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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

CRIIMI MAE INC.
(Exact name of registrant as specified in its charter)

11200 Rockville Pike
Rockville, Maryland 20852
(301) 816-2300
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)

Securities Registered Pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:
None

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K. o

        Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities and Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ý    No o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ý    No o

        The aggregate market value (based upon the last reported sale price on the New York Stock Exchange on June 30, 2003) of the shares of CRIIMI MAE Inc. common stock held by non-affiliates was approximately $148.7 million. (For purposes of calculating the previous amount only, all directors and executive officers of the registrant are assumed to be affiliates.)

        As of March 1, 2004, 15,471,420 shares of CRIIMI MAE Inc. common stock with a par value of $0.01 were outstanding.

Documents Incorporated By Reference

        The information required by Part III (Items 10, 11, 12, 13 and 14) is incorporated by reference to the Registrant's definitive proxy statement to be filed pursuant to Regulation 14A relating to the Registrant's 2004 annual meeting of shareholders.

CRIIMI MAE INC.

2003 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

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        FORWARD-LOOKING STATEMENTS. When used in this Annual Report on Form 10-K, in future filings with the Securities and Exchange Commission (the SEC or the Commission), in our press releases or in our other public or shareholder communications, the words "believe," "anticipate," "expect," "contemplate," "may," "will" and similar expressions are intended to identify forward-looking statements. Statements looking forward in time are included in this Annual Report on Form 10-K pursuant to the "safe harbor" provision of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially, including, but not limited to the risk factors contained or referenced under the headings "Business—Certain Risk Factors," and "Management's Discussion and Analysis of Financial Condition and Results of Operations". Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of anticipated or unanticipated events.

PART I

ITEM 1. BUSINESS

Overview

        CRIIMI MAE Inc. (together with its consolidated subsidiaries, We or CRIIMI MAE) is a commercial mortgage company structured as a self-administered real estate investment trust (or REIT). We currently own, and manage, a significant portfolio of commercial mortgage-related assets. Historically, we have focused primarily on acquiring high-yielding, non-investment grade (rated below BBB- or unrated) commercial mortgage-backed securities (subordinated CMBS). We commenced operations in 1989, are incorporated in Maryland, and are not a government sponsored entity or in any way affiliated with the United States government or any United States government agency. Our stock is traded on the New York Stock Exchange under the symbol "CMM".

        During late 2003, we undertook a review of the current market for acquisition of subordinated CMBS in preparation for the expected resumption of such acquisition activities in 2004. Due to a variety of factors such as increased competition in the sector, less attractive investment yields and underwriting standards that are widely believed to be deteriorating due to the surplus of investment capital dedicated to the subordinated CMBS market, we now believe that it is more prudent for us to focus our 2004 investment activity in the "manufacturing" of subordinated CMBS investments rather than pursuing secondary-market acquisition opportunities as we have in the past. By "manufacturing" we mean directly originating, or purchasing at origination, commercial mortgage loans, and financing these loans via the periodic issuance of investment-grade rated CMBS. This strategy would continue our historical focus on higher-yielding tranches of CMBS, but would allow us to better control the risk inherent in such investments by involving the company in the transactions at inception (i.e. at the time the loans are originated).

        As a full-service commercial mortgage company, we expect to originate, service and securitize commercial mortgage loans—which we believe gives us a competitive advantage over other securitized lenders in terms of level of service provided to mortgage loan borrowers and flexibility in addressing borrower needs over the term of their loans. Our aim would be to use securitization as a financing tool to create attractive long-term investment yields as opposed to the current market paradigm in which securitization is primarily used to generate short-term arbitrage gains on sale. Our goal is to deliver an attractive return on shareholders' equity generated by earnings that are sustainable over the long-term. We remain prepared to augment those returns by selectively participating in the subordinated CMBS acquisition market if market conditions warrant.

        Our existing business consists of investments in our core assets (subordinated CMBS backed by pools of commercial mortgage loans on multifamily, retail, hotel, and other commercial real estate) and

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investments in non-core assets (direct and indirect investments in government-insured mortgage-backed securities and a limited number of other assets). We also are a trader in CMBS, residential mortgage-backed securities, agency debt securities and other fixed income securities. We intend to refinance the shorter-term, recourse debt related to our existing subordinated CMBS through a collateralized debt obligation (CDO), other refinancing transaction, or combination thereof, by mid-2004.

        We have significant experience in the following areas:

•

Subordinated CMBS Acquisitions. We were a leading purchaser of subordinated CMBS from 1996 to 1998, acquiring an aggregate face amount of approximately $2.8 billion through 1998. We have not made any further subordinated CMBS acquisitions since 1998.



•

CMBS Resecuritizations. We completed two of the commercial real estate industry's first resecuritizations of subordinated CMBS in 1996 and 1998. These transactions had a combined face value of $449 million and $1.8 billion, respectively.



•

Loan Originations and Securitizations. Prior to 1999, we had originated more than $900 million in aggregate principal amount of commercial real estate mortgage loans. In 1998, we securitized approximately $496 million of commercial mortgage loans originated or acquired by us. We have not originated any loans since 1998.



•

Mortgage Servicing. Through our servicing subsidiary, CRIIMI MAE Services Limited Partnership (CMSLP), we are responsible for special servicing functions for 2,800 loans, representing an aggregate $15.3 billion of commercial mortgage loans underlying our subordinated CMBS. Additionally, CMSLP performs special servicing for third parties on approximately 440 loans, with aggregate principal balances of approximately $2 billion.

2003 Accomplishments

        Our strategic priorities and accomplishments in 2003 were as follows:

•

Refine and Develop Our Team and Realign Executive Compensation

Priority: Ensure that we have the personnel with the requisite expertise to maximize asset values and develop and execute investment strategies.

Accomplishment: We added to our senior management team, led by Barry Blattman, Mark Jarrell and Stephen Abelman and retained Cynthia Azzara. In addition to refining our team, during late 2003, we realigned our executive compensation based on current industry norms, resulting in a reduction in aggregate annual cash compensation payable to executives.

•

Resume Payment of Preferred Stock Dividends

Priority: Address the preferred stock dividends in arrears.

Accomplishment: During 2003, we paid all preferred stock dividends that were in arrears and all current preferred stock dividends to prepare for our return to the capital markets. In furtherance of our goal to return to the capital markets, on January 27, 2004, we filed a shelf registration statement with the Securities and Exchange Commission to register an aggregate principal amount of $200 million of debt securities, warrants, preferred shares and common shares for sale.

