Criimi Mae Announces CMBS Purchases

Criimi Mae Inc., Rockville, Md., has purchased (or agreed to purchase) approximately $130 million of subordinated commercial mortgage-backed securities in two transactions.About $65 million of the CMBS were issued by Morgan Stanley Securities Corp., and the rest were issued by Mortgage Capital Funding Inc., a subsidiary of Citicorp. Criimi Mae president H. William Willoughby said investors should note the differences in investment strategies between Criimi Mae and residential mortgage real estate investment trusts. "Criimi Mae's financial results are largely insulated from any negative impact of prepayments for several reasons," Mr. Willoughby said. "First, [interest-only] strips represent less than 2% of total assets at March 31, 1998. Second, prepayment prohibitions or penalties on commercial mortgages serve to maintain CMBS yields. And finally, Criimi Mae acquires CMBS at a discount to face value." Prepayments are expected to increase the value of Criimi Mae's subordinated CMBS by making it more likely that the subordinated tranches will be fully repaid, he said.