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CIM Commercial Trust Corporation Reports 2018 Second Quarter Results

August 9, 2018

DALLAS--(BUSINESS WIRE)--Aug 9, 2018--CIM Commercial Trust Corporation (NASDAQ & TASE: CMCT) (“we”, “our”, “CMCT”, or “CIM Commercial Trust”), a real estate investment trust (“REIT”) that primarily acquires, owns, and operates Class A and creative office assets in vibrant and improving urban communities throughout the United States, today reported operating results for the three months ended June 30, 2018.

Second Quarter 2018 Highlights

Same-store 1 office segment and cash net operating income (“NOI”) increased 8.6% and 4.8%, respectively, for the second quarter of 2018 from the corresponding period in 2017. Annualized rent per occupied square foot on a same-store basis increased 7.4% to $42.99 as of June 30, 2018 compared to June 30, 2017; annualized rent per occupied square foot across all properties was $44.54 as of June 30, 2018. On a same-store basis, the office portfolio was 94.1% leased as of June 30, 2018. During the second quarter of 2018, we executed 25,898 square feet of leases with terms longer than 12 months, including 19,442 square feet of recurring leases; all of which were executed at our same-store office portfolio, representing same-store cash rent growth per square foot of 17.0%. Net loss attributable to common stockholders was $1,876,000, or $0.04 per diluted share, for the second quarter of 2018. Funds from operations (“FFO”) attributable to common stockholders was $11,449,000, or $0.26 per diluted share, for the second quarter of 2018.

Management Commentary

Charles E. Garner II, CEO of CMCT, stated, “We again generated strong same-store NOI growth in the quarter, driven by higher average rent per square foot.

In addition, our same-store cash rent growth on recurring leases signed during the second quarter of 2018 was 17.0%. We expect this increase to benefit NOI and FFO in the future as these new leases commence.

Our premium rents, NOI growth, high leased percentage, and strong re-leasing spreads reflect the strength of our platform and Class A and creative office portfolio, which is concentrated in high barrier to entry gateway markets. We continue to target 4% to 6% annualized same-store NOI growth through 2022 driven by contractual rent increases and below market in-place leases rolling to market. We also have additional growth potential from already owned development sites.

We are focused on growing our net asset value (“NAV”) and cash flow per share and providing liquidity to shareholders at prices that reflect our strong prospects. As we have done since our 2014 merger, we will continue to actively manage our portfolio to drive returns for our shareholders, while further progressing toward a prudent capital structure that we anticipate will consist of approximately 45% common equity, based on fair values.

Since the beginning of 2014, we have provided $8.61 per share in regular dividends, special dividends, and a tender offer made available to all shareholders 2,3. Since the time of our merger in 2014, increases in our NAV per share plus the cumulative amount of regular and special dividends paid per share have resulted in a return per share of approximately 41% 2,4.”

Financial Highlights

As of June 30, 2018, our real estate portfolio consists of 21 assets, all of which are fee-simple properties. The portfolio includes 19 office properties (including one parking garage and two development sites, one of which is being used as a parking lot), totaling approximately 3.4 million rentable square feet and one hotel, which has 503 rooms and an ancillary parking garage. We also operate a lending business.

Second Quarter 2018

Net loss attributable to common stockholders was $1,876,000, or $0.04 per diluted share of common stock, for the three months ended June 30, 2018, compared to net income attributable to common stockholders of $91,291,000, or $1.16 per diluted share of common stock, for the three months ended June 30, 2017. The decrease is primarily attributable to a decrease in the gain on sale of real estate of $116,283,000, a decrease of $3,117,000 in net operating income of our operating segments, and an increase of $632,000 in corporate general and administrative expenses, partially offset by a decrease of $13,100,000 in impairment of real estate, a decrease of $11,271,000 in transaction costs, a decrease of $3,057,000 in interest expense, a decrease of $1,575,000 in asset management and other fees to related parties, and a decrease of $1,436,000 in depreciation and amortization expense.

FFO attributable to common stockholders was $11,449,000, or $0.26 per diluted share of common stock, for the three months ended June 30, 2018, compared to $2,869,000, or $0.04 per diluted share of common stock, for the three months ended June 30, 2017. The increase in FFO attributable to common stockholders was primarily attributable to a decrease of $11,271,000 in transaction costs, a decrease of $3,057,000 in interest expense, and a decrease of $1,575,000 in asset management and other fees to related parties, partially offset by $3,152,000 in redeemable preferred stock dividends accumulated, a decrease of $3,117,000 in net operating income of our operating segments, and an increase of $632,000 in corporate general and administrative expenses.