•

Maximize Core Asset Values

Priority: Maximize the value of our existing subordinated CMBS portfolio by accelerating workouts or dispositions of commercial mortgage loans in special servicing and by taking advantage of the "delevering" of our portfolio which occurs as CMBS classes senior to our CMBS pay down.

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Accomplishment: We made significant strides towards this priority in 2003 by resolving approximately $596 million of specially serviced assets compared to approximately $354 million during 2002. Additionally, through February 29, 2004, we resolved an additional $54 million of specially serviced assets. In 2004, we intend to structure an anticipated CDO or other refinancing of the Bear Stearns Debt (as defined below) in a manner that we benefit from portfolio delevering and continue to enjoy the potential for increases in value that could result from future ratings upgrades and continued improvement in the secondary market for seasoned subordinated CMBS.

•

Earn Attractive Returns

Priority: Earn attractive returns through the prudent investment of our capital and net cash flows.

Accomplishment: Our 2003 accomplishments in enhancing returns were evident primarily in our non-core investments. For our non-core assets (primarily insured mortgage securities), we enhanced returns by completing or making preparations to complete three "clean-up" calls related to outstanding collateralized mortgage obligation financings, significantly reducing our financing costs associated with these investments. In December 2003, we refinanced the $24.5 million balance of our Fannie Mae funding note resulting in a significant reduction in annualized interest costs. We prepaid the Freddie Mac funding note in March 2004 and expect to prepay the CMO debt by the end of the second quarter of 2004, which is expected to result in further interest savings. For our core subordinate CMBS portfolio, we have hired Stephen Abelman, an experienced manager of distressed real estate, who has restructured our Asset Management group to expedite reviews of our specially serviced loans, which we believe will result in more efficient resolutions of our specially serviced assets.

•

Pursue Investments

Priority: Develop and execute strategies relating primarily to CMBS and commercial mortgage loans that capitalize on our real estate and mortgage finance, underwriting, loan management and special servicing experience, and our access to performance information on mortgages and real estate markets throughout the country derived from our special servicing responsibilities.

Accomplishment: We evaluated returning to the subordinated CMBS acquisition model historically employed by us as a way of capitalizing on our existing expertise and, as indicated above, concluded that we could better utilize this expertise in an originations-focused business plan for 2004. We believe our development in management and personnel in late 2003 provides us with a foundation to begin execution of this strategy in 2004.

2003 Recapitalization Overview

        On January 23, 2003, we completed a recapitalization of the secured debt incurred upon our emergence from Chapter 11 in April 2001. We refer to that secured debt as the Exit Debt. This recapitalization was funded with approximately $344 million in proceeds from debt and equity financings and a portion of our available cash and liquid assets. The recapitalization included approximately $14 million in common equity and $30 million in senior secured subordinated debt purchased by Brascan Real Estate Finance Fund I L.P., a private asset management fund established by Brascan Corporation and a New York-based management team. We refer to the senior secured subordinated debt as the BREF Debt and Brascan Real Estate Finance Fund I L.P. as the BREF Fund. Additionally, we received $300 million in secured financing in the form of a repurchase transaction from a unit of Bear, Stearns & Co., Inc., which we refer to as the Bear Stearns Debt.

        The recapitalization increased our financial flexibility primarily through the elimination of the requirement to use virtually all of our net cash flow to pay down principal on the Exit Debt. This,

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along with the elimination of REIT distribution requirements due to our net operating losses (NOLs), provides us with additional liquidity for mortgage-related investments and acquisitions and other corporate purposes. We presently intend to use substantially all of our net cash flow for investments, hedging activities and general working capital purposes. See Note 6 of Notes to Consolidated Financial Statements for further discussion of the January 2003 recapitalization.

Business Segments

        Management currently assesses our performance and allocates resources principally on the basis of two lines of business: portfolio investment and mortgage servicing. These two lines of business, or operating segments, are managed separately as they provide different sources and types of revenues.

Portfolio Investment

        Portfolio investment primarily includes (i) CMBS, (ii) direct investments in government insured securities and entities that own government insured securities, (iii) direct investments in mezzanine loans and (iv) securities trading activities. Our income from this segment is primarily generated from these assets.

CMBS

        CMBS are generally created by pooling commercial mortgage loans and directing the cash flow from such mortgage loans to various tranches of securities. The tranches consist of investment grade (AAA to BBB-), non-investment grade (BB+ to D) and unrated securities. The first step in the process of creating CMBS is loan origination. Loan origination occurs when a financial institution lends money to a borrower to refinance or to purchase a commercial real estate property, and secures the loan with a mortgage on the property that the borrower owns or purchases. Commercial mortgage loans are typically non-recourse to the borrower. A pool of these commercial mortgage loans is then accumulated, often by a large commercial bank or other financial institution. One or more rating agencies then analyze the loans and the underlying real estate to determine their credit quality. The mortgage loans are then deposited into an entity that is not subject to taxation, often a real estate mortgage investment conduit (or REMIC). The investment vehicle then issues securities backed by the cash flows from commercial mortgage loans, or CMBS.

        At the time of a securitization, one or more entities are appointed as "servicers" for the pool of mortgage loans, and are responsible for performing servicing duties which include collecting payments (master or direct servicing), monitoring performance (loan management) and working out or foreclosing on defaulted loans (special servicing). Each servicer typically receives a fee and other financial incentives based on the type and extent of servicing duties.

        The CMBS are divided into tranches, which are afforded certain priority rights to the cash flow from the underlying mortgage loans. Interest payments typically flow first to the most senior tranche until it receives all of its accrued interest and then to the junior tranches in order of seniority. Principal payments typically flow to the most senior tranche until it is retired. Tranches are then retired in order of seniority, based on available principal. Losses, if any, are generally first applied against the principal balance of the lowest rated or unrated tranche. Losses are then applied in reverse order of seniority. Each tranche is assigned a credit rating by one or more rating agencies based on the agencies' assessment of the likelihood of the tranche receiving its stated payment of principal. The CMBS are then sold to investors through either a public offering or a private placement.

        Historically, we have focused primarily on acquiring or retaining non-investment grade and unrated tranches, issued by mortgage conduit entities, in which we believed our market knowledge and real estate expertise allowed us to earn attractive risk-adjusted returns. We did not acquire any subordinated CMBS subsequent to 1998. Prior to the fall of 1998, we generally acquired subordinated CMBS in

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privately negotiated transactions, which allowed us to perform due diligence on a substantial portion of the mortgage loans underlying the subordinated CMBS as well as the underlying real estate prior to consummating the purchase. In connection with our subordinated CMBS acquisitions, we targeted diversified mortgage loan pools with a mix of property types, geographic locations and borrowers.

