| CRIIMI MAE Reports 2001 Results
ROCKVILLE, MD (March 25, 2002) -- CRIIMI MAE Inc. (CMM) today reported results for the fourth quarter and the year ended December 31, 2001.
All per share amounts have been adjusted to reflect a one-for-ten reverse stock split of the Company's shares of common stock effected on October 17, 2001.
For the year ended December 31, 2001, CRIIMI MAE reported a net loss to common shareholders under generally accepted accounting principles (GAAP) of approximately $24.2 million or $2.18 per basic and diluted share. This compares to a net loss of approximately $155.5 million or $25.02 per basic and diluted share for 2000.
For the fourth quarter of 2001, the net loss to common shareholders was approximately $27.2 million, or $2.10 per basic and diluted share, compared to a net loss for the prior year's fourth quarter of approximately $118.8 million, or $19.05 per basic and diluted share.
The Company generated net cash flow from operations of approximately $8.6 million for the fourth quarter of 2001.
The net loss to common shareholders for 2001 includes $34.7 million in non-cash accounting impairment charges related to certain of the Company's commercial mortgage-backed securities (CMBS), Chapter 11 reorganization expenses of $1.8 million and a one-time financing origination fee expense of $3.9 million related to the Company's emergence from Chapter 11 in April 2001. Net income also includes revenues of $2.0 million related to a change in accounting principle for servicing revenue.
Excluding the non-cash impairment charges, the reorganization expenses and emergence fee, and revenue and expense related to the changes in accounting principles, pro forma net income to common shareholders for the year 2001 would have been $14.3 million, or $1.11 per diluted share. Pro forma net income to common shareholders for the fourth quarter of 2001 would have been $3.5 million, or 21 cents per diluted share.
Results for 2000 included a $143.5 million non-cash accounting impairment charge in the fourth quarter related to the Company's CMBS. Results for 2000 also included $66.1 million of expenses related to the Company's reorganization.
Net interest margin was $9.0 million for the three months and $36.6 million for the twelve months ended December 31, 2001, representing a decline from the 2000 comparable periods. The decline in the net interest margin was due primarily to the sale of certain CMBS and the Company's interest in CMO-IV during 2000 in connection with the Company's Chapter 11 reorganization. The reduction in mortgage assets and related debt caused both total interest income and total interest expense to decline. Also included in the decrease in the net interest margin was an overall increase in borrowing costs in 2001 due to higher interest rates and amortization of extension fees on the Company's secured debt.
The Company recorded impairment charges in 2001 of $34.7 million, $30.8 million in the fourth quarter and $3.9 million in the third quarter, primarily because monetary defaults were greater, and losses were expected to be greater and occur sooner than previously anticipated on the commercial mortgage loans underlying CRIIMI MAE's CMBS. These monetary defaults, which resulted largely from the economic recession and the September 11 terrorist events, were principally on hotel mortgage loans. The increase in monetary defaults and the reduction in values of certain properties underlying these mortgage loans caused the Company to revise its total estimate of losses to be realized over the life of the CMBS from $307 million at September 30, 2001 to $335 million at year end 2001. As a result of this adverse change in expected cash flows from its CMBS, the Company concluded that certain of its CMBS had been impaired under GAAP. The $30.8 million impairment charge was calculated as the difference between the fair value and amortized cost of the impaired CMBS as of December 31, 2001. Impairment is a non-cash accounting charge against earnings that does not reflect actual current cash losses.
Defaulted or delinquent mortgage loans in special servicing at December 31, 2001 were $792 million, or 4.1% of the aggregate $19.3 billion outstanding principal balance of the mortgage loans underlying the Company's CMBS portfolio. This compares with $609 million, or 3.1%, as of September 30, 2001. Hotel property mortgage loans account for $408 million, or 51%, and retail property mortgage loans account for $241 million, or 30%, of the total $792 million of specially serviced loans as of December 31, 2001.
As of February 28, 2002, the mortgage loans in special servicing totaled $902 million. Of that total, $834 million of mortgage loans were in special servicing due to monetary defaults and real estate owned, and the remainder were in special servicing due primarily to technical defaults. From September 30, 2001 to February 28, 2002, approximately $132 million of the loans in special servicing due to monetary default and real estate owned were resolved through negotiated workouts, payoffs or sales. During this same period, approximately $25.3 million of the mortgage loans in special servicing due to technical default were also resolved.
