ROCKVILLE, Md., Nov. 4 /PRNewswire-FirstCall/ -- CRIIMI MAE Inc.
(NYSE:CMM) today reported net income to common shareholders for the
third quarter of 2005 of $5.8 million, or $0.36 per diluted share,
compared to a net loss of $9.3 million, or a loss of $0.60 per
diluted share, for the third quarter of 2004. THIRD QUARTER 2005
HIGHLIGHTS -- Book value and adjusted book value (described below)
were $22.48 and $17.58, respectively, per diluted common share at
September 30, 2005 -- Generated $14.1 million of cash during the
third quarter from the retained CMBS portfolio and non-core assets
-- Total liquidity at September 30, 2005 increased to $71.5 million
-- Special Servicing portfolio decreased by 41% to $486 million as
of September 30, 2005 compared to $821 million as of December 31,
2004; decreased by 6% compared to $515 million as of June 30, 2005
-- Recognized $1.2 million of net gain on derivatives and $661,000
of impairment on CMBS during the third quarter Barry Blattman,
Chairman and Chief Executive Officer said: "We are pleased with our
operating results this quarter. The increase in liquidity to almost
$72 million demonstrates the significant cash flow that has been
generated by our seasoned portfolio of CMBS and the performance of
the mortgages underlying our CMBS has continued to improve as
evidenced by the decreasing special servicing portfolio. We were
especially pleased this quarter to be able to announce our
agreement to be acquired by CDP Capital-Financing at what the Board
of Directors believes is a very attractive price for our
shareholders." FINANCIAL RESULTS Increased Third Quarter Net Income
For the three months ended September 30, 2005, net income to common
shareholders was $5.8 million, or $0.36 per diluted common share,
compared to a net loss of $9.3 million, or a loss of $0.60 per
diluted common share, for the third quarter of 2004. Results for
the third quarter of 2005 included net interest margin of $9.7
million, servicing revenues of $2.0 million, corporate general and
administrative expenses of $2.7 million, and net other items
totaling $516,000. Other items included a net gain on derivatives
of $1.2 million and impairment of CMBS of $661,000. Net Interest
Margin for the Three Months Ended September 30, 2005 CRIIMI MAE's
net interest margin decreased slightly to $9.7 million for the
three months ended September 30, 2005 compared to $9.9 million for
the corresponding period in 2004 primarily due to the higher cost
of financing the $260 million (face amount) of non-recourse
match-funded debt issued as part of the Company's refinancing
transaction in June 2004 and a decrease in net interest margin as a
result of significant prepayments of the mortgages underlying the
Company's insured mortgage securities. During the third quarter of
2005, the Company's average total debt balance was $593 million
compared to $649 million for the third quarter of 2004. The
weighted average effective interest rate on the Company's total
average debt outstanding during the third quarter was 8.8% compared
to 8.3% for the same period in 2004. Servicing Revenues Servicing
revenues in the third quarter of 2005 decreased by $157,000 to $2.0
million as compared to $2.2 million for the same period in 2004
primarily due to a reduction in routine servicing fees as a result
of a decline of $1.9 billion in the mortgage loans underlying the
Company's CMBS since December 2004 and, to a lesser extent, a
reduction in non-routine fees associated with the resolution and
disposition of loans in special servicing. Corporate General and
Administrative Expenses During the three months ended September 30,
2005, corporate G&A of $2.7 million included certain
non-routine costs incurred in connection with the Company's review
of strategic alternatives of approximately $400,000. Other Items
For the third quarter of 2005, other items totaling $516,000
included a net gain on derivatives of $1.2 million partially offset
by impairment of CMBS of $661,000. The net gain on derivatives of
$1.2 million was recognized as a result of changes in fair value of
an interest rate swap with a notional amount of $40 million. This
swap was not designated as a hedging instrument and, as a result,
changes in its fair value, as well as the impact of any cash
payments, were recognized in current period earnings. The