        As of December 31, 2003, our $1.1 billion portfolio of assets included $837 million of CMBS (representing approximately 78% of our total consolidated assets), which had the following ratings (based on fair value) reflected as a percentage of total CMBS:

(a)

Represents investment grade securities reflected on our balance sheet as a result of CBO-2, our second resecuritization transaction.

CMBS Resecuritizations

        We initially funded a substantial portion of our subordinated CMBS acquisitions with short-term, variable-rate secured debt. To mitigate our exposure to interest rate risk, our business strategy was to periodically refinance a significant portion of this short-term, variable-rate recourse debt with fixed-rate, non-recourse debt having maturities that matched those of our mortgage assets securing such debt, also known as match-funded debt. We effected such refinancings by pooling subordinated CMBS, once a sufficient pool of subordinated CMBS had been accumulated, and issuing newly created CMBS backed by the pooled subordinated CMBS. The CMBS issued in such resecuritizations were fixed-rate obligations with maturities that matched the maturities of the subordinated CMBS backing the new CMBS. These resecuritizations also increased the amount of borrowings available to us due to the increased collateral value of the new CMBS relative to the pooled subordinated CMBS. The increase in collateral value was principally attributable to the seasoning of the underlying mortgage loans and the diversification that occurred when such subordinated CMBS were pooled. We generally used the cash proceeds from the investment grade CMBS that were sold in the resecuritization to reduce the amount of our short-term, variable-rate debt. We then used the net excess borrowing capacity created by the resecuritization to obtain new short-term, variable-rate secured borrowings, typically provided by the subordinated CMBS issuer and, to a lesser extent, cash, to purchase additional subordinated CMBS.

        In December 1996, we completed our first resecuritization of subordinated CMBS, CRIIMI MAE Trust I Series 1996-C1 (CBO-1), with a combined face value of approximately $449 million involving 35 individual securities collateralized by 12 mortgage securitization pools. In CBO-1 we sold, in a private placement, securities with a face amount of $142 million and retained securities with a face amount of approximately $307 million. As a result of CBO-1, we refinanced approximately $142 million of short-term, variable-rate, secured recourse debt with fixed-rate, non-recourse, match-funded debt.

        In May 1998, we completed our second resecuritization of subordinated CMBS, CRIIMI MAE Commercial Mortgage Trust Series 1998-C1 (CBO-2), with a combined face value of approximately $1.8 billion involving 75 individual securities collateralized by 19 mortgage securitization pools and three of the retained securities from CBO-1. In CBO-2, we eventually sold, in private transactions, securities with an aggregate face amount of $673 million and retained securities with a face amount of approximately $1.1 billion.

        As of December 31, 2003, our total debt was approximately $765.6 million, of which approximately 53% was fixed-rate, match-funded, non-recourse debt and approximately 47% was variable-rate or

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fixed-rate debt that was not match-funded. See Notes 4 and 6 to the Notes to Consolidated Financial Statements for further information regarding our CMBS resecuritizations and variable-rate secured borrowings.

Loan Originations and Securitizations

        From 1996 through 1998, we originated mortgage loans principally through mortgage loan conduit programs with major financial institutions for the primary purpose of pooling such loans for securitization. We viewed a securitization as a means of extracting the maximum value from the mortgage loans originated. In June 1998, we securitized approximately $496 million of the commercial mortgage loans originated or acquired by us through a mortgage loan conduit program with Citicorp Real Estate, Inc. and, through our subsidiary, CRIIMI MAE CMBS Corp., issued Commercial Mortgage Loan Trust Certificates, Series 1998-1 (CMO-IV). In CMO-IV, we sold all of the investment grade tranches to third parties and received net cash flow on the CMBS retained by us. We sold all of our remaining interests in CMO-IV in November 2000.

Portfolio Investment's Assets

        See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" for a discussion of Portfolio Investment's Assets.

Mortgage Servicing

        We conduct our mortgage loan servicing operations through CMSLP. CMSLP's principal servicing activities are described below.

Special Servicing

        A special servicer typically provides asset management and resolution services with respect to nonperforming or underperforming loans within a pool of mortgage loans. When we acquired subordinated CMBS, we typically required that we retain the right to appoint the special servicer for the related mortgage pools. When serving as special servicer of mortgage loans in a CMBS pool, CMSLP has the authority to deal directly with any borrower that fails to perform under certain terms of its mortgage loan, including the failure to make payments, and to manage any loan workouts and foreclosures. As special servicer, CMSLP earns fee income on services provided in connection with any loan servicing function transferred to it from the master servicer. We believe that because we own the first loss unrated or lowest rated bond of all but two CMBS transactions, we have an incentive to quickly resolve any loan workouts. As of December 31, 2003, CMSLP was designated as the special servicer for approximately 2,800 commercial mortgage loans, representing an aggregate principal amount of approximately $15.3 billion of commercial mortgage loans underlying our CMBS. Additionally, CMSLP performed special servicing on approximately 440 loans, representing an aggregate principal balance of approximately $2 billion, for third parties. We currently have a Standard & Poors (S&P) Special Servicer ranking of "below average". Despite the ranking, S&P provided a "positive outlook" and recognized that CMSLP has begun to take measures to stabilize its operations, most notably by hiring some well-experienced asset management personnel.

Loan Management

        In April 2003, we restructured CMSLP's property servicing group resulting in the termination of 10 employees. In conjunction with this restructuring, we have outsourced substantially all of our contractual property servicing duties related to the labor-intensive tasks of financial statement collection and analysis and property inspection performance. The outsourcing was completed in February 2004. This outsourcing does not relieve us of any of our contractual obligations or reduce any of our rights as

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property servicer, since CMSLP remains the property servicer of record, but it does relieve us of the administrative task of collecting financial operating data. This will allow the remaining resources in surveillance to focus more on collateral analysis. For the outsourced loans, CMSLP coordinates the delivery of monthly reports and inspections with the third-party servicers. For the portfolios for which the third-party servicer is not also the master servicer, CMSLP reviews and approves the reports from these servicers prior to submission by CMSLP to the securitization trustees.

        For all of the loans underlying our subordinated CMBS portfolio, including those outsourced as noted above, CMSLP performs analyses of operating performance and property inspections as part of its routine asset monitoring process. This allows CMSLP to identify and evaluate potential issues that could result in losses. As of February 29, 2004, CMSLP analyzes the performance and physical condition of approximately 2,800 commercial mortgage loans, representing an aggregate principal of $15 billion.

Other Servicing

        CMSLP performs master and/or direct servicing for an insignificant number of non-CMBS loans. A master servicer typically provides administrative and reporting services to the trustee with respect to a particular issuance of CMBS or other securitized pools of mortgages. Direct (or primary) servicers typically perform certain functions for the master servicer.

