REAL ESTATE-RELATED SECURITIES AND OTHER

3 Months Ended

Mar. 31, 2025

Investments, Debt and Equity Securities [Abstract]

NOTE 7 — REAL ESTATE-RELATED SECURITIES AND OTHER

As of March 31, 2025, the Company’s real estate-related securities and other had an aggregate estimated fair value of $302.0 million, which included 15 CMBS investments, one CLO subordinated note and four equity securities. The CMBS investments have initial maturity dates ranging from July 2025 through June 2058 and have interest rates ranging from 0.2% to 11.7% as of March 31, 2025, with one CMBS earning a zero coupon rate. As of March 31, 2025, the CLO subordinated note has an initial maturity date of July 2037 and an estimated effective yield of 14.9%. The following is a summary of the Company’s real estate-related securities and other as of March 31, 2025 (in thousands):


	Real Estate-Related Securities and Other
			Gross Unrealized
	Amortized Cost Basis		Gains		Losses		CECL		Fair Value
CMBS	$	435,568	$	696	$	(12,231)	$	(182,328)	$	241,705
CLO subordinated note	27,904		—		(3,049)		—		24,855
Equity securities	58,447		—		(22,977)		—		35,470

Total real estate-related securities and other	$	521,919	$	696	$	(38,257)	$	(182,328)	$	302,030

The following table provides the activity for the real estate-related securities and other during the three months ended March 31, 2025 (in thousands):


	Amortized Cost Basis		Unrealized (Loss) Gain		CECL		Fair Value
Real estate-related securities and other as of January 1, 2025	$	568,432	$	(112,542)	$	(110,062)	$	345,828





Accretion of discount on real estate-related securities	364		—		—		364
Accretion of interest income on CLO subordinated note	1,028		—		—		1,028
Sale of real estate-related securities	(44,026)		410				(43,616)
Capitalized interest income on real estate-related securities	311		—		—		311
Principal payments received on real estate-related securities	(1,848)		—		—		(1,848)
Proceeds from the repayment of portfolio investments on CLO subordinated note	(2,342)		—		—		(2,342)
Unrealized gains on real estate-related securities and other, net	—		3,549		—		3,549
Unrealized loss reclassified to CECL	—		71,022		—		71,022
Provision for credit losses	—		—		(72,266)		(72,266)
Real estate-related securities and other as of March 31, 2025	$	521,919	$	(37,561)	$	(182,328)	$	302,030

During the three months ended March 31, 2025, the Company sold CMBS with an aggregate amortized cost basis of $44.0 million, resulting in net proceeds of $43.6 million and a loss of $410,000, the loss of which was reclassified from other comprehensive income as a decrease to other income, net in the accompanying consolidated statements of operations. Unrealized gains and losses on CMBS and the CLO subordinated note are recorded in other comprehensive income, with a portion of the amount subsequently reclassified into other income, net in the accompanying condensed consolidated statements of operations as securities are sold and gains and losses are recognized. During the three months ended March 31, 2025, the Company recorded $3.5 million of net unrealized gain on its real estate-related securities and other, comprised of a $982,000 unrealized gain on CMBS and a $733,000 unrealized loss on the CLO subordinated note, which are included in other comprehensive income in the accompanying condensed consolidated statements of comprehensive income (loss) and a $3.3 million unrealized gain on the Company’s equity securities, which is included in unrealized gain (loss) on equity securities in the accompanying condensed consolidated statements of operations.

During the three months ended March 31, 2024, the Company recorded $6.5 million of net unrealized loss on its real estate-related securities and other, comprised of a $4.9 million unrealized gain on CMBS, which is included in other comprehensive income in the accompanying condensed consolidated statements of comprehensive income (loss) and an $11.4 million unrealized loss on the Company’s equity securities, which is included in unrealized gain (loss) on equity securities in the accompanying condensed consolidated statements of operations.

