CRIIMI MAE Reports First Quarter 2005 Net Income ROCKVILLE, Md.,
May 5 /PRNewswire-FirstCall/ -- CRIIMI MAE Inc. (NYSE:CMM) today
reported net income to common shareholders of $828,000 or $0.05 per
diluted common share in the first quarter of 2005 compared to net
income to common shareholders of $2.5 million or $0.16 per diluted
common share for the same period in 2004. FIRST QUARTER 2005
HIGHLIGHTS -- Book value and adjusted book value (described below)
were $22.38 and $16.94, respectively, per diluted common share at
March 31, 2005 -- Generated $12.4 million of cash during the first
quarter from the retained CMBS portfolio and non-core assets --
Total liquidity at March 31, 2005 approximated $53 million -- Loans
in Special Servicing decreased by 9% to $751 million as of March
31, 2005 compared to $821 million as of December 31, 2004 --
Recognized net other charges of $3.0 million for the quarter Mark
Jarrell, President and Chief Operating Officer, said: "Our retained
CMBS portfolio continues to generate significant cash flow and the
balance of loans in special servicing continues to decline. We are
pleased that specially-serviced hotel loans, which represent the
largest percentage of loans in special servicing, has decreased
over the last several quarters as the economy and the lodging
sector continue to improve. This quarter, we decreased our overall
expected loss estimate related to our CMBS by $9 million to $619
million as of March 31, 2005, primarily as a result of changes in
the amount and timing of resolutions and dispositions of certain
specially- serviced assets. A change in the timing of anticipated
cash flows for certain of the Company's CMBS resulted in this
quarter's $3.5 million impairment charge." FINANCIAL RESULTS Net
Income For the three months ended March 31, 2005, net income to
common shareholders was $828,000 or $0.05 per diluted common share
compared to $2.5 million, or $0.16 per diluted common share for the
first quarter of 2004. Results for the first quarter of 2005
included net interest margin of $9.5 million, total operating
expenses of $6.5 million and net other charges of $3.0 million,
including $3.5 million of impairment on certain of the Company's
subordinated commercial mortgage-backed securities ("CMBS"). Net
Interest Margin for the Three Months Ended March 31, 2005 CRIIMI
MAE's net interest margin decreased to $9.5 million for the three
months ended March 31, 2005 compared to $10.9 million for the
corresponding period in 2004 primarily due to the higher cost of
financing the $260 million of non-recourse match-funded debt issued
in June 2004 as part of the Company's refinancing of a significant
amount of its recourse debt. During the first quarter of 2005, the
Company's average total debt balance was $622 million compared to
$727 million for the first quarter of 2004. The weighted average
effective interest rate on the Company's total average debt
outstanding during the first quarter was 8.5% compared to 7.4% for
the same period in 2004. Total Operating Expenses Operating
expenses during the three months ended March 31, 2005 included the
incurrence of certain non-routine costs as follows: Corporate
G&A: During the three months ended March 31, 2005, corporate
general and administrative expenses of $2.8 million included legal
fees of $475,000 incurred in connection with the Board of
Directors' review of strategic alternatives. Depreciation and
Amortization: Depreciation and amortization expense of $601,000
included $503,000 related to the write-off of certain deferred
costs. Servicing G&A: Servicing general and administrative
expenses of $2.1 million included $235,000 related to non-routine
special servicing costs. Other Items Results for the first quarter
of 2005 also included reductions in aggregate impairment charges,
net losses on insured mortgage security dispositions and
extinguishment of debt as compared to the first quarter of 2004.
