MERGER

The Merger Agreement provided for the business combination of CIM REIT’s wholly-owned subsidiary, CIM Urban, and PMC Commercial. Pursuant to the Merger Agreement, Urban Partners II, LLC ("Urban II"), an affiliate of CIM REIT and CIM Urban, received 4,400,000 shares of newly-issued PMC Commercial common stock 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 PMC Commercial preferred stock was converted into 1.4 shares of PMC Commercial common stock, resulting in the issuance of 95,440,000 shares of PMC Commercial 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.

All shares of PMC Commercial common stock that were outstanding immediately prior to the closing of the Merger continued to remain outstanding following the Acquisition Date. In addition, stockholders of record of PMC Commercial at the close of the business day prior to the Acquisition Date received a special cash dividend of $27.50 per share of PMC Commercial common stock plus the pro-rata portion of PMC Commercial’s regular quarterly cash dividend accrued through the Acquisition Date, each of which was paid on March 25, 2014.

The Merger was accounted for as a reverse acquisition under the acquisition method of accounting with CIM Urban considered to be the accounting acquirer based upon the terms of the Merger Agreement. Based on the determination that 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.

Accordingly, the accompanying financial statements include (1) the historical financial information for CIM Urban for all periods presented, (2) the assets and liabilities of PMC Commercial acquired on March 11, 2014 and still owned or held by us in the consolidated balance sheets as of December 31, 2016 and 2015, respectively and (3) the results of PMC Commercial’s operations and cash flows in the consolidated statements of operations and cash flows from the Acquisition Date. The equity of CIM Commercial is the historical equity of CIM Urban retroactively restated to reflect the number of shares of stock issued by PMC Commercial pursuant to the Merger Agreement. In connection with the reverse acquisition, for purposes of presenting equity for CIM Commercial, the historical stockholders of PMC Commercial were deemed to have been issued 2,119,244 shares of Common Stock (2,226,509 shares of Common Stock, less 107,265 shares of treasury stock) on the Acquisition Date.

Based on an arrangement with PMC Commercial, certain legal and due diligence expenses related to the Merger incurred by PMC Commercial during a certain period of time were reimbursed by CIM Urban. For the year ended December 31, 2014, Merger related costs of $467,000 are included in transaction costs.

Unaudited Pro Forma Financial Information—The following unaudited pro forma consolidated results for the year ended December 31, 2014 assume the Merger was completed as of January 1, 2014:



	(in thousands, except per share amounts)
Pro forma revenue (A)	$	263,845
Pro forma net income	$	19,083
Pro forma basic and diluted earnings per share	$	0.20


(A)	Unaudited pro forma revenue including revenue from the acquired assets included in discontinued operations were $278,398,000 for the year ended December 31, 2014.

The unaudited pro forma amounts include the historical operating results of CIM Urban and PMC Commercial prior to the Merger, with adjustments directly attributable to the Merger. The unaudited pro forma results for the year ended December 31, 2014 exclude transaction costs of $3,046,000, a one-time gain of $1,166,000 related to the settlement of a contractual obligation, and the $4,918,000 bargain purchase gain recorded on the Acquisition Date.