During the first few weeks of March, only one additional defaulted mortgage loan, with an unpaid principal balance of $8.5 million, transferred into special servicing. While management believes the rate of defaults on the mortgage loans underlying the Company's CMBS may be slowing, there can be no assurance that this is the case.
For all of the mortgage loans in special servicing, CRIIMI MAE Services Limited Partnership, CRIIMI MAE's servicing subsidiary, is pursuing available remedies in order to maximize value.
Notwithstanding the increase in monetary defaults, CRIIMI MAE's CMBS portfolio continues to generate significant cash flows and the Company continues to use its net cash flows to pay down the secured debt incurred in connection with its emergence from Chapter 11. As outlined in the attached cash flow table for the fourth quarter, CRIIMI MAE's CMBS generated cash inflows of $18.7 million during the fourth quarter and other assets generated additional cash flows of $1.8 million. On a cash basis, interest expense totaled $8.9 million and general and administrative expenses totaled $3.0 million. The net operating cash flows of approximately $8.6 million were used to pay down $8.6 million of the Company's secured debt during the fourth quarter of 2001.
Since emergence from Chapter 11 on April 17, 2001 through March 15, 2002, the Company used approximately $33 million of net cash flow to pay down its secured debt, resulting in an aggregate outstanding principal balance of such debt of approximately $398 million as of March 15, 2002.
CRIIMI MAE's restricted and unrestricted cash totaled $49 million at December 31, 2001. In addition, CRIIMI MAE Services had cash totaling $6.5 million at December 31, 2001. After giving effect to the March 2002 redemption of the Company's Series E Preferred Stock and CRIIMI MAE's settlement of its last outstanding reorganization claim with First Union National Bank, CRIIMI MAE had approximately $24.6 million of cash, including approximately $7.6 million of restricted cash, as of March 21, 2002. In addition, CRIIMI MAE Services had cash of approximately $15.5 million as of March 21, 2002, which includes proceeds from the sale of CMBS master and direct servicing rights in February 2002. Including a $5.3 million GNMA security and $8.3 million in trading assets that are not collateral for the secured debt, the Company's total liquidity, therefore, is approximately $53.7 million as of March 21, 2002.
In the third quarter of 2001, CRIIMI MAE Services changed its accounting policy for recognizing special servicing fee revenue, effective as of January 1, 2001. This accounting policy change resulted in approximately $2 million in additional special servicing fee revenue, previously deferred for periods prior to 2001, being recorded for 2001 as a cumulative effect of a change in accounting principle.
Excluding the cumulative effect of the change in accounting principle for special servicing revenue, CRIIMI MAE Services' operations generated a net loss of $854,000 for the fourth quarter of 2001 versus net income of $670,000 for the same period in 2000. For the year ended December 31, 2001, CRIIMI MAE Services' operations generated a net loss of $3.3 million compared to net income of $531,000 for 2000. The 2001 losses are largely attributable to lower revenues, along with an increase in information technology and restructuring expenses for 2001 as compared to the corresponding 2000 periods. Revenues declined primarily due to a reduction in assumption fees and interest income resulting from a decreased servicing portfolio and the low interest rate environment in 2001. Also included in CRIIMI MAE Services' operations are non-cash charges, such as depreciation and amortization.
As of October 2001, CRIIMI MAE, through two subsidiaries, owns 100% of the partnership interests in a partnership that owns a shopping center in Orlando, Florida. The Company accounts for this asset as real estate owned ("REO). As of December 31, 2001, $8.6 million of REO asset and $7.1 million of mortgage payable (net of a $1.7 million discount) are included on the Company's balance sheet. The Company hopes to reposition and stabilize this property and sell it for a price that more accurately reflects its value. There can be no assurance the Company will meet this goal and, the Company expects that it will hold the property for more than one year.
Other factors which impacted the 2001 fourth quarter and year-end results can be found in the table that follows this release.
As of December 31, 2001, shareholders' equity was approximately $261.0 ($11.54 per diluted share) as compared to approximately $268.3 million ($16.96 per diluted share) as of December 31, 2000. After giving effect to the First Union settlement and the Series E Preferred Stock redemption (each of which occurred in March 2002), the pro forma diluted book value per share, as of December 31, 2001, would have been $14.18 per share.