The Reorganization Plan

        On October 5, 1998, CRIIMI MAE Inc. (unconsolidated) and two operating subsidiaries, CRIIMI MAE Management, Inc. and CRIIMI MAE Holdings II, L.P., filed for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Maryland, Southern Division, in Greenbelt, Maryland. On November 22, 2000, the United States Bankruptcy Court for the District of Maryland entered an order confirming our reorganization plan, and we emerged from Chapter 11 on April 17, 2001. Under our reorganization plan, the holders of our equity retained their shares of stock and our creditors were paid in full.

Certain Risk Factors

        In addition to the risk factors set forth below, please see the discussion of various risks in "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."

        Our significant indebtedness limits our ability to take certain actions and could adversely affect our financial condition if we are unable to meet our obligations.

        We are highly leveraged. As of December 31, 2003, our total consolidated indebtedness was $765.6 million (of which $350.0 million was recourse debt), and our shareholders' equity was $291.8 million.

        Our ability to meet our existing debt service obligations depends on a number of factors, including management's ability to:

•

maintain cash flow from our mortgage assets (which is impacted by, among other things, the credit performance of the mortgage loans underlying our subordinated CMBS and changes in interest rates and spreads); and



•

generate capital internally from operating and investing activities and expected reductions in REIT distribution requirements to shareholders due to net operating losses for tax purposes.

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        Our high level of debt:

•

limits our ability to obtain additional capital;



•

significantly reduces income available for other activities;



•

restricts our ability to react quickly to changes in our business;



•

limits our ability to hedge our assets and liabilities; and



•

makes us more vulnerable to general adverse economic and industry conditions.

        We are subject to a number of borrowing risks, including refinancing risk and margin calls.

        The Bear Stearns Debt and BREF Debt mature in January 2006. As a result, we must either refinance or retire the remaining principal balances of each of the Bear Stearns Debt and BREF Debt at their maturity in 2006. In 2004, we expect to refinance the Bear Stearns Debt through a CDO, other refinancing, or combination thereof. There can be no assurance that a refinancing will occur or that it will be advantageous to us. Such a transaction may increase the cost of our borrowings, require increased amortization payments and cash sweeps and fail to provide us with sufficient funds to retire the entire amount outstanding of the Bear Stearns Debt, all of which may significantly reduce our cash flow, and further limit our financial flexibility.

        Substantially all of our future borrowings are expected to continue to be in the form of collateralized borrowings, as are the Bear Stearns Debt and BREF Debt. A default under our collateralized borrowings could result in a liquidation of the collateral. If we are forced to liquidate any assets that qualify as qualified real estate assets (under the REIT provisions of the Internal Revenue Code) to repay borrowings, there can be no assurance that we will be able to maintain compliance with the REIT provisions of the Internal Revenue Code regarding asset and source of income requirements. See the risk factor related to tax related risks. The liquidation of CMBS or other assets could also result in the loss of our Investment Company Act exclusion. See the risk factor related to the Investment Company Act exclusion. A default under the operative documents of any collateralized borrowing could result in a default under the operative documents of other collateralized or non collateralized borrowing or other obligations, which could result in our being required to pay all such obligations. We may be unable to repay such obligations.

        A substantial portion of any future borrowings used to acquire mortgage-related assets may be structured as collateralized, short-term, floating-rate secured borrowings. The amount borrowed under such agreements is typically based on the market value of the assets pledged to secure specific borrowings. Under adverse market conditions, the value of pledged assets could decline, and lenders could initiate margin calls (in which case we could be required to post additional collateral or to reduce the amount borrowed to restore the ratio of the amount of the borrowing to the value of the collateral). In order to meet a margin call, we may be required to sell assets at prices lower than their carrying value or provide additional collateral, which could have an adverse effect on us and our financial position and results of operation.

        We face considerable competition from competitors with greater resources, which could adversely affect our ability to execute our strategy to become a full-service commercial mortgage company.

        If we resume commercial mortgage loan originations and/or other mortgage related activities, we would compete with financial institutions, mortgage REITs, specialty finance companies, banks, mortgage companies, hedge funds, other lenders, and/or other entities originating and/or purchasing commercial mortgage-related assets. Many of these competitors may have greater access to capital and/or other resources (or the ability to obtain capital at a lower cost) and may have other advantages over us. Although subject to a non-competition agreement with us through January 2006, BREF Fund and its controlled affiliates are permitted to sponsor collateralized bond or loan obligations, or CBOs,

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and to acquire subordinated CMBS for inclusion in such CBOs. As a result, they could compete with us in connection with such activities.

        Failure to manage mismatch between long-term mortgage assets and short-term funding could negatively impact our net income and distributions.

        Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control. Interest rate fluctuations can adversely affect our net income and value in many ways and present a variety of risks, including the risk of a mismanagement between asset yields and borrowing rates and reshaping of the yield curve. We intend to continue entering into hedging transactions, as appropriate, in an effort to protect our mortgage assets and related debt from interest rate fluctuations. See the risk factor regarding limited protection from hedging transactions.

        Our operating results depend in large part on differences between the income from our mortgage assets and our borrowing costs. We may finance a significant portion of new investments with borrowings, initially, having adjustable interest rates (or borrowing rates) that reset while the rates on fixed rate investments stay constant. If interest rates rise, borrowing rates (and borrowing costs) are expected to rise while coupon rates (and investment income) on our fixed rate mortgage assets remain constant. This would decrease both our net income, potentially resulting in a net loss, and the mark-to-market value of our net assets, and would be expected to slow future investments of assets. Although we intend to invest primarily in fixed-rate mortgage assets, we also may own adjustable rate mortgage assets. We may fund these adjustable rate mortgage assets with borrowings having borrowing rates which reset monthly or quarterly. To the extent that there is a difference between (i) the interest rate index used to determine the coupon rate of the adjustable rate mortgage assets (asset index) and (ii) the interest rate index used to determine the borrowing rate for the related financing (borrowing index), we will be exposed to "basis" risk. Typically, if the borrowing index rises more than the asset index, our net income would decrease, all other things being constant. Additionally, our adjustable rate mortgage assets may be subject to periodic rate adjustment limitations and periodic and lifetime rate caps which limit the amount that the coupon rate can change during any given period. No assurance can be given as to the amount or timing of changes in interest rates or their effect on our mortgage assets, their valuation or income derived therefrom. During periods of changing interest rates, coupon rate and borrowing rate mismatches could negatively impact our net income and distributions.

        Our hedging transactions provide limited protection.