Year to Date 2018

Net loss attributable to common stockholders was $4,902,000, or $0.11 per diluted share of common stock, for the six months ended June 30, 2018, compared to net income attributable to common stockholders of $285,190,000, or $3.50 per diluted share of common stock, for the six months ended June 30, 2017.

FFO attributable to common stockholders was $21,571,000, or $0.49 per diluted share of common stock, for the six months ended June 30, 2018, compared to $26,265,000, or $0.32 per diluted share of common stock, for the six months ended June 30, 2017.

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1 Please see Reconciliation of Net Operating Income on page 10 for our definition of “same-store.”

2 CMCT is the product of a merger (the “Merger”) between CIM Urban REIT, LLC (“CIM REIT”), a fund operated by CIM Group, L.P., and PMC Commercial Trust in Q1 2014. Represents dividends declared on our common stock from January 1, 2014 through June 30, 2018. Excludes a special dividend paid to PMC Commercial Trust’s shareholders in connection with the Merger, but includes 2014 dividends received by CIM REIT shareholders prior to the Merger and dividends on convertible preferred stock received by Urban Partners II, LLC, an affiliate of CIM REIT and CIM Group, L.P., on an as converted basis, in the Merger. The amounts of regular and special cash dividends per share are based on the number of shares outstanding as of the applicable record dates. Past performance is not a guarantee of future results.

3 The per share equivalent in proceeds from the tender offer is $2.15, calculated by dividing $210,000,000, the amount used by CMCT to purchase shares of common stock of CMCT in the tender offer, by 97,676,197, the number of shares of common stock outstanding immediately prior to such tender offer.

4 The total return is calculated based on (i) NAV growth which represents the change in NAV from December 31, 2013 (the last period before the Merger) to December 31, 2017 and (ii) the aggregate amount of regular and special dividends declared and paid on our common stock described in Note 2 above. No NAV has been calculated since December 31, 2017. Please see Net Asset Value on page 13 for more information on our NAV and the calculation thereof. Past performance is not a guarantee of future results.

Segment Information

Our reportable segments during the three months ended June 30, 2018 consist of two types of commercial real estate properties, namely, office and hotel, as well as a segment for our lending business. Our reportable segments during the three months ended June 30, 2017 consist of three types of commercial real estate properties, namely, office, hotel and multifamily, as well as a segment for our lending business. Aggregate segment NOI was $29,352,000 for the three months ended June 30, 2018, compared to $32,469,000 for the three months ended June 30, 2017.

Office

Same-Store

Same-store office segment NOI increased 8.6% on a GAAP basis and 4.8% on a cash basis. The increase in same-store segment NOI is primarily due to an increase in revenue at certain of our California and Washington D.C. properties due to increases in occupancy and or rental rates and an increase in expense reimbursements at certain of our California properties and at one of our Washington, D.C. properties, partially offset by an increase in operating expenses and other reimbursable expenses at certain of our California properties and one of our Washington, D.C. properties and a decrease in lease termination income at one of our California properties.

At June 30, 2018, the Company’s office portfolio was 94.0% occupied, an increase of 80 basis points year-over-year on a same-store basis and 94.1% leased, a decrease of 10 basis points year-over-year on a same store basis. The annualized rent per occupied square foot on a same store basis was $42.99 at June 30, 2018 compared to $40.01 at June 30, 2017. For the three months ended June 30, 2018, the Company executed 19,442 square feet of recurring leases at our same-store office portfolio, representing same-store cash rent growth per square foot of 17.0%.

Total

Office segment NOI decreased to $23,863,000 in the three months ended June 30, 2018, from $25,716,000 in the three months ended June 30, 2017. Such decrease was primarily attributable to the sale of five office properties and a parking garage during the last nine months of 2017, a decrease in lease termination income at one of our California properties, and an increase in operating expenses and other reimbursable expenses at certain of our California properties and at one of our Washington, D.C. properties, partially offset by an increase due to the acquisition of two office properties in December 2017 and January 2018 and an increase in rental revenue and expense reimbursements at certain of our California and Washington D.C. properties due to increases in occupancy and or rental rates.

Hotel

Hotel segment NOI was $4,110,000 in the three months ended June 30, 2018, compared to $3,983,000 in the three months ended June 30, 2017.

Multifamily

During the three months ended June 30, 2017, we sold three of our five multifamily properties and sold the remaining two multifamily properties during the last six months of 2017. Multifamily segment NOI was $1,742,000 for the three months ended June 30, 2017.