impairment charge on CMBS of $661,000 was calculated as the
difference between the fair value and amortized cost of one of the
Company's CMBS and resulted primarily from a change in the timing
of anticipated cash flows for such CMBS. For the third quarter of
2004, other items included impairment charges of $13.2 million on
certain of the Company's CMBS, and a net loss on derivatives of
$1.1 million primarily as a result of changes in fair value related
to the Company's interest rate swap. Year to Date Net Income For
the nine months ended September 30, 2005, net income to common
shareholders was $7.7 million, or $0.48 per diluted common share,
compared to $11.3 million, or $0.72 per diluted common share, for
the first nine months of 2004. Results for the first nine months of
2005 included net interest margin of $28.0 million, servicing
revenues of $5.6 million, corporate general and administrative
expenses of $8.5 million, and net other charges totaling $4.8
million. These other charges included impairment of CMBS of $4.1
million and a net loss on derivatives of $492,000. Net Interest
Margin for the Nine Months Ended September 30, 2005 CRIIMI MAE's
net interest margin decreased to $28.0 million for the nine months
ended September 30, 2005 compared to $33.9 million for the first
nine months of 2004 primarily due to the increased cost of
borrowing resulting from the issuance of $260 million of
non-recourse debt in June 2004 and a decrease in net interest
margin as a result of significant prepayments of the mortgages
underlying the Company's insured mortgage securities. Servicing
Revenues Servicing revenues for the first nine months of 2005
decreased by $2.6 million to $5.6 million as compared to $8.2
million for the first nine months of 2004 primarily due to a
reduction in fees, as discussed above. Corporate General and
Administrative Expenses Corporate general and administrative
expenses of $8.5 million during the first nine months of 2005
included non-routine legal fees related to the Company's review of
strategic alternatives of approximately $1.1 million. Other Items
For the nine months ended September 30, 2005, other charges
totaling $4.8 million included impairment charges on certain of the
Company's CMBS of $4.1 million and a net loss on derivatives of
$492,000. The impairment charge on CMBS, as described above,
resulted primarily from a change in the timing of anticipated cash
flows on certain CMBS. The Company's derivative financial
instruments were not designated as hedging instruments and, as a
result, changes in fair value were recognized in current period
earnings as a net loss on derivatives. For the nine months ended
September 30, 2004, other charges included: a net gain on
derivatives of $13.5 million related to an increase in value on the
$200 million notional amount of previously owned interest rate
swaps; impairment charges aggregating $18.0 million, including
$14.9 million on the Company's CMBS and a $3.1 million write down
on two of the Company's non-core assets; and a net loss on
extinguishment of debt of $5.2 million due to the write-off of
unamortized discount and deferred financing costs related to the
extinguishment of certain of the Company's debt. LIQUIDITY AND
SHAREHOLDERS' EQUITY Increased Liquidity As of September 30, 2005,
total liquidity approximated $71.5 million, including $66.5 million
of cash and cash equivalents and $5.1 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 non-core
assets, continued to generate significant cash in the third quarter
of 2005. Sources of cash included $12.0 million from the Company's
retained CMBS portfolio and $2.1 million from its non-core assets.
Cash outflows during the third quarter of 2005 included interest
payments on the Company's debt (excluding match-funded debt) of
approximately $500,000, $2.7 million of corporate general and
administrative expenses, $122,000 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 September 30, 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. As
previously announced, the Company entered into an agreement and
plan of merger with CDP Capital - Financing, dated October 6, 2005,
and if the merger contemplated thereby is approved by the requisite
vote of the Company's shareholders, an ownership change will occur.