CRIIMI MAE had 12,969,841 common shares outstanding at March 21, 2002. At December 31, 2001, the Company had 12,937,341 common shares outstanding as compared to 6,235,317 at December 31, 2000.
For the year ended December 31, 2001, the Company incurred a net operating loss (NOL) for tax purposes of approximately $96.9 million compared to a NOL of approximately $49.6 million for the year ended December 31, 2000.
Because CRIIMI MAE incurred a net operating loss for tax purposes in 2001, the Company did not have any taxable income, and accordingly, was not required to pay dividends to common shareholders for that period in order to maintain its REIT status. The Company does not anticipate paying dividends to common shareholders for the foreseeable future.
On January 1, 2002, CRIIMI MAE adopted Statement of Financial Accounting Standard No. 142 and wrote off $9.8 million of goodwill related to the 1995 merger of the CRI mortgage businesses. The one-time write-off of goodwill will be reflected as a change in accounting principle in the first quarter of 2002 and will reduce the Company's annual amortization expense by approximately $2.8 million.
In order to redeem the Series E Preferred Stock on March 21, 2002, CRIIMI MAE was required to contemporaneously declare the payment of all accrued and unpaid dividends for the fourth quarter of 2001 and first quarter of 2002 on shares of the Company's Series B Preferred Stock. The Board also declared all accrued and unpaid dividends on the Company's Series F Preferred Stock and Series G Preferred Stock. The Company will pay the dividends on the Series B, F and G Preferred Stock in shares of common stock on April 15, 2002 to shareholders of record on April 1, 2002.
CRIIMI MAE will hold a conference call to discuss its earnings on Tuesday, March 26, 2002 at 10:00 a.m. EST. The conference call access number is 877-852-7897. A replay of the call will be available from the afternoon of March 26 until April 2, 2002 at 800-642-1687, conference ID number 3593756. |
CRIIMI MAE INC.
CONSOLIDATED STATEMENTS OF INCOME
For the three months ended
December 31,
2001 2000
Interest income:
Subordinated CMBS $26,408,303 $29,254,581
Insured mortgage securities 6,849,699 7,581,595
Originated loans - 2,619,904
Total interest income 33,258,002 39,456,080
Interest and related expenses:
Variable-rate secured borrowing 4,419,922 --
Series A senior secured notes 3,080,147 --
Series B senior secured notes 3,314,605 --
Fixed-rate collateralized bond
obligations-CMBS 6,361,405 6,320,705
Fixed-rate collateralized
mortgage obligations-
insured securities 6,744,080 6,882,223
Fixed-rate collateralized
mortgage obligations-
originated loans -- 2,316,582
Variable-rate secured
borrowings-CMBS -- 8,731,300
Fixed-rate senior unsecured
notes -- 2,281,251
Other interest expense 328,066 2,121,335
Total interest expense 24,248,225 28,653,396
Net interest margin 9,009,777 10,802,684
General and administrative
expenses (3,039,384) (2,719,167)
Amortization of assets acquired
in the Merger (719,394) (719,394)
Equity in earnings (losses) from
investments 159,249 827,496
Servicing revenue 3,532,862 --
Servicing general and
administrative expenses (2,919,605) --
Servicing amortization,
depreciation and impairment (1,029,626) --
Servicing restructuring expense (437,723) --
Other income, net 1,033,904 2,496,284
Net (losses) gains on mortgage
security
and originated loan
dispositions (42,289) 38,503
Impairment on CMBS (30,768,583) (143,478,085)
Hedging loss (77,143) --
Reorganization items 96,560 1,038,454
Emergence financing origination
fee -- --
Litigation expense -- --
(34,211,172) (142,515,909)
Net loss before extraordinary
item and cumulative effect
of changes in accounting
principles (25,201,395) (131,713,225)
Extraordinary item-gain on debt
extinguishment -- 14,808,737
Cumulative effect of adoption of
SFAS 133 -- --
Cumulative effect of change in
accounting principle
related to servicing revenue -- --
Net loss before dividends
accrued or paid on preferred
shares (25,201,395) (116,904,488)
Dividends accrued or paid on
preferred shares (1,952,037) (1,905,973)