Lending

Our lending segment primarily consists of our SBA 7(a) lending platform, which is a national lender that primarily originates loans to small businesses in the hospitality industry. Lending segment NOI was $1,379,000 in the three months ended June 30, 2018, compared to $1,028,000 in the three months ended June 30, 2017. The increase is primarily due to an increase in premium income from the sale of the guaranteed portion of our SBA 7(a) loans, an increase in interest income due to an increase in the principal balance of our loan portfolio as well as increases in the prime rate, and higher revenue as a result of the recognition of accretion for discounts related to increased prepayments on our loans, partially offset by interest expense that commenced in May 2018 as a result of the issuance of the SBA 7(a) loan-backed notes and an increase in interest expense from secured borrowings.

Debt and Equity

On May 30, 2018, we completed a securitization of the unguaranteed portion of certain of our SBA 7(a) loans receivable with the issuance of $38,200,000 of unguaranteed SBA 7(a) loan-backed notes. The SBA 7(a) loan-backed notes are collateralized by the right to receive payments and other recoveries attributable to the unguaranteed portions of certain of our SBA 7(a) loans receivable. The SBA 7(a) loan-backed notes mature on March 20, 2043, with monthly payments due as payments on the collateralized loans are received. Based on the anticipated repayments of our collateralized SBA 7(a) loans, we estimate the weighted average life of the SBA 7(a) loan-backed notes to be approximately three years. The SBA 7(a) loan-backed notes bear interest at the lower of the one-month LIBOR plus 1.40% or the prime rate less 1.08%. We reflect the SBA 7(a) loans receivable as assets on our consolidated balance sheet and the SBA 7(a) loan-backed notes as debt on our consolidated balance sheet.

During the three months ended June 30, 2018, we issued 476,462 Series A preferred units, with each Series A preferred unit consisting of one share of Series A preferred stock and one warrant to purchase 0.25 shares of our common stock, resulting in net proceeds of approximately $10,971,000. Net proceeds represent gross proceeds offset by costs specifically identifiable to the offering of the Series A preferred units, such as commissions, dealer manager fees, and other offering fees and expenses.

Dividends

On June 4, 2018, CIM Commercial Trust’s Board of Directors approved, and we declared, a quarterly cash dividend of $0.125 per common share. The dividend was paid on June 28, 2018 to stockholders of record on June 15, 2018.

In addition, the Board of Directors approved, and we declared, a quarterly cash dividend of $0.34375 per share of CMCT’s Series A preferred stock. For shares of Series A preferred stock issued during the second quarter of 2018, the dividend was prorated from the time of issuance. The dividend was paid on July 16, 2018 to stockholders of record on July 5, 2018.

About CMCT

CIM Commercial Trust is a real estate investment trust that primarily acquires, owns, and operates Class A and creative office assets in vibrant and improving urban communities throughout the United States. Its properties are primarily located in Los Angeles, the San Francisco Bay Area and Washington, D.C. CIM Commercial Trust is operated by affiliates of CIM Group, L.P., a vertically-integrated owner and operator of real assets with multi-disciplinary expertise and in-house research, acquisition, credit analysis, development, finance, leasing, and asset management capabilities ( www.cimcommercial.com ).

FORWARD-LOOKING STATEMENTS

The information set forth herein contains “forward-looking statements.” You can identify these statements by the fact that they do not relate strictly to historical or current facts or discuss the business and affairs of CIM Commercial Trust on a prospective basis. Further, statements that include words such as “may,” “will,” “project,” “might,” “expect,” “target,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “continue,” “pursue,” or “should” or the negative or other words or expressions of similar meaning, may identify forward-looking statements.

CIM Commercial Trust bases these forward-looking statements on particular assumptions that it has made in light of its experience, as well as its perception of expected future developments and other factors that it believes are appropriate under the circumstances. These forward-looking statements are necessarily estimates reflecting the judgment of CIM Commercial Trust and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors, including those set forth in CIM Commercial Trust’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, the Registration Statement on Form S-11 (Reg. No 333-210880) relating to the Series A preferred stock, and the Registration Statement on Form S-3 (Reg. No, 333-203639) relating to the sale of common stock by a selling shareholder.

As you read and consider the information herein, you are cautioned to not place undue reliance on these forward-looking statements. These statements are not guarantees of performance or results and speak only as of the date hereof. These forward-looking statements involve risks, uncertainties and assumptions. In light of these risks and uncertainties, there can be no assurance that the results and events contemplated by the forward-looking statements contained herein will in fact transpire. New factors emerge from time to time, and it is not possible for CIM Commercial Trust to predict all of them. Nor can CIM Commercial Trust assess the impact of each such factor or the extent to which any factor, or combination of factors may cause results to differ materially from those contained in any forward-looking statement. CIM Commercial Trust undertakes no obligation to publicly update or release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law.

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