This quarter's $3.5 million of impairment charges on CMBS was
calculated as the difference between the fair value and amortized
cost of certain of the Company's CMBS as of March 31, 2005 and
resulted primarily from a change in the timing of anticipated cash
flows for these CMBS. For the first quarter of 2004, impairment
charges totaled $3.6 million, including a $3.1 million write down
on two of the Company's non-core assets and $518,000 on one of the
Company's CMBS. Net losses on insured mortgage security
dispositions were $77,000 in the first quarter of 2005 compared to
losses of $626,000 in the first quarter of 2004, due to fewer
prepayments in 2005. The Company incurred no losses on
extinguishment of debt this quarter compared to a net loss on
extinguishment of debt of $707,000 associated with the refinancing
of one of the Company's insured mortgage portfolios in the first
quarter of 2004. LIQUIDITY AND SHAREHOLDERS' EQUITY Increased
Liquidity As of March 31, 2005, total liquidity approximated $52.7
million, including cash and cash equivalents of approximately $48.6
million and $4.1 million in liquid securities, compared to total
liquidity of $45.1 million at December 31, 2004. CRIIMI MAE's
retained CMBS portfolio, along with its other assets, continued to
generate significant cash in the first quarter of 2005. Sources of
cash included $11.4 million from the retained CMBS portfolio and
$1.0 million from its non-core assets. Cash outflows during the
first quarter of 2005 included interest payments on the Company's
debt (excluding match-funded debt) of approximately $500,000, $2.8
million of corporate general and administrative expenses, $200,000
in interest rate swap payments, $434,000 of maintenance fee expense
and $1.5 million for payment of preferred dividends. Unlike most
other REITs, CRIIMI MAE is currently able to distribute or retain
its net cash flows as a result of its tax net operating loss (NOL)
carryforwards. As a result of the Company's election to be taxed as
a trader in 2000, the Company has accumulated unused NOLs of
approximately $291.4 million as of March 31, 2005. Any accumulated
and unused net operating losses, subject to certain limitations,
generally may be carried forward for up to 20 years to offset
taxable income until fully utilized. As discussed in the Company's
quarterly and annual reports filed with the Securities and Exchange
Commission, the Company's future use of NOLs for tax purposes could
be substantially limited in the event of an "ownership change" as
defined under Section 382 of the Internal Revenue Code. The Company
expects any dividends paid in 2005 to be taxable to the recipients
to the extent of the Company's taxable income for the year. The
determination of the taxability of a dividend distribution is based
on the current year's earnings and profits (before application of
the dividends paid deduction and NOL carryforwards), which
approximates the Company's taxable income. The Company expects to
offset taxable income, if any, by first applying the dividends paid
deductions related to distributions on its stock and then by
utilizing its prior year NOL carryforwards in 2005. Shareholders'
Equity As of March 31, 2005, shareholders' equity was approximately
$412.5 million or $22.38 per diluted common share as compared to
$428.1 million or $23.49 per diluted common share at December 31,
2004. The diluted book value per common share is based on total
shareholders' equity less the liquidation value of the Company's
then outstanding preferred stock. The net decrease in total
shareholders' equity was primarily attributable to a reduction in
the value of CMBS due principally to an increase in Treasury rates
as of quarter end. Shareholders' equity as of March 31, 2005
includes, among other things, the excess of the carrying amount of
the Company's CMBS rated AAA and the senior interest in its BBB-
rated CMBS over the related non-recourse debt. The Company does not
actually own these assets but is required by GAAP to include them
on its balance sheet. After removing the net impact of the CMBS
pledged to secure non-recourse debt and the related non-recourse
debt, the adjusted book value was $16.94 per diluted common share
and $17.27 per diluted common share as of March 31, 2005 and
December 31, 2004, respectively. The net decrease in adjusted book
value is primarily attributable to a reduction in the value of the
retained CMBS portfolio due principally to an increase in Treasury
rates as of quarter end. The Company believes adjusted book value
per diluted common share provides a more meaningful measure of book
value because the Company receives no cash flows from the CMBS
pledged to secure non-recourse debt that are reflected on its
consolidated balance sheet and used to calculate its book value in
accordance with GAAP. All cash flows related to the CMBS pledged to
secure non-recourse debt are used to service the related
non-recourse debt. The reconciliation of this non-GAAP financial
measure to shareholders' equity is presented in the tables that
follow. CRIIMI MAE had 15,584,734 and 15,546,667 common shares
outstanding as of March 31, 2005 and December 31, 2004,
respectively. As of May 2, 2005, the Company has 15,587,827 common
shares outstanding. EXISTING OPERATIONS As of March 31, 2005,
specially serviced mortgage loans totaled $751.1 million, or 5.9%
of the aggregate $12.7 billion of mortgage loans underlying the
Company's CMBS. Hotel property mortgage loans (including the Shilo
Inn loans with an aggregate principal balance of $134.7 million)
accounted for $316.1 million, or 42% of the special servicing
portfolio at quarter end, down from $375.7 million, or 46% of the
special servicing portfolio at year end. The Company decreased its
overall expected loss estimate related to its CMBS from $628
million at December 31, 2004 to $619 million at March 31, 2005,
including cumulative actual losses of approximately $274 million
realized from 1999 through March 31, 2005. These cumulative
expected losses of $619 million are anticipated to occur through
the life of the Company's CMBS. FIRST QUARTER CONFERENCE CALL
CRIIMI MAE will hold a conference call to discuss its first quarter
2005 results on Friday, May 6, 2005 at 11:00 a.m. ET. To access the
conference call, please dial in to the following: Teleconference #
1-800-798-2884 (North America), 1-617-614-6207 (International).