        There can be no assurance that our hedging activities will have the desired impact of protecting us from the risks associated with changes in interest rates. No hedging activity can completely protect us from the risks associated with changes in interest rates. Non-performance by counterparties to hedging transactions could result in losses to us. We may not be able to dispose of, or close out a hedging position without the consent of the counterparty, and we may not be able to enter into an offsetting hedging contract in order to cover our risk. There can be no assurance that a liquid market will exist for the purchase or sale of hedging instruments, and we may be required to maintain a position until expiration, which could result in losses. There can be no assurance that we will be able to replace a hedge upon expiration which could result in increased interest rate risk. See further discussion of our derivative financial instruments in Note 7 of Notes to Consolidated Financial Statements.

        Owning subordinated CMBS subjects us to significant risks.

        Potential Losses and Reduced Cash Flows.    As an owner of the most subordinate tranches of CMBS, we will be the first to bear any loss and will absorb 100% of the losses on the underlying mortgage loan collateral until cumulative losses exceed the principal amount of our subordinated CMBS. We will also be the last to receive cash flow from the underlying mortgage loans. Interest payments typically flow first to the most senior certificates until they receive all of their accrued interest and then sequentially to the junior certificates in order of seniority. Principal payments typically flow to the most senior certificates until they are retired. Tranches are then retired in order of seniority based

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on available principal. When delinquencies, defaults and losses occur, cash flows otherwise due to our subordinated CMBS may not be advanced by the master servicers to the extent required to meet scheduled principal and interest payments, resulting in interest shortfalls to our subordinated CMBS. See below for a discussion of our most significant borrowing relationship and its potential impact on our cash flows. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and Note 4 to Notes of Consolidated Financial Statements.

        Changes in Value due to Economic Factors.    The value of our subordinated CMBS, along with our book value per diluted share, can change due to a number of economic factors. These factors include changes in the value of the underlying real estate, fluctuations in U.S. Treasury rates, and changes in the spread between interest rates on our subordinated CMBS and the U.S. Treasury securities with comparable maturities. For instance, changes in the performance of the properties securing the underlying mortgage loans can result in interest payment shortfalls to the extent there are mortgage payment delinquencies, and principal losses to the extent that there are payment defaults and the amounts of such principal and interest shortfalls are not fully recovered. These losses may result in a permanent decline in the value of our subordinated CMBS and may change our anticipated yield to maturity on such subordinated CMBS if the losses are in excess of those previously estimated. CMBS are priced at a spread above the current U.S. Treasury security (such as the 10 year U.S. Treasury Note) with a maturity that most closely matches the CMBS's weighted average life. The value of CMBS can be affected by changes in U.S. Treasury rates, as well as changes in the spread between such CMBS and the U.S. Treasury security with a comparable maturity. Generally, increases and decreases in both U.S. Treasury rates or spreads will result in temporary changes in the value of our subordinated CMBS assuming that we have the ability and intent to hold our subordinated CMBS investments until maturity. Temporary changes in fair value are reflected as a component of shareholders' equity. However, such temporary changes in the value of our subordinated CMBS become permanent changes realized through our income statement when the expected credit losses related to those subordinated CMBS are greater or occur sooner than originally anticipated or we no longer intend or fail to have the intent and ability to hold such subordinated CMBS to maturity. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and Note 4 to Notes of Consolidated Financial Statements.

        Significant borrowing relationship related to certain mortgage loans underlying our subordinated CMBS.    The most significant borrowing relationship in our specially serviced mortgage loan portfolio consists of 27 loans with scheduled principal balances as of December 31, 2003 totaling approximately $133 million spread across three CMBS transactions secured by hotel properties in the western and Pacific northwestern states. As of December 31, 2003, our total exposure, including advances and interest on advances of approximately $43 million, on these loans was approximately $176 million. Such total exposure is prior to the application of payments made to date by the borrower under the terms of our consensual settlement agreement and is expected to be reduced by the application of such payments at the settlement agreement closing. The borrower initially filed for bankruptcy protection in February 2002 and indicated that the properties had experienced reduced operating performance due to new competition, the economic recession, and reduced travel resulting from the September 11, 2001 terrorist attacks. We entered into a consensual settlement agreement dated February 25, 2003 pursuant to which the loan terms were amended and modified. This agreement was subsequently approved and confirmed by the bankruptcy court on March 28, 2003. The parties are currently proceeding toward closing a comprehensive modification of each loan, which is expected to occur in March 2004 and which is expected to return the loans to performing status. The closing of the loan modification is a complex process involving a large number of parties, all of whom must ultimately agree on, among other things, a reconciliation of payments and funds applied since the loan modification was approved by the bankruptcy court. The borrower continues to make payments under the modified terms. As of December 31, 2003, the borrower has made principal and interest payments totaling approximately $10 million, the majority of which represents interest paid (as compared to principal amortization) on

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the modified loan balances. During the year ended December 31, 2003, the borrower also sold one of the properties that secured these loans. In addition, as of December 31, 2003, the borrower has remitted approximately $1.5 million in funds from debtor-in-possession accounts, which is expected to be applied to arrearages at closing.

        Cash received from our subordinated CMBS could be significantly reduced if we are not successful in resolving these loans favorably and returning them to performing status. If the modifications are not successfully closed, the loans would remain in default. There can be no assurance that the borrower would continue making the loan payments required under the loan modifications or that the trust master servicers would continue to advance loan payments on behalf of the borrower. Further, as previously mentioned, as a result of the borrower's initial default, the trust master servicers have advanced substantial amounts of principal and interest payments to the related trusts. We do not believe that the governing trust agreements are clear as to the manner in which such master servicer advances are to be reimbursed, and are attempting to negotiate an arrangement with the master servicers and other parties to the trust which would provide for reimbursement of master servicer advances that would be in the best interest of all of the respective certificateholders. To the extent that we cannot successfully complete those arrangements, we and the other trust parties could dispute the proper reimbursement mechanics, and, as a result, the timing and/or amount of payments made to us on our subordinated CMBS, and the related fair value of our subordinated CMBS, could be adversely affected. Finally, even if both the loan modifications and master servicer advance reimbursement arrangements are successfully completed, distributions on our subordinated CMBS, and the related fair value of our subordinated CMBS, will continue to be dependent on the borrower's continued performance under the terms of the modified loans.

        Limited liquidity of the subordinated CMBS market results in uncertainty in the valuation of our portfolio.

        There is no active secondary trading market for subordinated CMBS. This limited liquidity results in uncertainty in the valuation of our portfolio of subordinated CMBS. The liquidity of such market has historically been limited, and during adverse market conditions has been severely limited. Future adverse market conditions would likely adversely impact the value of our subordinated CMBS and amounts we could realize if we were required to sell all or a portion of our subordinated CMBS. Due to this limited liquidity, among other matters, management's estimate of the value of our subordinated CMBS could vary significantly from the value that could be realized in a current sale transaction.

