owned subsidiary of the Company. In accordance with the applicable provisions of the MGCL, the separate existence of CCPT V ceased.
At the effective time of the CCPT V Merger, each issued and outstanding share of CCPT V’s Class A common stock, $0.01 par value per share (the “CCPT V Class A Common Stock”), and Class T common stock, $0.01 par value per share (the “CCPT V Class T Common Stock” and, together with the CCPT V Class A Common Stock, the “CCPT V Common Stock”), was converted into the right to receive 2.892 shares of CMFT Common Stock, subject to the treatment of fractional shares in accordance with the CCPT V Merger Agreement (the “CCPT V Merger Consideration”). At the effective time of the CCPT V Merger, each issued and outstanding share of CCPT V Class A Common Stock granted under CCPT V’s 2018 Equity Incentive Plan, whether vested or unvested, was cancelled in exchange for an amount equal to the CCPT V Merger Consideration.
The foregoing description of the CCPT V Merger Agreement is only a summary, does not purport to be complete and is qualified in its entirety by reference to the full text of the CCPT V Merger Agreement. A copy of the CCPT V Merger Agreement and the amendments thereto are filed as Exhibit 2.3, Exhibit 2.4, Exhibit 2.5 and Exhibit 2.6 to this Current Report on Form 8-K and are incorporated herein by reference.
Combined Company
The combined company after the Mergers (the “Combined Company”) retains the name “CIM Real Estate Finance Trust, Inc.” Each Merger is intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended.
On December 22, 2020, the Company issued a press release in connection with the closing of the Mergers, a copy of which is filed as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.
Distribution
On December 20, 2020, the Board authorized a distribution for the month of December 2020 of $0.0303 per share of CMFT Common Stock. On August 30, 2020, the Board approved the suspension of the Company’s distribution reinvestment plan, and therefore, distributions for the month of December 2020 will be paid in cash to all stockholders. The distribution is payable to stockholders of record as of the close of business on December 30, 2020 and will be paid in cash in January 2021.
| Item 9.01 | Financial Statements and Exhibits. |
|---|
(d) Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CIM REAL ESTATE FINANCE TRUST, INC. | ||
|---|---|---|
| Date: December 22, 2020 | By: | /S/ Nathan D. DeBacker |
| Nathan D. DeBacker | ||
| Vice President, Chief Financial Officer and Treasurer |
EX-99.1
Exhibit 99.1
CIM Real Estate Finance Trust, Inc. Announces Completion of Mergers with Two Net Lease REITs Managed by CIM Group
Stock-for-stock mergers result in a credit-focused REITwith $4.8 billion of total assets, greater diversification and operational efficiencies with the goal of creating near-, medium- and long-term value
12/22/20
LOS ANGELES—CIM Real Estate Finance Trust, Inc. (“CMFT”), Cole Office & Industrial REIT (CCIT III), Inc. (“CCIT III”) and Cole Credit Property Trust V, Inc. (“CCPT V”) today announced that CMFT has acquired each of CCIT III and CCPT V in separate stock-for-stock, tax-free merger transactions pursuant to definitive agreements executed in August 2020 and amended in October and November 2020. CMFT, CCIT III and CCPT V are non-traded REITs managed by affiliates of CIM Group, LLC (“CIM”).
The combined CMFT, CCIT III and CCPT V (“Combined Company”) has approximately $4.8 billion in total asset value and a net asset value (“NAV”) of $2.6 billion, based upon the companies’ respective June 30, 2020 NAVs, creating a leading commercial real estate credit-focused REIT with scale, primarily invested in net lease assets and commercial real estate debt. The immediate benefits of the transaction include increased scale along with asset and tenant diversity, while maintaining a flexible balance sheet. The Combined Company’s greater size and improved portfolio diversification should provide it with greater access to debt and equity capital markets. The merger transactions are anticipated to better position the Combined Company for a potential future liquidity event, including a public market listing.
“The Combined Company will provide several benefits for stockholders and will be well-positioned to navigate the post-COVID economic environment with enhanced financial and operational flexibility and efficiency, making the Combined Company more valuable,” said Richard Ressler, Principal and Co-Founder of CIM Group.
The transactions were subject to the approval of the respective mergers and certain other matters by stockholders of CCIT III and CCPT V. Both CCIT III and CCPT V stockholders voted in favor of the respective mergers during virtual special meetings of stockholders held on December 17, 2020. CCIT III stockholders will receive 1.098 shares of CMFT stock for each CCIT III share and CCPT V stockholders will receive 2.892 shares of CMFT stock for each CCPT V share.
Cautionary Statement Regarding Forward-Looking Information
This communication includes certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. Statements can generally be identified as forward-looking because they include words such as “believes,” “anticipates,” “expects,” “would,” “could,” or words of similar meaning. Statements that describe future plans and objectives are also forward-looking statements. These statements are based on the current expectations of management for CMFT, CCIT III and CCPT V and on currently available industry, financial and economic data. Actual results may vary materially from those expressed or implied by the forward-looking statements, which are subject to a number of risks and uncertainties, many of which are out of the control of such companies, including, but not limited to, those associated with the ability of the combined companies to achieve expected cost synergies or to engage in any liquidity event or public offering; the availability of suitable investment or disposition opportunities and access to debt and equity capital markets; the impact of the COVID-19 pandemic on the operations and financial condition the Combined Company and the real estate industries in which it operates, including with respect to occupancy rates, rent deferrals and the financial condition of its tenants; general financial and economic conditions, which may be affected by government responses to the COVID-19 pandemic; legislative and regulatory changes; and other factors, including those set forth in the section entitled “Risk Factors” in CMFT’s, CCIT III’s and CCPT V’s most recent Annual Reports on Form 10-K, as amended, and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission (“SEC”), and other reports filed by CMFT, CCIT III and CCPT V with the SEC, copies of which are available on the SEC’s website, www.sec.gov. Forward-looking statements are not guarantees of performance or results and speak only as of the date such statements are made. Except as required by law, none of CMFT, CCIT III or CCPT V undertakes any obligation to update or revise any forward-looking statement in this communication, whether to reflect new information, future events, changes in assumptions or circumstances or otherwise.
About CIM Real Estate Finance Trust, Inc.
CMFT is a public non-traded corporation that has elected to be taxed and currently qualifies as a REIT. CMFT holds investments in net lease and multi-tenant retail assets as well as real estate loans and other credit investments. CMFT is managed by affiliates of CIM. ****
About CIM Group
CIM is a community-focused real estate and infrastructure owner, operator, lender and developer. Since 1994, CIM has sought to create value in projects and positively impact the lives of people in communities across the Americas by delivering more than $60 billion of essential real estate and infrastructure projects. CIM’s diverse team of experts applies its broad knowledge and disciplined approach through hands-on management of real assets from due diligence to operations through disposition. CIM strives to make a meaningful difference in the world by executing key environmental, social and governance (ESG) initiatives and enhancing each community in which it invests. For more information, visit www.cimgroup.com.
Shareholder Relations
ShareholderRelations@cimgroup.com
Media Relations
Karen Diehl
Diehl Communications
karen@diehlcommunications.com