Please refer to passcode 82160904. To access the call by audio
webcast, go to CRIIMI MAE's web site at
http://www.criimimaeinc.com/ and click on the link on the home
page. THE COMPANY CRIIMI MAE Inc. is a commercial mortgage company
structured as a REIT. CRIIMI MAE owns and manages a significant
portfolio of commercial mortgage- related assets. Historically,
CRIIMI MAE's primary focus was acquiring high- yielding,
non-investment grade commercial mortgage-backed securities
(subordinated CMBS). For further information about the conference
call or the Company, see the Company's Web site:
http://www.criimimaeinc.com/. Shareholders and securities brokers
should contact Susan Railey at 301-255-4740, e-mail , and news
media should contact James Pastore, Pastore Communications Group
LLC, at 202-546-6451, e-mail . Note: Forward-looking statements or
statements that contain the words "believe," "anticipate,"
"expect," "contemplate," "may," "will" and similar projections
contained in this release involve a variety of risks and
uncertainties. These risks and uncertainties include whether the
Company will be able to maximize the value of its existing assets
(by maximizing recoveries on loans in special servicing or
otherwise) or achieve or realize upon its other goals or strategic
alternatives, minimize the risk associated with its assets, return
loans to performing status or otherwise successfully resolve
defaulted loans, or complete other investment strategies, improve
financial performance, support liquidity, effectively hedge its
interest rate exposure; the trend in interest rates (including
LIBOR) and the impact on the Company's asset values and borrowing
costs; the trends in the commercial real estate and CMBS markets;
competitive pressures; the trend and effect of defaulted loans,
future losses and impact of the reimbursement of master servicer
advances on the timing and amount of the Company's equity and cash
flows and its need for liquidity; general economic conditions;
restrictive covenants and other restrictions under the operative
documents evidencing the Company's outstanding secured and other
obligations (including a repurchase agreement); the possibility
that the Company's trader election may be challenged and that the
Company will, therefore, not be able to mark-to-market its
securities, or that it will be limited in its ability to recognize
certain losses, resulting in an increase in shareholder
distribution requirements with the possibility that the Company may
not be able to make such distributions or maintain REIT status; as
well as the risks and uncertainties that are set forth from time to
time in the Company's publicly filed reports, including its Annual
Report on Form 10-K for the most recent year and Quarterly Report
on Form 10-Q for the most recent quarter. Such statements are
subject to these risks and uncertainties, which could cause actual
results to differ materially from those anticipated. CRIIMI MAE
assumes no obligation to update or supplement forward-looking
statements that become untrue because of subsequent events. CRIIMI
MAE INC. CONSOLIDATED STATEMENTS OF INCOME For the three months
ended March 31, 2005 2004 Interest income: CMBS: CMBS pledged to
secure recourse debt $ 2,802,474 $ 15,759,941 CMBS 7,022,202 - CMBS
pledged to secure non- recourse debt 12,456,236 6,531,503 Insured
mortgage securities 338,985 2,018,105 Total interest income
22,619,897 24,309,549 Interest expense: Recourse debt 1,733,006
4,832,550 Non-recourse debt 11,420,721 8,513,142 Other 4,587 42,448
Total interest expense 13,158,314 13,388,140 Net interest margin
9,461,583 10,921,409 Fee/other income: Servicing revenue 1,970,871
3,007,816 Other income 365,237 741,890 Total fee/other income
2,336,108 3,749,706 Operating expenses: General and administrative
expenses 2,816,096 2,711,153 Equity compensation expense 287,600
144,464 Depreciation and amortization 601,022 116,413 Servicing
general and administrative expenses 2,101,365 1,925,370 Servicing
amortization, depreciation, and impairment expenses 213,027 227,727
Income tax expense - 3,016 BREF maintenance fee 434,000 434,000
Total operating expenses 6,453,110 5,562,143 Other: Net losses on
insured mortgage security dispositions (77,223) (625,813) Net loss