        The limited liquidity of the subordinated CMBS market and the resulting potential uncertainty in the valuation of our subordinated CMBS contributes to the risk of margin calls due to the creditor's discretionary determination of collateral market value in a limited liquidity market. This was a factor in connection with our October 1998 Chapter 11 filing. See the risk factors related to borrowing risks.

        The effects of terrorist attacks, economic and industry slowdown have contributed to defaults on the mortgage loans underlying our subordinated CMBS.

        The economic and commercial real estate industry slowdown, terrorist attacks and threats of further terrorist attacks have contributed to defaults on mortgage loans underlying our subordinated CMBS. These factors may continue to negatively impact the values of the commercial real estate securing the mortgage loans, weakening collateral coverage and the demand for the commercial real estate securing the underlying mortgage loans and increasing the possibility of defaults and losses. Mortgage loan defaults related to our subordinated CMBS have resulted in increased estimated losses, and may result in further losses on our subordinated CMBS. See Note 4 to the Notes to Consolidated Financial Statements and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" for information regarding the performance of the underlying mortgage loans underlying our subordinated CMBS. The factors described in this paragraph could also adversely affect loans that we may originate in the future.

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        We are subject to a number of tax related risks including loss of REIT status.

        REIT Status.    We have elected to qualify as a REIT for tax purposes under sections 856-860 of the Internal Revenue Code. We are required to meet income, asset, ownership and distribution tests to maintain our REIT status. Although there can be no assurance, we believe that we have satisfied the REIT requirements for all years through, and including 2003. There can also be no assurance that we will maintain our REIT status for 2004 or subsequent years. If we fail to maintain our REIT status for any taxable year, we will be taxed as a regular domestic corporation subject to federal and state income tax in the year of disqualification and for at least the four subsequent years. Depending on the amount of any such federal and state income tax, we may have insufficient funds to pay any such tax and also may be unable to comply with some or all of our obligations, including the Bear Stearns and BREF Debt.

        We and two of our subsidiaries incorporated in 2001 jointly elected to treat such two subsidiaries as taxable REIT subsidiaries (TRS) effective January 1, 2001. The TRSs allow us to earn non-qualifying REIT income while maintaining our REIT status. These two subsidiaries hold all of the partnership interests of CMSLP.

        Net Operating Loss for Tax Purposes/Trader Election.    For tax purposes we have elected to be classified as a trader in securities. We trade in both short and longer duration fixed income securities, including CMBS, residential mortgage-backed securities and agency debt securities (such securities traded and all other securities of the type described constituting the "Trading Assets" to the extent owned by us or any qualified REIT subsidiary, meaning generally any wholly owned subsidiary that is not a taxable REIT subsidiary). Such Trading Assets are classified as Other MBS on our balance sheet.

        As a result of our election in 2000 to be taxed as a trader, we recognized a mark-to-market tax loss on our Trading Assets on January 1, 2000 of approximately $478 million (the January 2000 Loss). Such loss was recognized evenly for tax purposes over four years beginning with the year 2000 and ending in 2003. Such loss was ordinary, which allowed us to offset our ordinary income.

        We generated a net operating loss (or NOL) for tax purposes of approximately $84.0 million and $83.6 million during the years ended December 31, 2003 and 2002, respectively. As such, our taxable income was reduced to zero and, accordingly, our REIT distribution requirement was eliminated for 2003 and 2002. As of December 31, 2003, our accumulated and unused net operating loss (or NOL) was $307.8 million. Any accumulated and unused net operating losses, subject to certain limitations, generally may be carried forward for up to 20 years to offset taxable income until fully utilized. Accumulated and unused net operating losses cannot be carried back because we are a REIT.

        There can be no assurance that our position with respect to our election as a trader in securities will not be challenged by the Internal Revenue Service (or IRS) and, if challenged, will be defended successfully by us. As such, there is a risk that the January 2000 Loss will be limited or disallowed, resulting in higher tax basis income and a corresponding increase in REIT distribution requirements. It is possible that the amount of any under-distribution for a taxable year could be corrected with a "deficiency dividend" as defined in Section 860 of the Internal Revenue Code; however, interest may also be due to the IRS on the amount of this under-distribution.

        If we are required to make taxable income distributions to our shareholders to satisfy required REIT distributions, all or a substantial portion of these distributions, if any, may be in the form of non-cash dividends. There can be no assurance that such non-cash dividends would satisfy the REIT distribution requirements and, as such, we could lose our REIT status or may not be able to satisfy some or all of our contractual obligations.

        Our future use of NOLs for tax purposes could be substantially limited in the event of an "ownership change" as defined under Section 382 of the Internal Revenue Code. As a result of these limitations imposed by Section 382 of the Internal Revenue Code, in the event of an ownership change,

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our ability to use our NOL carryforwards in future years may be limited and, to the extent the NOL carryforwards cannot be fully utilized under these limitations within the carryforward periods, the NOL carryforwards would expire unutilized. Accordingly, after any ownership change, our ability to use our NOLs to reduce or offset taxable income would be substantially limited or not available under Section 382. In general, a company reaches the "ownership change" threshold if the "5% shareholders" increase their aggregate ownership interest in the company over a three-year testing period by more than 50 percentage points. The ownership interest is measured in terms of total market value of the company's capital stock. If an "ownership change" occurs under Section 382 of the Internal Revenue Code, our prospective use of our accumulated and unused NOL will be limited.

        We do not believe BREF Fund's investment in our common stock and warrants to purchase common stock has created an "ownership change" under Section 382. In addition, we are not aware of any other acquisition of shares of our capital stock that has created an "ownership change" under Section 382. We have adopted a shareholder rights plan and amended our charter to minimize the chance of an ownership change within the meaning of Section 382 of the Internal Revenue Code; however there can be no assurance that an ownership change will not occur.

        Changes in Tax Laws.    Our activities, structure and operations may be adversely affected by changes in the tax laws applicable to REITs and "traders in securities" for tax purposes.

        If we recognize phantom income our shareholders may be required to pay federal income tax with respect to such income before such income is realized by them in an economic sense.