Shareholders' Equity As of September 30, 2005, shareholders' equity
decreased to approximately $413.5 million or $22.48 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 $22.8 million decrease in the value of the
Company's CMBS, due principally to an increase in long-term
interest rates. Shareholders' equity as of September 30, 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 $17.58 per diluted common share
and $17.27 per diluted common share as of September 30, 2005 and
December 31, 2004, respectively. The net increase in adjusted book
value is primarily attributable to net income generated during the
nine months ended September 30, 2005. 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 15,609,838 and 15,546,667 common
shares outstanding as of September 30, 2005 and December 31, 2004,
respectively. As of November 2, 2005, the Company has 15,612,834
common shares outstanding. EXISTING OPERATIONS As of September 30,
2005, specially serviced mortgage loans decreased to $485.5
million, or 4.3% of the aggregate $11.3 billion of mortgage loans
underlying the Company's CMBS, as compared to $820.5 million, or
6.2% of an aggregate $13.2 billion of mortgage loans underlying the
Company's CMBS as of December 31, 2004. Hotel property mortgage
loans accounted for $107.1 million, or 22% of the special servicing
portfolio at quarter end, down from $375.7 million, or 46% of the
special servicing portfolio at year end. As reported in the second
quarter report, the Shilo Inn loans, consisting of 23 mortgage
loans with an aggregate principal balance of $134.5 million and
secured by 23 hotel properties, were returned to the respective
master servicers as "corrected loans," as of June 30, 2005.
Subsequently, one pool of 13 mortgage loans totaling $60 million
was transferred back to special servicing by the master servicer in
August 2005 for "imminent default." There can be no assurance that
any of the performing mortgage loans, including corrected loans, in
the mortgage loan pool underlying our CMBS will continue to perform
under their terms. The Company decreased its overall expected loss
estimate related to its CMBS from $628 million at December 31, 2004
to $599 million at September 30, 2005, including cumulative actual
realized losses of approximately $342 million incurred from 1999
through September 30, 2005. The remaining expected losses of $257
million are anticipated to occur throughout the remaining life of
the Company's CMBS. RECENT DEVELOPMENTS CRIIMI MAE Agrees to be
Acquired for $20.00 Per Common Share in Cash CRIIMI MAE announced
on October 6, 2005 that it had agreed to be acquired by CDP Capital
- Financing Inc., a subsidiary of Caisse de depot et placement du
Quebec. Under the terms and subject to the conditions of the
definitive merger agreement (the "Merger Agreement"), an indirect
subsidiary of CDP Capital - Financing, will be merged with and into
CRIIMI MAE and CRIIMI MAE's outstanding shares of common stock will
each be converted into $20.00 in cash without interest (the
"Merger"). The transaction is valued at approximately $328 million
based on approximately 16.4 million CRIIMI MAE common shares
outstanding. CRIIMI MAE's Board of Directors voted to recommend
that its shareholders approve the Merger based on the unanimous
recommendation of its Special Committee of independent directors.
CRIIMI MAE filed a preliminary proxy statement with the Securities
and Exchange Commission on November 3, 2005. Following the mailing
of a definitive proxy statement, the Company will solicit proxies
with respect to the voting of shares of the Company's common stock
for approval of the Merger. If approved by shareholders, the Merger
is anticipated to be completed during the first quarter of 2006.
CRIIMI MAE Executes Interest Rate Hedging Strategy CRIIMI MAE, in
accordance with the requirements of the Merger Agreement, executed
an interest rate hedging strategy in two phases. First, on October
6, 2005, the Company purchased a six-month option on an underlying
10-year interest rate swap at a cost of $3.975 million. This option
had an expiration date of March 30, 2006 and a notional amount of
$200 million. This option, which was intended as a temporary hedge
until such time as the terms of the second phase of the hedge
transaction could be arranged, was liquidated on October 20, 2005
for total proceeds of $4.7 million. On October 18, 2005, the
Company entered into two forward starting 10-year interest rate
swaps. The swaps have an aggregate notional amount of $200 million
and will require the Company to pay a fixed rate of 4.885% in
exchange for receiving floating payments based on one-month LIBOR.
The Company and the swap counterparty are not required to begin
exchanging monthly payments until May 3, 2006. These swaps require
the Company to post cash collateral as security for its future
obligations to the swap counterparty. The Company posted $4.9
million in initial cash collateral with such counterparty on
October 20, 2005, funded substantially by the $4.7 million
liquidation proceeds from the sale of the option transaction
described above. THIRD QUARTER CONFERENCE CALL CRIIMI MAE will hold
a conference call to discuss its third quarter 2005 results and the
previously announced proposed merger with a subsidiary of Caisse de
depot et placement du Quebec on Monday, November 7, 2005 at 11:00
am ET. To access the conference call, please dial in to the
following: Teleconference # 1-866-314-4483 (North America),
1-617-213-8049 (International). Please refer to passcode 38008313.
