SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported):March 14, 1998
CRIIMI MAE Inc.
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(Exact name of registrant as specified in its charter)
Maryland 1-10360 52-1622022
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
11200 Rockville Pike, Rockville, Maryland 20852
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(Address of principal executive office) (Zip code)
Registrant's telephone number including area code: (301) 816-2300
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(Former name or former address, if changed since last report)
Exhibit Index on Page 4<PAGE>
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Item 5. Other Events.
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CRIIMI MAE Inc. (the "Company") issued a press release on May 14, 1998
announcing announced the sale of $468 million of investment grade securities
created through the re-securitization of approximately $1.8 billion of its
subordinated commercial mortgage backed securities ("CMBS"). A copy of the
press release is attached hereto as Exhibit 99.1, and is incorporated in its
entirety by reference in response to this Item 5.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
c) Exhibits
99.1 Press Release
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CRIIMI MAE Inc.
Date: May 18, 1998 By: /s/ H. William Willoughby
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H. William Willoughby
President
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INDEX TO EXHIBITS
FORM 8-K
Exhibit Page
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99.1 Press Release
CRIIMI MAE SELLS $468 MILLION INVESTMENT GRADE SECURITIES
CREATED THROUGH RE-SECURITIZATION OF CMBS
REALIZES BOOK GAIN OF APPROXIMATELY $30 MILLION AND
INCREASES SHAREHOLDERS' EQUITY BY APPROXIMATELY $140 MILLION
Rockville, MD, May 14, 1998 (NYSE:CMM) CRIIMI MAE today announced the sale
of $468 million of investment grade securities created through the re-
securitization of approximately $1.8 billion of its subordinated commercial
mortgage backed securities (CMBS). The transaction resulted in a gain of
approximately $55 million for book purposes, $30 million of which was recognized
immediately. CRIIMI MAE elected to structure the transaction as a collatera
lized bond obligation (CBO) and was therefore able to achieve the equivalent of
retained earnings within the REIT structure.
This transaction uses proceeds from the sale of the $468 million long-term,
fixed rate, investment grade securities to reduce an equivalent amount of short-
term, floating rate repurchase agreement financing used to initially fund the
CMBS acquisitions, as well as to pay transaction costs. In addition to this
"match funding", the CBO transaction generates excess proceeds of approximately
$160 million that the company can utilize for future growth. These excess
proceeds, in the form of additional borrowing capacity, will enhance the ability
of the company to fund growth at a significantly lower cost than is obtainable
through other available sources.
The transaction was classified as follows: Of the total $468 million investment
grade securities sold, $345 million were non-callable securities, which
generated a gain for book purposes of approximately $30 million, and $123
million were callable securities. As a result of the implementation of
Financial Accounting Standard (FAS) 125 during 1997, this classification results
in sale treatment for those securities where control was transferred, and
financing treatment for those securities where control was not transferred;
control being defined as the right to call the securities.
Since a portion of this transaction was classified as a sale for book purposes,
all securities held in CRIIMI MAE's current portfolio will be reported at fair
market value on its balance sheet hereafter. This fair market value
classification results in approximate unrealized gains of $25 million on the
callable, investment grade securities issued in this CBO, and an additional $85
million on CRIIMI MAE's remaining CMBS securities and government insured assets.
These unrealized gains, along with the approximate $30 million of realized gains
generated from this CBO transaction, results in a total increase to
shareholders' equity of approximately $140 million.
Also as part of this transaction, CRIIMI MAE's servicing affiliate sold trustee
servicing rights on the CBO for $4.2 million, resulting in a gain of $4.2
million for tax purposes, and approximately $400,000 for financial reporting
purposes.
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"We have amassed one of the market's largest portfolios of subordinated CMBS and
this transaction is key to our strategy of extracting maximum value from that
portfolio," said CRIIMI MAE chairman William B. Dockser. "CRIIMI MAE pioneered
the first re-securitization of subordinated CMBS with a $449 million transaction
in December 1996, and this securitization of nearly $1.8 billion face amount of
CMBS is believed to be the largest re-securitization of subordinated CMBS to
date."
In explaining the re-securitization, CRIIMI MAE's president H. William
Willoughby
said, "The essence of the transaction is to combine individual CMBS assets into
a single, more diversified pool, which results in a higher portfolio credit
rating, allowing us to refinance under significantly better terms. The gains
from this transaction and the increase in shareholders' equity reflect the true
value of our portfolio of multifamily and commercial mortgage assets. Our
strategy of periodically re-securitizing our CMBS portfolio gives us capital
market efficiencies that should allow us to be a more active and efficient CMBS
acquirer."
CRIIMI MAE is a full-service commercial mortgage company involved in the
acquisition, origination, securitization and servicing of multifamily and
commercial mortgages and mortgage related assets throughout the United States.
CRIIMI MAE operates offices in suburban Washington, DC, Boston, Memphis and San
Francisco. The company plans to open additional offices in Texas and Chicago
later this year.
Nothing herein shall constitute an offer to sell or the solicitation of an offer
to buy any securities.
Certain statements in this press release regarding CRIIMI MAE's business
constitute "forward-looking statements" under federal securities laws and are
subject to a number of risks and uncertainties. Any such forward-looking
statements should not be relied upon as predictions of future events. For a
discussion of such risks and uncertainties, which could cause actual results to
differ materially from those contained in the forward-looking statements, see
"Forward-Looking Statements" in CRIIMI MAE's Annual Report for the fiscal year
ended December 31, 1997.