        Our investment in subordinated CMBS may cause us, under certain circumstances, to recognize taxable income in excess of our economic income (phantom income) actually received and to experience an offsetting excess of economic income over our taxable income in later years. As a result, our shareholders, from time to time, may be required to treat distributions that economically represent a return of capital as taxable dividends for federal income tax purposes. Such distributions would be offset in later years by distributions representing economic income that would be treated as returns of capital for federal income tax purposes. Accordingly, if we recognize phantom income, our shareholders may be required to pay federal income tax with respect to such income on an accelerated basis (i.e., before such income is realized by shareholders in an economic sense). Taking into account the time value of money, such an acceleration of federal income tax liabilities would cause shareholders to receive an after-tax rate of return on an investment in our stock that would be less than the after-tax rate of return on an investment with an identical before-tax rate of return that did not generate phantom income. As the ratio of our phantom income to our total income increases, the after-tax rate of return received by a shareholder paying taxes on such distributions will decrease.

        We are dependent upon the performance of key personnel.

        Our business is dependent upon the performance of key employees, including Barry Blattman, our Chairman and Chief Executive Officer, and Mark Jarrell, our President and Chief Operating Officer, and other executive officers. We cannot be certain that any key employee will continue in such capacity for any particular period of time. All of our key employees are "at will" such that we or they may terminate their employment at any time and for any reason, or no reason. The loss of key personnel, or the inability to hire and retain qualified employees, could adversely effect our business, financial condition and results of operations.

        Failure to qualify for the Investment Company Act exclusion could have a material adverse effect on us.

        Under the Investment Company Act of 1940, as amended, an investment company is required to register with the Securities and Exchange Commission (SEC) and is subject to extensive restrictive and potentially adverse regulation relating to, among other things, operating methods, management, capital structure, dividends and transactions with affiliates. However, as described below, companies primarily

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engaged in the business of acquiring mortgages and other liens on and interests in real estate (Qualifying Interests) are excluded from the requirements of the Investment Company Act.

        To qualify for the Investment Company Act exclusion, we, among other things, must maintain at least 55% of our assets in Qualifying Interests (the 55% Requirement) and are also required to maintain an additional 25% in Qualifying Interests or other real estate-related assets (Other Real Estate Interests and such requirement, the 25% Requirement). According to current SEC staff interpretations, we believe that all of our government-insured mortgage securities constitute other Real Estate Interests and that certain government-insured mortgage securities also constitute Qualifying Interests. In accordance with current SEC staff interpretations, we believe that all of our subordinated CMBS constitute Other Real Estate Interests and that certain of our subordinated CMBS also constitute Qualifying Interests. On certain of our subordinated CMBS, we, along with other rights, have the unilateral right to direct foreclosure with respect to the underlying mortgage loans. Based on such rights and our economic interest in the underlying mortgage loans, we believe that the related subordinated CMBS constitute Qualifying Interests. As of December 31, 2003, we believe that we were in compliance with both the 55% Requirement and the 25% Requirement.

        If the SEC or its staff were to take a different position with respect to whether such subordinated CMBS constitute Qualifying Interests, we could, among other things, be required either (i) to change the manner in which we conduct our operations to avoid being required to register as an investment company or (ii) to register as an investment company, either of which could have a material adverse effect on us. If we were required to change the manner in which we conduct our business, we would likely have to dispose of a significant portion of our subordinated CMBS or acquire significant additional assets that are Qualifying Interests. Alternatively, if we were required to register as an investment company, we expect that our operating expenses would significantly increase and that we would have to significantly reduce our indebtedness, which could also require us to sell a significant portion of our assets. No assurances can be given that any such dispositions or acquisitions of assets, or deleveraging, could be accomplished on favorable terms, or at all. There are restrictions under certain of the operative documents evidencing the Bear Stearns and BREF Debt which could limit possible actions we may take in response to any need to modify our business plan in order to register as an investment company or avoid the need to register. Certain dispositions or acquisitions of assets could require approval or consent of certain holders of this Debt. Any such results could have a material adverse effect on us.

        Further, if we were deemed an unregistered investment company, we could be subject to monetary penalties and injunctive relief. We would be unable to enforce contracts with third parties and third parties could seek to obtain rescission of transactions undertaken during the period we were deemed an unregistered investment company, unless the court found that under the circumstances, enforcement (or denial of rescission) would produce a more equitable result than nonenforcement (or grant of rescission) and would not be inconsistent with the Investment Company Act.

        If two trusts formed in connection with two CMBS resecuritization transactions in which we own all the equity interests were to lose their "taxable mortgage pool" exemption, we could be materially adversely affected.

        An entity that constitutes a "taxable mortgage pool" as defined in the Internal Revenue Code (TMP) is treated as a separate corporate level taxpayer for federal income tax purposes. In general, for an entity to be treated as a TMP (i) substantially all of the assets must consist of debt obligations and a majority of those debt obligations must consist of mortgages, (ii) the entity must have more than one class of debt securities outstanding with separate maturities, and (iii) the payments on the debt securities must bear a relationship to the payments received from the mortgages. As of December 31, 2003, we owned all of the equity interests in two trusts that constitute TMPs (individually a Trust and together the Trusts). The Trusts were formed in connection with our CBO-1 and CBO-2 resecuritization

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transactions. See "Business-CMBS Resecuritizations" and Note 4 to the Notes to Consolidated Financial Statements for descriptions of CBO-1 and CBO-2. The statutory provisions and regulations governing the tax treatment of TMPs (the TMP Rules) provide an exemption for TMPs that constitute "qualified REIT subsidiaries" (that is, entities whose equity interests are wholly owned by a REIT or a qualified REIT subsidiary). As a result of this exemption and the fact that as of December 31, 2003 we owned all of the equity interests in each of the Trusts, as of December 31, 2003 the Trusts were not required to pay a separate corporate level tax on income they derive from their underlying mortgage assets.

        As of December 31, 2003, we also owned certain securities structured as debt issued by the Trusts (the Bonds). As of December 31, 2003, certain of the Bonds owned by us served as collateral (the Pledged Bonds) for certain secured debt. If a creditor were to seize or sell the Pledged Bonds and the Pledged Bonds were deemed to constitute equity interests (rather than debt) in the Trusts, then the Trusts would no longer qualify for the exemption under the TMP Rules provided for qualified REIT subsidiaries. The Trusts would then be required to pay a corporate level federal income tax. As a result, available funds from the underlying mortgage assets that would ordinarily be used by the Trusts to make payments on certain securities issued by the Trusts (including the equity interests and the Pledged Bonds) would instead be applied to tax payments. Since the equity interests and Bonds owned by us are the most subordinated securities and, therefore, would absorb payment shortfalls first, the loss of the exemption under the TMP Rules could have a material adverse effect on their value, the payments received thereon and the value of our stock.

