Criimi Mae Sees New Opportunities
Criimi Mae has seen a turnaround in its financial performance, based on its fourth-quarter 2003 results. And the commercial mortgage investor and servicer is now contemplating the next step forward.
For the fourth quarter of 2003, the commercial mortgage real estate investment trust has reported net income of $2.6 million ($0.17 per share), compared to a net loss of $34.6 million ($2.48 per share) for the comparative period of 2002.
For the year ended Dec. 31 2003, Criimi Mae reports a net loss of $4.1 million ($0.27 per share), a major improvement from the net loss of $65.5 million ($4.77 per share) reported for the year ended Dec. 31, 2002.
The real estate investment trust attributes the improvement to reductions in impairment charges and interest expenses.
Criimi Mae has taken advantage of the current low interest rate environment to refinance its insured mortgage portfolio and thereby reduced its interest expense. The company also expects to refinance the portfolio further by mid-2004, to achieve additional savings.
In a related teleconference, Barry Blattman, chairman and CEO, Criimi Mae, said that the "dialogue is now shifting from challenges to opportunities" for Criimi Mae. Going forward, one plan that Criimi Mae is contemplating is getting into the "manufacture" of CMBS, by originating or purchasing newly originated commercial mortgage loans and issuing CMBS backed by the loans. By servicing the CMBS loans within the company, Criimi Mae hopes to differentiate itself from other companies in that arena, based on the service factor.
And while the company had evaluated the option of returning to its former business of purchasing subordinated CMBS, it "became obvious that the landscape had changed" in that market, Mark Jarrell, president and COO, Criimi Mae, said.
In the late '90s period before Criimi Mae declared bankruptcy, there were only about four to five "B" piece buyers that effectively constituted a "cartel."
Last year, there were 13 to 14 of these "B" piece buyers and "the pendulum had swung to the other extreme," Mr. Jarrell said, and the underwriting has become "too aggressive" and produces higher margins for Wall Street due to the oversubscription. Therefore, Criimi Mae has decided that instead of getting back into the market as a "B" piece buyer, they will contemplate other options.
About the alternative that Criimi Mae is considering, Mr. Jarrell said that by being there as a servicer of CMBS loans that they originate, they expect to differentiate themselves by "offering a flexibility that can't be offered by lenders that securitize for arbitrage profits."
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