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 the risks that
the proposed transaction described above may not be approved by
shareholders, the conditions to the closing may not be satisfied or
the anticipated benefits of such transaction will not be realized;
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;
minimize the risk associated with its assets; return loans to
performing status or otherwise successfully resolve defaulted loan
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; a possible adverse effect on
the Company's internal controls over financial reporting in future
reporting periods resulting from employee attrition related to, the
Company believes,its exploration over the last year of strategic
alternatives; 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 (unaudited) For the three months ended September 30, 2005
2004 Interest income: CMBS: CMBS pledged to secure recourse debt
$2,851,068 $2,760,794 CMBS 7,698,811 7,424,988 CMBS pledged to
secure non-recourse debt 12,233,756 12,148,932 Insured mortgage
securities 54,510 952,927 Total interest income 22,838,145
23,287,641 Interest expense: Recourse debt 1,871,864 1,621,304
Non-recourse debt 11,228,269 11,771,152 Other - 19,317 Total
interest expense 13,100,133 13,411,773 Net interest margin
9,738,012 9,875,868 Fee/other income: Servicing revenue 1,993,733
2,151,121 Other income 921,821 935,545 Total fee/other income
2,915,554 3,086,666 Operating expenses: General and administrative
expenses 2,708,159 2,716,549 Equity compensation expense 457,819
144,464 Depreciation and amortization 48,178 90,197 Servicing
general and administrative expenses 2,095,460 2,280,847 Servicing
amortization, depreciation, and impairment expenses 102,377 207,738
BREF maintenance fee 434,000 434,000 Total operating expenses
5,845,993 5,873,795 Other: Net losses on insured mortgage security
dispositions (41,368) (261,888) Net loss on extinguishment of debt
- - Impairment of REO asset - - Impairment of CMBS (660,505)
(13,226,278) Impairment of mezzanine loan - - Net gain (loss) on
derivatives 1,159,463 (1,099,986) Net expenses from lease
termination and recapitalization 58,845 (304,637) Total other
516,435 (14,892,789) Net income (loss) before dividends paid on
preferred shares 7,324,008 (7,804,050) Dividends paid on preferred
shares (1,481,708) (1,481,708) Net income (loss) to common
shareholders $5,842,300 $(9,285,758) Earnings per common share:
Basic $0.38 $(0.60) Diluted $0.36 $(0.60) Shares used in computing
basic earnings (loss) per share 15,560,164 15,450,988 Shares used
in computing diluted earnings (loss) per share 16,040,745
15,450,988 CRIIMI MAE INC. CONSOLIDATED STATEMENTS OF INCOME
(unaudited) For the nine months ended September 30, 2005 2004
Interest income: CMBS: CMBS pledged to secure recourse debt
$8,470,375 $35,485,949 CMBS 21,356,148 7,424,988 CMBS pledged to
secure non- recourse debt 37,239,394 25,235,466 Insured mortgage
securities 647,016 4,356,858 Total interest income 67,712,933
72,503,261 Interest expense: Recourse debt 5,392,539 11,277,527
Non-recourse debt 34,268,782 27,233,775 Other 7,055 99,768 Total
interest expense 39,668,376 38,611,070 Net interest margin
28,044,557 33,892,191 Fee/other income: Servicing revenue 5,553,348
8,171,438 Other income 1,615,420 1,898,585 Total fee/other income
7,168,768 10,070,023 Operating expenses: General and administrative
expenses 8,510,781 8,038,059 Equity compensation expense 1,010,520
433,393 Depreciation and amortization 726,552 307,231 Servicing
general and administrative expenses 6,134,010 6,049,229 Servicing
amortization, depreciation, and impairment expenses 598,808 682,924
BREF maintenance fee 1,302,000 1,302,000 Total operating expenses
18,282,671 16,812,836 Other: Net losses on insured mortgage