        In addition to causing the loss of the exemption under the TMP Rules, a seizure or sale of the Pledged Bonds and a characterization of them as equity for tax purposes, rather than debt, could also jeopardize our REIT status if the value of the remaining ownership interests in any Trust held by us (i) exceeded 5% of the total value of our assets or (ii) constituted more than 10% of the Trust's voting interests. Although it is possible that the election by the TMPs to be treated as taxable REIT subsidiaries could prevent the loss of our REIT status, there can be no assurance that a valid election could be made given the timing of a seizure or sale of the Pledged Bonds.

        On the effective date of our January 2003 recapitalization, we effected an affiliate reorganization principally to indirectly secure the Bear Stearns Debt with the equity interests in the Trusts. As a result of the affiliate reorganization, our REIT subsidiary CBO REIT II owns the Pledged Bonds and indirectly owns all of the equity interests in the Trusts (through its ownership of two qualified REIT subsidiaries which hold the equity interests in the Trusts). We believe that the TMP risks set forth above remain applicable, as of the effective date of our January 2003 recapitalization, with respect to CBO REIT II; provided, however, that the risks referenced in the two immediately preceding paragraphs should only apply if a creditor were to seize or sell collateral which constituted or represented only a portion of the equity interests in a Trust.

Employees

        As of February 1, 2004, we had 81 employees, 52 of whom are employed by CMSLP and 29 of whom are employed by CRIIMI MAE Management, Inc., one of our wholly owned subsidiaries.

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Executive Officers

        The following table sets forth information concerning our executive officers as of March 1, 2004:

        Barry S. Blattman has served as Chairman of the Board and Chief Executive Officer since January 23, 2003, and as President from January 23, 2003 to September 15, 2003.

        Mark R. Jarrell has served as President and Chief Operating Officer since September 15, 2003, and as a director from January 23, 2003 to August 13, 2003.

        Cynthia O. Azzara has served as Chief Financial Officer since 1994, Executive Vice President since August 2003, Senior Vice President from 1995 to August 2003 and Treasurer since 1997.

        Stephen M. Abelman has served as Executive Vice President since October 29, 2003.

        Daniel P. Warcholak has served as Senior Vice President since September 2003, as Group Vice President from March 2002 to September 2003 and as Vice President from January 1998 to March 2002.

Internet Website

        Our internet website can be found at www.criimimaeinc.com. We make available, free of charge on or through our website, access to our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after such material is filed with, or furnished to, the SEC. We also make available, free of change, access to our Codes of Business Conduct and Ethics, Board of Directors Goverance Guidelines, Audit Committee Charter, Compensation and Stock Option Committee Charter and Nominating and Governance Committee Charter.

Certifications

        Our Chief Executive Officer and Chief Financial Officer have executed certifications dated March 11, 2004, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, and we have included those certifications as exhibits to our Annual Report on Form 10-K for the year ended December 31, 2003. In addition, our Chief Executive Officer has certified to the New York Stock Exchange that he is unaware of any violation by CRIIMI MAE of the NYSE's corporate governance listing standards in effect as of February 26, 2004.

ITEM 2. PROPERTIES

        We lease our corporate offices at 11200 Rockville Pike, Rockville, Maryland. As of December 31, 2003, these offices occupy approximately 67,600 square feet. As of March 1, 2004, approximately 32,000 square feet of this office space was available to sublet to third parties and we are actively seeking sublet tenants.

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ITEM 3. LEGAL PROCEEDINGS

        In the course of our normal business activities, various lawsuits, claims and proceedings have been or may be instituted or asserted against us. Although there can be no assurance, based on currently available facts, we believe that the disposition of matters pending or asserted will not have a material adverse effect on our consolidated financial position, results of operations or liquidity. See Note 18 of Notes to Consolidated Financial Statements.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        We did not submit any matters to a vote of security holders during the fourth quarter of 2003.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Data

        Our common stock is listed on the New York Stock Exchange (symbol: CMM). On October 17, 2001, we implemented a one-for-ten reverse stock split designed, in part, to satisfy the New York Stock Exchange market price listing requirement. All share and per share information in this Annual Report on Form 10-K has been retroactively adjusted to reflect the reverse stock split. Share information adjustments include, without limitation, adjustments to the number of common shares issued and outstanding, issued as dividends on and upon conversion of shares of preferred stock and issuable under outstanding options.

        As of March 1, 2004, we had approximately 2,700 holders of record of our common stock. The following table sets forth the high and low closing sales prices for our common stock during the periods indicated.

Dividends

        No cash dividends were paid to common shareholders during 2003 or 2002. See "Business—Certain Risk Factors" for a brief discussion of the elimination of our REIT distribution requirements for 2003 and 2002 due to our net operating losses for tax purposes. Under the operative documents evidencing the BREF Debt and Bear Stearns Debt, we are permitted to pay cash dividends to shareholders after the payment of required principal and interest on that debt.

        In April 2002, dividends to preferred shareholders for the fourth quarter of 2001 and the first quarter of 2002 were paid in the form of shares of common stock. During 2003, dividends were paid to preferred shareholders in cash. See Notes 12 and 13 to Notes to Consolidated Financial Statements.

        On March 21, 2002, we redeemed in cash all 173,000 outstanding shares of our Series E Cumulative Convertible Preferred Stock at the stated redemption price of $106 per share plus accrued and unpaid dividends through and including the date of redemption. The total redemption price was approximately $18.7 million ($396,000 of which represented accrued and unpaid dividends).

Sale of Unregistered Securities

        In connection with the January 2003 recapitalization, BREF acquired 1,212,617 shares of our newly issued common stock, or approximately 8% of our outstanding common stock after giving effect to the share acquisition, at $11.50 per share, or approximately $13.9 million. BREF also received seven-year warrants to purchase up to 336,835 additional shares of common stock at a purchase price of $11.50 per share. In connection with the sale, BREF represented that it was an "accredited investor" within the meaning of Rule 501 under the Securities Act and that it had no intent to distribute the purchased securities. We claimed an exemption from registration under the Securities Act under Rule 506 of Regulation D in connection with this sale.

Repurchases

        We did not repurchase any shares of our equity securities during the fourth quarter of 2003.

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ITEM 6. SELECTED FINANCIAL DATA

Selected Consolidated Financial Data

Accounting Under Accounting Principles Generally Accepted in the United States

        The following table contains selected consolidated financial information about us. The selected financial data should be read in conjunction with the consolidated financial statements, the notes thereto, and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" included elsewhere in this Annual Report on Form 10-K. There were no cash dividends declared on our common stock for any of the periods presented. See Note 2 to Notes to Consolidated Financial Statements and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" for a discussion of the accounting for servicing revenue, derivatives, goodwill and other intangibles, preferred stock issuance costs and a discussion of certain expenses related to Chapter 11 reorganization, all of which affect the comparability of the periods presented below.