The scheduled maturities of the Company’s CMBS and CLO subordinated note as of March 31, 2025 are as follows (in thousands):


	CMBS and CLO
	Amortized Cost		Estimated Fair Value
Due within one year	$	363,637	$	181,657
Due after one year through five years	24,968		25,127
Due after five years through ten years	13,995		10,356
Due after ten years	60,872		49,420
Total	$	463,472	$	266,560

Actual maturities of real estate-related securities can differ from contractual maturities because borrowers on certain corporate credit securities may have the right to prepay their respective debt obligations at any time. In addition, factors such as prepayments and interest rates may affect the yields on such securities.

Current Expected Credit Losses

Current expected credit losses reflect the Company’s current estimate for potential credit losses related to real estate-related securities included in the Company’s condensed consolidated balance sheets. Current expected credit related losses are recorded

in increase in provision for credit losses on the Company’s condensed consolidated statements of operations. Refer to Note 2 — Summary of Significant Accounting Policies for further discussion of the Company’s current expected credit losses.

The following table presents the activity in the Company’s current expected credit losses related to its positions in two different tranches of a CMBS instrument for the three months ended March 31, 2025 and 2024 (in thousands):


	CMBS
Current expected credit losses as of January 1, 2025	$	110,062
Provision for credit losses	72,266
Current expected credit losses as of March 31, 2025	$	182,328


	CMBS
Current expected credit losses as of January 1, 2024	$	35,808
Reversal of credit losses	(246)
Current expected credit losses as of March 31, 2024	$	35,562

During the year ended December 31, 2023, the loan collateralizing one of the Company’s CMBS positions went into payment default and was appraised by a special servicer, resulting in an appraisal reduction that reduced cash flows received from the respective CMBS position during the year ended December 31, 2023. During the year ended December 31, 2024, the CMBS was modified to provide for an extended maturity date of July 2025 plus a six-month extension option, and to reduce the interest rate to a fixed 0.019% per annum. Additionally during the year ended December 31, 2024, the Company received notice of preliminary sales transaction activity in relation to the underlying collateral of this CMBS position, as well as an additional position in a separate tranche of this instrument, indicative of a bid below the carrying value of the investment. The Company considered various factors, including the factors noted above, in determining whether a credit loss existed. The present value of cash flows expected to be collected from the CMBS positions did not exceed their amortized cost basis, and as such the Company determined both tranches of the security the Company is invested in had incurred a credit loss. During the three months ended March 31, 2025, the property collateralizing the CMBS positions was re-appraised by the special servicer resulting in a further reduction to the appraisal value. As a result, the Company concluded it is considered more likely than not that the Company will not be able to recover the amortized cost prior to disposal, resulting in a reclassification of unrealized losses previously determined to be driven by non-credit specific factors, as further discussed below.

As a result of the credit loss incurred, the Company recorded a $1.2 million increase to the provision for credit losses on the condensed consolidated statements of operations during the three months ended March 31, 2025 and reclassified $71.0 million of unrealized loss previously recorded in other comprehensive income in the accompanying condensed consolidated statements of comprehensive income (loss) to increase in provision for credit losses on the condensed consolidated statements of operations. During the three months ended March 31, 2024, the Company recorded a $246,000 decrease to the provision for credit losses on the condensed consolidated statements of operations. As of March 31, 2025, the amortized cost basis of the CMBS positions identified as having incurred a credit loss was $192.8 million prior to any credit loss provisions. The Company will continue to monitor for changes in expected cash flows in order to continue to measure the credit loss.

As of March 31, 2025, there were six CMBS positions and one CLO subordinated note with an aggregate fair value of $147.6 million and $24.9 million, respectively, with unrealized losses reflected in other comprehensive income in the accompanying condensed consolidated statements of comprehensive income (loss). Upon evaluating these securities at the individual security level, the Company concluded that the unrealized losses included in other comprehensive income as of March 31, 2025 were noncredit-related and would be recovered from the securities’ estimated future cash flows. The Company considered various factors in reaching this conclusion, including that the Company did not intend to sell the securities, it was not considered more likely than not that the Company would be forced to sell the securities prior to recovering the amortized cost, and there were no material credit events that would have caused the Company to conclude that the amortized cost would not be recovered.

CIM REAL ESTATE FINANCE TRUST, INC. 10-Q