Net loss to common shareholders $(27,153,432) $(118,810,461)
For the years ended December 31,
2001 2000
Interest income:
Subordinated CMBS $105,522,833 $137,072,372
Insured mortgage securities 28,852,719 30,668,228
Originated loans -- 27,511,041
Total interest income 134,375,552 195,251,641
Interest and related expenses:
Variable-rate secured borrowing 14,648,215 --
Series A senior secured notes 8,780,576 --
Series B senior secured notes 9,224,817 --
Fixed-rate collateralized bond
obligations-CMBS 25,518,425 25,345,519
Fixed-rate collateralized
mortgage obligations-
insured securities 27,097,730 30,211,712
Fixed-rate collateralized
mortgage obligations-
originated loans -- 22,716,109
Variable-rate secured
borrowings-CMBS 7,325,059 43,785,955
Fixed-rate senior unsecured
notes 2,712,142 9,125,004
Other interest expense 2,480,604 8,182,070
Total interest expense 97,787,568 139,366,369
Net interest margin 36,587,984 55,885,272
General and administrative
expenses (11,548,759) (11,301,385)
Amortization of assets acquired
in the Merger (2,877,576) (2,877,576)
Equity in earnings (losses) from
investments (1,632,042) 1,512,005
Servicing revenue 6,886,057 --
Servicing general and
administrative expenses (5,882,889) --
Servicing amortization,
depreciation and impairment (1,699,186) --
Servicing restructuring expense (437,723) --
Other income, net 4,186,837 4,915,320
Net (losses) gains on mortgage
security
and originated loan
dispositions (41,982) 524,395
Impairment on CMBS (34,654,930) (143,478,085)
Hedging loss (1,073,392) --
Reorganization items (1,813,220) (66,072,460)
Emergence financing origination
fee (3,936,616) --
Litigation expense -- (2,500,000)
(54,525,421) (219,277,786)
Net loss before extraordinary
item and cumulative effect
of changes in accounting
principles (17,937,437) (163,392,514)
Extraordinary item-gain on debt
extinguishment -- 14,808,737
Cumulative effect of adoption of
SFAS 133 (135,142) --
Cumulative effect of change in
accounting principle
related to servicing revenue 1,995,262 --
Net loss before dividends
accrued or paid on preferred
shares (16,077,317) (148,583,777)
Dividends accrued or paid on
preferred shares (8,145,481) (6,911,652)
Net loss to common shareholders $(24,222,798) $(155,495,429)
FINANCIAL STATEMENT LOSS PER SHARE
For the three
months ended For the years
December 31, ended December 31,
2001 2000 2001 2000
Total Basic and Diluted Loss
per share - before
extraordinary item and
cumulative effect of
changes in accounting
principles $(2.10) $(21.43) $(2.35) $(27.40)
Total Basic and Diluted Loss
per share - after
extraordinary item and
cumulative effect of
changes in accounting
principles $(2.10) $(19.05) $(2.18) $(25.02)
Shares used in computing
basic loss per share 12,937,341 6,235,317 11,087,790 6,214,479
CRIIMI MAE INC.
As of As of
Dec. 31, 2001 Dec. 31, 2000
Balance Sheet Data:
Subordinated CMBS and other MBS,
at fair value $832,682,042 $856,846,268
Insured mortgage securities, at
fair value 343,091,303 385,751,407
Restricted and unrestricted cash
(including CMSLP cash) 55,513,150 202,415,779
Total assets 1,315,004,123 1,557,839,645
Total recourse debt 407,637,430 558,585,417
Total non recourse debt (match-
funded and other debt) 616,714,883 645,170,190
Shareholders' equity 261,044,678 268,258,016
Included in CRIIMI MAE's net operating cash flows for the three months ended December 31, 2001 are the following items:
Amounts in
Millions
Net operating cash flows:
CMBS cash inflows (BB+ through
unrated) $18.7
Other cash, net 1.8
Interest expense paid on
Variable-Rate Secured Borrowing (3.8)
Interest expense paid on Series A
Senior Secured Notes (3.0)
Interest expense accrued for
Series B Senior Secured Notes
semi-annual payment (2.1)
General and administrative
expenses (3.0)
Net operating cash flows during
fourth quarter 2001 $8.6
Principal payments on exit financing:
Variable-Rate Secured Borowing $6.8
Series A Senior Secured Notes 1.8
Total principal payments on exit
financing during fourth quarter
2001 $8.6
REO cash outflow, net $(0.2)
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