on extinguishment of debt - (707,116) Impairment of REO asset -
(2,608,740) Impairment of CMBS (3,484,905) (518,215) Impairment of
mezzanine loan - (526,865) Net gains on derivatives 489,466 318,160
Net income (expenses) from lease termination and recapitalization
37,605 (242,840) Total other (3,035,057) (4,911,429) Net income
before dividends paid on preferred shares 2,309,524 4,197,543
Dividends paid on preferred shares (1,481,708) (1,726,560) Net
income to common shareholders $ 827,816 $ 2,470,983 Earnings per
common share: Basic $ 0.05 $ 0.16 Diluted $ 0.05 $ 0.16 Shares used
in computing basic earnings per share 15,516,287 15,385,906 Shares
used in computing diluted earnings per share 15,946,310 15,642,742
CRIIMI MAE INC. As of As of Balance Sheet Data March 31, 2005
December 31, 2004 Retained CMBS Portfolio, at fair value $
327,248,575 $ 334,903,970 CMBS pledged to secure non-recourse debt,
at fair value 614,882,976 625,752,451 Insured mortgage securities,
at fair value 14,966,999 37,783,332 Cash and cash equivalents
48,571,925 41,073,516 TOTAL ASSETS 1,033,162,032 1,069,939,392
Total recourse debt 73,681,667 73,681,667 Total non-recourse debt
(match- funded and other non-recourse debt) 534,640,687 556,323,307
TOTAL DEBT 608,322,354 630,004,974 SHAREHOLDERS' EQUITY 412,462,970
428,057,560 For the three months ended Significant Sources and Uses
of Cash March 31, March 31, (in millions) 2005 2004 Sources and
Uses of Cash Related to Other Activities (1): Cash received from
Retained CMBS Portfolio $ 11.4 $ 9.5 Cash from non-core assets (2)
1.0 3.3 Cash used to service debt, excluding match-funded debt:
Principal payments - (1.3) Interest payments (0.5) (3.2) Cash used
to make interest rate swap payments (0.2) (0.8) General and
administrative expenses (3) (2.8) (2.7) BREF maintenance fee (3)
(0.4) (0.4) Cash used to pay preferred dividends (1.5) (1.7)
Sources and Uses of Cash Related to Equity/Other Transactions: Cash
used to purchase option on interest rate swap (0.3) - Cash from
issuance of Series B Preferred Stock - 14.9 Cash received/ used to
exercise clean-up calls related to non-recourse debt - (1.1) (1)
The amounts in this summary table do not include cash received on
our CMBS pledged to secure non-recourse debt and the associated
non- recourse debt payments. CMSLP's cash is not used to service
our debt or pay dividends and is therefore excluded from this
summary table. CMSLP retains its cash to fund its operations. (2)
Includes cash received primarily from our interests in the insured
mortgage securities, mezzanine loans and AIM Limited Partnerships.
The amount for the three months ended March 31, 2004 includes
proceeds aggregating $1.8 million from the liquidation of three AIM
Limited Partnerships. (3) The general and administrative expenses
and BREF maintenance fee are the amounts as reflected in our
consolidated income statement. General and administrative expenses
for the three months ended March 31, 2005 include certain costs
associated with the Board's review of strategic alternatives,
including legal costs of approximately $475,000. RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES CRIIMI MAE INC. COMPUTATION OF ADJUSTED
BOOK VALUE PER DILUTED COMMON SHARE As of As of March 31, 2005
December 31, 2004 Amount Book Value Amount Book Value (in per
Diluted (in per Diluted thousands) Common Share thousands) Common
Share Total shareholders' equity in conformity with GAAP $ 412,463
$ 428,058 Less: Liquidation value of preferred stock (54,475)
(54,475) Shareholders' equity attributable to common shareholders
357,988 $ 22.38 373,583 $23.49 Less: CMBS pledged to secure non-
recourse debt (614,883) (38.44) (625,752) (39.34) Add: Non-recourse
debt secured by pledge of CMBS 527,905 33.00 526,839 33.12 Adjusted
shareholders' equity attributable to common shareholders $ 271,010
$ 16.94 $ 274,670 $ 17.27 As of As of March 31, 2005 December 31,
2004 Shares used in computing book value per diluted common share
15,995,766 15,906,650 DATASOURCE: CRIIMI MAE CONTACT: For
shareholders and securities brokers: Susan B. Railey of CRIIMI MAE
Inc., +1-301-255-4740; or for news media: James T. Pastore,
+1-202-546-6451, for CRIIMI MAE Inc. Web site:
http://www.criimimaeinc.com/
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