security dispositions (157,816) (916,841) Net loss on
extinguishment of debt - (5,200,767) Impairment of REO asset -
(2,608,740) Impairment of CMBS (4,145,410) (14,863,483) Impairment
of mezzanine loan - (526,865) Net gain (loss) on derivatives
(492,459) 13,473,338 Net expenses from lease termination and
recapitalization (16,222) (547,477) Total other (4,811,907)
(11,190,835) Net income (loss) before dividends paid on preferred
shares 12,118,747 15,958,543 Dividends paid on preferred shares
(4,445,123) (4,689,978) Net income (loss) to common shareholders
$7,673,624 $11,268,565 Earnings per common share: Basic $0.49 $0.73
Diluted $0.48 $0.72 Shares used in computing basic earnings (loss)
per share 15,532,312 15,416,379 Shares used in computing diluted
earnings (loss) per share 16,001,784 15,698,764 CRIIMI MAE INC. As
of As of Balance Sheet Data September 30, 2005 December 31, 2004
(unaudited) Retained CMBS Portfolio, at fair value $327,325,946
$334,903,970 CMBS pledged to secure non-recourse debt, at fair
value 588,717,281 625,752,451 Insured mortgage securities, at fair
value 2,841,342 37,783,332 Cash and cash equivalents 66,465,496
41,073,516 TOTAL ASSETS 1,010,503,534 1,069,939,392 Total recourse
debt 73,266,667 73,681,667 Total non-recourse debt (match- funded
and other non-recourse debt) 510,444,426 556,323,307 TOTAL DEBT
583,711,093 630,004,974 SHAREHOLDERS' EQUITY 413,505,222
428,057,560 Significant Sources and For the three months ended Uses
of Cash (unaudited) September 30, 2005 June 30, 2005 (in millions)
Sources and Uses of Cash Related to Other Activities (1): Cash
received from Retained CMBS Portfolio $12.0 $10.4 Cash from
non-core assets (2) 2.1 0.8 Cash used to service debt, excluding
match-funded debt: Interest payments (3) (0.5) (2.8) Cash used to
make interest rate swap payments (0.1) (0.2) General and
administrative expenses (4) (2.7) (3.0) BREF maintenance fee (4)
(0.4) (0.4) Cash used to pay preferred dividends (1.5) (1.5)
Sources and Uses of Cash Related to Equity/Other Transactions: Cash
used to repay debt (0.4) - Cash received related to retirement of
debt secured by insured mortgage securities 5.4 - Cash used to
purchase option on swap - (0.2) (1) The amounts in this summary 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 from our
interests in the insured mortgage securities, mezzanine loans and
AIM Limited Partnerships. Also includes short-term interest earned
on our cash and cash equivalents. (3) The semi-annual interest
payment on the BREF Note was paid during the quarter ended June 30,
2005. (4) The general and administrative expenses and BREF
maintenance fee are the amounts as reflected in our consolidated
income statement. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
CRIIMI MAE INC. COMPUTATION OF ADJUSTED BOOK VALUE PER DILUTED
COMMON SHARE As of As of September 30, 2005 December 31, 2004 Book
Value Book Value per per Amount Diluted Amount Diluted (in Common
(in Common thousands) Share thousands) Share Total shareholders'
equity in conformity with GAAP $413,505 $428,058 Less: Liquidation
value of preferred stock (54,475) (54,475) Shareholders' equity
attributable to common shareholders 359,030 $22.48 373,583 $23.49
Less: CMBS pledged to secure non-recourse debt (588,717) (36.87)
(625,752) (39.34) Add: Non-recourse debt secured by pledge of CMBS
510,444 31.97 526,839 33.12 Adjusted shareholders' equity
attributable to common shareholders $280,757 $17.58 $274,670 $17.27
As of As of September 30, 2005 December 31, 2004 Shares used in
computing book value per diluted common share 15,968,815 15,906,650
DATASOURCE: CRIIMI MAE Inc. 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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