ROCKVILLE, Md., Nov. 8 /PRNewswire/ -- CRIIMI MAE Inc. (NYSE: CMM - news) today reported results for the three and nine months ended September 30, 2000.
For the three months ended September 30, 2000, CRIIMI MAE reported a net loss to common shareholders under generally accepted accounting principles (GAAP) of approximately $44.5 million, or 71 cents per basic and diluted share. This compares with net income available to common shareholders for the third quarter of 1999 of approximately $8.1 million, or 15 cents per basic share and 14 cents per diluted share.
Compared to the prior year's third quarter, results for the three months ended September 30, 2000 included a significant increase in reorganization items, including the recognition of an approximate $45.8 million loss on its investment in originated loans and an approximate $10.6 million of additional impairment on commercial mortgage-backed securities (``CMBS''). Reorganization items totaled approximately $52.3 million for the three months ended September 30, 2000 versus approximately $4.6 million for the same period in 1999.
In the third quarter of 2000, CRIIMI MAE decided that, as part of its plan of reorganization, it would sell its remaining interest in CRIIMI MAE CMBS Corp. Series 1998-1 (``CMO-IV''), a securitization of commercial mortgage loans completed by the Company in June 1998. The sale of the Company's interest in CMO-IV in November 2000 requires the net loss to be presented in two components. The first component is the write down to fair value of the Company's investment in originated loans of approximately $45.8 million in the third quarter of 2000, which is classified as a reorganization item. The second component includes a gain of approximately $16 million related to the extinguishment of debt. The extinguishment of debt will be recognized as an extraordinary item in the fourth quarter of 2000, which is when the debt was extinguished. For tax purposes, the net loss of approximately $29 million will be recorded entirely in the fourth quarter of 2000.
During the third quarter of 2000, CRIIMI MAE recognized additional impairment of approximately $10.6 million on the CMBS assets the Company sold in November 2000 as part of its recapitalization financing. These CMBS were subordinated tranches from Mortgage Capital Funding, Inc. Series 1998-MC1, Mortgage Capital Funding, Inc. Series 1998-MC2 and DLJ Mortgage Acceptance Corp. Series 1997 CF2 Tranche B-30C. Impairment is recognized through the income statement when the fair market value of a CMBS asset declines below its amortized cost for a significant period of time and the entity no longer has the ability or intent to hold the investment until the value recovers to amortized cost.
Net interest margin for the three months ended September 30, 2000 was $13.5 million versus $17.6 million for the same period in 1999. The net interest margin for the nine months ended September 30, 2000 was $45.1 million compared to $55.6 million for the corresponding period in 1999. The decrease in the net interest margin for the three and the nine months ended September 30, 2000 was due, primarily, to the sale of certain CMBS during 2000 which reduced CRIIMI MAE's CMBS holdings causing a reduction in both interest income and interest expense. Additionally, the net interest margin decreased due to reductions in the insured mortgage portfolio as a result of mortgage loan prepayments. Also contributing to the decrease in net interest margin was an increase in certain interest costs, caused, in part, by the replacement during 1999 of a portion of the Company's variable-rate debt with higher, fixed-rate debt and an increase in variable-rate borrowing costs due to higher interest rates in 2000 than in 1999.
For the nine months ended September 30, 2000, net loss to common shareholders was approximately $36.7 million, or 59 cents per basic and diluted share, compared to net income available to common shareholders of approximately $19.5 million, or 37 cents per basic share and 33 cents per diluted share for the same period in 1999.
The decrease in net income for the first nine months of 2000 as compared to the corresponding period in 1999 was primarily due to an increase in reorganization items, as discussed above. For the nine months ended September 30, 2000, reorganization items totaled $67.1 million versus $15.6 million for the nine months ended September 30, 1999.
The table that follows the text of this release identifies other items that contributed to the changes in GAAP earnings during the three and nine months ended September 30, 2000 compared to the corresponding periods in 1999.
On March 15, 2000, CRIIMI MAE elected for tax purposes to be classified as a trader in securities effective January 1, 2000. Such trading activity is, or is expected to be, in certain types of mortgage-backed securities, including subordinated and other CMBS. As a trader in securities, the Company will mark-to-market its trading assets for the current and future tax years.
The Company initially marked-to-market its trading assets on January 1, 2000, resulting in losses for tax purposes of approximately $478 million. Beginning with the 2000 tax year, the Company expects to recognize these losses evenly over four years at a rate of approximately $120 million per year. Any accumulated and unused losses generally may be carried forward for up to 20 years to offset taxable income until fully utilized.
For tax purposes, the estimated net operating loss for the nine months ended September 30, 2000 was approximately $45.4 million or a loss of 73 cents per weighted average share. For the first nine months of 2000, the $45.4 million net operating loss included three quarters, or approximately $90 million, of this year's portion of the $478 million four-year mark-to-market loss. This compares with tax basis income of approximately $13.7 million, or 26 cents per weighted average share for the first nine months of 1999.
As a result of its trader election, the Company will be required to mark- to-market its trading assets at the end of each tax year and reflect those year-end adjustments as unrealized ordinary gains and losses. In addition, CRIIMI MAE realizes ordinary gains and losses during the year on dispositions of its trading assets. So long as available, net operating losses, including the allocable portion of the $478 million loss, are expected to offset taxable income on an annual basis.
For a more complete discussion of the Company's trader election, including related risks and the effect on taxable income (loss), REIT distribution requirements and cash flows, reference is made to the Company's Current Report on Form 10-Q for the quarter ended September 30, 2000.
On September 11, 2000, CRIIMI MAE declared a stock dividend to common shareholders of record as of October 27, 2000. The dividend is payable on November 13, 2000 in up to an aggregate of 3.75 million shares of a new series of preferred stock designated Series G Redeemable Cumulative Dividend Preferred Stock (the ``Series G Preferred Stock'') (NYSE: CMM-PrG). The purpose of the stock dividend is to distribute approximately $37.5 million, or 60 cents per common share, of undistributed 1999 taxable income in order to satisfy the Company's Real Estate Investment Trust (``REIT'') distribution requirements and to eliminate any federal income tax obligation for the 1999 tax year. To the extent such income is not deemed distributed, the Company would bear a corporate level income tax on any undistributed amount. There can be no assurance that REIT status will be preserved or to what extent, if any, the distribution of the Series G Preferred Stock will eliminate the Company's 1999 taxable income.
CRIIMI MAE's total shareholders' equity was approximately $223 million ($2.37 per diluted share) at September 30, 2000.
The United States Bankruptcy Court for the District of Maryland, Greenbelt Division has set a confirmation hearing on CRIIMI MAE's Third Amended Joint Plan of Reorganization for November 15, 2000.
More information on CRIIMI MAE is available on its web site -- criimimaeinc.com -- or for investors, call Susan Railey, 301-468-3120, or for news media, call Jim Pastore, 202-546-6451. |
